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

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

---------------------
FORM 10-K

[X]            ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001.
[ ]          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM                 TO                 .
COMMISSION FILE NO. 001-15891

NRG ENERGY, INC.
(Exact name of Registrant as specified in its charter)

DELAWARE                      41-1724239
(State or other jurisdiction of        (I.R.S. Employer
incorporation or organization)       Identification No.)
901 MARQUETTE AVENUE                   55402
MINNEAPOLIS, MINNESOTA               (Zip Code)
(Address of principal executive offices)

(612) 373-5300
(Registrant's telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Common stock -- $.01 par value (Listed on the New York Stock Exchange)
Corporate Units -- (Listed on the New York Stock Exchange)

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None

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

Yes  X                No ____

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]

THE AGGREGATE MARKET VALUE OF THE REGISTRANT'S COMMON STOCK HELD BY
NON-AFFILIATES OF THE REGISTRANT WAS $659,505,775 AT MARCH 19, 2002.

INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES OF
COMMON STOCK AS OF THE LATEST PRACTICABLE DATE.

CLASS                             OUTSTANDING AT MARCH 19, 2002
----------------------------------------       --------------------------------------

Class A - Common Stock, $0.01 par value                  147,604,500 shares
Common Stock, $0.01 par value                            51,084,878 shares

Documents Incorporated by Reference: None.

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

NRG ENERGY, INC. AND SUBSIDIARIES

INDEX

PAGE NO.
--------

PART I

Item 1     Business....................................................        1

Item 2     Properties..................................................       22

Item 3     Legal Proceedings...........................................       26

Item 4     Submission of Matters to a Vote of Security Holders.........       28

PART II

Item 5     Market Price for the Registrant's Common Equity and Related
Stockholder Matters.......................................       28

Item 6     Selected Financial Data.....................................       29

Item 7     Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................       30

Item 7A    Quantitative and Qualitative Disclosures About Market
Risk......................................................       49

Item 8     Financial Statements and Supplementary Data.................       50

Item 9     Changes in & Disagreements with Accountants on Accounting
and Financial Disclosures.................................       94

PART III

Item 10    Directors and Executive Officers of the Registrant..........       94

Item 11    Executive Compensation......................................       97

Item 12    Security Ownership of Certain Beneficial Owners and
Management................................................      108

Item 13    Certain Relationships and Related Transactions..............      109

PART IV

Item 14    Exhibits, Financial Statements Schedules and Reports on Form
8-K.......................................................      112
SIGNATURES.............................................................      118

PART I

ITEM 1 -- BUSINESS

GENERAL

NRG Energy, Inc. (NRG Energy or the Company) is a leading global energy
company, primarily engaged in the acquisition, development, ownership, and
operation of power generation facilities and the sale of energy, capacity and
related products in the United States and internationally. NRG Energy believes
it is one of the three largest independent power generation companies in the
world, measured by its net ownership interest in power generation facilities. As
of December 31, 2001, NRG Energy owned all or a portion of 76 generation
projects, including projects under construction, that have a total generating
capacity of 38,388 megawatts (MW). Its current net ownership interest in those
projects is 24,357 MW, of which 19,077 MW are located in the United States.

As the following table illustrates, NRG Energy has grown significantly
during recent years, primarily as a result of its success in acquiring domestic
power generation facilities:

YEAR ENDED DECEMBER 31,
--------------------------------------------------
1997      1998       1999       2000       2001     CAGR
-------   -------   --------   --------   --------   ----
(IN THOUSANDS, EXCEPT MW DATA)

Net Ownership Interest
(In MW at end of period)(1).....    2,637     3,300     10,990     15,007     24,357    74%
Operating Income................  $18,109   $57,012   $109,520   $573,073   $714,822   151%
EBITDA(2).......................  $39,790   $82,711   $161,516   $692,548   $954,835   121%
Net Income......................  $21,982   $41,732   $ 57,195   $182,935   $265,204    86%

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

(1) Includes projects under construction; MW under construction for the years
1997, 1998, 1999, 2000 and 2001 were 616, 284, 252, 747, and 4,775,
respectively.

(2) EBITDA is the sum of income (loss) before income taxes, interest expense
(net of capitalized interest) and depreciation and amortization expense.
EBITDA is a measure of financial performance not defined under generally
accepted accounting principles, which should not be considered in isolation
or as a substitute for net income, cash flows from operations or other
income or cash flow data prepared in accordance with generally accepted
accounting principles or as a measure of a company's profitability or
liquidity. In addition, EBITDA as calculated by NRG Energy may not be
comparable to similarly titled measures presented by other companies, and
therefore could be misleading because all companies and analysts do not
calculate it in the same fashion.

NRG Energy has experienced significant growth in the last year, expanding
from 15,007 MW of net ownership interests in power generation facilities
(including those under construction) as of December 31, 2000, to 24,357 MW of
net ownership interests as of December 31, 2001. NRG Energy has a well
diversified portfolio in terms of location, fuel and dispatch mode.

NRG Energy is organized into four regionally-based divisions: NRG North
America, based in Minneapolis, Minnesota; NRG Europe, based in London; NRG
Asia-Pacific based in Brisbane, Australia and NRG Latin America, based in Miami,
Florida. Most of NRG Energy's North American projects are grouped under regional
holding companies corresponding to their domestic core market. NRG Energy
operates its generation facilities within each region as a separate operating
unit within its power generation business. This regional portfolio structure
allows NRG Energy to coordinate the operations of its assets to take advantage
of regional opportunities, reduce risks related to outages, whether planned or
unplanned, and pursue expansion plans on a regional basis.

NRG Energy's international power generation projects are managed as three
distinct markets, Asia-Pacific, Europe and Other Americas.

1

In addition to NRG Energy's power generation projects, NRG Energy also has
interests in district heating and cooling systems and steam transmission
operations.

NRG Energy intends to continue its growth through a combination of targeted
acquisitions in selected core markets, the expansion or repowering of existing
facilities and the development of new greenfield projects. However, in the short
term, recognizing market conditions, NRG Energy anticipates that its growth
level will be lower than in recent years. As of December 31, 2001, NRG Energy
had signed agreements to acquire an additional 3,571 MW of net ownership
interest in existing generation projects. Currently, NRG Energy has scheduled
expansion, repowering or greenfield generation projects that would add 5,308 MW
of net ownership interest.

NRG Energy has also expanded its power marketing activities, which allow
NRG Energy to optimize the value of its power generation assets and enable it to
better meet its customers' energy requirements. By linking NRG Energy's
capabilities and access to fuel supplies with its power marketing and risk
management expertise, NRG Energy believes that it effectively manages risk, and
has secured and will continue to secure favorable pricing for its fuel purchases
and power sales.

NRG Energy was incorporated as a Delaware corporation on May 29, 1992. Its
headquarters and principal executive offices are located at 901 Marquette
Avenue, Suite 2300, Minneapolis, Minnesota 55402. NRG Energy's telephone number
is (612) 373-5300.

On June 5, 2000, NRG Energy completed its initial public offering. Prior to
its initial public offering, NRG Energy was a wholly owned subsidiary of
Northern States Power (NSP). In August 2000, NSP merged with New Century
Energies, Inc. (NCE), a Colorado-based public utility holding company. The
surviving corporation in the merger was renamed Xcel Energy Inc. (Xcel Energy),
and the shares of NRG Energy's class A common stock previously owned by NSP are
now owned by a wholly-owned subsidiary of Xcel Energy. As of December 31, 2000,
Xcel Energy indirectly owned an 82% interest in NRG Energy's outstanding common
and class A common stock, representing 98% of the total voting power of NRG
Energy's common stock and class A common stock. Xcel Energy directly owns six
utility subsidiaries that serve electric and natural gas customers in 12 states.
Xcel Energy also owns or has interest in a number of nonregulated businesses,
the largest of which is NRG Energy.

In March 2001, NRG Energy completed a public offering of 18.4 million
shares of its common stock. Following this offering, Xcel Energy indirectly owns
a 74% interest in NRG Energy's common stock and class A common stock,
representing 96.7% of the total voting power of NRG Energy's common stock and
class A common stock.

XCEL ENERGY EXCHANGE OFFER

In February 2002, Xcel Energy announced its intention to commence an
exchange offer by which Xcel Energy would acquire all of the outstanding
publicly held shares of NRG Energy. In its announcement, Xcel Energy stated its
intention to close the transaction in April 2002, and stated that NRG Energy
shareholders would receive 0.4846 shares of Xcel Energy common stock in a
tax-free exchange for each outstanding share of NRG Energy common stock.

After completion of the merger, NRG Energy would be an indirect, wholly
owned subsidiary of Xcel Energy. NRG Energy's debt and other obligations will
continue to be the sole obligation of NRG Energy.

On March 13, 2002, Xcel Energy filed a registration statement on Form S-4
with the Securities and Exchange Commission and commenced the exchange offer. In
its registration statement, Xcel Energy stated that, if the exchange offer and
merger are completed, its plans for NRG Energy in 2002 include: infusing an
additional $300 million of equity into NRG Energy, in addition to an initial
loan of $300 million recently made to NRG Energy; slowing NRG Energy's growth in
megawatt capacity and the possible sale of $1.9 billion of existing generating
assets; canceling or deferring approximately $1.6 billion of planned projects;
and beginning the process of selling unassigned turbines and deferring
installment of additional unassigned turbines.

2

In addition, Xcel Energy stated in its registration statement that if the
offer and merger are completed and its plans for NRG Energy are implemented, it
expects to reduce NRG Energy's business development activities and
administrative and general costs, with annual estimated cost savings of
approximately $45 million, and to capture infrastructure savings by
consolidating trading and marketing organizations, where appropriate.

MARKET OPPORTUNITY

The power industry is one of the largest industries in the world,
accounting for approximately $225 billion in annual revenues and approximately
830,000 MW of installed generating capacity in the United States alone. The
generation segment of the industry historically has been characterized by
regulated electric utilities producing and selling electricity to a captive
customer base. However, the power generation market has been evolving from a
regulated market based on cost of service pricing to a competitive market. In
response to increasing customer demand for access to low-cost electricity and
enhanced services, new regulatory initiatives have been and are continuing to be
adopted to increase competition in the power industry.

Outside of the United States, governments in developed economies are
privatizing their utilities and developing regulatory structures that are
expected to encourage competition in the electricity sector, having realized
that their energy assets can be sold to raise capital without hindering system
reliability. In developing countries, the demand for electricity is expected to
grow rapidly. In order to satisfy this anticipated increase in demand, many
countries have adopted active government programs designed to encourage private
investment in power generation facilities. NRG Energy believes that these market
trends will continue to create opportunities to acquire and develop power
generation facilities globally.

STRATEGY

NRG Energy's vision has been to be a leading global generation company with
a top three position in selected core markets, which provides superior
performance to all stakeholders. Central to this vision is the development and
management of diverse regional portfolios of competitive power generating
facilities. This diversity incudes geographic location, fuel type and dispatch
profile. Currently, approximately 78% of NRG Energy's net MW of generation in
operation and under construction is located in the United States in five core
markets: Northeast, South Central and West Coast regions and the recently added
North Central and Mid Atlantic regions. With NRG Energy's diversified asset
base, NRG Energy seeks to have generating capacity available to back up any
given facility during its outages, whether planned or unplanned, while having
ample resources to take advantage of peak power market price opportunities and
periods of constrained availability of generating capacity, fuels and
transmission. NRG Energy's primary focus has been on generation assets powered
primarily by natural gas, coal, oil and to a lesser extent landfill gas, hydro,
refuse derived fuel and biomass technologies.

NRG Energy's strategy is to capitalize on its acquisition, development,
construction and operating skills to build a balanced portfolio of power
generation assets. NRG Energy intends to implement this strategy by continuing a
disciplined acquisition program, recognizing current market conditions. NRG
Energy believes that its facility operations and engineering expertise, fuel and
environmental strategies, labor and governmental relations expertise, legal and
financial skills give it a competitive advantage in the independent power
market.

NORTH AMERICAN POWER GENERATION

While NRG Energy expects the North American power generation market to
continue to evolve from a regulated, utility dominated market based upon
cost-of-service pricing to an independent power generation market based on
competitive market pricing, the pace of this evolution slowed in 2001 as a
result of the energy crisis in California, and more recently, the Enron
bankruptcy. Most domestic generation capacity is still utility owned and subject
to cost-of-service regulation. NRG Energy expects the evolution to continue as
non-regulated power generators build new capacity to meet demand, but, in view
of current market and forward

3

prices, and the credit and liquidity constraints reported by many competitive
power producers in recent months, NRG Energy expects such new capacity
development to be less than has been forecast.

Most of NRG Energy's North American projects are grouped under regional
holding companies corresponding to their domestic core markets. In order to
better manage NRG Energy's North American projects and to develop new projects
in these regions more effectively, NRG Energy has established regional offices
in Pittsburgh, Pennsylvania (Northeast region), Baton Rouge, Louisiana (South
Central region) and San Diego, California (West Coast region). NRG Energy's
recently added North Central and Mid Atlantic regions are managed from its
Minneapolis headquarters and Wilmington, Delaware offices, respectively.

NRG Energy operates its generation facilities within each region as a
separate operating unit within its power generation business. This regional
portfolio structure allows NRG Energy to coordinate the operations of its assets
to take advantage of regional opportunities, reduce risks related to outages,
whether planned or unplanned, and pursue expansion plans on a regional basis.

NORTHEAST REGION

As of December 31, 2001, NRG Energy owned approximately 7,676 MW of net
generating capacity (including projects under construction) in the Northeast
United States and Canada, primarily in New York, Connecticut and Massachusetts.
These generation facilities are well diversified in terms of dispatch level
(base-load, intermediate and peaking), fuel type (coal, natural gas and oil) and
customers. In addition, NRG Energy believes certain of its facilities and
facility sites in the Northeast provide opportunities for repowering or
expanding existing generating capacity.

NRG Energy's Northeast facilities are generally competitively positioned
within their respective market dispatch levels with favorable market dynamics
and locations close to the major load centers in the New York Power Pool (NYPP)
and New England Power Pool (NEPOOL).

SOUTH CENTRAL REGION

As of December 31, 2001, NRG Energy owned approximately 4,716 MW of net
generating capacity (including projects under construction) in the South Central
United States, primarily in Louisiana, Oklahoma, Texas and Mississippi. NRG
Energy's South Central generating assets consist primarily of its net ownership
of 1,947 MW of power generation facilities in New Roads, Louisiana (which are
referred to as the Cajun facilities) that were acquired in March 2000 and the
recently completed Big Cajun Peakers (238 MW). The South Central region also
includes the Sterlington (202 MW), McClain (400 MW), Batesville (837 MW),
Mustang (122 MW), and Sabine River (210 MW) generating facilities. In addition,
the Bayou Cove (320 MW) and Brazos Valley (633 MW) facilities are under
construction. The construction of the following additional facilities with a net
generating capacity of 2,680 MW is planned: Kaufman (545 MW), Batesville
expansion (292 MW), Big Cajun II, Unit 4 (675 MW) and Pike (1,168 MW).

WEST COAST REGION

As of December 31, 2001, NRG Energy owned approximately 1,596 MW of net
generating capacity on the West Coast of the United States, primarily California
and Nevada. NRG Energy's West Coast generation assets consist primarily of a 50%
interest in West Coast Power LLC (West Coast Power), a 58% interest in the
Crockett Cogeneration facility (138 MW)and a 50% interest in the Saguaro
generation facility (53 MW). In May 1999, Dynegy Power Corporation (Dynegy) and
NRG Energy formed West Coast Power to serve as the holding company for a
portfolio of operating companies that own generation assets in Southern
California. This portfolio currently is comprised of the El Segundo Generating
Station (510 MW), the Long Beach Generating Station (265 MW), the Encina
Generating Station (483 MW) and 17 combustion turbines in the San Diego area
(127 MW). Dynegy provides power marketing and fuel procurement services to West
Coast Power, and NRG Energy provides operations and management services. NRG
Energy believes certain of its facilities and facility sites on the West Coast
provide opportunities for repowering or expanding generating capacity.

4

NORTH CENTRAL REGION

As of December 31, 2001, NRG Energy owned approximately 3,706 MW of net
generating capacity in the north central United States, primarily in Illinois,
Missouri and Michigan. NRG Energy's North Central portfolio includes the 640 MW
simple cycle, gas-fired Audrain power generation facility, located in Vandalia,
Missouri. In August 2001, NRG Energy purchased a project portfolio from Indeck
Energy Services which includes the Rockford I (342 MW) and Rockford II (171 MW)
Energy Centers, located 75 miles west of Rockford, Illinois. Rockford II is
currently under construction with commercial operation expected in June 2002.
Other North Central projects in operation include Rocky Road (175 MW), Morris
Cogeneration (23 MW) and Cadillac Renewable Energy (19 MW). Two additional
projects in Illinois currently under construction will add 1,168 MW each to NRG
Energy's North Central portfolio. Kendall is estimated to be in commercial
operation in May 2002, and Nelson in the third quarter of 2003.

MID-ATLANTIC REGION

As of December 31, 2001, NRG Energy owned approximately 1,199 MW of net
generating capacity in the Mid-Atlantic region of the United States, primarily
Delaware, Maryland, Ohio and Pennsylvania. In June 2001, NRG Energy completed
the acquisition of approximately 1,081 MW of operational generating facilities
from Conectiv. In January 2002, NRG Energy closed the acquisition of the
Commonwealth Atlantic generating facility (188 MW) and the James River
generating facility (55 MW) from Edison Mission and expects to close on the
FirstEnergy acquisition of approximately 2,535 MW of generating facilities
during the second quarter of 2002.

COMPETITIVE POWER GENERATION -- INTERNATIONAL

Historically, the majority of power generating capacity outside of the
United States has been owned and controlled by governments. During the past
decade, however, many foreign governments moved to privatize power generation
plant ownership through sales to third parties and by encouraging new capacity
development and refurbishment of existing assets by independent power
developers. Governments have taken a variety of approaches to encourage the
development of competitive power markets, from awarding long-term contracts for
energy and capacity to purchasers of power generation to creating competitive
wholesale markets for selling and trading energy, capacity and related products.

NRG Energy has taken advantage of opportunities to invest in attractive
projects in international markets. To manage NRG Energy's international asset
portfolio risks, NRG Energy utilizes a portfolio risk management discipline
based upon country risk, as identified by an independent, internationally
recognized organization. Using this tool, NRG Energy is able to monitor the
exposure it is taking in emerging markets to maintain an appropriate balance in
its asset portfolio. NRG Energy's international power generation projects are
managed as three distinct markets, Asia Pacific, Europe and Other Americas.

ASIA PACIFIC

NRG Energy is one of the largest competitive power producers in Australia
and, with its 2001 acquisitions in Taiwan and India, now has a net ownership
interest of 2,297 MW, as of December 31, 2001, in power generation facilities.

EUROPE

NRG Energy is a participant in the competitive power generation markets in
Germany, the Czech Republic, the United Kingdom, and Hungary. As of December 31,
2001, NRG Energy has a net ownership interest of 1,854 MW in power generation
facilities (including projects under construction) in Europe. During 2001, NRG
Energy increased its ownership interest in the MIBRAG and Schkopau projects in
April 2001, both of which are located in Germany and completed its acquisition
of the Csepel facility located in Hungary in June 2001.

5

OTHER AMERICAS

NRG Energy has pursued acquisition and development opportunities in Latin
America since the mid-1990s. Initially, NRG Energy participated as one of four
original sponsors of the Latin Power Fund, a private equity investment fund
managed by Scudder. As of December 31, 2001, NRG Energy has ownership of 1,107
MW in Latin America. NRG Energy currently owns and operates 270 MW of hydro and
thermal electric operating assets in Bolivia and is the second largest generator
in that country. Similarly, NRG Energy owns and operates 111 MW of hydro and
thermal electric operating assets in Peru. NRG Energy owns a 99% interest in a
156 MW hydro facility under construction in Brazil set to enter commercial
operation in the third quarter 2002. In addition, NRG Energy recently formed a
partnership venture with Petrobras Brazileros SA, the large state owned
Brazilian oil company, to construct, own and operate a 1,040 MW gas-fired
thermal facility in which it will own a 50% share. The TermoRio Project,
currently under construction, is expected to enter full commercial operations in
March 2004.

ALTERNATIVE ENERGY

NRG Energy provides alternative energy through NEO Corporation (NEO), one
of the largest landfill gas generation companies in the United States, and NRG
Resource Recovery, which processes municipal solid waste as fuel used to
generate power.

NEO CORPORATION

NEO is a wholly owned subsidiary of NRG Energy that was formed to develop
power generation facilities, ranging in size from 1 to 50 MW, in the United
States. NEO is currently focusing on the development and acquisition of
distributed generation and peaking facilities and the acquisition of small
hydroelectric projects. NEO owns and operates 31 landfill gas collection systems
and has 46 MW of net ownership interests in related electric generation
facilities utilizing landfill gas as fuel. NEO also has 42 MW of net ownership
interests in 18 hydroelectric facilities and 109 MW of net ownership interests
in seven distributed generation facilities. The company's operations are located
primarily in the east and west coast regions of the United States. NEO derives a
substantial portion of its income as a result of the generation of Section 29
tax credits, which, for 2001, totaled $48.6 million. The existing tax law
authorizing these credits is scheduled to expire after 2007.

RESOURCE RECOVERY FACILITIES

NRG Energy's Resource Recovery business is focused on owning and operating
alternative fuel/"green power" generation and fuels processing projects. The
alternative fuels currently processed and combusted are municipal solid waste
(MSW), of which more than 90% is processed into refuse derived fuel (RDF), urban
wood waste (pallets, clean construction debris, etc.), forest industry waste
wood (bark, sawmill waste, tree trimmings, etc.), agricultural waste (walnut
shells, olive pits, peanut shells, etc.), and non-recyclable waste paper and
compost. Processing and recovery for generation into electricity and other
products is an environmentally superior method of waste management when compared
to adding to existing or creating new landfills. NRG Energy's Resource Recovery
business has MSW processing capacity of over 4,000 tons per day and generation
capacity of 35 MW, of which its net ownership interest is 26 MW.

NRG Energy's Resource Recovery business owns and operates MSW processing
and/or generation facilities in Maine and Minnesota. This business also owns and
operates a biomass fired generation facility in Florida and a wood processing
facility in Georgia, which supplies a portion of the biomass fuel to the power
plant in Florida. In addition to the fuels processing and generation portfolio,
Resource Recovery owns and operates several mono-ash landfills that receive ash
from the biomass and waste-to-energy power plants that are owned and operated.
Resource Recovery also owns and operates NRG Processing Solutions that includes
thirteen composting and biomass fuel processing sites in Minnesota of which
three sites are permitted to operate as MSW transfer stations. A majority of
Resource Recovery's facilities are under long-term contract for either the fuel
processing and/or its generation capacity.

6

THERMAL

NRG Energy has interests in district heating and cooling systems and steam
transmission operations. NRG Energy's thermal and chilled water businesses have
a steam and chilled water capacity equivalent to approximately of 1,641 MWt, of
which its net ownership interest is 1,514 MWt.

NRG Energy owns and operates, through its holding company NRG Thermal
Corporation, five district heating and cooling systems in Minneapolis,
Minnesota, San Francisco, California, Pittsburgh, Pennsylvania, Harrisburg,
Pennsylvania and San Diego, California. These systems provide steam heating to
approximately 600 customers and chilled water to 90 customers. In addition, NRG
Energy's thermal division operates five projects that serve
industrial/government customers with high-pressure steam and hot water. NRG
Thermal also owns and operates an 88 MW combustion turbine peaking generation
facility and an 18 MW coal-fired cogeneration facility in Dover, Delaware.

POWER MARKETING

NRG Energy's energy marketing subsidiary, NRG Power Marketing, Inc. (NRG
Power Marketing), began operations in 1998 to maximize the utilization of and
return from its domestic generation assets and to mitigate the risks associated
with those assets. This subsidiary markets energy and energy related
commodities, including electricity, natural gas, oil, coal and emission
allowance credits. By using internal resources to acquire fuel and market
electricity, NRG Energy believes it can secure the best pricing available in the
markets in which it sells power and enhance its ability to compete. NRG Power
Marketing provides a full range of energy management services for NRG Energy's
generation facilities in its Northeast, South Central, North Central and Mid
Atlantic regions. These services are provided under power sales and agency
agreements pursuant to which NRG Power Marketing manages the sales and marketing
of energy, capacity and ancillary services from these facilities and also
manages the purchase and sale of fuel and emission allowance credits needed to
operate these facilities.

NRG Energy is very disciplined in its approach to power marketing risk
management. NRG Power Marketing conducts its activities in accordance with risk
management guidelines approved by the NRG Power Marketing Board of Directors,
which has primary responsibility for oversight of NRG Power Marketing
activities. Accordingly, NRG Energy has established counter-party concentration
limits and portfolio VaR limits. NRG Energy's risk management guidelines require
that its treasury department perform a credit review and approve all
counter-parties and credit limits prior to NRG Power Marketing entering into a
transaction with such counter-parties. NRG Energy attempts to balance its
fixed-price physical and financial purchases and sales commitments in terms of
contract volumes and the timing of performance and delivery obligations.
However, uncovered market positions are taken within guidelines established by
the board of directors of NRG Power Marketing. Contracts for the transmission
and transportation of these commodities are also authorized, as necessary, in
order to meet physical delivery requirements and obligations.

HOW NRG ENERGY SELLS ITS GENERATING CAPACITY AND ENERGY

NRG Energy's operating revenues are derived primarily from the sale of
electrical energy, capacity and other energy products from its power generation
facilities. Revenues from these facilities are received pursuant to:

- long-term contracts of more than one year including:

- power purchase agreements with utilities and other third parties
(generally 2-25 years);

- standard offer agreements to provide load serving entities with a
percentage of their requirements (generally 4-9 years); and

- "transition" power purchase agreements with the former owners of
acquired facilities (generally 3-5 years).

7

- short-term contracts or other commitments of one year or less and spot
sales including:

- spot market and other sales into various wholesale power markets; and

- bilateral contracts with third parties.

NRG Energy strives to mitigate variability in its earnings by having
approximately 50% of its capacity contracted for under contracts with lengths of
greater than one year, generally seeking to enter into contracts with lengths of
1-5 years, selling half of its remaining capacity (25%) in the forward market
for 30-365 days, and selling the other half of its remaining capacity (25%) in
the spot market to capture opportunities in the market when prices are higher.
By following this strategy, NRG Energy seeks to achieve positive, stable returns
while retaining the flexibility to capture premium returns when available.

NRG Power Marketing handles fuel procurement and trading of emissions
allowances in order to support NRG Energy's overall needs. Generally, NRG Energy
seeks to hedge prices for 50% to 70% of its expected fuel requirements during
the succeeding 12 to 24 month period. This provides NRG Energy with certainty as
to a portion of its fuel costs while allowing it to maintain flexibility to
address lower than expected dispatch rates and to take advantage of the dual
fuel capabilities at many of its facilities.

SIGNIFICANT CUSTOMERS

During 2001, NRG Energy derived approximately 40.5% of its 2001 revenues
from majority owned operations from two customers: New York Independent System
Operator (26.7%) and Connecticut Light and Power Company (13.8%). During 2000,
NRG Energy derived approximately 34.4% of its 2000 revenues from majority owned
operations from two customers: New York Independent System Operator (22.2%) and
Connecticut Light and Power Company (12.2%). During 1999, NRG Energy derived
approximately 51.2% of total revenues from wholly owned operations from three
customers: Niagara Mohawk Power Corporation (21%), Consolidated Edison Company
of New York, Inc. (19.7%) and Eastern Utilities Associates (10.5%).

SEGMENT INFORMATION

For financial information on NRG Energy's operations on a geographical and
on a segment basis, see Item 8 -- Note 18 to the Consolidated Financial
Statements.

PLANT OPERATIONS

NRG Energy's success depends on its ability to achieve operational
efficiencies and high availability at its generation facilities. In the new
unregulated energy industries, minimizing operating costs without compromising
safety or environmental standards while maximizing plant flexibility and
maintaining high reliability is critical to maximizing profit margins. NRG
Energy's operations and maintenance practices are designed to achieve these
goals.

NRG Energy's overall corporate strategy of establishing a top three
presence in certain core markets is in part driven by its operational strategy.
NRG Energy's approach to plant management emphasizes the operational autonomy of
its individual plant managers and staff to identify and resolve operational and
maintenance issues at their respective facilities. NRG Energy has also
implemented a regional shared practices system in order to facilitate the
exchange of information and best practices among the plants in its various
regions. NRG Energy has organized its operations geographically such that
inventories, maintenance, backup and other operational functions are pooled
within a region. This approach enables NRG Energy to realize cost savings and
enhances its ability to meet its facility availability goals.

SIGNIFICANT ASSET AND BUSINESS ACQUISITIONS

GRANITE POWER PARTNERS

In January 2001, NRG Energy purchased from LS Power LLC a 5,339 MW
portfolio of operating projects and projects in construction and advanced
development that are located primarily in the north central
8

and south central United States. Approximately 3,295 MW are currently in
operation or under construction. Each facility employs natural gas-fired,
combined-cycle technology. Through December 31, 2005, NRG Energy also has the
opportunity to acquire ownership interests in an additional 3,000 MW of
generation projects developed and offered for sale by LS Power and its partners.

BATESVILLE

In March 2001, NRG Energy purchased from Cogentrix the remaining 430 MW or
51.37% interest, in a 837 MW natural gas-fired combined-cycle plant in
Batesville, Mississippi. NRG Energy acquired a 48.63% interest in the plant in
January 2001 from LS Power.

AUDRAIN

In June 2001, NRG Energy purchased a 640 MW natural gas-fired power plant
in Audrain County, Missouri from Duke Energy North America LLC.

BRAZOS VALLEY

In June 2001, NRG Energy closed on the construction financing for the
Brazos Valley generating facility a 633 MW gas-fired power plant in Fort Bend
County, Texas that NRG Energy will build, operate and manage. At the time of the
closing, NRG Energy also became 100% owner of the project by purchasing STEAG
Power LLC's 50% interest in the project. Commercial operation is expected in
June 2003.

CONECTIV

In June 2001, NRG Energy purchased 1,081 MW of interests in power
generation plants from a subsidiary of Conectiv. NRG Energy acquired a 100%
interest in the 784 MW coal-fired Indian River Generating Station located near
Millsboro, Delaware and in the 170 MW oil-fired Vienna Generating Station
located in Vienna, Maryland. In addition, NRG Energy acquired 64 MW of the 1,711
MW coal-fired Conemaugh Generating Station located approximately 60 miles east
of Pittsburgh, Pennsylvania and 63 MW of the 1,711 MW coal-fired Keystone
Generating Station located approximately 50 miles east of Pittsburgh,
Pennsylvania.

POWERGEN

In June 2001, NRG Energy purchased a 389 MW gas-fired power plant and a 116
MW thermal power plant, both of which are located on Csepel Island in Budapest,
Hungary, from PowerGen. In April 2001, NRG Energy also purchased from PowerGen
its interest in Saale Energie GmbH and its 33.3% interest in MIBRAG BV. By
acquiring PowerGen's interest in Saale Energie, NRG Energy increased its
ownership interest in the 960 MW coal-fired Schkopau power station located near
Halle, Germany from 200 MW to 400 MW. By acquiring PowerGen's interest in
MIBRAG, an integrated energy business in eastern Germany consisting primarily of
two lignite mines and three power stations, and following MIBRAG's buy back of
the shares NRG Energy acquired from PowerGen, NRG Energy increased its ownership
of MIBRAG from 33.3% to 50%. The Washington Group International, Inc., MIBRAG's
other shareholder, owns the remaining 50% of MIBRAG.

INDECK

In August 2001, NRG Energy acquired an approximately 2,255 MW portfolio of
operating projects and projects in advanced development, including projects that
NRG Energy intends to develop, that are located in Illinois and upstate New York
from Indeck Energy Services, Inc. Approximately 402 MW are currently in
operation.

9

MCCLAIN

In August 2001, NRG Energy acquired Duke Energy's 77% interest in the
approximately 520 MW natural gas-fired McClain Energy Generating facility
located near Oklahoma City, Oklahoma. The Oklahoma Municipal Power Authority
owns the remaining 23% interest. The McClain facility became operational in June
2001.

TERMORIO

In September 2001, NRG Energy acquired a 50% interest in TermoRio SA, a
1,040 MW gas-fired cogeneration facility currently under construction in Rio de
Janeiro State, Brazil from Petroleos Brazileiros SA. Commercial operation is
expected to begin in March 2004. NRG Energy has the option to put its interest
in the project back to Petrobras after March 2002 if by that time certain
milestones have not been met, including final agreement on the terms of all
project documents.

MERIDEN

In December 2001, NRG Energy acquired a 540 MW natural gas fired generation
facility being developed in Meriden, Connecticut. The plant has a planned
commercial operation date of August 2003.

COMMONWEALTH ATLANTIC AND JAMES RIVER

In July 2001, NRG Energy signed agreements to acquire from Edison Mission
Energy a 50% interest in the 375 MW Commonwealth Atlantic gas and oil-fired
generating station located near Chesapeake, Virginia, and a 50% interest in the
110 MW James River coal-fired generating facility in Hopewell, Virginia. NRG
Energy closed the acquisition of the Commonwealth Atlantic and James River
generating facilities in January 2002.

OTHER PROJECTS

During fiscal year 2001, NRG Energy also acquired interests in projects in
Taiwan, India, Peru and the State of Nevada.

SIGNIFICANT EQUITY INVESTMENTS

The following are the more significant equity investments included in NRG
Energy's Power Generation Segment.

MIBRAG

NRG Energy indirectly purchased a 33 1/3% interest in the equity of
Mitteldeutsche Braunkohlengesellschaft mbH (MIBRAG) in 1994 for $10.6 million.
In April 2001, NRG Energy purchased from PowerGen its 33.3% interest in MIBRAG
Bv for $35.3 million which was repaid by the project company in June 2001. By
acquiring PowerGen's interest in MIBRAG, and following MIBRAG's buy back of the
shares, NRG Energy acquired from PowerGen, NRG Energy increased its ownership of
MIBRAG from 33.3% to 50%. The Washington Group International, Inc., MIBRAG's
other shareholder owns the remaining 50% of MIBRAG. MIBRAG owns coal mining,
power generation and associated operations, all of which are located south of
Leipzig, Germany. MIBRAG was formed by the German government following the
reunification of East and West Germany to hold two open-cast brown coal
(lignite) mining operations, a lease on an additional mine, three lignite-fired
industrial cogeneration facilities and briquette manufacturing and coal dust
plants, all located in the former East Germany. MIBRAG's cogeneration operations
consist of the 115 MW Mumsdorf facility, the 86 MW Deuben facility and the 37 MW
Wahlitz facility. These facilities provide power and thermal energy for MIBRAG's
coal mining operations and its briquette manufacturing plants. All power not
consumed by MIBRAG's internal operations is sold under an eight-year power
purchase agreement with
10

ENVIA the regional energy provider. MIBRAG's lignite mine operations include
Profen and Schleenhain with total estimated reserves of 776 million metric tons,
which are expected to last for more than 40 years. A dispute has arisen as to
coal transportation compensation payments to be made to MIBRAG pursuant to the
acquisition agreement by Bundesanstalt fur vereinigungsbedingte Sonderaufgaben
(BvS), a German governmental entity that facilitated the privatization of
MIBRAG. The size of the annual coal transportation compensation payments
fluctuates based on the volume of coal transported to the Schkopau facility. The
parties have reached a settlement, pending approval by the European Union. The
settlement is not expected to have a material adverse impact on MIBRAG's
operations.

GLADSTONE POWER STATION

The Gladstone facility is a 1,680 MW coal-fired power generation facility
located in Gladstone, Australia. NRG Energy acquired a 37.5% ownership interest
in the Gladstone facility for $64.9 million when the facility was privatized in
March 1994.

NRG Energy is responsible for the operation and maintenance of the
Gladstone facility pursuant to a 17-year operation and maintenance agreement
that commenced in 1994, which includes an annual bonus based on availability
targets. The Gladstone facility sells electricity to the Enertrade, a government
owned entity, and to Boyne Smelters Limited. Pursuant to an interconnection and
power pooling agreement, Enertrade is obligated to accept all electricity
generated by the facility, subject to merit order dispatch, for an initial term
of 35 years.

Enertrade also entered into a 35-year capacity purchase agreement with each
of the project's owners for such owner's percentage of the capacity of the
Gladstone facility, excluding that sold directly to Boyne Smelters. Under the
capacity purchase agreements, Enertrade pays the facility owners both a capacity
and an energy charge. The capacity charge is designed to cover the projected
fixed costs allocable to Enertrade, including debt service and an equity return,
and is adjusted to reflect variations in interest rates.

The owners of Boyne Smelters have also entered into a power purchase
agreement with each of the project's owners, providing for the sale and purchase
of such owner's percentage share of capacity allocated to Boyne Smelters. The
term of each of these power purchase agreements is 35 years. The owners of Boyne
Smelters are obligated to pay to each of the project's owners a demand charge
that is intended to cover the fixed costs of supplying capacity to Boyne
Smelters, including debt service and return on equity. The owners of Boyne
Smelters are also obligated to pay an energy charge based on the fuel cost
associated with the production of energy from the Gladstone facility.

ENERGY CENTER KLADNO

The Energy Center Kladno project, located in Kladno, the Czech Republic
consists of two phases. In 1994, NRG Energy acquired an interest in the existing
coal-fired electricity and thermal energy facility that can supply 28 MW of
electrical energy and 150 MW equivalent of steam and heated water. This facility
historically supplied electrical and thermal energy to a nearby industrial
complex and to a municipal heating company. The second phase was the expansion
of the existing facility, which started commercial operation in January 2000, by
the addition of 345 MW of new capacity, 271 MW of which is coal-fired and 74 MW
of which is gas/oil-fired, facility acceptance was awarded in December 2001. The
original project is owned by Energy Center Kladno, a Czech limited liability
company in which NRG Energy owns a 44.5% interest. The expansion is held
separately through ECK Generating, a Czech limited liability company in which
NRG Energy owns a 44.5% interest.

COLLINSVILLE POWER STATION

The Collinsville Power Station is a 192 MW coal-fired power generation
facility located in Collinsville, Australia. In March 1996, NRG Energy acquired
a 50% ownership interest in the idled Collinsville facility for $11.9 million
when the Queensland State government privatized it. The Collinsville facility
was recommis-

11

sioned and commenced operations on August 11, 1998. Transfield Holdings Pty Ltd,
the project's other 50% owner, and NRG Energy have entered into an 18-year power
purchase agreement with Enertrade under which Enertrade will pay both a capacity
and an energy charge to the project's owners. The capacity charge is designed to
cover the projected fixed costs allocable to Enertrade, including debt service
and an equity return. The energy charge is based on the fuel costs associated
with the production of energy from the facility.

ENERGY DEVELOPMENTS LTD

Energy Developments Limited, a publicly traded company listed on the
Australian Stock Exchange, owns and operates approximately 357 MW of generation
with 77% of that generation located in Australia. Between February 1997 and
April 1998, NRG Energy acquired a total of 14,609,670 common shares and
16,800,000 convertible, non- voting preference shares of Energy Developments.
NRG Energy paid a total of approximately AUD$69.1 million (US$44.5 million at
the time of acquisition), or AUD$2.20 (US$1.42) per share, for the shares, which
represented approximately 29.1% ownership interest in Energy Developments. Since
the acquisition NRG Energy's holding has been diluted to 26.3%. NRG Energy has
agreed to restrictions on its ability to purchase more shares or to dispose of
any existing shares of Energy Developments. The preference shares do not become
convertible into common shares unless a takeover bid is made for Energy
Developments. In such event, if Energy Developments fails to comply with an
obligation to appoint directors, NRG Energy is entitled to nominate under the
terms of the agreement with Energy Developments. In either of those
circumstances, the preference shares can be converted at the option of the owner
to common shares on a share-for-share basis.

LOY YANG POWER

NRG Energy has a 25.4% interest in Loy Yang Power, which owns and operates
the 2,000 MW Loy Yang A brown coal fired thermal power station and the adjacent
Loy Yang coal mine located in Victoria, Australia. This interest was purchased
for AUD $340 million (approximately US $264.3 million at the time of the
acquisition) in 1997. The power station has four units, each with a 500 MW
boiler and turbo generator, which commenced commercial operation between July
1984 and December 1988. In addition, Loy Yang manages the common infrastructure
facilities that are located on the Loy Yang site, which service not only the Loy
Yang A facility, but also non-NRG facilities such as the adjacent Loy Yang B
1,000 MW power station, a pulverized dried brown coal plant, and several other
nearby power stations.

The wholesale electricity market in Australia is regulated under the
National Electricity Law, which provides for a legally enforceable National
Electricity Code, which defines the market rules. The code also makes provision
for the establishment of the National Electricity Market Management Company to
manage the power system, maintain system security and administer the spot
market. Under the rules of the National Electricity Market, the Loy Yang
facility is required to sell all of its output of electricity through the
competitive wholesale market for electricity operated and administered by the
National Electricity Market. In the National Electricity Market power pool
system, it is not possible for a generator such as Loy Yang to enter into
traditional power purchase agreements. In order to provide a hedge against pool
price volatility, generators have entered into "contracts for differences" with
distribution companies, electricity retailers, industrial customers and other
generators. These contracts for differences are financial hedging instruments,
which have the effect of fixing the price for a specified quantity of
electricity for a particular seller and purchaser over a defined period.

Energy prices in the Victoria region of the National Electricity Market of
Australia into which the Loy Yang facility sells its power have been
significantly lower than NRG Energy expected when it acquired its interest in
the facility. Prices improved during 2001 producing a 14% increase in revenue
improvement over the prior year.

Despite this improvement, a significant unplanned outage, beginning in late
December 2001 and expected to last until April 2002, will result in a reduction
in 2002 revenues and cash flows, and may cause the Loy Yang project company to
fail its required coverage ratios under its loan agreements during the next 12
months,

12

which would constitute an event of default. In the case of default, the project
company's lenders would be allowed to accelerate the project company's
indebtedness. The ultimate financial impact of the outage is subject to
continuing investigation, and is also subject to several events including; the
receipt and timing of insurance proceeds, the cost and timing of repairs to the
damaged unit, the potential installation of a replacement unit while repairs are
carried out to the original unit and electricity market conditions. Management
is actively pursuing each of these options to mitigate the impact of the outage.
However, in the event all factors are unfavorable, NRG Energy may be required to
infuse equity or write-off all or a portion of its $250 million investment in
this project as a result of such acceleration.

In its current circumstances, Loy Yang Power is prohibited by its loan
agreements from making equity distributions to the project owners.

In February 2000, CMS Energy announced its intention to divest its 49.6%
ownership in the Loy Yang project but has established no deadline for completion
of the sale. CMS Energy indicated that it intended to sell its interest because
the project was no longer of strategic value to its portfolio and had not met
its financial expectations. Under certain circumstances CMS will require the
approval of Loy Yang Power's lenders and other parties to enable the sale to
proceed. The impact (if any) of the proposed sale on NRG Energy's existing
investment in Loy Yang Power is not known at the date of this report.

WEST COAST POWER

In May 1999, Dynegy and NRG Energy formed West Coast Power LLC (West Coast
Power), 50% owned by affiliates of each sponsor. West Coast Power serves as the
holding company for a portfolio of operating companies that own generating
assets in Southern California. These assets are currently comprised of the El
Segundo Generating Station, the Long Beach Generating Station, the Encina
Generating Station and 17 Combustion Turbines in the San Diego area (the San
Diego Combustion Turbines).

El Segundo Generating Station: The El Segundo Generating Station is a 1,020
MW plant consisting of four units: two units at 175 MW each and two units at 335
MW each. El Segundo was purchased from the Southern California Edison Company
through a competitive bid process for $88.3 million during April 1998.

Long Beach Generating Station: The Long Beach Generating Station is a 530
MW combined cycle plant with seven 56 MW gas turbine generators and, one 80 MW
steam turbine unit and one 58 MW steam turbine unit. The Long Beach plant was
purchased from Southern California Edison Company during April 1998 through a
competitive bid process for $29.9 million.

Encina Generating Station: The Encina Generating Station is located in
Carlsbad, California and consists of five steam-electric generating units and
one combustion turbine with net generating capacity of 965 MW. The Encina
Generating Station was purchased from San Diego Gas & Electric during May 1999,
at a purchase price of $283.2 million.

San Diego Combustion Turbines: The San Diego Combustion Turbine assets
consist of 17 combustion turbine generator sets (the CT's) with an aggregate
capacity of 253 MW, located on seven different sites in San Diego County. During
May 1999, Dynegy and NRG Energy purchased the CT's from San Diego Gas & Electric
through a competitive bid process. The CT's acquisition had a purchase price of
$69.1 million. The CT's have the ability to provide spinning reserve, black
start capability, quick start capability, voltage support and quick load
capability for the ancillary services market.

In December 2000, NRG Energy and its partner submitted permit applications
in respect of a planned repowering of the jointly-owned El Segundo station. The
planned repowering will add approximately 621 MW of generating capacity to the
facility at a cost of approximately $368 million. Prior to the repowering,
approximately 350 MW at the El Segundo Station will be decommissioned. The
repowering project is expected to be permitted by the third quarter of 2003.

For additional information regarding the California utility liquidity
crisis see Item 7 -- Management's Discussion and Analysis of Financial Condition
and Results of Operations -- California Liquidity Crisis.

13

KONDAPALLI

During 2001, NRG Energy acquired a 30% interest in Lanco Kondapalli Power
Private Limited and 100% of Eastern Generation Services (India) Private Limited
for US $27 million. Kondapalli is a 355 MW combined cycle power plant located in
Andhra Pradesh, India. Eastern Generation Services is the plant operator.

Kondapalli earns revenue under a 15 year power purchase agreement with the
state owned distributor and retailer Andhra Pradesh Transmission Corporation.
The plant is natural gas fired and uses diesel/naptha as a backup fuel supply.

NRG Energy is responsible for the operation and maintenance of the
Kondapalli facility via Eastern Generation Services. The Operations and
Management Agreement is a cost plus contract that provides financial incentives
to ensure the plant is operated efficiently.

SAGUARO POWER COMPANY

In September 2001, NRG Energy, acquired, for $66 million, a 50% interest in
Saguaro Power Company, L.P. Other partners include Manga Energy Systems, Inc and
Black Mountain Power Company, a wholly owned subsidiary of Boulder Power, LLC.
The partnership owns a 105 MW natural gas fired cogeneration facility in
Hendersen, Nevada, a suburb of Las Vegas. Nevada Power Company is obligated to
purchase 90 MW per hour of electric energy under a long-term power purchase
agreement. The facility is also capable of generating 50 to 160 thousand pounds
per hour of export steam. Under long-term steam purchase and sales agreements, a
combined total of 50 thousand pounds per hour of high-pressure steam is
committed to be sold to both Pioneer Chlor Akali Company, Inc. and Ocean Spray
Cranberries, Inc. Fuel gas requirements are provided to the facility under a
long-term purchase agreement with Burlington.

SIGNIFICANT MAJORITY- AND WHOLLY-OWNED OPERATIONS

The following are the more significant majority- and wholly-owned
operations included in NRG Energy's Independent Power Generation segment.

CROCKETT COGENERATION

Pacific Crockett Energy, Inc., an indirect, wholly owned subsidiary of NRG
Energy, is the general partner of the Crockett Cogeneration Project (Crockett).
Crockett, a 240 MW gas fired plant, began operations in May 1996. Pacific
Generation Company, another wholly owned subsidiary of NRG Energy, owns a 56.67
percent limited partnership interest in Crockett through ENI Crockett LP (ENI
Crockett). ENI Crockett is a limited partnership in which Pacific Generation
Company is the general partner and El Paso Energy is a limited partner. The
project sells 240 MW of capacity and energy to Pacific Gas & Electric Company
under a modified Standard Offer No. 4 Purchase Power Agreement (PPA) extending
to 2026. The PPA provides for a fixed capacity payment and a variable energy
payment based on the market price of gas. In addition, Crockett provides up to
450,000 lbs/hr of steam to the adjacent C&H Sugar refinery under a steam sales
agreement that expires in 2026. Natural gas is supplied to the project by BP
Canada Energy Marketing. ESOCO operates the project under a renewable 15-year
contract that provides for reimbursement of all costs within an approved budget,
plus a fee and provision for a performance bonus. Other limited partners include
Energy Investors Fund LP and Energy Investors Fund II, LP and a subsidiary of
Tomen Power Corp. Crockett was originally financed with a $260 million
construction and term loan facility provided by a commercial bank syndicate led
by ABN-AMRO. On December 15, 1999, Crockett was refinanced with a $255 million
term loan facility provided by a commercial bank syndicate led by ABN-AMRO,
maturing in December 31, 2014.

14

NRG NORTHEAST GENERATING LLC

NRG Energy has acquired, through subsidiaries, in five separate
transactions, certain generating assets from Niagara Mohawk Power Corporation
(NIMO), Consolidated Edison Company of New York (ConEd), Montaup Electric
Company (MEC), a wholly owned subsidiary of Eastern Utilities Association (EUA),
and Connecticut Light & Power Company (CL&P) for a total cost of approximately
$1.5 billion. NRG Energy has aggregated these assets into a regional generating
company, NRG Northeast Generating LLC (NRG Northeast) (collectively, the NRG
Northeast assets).

The NRG Northeast assets represent competitive, low cost units with
favorable market dynamics and locations close to major load centers in the NYPP
and NEPOOL.

Huntley and Dunkirk: In June 1999, NRG Energy completed the acquisition of
the Huntley and Dunkirk generating stations from NIMO for $355 million. The two
coal-fired power generation facilities are located near Buffalo, New York and
have a combined capacity rating of 1,360 MW. In connection with this
acquisition, NRG Energy entered into a 4-year agreement with NIMO that requires
NRG Energy to provide to NIMO, pursuant to a predetermined schedule, fixed
quantities of energy and capacity at a fixed price.

Oswego: In October 1999, NRG Energy completed the acquisition of the 1,700
MW oil and gas fired Oswego generating station for approximately $85 million
from NIMO and Rochester Gas and Electric Corporation.

Astoria Gas Turbines and Arthur Kill: In June 1999, NRG Energy completed
the acquisition of the Astoria gas turbine facility and the Arthur Kill
Generating Station from ConEd for $505 million. These facilities, which are
located in the New York City area, have a combined capacity rating of 1,456 MW.

Somerset: In April 1999, NRG Energy completed the acquisition of the
Somerset power station for approximately $55 million from MEC. The Somerset
station includes two coal fired base-load generating facilities supplying a
total of 181 MW and two aeroderivative combustion turbine peaking units
supplying a total of 48 MW, including 69 MW on deactivated reserve. It is
located on the west bank of the Taunton River in Somerset, Massachusetts and is
interconnected with the NEPOOL market.

Connecticut stations: In December 1999, NRG Energy completed the
acquisition of four fossil fuel electric generating stations and six remote gas
turbines totaling 2,235 MW from CL&P for $460 million, plus adjustments for
working capital. The assets acquired from CL&P (CL&P Assets) are comprised of
the Middletown, Montville, Devon and Norwalk Harbor gas- and oil-fired steam
generating stations totaling 2,108 MW and 127 MW of remote gas turbines at
Branford, Torrington and Cos Cob, Connecticut. NRG Energy also entered into a
4-year standard offer agreement that requires NRG Energy to provide to CL&P a
portion of its load requirements through the year 2003 at a substantially fixed
price.

Middletown station, an 856 MW gas- and oil-fired plant, is located in
Middletown, Connecticut. The 498 MW Montville Station in Uncasville, Connecticut
is composed of one gas- or oil-fired unit, one oil-fired unit and two diesel
generators. Norwalk Station, with 353 MW of capacity from two oil-fired units
and one gas turbine, is located on Manresa Island at the mouth of Norwalk
Harbor. Devon Station, consisting of 401 MW of generation capacity derived from
two gas- or oil-fired units and five gas turbines, is located at Milford,
Connecticut.

NRG SOUTH CENTRAL GENERATING LLC

In March 2000, the South Central facilities were acquired in a competitive
bidding process following a Chapter 11 bankruptcy filing by their former owner,
Cajun Electric. NRG Energy paid approximately $1,055.9 million for these
facilities. NRG South Central Generating LLC, an indirect wholly-owned
subsidiary of NRG Energy, Inc, through its wholly-owned subsidiaries, Louisiana
Generating LLC (Louisiana Generating), NRG New Roads Holdings LLC, NRG
Sterlington Power LLC, Big Cajun I Peaking Power LLC (Big Cajun 1 Peakers), NRG
Sabine River Works GP LLC, NRG Sabine River Works LP LLC and NRG Bayou Cove LLC
owns approximately 2,679 MW of net electric generating capacity as of December
31, 2001 (including projects under construction).

15

Through its subsidiaries, Louisiana Generating and Big Cajun 1 Peakers, NRG
South Central owns the Big Cajun I and Big Cajun II generating facilities in New
Roads, Louisiana (the Cajun facilities). The Cajun facilities consist of 100%
ownership of four gas-fired intermediate/peaking power generation units which
NRG Energy collectively refers to as Big Cajun I. Two of these units were
completed and commenced commercial operation in May and June 2001. The Cajun
facilities also include 100% interest of two coal-fired, base-load power
generation units, and a 58% interest in a third coal-fired, base load unit,
which NRG Energy refers to collectively as Big Cajun II. The Cajun facilities
were acquired through a competitive bidding process following a Chapter 11
bankruptcy filing by Cajun Electric Power Cooperative, Inc., a non-profit
Louisiana electric membership cooperative corporation. Cajun Electric sold
wholesale energy and capacity generated by the Cajun facilities to its
cooperative members for more than 20 years under long-term, all-requirements
power supply agreements. NRG Energy sells most 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 NRG Energy, and four have entered into two to four year power purchase
agreements. In addition, NRG Energy sells power under contract to two municipal
power authorities and one investor-owned utility that were former customers of
Cajun Electric.

In March 2000, NRG South Central formed NRG New Roads Holdings LLC (New
Roads) to hold certain assets that were acquired in conjunction with the
purchase of the Cajun facilities but which are not necessary for the operation
of the Cajun facilities. NRG Sterlington Power LLC (Sterlington), which was
acquired by NRG Energy and contributed to NRG South Central in August 2000, was
formed for the purpose of developing, constructing, owning and operating an
approximately 202 MW simple cycle gas peaking facility in Sterlington,
Louisiana. Louisiana Generating has a right of first refusal on any sale of
capacity or energy by Sterlington. In December 2000, NRG Sabine River Works LP
and NRG Sabine River Works GP acquired, respectively, a 49% limited partnership
interest and a 1% general partnership interest in SRW Cogeneration Limited
Partnership, that owns and operates an approximately 420 MW natural gas-fired
cogeneration plant at the DuPont Company's Sabine River Works petrochemical
facility near Orange, Texas. Subsidiaries of Conoco, Inc. own the other 50%
interest in SRW Cogeneration Limited Partnership. Commercial operation of the
plant commenced in November 2001.

KILLINGHOLME

In March 2000, NRG Energy acquired the 680 MW gas-fired Killingholme
combined cycle, baseload facility in North Lincolnshire, England from National
Power plc. The purchase price was L390 million (approximately U.S. $615.0
million at the time of acquisition), subject to post closing adjustments. NRG
Energy financed the acquisition with a 19-year non-recourse credit facility that
provides for L235 million (approximately U.S. $374 million at the time of
acquisition) for the costs of the acquisition and L90 million (approximately
U.S. $143 million at the time of acquisition) for letters of credit and working
capital needs. NRG Energy sells power from the facility into the wholesale
electricity market of England and Wales. The facility has a ten and one half
year contract to purchase up to 70% of its natural gas requirements from a
subsidiary of Centrica plc. From January 1, 2000 through the date of the
acquisition, NRG Energy entered into a tolling agreement with National Power
pursuant to which NRG Energy received revenues based on the prevailing market
prices for electricity in exchange for payments to National Power based on the
incremental operating costs of the facility.

Prices for power in the wholesale electricity market of England and Wales
have decreased since the acquisition date due to new trading rules that are
expected to come into effect and increase competition in this market. NRG Energy
has entered into short-term agreements to sell a portion of the output of the
Killingholme facility, and, in the future, NRG Energy intends to enter into
similar short-term and long-term agreements that will provide a degree of
stability to its revenues from the facility.

FLINDERS POWER

In September 2000, NRG Energy completed the acquisition of Flinders Power,
South Australia's final generation company to be privatized. NRG Energy paid
approximately AUD $314.4 million (approximately
16

U.S. $180 million at the date of acquisition) for a 100-year lease of certain
Flinders Power assets, including two power stations totaling 760 MW. In
addition, NRG Energy received a 20-year lease, renewable for additional 10-year
terms, for the Leigh Creek coal mine and a dedicated rail line. The 100-year
lease agreement also includes managing the long-term fuel supply and power
purchase agreement of the 180 MW Osborne Cogeneration Station. Since that
original acquisition, NRG Energy has also announced that it will undertake a
refurbishment of its 240 MW Playford Power Station, being one of the two
coal-fired plants that form the central part of the Flinders business.

GRANITE POWER PARTNERS

NRG Energy has acquired, in two separate transactions a 5,339 MW portfolio
of operating projects and projects in construction and advanced development from
LS Power, LLC and Cogentrix for a total cost of approximately $830 million.
Through 2005, NRG has the opportunity to acquire ownership interests in an
additional 3,000 MW of generation projects developed and offered for sale by LS
Power and its partners.

Batesville: NRG Energy, through subsidiaries acquired approximately 100%
ownership of a natural gas-fired combined-cycle electric generating facility
with a design capacity of approximately 837 megawatts located in Batesville,
Mississippi. All of the electric power generation is sold under long-term
tolling agreements with Virginia Electric and Power and Aquila. Additionally, a
292 MW expansion scheduled for operation in 2005 is currently in development.

Mustang: NRG Energy acquired a 25% ownership interest in an approximately
122 MW electric generating facility located in Texas. The facility sells its
energy under a long-term power purchase agreement.

Kendall: Scheduled to be commercially operable in the second quarter 2002,
the Kendall facility located just south of Chicago, Illinois will generate
approximately 1,168 MW of electric power utilizing combined cycle gas turbines.
Tolling agreements with Dynegy and Minnesota Power are in place for 870 MW with
the remaining generation available for merchant markets. Additionally, a 584 MW
expansion scheduled for operation in 2006 is currently in development.

Pike: Construction began in February 2002 for a 1,168 MW natural gas fired
facility located near McComb, Mississippi. This facility will use combined cycle
gas turbines and is scheduled to be commercially operable in 2003.

Nelson: Scheduled to be commercially operable in 2003, the Nelson facility
to be located just west of Chicago, Illinois will generate approximately 1,168
MW of electric power utilizing combined cycle gas turbines.

SCHKOPAU POWER STATION

In 1993, NRG Energy acquired for $18.2 million an indirect 50% interest in
a German limited liability company, Saale Energie GmbH, which then acquired a
41.9% participation interest in a 960 MW coal-fired power plant that was under
construction in the East German city of Schkopau. The first 425 MW unit of the
Schkopau plant began operation in January 1996, the 110 MW turbine in February
1996, and the second 425 MW unit in July 1996. The coal is provided under a
long-term contract by MIBRAG's Profen lignite mine.

Saale Energie sells its allocated 400 MW portion of the plant's capacity
under a 25-year contract with VEAG, a major German utility that controls the
high-voltage transmission of electricity in the former East Germany. VEAG pays a
price that is made up of three components, the first of which is designed to
recover installation and capital costs, the second to recover operating and
other variable costs, and the third to cover fuel supply and transportation
costs. In April 2001, NRG Energy acquired the remaining 50% of Saale Energie
GmbH for $37.3 million which effectively increased NRG Energy's participation
interest in Schkopau to 41.9% totaling 400 MW.

17

COBEE

In December 1996, NRG Energy acquired for $81.8 million a 49.1% interest in
COBEE, the second largest generator of electricity in Bolivia. In June 2001, NRG
Energy increased its interest in COBEE as part of a large portfolio acquisition
of assets. COBEE has entered into contracts, which expire in 2008, with two
Bolivian distribution companies pursuant to which COBEE supplies electricity.
All payments under these contracts are made in United States dollars.

COBEE operates its electric generation business under a 40-year concession
granted by the Bolivian government in 1990. Under this concession, COBEE is
entitled to earn a return of 9.0% on assets within its rate base. The Bolivian
Electricity Code also provides for the adjustment of rates to compensate COBEE
for any shortfall or to recapture any excess in COBEE's actual rate of return
during the previous year. COBEE periodically applies to the Superintendent of
Electricity for rate increases sufficient to provide its 9.0% rate of return
based on COBEE's current operating results and its projection of future revenues
and expenses. Under COBEE's concession, COBEE's assets are required to be
removed from the rate base in 2008.

CSEPEL

The Csepel facility is a 389 MW gas-fired power plant and a 116 MW thermal
power plant, both of which are located on Csepel Island in Budapest, Hungary. In
June 2001, NRG Energy acquired a 100% interest in the Csepel project for $111.4
million. The Csepel facility was the first new independent power station in
Hungary. Csepel commenced operations in November 2000.

The Csepel facility has a signed 20-year purchase power agreement with MVM,
the Hungarian state owned utility. At commercial operation the purchase power
agreement was replaced with an annual administrative price set by the Hungarian
Energy office and approved by the Economic Ministry. Since commercial operation,
the administrative price followed in line with the purchase power agreement
pricing. In addition, the fuel is supplied to Csepel through a 20-year "back to
back" gas supply agreement.

MIDATLANTIC

In June 2001 NRG Energy acquired 1,081 MW of baseload electric generating
plants from Delmarva Power and Light, a subsidiary of Wilmington, Delaware-based
Conectiv. As part of the agreement, NRG entered into both short- and long-term
purchase power contracts with Delmarva Power to provide energy and capacity for
the Delmarva Peninsula. Under the long-term agreement, Conectiv is obligated to
purchase 500 MW through 2005 at contracted prices.

The 784 MW coal-fired Indian River Generating Station is located on the
Delmarva Peninsula near Millsboro, Delaware. The Vienna Generating Station is a
170 MW oil-fired generating station located along the Nanticoke River in the
town of Vienna, Maryland. Of the 1,711 MW coal-fired Conemaugh Generating
Station, NRG acquired 64 MW. The plant is located on the Conemaugh River,
approximately 60 miles east of Pittsburgh, Pennsylvania. NRG Energy also
acquired 63 MW of the 1,711 MW coal-fired Keystone Generating Station, located
approximately 50 miles east of Pittsburgh, Pennsylvania.

INDECK

In August 2001, NRG Energy acquired a 2,255 MW project portfolio from
Indeck Energy Services, Inc. The portfolio primarily serves the Chicago,
Illinois energy market.

NRG Energy acquired full ownership in five projects in operation,
construction and advanced development. The portfolio includes combined-cycle and
peaking power plants that employ natural gas-fueled combustion technology.
Operational facilities include the Rockford I and Ilion Energy Centers. Projects
under construction and development include the Rockford II Energy Center,
Bourbonnais I and II Energy Centers.

Rockford I is a 342 MW simple cycle power generation plant designed to
produce peaking electricity located in Rockford, Illinois. Power is contracted
to ComEd under a long-term power sales agreement. Under
18

the agreement, ComEd delivers natural gas and the facility generates electricity
to ComEd that amounts to a tolling arrangement. Ilion, located in central
upstate New York, is a 60 MW combined cycle cogeneration plan. Ilion operates as
a merchant power plant while selling its steam to Remington Arms Company. The
Rockford II project is scheduled for commercial operation in 2002 while the
Bourbonnais projects are planned for 2004 and 2005.

HSIN YU ENERGY DEVELOPMENT CO. LIMITED

During 2001, NRG Energy acquired approximately 60% ownership in Hsin Yu
Energy Development Co. LTD for NT $1.6 billion (approximately $46.7 million at
the date of acquisition). Hsin Yu is a Taiwan company that owns a 170 MW
cogeneration facility located near Taipei. Hsin Yu is developing a 245 MW
expansion of the facility and has rights to develop a 490 MW Greenfield project
near Tainan. Hsin Yu sells power to industrial customer under short-term power
purchase agreements and sells residual power to Tai Power. Hsin Yu secures gas
supply through a 12-year contract with China Petroleum Corp. the state owned gas
supplier.

SIGNIFICANT PENDING ACQUISITIONS AND PROJECTS UNDER DEVELOPMENT

Due to the many complexities inherent in the acquisition, development and
financing of projects, there can be no assurance that any of NRG Energy's
pending acquisitions and projects under development, including those described
below, will be consummated.

FIRSTENERGY

In November 2001, NRG Energy signed purchase agreements to acquire or lease
four coal-fired generating facilities totaling approximately 2,535 MW and two
ash disposal sites from subsidiaries of FirstEnergy Corporation. The four
generating facilities are located in Ohio, along the shore of Lake Erie, and the
approximately 376 MW Ashtabula facility in Ashtabula, Ohio, the approximately
249 MW Lake Shore facility in downtown Cleveland, the approximately 1,262 MW
Eastlake facility near Cleveland and the approximately 648 MW Bay Shore facility
near Toledo. NRG Energy is also acquiring all of the equity interests in Bay
Shore Power Company, which is a subsidiary of FirstEnergy and the owner of a 136
MW petroleum coke-fired steam generating project on the Bay Shore facility site.
The acquisition is expected to close in the second quarter of 2002. In
connection with the acquisition of these facilities, NRG Energy also entered
into a Transition Power Purchase Agreement with FirstEnergy, pursuant to which
NRG Energy will supply to FirstEnergy approximately 95% of the output from the
facilities through 2005.

CONECTIV ASSETS

In June and October 2001, NRG Energy extended purchase agreements that NRG
Energy entered into with a subsidiary of Conectiv in January 2000 to acquire 794
MW of coal and oil-fired electric generating capacity and other assets in New
Jersey and Pennsylvania, including an additional 66 MW of Conemaugh Generating
Station and an additional 42 MW of the Keystone Generating Station. By their
terms these purchase agreements became terminable by either party after February
28, 2002, and on April 1, 2002 NRG Energy exercised its right to terminate the
agreements.

REGULATION

NRG Energy is subject to a broad range of federal, state and local energy
and environmental laws and regulations applicable to the development, ownership
and operation of its United States and international projects. These laws and
regulations generally require that permits and approvals be obtained before
siting a power plant, during the plants construction, and after it becomes fully
operational. Throughout each phase of the project's implementation, all
operations must be conducted in compliance with the terms specified in such
permits and approvals.

19

NRG Energy strives to comply with the terms of all applicable laws,
regulations, permits and licenses and believes that all of its ongoing
operations are in material compliance with all such requirements. Even so, due
to the promulgation of increasingly stringent regulatory requirements and/or
local opposition to its projects, NRG Energy cannot presently assure its ability
to obtain all future permits and approvals nor guarantee 100% regulatory
compliance. In order to approach such levels of regulatory certainty,
prohibitive expenditures could force projects to be abandoned, create the risk
of expensive delays or materially impair project values.

In particular, the competitive power markets in the United States, United
Kingdom, Australia and other countries are dependent on the existing regulatory
structure, and while NRG Energy strives to take advantage of the opportunities
created by regulatory changes, it is impossible to predict the impact of
regulatory changes on its operations. The level of environmental awareness and
enforcement is growing in most countries, including most of the countries in
which NRG Energy intends to develop and operate new projects. Accompanying such
awareness is the requirement to achieve stringent emission limitations. NRG
Energy believes that the nature and level of environmental regulation to which
it is subject will become more stringent. Therefore, NRG Energy's policy is to
integrate the consideration of potential environmental impacts into every
decision it makes, and by doing so strive to improve its competitive advantage
by meeting or exceeding environmental requirements pertaining to the management
and operation of its assets.

COMPETITION

The independent power industry is characterized by numerous strong and
capable competitors, some of which may have more extensive operating experience,
more extensive experience in the acquisition and development of power generation
facilities, larger staffs or greater financial resources than NRG Energy does.
In recent years, the independent power industry has been characterized by
increased competition for asset purchases and development opportunities. In
recent months there have been announcements from several of NRG Energy's
competitors that they will be scaling back their growth plans and delaying
construction expenditures.

In addition, regulatory changes have also been proposed to increase access
to transmission grids by utility and non-utility purchasers and sellers of
electricity. Industry deregulation may encourage the disaggregation of
vertically integrated utilities into separate generation, transmission and
distribution businesses.

The United States electric utility industry is currently experiencing
increasing competitive pressures, primarily in wholesale markets, as a result of
consumer demands, technological advances, greater availability of natural
gas-fired generation that is more efficient than NRG Energy's generation
facilities and other factors. The Federal Energy Regulatory Commission (FERC)
has implemented and continues to propose regulatory changes to increase access
to the nationwide transmission grid by utility and non-utility purchasers and
sellers of electricity.

Proposals have been introduced in Congress to repeal PURPA and PUHCA, and
FERC has publicly indicated support for the PUHCA repeal effort. If the repeal
of PURPA or PUHCA occurs, either separately or as part of legislation designed
to encourage the broader introduction of wholesale and retail competition, the
significant competitive advantages that independent power producers currently
enjoy over certain regulated utility companies would be eliminated or sharply
curtailed, and the ability of regulated utility companies to compete more
directly with independent power companies would be increased. To the extent
competitive pressures increase and the pricing and sale of electricity assumes
more characteristics of a commodity business, the economics of domestic
independent power generation projects may come under increasing pressure.
Deregulation may not only continue to fuel the current trend toward
consolidation among domestic utilities, but may also encourage the
disaggregation of vertically-integrated utilities into separate generation,
transmission and distribution businesses.

In addition, the independent system operators who oversee most of the
wholesale power markets have in the past imposed, and may in the future continue
to impose, price limitations and other mechanisms to address some of the
volatility in these markets. For example, the independent system operator for
the New York power Pool and the California independent system operator have
recently imposed price limitations. These types of price limitations and other
mechanisms in New York, California, the New England Power Pool and elsewhere may
adversely impact the profitability of NRG Energy's generation facilities that
sell energy into the
20

wholesale power markets. Finally, the regulatory and legislative changes that
have recently been enacted in a number of states in an effort to promote
competition are novel and untested in many respects. These new approaches to the
sale of electric power have very short operating histories, and it is not yet
clear how they will operate in times of market stress or pressure, given the
extreme volatility and lack of meaningful long-term price history in many of
these markets and the imposition of price limitations by independent system
operators.

EMPLOYEES

At December 31, 2001, NRG Energy had 3,888 employees, approximately 496 of
whom are employed directly by NRG Energy and approximately 3,392 of whom are
employed by its wholly owned subsidiaries and affiliates. Approximately 1,825
employees are covered by bargaining agreements. NRG Energy has experienced no
significant labor stoppages or labor disputes at its facilities.

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION

The information presented in this annual report includes forward-looking
statements in addition to historical information. These Statements involve known
and unknown risks and relate to future events, or projected business results. In
some cases forward-looking statements may be identified by their use of such
words as "may," "expects," "plans," "anticipates," "believes," and similar
terms. Forward-looking statements are only predictions, and actual results may
differ materially from the expectations expressed in any forward-looking
statement. While NRG Energy believes that the expectations expressed in such
forward-looking statements are reasonable, we can give no assurances that these
expectations will prove to have been correct. In addition to any assumptions and
other factors referred to specifically in connection with such forward-looking
statements, factors that could cause actual results to differ materially from
those contemplated in any forward-looking statements include, among others, the
following:

- General economic conditions including inflation rates and monetary or
currency exchange rate fluctuations; the risk of a significant slowdown
in growth in the U.S. economy or risk of delay in growth recovery in the
U.S. as a consequence of the September 11, 2001 terrorist attacks and
other factors;

- Trade, monetary, fiscal, taxation, and environmental policies of
governments, agencies and similar organizations in geographic areas where
NRG Energy 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;

- Factors affecting the 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 credit 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;

- Employee workforce factors including loss or retirement of key
executives, collective bargaining agreements with union employees, or
work stoppages;

- Volatility of energy prices in a deregulated market environment;

- Increased competition in the power generation industry;

- Cost and other effects of legal and administrative proceedings,
settlements, investigations and claims;

21

- Technological developments that result in competitive disadvantages and
create the potential for impairment of existing assets;

- The completion of the Xcel Energy exchange offer transaction and the
business plan Xcel Energy puts in place following such completion;

- Factors associated with various investments including conditions of final
legal closing, partnership actions, competition, operating risks,
dependence on certain suppliers and customers, domestic and foreign
environmental and energy regulations;

- Limitations on NRG Energy's ability to control the development or
operation of projects in which the Company has less than 100% interest;

- The lack of operating history at development projects, the lack of NRG
Energy's operating history at the projects not yet owned and the limited
operating history at the remaining projects provide only a limited basis
for management to project the results of future operations;

- Risks associated with timely completion of projects under construction,
including obtaining competitive contracts, obtaining regulatory and
permitting approvals, local opposition, construction delays and other
factors beyond NRG Energy's control;

- The failure to timely satisfy the closing conditions contained in the
definitive agreements for the acquisitions of projects subject to
definitive agreements but not yet closed, many of which are beyond NRG
Energy's control;

- Factors challenging the successful integration of projects not previously
owned or operated by NRG Energy, including the ability to obtain
operating synergies;

- Factors associated with operating in foreign countries including: delays
in permitting and licensing, construction delays and interruption of
business, political instability, risk of war, expropriation,
nationalization, renegotiation, or nullification of existing contracts,
changes in law, and the ability to convert foreign currency into United
States dollars;

- Changes in government regulation or the implementation of government
regulations, including pending changes within or outside of California as
a result of the California energy crisis, which could result in NRG
Energy's failure to obtain regulatory approvals required to close project
acquisitions, and which could adversely affect the continued deregulation
of the electric industry;

- Other business or investment considerations that may be disclosed from
time to time in NRG Energy's Securities and Exchange Commission filings
or in other publicly disseminated written documents, including NRG
Energy's Registration Statement No. 333-62958, as amended, and all
supplements therein.

NRG Energy undertakes no obligation or publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. The foregoing review of factors that could cause our actual
results to differ materially from those contemplated in any forward-looking
statements included in this annual report should not be construed as exhaustive.

ITEM 2 -- PROPERTIES

Listed below are descriptions of NRG Energy's interests in facilities,
operations and/or projects under construction as of December 31, 2001.

22

INDEPENDENT POWER PRODUCTION AND COGENERATION FACILITIES

NET        NRG'S
OWNED     PERCENTAGE
CAPACITY   OWNERSHIP
NAME AND LOCATION OF FACILITY              PURCHASER/POWER MARKET        (MW)      INTEREST     FUEL TYPE
-----------------------------              ----------------------      --------   ----------    ---------

NORTHEAST REGION:
Oswego, New York.......................  Niagara Mohawk/NYISO           1,700         100%     Oil/Gas
Huntley, New York......................  Niagara Mohawk/NYISO             760         100%     Coal
Dunkirk, New York......................  Niagara Mohawk/NYISO             600         100%     Coal
Arthur Kill, New York..................  NYISO                            842         100%     Gas/Oil
Astoria Gas Turbines, New York.........  NYISO                            614         100%     Gas/Oil
Ilion, New York........................  NYISO                             60         100%     Gas/Oil
Somerset, Massachusetts................  Eastern Utilities                229         100%     Coal/Oil/Jet
Associates
Middletown, Connecticut................  Connecticut Light & Power        856         100%     Oil/Gas/Jet
Meriden Power, Connecticut.............  ISO-NE                           540         100%     Gas/Oil
Montville, Connecticut.................  Connecticut Light & Power        498         100%     Oil/Gas
Devon, Connecticut.....................  Connecticut Light & Power        401         100%     Gas/Oil/Jet
Norwalk Harbor, Connecticut............  Connecticut Light & Power        353         100%     Oil
Connecticut Jet Power, Connecticut.....  Connecticut Light & Power        127         100%     Jet
Other -- 7 projects....................  Various                           96      Various     Various
SOUTH CENTRAL REGION:
Big Cajun II, Louisiana................  Cooperatives/SERC-Entergy      1,489       86.04%     Coal
Big Cajun I, Louisiana.................  Cooperatives/SERC-Entergy        458         100%     Gas
Bayou Cove, Louisiana..................  SERC-Entergy                     320         100%     Gas
Sterlington, Louisiana.................  Louisiana Generating             202         100%     Gas
Batesville, Mississippi................  SERC-TVA                         837         100%     Gas
McClain, Oklahoma......................  SPP-Southern                     400          77%     Gas
Brazos Valley, Texas...................  ERCOT                            633         100%     Gas
Sabine River Works, Texas..............  Dupont/SERC-Entergy              210          50%     Gas
Mustang, Texas.........................  Golden Spread Electric Coop      122          25%     Gas
Other -- 3 projects....................  Various                           45      Various     Various
WEST COAST REGION:
El Segundo Power, California...........  California DWR                   510          50%     Gas
Encina, California.....................  California DWR                   483          50%     Gas/Oil
Long Beach Generating, California......  California DWR                   265          50%     Gas
San Diego Combustion Turbines,                                                         50%
California...........................  Cal ISO                          127                  Gas/Oil
Crockett Cogeneration, California......  PG&E                             138       57.67%     Gas
Mt. Poso Cogeneration, California......  PG&E                              20       39.50%     Coal
Saguaro Power Co., Nevada..............  Nevada Power                      53       50.00%     Gas/Oil
NORTH CENTRAL REGION:
Kendall, Illinois......................  MAIN                           1,168         100%     Gas
Nelson, Illinois.......................  MAIN                           1,168         100%     Gas
Rockford I, Illinois...................  ComEd                            342         100%     Gas
Rockford II, Illinois..................  MAIN                             171         100%     Gas
Rocky Road Power, Illinois.............  MAIN                             175          50%     Gas
Audrain, Missouri......................  MAIN/SERC-Entergy                640         100%     Gas
Other -- 2 projects....................  Various                           42      Various     Various
MID-ATLANTIC REGION:
Indian River, Delaware.................  Delmarva/PJM                     784         100%     Coal/Oil
Dover, Delaware........................  PJM                              106         100%     Gas/Coal
Vienna, Maryland.......................  Delmarva/PJM                     170         100%     Oil
Conemaugh, Pennsylvania................  PJM                               64        3.72%     Coal/Oil
Keystone, Pennsylvania.................  PJM                               63        3.70%     Coal/Oil
Paxton Creek Cogeneration,                                                            100%
Pennsylvania.........................  Virginia Electric & Power         12                  Gas
OTHER NORTH AMERICA:
NEO Corporation, Various...............  Various                          197       71.57%     Various
Energy Investors Funds, Various........  Various                           11        0.73%     Various

23

NET        NRG'S
OWNED     PERCENTAGE
CAPACITY   OWNERSHIP
NAME AND LOCATION OF FACILITY              PURCHASER/POWER MARKET        (MW)      INTEREST     FUEL TYPE
-----------------------------              ----------------------      --------   ----------    ---------

INTERNATIONAL PROJECTS:
Asia-Pacific:
Lanco Kondapalli Power, India..........  APTRANSCO                        107          30%     Gas/Oil
Hsinchu, Taiwan........................  Industrials                      102          60%     Gas
Australia:
Flinders, South Australia..............  South Australian Pool            760         100%     Coal
Gladstone Power Station, Queensland....  Enertrade/Boyne Smelters         630       37.50%     Coal
Loy Yang Power A, Victoria.............  Victorian Pool                   507       25.37%     Coal
Collinsville Power Station,                                                            50%
Queensland...........................  Enertrade                         96                  Coal
Energy Developments Limited, Various...  Various                           95       25.10%     Various
Europe:
Killingholme Power A, UK...............  UK Electricity Grid              680         100%     Gas
Enfield Energy Centre, UK..............  UK Electricity Grid               99          25%     Gas/Oil
Schkopau Power Station, Germany........  VEAG/Industrials                 400       41.67%     Coal
MIBRAG mbH, Germany....................  ENVIA/MIBRAG Mines               119          50%     Coal
Csepel II, Hungary.....................  MVM                              389         100%     Gas/Oil
ECK Generating, Czech Republic.........  STE/Industrials                  166       44.50%     Coal/Gas/Oil
CEEP Fund, Poland......................  Industrials                        1        9.33%     Gas/Coal
Other Americas:
TermoRio, Brazil.......................  Petrobras                        520          50%     Gas/Oil
Itiquira Energetica, Brazil............  COPEL/Tradener                   154       98.73%     Hydro
COBEE, Bolivia.........................  Electropaz/ELF                   217       98.90%     Hydro/Gas
Bulo Bulo, Bolivia.....................  Bolivian Grid                     53          60%     Gas
Energia Pacasmayo, Peru................  Electroperu/Peruvian Grid         66         100%     Hydro/Oil
Cahua, Peru............................  Quimpac/Industrials               45         100%     Hydro
Latin Power, Various...................  Various                           52        6.75%     Various

THERMAL ENERGY PRODUCTION AND TRANSMISSION FACILITIES
AND RESOURCE RECOVERY FACILITIES

NRG'S
PERCENTAGE         THERMAL ENERGY
DATE OF                                OWNERSHIP          PURCHASER/MSW
NAME AND LOCATION OF FACILITY       ACQUISITION    NET OWNED CAPACITY(1)      INTEREST             SUPPLIER
-----------------------------       -----------    ---------------------     ----------         --------------

NRG Energy Center Minneapolis,
Minnesota.....................       1993        Steam: 1,403 mmBtu/hr.        100%      Approximately 100 steam
(411 MWt)                               customers and 40 chilled
Chilled water: 42,450                   water customers
tons (149 MWt)
NRG Energy Center San Francisco,
California....................       1999        Steam: 490 mmBtu/hr.          100%      Approximately 185 steam
(144 MWt)                               customers
NRG Energy Center Harrisburg,
Pennsylvania..................       2000        Steam: 490 mmBtu/hr.          100%      Approximately 295 steam
(144 MWt)                               customers and 2 chilled
Chilled water: 1,800                    water customers
tons (6 MWt)
NRG Energy Center Pittsburgh,
Pennsylvania..................       1999        Steam: 260 mmBtu/hr.          100%      Approximately 30 steam
(76 MWt)                                and 30 chilled water
Chilled water: 12,580                   customers
tons (44 MWt)
NRG Energy Center San Diego,
California....................       1997        Chilled water: 8,000          100%      Approximately 20 chilled
tons (28 MWt)                           water customers
Hennepin Co. Energy Center,
Minnesota.....................        N/A        Steam: 140 mmBtu/hr.           --       NRG Energy Center
(41 MWt)                                Minneapolis Customers

24

NRG'S
PERCENTAGE         THERMAL ENERGY
DATE OF                                OWNERSHIP          PURCHASER/MSW
NAME AND LOCATION OF FACILITY       ACQUISITION    NET OWNED CAPACITY(1)      INTEREST             SUPPLIER
-----------------------------       -----------    ---------------------     ----------         --------------

NRG Energy Center Rock-Tenn,
Minnesota.....................       1992        Steam: 430 mmBtu/hr.          100%      Rock-Tenn Company
(126 MWt)
Camas Power Boiler,
Washington....................       1997        Steam: 200 mmBtu/hr.          100%      Georgia-Pacific Corp.
(59 MWt)
NRG Energy Center Dover,
Delaware......................       2000        Steam: 190 mmBtu/hr.          100%      Kraft Foods Inc.
(56 MWt)
NRG Energy Center Washco,
Minnesota.....................       1992        Steam: 160 mmBtu/hr.          100%      Andersen Corporation,
(47 MWt)                                Minnesota Correctional
Facility
Energy Center Kladno, Czech
Republic (2)..................       1994        227 mmBtu/hr. (67 MWt)      44.40%      City of Kladno
Csepel I, Budapest, Hungary.....       2001        396 mmBtu/hr. (116            100%      Industrial customers
MWt)
RESOURCE RECOVERY FACILITIES
Newport, Minnesota..............       1993        MSW: 1,500 tons/day           100%      Ramsey and Washington
Counties
Elk River, Minnesota............       2001        MSW: 1,275 tons/day            85%      Anoka, Hennepin, and
Sherburne Counties;
Tri-County Solid Waste
Management Commission
Penobscot Energy Recovery,
Maine.........................       1997        MSW: 590 tons/day              59%      Bangor Hydroelectric
Company

---------------
(1) Thermal production and transmission capacity is based on 1,000 Btus per
pound of steam production or transmission capacity. The unit mmBtu is equal
to one million Btus.

(2) Kladno also is included in the Independent Power Production and Cogeneration
Facilities table on the preceding page, under the name ECK Generating.

OTHER PROPERTIES

In addition to the above, NRG Energy leases its corporate offices at 901
Marquette, Suite 2300, Minneapolis, Minnesota 55402 and various other office
spaces.

25

ITEM 3 -- LEGAL PROCEEDINGS

FORTISTAR CAPITAL V. NRG ENERGY

In July 1999, Fortistar Capital Inc., a Delaware corporation, filed a
complaint in District Court (Fourth Judicial District, Hennepin County) in
Minnesota against NRG Energy asserting claims for injunctive relief and for
damages as a result of NRG Energy's alleged breach of a confidentiality letter
agreement with Fortistar relating to the Oswego facility in New York. NRG Energy
disputed Fortistar's allegations and asserted numerous counterclaims, and in
October 1999, NRG Energy, through a wholly-owned subsidiary, closed on the
acquisition of the Oswego facility. In April and December 2000, NRG Energy filed
summary judgment motions to dispose of the litigation. A hearing on these
motions was held in February 2001 and certain of Fortistar's claims were
dismissed. NRG Energy intends to continue to vigorously defend the suit and
believes Fortistar's claims to be without merit. A trial date of May 13, 2002
has been set in respect of the remaining claims.

NEW YORK ENVIRONMENTAL LITIGATION

In January 2002 the New York Attorney General and the New York Department
of Environmental Control (NYDEC) filed suit in the western district of New York
against NRG Energy and Niagara Mohawk Power Corporation (Niagara Mohawk), the
prior owner of the Huntley and Dunkirk facilities in New York. The lawsuit
relates to physical changes made at those facilities prior to NRG Energy's
assumption of ownership. The complaint alleges that these changes represent
major modifications undertaken without the required permits having been
obtained. Although NRG Energy has a right to indemnification by the previous
owner for fines, penalties, assessments and related losses resulting from the
previous owner's failure to comply with environmental laws and regulations, NRG
Energy could be enjoined from operating the facilities if the facilities are
found not to comply with applicable permit requirements.

In July 2001, Niagara Mohawk Power Corporation filed a declaratory judgment
action in the Supreme Court for the State of New York, County of Onondaga,
against NRG Energy and its wholly-owned subsidiaries, Huntley Power LLC and
Dunkirk Power LLC. Niagara Mohawk requests a declaration by the Court that,
pursuant to the terms of the Assets Sales Agreement under which NRG Energy
purchased the Huntley and Dunkirk generating facilities from Niagara Mohawk (the
ASA), defendants have assumed liability for any costs for the installation of
emissions controls or other modifications to or related to the Huntley or
Dunkirk plants imposed as a result of violations or alleged violations of
environmental law. Niagara Mohawk also requests a declaration by the Court that,
pursuant to the ASA, defendants have assumed all liabilities, including
liabilities for natural resource damages, arising from emissions or releases of
pollutants from the Huntley and Dunkirk plants, without regard to whether such
emissions or releases occurred before, on or after the closing date for the
purchase of the Huntley and Dunkirk plants. NRG Energy has counterclaimed
against Niagara Mohawk, and the parties have exchanged discovery requests.

NYDEC OPACITY NOTICE OF VIOLATION

NRG Energy became part of an opacity consent order as a result of acquiring
its Huntley, Dunkirk and Oswego plants from Niagara Mohawk. At the time of
financial close on these assets, a consent order was being negotiated between
Niagara Mohawk and the NYDEC; it required Niagara Mohawk to pay a stipulated
penalty for each opacity event at these facilities. On January 14, 2002, the
NYDEC issued NRG Energy Notices of Violations (NOV) for opacity events which had
occurred since the time NRG Energy assumed ownership of the Huntley, Dunkirk and
Oswego generating stations. The NOVs allege that a total of 7,231 events had
occurred where the average opacity during a six minute block of time had
exceeded 20%. The NYDEC set the penalty associated with the NOVs at $900,000.

CALIFORNIA LITIGATION

NRG Energy and other power generators and power traders have been named as
defendants in certain private plaintiff class actions filed in the Superior
Court of the State of California for the County of San Diego in San Diego,
California in November 2000 (Pamela R. Gordon v. Reliant Energy, Inc., et al.
and Ruth Hendricks

26

v. Dynegy Power Marketing Inc., et al). NRG Energy has also been named in
another suit filed in January 2001 in San Diego County and brought by three
California water districts, as consumers of electricity (Sweetwater Authority v.
Dynegy, Inc., et al.), and in two suits filed in San Francisco County, one
brought by the San Francisco City Attorney on behalf of the people of the State
of California (The People of the State of California v. Dynegy Power Marketing,
Inc., et al.) and one brought by Pier 23 Restaurant as a class action (Pier 23
Restaurant v. PG&E Energy Trading, et al.). Certain NRG Energy affiliates in NRG
Energy's West Coast power partnership with Dynegy (Cabrillo I and II, Long Beach
Generation and El Segundo Power) have been named as defendants in a state court
action in Los Angeles County (Bustamonte v. Dynegy, Inc., et al.).

Although the complaints contain a number of allegations, the basic claim is
that, by underbidding forward contracts and exporting electricity to surrounding
markets, the defendants, acting in collusion, were able to drive up wholesale
prices on the Real Time and Replacement Reserve markets, through the Western
Coordinating Council and otherwise. The complaints allege that the conduct
violated California antitrust and unfair competition laws. NRG Energy does not
believe that it has engaged in any illegal activities, and intends to vigorously
defend these lawsuits. These six civil actions brought against NRG Energy and
other power generators and power traders in California have been consolidated
and assigned to the presiding judge of the San Diego County Superior Court, and
a pre-trial conference has been scheduled for March 2002. The plaintiffs in
these six consolidated civil actions have filed a master amended complaint with
the Superior Court of the State of California, County of San Diego. The
plaintiffs reiterate the allegations contained in their complaints and allege
that defendants' anti-competitive conduct damaged the general public and class
members in an amount in excess of $1.0 billion.

On March 20, 2002 the Attorney General of California filed at the Federal
Energy Regulatory Commission a complaint against specific named generators and
marketers (including Dynegy Power Marketing, Inc., which serves as the
scheduling coordinator for certain NRG affiliates) and against "all other public
utility sellers of energy and ancillary services into markets operated by the
California Power Exchange and California Independent System Operator." The
complaint alleges that defendants have violated FERC's grant of market-based
rate authority by failing to file their rates, as required by Section 205(c) of
the Federal Power Act and numerous FERC orders requiring the filing of
transaction-specific information about defendants' sales and purchases at
market-based rates. The plaintiff seeks injunctive relief to compel defendants'
prospective compliance with Section 205 of the Federal Power Act, as well as
refunds on behalf of California purchasers to the extent prior transactions are
found to exceed just and reasonable price levels.

On March 27, 2002, the Attorney General of California requested that Xcel,
Inc., NRG Energy, Inc., Dynegy, Inc., Dynegy Power Marketing, Inc., and certain
NRG affiliates agree to toll the statute of limitations for a threatened action
under the Clayton Antitrust Act. The Attorney General has neither provided a
draft complaint nor served an actual complaint, but the Company expects to see a
draft complaint within the next several weeks.

SHAREHOLDER LITIGATION

On February 15, 2002, Xcel Energy announced its intention to commence an
exchange offer to acquire all of the outstanding publicly held shares of NRG
Energy. Following this announcement, nine separate but similar civil actions
were filed in the Court of Chancery of the State of Delaware in and for New
Castle County by owners of NRG Energy common stock, against Xcel Energy, NRG
Energy and NRG Energy's directors. The complaints contain a number of
allegations, but the basic claim is that Xcel proposes to acquire the remaining
ownership of NRG Energy for inadequate consideration and without full and
complete disclosure of all material information, in breach of defendants'
fiduciary duties. The complaints request the court to enjoin the proposed
transaction and, in the event the exchange offer is consummated, to award
damages to plaintiffs. An NRG Energy stockholder has also filed a class action
complaint challenging the transaction in a Minnesota state court against Xcel
Energy, NRG Energy, and seven of the nine NRG Energy directors, alleging
essentially the same charges.

27

ANCILLARY SERVICES

On March 11, 2002, the Attorney General of California filed a civil
complaint against NRG Energy, certain NRG Energy affiliates, Xcel Energy,
Dynegy, Inc. and Dynegy Power Marketing, Inc., alleging antitrust violations in
the ancillary services market. The complaint alleges that defendants repeatedly
sold electricity generating capacity to the California ISO for use as a reserve
and subsequently, and impermissibly, sold the same capacity into the "spot"
market for wholesale power, unlawfully collecting millions of dollars. Similar
complaints were filed against other power generators. The plaintiff seeks an
injunction against further similar acts by the defendants, and also seeks
restitution, disgorgement of all proceeds, including profits, gained from these
sales, and certain civil penalties.

There are no other material legal proceedings pending to which NRG Energy
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 NRG Energy or its
subsidiaries. There are no other material administrative or judicial proceedings
arising under environmental quality or civil rights statutes pending or known to
be contemplated by governmental agencies to which NRG Energy is or would be a
party.

ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were considered during the fourth quarter of 2001.

PART II

ITEM 5 -- MARKET PRICE FOR THE REGISTRANT'S
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

QUARTERLY STOCK DATA

NRG Energy's common stock is traded principally on the New York Stock
Exchange (the Exchange). The common stock was first traded on the Exchange on
May 31, 2000, concurrent with the underwritten initial public offering of shares
of NRG Energy's common stock at an initial price to the public of $15.00 per
share. The following table reflects the range of high and low selling prices of
NRG Energy's common stock by quarter from May 31, 2000 through December 31,
2001. This information is based on selling prices as reported by the New York
Stock Exchange.

2001                2000
----------------    ----------------
HIGH      LOW       HIGH      LOW
------    ------    ------    ------

First Quarter.......................................    $36.40    $22.19      N.A.      N.A.
Second Quarter......................................    $35.75    $21.38    $18.15    $16.25
Third Quarter.......................................    $25.30    $13.72    $36.50    $18.15
Fourth Quarter......................................    $20.47    $12.24    $36.50    $22.50

N.A. -- Not available -- stock not publicly traded

HOLDERS

At March 6, 2002, there were approximately 278 holders of record of common
stock and 1 holder of Class A common stock.

28

DIVIDENDS ON COMMON STOCK

NRG Energy has not paid and does not currently intend to distribute any
earnings as dividends.

ITEM 6 -- SELECTED FINANCIAL DATA

The following table presents selected financial data of NRG Energy. This
historical data should be read in conjunction with the Consolidated Financial
Statements and the related notes thereto in Item 8 and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" in Item 7.

YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
2001           2000          1999          1998          1997
(In thousands, except per share data.)    -----------    ----------    ----------    ----------    ----------

Total operating revenues and equity
earnings..........................      $ 3,008,640    $2,157,986    $  500,018    $  182,130    $  118,252
Total operating costs and expenses...       2,293,818     1,584,913       390,498       125,118       100,143
Net Income..........................          265,204       182,935        57,195        41,732        21,982
Weighted Average Number of Common
Shares Outstanding -- Basic.......          194,929       165,861       147,605       147,605       147,605
Weighted Average Number of Common
Shares Outstanding -- Diluted.....          196,439       166,989       147,605       147,605       147,605
Earnings per Weighted Average Common
Share -- Basic....................      $      1.36    $     1.10    $      .39    $      .28    $      .15
Earnings per Weighted Average Common
Share -- Diluted..................             1.35          1.10           .39           .28           .15
Total Assets........................       12,894,545     5,978,992     3,431,684     1,293,426     1,168,102
Long-term debt, including current
Maturities........................        8,343,986     3,797,318     1,971,860       626,476       620,855

---------------
* Earnings Per Share amounts for the years 1999 and earlier have been restated
to reflect the issuance of Class A common stock.

29

ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2001 COMPARED TO THE YEAR ENDED DECEMBER 31,
2000

EARNINGS PER SHARE

Earnings per share on a fully diluted basis for 2001 were $1.35, compared
to $1.10 for 2000, an increase of $0.25 or approximately 22.7%. During the year
2001, earnings per share were adversely affected through additional dilution
resulting from the issuance of 18.4 million shares of common stock in March 2001
and through the issuance and exercise of stock options throughout the year, as
compared to 2000.

NET INCOME

Net income for 2001 was $265.2 million, compared to $182.9 million for
2000, an increase of $82.3 million or approximately 45.0%. Net income for 2001
increased by $82.3 million due to the factors described below.

REVENUES AND EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES

For the year ended December 31, 2001, NRG Energy had total revenues and
equity earnings of $3.0 billion, compared to $2.2 billion for 2000, an increase
of $850.7 million or approximately 39.4%.

REVENUES FROM MAJORITY-OWNED OPERATIONS

NRG Energy's operating revenues from majority-owned operations were $2.8
billion compared to $2.0 billion, an increase of $780 million or approximately
38.6%. Revenues from majority-owned operations for the year ended December 31,
2001, consisted primarily of power generation revenues from domestic operations
of approximately $1.8 billion, operations in Europe of $490.9 million,
Asia-Pacific $239.1 million and Other Americas $34.7 million, resulting in
increases of $256.5 million, $293.2 million, $144.4 million and $34.4 million
compared to 2000, respectively. In addition, NRG Energy recognized revenues from
majority-owned operations from its alternative energy, thermal and other
operations of approximately $79.5 million, $108.3 million and $10.9 million
respectively, resulting in increases of $37.9 million, $20.5 million and a
decrease of $6.9 million compared to 2000, respectively.

The increase of $256.5 million related to NRG Energy's domestic power
generation operations is due primarily to additional sales at NRG Energy's Mid
Atlantic region facilities which were acquired in June 2001 from Conectiv and
increased sales at NRG Energy's South Central region facilities which were
primarily acquired in March 2000 from Cajun Electric and expanded with the
acquisition of the Batesville facility from LS Power in January 2001 and
completion of the Sterlington and Big Cajun 1 peaking facilities in 2001.

The increase of $293.2 million related to NRG Energy's Europe power
generation operations is due primarily to operations at Entrade, the Csepel
facility in Hungary and Saale Energia in Germany (SEG). Entrade was acquired in
November 2000, Csepel was acquired in June 2001 and SEG through an increase in
ownership became consolidated in March 2001.

The increase of $144.4 million related to NRG Energy's Asia-Pacific's power
generation operations is due primarily to a full year of operations at the
Flinders Power facilities which was acquired in August 2000 and to a lesser
degree the addition of the Hsin Yu Development Company facilities in July 2001.

The increase of $34.4 million related to NRG Energy's Other America's power
generation operations is due primarily to the consolidation in 2001 of the COBEE
and Bulo Bulo facilities which were previously accounted for under the equity
method.

EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES

For the year ended December 31, 2001, NRG Energy had equity in earnings of
unconsolidated affiliates of $210.0 million, compared to $139.4 million for
2000, an increase of $70.6 million or approximately 50.7%. The increase of $70.6
million is primarily comprised of favorable results from NRG Energy's domestic
and

30

international power generation equity investments. During 2001, NRG Energy's
domestic power generation investment in West Coast Power contributed $41.0
million of this increase. NRG Energy's international power generation
investments in MIBRAG, Loy Yang and Kladno (ECKG) also favorably contributed to
equity in earnings for 2001 in comparison to 2000. MIBRAG favorably contributed
$13.3 million, Loy Yang favorably contributed $11.7 million due to improved
market prices in Australia, Kladno contributed $6.6 million, Enfield contributed
$7.4 million and Kondapalli contributed $3.8 million. These increases were
partially offset by unfavorable results at NRG Energy's other investments
accounted for under the equity method and continued reductions in the equity
earnings attributable to NEO Corporation. NEO Corporation derives a significant
portion of its net income from Section 29 tax credits.

OPERATING COSTS AND EXPENSES

For the year ended December 31, 2001, cost of majority-owned operations was
$1.9 billion compared to $1.3 billion for 2000, an increase of $566.2 million or
approximately 43.9%. For the years ended December 31, 2001 and 2000, cost of
majority-owned operations represented approximately 66.3% and 63.9% of revenues
from majority-owned operations, respectively. Cost of majority-owned operations
consists primarily of cost of energy (primarily fuel costs), labor, operating
and maintenance costs and non-income based taxes related to NRG Energy's
majority-owned operations.

Approximately 89% of the increase in operating costs and expenses for 2001
compared to 2000 of $566.2 million is primarily due to increased cost of energy
incurred at NRG Energy's generating facilities.

The majority of the growth in cost of majority owned operations was due to
NRG Energy's recent international acquisitions. In the third and fourth quarters
of 2000, NRG Energy completed the Flinders and Entrade acquisitions, during the
second quarter of 2001, NRG Energy increased its ownership in the Schkopau,
Cobee and Bulo Bulo projects as well as acquired the Csepel facility in Hungary.
During the third quarter NRG Energy acquired a 60% interest in the Hsin Yu
Energy Development Company. These recent acquisitions accounted for
approximately $370.7 million of the increase in the cost of majority-owned
operations the remaining increase is due primarily to increased operating costs
at the South Central region generating facilities, the recently acquired
Mid-Atlantic generating facilities and costs incurred by NRG Energy's power
marketing operations.

DEPRECIATION AND AMORTIZATION

For the year ended December 31, 2001, depreciation and amortization was
$212.5 million, compared to $122.9 million for the year ended December 31, 2000,
an increase of $89.5 million or approximately 72.8%. This increase is primarily
due to the addition of property, plant and equipment related to NRG Energy's
recently completed acquisitions of electric generating facilities. Approximately
$57.2 million of this increase is related to increased depreciable balances
resulting from recently completed domestic acquisitions and the remainder is
related to recently completed international acquisitions. Through primarily
acquisitions NRG Energy's net property, plant and equipment balance has grown to
$9.4 billion, at the end of 2001 from $4.0 billion, at the end of 2000, an
increase of $5.4 billion, or approximately 133.4%.

GENERAL, ADMINISTRATIVE AND DEVELOPMENT

For the year ended December 31, 2001, general, administrative and
development costs were $225.7 million, compared to $172.5 million, an increase
of $53.2 million or approximately 30.8%. This increase is primarily due to
increased business development activities, associated legal, technical and
accounting expenses, employees and equipment resulting from expanded operations
and pending acquisitions. This also includes a $10.3 million expense related to
Enron's bankruptcy. This amount includes a pre-tax charge of $22.4 million to
establish bad debt reserves, which was partially offset by a pre-tax gain of
$12.1 million on a credit swap agreement entered into as part of the NRG
Energy's credit risk management program.

31

OTHER INCOME (EXPENSE)

For the year ended December 31, 2001, total other expense was $416.2
million, compared to $297.4 million for the year ended December 31, 2000, an
increase of $118.8 million or approximately 40.0%. The increase in total other
expense of $118.8 million, from 2000, consisted primarily of an increase in
interest expense that was partially offset by an increase in other income and a
reduction in minority interest in earnings of consolidated subsidiaries.

For the year ended December 31, 2001, interest expense (which includes both
corporate and project level interest expense) was $443.7 million, compared to
$293.9 million in 2000, an increase of $149.8 million or approximately 51.0%.
This increase is due to increased corporate and project level debt issued during
2001. During 2001, NRG Energy issued substantial amounts of long-term debt at
both the corporate level (recourse debt) and project level (non-recourse debt)
to either directly finance the acquisition of electric generating facilities or
refinance short-term bridge loans incurred to finance such acquisitions. NRG
Energy also completed its issuance of a $2 billion construction revolver during
2001 of which approximately $697.5 million is outstanding as of December 31,
2001. NRG Energy's outstanding debt balances has grown to $9.2 billion at the
end of 2001 from $3.8 billion at the end of 2000. The growth in the outstanding
debt balance has contributed directly to the growth in interest expense during
2001, as compared to 2000.

For the year ended December 31, 2001, minority interest in earnings of
consolidated subsidiaries was $6.6 million, compared to $11.3 million, a
decrease of $4.7 million or approximately 42.1%, as compared to 2000. The
decrease is primarily due to lower earnings from the Crockett Cogeneration
project which resulted from bad debt reserves established in 2001.

For the year ended December 31, 2001, other income, net, was $34.1 million,
as compared to $7.9 million, for the year ended December 31, 2000, an increase
of $26.2 million, or approximately 333.8%. Other income, net consists primarily
of interest income on cash balances and loans to affiliates, and miscellaneous
other items, including the income statement impact of certain foreign currency
translation adjustments and the impact of gains and losses on the dispositions
of investments. Approximately $18.0 million of the increase relates to interest
on cash balances and loans to affiliates, primarily West Coast Power. The
increase also includes gains on foreign currency translation adjustments and
miscellaneous asset sales that were partially offset by a $3.8 million charge to
write-off capitalized costs associated with the Estonia project.

INCOME TAX

For the year ended December 31, 2001, income tax expense was $33.4 million,
compared to an income tax expense of $92.7 million for the year ended December
31, 2000, a decrease of $59.3 million, or approximately 64.0%. Approximately
$14.7 million of the decrease is attributed to additional IRC Section 29 energy
credits that were recorded in 2001, as compared to the same period in 2000. NRG
Energy reported a worldwide effective tax rate of approximately 27.5% (before
tax credits) for the year ended December 31, 2001, compared to approximately
46.0% for the year ended December 31, 2000. The overall reduction in tax rates
was primarily due to the implementation of state tax planning strategies and a
higher percentage of NRG's overall earnings derived from foreign projects in
lower tax jurisdictions.

FOR THE YEAR ENDED DECEMBER 31, 2000 COMPARED TO THE YEAR ENDED DECEMBER 31,
1999

For the year ended December 31, 2000, net income was $182.9 million
compared to $57.2 million for 1999, an increase of $125.7 million or 219.8%.
This increase was due to the factors described below.

REVENUES AND EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES

For the year ended December 31, 2000, NRG Energy had total revenues and
equity earnings of $2.2 billion, compared to $500.0 million for the year ended
December 31, 1999, an increase of $1.7 billion or approximately 331.6%. NRG
Energy's operating revenues from majority-owned operations were $2.0 billion
compared to $432.5 million, an increase of $1.6 billion or approximately 366.7%.
The increase in revenues from majority-owned operations is primarily due to
increased sales resulting from recently completed acquisitions of electric
generating facilities, primarily during the later portion of 1999 and the first
and third
32

quarters of 2000. During the later portion of 1999, NRG Energy acquired certain
electric generating facilities in the northeastern region of the United States.
In addition, NRG Energy acquired certain electric generating facilities located
in Louisiana and the United Kingdom at the end of the first quarter of 2000.
During the third quarter of 2000, NRG Energy acquired Flinders Power and certain
thermal operations. In addition, NRG Energy's increased ownership in Crockett
Cogeneration has contributed significantly to its revenue growth during 2000, as
compared to 1999.

For the year ended December 31, 2000, NRG Energy had equity in earnings of
unconsolidated affiliates of $139.4 million, compared to $67.5 million for the
year ended December 31, 1999, an increase of $71.9 million or 106.5%. The
increase in equity earnings of unconsolidated affiliates is due primarily to NRG
Energy's investment in West Coast Power LLC, which benefited from favorable
market conditions in California. In addition, NRG Energy's investment in Rocky
Road LLC, in the fourth quarter of 1999, also contributed favorably to the
increase in equity earnings, compared to the prior year. These increases were
partially offset by reductions in the earnings attributable to NRG Energy's
international equity investments and its investment in NEO Corporation. NEO
Corporation derives a significant portion of its net income from Section 29 tax
credits.

OPERATING COSTS AND EXPENSES

For the year ended December 31, 2000, cost of majority-owned operations,
was $1.3 billion, compared to $269.9 million, an increase of $1.0 billion or
approximately 377.8%. For the year ended December 31, 2000 and 1999, cost of
majority-owned operations represented approximately 59.8% and 54.0% of total
operating revenues and equity earnings, respectively.

For the year ended December 31, 2000, the increase of $1.0 billion is
primarily due to NRG Energy's recent acquisitions of electric generating
facilities during the later portion of 1999 and primarily the first and third
quarters of 2000. During the later portion of 1999, NRG Energy acquired certain
electric generating facilities in the northeastern region of the United States.
In addition, NRG Energy acquired certain electric generating facilities located
in Louisiana and the United Kingdom at the end of the first quarter of 2000.
During the third quarter of 2000, NRG Energy acquired Flinders Power and certain
thermal operations. In addition, NRG Energy's ownership in Crockett Cogeneration
has contributed significantly to the growth the cost of majority-owned
operations during 2000, as compared to 1999.

DEPRECIATION AND AMORTIZATION

For the year ended December 31, 2000, depreciation and amortization was
$122.9 million, compared to $37.0 million for the year ended December 31, 1999,
an increase of $85.9 million or 232.1%. This increase is primarily due to the
addition of property, plant and equipment related to NRG Energy's recently
completed acquisitions of electric generating facilities during the later
portion of 1999 and primarily the first and third quarters of 2000. In addition
the consolidation of NRG Energy's investment in Crockett Cogeneration at the end
of 1999 also contributed to the increase in depreciation and amortization during
2000. Through these acquisitions NRG Energy's net property, plant and equipment
balance has grown to $4.0 billion at the end of 2000 from $2.0 billion at the
end of 1999, an increase of $2.0 billion or approximately 104.6%.

GENERAL, ADMINISTRATIVE AND DEVELOPMENT

For the year ended December 31, 2000, general, administrative and
development costs were $172.5 million, compared to $83.6 million, an increase of
$88.9 million or approximately 106.4%. This increase is primarily due to
increased business development activities, associated legal, technical and
accounting expenses, employees and equipment resulting from expanded operations
and pending acquisitions. NRG Energy's asset base has grown to $6.0 billion at
the end of 2000, compared to $3.4 billion at the end of 1999, an increase of
$2.5 billion or approximately 74.2%. NRG Energy expects this trend to continue
as it continues to be successful in expanding its operations through closure of
its pending acquisitions and business development activities.

33

OTHER INCOME (EXPENSE)

For the year ended December 31, 2000, total other expense was $297.4
million, compared to $78.4 million for the year ended December 31, 1999, an
increase of $219.0 million or approximately 279.3%.

The increase in total other expense of $219.0 million, as compared to 1999,
consisted primarily of an increase in Interest expense and Minority interest in
earnings of consolidated subsidiary. These increases were partially offset by
decreases in other income, net and gain on sale of interest in projects, in
comparison to 1999.

For the year ended December 31, 2000, interest expense (which includes both
corporate and project level interest expense) was $293.9 million, as compared to
$93.4 million in 1999, an increase of $200.5 million or approximately 214.8%.
This increase is due to increased corporate and project level debt issued during
2000 as compared to 1999. During 2000, NRG Energy issued substantial amounts of
long term debt at both the corporate level (recourse debt) and project level
(non-recourse debt) to either directly finance the acquisition of electric
generating facilities or refinance short term bridge loans incurred to finance
such acquisitions. NRG Energy's outstanding long-term debt balances have grown
to $3.8 billion at the end of 2000 from $2.0 billion at the end of 1999. The
growth of such outstanding debt balances has contributed directly to the growth
in interest expense during 2000 as compared to 1999.

For the year ended December 31, 2000, minority interest in earnings of
consolidated subsidiaries was $11.3 million, compared to $2.5 million, an
increase of $8.8 million or approximately 361.5% as compared to 1999. The
increase is due to the consolidation of NRG Energy's 58% interest in Crockett
Cogeneration at the end of 1999 and the recognition of the minority interest in
the project.

For the year ended December 31, 2000, NRG Energy did not recognize any
gains on the sale of any project interests. During 1999 NRG Energy recognized a
gain of $11.0 million related to the reduction in its ownership of Cogeneration
Corporation of America (CogenAmerica). For the year ended December 31, 2000,
other income, net, was $7.9 million, as compared to $6.4 million, for the year
ended December 31, 1999, an increase of $1.5 million, or approximately 22.2%.
Other income, net consists primarily of interest income on loans to affiliates,
and miscellaneous other items, including the income statement impact of certain
foreign currency translation adjustments and the impact of project write-downs
and gains and losses on the dispositions of investments. The increase of $1.5
million is primarily due to an increase in interest income in 2000.

INCOME TAX

For the year ended December 31, 2000, income tax expense was $92.7 million,
compared to an income tax benefit of $26.1 million, an increase of $118.8
million or approximately 455.6%, compared to 1999. The increase in tax expense
in 2000 compared to 1999 is due primarily to higher domestic taxable income.
This increase was partially offset by additional IRC Section 29 energy credits.
For the year ended December 31, 2000, NRG Energy's overall effective income tax
rate was approximately 34%. NRG Energy's effective income tax rate before
recognition of tax credits is 46%. This rate is higher than a combined federal
and Minnesota statutory rate because a significant portion of NRG Energy's
income is generated in New York City, an area with high state and local tax
rates. In addition, NRG Energy has recorded a valuation allowance on certain
state and foreign tax losses, also increasing the effective tax rate.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

NRG Energy's discussion and analysis of its financial condition and results
of operations are based upon NRG Energy's consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements and
related disclosures in compliance with generally accepted accounting principles
(GAAP) requires the application of appropriate technical accounting rules and
guidance as well as the use of estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosures
of contingent assets and liabilities. The application of these policies
necessarily involves judgments regarding future events, including the likelihood
of success of particular projects, legal and regulatory challenges. These
judgments, in and of themselves, could materially impact the financial
statements and disclosures based on varying

34

assumptions, which may be appropriate to use. In addition, the financial and
operating environment also may have a significant effect, not only on the
operation of the business, but on the results reported through the application
of accounting measures used in preparing the financial statements and related
disclosures, even if the nature of the accounting policies have not changed.

On an ongoing basis, NRG Energy, evaluates its estimates, utilizing
historic experience, consultation with experts and other methods NRG Energy
considers reasonable in particular circumstances. In any case, actual results
may differ significantly from NRG Energy's estimates. Any effects on NRG
Energy's business, financial position or results of operations resulting from
revisions to these estimates are recorded in the period in which the facts that
give rise to the revision become known.

NRG Energy's significant accounting policies are summarized in Item
8 -- Note 2 of the Consolidated Financial Statements. The following table
identifies certain of the significant accounting policies listed in Item
8 -- Note 2 of the Consolidated Financial Statements. The table also identifies
the judgments required and uncertainties involved in the application of each.
These policies, along with the underlying assumptions and judgments made by NRG
Energy's management in their application, have a significant impact on NRG
Energy's consolidated financial statements. NRG Energy identifies its most
critical accounting policies as those that are the most pervasive and important
to the portrayal of NRG Energy's financial position and results of operations,
and that require the most difficult, subjective and/or complex judgments by
management regarding estimates about matters that are inherently uncertain.

ACCOUNTING POLICY                   JUDGMENTS/UNCERTAINTIES AFFECTING APPLICATION
-----------------                   ---------------------------------------------

Consolidation Policy                - Determination of control of investments with less than or
equal to 50% interest
- Consistent application of accounting policies of
partnerships and joint ventures
Capitalization Practices            - Determination of beginning and ending of capitalization
periods
Asset Valuation/Purchase            - Recoverability of investment through future operations
Accounting                        - Regulatory and political environments and requirements
- Estimated useful lives of assets
- Allocation of purchase prices to identified assets
Revenue Recognition                 - Customer/counter-party dispute resolution practices
- Market maturity and economic conditions
- Contract interpretation
Uncollectible Receivables           - Economic conditions affecting customers, counter parties,
suppliers and market prices
- Regulatory environment and impact on customer financial
condition
- Outcome of litigation and bankruptcy proceedings
Derivative Financial Instruments    - Market conditions in the energy industry, especially the
effects of price volatility on contractual commitments
- Assumptions used in valuation models
- Counter party credit risk
- Market conditions in foreign countries
- Regulatory and political environments and requirements
Environmental Issues                - Government regulations and standards
- Results of ongoing research and development regarding
environmental impacts
- Cost of remediation
Benefit Plan Accounting             - Future rate of return on pension and other plan assets
- Interest rates used in valuing benefit obligation

35

ACCOUNTING POLICY                   JUDGMENTS/UNCERTAINTIES AFFECTING APPLICATION
-----------------                   ---------------------------------------------

Income Tax Reserves                 - Application of tax statues and regulations to transactions
- Anticipated future decisions of tax authorities
- Ability of tax authority decisions/positions to withstand
legal challenges and appeals
- Ability to utilize tax benefits through future earnings

Of all of the accounting policies identified in the above table, NRG Energy
believes that the following policies and the application thereof to be those
having the most direct impact on NRG Energy's financial position and results of
operations.

CONSOLIDATION POLICY

NRG Energy's consolidated financial statements include NRG Energy's
accounts and those of its subsidiaries. The accounting policies for all of NRG
Energy's operations are in accordance with accounting principles generally
accepted in the United States. NRG Energy has investments in partnerships, joint
ventures and projects, investments such as these in which NRG Energy does not
have control, but has the ability to exercise significant influence over the
operating and financial policies, are accounted for under the equity method.

CAPITALIZATION PRACTICES, ASSET VALUATION AND PURCHASE ACCOUNTING

As of December 31, 2001, NRG Energy has a carrying value of approximately
$9.4 billion of net property, plant and equipment, $2.9 billion of which is
under construction, representing approximately 73.1% and 22.8% of total assets,
respectively. The majority of the carrying value of property, plant and
equipment is the result of NRG Energy's recent asset acquisitions. These amounts
represent the estimated fair values at the date of acquisition. These estimates
may be adjusted based upon completion of certain procedures including third
party valuations. For those assets that were or are being constructed by NRG
Energy the carrying value reflects the application of NRG Energy's property,
plant and equipment policies which incorporate estimates, assumptions and
judgments by management relative to the capitalized costs and useful lives of
NRG Energy's generating facilities. NRG Energy periodically evaluates the
recoverability of the carrying value of its property, plant and equipment when
events or changes in circumstances indicate that the carrying value of such
assets may be impaired. Asset impairment evaluations are, by nature highly
subjective.

REVENUE RECOGNITION AND UNCOLLECTIBLE RECEIVABLES

NRG Energy is primarily an electric generation company, operating a
portfolio of majority-owned electric generating plants and certain plants in
which its ownership is 50% or less which are accounted for under the equity
method of accounting. NRG Energy also produces thermal energy for sale to
customers and collects methane gas from landfill sites, which is then used for
the generation of electricity. Both physical and financial transactions are
entered into to optimize the financial performance of NRG Energy's generating
facilities. Electric energy is recognized upon transmission to the customer.
Capacity and ancillary revenue is recognized when contractually earned. Revenues
from operations and maintenance services, is recognized when the services are
performed. NRG Energy uses the equity method of accounting to recognize it's pro
rata share of the net income or loss of its unconsolidated investments. NRG
Energy continually assesses the collectibility of its receivables and in the
event it believes a receivable to be uncollectible an allowance for doubtful
accounts is recorded or in the event of a contractual dispute the receivable and
corresponding revenue may be considered unlikely of recovery and not recorded in
the financial statements until management is satisfied that it will be
collected.

DERIVATIVE FINANCIAL INSTRUMENTS

In January 2001, NRG Energy adopted SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended by SFAS No. 137 and SFAS No. 138.
SFAS No. 133 requires NRG Energy to record all derivatives on the balance sheet
at fair value. Changes in the fair value of non-hedge derivatives

36

are immediately recognized in earnings. Changes in the fair value of derivatives
accounted for as hedges are either recognized in earnings as offset to the
charges in the fair value of the related hedged assets, liabilities and firm
commitments or for forecasted transactions, deferred and recorded as a component
of accumulated other comprehensive income (OCI) until the hedged transactions
occur and are recognized in earnings. NRG Energy primarily applies SFAS No. 133
to long-term power sales contracts, long-term gas purchase contracts and other
energy related commodities financial instruments used to mitigate variability in
earnings due to fluctuations in spot market prices, hedge fuel requirements at
generation facilities and protect investments in fuel inventories. SFAS No. 133
also applies to interest rate swaps and foreign currency exchange rate
contracts. The application of SFAS No. 133 results in increased volatility in
earnings due to the impact market prices have on the market positions and
financial instruments that NRG Energy has entered into. In determining the fair
value of these derivative/financial instruments NRG Energy uses estimates,
various assumptions, judgement of management and when considered appropriate
third party experts in determining the fair value of these derivatives.

LIQUIDITY AND CAPITAL RESOURCES

Historically, NRG Energy and its subsidiaries have obtained cash from
operations, issuance of debt and equity securities, borrowings under credit
facilities, capital contributions from Xcel Energy, reimbursement by Xcel Energy
of tax benefits pursuant to a tax sharing agreement and proceeds from
non-recourse project financings. NRG Energy has used these funds to finance
operations, service debt obligations, fund the acquisition, development and
construction of generation facilities, finance capital expenditures and meet
other cash and liquidity needs.

NRG Energy targets a financial strategy that sustains investment grade
ratings and diversifies investment risk. Specifically, NRG Energy seeks to fund
an average of 50% of its project investments with non-recourse project level
debt, 20% with senior unsecured recourse debt, and 30% with equity and internal
cash generation. The proportion of project financing varies depending on the
dispatch and the quantity of revenues under contract so that base load or highly
contracted plants will typically support greater than 50% non-recourse debt;
whereas merchant or peaking assets will support less than 50% financing. When
taken in total NRG Energy has and will continue to arrange 50% of its financing
with non-recourse project level debt.

Substantially all of NRG Energy's operations are conducted by project
subsidiaries and project affiliates. NRG Energy's cash flow and ability to
service corporate-level indebtedness when due is dependent upon receipt of cash
dividends and distributions or other transfers from NRG Energy's projects and
other subsidiaries. The debt agreements of NRG Energy's subsidiaries and project
affiliates generally restrict their ability to pay dividends, make distributions
or otherwise transfer funds to NRG Energy. As of December 31, 2001, six of NRG
Energy's subsidiaries and project affiliates are restricted from making cash
payments to NRG Energy. Loy Yang, Killingholme, Energy Center Kladno and
Louisiana Generating do not currently meet the minimum debt service coverage
ratios required for these projects to make payments to NRG Energy; Batesville is
resolving equipment problems that will cause its debt service coverage ratio to
fall below the minimum required for distribution, though, irrespective of the
debt service coverage ratio, no distributions to NRG Energy were anticipated
from Batesville in 2002; and Crockett Cogeneration is limited in its ability to
make distributions to NRG Energy and the other partners.

NRG Energy believes that the situations at Louisiana Generating, Energy
Center Kladno, Batesville and Killingholme do not create an event of default and
will not allow the lenders to accelerate the project financings. The forced
outage of one 500 MW unit at Loy Yang combined with current market prices may
lead to an event of default and the possible acceleration of the Loy Yang
project debt in the fourth quarter of 2002, but if insurance claims are paid and
budgeted revenues and costs are achieved, along with replacement of the damaged
unit as scheduled, default will be avoided. Loy Yang then has an AUD $500
million repayment due in May 2003 that will need to be refinanced prior to
maturity.

The bankruptcy of PG&E creates the potential for a covenant default that
would result in the acceleration of the debt at Crockett if not resolved with
the lenders. Management has engaged in active discussions with the lenders to
Crockett since PG&E filed for bankruptcy in April 2001, and Crockett is being
paid each month

37

by PG&E since the bankruptcy filing. Thus NRG Energy believes that an
acceleration of the Crockett debt is unlikely. The U.S. Federal Bankruptcy Court
recently approved the power purchase agreement thereby increasing the likelihood
that Crockett soon will be permitted by the lenders to distribute any excess
cash flows to the partners.

In all of these cases NRG Energy's corporate-level financial obligations to
project lenders is limited to no more than six-months debt service.

CASH FLOWS

2001        2000        1999
----        ----        ----

Net cash provided by (used in) operating activities (in
thousands)...............................................  $276,014    $361,678    ($11,380)

Net cash provided by operating activities decreased during 2001 compared
with 2000, primarily due to adverse changes to working capital and increased
undistributed equity earnings from unconsolidated affiliates. These decreases to
net cash were partially offset by increases in net income after non-cash
adjustments for depreciation and amortization in 2001 as compared to 2000. The
adverse changes to working capital are primarily due to increases in inventory
balances, accrued income taxes receivables and changes in other long term assets
and liabilities, partially offset by a favorable change in other current
liabilities.

Net cash provided by operating activities increased during 2000 compared
with 1999, primarily due to increased earnings during the year, increased
depreciation and amortization and deferred income tax and investment tax
credits, non-cash reductions in earnings and improved working capital.

2001           2000           1999
----           ----           ----

Net cash used in investing activities (in
thousands)........................................  ($4,335,641)   ($2,204,148)   ($1,668,613)

Net cash used in investing activities increased in 2001, compared with
2000, primarily due to additional acquisitions of electric generating facilities
and increased capital expenditures and project investments. Net cash used in
investing activities increased in 2000, compared with 1999, primarily due to
acquisitions of electric generating facilities and increased capital
expenditures and project investments.

2001          2000          1999
----          ----          ----

Net cash provided by financing activities (in
thousands)...........................................  $4,153,546    $1,905,870    $1,705,095

Net cash provided by financing activities during 2001 increased, compared
to 2000 due to the issuance of debt and equity securities to finance asset
acquisitions. Net cash provided by financing activities during 2000 increased,
compared to 1999, primarily due to the issuance of debt and equity securities to
finance asset acquisitions.

PROSPECTIVE CAPITAL REQUIREMENTS

In 2002, NRG Energy expects to complete the acquisition from FirstEnergy,
for approximately $1.6 billion in cash and assumed debt, of a portfolio of
assets. The FirstEnergy acquisition is expected to be financed with an $875
million lease with limited recourse to NRG Energy, the assumption of $145
million of municipal debt secured by the Bay Shore facility, and $575 million of
capital raised directly by NRG Energy through internal cash flow and the sale of
existing assets.

CONSTRUCTION PROGRAM REQUIREMENTS

As of December 31, 2001, NRG Energy estimates its capital expenditure
program to be approximately $7.5 billion for the period 2002 - 2006. NRG Energy
expects to spend approximately $1.9 billion in 2002, $1.8 billion in 2003 and
$1.6 billion in 2004. These estimated expenditures are primarily for NRG
Energy's project development program. For 2002, NRG Energy's capital
requirements reflect the expected construction costs for those projects
currently under construction and those expected to begin construction in the
near future. In January 2002, NRG Energy announced that it planned to scale back
its previously announced acquisition and construction plans in order to enhance
its financial position and improve liquidity in 2002. The

38

above amounts reflect this previously announced scaled back construction
schedule. In March 2002, Xcel Energy commenced an exchange offer by which Xcel
Energy would acquire all of the outstanding publicly held shares of NRG Energy.
If successful, Xcel Energy has stated that it intends to delay or cancel $1.6
billion of planned projects, among other actions. The proposed delays or
cancellations have not been factored into the above expected capital
expenditures.

NRG Energy's capital expenditure program is subject to continuing review
and modification. Actual expenditures may differ significantly depending upon
such factors as the success, timing of and the level of involvement in projects
under consideration.

ACQUISITION AND CONSTRUCTION PROGRAM CAPITAL SOURCES

NRG Energy has generally financed the acquisition and development of its
projects under financing arrangements to be repaid solely from each of its
project's cash flows, which are typically secured by the plant's physical assets
and equity interests in the project company.

Financing needs are subject to continuing review and can change depending
on market and business conditions and changes, if any, in the capital
requirements of NRG Energy and its subsidiaries. During the year ended December
31, 2001, NRG Energy financed its acquisition program and construction
activities through a combination of the following corporate level and project
level financings and operating cash flows. The specifics of such financing
arrangements are detailed below:

As of December 31, 2001, NRG Energy had a $500 million recourse revolving
credit facility under a commitment fee arrangement that matures in March of
2002. This facility provided short-term financing in the form of bank loans. At
December 31, 2001, NRG Energy had $170 million outstanding under this facility.
In March 2002, the revolving credit facility terminated and was replaced with a
$1.0 billion 364-day corporate level unsecured revolving line of credit with ABN
AMRO Bank, N.V. as Administrative Agent.

NRG Energy's $1.0 billion 364-day revolving line of credit terminates on
March 7, 2003. The facility is unsecured and provides for borrowings of "Base
Rate Loans" and "Eurocurrency Loans". The Base Rate Loans bear interest at the
greater of the Administrative Agent's prime rate or the sum of the prevailing
per annum rates for overnight funds plus 0.5% per annum, plus an additional
margin which varies based upon NRG Energy's utilization of the facility and its
then-current senior debt credit rating. The Eurocurrency loans bear interest at
an adjusted rate based on LIBOR plus an adjustment percentage which varies
depending on NRG Energy's senior debt credit rating and the amount outstanding
under the facility. The facility contains covenants that, among other things,
restrict the incurrence of liens and require NRG Energy to maintain a net worth
of at least $500 million plus 25% of NRG Energy's consolidated net income from
January 1, 2002 through the determination date. In addition, NRG Energy must
maintain a debt to capitalization ratio of not more than 0.68 to 1.00, and must
maintain an interest coverage ratio of not less than 2.00 to 1.00, as determined
at the end of each fiscal quarter. The failure to comply with any of these
covenants would be an Event of Default under the terms of the credit agreement.

In May 2001, NRG Energy's wholly-owned subsidiary, NRG Finance Company I
LLC, entered into a $2 billion revolving credit facility. The facility has been
and will be used to finance the acquisition, development and construction of
power generating plants located in the United States and to finance the
acquisition of turbines for such facilities. The facility provides for
borrowings of base rate loans and Eurocurrency loans and is secured by mortgages
and security agreements in respect of the assets of the projects financed under
the facility, pledges of the equity interests in the subsidiaries or affiliates
of the borrower that own such projects, and by guaranties from each such
subsidiary or affiliate. Provided that certain conditions are met that assure
the lenders that sufficient security remains for the remaining outstanding
loans, the borrower may repay loans relating to one project and have the liens
relating to that project released. Loans that have been repaid may be
re-borrowed, as permitted by the terms of the facility. The facility terminates
on May 8, 2006. The facility is non-recourse to NRG Energy other than its
obligation to contribute equity at certain times in respect of projects and
turbines financed under the facility. As of December 31, 2001, the aggregate
amount outstanding under this facility was $697.5 million.

39

In January 2001, NRG Energy entered into a bridge credit agreement, with a
final maturity date of December 31, 2001. Approximately $600 million was
borrowed under this facility to partially finance NRG Energy's acquisition of
the LS Power generation assets.

During March of 2001, NRG Energy raised net proceeds of approximately
$473.4 million through a second common stock offering of 18.4 million shares of
common stock. In addition, approximately $278.4 million of net proceeds were
raised through the issuance of 11.5 million equity units. Each equity unit
initially comprises a $25 principal amount of NRG Energy's senior debentures and
an obligation to acquire shares of NRG Energy's common stock no later then May
18, 2004. A portion of the combined net proceeds were used to repay a $600
million bridge credit agreement entered into in January 2001 to acquire certain
generating facilities and projects from LS Power; the remaining net proceeds
were used for general corporate purposes.

In April 2001, NRG Energy issued $690 million of senior notes in two
tranches. The first tranche of $350 million matures in April 2011 and bears an
interest rate of 7.75%. The second tranche of $340 million matures in April 2031
and bears an interest rate of 8.625%. The net proceeds of the issuance were used
for repayment of short-term indebtedness incurred to fund acquisitions, for
investments, general corporate purposes and to provide capital for future
planned acquisitions.

In June 2001, NRG Energy entered into a $600 million term loan facility.
The facility was unsecured and provided for borrowings of base rate loans and
Eurocurrency loans. The facility had a termination date of June 21, 2002. As of
December 31, 2001, the aggregate amount outstanding under this facility was $600
million. NRG Energy repaid this facility in March 2002 in conjunction with the
closing of its new $1.0 billion unsecured corporate level revolving line of
credit and the receipt of $300 million of cash from Xcel Energy.

On June 22, 2001, NRG Mid Atlantic Generating LLC (Mid Atlantic), a wholly
owned subsidiary of NRG Energy, borrowed approximately $420.9 million under a
five year term loan agreement (Agreement) to finance, in part, the acquisition
of certain generating facilities from Conectiv. The Agreement terminates in
November 2005 and provides for a total credit facility of $580 million.

In June 2001, NRG Energy through its wholly owned subsidiaries, Brazos
Valley Energy LP and Brazos Valley Technology LP, entered into a $180 million
non-recourse construction credit facility to fund the construction of the 600 MW
Brazos Valley gas-fired combined cycle merchant generation facility located in
Fort Bend County, Texas. As of December 31, 2001, there exists an outstanding
balance of $159.8 million under this credit agreement.

In connection with NRG Energy's acquisition of the Audrain facilities, NRG
Energy has recognized a capital lease on its balance sheet in the amount of
$239.9 million, as of December 31, 2001. The capital lease obligation is
recorded at the net present value of the minimum lease obligation payable. The
lease terminates in May 2023. In addition, approximately $326 million was drawn
down on NRG Energy's construction revolver to refinance NRG Energy's investment
in the Audrain County Municipal bonds originally issued to finance the
construction of the Audrain generating facility.

In July 2001, NRG Energy completed the sale of $500 million of unsecured
senior notes. The senior notes were issued in two tranches, the first tranche of
$340 million of 6.75% Senior Notes is due July 2006 and the second tranche of
$160 million of 8.625% Senior Notes is due April 2031. NRG Energy received net
proceeds from the sale of both series of notes of approximately $505.2 million,
including interest on the senior notes due 2031, accrued from April 5, 2001. The
net proceeds were used to repay all amounts outstanding under NRG Energy's
revolving credit agreement and for investments, other general corporate purposes
and to provide capital for planned acquisitions.

In August 2001, NRG Energy entered into a 364-day term loan of up to $296
million. The credit facility was structured as a senior unsecured loan and was
partially non-recourse to NRG Energy. The proceeds were used to finance the
McClain generating facility acquisition. In November 2001 the credit facility
was repaid from the proceeds of a $181.0 million term loan and $8.0 million
working capital facility entered into by NRG McClain LLC, with Westdeutsche
Landesbank Girozentrale, New York branch, as agent (Non-recourse to
40

NRG Energy). The final maturity date of the facility is November 30, 2006. As of
December 31, 2001, the aggregate amount outstanding under this facility was
$159.9 million.

REGISTRATION STATEMENTS

In December 2000, NRG Energy filed a universal shelf registration statement
with the SEC. Based on this registration, NRG Energy could issue up to $1.65
billion of debt securities, preferred stock, common stock, depositary shares,
warrants and convertible securities. This registration statement included $150
million of securities that were carried forward from a previous shelf
registration. During March 2001, NRG Energy issued 18.4 million shares of common
stock and 11.5 million corporate units under this shelf registration. There are
no remaining amounts available under this shelf registration as of December 31,
2001.

In June 2001, NRG Energy filed a shelf registration with the SEC to sell up
to $2 billion in debt securities, common and preferred stock, warrants and other
securities. NRG Energy expects to use the net proceeds for general corporate
purposes, which may include the financing and development of new facilities,
working capital and debt reduction. In July 2001, NRG Energy completed the sale
of $500 million of unsecured senior notes under this shelf registration,
approximately $1.5 billion remains available under this facility at December 31,
2001.

PREVIOUSLY EXISTING DEBT AND DEBT ASSUMED UPON ACQUISITION

For additional information on NRG Energy's short term and long term
borrowing arrangements, see Item 8 -- Note 9 to the Consolidated Financial
Statements.

PROJECTED FINANCING NEEDS

NRG Energy expects to meet its future financing requirements through a
combination of internally generated cash, corporate and project level long term
and short term debt, equity securities and equity like securities. As outlined
above, NRG Energy is expected to need approximately $7.5 billion during the
period 2002 - 2006 in order to meet its planned construction schedule. NRG
Energy plans to issue equity in the total amount of $1.1 billion during the
period 2002 - 2006, and project level long term debt financing in the amount of
$6.3 billion during this same period of time. If Xcel Energy successfully
completes its tender offer, NRG Energy's equity capital requirements would come
from cash infusions from Xcel Energy. NRG Energy believes it will be able to
raise the necessary funding in the capital markets in the near term because most
of the project level construction financing has already been committed either
through the $2.0 billion construction revolver or project specific construction
financings.

IMPACT OF A DOWNGRADE OF CREDIT RATING

NRG Energy's unsecured credit rating is BBB- from Standard & Poors's and
Baa3 from Moody's Investors Service. In December 2001, Moody's placed NRG
Energy's credit rating on review for potential downgrade. NRG Energy's credit
rating remains under review by Moody's for potential downgrade.

As of December 31, 2001, NRG Energy's off-balance sheet obligations
pursuant to its guarantees of performance, equity and indebtedness obligations
of its subsidiaries totaled approximately $721.7 million. NRG Energy is 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. In addition, in connection with the purchase
and sale of fuel emission credits and power generation products to and from
third parties with respect to the operation of some of NRG Energy's generation
facilities in the United States, NRG Energy may be required to guarantee a
portion of the obligations of certain of its subsidiaries.

If Moody's or Standard & Poor's were to downgrade NRG Energy, many of the
corporate guarantees and commitments currently in place would need to be
supported with letters of credit or cash collateral within 5 to 30 days. As of
December 31, 2001, the amount of collateral required, if NRG Energy were
downgraded, was approximately $960 million, to satisfy certain of the above
mentioned guarantees and obligations associated with the $2 billion
construction/acquisition revolver. Of the $960 million in collateral that could
be required,

41

approximately $200 million relates to NRG Energy's guarantees of debt service
reserve accounts required by some of its project-level financings; approximately
$400 million relates to NRG Energy's power marketing activities; and $360
million would be required to support its Contingent Equity Guarantee associated
with the $2 billion construction/acquisition revolver.

Because NRG Energy limits the amount of the guarantees it issues to support
NRG Power Marketing's activities, and because of the relatively small number of
margin accounts in place, even very large changes in market conditions would not
have a material impact on the $400 million of collateral that would be required
for NRG Power Marketing in the event of a downgrade.

In the event of a downgrade, NRG Energy would expect to meet its collateral
obligations with cash on hand, available credit lines provided under its
revolving line of credit potentially from, liquidity support from Xcel Energy
and the issuance of debt into capital markets. Xcel Energy has stated its plan
to infuse approximately $600 million of equity into NRG Energy in 2002 in
connection with its exchange offer and merger. Of this amount, $300 million has
already been provided in the form of a convertible subordinated note that Xcel
Energy has said it will cancel if its exchange offer and merger are completed.
If the offer and merger are not completed, Xcel Energy has said it will continue
to evaluate the terms and timing of any additional investment in NRG Energy. In
March 2002, NRG Energy successfully replaced its corporate level $500 million
unsecured revolving line of credit facility with a new 364-day $1.0 billion
corporate level unsecured revolving line of credit. In addition, NRG Energy will
maintain its $125 million letter of credit facility and plans to secure an
additional $125 million credit facility for total credit facilities of $1.25
billion to be available in 2002.

The Contingent Equity Guarantee associated with NRG Energy's
construction/acquisition revolver could increase to a maximum of $850 million by
the end of 2002 as NRG Energy utilizes the capacity of the
construction/acquisition revolver. Therefore, the amount of collateral required
by the end of 2002 could increase to $1.45 billion.

ASSET SALES

In January 2002, NRG Energy also announced that it has reviewed its
portfolio of operating assets and has identified approximately 650 MW of less
strategic facilities that it plans to put up for sale in the near term and
expects to raise an additional $350-$400 million cash after paying off any
project level debt.

OFF BALANCE-SHEET ITEMS

As of December 31, 2001, NRG Energy does not have any significant
relationships with structured finance or special purpose entities that provide
liquidity, financing or incremental market risk or credit risk. However, as
noted in Item 8 -- Note 9 to the Consolidated Financial Statements, NRG Energy
issued $250 million of 8.70% ROARS due March 2020 through an unconsolidated
guarantor trust. The sole assets of the trust consist of L160 million of Reset
senior notes due March 2020. NRG Energy has numerous investments of generally
less then 50% interests in numerous energy and energy related entities that are
accounted for under the equity method of accounting as disclosed in Item
8 -- Note 6 to the Consolidated Financial Statements. NRG Energy's pro-rata
share of non-recourse debt held by unconsolidated affiliates was approximately
$940 million as of December 31, 2001. In the normal course of business NRG
Energy may be asked to loan funds to these entities on both a long and
short-term basis. Such transactions are generally accounted for as accounts
payables and receivables to/from affiliates and notes receivables from
affiliates and if appropriate, bear market based interest rates. For additional
information regarding amounts accounted for as notes receivables to affiliates
see Item 8 -- Note 8 to the Consolidated Financial Statements.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

NRG Energy has a variety of contractual obligations and other commercial
commitments that represent prospective cash requirements in addition to its
capital expenditure programs. The following is a summarized

42

table of contractual obligations. See additional discussion in Item 8 -- Notes 9
and 17 to the Consolidated Financial Statements.

PAYMENTS DUE BY PERIOD AS OF DECEMBER 31, 2001 (IN THOUSANDS)
-------------------------------------------------------------
1-3         4-5         AFTER
CONTRACTUAL CASH OBLIGATIONS          TOTAL      SHORT TERM    YEARS       YEARS       5 YEARS
----------------------------       -----------   ----------   --------   ----------   ----------

Long term debt...................  $ 7,791,660   $  477,638   $274,914   $2,052,963   $4,986,145
Capital lease obligations........      552,326       22,516     45,010       45,010      439,790
Operating leases.................       87,779       10,742     19,111       16,311       41,615
Unconditional purchase
obligations....................    1,900,000    1,900,000         --           --           --
Short term debt..................      832,156      832,156         --           --           --
-----------   ----------   --------   ----------   ----------
Total contractual cash
obligations....................  $11,163,921   $3,243,052   $339,035   $2,114,284   $5,467,550
===========   ==========   ========   ==========   ==========

AMOUNT OF COMMITMENT EXPIRATION PER PERIOD
AS OF DECEMBER 31, 2001 (IN THOUSANDS)
--------------------------------------------------------
TOTAL
AMOUNTS                    1-3       4-5       AFTER
OTHER COMMERCIAL COMMITMENTS             COMMITTED    SHORT TERM    YEARS     YEARS     5 YEARS
----------------------------             ----------   ----------   -------   -------   ----------

Lines of credit........................  $2,540,000    $540,000    $    --   $    --   $2,000,000
Stand by letters of credit.............     170,287     170,287         --        --           --
Guarantees.............................     721,730     149,450     37,300    19,000      515,980
Standby repurchase obligations.........          --          --         --        --           --
Other commercial commitments...........          --          --         --        --           --
----------    --------    -------   -------   ----------
Total commercial commitments...........  $3,432,017    $859,737    $37,300   $19,000   $2,515,980
==========    ========    =======   =======   ==========

INTERDEPENDENT RELATIONSHIPS

NRG Energy does not have any significant interdependent relationships.
Since it is a majority owned subsidiary of Xcel Energy there are certain related
party transactions that take place in the normal course of business. For
additional information regarding NRG Energy's related party transactions see
Item 8 -- Note 7 to the Consolidated Financial Statements and Item 13 -- Certain
Relationships and Related Transactions.

DOMESTIC ENVIRONMENTAL MATTERS

The construction and operation of power projects are subject to stringent
environmental protection and land use regulation in the United States. These
laws and regulations generally require lengthy and complex processes to obtain
licenses, permits and approvals from federal, state and local agencies. If such
laws and regulations are tightened and NRG Energy's facilities are not exempted
from coverage, extensive modifications to further reduce environmental impacts
could be required.

NRG Energy and its subsidiaries continue to strive to exceed compliance
with all environmental regulations currently applicable to their operations.
However, it is not possible at this time to determine when or to what extent
additional facilities or modifications of existing or planned facilities will be
required as a result of changes to environmental regulations, interpretations or
enforcement policies or, generally, what effect future laws or regulations may
have upon NRG Energy's operations. For more information on Environmental Matters
see Item 8 -- Note 17 to the Consolidated Financial Statements.

FEDERAL INITIATIVES

Numerous Federal and legislative initiatives are being undertaken to
control pollutant emissions from fossil-fuel-fired combustion units. All of NRG
Energy's power plants will be affected in some manner by

43

changes that are expected to occur. In Congress, legislation is being proposed
that would impose annual caps on U.S. power plant emissions of nitrogen oxide
(NO(X)), sulfur dioxide (SO(2)), mercury, and, in some instances, carbon dioxide
(CO(2)). NRG Energy is currently participating in the debates around such
legislative proposals as a member of the Electric Power Supply Association. The
U.S. Environmental Protection Agency (USEPA) is set to propose in December 2003
rules governing mercury emissions from power plants; these rules are set to be
finalized on December 2004. In support of maintaining this schedule, a thorough
review of existing power plant mercury emissions data is underway by USEPA and
critical stakeholders.

Federal rules governing ozone season NO(X) emissions across the eastern
United States have been finalized and will now occur in two phases. The first
phase of restrictions will occur in the Ozone Transport Commission region during
the 2003 and subsequent ozone seasons; all of NRG Energy's existing, wholly
owned generating units in the Northeast and Mid-Atlantic regions are included in
this part of the program. The second phase of NO(X) reductions will extend to
states within the ozone transport assessment region and restrict 2004 and
subsequent ozone season NO(X) emissions in most states east of the Mississippi
River.

New rules governing cooling water intake structures at existing facilities
are to be proposed during the first quarter of 2002 and finalized in August of
2003. These rules will specify rules governing the location, design,
construction, and capacity of cooling water intake structures and reflect the
best technology available for minimizing adverse environmental impact therewith.

Other Federal initiatives that would govern regional haze and fine
particulate matter are underway, but under extended compliance timeframes.

REGIONAL INITIATIVES

WEST COAST REGION

The California Air Resources Board (CARB) is required under Senate Bill 28
(SB 28) to develop a schedule for retrofitting, by December 31, 2004, emission
controls on existing power generation facilities. SB 28 requires that the
emission control retrofit schedule be completed by CARB on or before July 1,
2002. CARB's current schedule for implementing the requirements of SB 28 show
final rulemaking by spring of 2003. Because the SB 28 emission control retrofit
requirements are not intended to change local or regional air quality control
requirements, it is difficult to predict what, if any, additional emission
controls would be required on NRG Energy's California assets.

The El Segundo and Long Beach Generating Stations are both regulated by the
South Coast Air Quality Management District's (SCAQMD) Regional Clean Air
Incentives Market (RECLAIM) program. This program, which regulates NO(X)
emissions in the Los Angeles area, was amended on May 11, 2001 and included
major changes with respect to power generation facilities. New RECLAIM Rule 2009
requires all existing power generation facilities to meet Best Available
Retrofit Control Technology (BARCT) for NO(X) emissions from all utility boilers
by January 1, 2003, and for all gas turbine units by January 1, 2004. Under the
new rule, existing power generation facilities were required to submit
compliance plans by September 1, 2001, listing how each unit at the stations
would meet BARCT by the deadlines. El Segundo's compliance plan did not plan for
any additional NO(X) controls to meet BARCT since Units 3 & 4 are already
equipped with SCR technology (first installed on Unit 4 in 1995 and on Unit 3 in
2001) and Units 1 & 2 are expected to be decommissioned in order to build a new
621 MW combined cycle plant. The SCAQMD denied the El Segundo Compliance Plan in
late 2001, citing that the SCRs on Units 3 & 4 could be cost effectively
modified to meet a lower NO(X) emission rate. El Segundo Power, LLC has appealed
this denial because the SCAQMD criteria for cost effectiveness assumes the units
operate at 100% capacity factor, which is not how they truly operate and is
contradictory to SCAQMD rules. The appeal case is still pending. The Long Beach
Generating Station's compliance plan demonstrated that SCR technology is neither
technically feasible nor cost effective and called for approximately $1 million
in modifications to the existing steam injection system to meet BARCT. This
compliance plan is still pending a decision by SCAQMD.

44

NORTHEAST REGION

Final rules implementing changes in air regulations in the states of
Massachusetts and Connecticut were promulgated in 2000. The Connecticut rules
required that existing facilities reduce their emissions of SO(2) in two steps,
the first of which took place on January 1, 2002. The second milestone change is
set to occur on January 1, 2003. NRG Energy is operating in full compliance with
the first phase now and expects to comply with step phase changes in accordance
with the established schedule. Connecticut's rules governing emissions of NO(X)
were modified to restrict the average, non-ozone season NO(X) emission rate to
0.15 pound per million Btu heat input. NRG Energy will comply with the new NO(X)
rules, in part, through selective firing of natural gas.

The new Massachusetts rules set forth schedules under which six existing
coal-fired power plants were required to meet stringent emission limits for
NO(X), SO(2), mercury, and CO(2). Control of carbon monoxide and particulate
matter emissions were reserved for future consideration. NRG Energy has
submitted an Emission Control Plan (ECP) to the Massachusetts Department of
Environmental Protection (MADEP) which identified natural gas reburn technology
as an option for meeting the NO(X) and SO(2) limits specified in the new rule.
NRG Energy is conducting ongoing discussions with MADEP with respect to
finalizing its ECP. By December 1, 2002, MADEP is to complete an evaluation of
the technological and economic feasibility of controlling and eliminating
emissions of mercury from the combustion of solid fossil fuel in Massachusetts.
Within six months of completing the feasibility evaluation, MADEP must propose
emission standards for mercury, with a proposed compliance date of October 1,
2006. NRG Energy is still considering its options with respect to how it will
address MADEP's CO(2) emission standards. Such options include filing a legal
challenge with respect to MADEP's legal authority to regulate CO(2) emissions.

New rules reducing allowable SO(2) and NO(X) emissions from large,
fossil-fuel-fired combustion units in New York State were expected to be
proposed in January 2002. No word has been released with regard to the reason
the proposal of these rules has been delayed. NRG Energy has provided comments
as part of New York State coalition of electricity producers on major conceptual
flaws contained in pre-publication releases of the proposed rule.

SOUTH-CENTRAL REGION

The Louisiana Department of Environmental Quality has promulgated State
Implementation Plan revisions to bring the Baton Rouge ozone non-attainment area
into compliance with National Ambient Air Quality Standards. NRG Energy
participated in development of the revisions which require NO(X) emissions to be
reduced at the Big Cajun II Power Station to 0.21 pounds per million Btu heat
input. This revision of the Louisiana air rules would appear to constitute a
change-in-law covered by agreement between Louisiana Generating LLC and the
electric cooperatives allowing the costs of added controls to be passed through
to the cooperatives.

MID-ATLANTIC AND NORTH-CENTRAL REGION

No material impending rule changes affecting NRG Energy's existing
facilities have been proposed in either of these regions.

INTERNATIONAL ENVIRONMENTAL MATTERS

Most of the foreign countries in which NRG Energy owns or may acquire or
develop independent power projects have laws or regulations relating to the
ownership or operation of electric power generation facilities. These laws and
regulations are typically significant for independent power producers because
they are still changing and evolving.

NRG Energy retains appropriate advisors in foreign countries and seeks to
design its international development and acquisition strategy to comply with and
take advantage of opportunities presented by each

45

country's energy laws and regulations. There can be no assurance that changes in
such laws or regulations could not adversely affect NRG Energy's international
operations.

RECENT ACCOUNTING DEVELOPMENTS

In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other
Intangible Assets". SFAS No. 142 requires that goodwill and intangible assets
with indefinite useful lives no longer be amortized but instead be tested for
impairment in accordance with SFAS No. 121, "Accounting for the Impairment of
Long-lived assets and for Long-lived Assets to Be Disposed Of." Goodwill will no
longer be amortized to comply with the provisions of SFAS No. 142. Instead,
goodwill and intangible assets that will not be amortized should be tested for
impairment annually and on an interim basis if an event occurs or a circumstance
changes between annual tests that may reduce the fair value of a reporting unit
below its carrying value. An impairment test is required to be performed within
six months of the date of adoption, and the first annual impairment test must be
performed in the year the statement is initially adopted.

NRG Energy and its subsidiaries, as required, adopted SFAS No. 142 on
January 1, 2002. At December 31, 2001, NRG Energy had intangible assets of $97.1
million, including $56.6 million of goodwill. These amounts and all intangible
assets and goodwill acquired in the future will be accounted for under the new
accounting standard. The new accounting standard is expected to initially
increase earnings by an immaterial amount due to the elimination of regular
amortization expense, but occasionally cause reductions in earnings when
impairment write-downs of goodwill and/or intangible assets are required.
Expense recognized for amortization of goodwill in 2001 was $3.8 million. NRG
Energy does not expect to recognize any asset impairments as a result of
adopting SFAS No. 142 in the first quarter of 2002.

In June 2001, FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." This statement addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. SFAS No. 143 requires an entity to recognize
the fair value of a liability for an asset retirement obligation in the period
in which it is incurred. Upon initial recognition of a liability for an asset
retirement obligation, an entity shall capitalize an asset retirement cost by
increasing the carrying amount of the related long-lived asset by the same
amount as the liability. SFAS No. 143 is effective for financial statements
issued for fiscal years beginning after June 15, 2002. NRG Energy has not
completed its analysis of SFAS No. 143.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." This statement addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
SFAS No. 144 retains and expands upon the fundamental provisions of existing
guidance related to the recognition and measurement of the impairment of
long-lived assets to be held and used and the measurement of long-lived assets
to be disposed of by sale. Generally, the provisions of SFAS No. 144 are
effective for financial statements issued for fiscal years beginning after
December 15, 2001.

CALIFORNIA LIQUIDITY CRISIS

NRG Energy's California generation assets include a 57.67% interest in
Crockett Cogeneration, a 39.5% interest in the Mt. Poso facility and a 50%
interest in the West Coast Power partnership with Dynegy.

In March 2001, the California PX filed for bankruptcy under Chapter 11 of
the Bankruptcy Code, and in April 2001, Pacific Gas & Electric Company (PG&E)
also filed for bankruptcy under Chapter 11. PG&E's filing delayed collection of
receivables owed to the Crockett facility. In September 2001, PG&E filed a
proposed plan of reorganization. Under the terms of the proposed plan, which is
subject to challenge by interested parties, unsecured creditors such as NRG
Energy's California affiliates would receive 60% of the amounts owed upon
approval of the plan. The remaining 40% would be paid in negotiable debt with
terms from 10 to 30 years. The California Power Exchange's (PX) ability to repay
its debt is dependent on the extent to which it receives payments from PG&E and
SCE. On December 21, 2001, the California bankruptcy court affirmed the Mt. Poso
and Crockett Power Purchase Agreement (it had previously affirmed Mt. Poso's
agreement) with PG&E and, in respect of the Crockett Power Purchase Agreement,
approved a twelve-month
46

repayment schedule of all past due amounts totaling $49.6 million, plus
interest. The first payment of $6.2 million, including accrued interest, was
received on December 31, 2001.

NRG Energy's share of the net amounts owed to West Coast Power by the
California ISO and PX totaled approximately $85.1 million as of December 31,
2001, compared to $101.8 million at December 31, 2000. These amounts reflect NRG
Energy's share of (a) total amounts owed to West Coast Power less (b) amounts
that are currently treated as disputed revenues and are not recorded as accounts
receivable in the financial statements of West Coast Power LLC, and reserves
taken against accounts receivable that have been recorded in the financial
statements. The decrease is primarily attributed to cash collections from the
California ISO during the fourth quarter of 2001.

ENRON EXPOSURE

During the fourth quarter of 2001, NRG Energy recorded a net after-tax
expense of approximately $6.7 million related to Enron Corp.'s bankruptcy. This
amount includes a $14.2 million after-tax charge to establish bad debt reserves,
which was partially offset by a $7.5 million after-tax gain on a credit swap
agreement entered into as part of NRG Energy's credit risk management program.
NRG Energy has fully provided for its exposure to Enron; however, as with any
receivable, NRG Energy will pursue collection of all amounts outstanding through
the ordinary course of business.

In addition, an Enron subsidiary, NEPCO, is serving as the construction
contractor for two greenfield development projects, the Kendall and Nelson
projects (2,336 MW combined) currently under construction in Illinois. Enron
guaranteed NEPCO's obligations under the construction contracts. To date, the
actual construction and engineering work on both projects has continued without
disruption and NRG Energy expects the projects to achieve commercial operations
on schedule. NRG Energy believes its overall construction costs for these two
projects will increase by approximately $22 per kilowatt, as a result of the
need to restructure the underlying construction contracts following the Enron
bankruptcy.

CERTAIN TRADING ACTIVITIES

The tables below disclose the trading activities that include non-exchange
traded contracts accounted for at fair value. Specifically, these tables
disaggregate realized and unrealized changes in fair value; identifies changes
in fair value attributable to changes in valuation techniques; disaggregates
estimated fair values at December 31, 2001 based on whether fair values are
determined by quoted market prices or more subjective means; and indicates the
maturities of contracts at December 31, 2001.

TRADING ACTIVITY (Gains/(Losses), in thousands)

Fair Value of contracts outstanding at the beginning of the
period....................................................  $(75,188)
Contracts realized or otherwise settled during the period...   (38,097)
Fair value of new contract when entered into during the
period....................................................        --
Changes in fair values attributable to changes in valuation
techniques................................................        --
Other changes in fair values................................   185,521
--------
Fair value of contracts outstanding at the end of the
period....................................................  $ 72,236
========

47

SOURCES OF FAIR VALUE (Gains/(Losses), in thousands)

FAIR VALUE OF CONTRACTS AT PERIOD-END
-------------------------------------------------------
MATURITY    MATURITY   MATURITY    MATURITY     TOTAL
LESS THAN     1-3        4-5      IN EXCESS      FAIR
1 YEAR      YEARS      YEARS     OF 5 YEARS    VALUE
---------   --------   --------   ----------   --------

Prices actively quoted.................  $(18,826)   $(18,553)  $  8,200   $   2,823    $(26,356)
Prices provided by other external
sources..............................        --          --         --          --          --
Prices based on models & other
valuation methods....................    58,890     156,326    (10,087)   (106,537)     98,592
--------    --------   --------   ---------    --------
$ 40,064    $137,773   $ (1,887)  $(103,714)   $ 72,236
========    ========   ========   =========    ========

48

ITEM 7A -- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

NRG Energy uses a variety of financial instruments to manage its exposure
to fluctuations in foreign currency exchange rates on its international project
cash flows, interest rates on its cost of borrowing and energy and energy
related commodities prices.

CURRENCY EXCHANGE RISK

NRG Energy has an investment in the Kladno project in the Czech Republic.
Statement of Financial Accounting Standard (SFAS) No. 52, "Foreign Currency
Translation," requires foreign currency gains and losses to flow through the
income statement if settlement of an obligation is in a currency other than the
local currency of the entity. A portion of the Kladno project debt is in a
non-local currency (U.S. dollars and German deutsche marks). As of December 31,
2001, if the value of the Czech koruna decreases by 10% in relation to the U.S.
dollar and the German deutsche mark, NRG Energy would record a $4.2 million loss
(after tax) on the currency transaction adjustment. If the value of the Czech
koruna increased by 10%, NRG Energy would record a $4.2 million gain (after tax)
on the currency transaction adjustment. Additionally, NRG Energy has in
investment in Hsin Yu in Taiwan which holds a payable denominated in U.S.
Dollars. If the New Taiwan Dollar increased by 10%, NRG Energy would record a
$0.8 million gain (after tax) on the currency adjustment. These currency
fluctuations are inherent to the debt structure of the projects and not
indicative of the long-term earnings potential of the investments.

NRG Energy is also subject to currency risks associated with foreign
denominated distributions from international investments. In the normal course
of business NRG Energy receives distributions denominated in Australian Dollar,
British Pound, Euro, Hungarian Forint and Czech Koruna. Upon completion of the
Itiquira plant in Brazil, NRG Energy will also be subject to currency risk with
the Brazilian Real. NRG Energy engages in a Board approved strategy of hedging
foreign denominated cash flows through a program of matching currency inflows
and outflows, and to the extent required, fixing the U.S. Dollar equivalent of
net foreign denominated distributions with currency forward and swap agreements
with highly credit worthy financial institutions.

As of December 31, 2001, NRG Energy had two foreign currency exchange
contracts with notional amounts of $46.3 million. If the contracts had been
discontinued on December 31, 2001, NRG Energy would have owed the
counter-parties approximately $2.4 million.

INTEREST RATE RISK

In order to minimize NRG Energy's exposure to changes in interest rates,
NRG Energy attempts to maintain 60-70% of its debt as fixed rate, which has
proven historically to provide the lowest volatility and price, when calculated
on an annual basis. When necessary, NRG Energy will employ the use of interest
rate swaps with highly credit worthy counter-parties to maintain this mix of
fixed and floating rates.

As of December 31, 2001, NRG energy had various interest rate swap
agreements with notional amounts totaling approximately $2.4 billion. If the
swaps had been discontinued on December 31, 2001, NRG Energy would have owed the
counter parties approximately $81.5 million. Based on the investment grade
rating of the counter parties, NRG Energy believes that its exposure to credit
risk due to nonperformance by the counter-parties to its hedging contracts is
insignificant.

NRG Energy and its subsidiaries have both long and short-term debt
instruments that subject it to the risk of loss associated with movements in
market interest rates. As of December 31, 2001, a 100 basis point change in the
benchmark rate on NRG Energy's variable rate debt would impact net income by
approximately $16.6 million. As of December 31, 2000, NRG Energy did not have a
material interest rate exposure as a result of interest rate swaps, which
convert floating rate debt into fixed rate debt.

COMMODITY PRICE

NRG Energy is exposed to commodity price variability in electricity,
emission allowances and natural gas, oil and coal used to meet fuel
requirements. To manage earnings volatility associated with these
49

commodity price risks, NRG Energy enters into financial instruments, which may
take the form of fixed price, floating price or indexed sales or purchases, and
options, such as puts, calls, basis transactions and swaps.

NRG Energy utilizes a "Value-at-Risk" (VAR) model to estimate a maximum
potential loss in the fair value of its commodity portfolio including generation
assets, load obligations and bilateral physical and financial transactions. The
key assumptions for the NRG Energy VaR model include (1) a lognormal
distribution of price returns (2) three day holding period and (3) a 95%
confidence interval. The volatility estimate is based on the implied volatility
for at the money call options. This model encompasses the following generating
regions: Entergy, NEPOOL, NYPP, PJM, WSCC, SPP and Main.

The estimated maximum potential three-day loss in fair value of its
commodity portfolio, calculated using the VAR model is as follows:

(IN MILLIONS)
-------------

Year end December 31, 2001..................................       $ 71.7
Average.....................................................         78.8
High........................................................        126.6
Low.........................................................         58.6
Year end December 31, 2000..................................       $116.0
Average.....................................................         80.0
High........................................................        125.0
Low.........................................................         50.0

CREDIT RISK

NRG Energy is exposed to credit risk in its risk management activities.
Credit risk relates to the risk of loss resulting from the nonperformance by a
counter party of its contractual obligations. NRG Energy actively manages its
counter-party credit risk. NRG Energy has an established credit policy in place
to minimize overall credit risk. Important elements of this policy include
ongoing financial reviews of all counter-parties, established credit limits, as
well as monitoring, managing, and mitigating credit exposure.

ITEM 8 -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements of NRG Energy, Inc. as of December
31, 2001 and 2000, and for the years then ended together with the Report of
Independent Accountants are included in this Form 10-K on the pages indicated
below.

PAGE NO.
--------

Report of Independent Accountants...........................       51
Consolidated Statement of Income............................       52
Consolidated Statement of Cash Flows........................       53
Consolidated Balance Sheet..................................       54
Consolidated Statement of Stockholders' Equity..............       56
Notes to Consolidated Financial Statements..................       57
Schedule II. Valuation and Qualifying Accounts..............       93

50

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
of NRG Energy, Inc.:

In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of NRG Energy, Inc. and its subsidiaries at December 31, 2001 and 2000,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States of America. In addition, in
our opinion, the financial statement schedule listed in the accompanying index
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
These financial statements and financial statement schedule are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

As discussed in Note 21 to the financial statements, the Company adopted
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" on January 1, 2001.

/s/  PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 21, 2002

51

NRG ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME

YEAR ENDED DECEMBER 31,
----------------------------------------
2001           2000          1999
------------   ------------   ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

OPERATING REVENUES AND EQUITY EARNINGS
Revenues from majority-owned operations...................   $2,798,608     $2,018,622     $432,518
Equity in earnings of unconsolidated affiliates...........      210,032        139,364       67,500
----------     ----------     --------
Total operating revenues and equity earnings.........    3,008,640      2,157,986      500,018
----------     ----------     --------
OPERATING COSTS AND EXPENSES
Cost of majority-owned operations.........................    1,855,631      1,289,471      269,900
Depreciation and amortization.............................      212,493        122,953       37,026
General, administrative and development...................      225,694        172,489       83,572
----------     ----------     --------
Total operating costs and expenses...................    2,293,818      1,584,913      390,498
----------     ----------     --------
OPERATING INCOME............................................      714,822        573,073      109,520
----------     ----------     --------
OTHER INCOME (EXPENSE)
Minority interest in earnings of consolidated
subsidiaries...........................................       (6,564)       (11,335)      (2,456)
Gain on sale of interest in projects......................           --             --       10,994
Other income, net.........................................       34,084          7,857        6,432
Interest expense..........................................     (443,734)      (293,922)     (93,376)
----------     ----------     --------
Total other expense..................................     (416,214)      (297,400)     (78,406)
----------     ----------     --------
INCOME BEFORE INCOME TAXES..................................      298,608        275,673       31,114
INCOME TAX EXPENSE (BENEFIT)................................       33,404         92,738      (26,081)
----------     ----------     --------
NET INCOME..................................................   $  265,204     $  182,935     $ 57,195
==========     ==========     ========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING - BASIC.......................................      194,929        165,861      147,605
EARNINGS PER WEIGHTED AVERAGE COMMON SHARE - BASIC..........   $     1.36     $     1.10     $   0.39
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING - DILUTED.....................................      196,439        166,989      147,605
EARNINGS PER WEIGHTED AVERAGE COMMON SHARES - DILUTED.......   $     1.35     $     1.10     $   0.39

See notes to consolidated financial statements.

52

NRG ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

YEAR ENDED DECEMBER 31,
-----------------------------------------
2001           2000           1999
-----------    -----------    -----------
(IN THOUSANDS)

CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................   $   265,204    $   182,935    $    57,195
Adjustments to reconcile net income to net cash provided
by (used in) operating activities
Undistributed equity in earnings of unconsolidated
affiliates............................................      (119,002)       (43,258)       (27,181)
Depreciation and amortization...........................       212,493        122,953         37,026
Deferred income taxes and investment tax credits........        45,556         38,458         (3,401)
Unrealized (gains)/losses on energy contracts...........       (13,257)            --             --
Minority interest.......................................         6,564          4,993            857
Gain on sale of investments.............................            --             --        (10,994)
Cash provided by (used in) changes in certain working
capital items, net of effects from acquisitions and
dispositions..........................................
Accounts receivable...................................        89,523       (198,091)       (99,608)
Accounts receivable-affiliates........................            --         10,703          9,964
Inventory.............................................      (111,131)       (12,316)       (17,287)
Prepayments and other current assets..................       (36,530)          (608)       (13,433)
Accounts payable......................................        (4,512)       143,045         40,616
Accounts payable-affiliates...........................         4,989             --             --
Accrued income taxes..................................       (75,132)        39,137         25,834
Accrued property and sales taxes......................         4,054          3,743          1,740
Accrued salaries, benefits, and related costs.........        15,785         (8,153)         1,955
Accrued interest......................................        35,637         38,479          5,192
Other current liabilities.............................        37,675         (5,136)        (3,533)
Cash provided by (used by) changes in other assets and
liabilities...........................................       (81,902)        44,794        (16,322)
-----------    -----------    -----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES.........       276,014        361,678        (11,380)
-----------    -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions, net of liabilities assumed..................    (2,813,117)    (1,912,957)    (1,519,365)
Consolidation of equity subsidiaries......................            --             --         20,181
Proceeds from sale of investments.........................         4,063          8,917         43,500
Decrease/(increase) in restricted cash....................       (99,707)         5,306        (13,067)
Decrease/(increase) in notes receivable...................        45,091         (5,444)        58,331
Capital expenditures......................................    (1,322,130)      (223,560)       (94,853)
Proceeds from sale of property............................            --          9,785             --
Investments in projects...................................      (149,841)       (86,195)      (163,340)
-----------    -----------    -----------
NET CASH USED BY INVESTING ACTIVITIES.......................    (4,335,641)    (2,204,148)    (1,668,613)
-----------    -----------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (payments)/borrowings under line of credit
agreement...............................................       202,000       (367,766)       216,000
Proceeds from issuance of stock...........................       475,464        453,719             --
Proceeds from issuance of corporate units (warrants)......         4,080             --             --
Proceeds from issuance of short term debt.................       622,156             --        682,096
Capital contributions from parent.........................            --             --        250,000
Proceeds from issuance of long-term debt..................     3,268,017      3,034,909        575,633
Principal payments on long-term debt......................      (418,171)    (1,214,992)       (18,634)
-----------    -----------    -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES...................     4,153,546      1,905,870      1,705,095
-----------    -----------    -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS...............................................        (3,055)           360             --
-----------    -----------    -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS...................        90,864         63,760         25,102
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR..............        95,243         31,483          6,381
-----------    -----------    -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR....................   $   186,107    $    95,243    $    31,483
===========    ===========    ===========

See notes to consolidated financial statements.

53

NRG ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

DECEMBER 31,
-------------------------
2001           2000
-----------    ----------
(IN THOUSANDS)

ASSETS
CURRENT ASSETS
Cash and cash equivalents.................................    $   186,107    $   95,243
Restricted cash...........................................        161,842        12,135
Accounts receivable-trade, less allowance for doubtful
accounts of $33,962 and $21,199........................        346,154       360,075
Income tax receivable.....................................         28,118            --
Inventory.................................................        331,323       174,864
Current portion of notes receivable.......................            737           267
Derivative instruments valuation -- at market.............         54,934            --
Prepayments and other current assets......................         78,142        30,074
-----------    ----------
Total current assets........................................      1,187,357       672,658
-----------    ----------
PROPERTY, PLANT AND EQUIPMENT, AT ORIGINAL COST
In service................................................      7,005,680     4,106,653
Under construction........................................      2,942,993       206,992
-----------    ----------
Total property, plant and equipment.........................      9,948,673     4,313,645
Less accumulated depreciation.............................       (516,454)     (271,977)
-----------    ----------
Net property, plant and equipment...........................      9,432,219     4,041,668
-----------    ----------
OTHER ASSETS
Equity investments in affiliates..........................      1,050,510       973,261
Capitalized project costs.................................          2,581        10,262
Notes receivable, less current portion....................        775,865        76,745
Decommissioning fund investments..........................          4,336         3,863
Intangible assets, net of accumulated amortization of
$15,311 and $8,951.....................................         97,133       101,570
Debt issuance costs, net of accumulated amortization of
$17,250 and $6,443.....................................        110,708        48,773
Derivative instruments valuation -- at market.............        179,605            --
Other assets, net of accumulated amortization of $13,323
and $10,628............................................         54,231        50,192
-----------    ----------
Total other assets..........................................      2,274,969     1,264,666
-----------    ----------
TOTAL ASSETS................................................    $12,894,545    $5,978,992
===========    ==========

See notes to consolidated financial statements.

54

NRG ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

DECEMBER 31,
-------------------------
2001           2000
-----------    ----------
(IN THOUSANDS)

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of project level long-term debt...........    $   500,154    $  146,469
Revolving line of credit..................................        170,000         8,000
Revolving line of credit, non-recourse debt...............         40,000            --
Project-level, non-recourse debt..........................         22,156            --
Corporate level, recourse debt............................        600,000            --
Accounts payable-trade....................................        330,471       255,917
Accounts payable-affiliate................................         16,867         7,191
Accrued income taxes......................................             --        43,870
Accrued property, sales and other taxes...................         14,585        10,531
Accrued salaries, benefits and related costs..............         40,043        24,830
Accrued interest..........................................         96,479        51,962
Derivative instruments valuation -- at market.............         21,910            --
Other current liabilities.................................         97,939        14,220
-----------    ----------
Total current liabilities...................................      1,950,604       562,990
OTHER LIABILITIES
Project-level, long-term, non-recourse debt...............      4,871,432     2,146,953
Corporate level long-term, recourse debt..................      2,972,400     1,503,896
Deferred Income Taxes.....................................        445,736        55,642
Postretirement and other benefit obligations..............         75,455        83,098
Derivative instruments valuation -- at market.............         51,520            --
Other long-term obligations and deferred income...........        222,468       149,640
Minority interest.........................................         67,801        14,685
-----------    ----------
Total liabilities...........................................     10,657,416     4,516,904
-----------    ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Class A - Common stock; $.01 par value; 250,000,000 shares
authorized; 147,604,500 shares issued and
outstanding............................................          1,476         1,476
Common stock; $.01 par value; 550,000,000 shares
authorized; 50,939,875 shares and 32,395,500 shares
issued and outstanding at December 31, 2001 and 2000...            509           324
Additional paid-in capital................................      1,713,984     1,233,833
Retained earnings.........................................        635,349       370,145
Accumulated other comprehensive income....................       (114,189)     (143,690)
-----------    ----------
Total Stockholders' Equity..................................      2,237,129     1,462,088
-----------    ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................    $12,894,545    $5,978,992
===========    ==========

See notes to consolidated financial statements.

55

NRG ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

CLASS A                                                  ACCUMULATED
COMMON            COMMON       ADDITIONAL                  OTHER           TOTAL
----------------   --------------    PAID-IN     RETAINED   COMPREHENSIVE   STOCKHOLDERS'
STOCK    SHARES    STOCK   SHARES    CAPITAL     EARNINGS      INCOME          EQUITY
-----    ------    -----   ------   ----------   --------   -------------   -------------
(IN THOUSANDS)

BALANCES AT DECEMBER 31, 1998........  $1,476   147,605   $ --        --   $  530,438   $130,015     $ (82,597)     $  579,332
------   -------   ----    ------   ----------   --------     ---------      ----------
Net Income.........................                                                     57,195                        57,195
Foreign currency translation
adjustments....................                                                                    7,127           7,127
----------
Comprehensive income for 1999....                                                                                   64,322
Capital contribution from
parent.........................                                         250,000                                  250,000
------   -------   ----    ------   ----------   --------     ---------      ----------
BALANCES AT DECEMBER 31, 1999........  $1,476   147,605   $ --        --   $  780,438   $187,210     $ (75,470)     $  893,654
======   =======   ====    ======   ==========   ========     =========      ==========
Net Income.........................                                                    182,935                       182,935
Foreign currency translation
adjustments....................                                                                  (68,220)        (68,220)
----------
Comprehensive income for 2000....                                                                                  114,715
Issuance of common stock, net of
issuance costs of $32.2
million........................                      324    32,396      453,395                                  453,719
------   -------   ----    ------   ----------   --------     ---------      ----------
BALANCES AT DECEMBER 31, 2000........  $1,476   147,605   $324    32,396   $1,233,833   $370,145     $(143,690)     $1,462,088
======   =======   ====    ======   ==========   ========     =========      ==========
Net Income.........................                                                    265,204                       265,204
Foreign currency translation
adjustments and other..........                                                                  (41,600)        (41,600)
Deferred unrealized gains, net on
derivatives....................                                                                   71,101          71,101
----------
Comprehensive income for 2001....                                                                                  294,705
Capital stock activity:
-Issuance of corporate units/
warrant........................                                           4,080                                    4,080
-Tax benefits of stock option
issuance.......................                                             792                                      792
-Issuance of common stock, net of
issuance costs of $23.5
million........................                      185    18,543      475,279                                  475,464
------   -------   ----    ------   ----------   --------     ---------      ----------
BALANCES AT DECEMBER 31, 2001........  $1,476   147,605   $509    50,939   $1,713,984   $635,349     $(114,189)     $2,237,129
======   =======   ====    ======   ==========   ========     =========      ==========

See notes to consolidated financial statements.

56

NOTE 1 -- ORGANIZATION

NRG Energy, Inc., (NRG Energy), was incorporated as a Delaware corporation
on May 29, 1992. Beginning in 1989, NRG Energy conducted business through its
predecessor companies, NRG Energy, Inc. and NRG Group, Inc., Minnesota
corporations, which were merged into NRG Energy subsequent to its incorporation.
NRG Energy, together with its majority owned subsidiaries and affiliates, is a
leading global energy company primarily engaged in the acquisition, development,
ownership and operation of power generation facilities and the sale of energy,
capacity and related products.

On June 5, 2000, NRG Energy completed its initial public offering. Prior to
completing its initial public offering, NRG Energy was a wholly owned subsidiary
of Northern States Power Company (NSP). During August 2000, NSP and New Century
Energies, Inc. completed their merger. The surviving company operates under the
new name Xcel Energy, Inc. (Xcel Energy). The shares of NRG Energy's class A
common stock previously held by NSP are now owned by Xcel Energy. As of December
31, 2001, Xcel Energy owned a 74% interest in NRG Energy's outstanding common
and class A common stock, representing 97% of the total voting power of NRG
Energy's common stock and class A common stock.

In February 2002, Xcel Energy announced its intention to commence an
exchange offer to acquire all of NRG Energy's outstanding common stock, and
stated its intention to close this transaction in April 2002 (See Note 23).

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

The consolidated financial statements include NRG Energy's accounts and
those of its subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation. Accounting policies for all of
NRG Energy's operations are in accordance with accounting principles generally
accepted in the United States of America. As discussed in Note 6, NRG Energy has
investments in partnerships, joint ventures and projects. Investments in such
businesses in which NRG Energy does not have control, but has the ability to
exercise significant influence over the operating and financial policies, are
accounted for under the equity method. Earnings from equity in international
investments are recorded net of foreign income taxes.

CASH AND CASH EQUIVALENTS

Cash equivalents include highly liquid investments (primarily commercial
paper) with an original maturity of three months or less at the time of
purchase.

RESTRICTED CASH

Restricted cash consists primarily of cash collateral for letters of credit
issued in relation to project development activities and funds held in trust
accounts to satisfy the requirements of certain debt agreements.

INVENTORY

Inventory is valued at the lower of weighted average cost or market and
consists principally of fuel oil, spare parts, coal, kerosene, emission
allowance credits and raw materials used to generate steam.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at original cost or the present
value of minimum lease payments for assets under capital leases. Significant
additions or improvements extending asset lives are capitalized,

57

while repairs and maintenance are charged to expense as incurred. Depreciation
is computed using the straight-line method over the following estimated useful
lives:

Facilities and improvements.................................    10-45 years
Machinery and equipment.....................................     7-30 years
Office furnishings and equipment............................      3-5 years

The assets and related accumulated depreciation amounts are adjusted for
asset retirements and disposals with the resulting gain or loss included in
operations. NRG Energy analyzes property, plant and equipment quarterly for
potential impairment, assessing the appropriateness of lives and recoverability
of net balances in accordance with Statement of Financial Accounting Standards
(SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of."

IMPAIRMENT OF LONG LIVED ASSETS

Long-lived assets and intangibles are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets to be held and used is measured
by a comparison of the carrying amount of the assets to the future net cash
flows expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
the cost to sell.

CAPITALIZED INTEREST

Interest incurred on funds borrowed to finance projects expected to require
more than three months to complete is capitalized. Capitalization of interest is
discontinued when the asset under construction is ready for its intended use.
Capitalized interest was approximately $27,175,000, $2,667,000, and $287,000 in
2001, 2000 and 1999, respectively.

CAPITALIZED PROJECT COSTS

Development costs and capitalized project costs include third party
professional services, permits, and other costs which are incurred incidental to
a particular project. Such costs are expensed as incurred until an acquisition
agreement or letter of intent is signed, and the project has been approved by
NRG Energy's Board of Directors. Additional costs incurred after this point are
capitalized. When a project begins operation, previously capitalized project
costs are reclassified to equity investments in affiliates or property plant and
equipment and amortized on a straight-line basis over the lesser of the life of
the project's related assets or revenue contract period.

DEBT ISSUANCE COSTS

Debt issuance costs are capitalized and amortized over the terms of the
related debt.

INTANGIBLE ASSETS

Goodwill results when NRG Energy purchases a business at a price higher
than the underlying fair value of the net assets. Effective January 1, 2002, NRG
Energy implemented SFAS No. 142, "Goodwill and Other Intangible Assets." (SFAS
No. 142). At December 31, 2001, NRG Energy had intangible assets of $97.1
million including $56.6 million of goodwill. These amounts and all intangible
assets and goodwill acquired in the future will be accounted for under the new
accounting standard. The new accounting can be expected to initially increase
earnings due to the elimination of regular amortization expense, but
periodically cause reductions in earnings when impairment write-downs of
goodwill and/or intangible assets are required.

58

INCOME TAXES

In March 2001, NRG Energy was deconsolidated from Xcel Energy for Federal
income tax purposes. Prior to March 13, 2001, NRG Energy was included in the
consolidated tax returns of Xcel Energy. NRG Energy calculated its income tax
provision on a separate return basis under a tax sharing agreement with Xcel
Energy as discussed in Note 10. Current Federal and certain state income taxes
were payable to or receivable from Xcel Energy.

Deferred income taxes are recognized for the tax consequences in future
years of differences between the tax basis of assets and liabilities and their
financial reporting amounts at each year end based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are
expected to affect taxable income. Income tax expense is the tax payable for the
period and the change during the period in deferred tax assets and liabilities.

REVENUE RECOGNITION

NRG Energy is primarily an electric generation company, operating a
portfolio of majority-owned electric generating plants and certain plants in
which its ownership interest is 50% or less and which are accounted for under
the equity method. In connection with its electric generation business, NRG
Energy also produces thermal energy for sale to customers, principally through
steam and chilled water facilities. NRG Energy also collects methane gas from
landfill sites, which is then used for the generation of electricity. In
addition, NRG Energy sells small amounts of natural gas and oil to third
parties. NRG Energy's wholly owned subsidiary, NRG Power Marketing, Inc. enters
into both physical and financial transactions on behalf of the entities which
own the electric generating plants in order to optimize the financial
performance of the plants.

Electrical energy revenue is recognized upon transmission to the customer.
Capacity and ancillary revenue is recognized when contractually earned. Disputed
revenues are not recorded on the financial statements and will not be recognized
as income until disputes are resolved and collection is assured.

NRG Energy also performs operations and maintenance services for some of
the projects in which it has an interest. Revenue is recognized as service
contract revenue on these contracts when the services are performed.

NRG Energy uses the equity method of accounting to recognize as revenue its
pro rata share of the net income or loss of the unconsolidated investment until
such time as the company's investment is reduced to zero, at which time equity
income is generally recognized only upon receipt of cash distributions from the
investee.

NRG Energy recognizes other income for interest income on loans to
affiliates as the interest is earned and realizable.

FOREIGN CURRENCY TRANSLATION

The local currencies are generally the functional currency of NRG Energy's
foreign operations. Foreign currency denominated assets and liabilities are
translated at end-of-period rates of exchange. Revenues, expenses and cash flows
are translated at weighted-average rates of exchange for the period. The
resulting currency adjustments are accumulated and reported as a separate
component of stockholders' equity and are not included in the determination of
the results of operations.

CONCENTRATIONS OF CREDIT RISK

Financial instruments which potentially subject NRG Energy to
concentrations of credit risk consist primarily of cash, accounts receivable,
and notes receivable. Cash accounts are generally held in Federally insured
banks. Accounts receivable, notes receivable and derivative instruments are
concentrated within entities engaged in the energy industry. These industry
concentrations may impact NRG Energy's overall exposure to credit risk, either
positively or negatively, in that the customers may be similarly affected by
changes in economic, industry or other conditions. Receivables are generally not
collateralized; however, NRG

59

Energy believes the credit risk posed by industry concentration is offset by the
diversification and creditworthiness of its customer base. See Note 17.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of cash and cash equivalents, receivables, accounts
payables, and accrued liabilities approximate fair value because of the short
maturity of these instruments. The carrying amounts of long-term receivables
approximate fair value as the effective rates for these instruments are
comparable to market rates at year end, including current portions. The carrying
amount of long term debt was approximately $8.3 billion and $3.8 billion at
December 31, 2001 and 2000, respectively. The estimated fair value of long-term
debt is based on borrowing rates currently available with similar terms and
average maturities.

STOCK BASED COMPENSATION

In 1995, the Financial Accounting Standard Board (FASB) issued Statement of
Financial Accounting Standard (SFAS) No. 123, "Accounting for Stock Based
Compensation." NRG Energy has elected to continue to account for stock-based
compensation using the intrinsic value method prescribed in Accounting Principle
Board Opinion No. 25, "Accounting for Stock Issued to Employees." Accordingly,
NRG Energy records expense in an amount equal to the excess of the quoted market
price on the grant date over the option price. Such expense is recognized at the
grant date for options fully vested. For options with a vesting period, the
expense is recognized over the vesting period. NRG Energy has recognized
approximately $1.9 million and $7.3 million of stock based compensation expense
for the periods ended December 31, 2001 and 2000, respectively.

NET INCOME PER SHARE

Basic net income per share is calculated based on the weighted average of
common shares outstanding during the period. Net income per share, assuming
dilution is computed by dividing net income by the weighted average number of
common and common equivalent shares outstanding. NRG Energy's only common
equivalent shares are those that result from dilutive common stock options and
NRG Energy's Corporate Units (see Note 15).

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements, disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.

In recording transactions and balances resulting from business operations,
NRG Energy uses estimates based on the best information available. Estimates are
used for such items as plant depreciable lives, tax provisions, un-collectible
accounts and actuarially determined benefit costs and the valuation of long-term
energy commodities contracts, among others. As better information becomes
available (or actual amounts are determinable), the recorded estimates are
revised. Consequently, operating results can be affected by revisions to prior
accounting estimates.

NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 142 requires that goodwill and intangible assets with
indefinite useful lives no longer be amortized but instead be tested for
impairment in accordance with SFAS No. 121, "Accounting for the Impairment of
Long-lived assets and for Long-lived Assets to Be Disposed Of." Goodwill will no
longer be amortized to comply with the provisions of SFAS No. 142. Instead,
goodwill and intangible assets that will not be amortized should be tested for
impairment annually and on an interim basis if an event occurs or a circumstance
changes between annual tests that may reduce the fair value of a reporting unit
below its carrying value. An impairment test is
60

required to be performed within six months of the date of adoption, and the
first annual impairment test must be performed in the year the statement is
initially adopted.

NRG Energy and its subsidiaries, as required, adopted SFAS No. 142 on
January 1, 2002. At December 31, 2001, NRG Energy had intangible assets of $97.1
million, including $56.6 million of goodwill. These amounts and all intangible
assets and goodwill acquired in the future will be accounted for under the new
accounting standard. The new accounting standard is expected to initially
increase earnings by an immaterial amount due to the elimination of regular
amortization expense, but occasionally cause reductions in earnings when
impairment write-downs of goodwill and/or intangible assets are required.
Expense recognized for amortization of goodwill in 2001 was $3.8 million
(pre-tax). NRG Energy does not expect to recognize any asset impairments as a
result of adopting SFAS No. 142 in the first quarter of 2002.

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." This statement addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. SFAS No. 143 requires an
entity to recognize the fair value of a liability for an asset retirement
obligation in the period in which it is incurred. Upon initial recognition of a
liability for an asset retirement obligation, an entity shall capitalize an
asset retirement cost by increasing the carrying amount of the related
long-lived asset by the same amount as the liability. SFAS No. 143 is effective
for financial statements issued for fiscal years beginning after June 15, 2002.
NRG Energy has not completed its analysis of SFAS No. 143.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." This statement addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
SFAS No. 144 retains and expands upon the fundamental provisions of existing
guidance related to the recognition and measurement of the impairment of
long-lived assets to be held and used and the measurement of long-lived assets
to be disposed of by sale. Generally, the provisions of SFAS No. 144 are
effective for financial statements issued for fiscal years beginning after
December 15, 2001.

RECLASSIFICATIONS

Certain prior-year amounts have been reclassified for comparative purposes.
These reclassifications had no effect on net income or total stockholders'
equity as previously reported.

NOTE 3 -- ASSET ACQUISITIONS

During the year ended December 31, 2001, NRG Energy completed numerous
acquisitions. These acquisitions have been recorded using the purchase method of
accounting. Accordingly, these purchase prices have been preliminarily allocated
to assets acquired and liabilities assumed based on their estimated fair values
at the date of acquisition. These estimates may be adjusted based upon
completion of certain procedures including third party valuations. Operations of
the acquired companies have been included in the operations of NRG Energy since
the date of the respective acquisitions.

In January 2001, NRG Energy purchased from LS Power, LLC a 5,339 MW
portfolio of operating projects and projects in construction and advanced
development that are located primarily in the north central and south central
United States. Each facility employs natural gas-fired, combined-cycle
technology. Through December 31, 2005, NRG Energy also has the opportunity to
acquire ownership interests in an additional 3,000 MW of generation projects
developed and offered for sale by LS Power and its partners.

In March 2001, NRG Energy purchased from Cogentrix the remaining 430 MW, or
51.37% interest, in an 837 MW natural gas-fired combined-cycle plant in
Batesville, Mississippi. NRG Energy acquired a 48.63% interest in the plant in
January 2001 from LS Power.

In June 2001, NRG Energy purchased a 640 MW natural gas-fired power plant
in Audrain County, Missouri from Duke Energy North America LLC.

In June 2001, NRG Energy closed on the construction financing for the
Brazos Valley generating facility, a 633 MW gas-fired power plant in Fort Bend
County, Texas that NRG Energy will build, operate and

61

manage. At the time of the closing, NRG Energy also became the 100% owner of the
project by purchasing STEAG Power LLC's 50% interest in the project. NRG Energy
expects the project to begin commercial operation in February 2003.

In June 2001, NRG Energy purchased 1,081 MW of interests in power
generation plants from a subsidiary of Conectiv. NRG Energy acquired a 100%
interest in the 784 MW coal-fired Indian River Generating Station located near
Millsboro, Delaware and in the 170 MW oil-fired Vienna Generating Station
located in Vienna, Maryland. In addition, NRG Energy acquired 64 MW of the 1,711
MW coal-fired Conemaugh Generating Station located approximately 60 miles east
of Pittsburgh, Pennsylvania and 63 MW of the 1,711 MW coal-fired Keystone
Generating Station located approximately 50 miles east of Pittsburgh,
Pennsylvania.

In June 2001, NRG Energy purchased a 389 MW gas-fired power plant and a 116
MW thermal power plant, both of which are located on Csepel Island in Budapest,
Hungary, from PowerGen. In April 2001, NRG Energy also purchased from PowerGen
its interest in Saale Energie GmbH and its 33.3% interest in MIBRAG BV. By
acquiring PowerGen's interest in Saale Energie, NRG Energy increased its
ownership interest in the 960 MW coal-fired Schkopau power station located near
Halle, Germany from 200 MW to 400 MW.

By acquiring PowerGen's interest in MIBRAG, an integrated energy business
in eastern Germany consisting primarily of two lignite mines and three power
stations, and following MIBRAG's buy back of the shares NRG Energy acquired from
PowerGen, NRG Energy increased its ownership of MIBRAG from 33.3% to 50%. The
Washington Group International, Inc., owns the remaining 50% of MIBRAG.

In August 2001, NRG Energy acquired an approximately 2,255 MW portfolio of
operating projects and projects in advanced development, including projects that
NRG Energy intends to develop, that are located in Illinois and upstate New York
from Indeck Energy Services, Inc.

In August 2001, NRG Energy acquired Duke Energy's 77% interest in the
approximately 520 MW natural-gas fired McClain Energy Generating Facility
located near Oklahoma City, Oklahoma. The Oklahoma Municipal Power Authority
owns the remaining 23% interest. The McClain facility commenced operations in
June 2001.

In September 2001, NRG Energy acquired a 50% interest in TermoRio SA, a
1,040 MW gas-fired cogeneration facility currently under construction in Rio de
Janeiro State, Brazil, from Petroleos Brasileiros SA (Petrobras). Commercial
operation of the facility is expected to begin in March 2004. NRG Energy has the
option to put its interest in the project back to Petrobras after March 2002 if
by that time certain milestones have not been met, including final agreement on
the terms of all project documents.

During fiscal year 2001, NRG Energy also acquired other minor interests in
projects in Taiwan, India, Peru and the State of Nevada.

62

The respective purchase prices have been allocated to the net assets of the
acquired entities as follows:

DECEMBER 31, 2001
-----------------
(IN THOUSANDS)

Current assets..............................................     $   307,654
Property plant and equipment................................       4,173,509
Non-current portion of notes receivable.....................         736,041
Current portion of long term debt assumed...................         (61,268)
Other current liabilities...................................         (99,666)
Long term debt assumed......................................      (1,586,501)
Deferred income taxes.......................................        (149,988)
Other long term liabilities.................................        (202,411)
Other non-current assets and liabilities....................        (181,473)
-----------
Total purchase price...................................       2,935,897
Less -- Cash balances acquired (excluding restricted
cash).....................................................        (122,780)
-----------
Net purchase price.....................................     $ 2,813,117
===========

NOTE 4 -- PROPERTY, PLANT AND EQUIPMENT

The major classes of property, plant and equipment at December 31, were as
follows:

2001             2000
----------       ----------
(IN THOUSANDS)

Facilities and equipment....................................    $6,863,930       $4,009,244
Land and improvements.......................................       111,368           79,190
Office furnishings and equipment............................        30,382           18,219
Construction in Progress....................................     2,942,993          206,992
----------       ----------
Total property, plant and equipment..................     9,948,673        4,313,645
Accumulated depreciation.............................      (516,454)        (271,977)
----------       ----------
Net property, plant and equipment....................    $9,432,219       $4,041,668
==========       ==========

NOTE 5 -- INVENTORY

Inventory, which is stated at the lower of weighted average cost or market,
at December 31, consists of:

2001           2000
--------       --------
(IN THOUSANDS)

Fuel oil....................................................    $ 89,318       $ 48,541
Coal........................................................      96,193         17,439
Kerosene....................................................       1,267          1,524
Spare parts.................................................     121,622         85,136
Emission credits............................................      16,995            871
Natural gas.................................................       1,395             --
Other.......................................................       4,533         21,353
--------       --------
Total Inventory......................................    $331,323       $174,864
========       ========

NOTE 6 -- INVESTMENTS ACCOUNTED FOR BY THE EQUITY METHOD

NRG Energy has investments in various international and domestic energy
projects. The equity method of accounting is applied to such investments in
affiliates, which include joint ventures and partnerships, because the ownership
structure prevents NRG Energy from exercising a controlling influence over
operating and financial policies of the projects. Under this method, equity in
pretax income or losses of domestic

63

partnerships and, generally, in the net income or losses of international
projects, are reflected as equity in earnings of unconsolidated affiliates.

A summary of NRG Energy's equity-method investments of 200 MW or more which
were in operation at December 31, 2001 is as follows:

NAME                                                            GEOGRAPHIC AREA    ECONOMIC INTEREST
----                                                            ---------------    -----------------

Gladstone Power Station.....................................      Australia              37.50%
Loy Yang Power A............................................      Australia              25.37%
Lanco Kondapalli Power......................................        India                30.00%
MIBRAG GmbH.................................................        Europe               50.00%
ECK Generating (ECKG).......................................    Czech Republic           44.50%
Scudder Latin American Power................................    Latin America            25.00%
El Segundo Power............................................         USA                 50.00%
Long Beach Generating.......................................         USA                 50.00%
Encina......................................................         USA                 50.00%
San Diego Combustion Turbines...............................         USA                 50.00%
Rocky Road Power............................................         USA                 50.00%
Mustang.....................................................         USA                 25.00%
Sabine River Works Cogeneration.............................         USA                 50.00%
Cogeneration Corp. of America...............................         USA                 20.00%

Summarized financial information for investments in unconsolidated
affiliates accounted for under the equity method as of and for the year ended
December 31, is as follows:

2001          2000          1999
----------    ----------    ----------
(IN THOUSANDS)

Operating revenues.......................................    $3,070,078    $2,349,108    $1,732,521
Costs and expenses.......................................     2,658,168     1,991,086     1,531,958
----------    ----------    ----------
Net income..........................................    $  411,910    $  358,022    $  200,563
----------    ----------    ----------
Current assets...........................................    $1,425,175    $1,000,670    $  742,674
Noncurrent assets........................................     7,009,862     7,470,766     7,322,219
----------    ----------    ----------
Total assets........................................    $8,435,037    $8,471,436    $8,064,893
----------    ----------    ----------
Current liabilities......................................    $1,192,630    $1,094,304    $  708,114
Noncurrent liabilities...................................     4,533,168     4,306,142     5,168,893
Equity...................................................     2,709,239     3,070,990     2,187,886
----------    ----------    ----------
Total liabilities and equity........................    $8,435,037    $8,471,436    $8,064,893
NRG's share of equity....................................    $1,050,510    $  973,261    $  932,591
NRG's share of net income................................    $  210,032    $  139,364    $   67,500

NOTE 7 -- RELATED PARTY TRANSACTIONS

NRG Energy and Xcel Energy have entered into material transactions and
agreements with one another and are expected to enter into material transactions
and agreements from time to time in the future. Certain material agreements and
transactions currently existing between NRG Energy and Xcel Energy are described
below.

OPERATING AGREEMENTS

NRG Energy has two agreements with Xcel Energy for the purchase of thermal
energy. Under the terms of the agreements, Xcel Energy charges NRG Energy for
certain costs (fuel, labor, plant maintenance, and auxiliary power) incurred by
Xcel Energy to produce the thermal energy. NRG Energy paid Xcel Energy $7.1
million, $5.5 million and $4.4 million in 2001, 2000 and 1999, respectively,
under these agreements. One of these agreements expires on December 31, 2002 and
the other expires on December 31, 2006.

64

NRG Energy has a renewable 10-year agreement with Xcel Energy, expiring on
December 31, 2006, whereby Xcel Energy agreed to purchase refuse-derived fuel
for use in certain of its boilers and NRG Energy agrees to pay Xcel Energy a
burn incentive. Under this agreement, NRG Energy received $1.6 million, $1.5
million and $1.4 million from Xcel Energy, and paid $2.8 million, $2.8 million
and $2.7 million to Xcel Energy in 2001, 2000 and 1999, respectively.

ADMINISTRATIVE SERVICES AND OTHER COSTS

NRG Energy has an administrative services agreement in place with Xcel
Energy. Under this agreement NRG Energy reimburses Xcel Energy for certain
overhead and administrative costs, including benefits administration,
engineering support, accounting, and other shared services as requested by NRG
Energy. In addition, NRG Energy employees participate in certain employee
benefit plans of Xcel Energy as discussed in Note 11. NRG Energy reimbursed Xcel
Energy in the amounts of $12.2 million, $5.9 million and $6.4 million, during
2001, 2000 and 1999, respectively, under this agreement.

NOTE 8 -- NOTES RECEIVABLE

Notes receivable consists primarily of fixed and variable rate notes
secured by equity interests in partnerships and joint ventures. The notes
receivable as of December 31, are as follows:

2001          2000
--------       -------
(THOUSANDS OF DOLLARS)

Central Texas Commercial Air Conditioning & Heating, Inc.,
due July 10, 2001, 10%....................................    $     --       $    60
O'Brien Cogen II note, due 2008, non-interest bearing.......         553           513
Southern Minnesota-Praireland Solid Waste, note due 2003,
7%........................................................          24            34
Omega Energy, LLC, due 2004, 12.5%..........................       4,095         3,745
Omega Energy, LLC, due 2009, 11%............................       1,533         1,533
Audrain County, due December 2023, 10%......................     239,930            --
Elk River -- GRE, due December 31, 2008, non-interest
bearing...................................................       2,098            --
Bangor Hydro Electric, due October 1, 2002, 5.45%...........         737            --
SET PERC Investment, LLC, due December 31, 2005, 7%.........       2,497
SET Telogia Investment, LLC, due December 31, 2008, 7%......       3,775            --
--------       -------
Notes receivable - non-affiliates.........................     255,242         5,885
NEO notes to various affiliates due primarily 2012, prime
+2%.......................................................      21,087        23,277
TOSLI, various notes due 2000, LIBOR plus 4.0%, 6.56%
December 31, 2000.........................................          --           207
Pacific Generation, various notes, prime +2% to 12%.........          --         3,368
Kladno Power (No. 2) B.V. notes to various affiliates,
non-interest bearing......................................      46,635        44,275
Termo Rio (via NRGenerating Luxembourg (No. 2) S.a.r.L, due
20 years after plant becomes operational, 19.5%...........      46,890            --
Saale Energie Gmbh, indefinite maturity date, 4.75%-7.79%...      79,476            --
Northbrook Texas LLC, due February 2024, 9.25%..............       8,323            --
--------       -------
Notes receivable - affiliates.............................     202,411        71,127
Saale Energia GmbH, due August 31, 2021, 13.88% (direct
financing lease)..........................................     318,949            --
--------       -------
Total.................................................    $776,602       $77,012
========       =======

Saale Energie GmbH (SEG) has a long-term electricity supply contract with
its sole customer, VEAG. SEG supplies its total available electricity capacity
to VEAG. The contract has a term of 25 years. VEAG is obligated to pay on a
monthly basis a price that covers 1) the availability of power supply capacity
and 2) the operating costs incurred to produce electricity. During the nine
months subsequent to NRG Energy's consolidation of SEG in March 2001,
approximately $56.3 million was recognized as revenue under this agreement.

65

NOTE 9 -- DEBT AND CAPITAL LEASES

Long-term debt and capital leases consist of the following:

2001          2000
----------    ----------
(THOUSANDS OF DOLLARS)

NRG DEBT:
NRG Energy ROARS, due March 15, 2020, 7.97%.................    $  232,960    $  239,386
NRG Finance Company I LLC -- Construction revolver, due May
2006, various interest rates..............................       697,500            --
NRG Energy senior debentures (corporate units), due May 16,
2006, 6.5%................................................       284,440            --
NRG Energy senior notes:
February 1, 2006, 7.625%..................................       125,000       125,000
July 15, 2006, 6.75%......................................       340,000            --
June 15, 2007, 7.50%......................................       250,000       250,000
June 1, 2009, 7.50%.......................................       300,000       300,000
September 15, 2010, 8.25%.................................       350,000       350,000
April 1, 2011, 7.75%......................................       350,000            --
Nov. 1, 2013, 8.00%.......................................       240,000       240,000
April 1, 2031, 8.625%.....................................       500,000            --
NRG DEBT SECURED SOLELY BY PROJECT ASSETS:
COBEE, due upon demand, non-interest bearing................            --            69
San Francisco Capital lease, due September, 2002, 20.8%.....            11            --
Timber Energy Resources, Inc., due December 2002, 7%........         4,620            --
Entrade revolving line of credit, various interest rates....         8,485            --
Hsin Yu Energy -- Capital lease, due April, 2003, 10.25%....           518            --
NRG San Diego, Inc. promissory note, due June 25, 2003,
8.0%......................................................           801         1,283
Pittsburgh Thermal LP, due 2002-2004, 10.61%-10.73%.........         4,400         5,525
San Francisco Thermal LP, October 5, 2004, 10.61%...........         3,761         4,984
Cahua SA, due various dates through November 2004, various
interest rates............................................        29,106            --
Various NEO debt due 2005-2008, 9.35%.......................        23,956        27,186
LSP Kendall Energy LLC, due September 2005, 3.15%...........       499,500            --
MidAtlantic Generating LLC, due October 2005, 3.56%.........       420,892            --
NRG McClain due December 31, 2005, 3.43%....................       159,885            --
Camas Power Boiler LP, unsecured term loan, due June 30,
2007, 7.65%...............................................        11,779        14,526
COBEE, due July 2007, various interest rates................        51,600            --
Camas Power Boiler LP, revenue bonds, due August 1, 2007,
4.65%.....................................................         9,130         9,130
NRG Brazos Valley LLC, due June 30, 2008, 3.44%.............       159,750            --
Cementos Energia SA, due various dates through January 2011,
various interest rates....................................        26,014            --
Hsin Yu Energy Development, due various dates through 2012,
various interest rates....................................        89,964            --
Flinders Power Finance Pty, due September 2012, 8.56%.......        74,886        83,820
NRG Energy Center, Inc. senior secured notes due June 15,
2013, 7.31%...............................................        62,408        65,762
LSP Energy LLC (Batesville), due 2014 and 2025,
7.16%-8.16%...............................................       321,875            --
Crockett Cogeneration LLP, due December 31, 2014, 8.13%.....       234,497       245,229
PERC, due 2017 and 2018, 5.2%...............................        33,220            --
Csepeli Aramtermelo, due October 2017, 3.79%-4.85%..........       169,712            --
Sterling Luxembourg (No. 3) S.a.r.L., due June 30, 2019,
7.86%, LIBOR+1.31%........................................       329,842       346,668
Saale Energie GmbH, Schkopau Capital lease, due 2021,
various interest rates....................................       311,867            --
Audrain County, MO -- Capital lease, due December 2023,
10%.......................................................       239,930            --

66

2001          2000
----------    ----------
(THOUSANDS OF DOLLARS)

NRG South Central Generating LLC senior bonds, due various
dates through September 15, 2024, various interest
rates.....................................................       763,500       788,750
NRG Northeast Generating LLC senior bonds, due various dates
through December 15, 2024, various interest rates.........       610,000       700,000
Bulo Bulo, indefinite lived, non-interest bearing...........        18,177            --
----------    ----------
8,343,986     3,797,318
Less current maturities.....................................       500,154       146,469
----------    ----------
Total...................................................    $7,843,832    $3,650,849
==========    ==========

SHORT TERM DEBT

As of December 31, 2001, NRG Energy had a $500 million recourse revolving
credit facility under a commitment fee arrangement that matures in March of
2002. This facility provides short-term financing in the form of bank loans and
replaced an earlier facility with substantially similar terms and conditions,
that matured in March 2001. At December 31, 2001, NRG Energy had $170 million
outstanding under this facility. In March 2002, the revolving credit facility
was terminated and was replaced with a $1.0 billion 364-day corporate-level
unsecured revolving line of credit with ABN AMRO Bank N.V. as Administrative
Agent. During the period ended December 31, 2001 the facility bore interest at a
floating rate based on LIBOR and Prime rates throughout the period and had a
weighted average interest rate of 5.89%.

As of December 31, 2001, NRG Energy, through its wholly owned subsidiary,
NRG South Central Generating LLC, had outstanding approximately $40 million
under a project level, non-recourse revolving credit agreement which matures in
March 2002. During the period ended December 31, 2001, the weighted average
interest rate of such outstanding advances was 4.46%. The maximum available
under this facility is $40 million. NRG Energy intends to renew this facility
with a facility having substantially similar terms and conditions.

In January 2001, NRG Energy entered into a bridge credit agreement with a
final maturity date of December 31, 2001. Approximately $600 million was
borrowed under this facility to partially finance NRG Energy's acquisition of
the LS Power generation assets. In March 2001, the bridge credit facility was
repaid with proceeds from NRG Energy's offering of common stock and equity
units.

In June 2001, NRG Energy entered into a $600 million term loan facility.
The facility is unsecured and provides for borrowings of base rate loans and
Eurocurrency loans. The facility terminates on June 21, 2002. As of December 31,
2001, the aggregate amount outstanding under this facility was $600 million.
During the period ended December 31, 2001 the weighted average interest rate of
such outstanding advances was 3.94%. NRG Energy repaid this facility in March
2002, in connection with the closing of its new $1.0 billion unsecured
corporate-level revolving line of credit and the receipt of $300 million of cash
from Xcel Energy.

NRG Energy had $170 million and $63 million in outstanding letters of
credit as of December 31, 2001 and 2000, respectively.

LONG-TERM DEBT AND CAPITAL LEASES

In May 2001, NRG Energy's wholly-owned subsidiary, NRG Finance Company I
LLC, entered into a $2 billion revolving credit facility. The facility will be
used to finance the acquisition, development and construction of power
generating plants located in the United States and to finance the acquisition of
turbines for such facilities. The facility provides for borrowings of base rate
loans and Eurocurrency loans and is secured by mortgages and security agreements
in respect of the assets of the projects financed under the facility, pledges of
the equity interests in the subsidiaries or affiliates of the borrower that own
such projects, and by guaranties from each such subsidiary or affiliate.
Provided that certain conditions are met that assure the lenders that sufficient
security remains for the remaining outstanding loans, the borrower may repay
loans

67

relating to one project and have the liens relating to that project released.
Loans that have been repaid may be re-borrowed, as permitted by the terms of the
facility. The facility terminates on May 8, 2006. The facility is non-recourse
to NRG Energy other than its obligation to contribute equity at certain times in
respect of projects and turbines financed under the facility. As of December 31,
2001, the aggregate amount outstanding under this facility was $697.5 million.
During the period ended December 31, 2001, the weighted average interest rate of
such outstanding advances was 4.83%.

As part of NRG Energy's acquisition of the LS Power assets in January 2001,
NRG Energy, through its wholly owned subsidiary, LSP Kendall Energy LLC, has
acquired a $554.2 million credit facility. The facility is non-recourse to NRG
Energy and consists of a construction and term loan, working capital and letter
of credit facilities. As of December 31, 2001, there were borrowings totaling
approximately $499.5 million outstanding under the facility at a weighted
average annual interest rate of 5.12%.

Upon the acquisition of the LS Power assets, NRG Energy assumed
approximately $326 million of bonds outstanding originally issued to finance the
construction of the Batesville generation plant. In May 1999, LSP Energy Limited
Partnership (Partnership) and LSP Batesville Funding Corporation (Funding)
issued two series of Senior Secured Bonds (Bonds) in the following total
principle amounts: $150 million 7.16% Series A Senior Secured Bonds due 2014 and
$176 million 8.160% Series B Senior Secured Bonds due 2025. Interest is payable
semiannually on each January 15 and July 15. In March 2000, a registration
statement was filed by Partnership and Funding and became effective. The
registration statement was filed to allow the exchange of the Bonds for two
series of debt securities (Exchange Bonds), which are in all material respects
substantially identical to the Bonds. The Exchange Bonds are secured by
substantially all of the personal property and contract rights of the
Partnership and Funding. The Exchange Bonds are redeemable, at the option of
Partnership and Funding, at any time in whole or from time to time in part, on
not less than 30 nor more than 60 days prior notice to the holders of that
series of Exchange Bonds, on any date prior to their maturity at a redemption
price equal to 100% of the outstanding principal amount of the Exchange Bonds
being redeemed and a make whole premium. In no event will the redemption price
ever be less than 100% of the principal amount of the Exchange Bonds being
redeemed plus accrued and unpaid interest thereon. Principal payments are
payable on each January 15 and July 15 beginning July 15, 2001.

On March 13, 2001, NRG Energy completed the sale of 11.5 million equity
units for an initial price of $25 per unit. The 11.5 million equity units sold
included 1.5 million units sold pursuant to the underwriters' over-allotment
option. NRG Energy received gross proceeds from the issuance of $287.5 million.
Net proceeds from this issuance were $278.4 million after deducting underwriting
discounts, commissions and estimated offering expenses. Each equity unit
initially consists of a corporate unit comprising a $25 principal amount of NRG
Energy's senior debentures and an obligation to acquire shares of NRG Energy
common stock no later than May 18, 2004 at a price ranging from between $27.00
and $32.94. Approximately $4.1 million of the gross proceeds have been recorded
as additional paid in capital to reflect the value of the obligation to purchase
NRG Energy's common stock. Interest payments will be payable on the debentures
quarterly in arrears on each February 16, May 16, August 16 and November 16,
commencing May 16, 2001. Interest will be payable initially at an annual rate of
6.50% of the principal amount of $25 per debenture to, but excluding, February
17, 2004, or May 18, 2004 if the interest rate is not reset three business days
prior to February 17, 2004 or three business days prior to May 18, 2004, the
debentures will bear interest from February 17, 2004, or May 18, 2004, as
applicable, at the reset rate to, but excluding, May 16, 2006. In addition,
original issued discount will accrue on the debentures. The net proceeds were
used in part to reduce amounts outstanding under NRG Energy's $600 million
short-term bridge credit agreement, which was used to finance in part NRG
Energy's acquisition of LS Power generation assets.

In March 2001, NRG Energy increased its ownership interest in PERC, which
resulted in the consolidation of its equity investment in PERC. As a result, the
assets and liabilities of PERC became part of the assets and liabilities of NRG
Energy. Upon completion of the transaction, NRG Energy recorded approximately
$37.9 million of outstanding Finance Authority of Maine (FAME) Electric Rate
Stabilization Revenue Refunding Bonds Series 1998 (FAME bonds) which were issued
on PERC's behalf by FAME in June 1998. The face amount of the bonds that were
initially issued was approximately $44.9 million and was used to repay the
Floating Rate Demand Resource Revenue Bonds issued by the Town of Orrington,
Maine
68

on behalf of PERC. The FAME bonds are fixed rate bonds with yields ranging from
3.75% to 5.2%. The weighted average yield on the FAME bonds is approximately
5.1%. The FAME bonds are subject to mandatory redemption in annual installments
of varying amounts through July 1, 2018. Beginning July 1, 2008 the FAME bonds
are subject to redemption at the option of PERC at a redemption price equal to
102% through June 30, 2009, 101% for the period July 1, 2009 to June 30, 2010
and 100% thereafter, of the principal amount outstanding, plus accrued interest.
The loan agreement with FAME contains certain restrictive covenants relating to
the FAME bonds, which restrict PERC's ability to incur additional indebtedness,
and restricts the ability of the general partners to sell, assign or transfer
their general partner interests. The bonds are collateralized by liens on
substantially all of PERC's assets.

In April 2001, NRG Energy issued $690 million of senior notes in two
tranches. The first tranche of $350 million matures in April 2011 and bears an
interest rate of 7.75%. The second tranche of $340 million matures in April 2031
and bears an interest rate of 8.625%. Interest on the notes is due semi-annually
each April and October. The net proceeds of the issuance were used for repayment
of short-term indebtedness incurred to fund acquisitions, for investments,
general corporate purposes and to provide capital for future planned
acquisitions.

On June 22, 2001, NRG MidAtlantic Generating LLC (MidAtlantic), a wholly
owned subsidiary of NRG Energy, borrowed approximately $420.9 million under a
five year term loan agreement (Agreement) to finance, in part, the acquisition
of certain generating facilities from Conectiv. The Agreement terminates in
November 2005 and provides for a total credit facility of $580 million. Interest
is payable quarterly. The debt is guaranteed by MidAtlantic and its wholly owned
subsidiaries. The Agreement provides for a variable interest rate at either the
higher of the Prime rate or the Federal Funds rate plus 0.50%, or the London
Interbank Offered Rate (LIBOR) of interest. During the period ended December 31,
2001, the weighted average interest rate for amounts outstanding under the
Agreement was 4.56%. MidAtlantic is obligated to pay a commitment fee of 0.375%
of the unused portion of the credit facility. The Agreement requires MidAtlantic
to comply with certain covenants concerning limitations on additional
borrowings, sales of assets, capital expenditures, and payment of dividends or
other distributions to shareholders.

In June 2001, in connection with NRG Energy's acquisition of the Csepel
facilities, NRG Energy assumed a non-recourse credit facility agreement that
provides for borrowings of approximately $78.5 million and DEM 203.6 million. As
of December 31, 2001, there exists an outstanding balance of approximately
$169.7 million under this credit facility. The facility terminates in 2017 with
principle payments due quarterly in varying amounts throughout the term of the
agreement. Interest is payable quarterly at a variable rate.

In June 2001, NRG Energy through its wholly owned subsidiaries, Brazos
Valley Energy LP and Brazos Valley Technology LP, entered into a $180 million
non-recourse construction credit facility to fund the construction of the 600 MW
Brazos Valley gas-fired combined cycle merchant generation facility located in
Fort Bend County, Texas. As of December 31, 2001, there exists an outstanding
balance of $159.8 million under this credit agreement. The weighted average
interest rate as of December 31, 2001 was 4.61%, interest is payable quarterly.

In connection with NRG Energy's acquisition of the COBEE facilities, NRG
Energy recorded on its balance sheet approximately $56.3 million of non-recourse
long-term debt that is due in 18 semi-annual installments of varying amounts
beginning January 31, 1999 and ending July 31, 2007. The loan agreement provides
an A Loan of up to $30 million and a B Loan of up to $45 million. Interest is
payable semi-annual in arrears at a rate equal to 6-month LIBOR plus a margin of
4.5% on the A Loan and 6-month LIBOR plus a margin of 4.0% on the B Loan. The A
Loan and the B Loan are collateralized by a mortgage on substantially all of
COBEE's assets.

In August 2001, NRG Energy entered into a 364-day term loan of up to $296
million. The credit facility was structured as a senior unsecured loan and was
partially non-recourse to NRG Energy. The proceeds were used to finance the
McClain generating facility acquisition. In November 2001, the credit facility
was repaid from the proceeds of a $181.0 million term loan and $8.0 million
working capital facility entered into by NRG McClain LLC, with Westdeutsche
Landesbank Girozentrale, New York branch, as agent (non-recourse to NRG Energy).
The final maturity date of the facility is November 30, 2006. As of December 31,
2001, the
69

aggregate amount outstanding under this facility was $159.9 million. During the
period ended December 31, 2001, the weighted average interest rate of such
outstanding borrowings was 5.07%.

In connection with NRG Energy's acquisition of the Audrain facilities, NRG
Energy has recognized a capital lease on its balance sheet within long-term debt
in the amount of $239.9 million, as of December 31, 2001. The capital lease
obligation is recorded at the net present value of the minimum lease obligation
payable. The lease terminates in May 2023. NRG Energy will make interest
payments only over the term of the lease and no principal payments until the end
of the lease term. In addition, NRG Energy has recorded in notes receivable, an
amount of approximately $239.9 million, which represents its investment in the
bonds that the county of Audrain issued to finance the project.

In connection with NRG Energy's purchase of PowerGen's interest in Saale
Energie GmbH, NRG Energy has recognized a non-recourse capital lease on its
balance sheet within long-term debt in the amount of $311.9 million, as of
December 31, 2001. The capital lease obligation is recorded at the net present
value of the minimum lease obligation payable over the lease's remaining period
of 20 years. In addition, a direct financing lease was recorded in notes
receivable in the amount of approximately $318.9 million.

The NRG Energy Center, Inc. notes are secured principally by long-term
assets of the Minneapolis Energy Center (MEC). In accordance with the terms of
the note agreement, MEC is required to maintain compliance with certain
financial covenants primarily related to incurring debt, disposing of MEC
assets, and affiliate transactions. MEC was in compliance with these covenants
at December 31, 2001.

The NRG Energy senior notes are unsecured and are used to support equity
requirements for projects acquired and in development. Interest is paid
semi-annually.

The $240 million NRG Energy Senior notes due November 1, 2013 are
remarketable or redeemable Security (ROARS). November 1, 2003 is the first
remarketing date for these notes. Interest is payable semi-annually on May 1,
and November 1, of each year through 2003, and then at intervals and interest
rates as discussed in the indenture. On the remarketing date, the notes will
either be mandatorily tendered to and purchased by Credit Suisse Financial
Products or mandatorily redeemed by NRG Energy at prices discussed in the
indenture. The notes are unsecured debt that rank senior to all of NRG Energy's
existing and future subordinated indebtedness.

The various NEO notes are term loans. The loans are secured principally by
long-term assets of NEO Landfill Gas collection system. NEO Landfill Gas is
required to maintain compliance with certain covenants primarily related to
incurring debt, disposing of the NEO Landfill Gas assets, and affiliate
transactions. NEO was in compliance with these covenants at December 31, 2001.

The Camas Power Boiler LP notes are secured principally by its long-term
assets. In accordance with the terms of the note agreements, Camas Power Boiler
LP is required to maintain compliance with certain financial covenants primarily
related to incurring debt, disposing of assets, and affiliate transactions.
Camas Power Boiler was in compliance with these covenants at December 31, 2001.

The Crockett Corporation term loan is secured primarily by the long-term
assets of the Crockett Cogeneration project. Crockett is required to maintain
compliance with certain financial covenants primarily related to incurring debt,
disposing of assets and complying with the terms of the contract to sell energy,
capacity and steam to Pacific Gas & Electric and its other customer. Crockett
was in compliance with these covenants at December 31, 2001, but the bankruptcy
of Pacific Gas & Electric, the counterparty on a material contract that provides
security to the lenders, gives rise to a situation that could result in the
acceleration of the loan. The Crockett partnership has been working with the
lenders to resolve this issue, and it is the view of NRG Energy management that
the lenders will not exercise their right to accelerate this loan.

On February 22, 2000, NRG Northeast Generating LLC, an indirect,
wholly-owned subsidiary of NRG Energy, issued $750 million of project level
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% due in 2004, $130 million with an interest rate of
8.842% due in 2015 and $300 million with an interest rate of 9.292% due in 2024.
Interest and principal payments are due quarterly. The bonds are jointly and

70

severally guaranteed by each of NRG Northeast's existing and future
subsidiaries. The bonds are secured by a security interest in NRG Northeast's
membership or other ownership interests in the guarantors and its rights under
all inter-company notes between NRG Northeast and the guarantors. In December
2000, NRG Northeast Generating LLC exchanged all of its outstanding bonds for
bonds registered under the Securities Act of 1933. As of December 31, 2001,
there remains $610 million of outstanding bonds.

In March 2000, NRG Energy issued $250 million of 8.70% ROARS due March 15,
2005. Each security represents a fractional interest in the assets of an
unconsolidated grantor trust that pays interest semi-annually on March 15, and
September 15, of each year through 2005. The sole assets of the Trust consists
of (pounds)160 million of Reset senior notes due March 15, 2020 issued by NRG
Energy pursuant to the Indenture and certain other defined rights. The Reset
senior notes were used principally to finance NRG Energy's acquisition of 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, or redeemed by NRG Energy. 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.

Additionally, three of NRG Energy's foreign subsidiaries entered into a
(pounds)325 million (US $517 million at March 31, 2000) secured borrowing
facility agreement with Bank of America International Limited. Under this
facility, the financial institutions have made available to our subsidiaries
various term loans totaling (pounds)235 million (US $374 million at March 31,
2000) for purposes of financing the acquisition of the Killingholme facility and
(pounds)90 million (US $143 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.

In March 2000, NRG South Central Generating LLC, an indirect wholly owned
subsidiary of NRG Energy, issued $800 million of senior secured bonds in a
two-part offering, to finance its acquisition of the Cajun generating
facilities. The first tranche was for $500 million with a coupon of 8.962% and a
maturity of 2016. The second tranche was for $300 million with a coupon of
9.479% and a maturity of 2024. Interest and principal payments are due
quarterly. The bonds are secured by a security interest in NRG Central U.S.
LLC's and South Central Generating Holding LLC's membership interests in NRG
South Central and NRG South Central's membership interests in Louisiana
Generating and all of the assets related to the Cajun facilities including its
rights under a guarantor loan agreement and all inter-company notes between it
and Louisiana Generating, and a revenue account and a debt service reserve
account. In January 2001, NRG South Central Generating LLC exchanged all of its
outstanding bonds for bonds registered under the Securities Act of 1933. As of
December 31, 2001, there remains $763.5 million of outstanding bonds.

In September 2000, Flinders Power Finance Pty, an Australian wholly owned
subsidiary, entered into a twelve year AUD $150 million promissory note (US
$81.4 million at September 2000). The interest has a fixed and variable
component. At December 31, 2001, the effective interest rate was 5.89% and is
paid semi annually.

In December 2000, NRG Energy filed a shelf registration with the SEC to
issue up to $1,650.0 million of an indeterminate amount of debt securities,
preferred stock, common stock, depository shares, debt warrants, stock purchase
contracts, stock purchase units and hybrid securities. This shelf registration
includes $150 million of securities that were carried forward from NRG Energy's
previous shelf registration filed in December 1999.

In June 2001, NRG filed a shelf registration with the SEC to sell up to $2
billion in debt securities, common and preferred stock, warrants and other
securities. NRG expects to use the net proceeds of offering under the shelf for
general corporate purposes, which may include the financing and development of
new facilities, working capital and debt reduction. In July 2001, NRG Energy
completed the sale of $500 million of unsecured senior notes under this shelf
registration. The senior notes were issued in two tranches, the first tranche of
$340 million of 6.75% Senior Notes is due July 2006 and the second tranche of
$160 million of 8.625% Senior Notes is due April 2031. Interest payments are due
semi-annually on January 15 and July 15
71

until maturity for the Senior Notes due 2006 and April 1 and October 1 until
maturity for the Senior Notes due 2031. NRG received net proceeds from the sale
of both series of notes of approximately $505.2 million, including interest on
the senior notes due 2031, accrued from April 5, 2001. The net proceeds were
used to repay all amounts outstanding under NRG's revolving credit agreement and
for investments and other general corporate purposes and to provide capital for
planned acquisitions.

Annual maturities of long-term debt and capital leases for the years ending
after December 31, 2001 are as follows:

(THOUSANDS OF DOLLARS)                                            TOTAL
----------------------                                          ----------

2002........................................................    $  500,154
2003........................................................       159,095
2004........................................................       160,829
2005........................................................       908,435
2006........................................................     1,189,538
Thereafter..................................................     5,425,935
----------
Total..................................................    $8,343,986

Future minimum lease payments for capital leases included above at December
31, 2001 are as follows:

(THOUSANDS OF DOLLARS)
----------------------

2002........................................................    $   69,576
2003........................................................        67,775
2004........................................................        65,985
2005........................................................        64,195
2006........................................................        62,405
Thereafter..................................................       988,420
----------
Total minimum obligations..............................    $1,318,356
==========
Interest....................................................    $ (766,030)
----------
Present value of minimum obligations........................       552,326
----------
Current Portion.............................................       (22,516)
----------
Long-term obligations.......................................    $  529,810
==========

Total accumulated amortization related to the assets recorded with respect
to NRG Energy's capital leases at December 31, 2001 was $0.

NRG ENERGY CREDIT RATING

NRG Energy's unsecured credit rating is BBB- from Standard & Poor's and
Baa3 from Moody's Investors Service. In December 2001, Moody's placed NRG
Energy's credit rating on review for potential downgrade. NRG Energy's credit
rating remains under review by Moody's for potential downgrade.

As of December 31, 2001, and 2000, NRG Energy's off-balance sheet
obligations pursuant to its guarantees of performance, equity and indebtedness
obligations of its subsidiaries totaled approximately $721.7 million and $493
million, respectively. NRG Energy is 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. In
addition, in connection with the purchase and sale of fuel emission credits and
power generation products to and from third parties with respect to the
operation of some of NRG Energy's generation facilities in the United States,
NRG Energy may be required to guarantee a portion of the obligations of certain
of its subsidiaries.

If Moody's or Standard & Poor's were to downgrade NRG Energy, many of the
corporate guarantees and commitments currently in place would need to be
supported with letters of credit or cash collateral within 5 to 30 days.

72

As of December 31, 2001, the amount of collateral required, if NRG Energy
were downgraded, was approximately $960 million to satisfy certain of the above
mentioned guarantees and certain obligations associated with the $2 billion
construction/acquisition revolver. Of the $960 million in collateral that could
be required, approximately $200 million relates to NRG Energy's guarantees of
debt service reserve accounts required by some of its project-level financings,
approximately $400 million relates to NRG Energy's power marketing activities;
and $360 million would be required to support its Contingent Equity Guarantee
associated with the $2 billion Construction/Acquisition Revolver.

Because NRG Energy places a maximum amount on its guarantees in place to
support power marketing activities, and because of the relatively small number
of margin accounts in place, even very large changes in market conditions would
not have a material impact on the approximately $400 million of collateral that
would be required for NRG Power Marketing in the event of a downgrade.

In the event of a downgrade, NRG Energy would expect to meet its collateral
obligations with cash on hand, available credit lines provided under its
revolving line of credit, liquidity support from Xcel Energy and potentially
from the issuance of debt into capital markets. Xcel Energy has stated its plan
to infuse $600 million of equity into NRG Energy in 2002 in connection with its
exchange offer and merger. Of this amount, $300 million has already been
provided (March 2002) in the form of a convertible subordinated note that Xcel
Energy has said it will cancel if its exchange offer and merger are completed.
If the offer and merger are not completed, Xcel Energy has said it will continue
to evaluate the terms and timing of any additional investment in NRG Energy. NRG
Energy's revolving line of credit is expected to be increased from $500 million
to $1 billion in March 2002. In addition, NRG Energy will maintain its $125
million letter of credit facility and plans to secure an additional $125 million
credit facility for total credit facilities of $1.25 billion to be available in
2002.

The Contingent Equity Guarantee associated with NRG Energy's construction
revolver could increase to a maximum of $850 million by the end of 2002 as NRG
Energy utilizes the capacity of the Construction/ Acquisition Revolver.
Therefore, the amount of collateral required by the end of 2002 could increase
to $1.45 billion.

NOTE 10 -- INCOME TAXES

Through March 12, 2001, NRG Energy had a tax sharing agreement with its
parent, Xcel Energy, that included the following significant provisions: (1) if
NRG Energy, along with its subsidiaries, is in a taxable income position, NRG
Energy will be currently charged with an amount equivalent to its federal income
tax computed as if the group had actually filed a separate return, and (2) if
NRG Energy, along with its subsidiaries, is in a tax loss position, NRG Energy
will be currently reimbursed to the extent its combined losses are utilized in a
consolidated return, and (3) NRG Energy will be currently reimbursed for the tax
credits it generates to the extent its tax credits are utilized in a
consolidated return.

Due to the 2001 public equity offering, NRG Energy and its subsidiaries
will file a federal income tax return separate from Xcel Energy for the period
March 13, 2001 through December 31, 2001. This

73

deconsolidation for tax purposes has had no material impact on current or
deferred taxes recorded for NRG Energy. The provision (benefit) for income taxes
for the years ended December 31, consists of the following:

2001           2000           1999
--------       --------       --------
(THOUSANDS OF DOLLARS)

Current
U.S....................................................    $ 29,301       $ 89,020       $  4,661
Foreign................................................       7,149           (614)         4,040
--------       --------       --------
36,450         88,406          8,701
--------       --------       --------
Deferred
U.S....................................................      31,773         31,311         (6,693)
Foreign................................................      13,969          7,104         (7,668)
--------       --------       --------
45,742         38,415        (14,361)
Tax credits recognized...................................     (48,788)       (34,083)       (20,421)
--------       --------       --------
Total income tax (benefit)..........................      33,404         92,738        (26,081)
--------       --------       --------
Effective tax rate.......................................        11.2%          33.6%         (84.0)%

The components of the net deferred income tax liability at December 31
were:

2001         2000
---------    ---------
(THOUSANDS OF DOLLARS)

Deferred tax liabilities
Differences between book and tax basis of property........  $491,633     $ 82,392
Investments in projects...................................    30,036       29,475
Goodwill..................................................     2,116        2,015
Net unrealized gains on mark to market transactions.......    53,944           --
Other.....................................................     8,845       10,546
--------     --------
Total deferred tax liabilities............................  $586,574     $124,428
--------     --------
Deferred tax assets
Deferred compensation, accrued vacation and other
reserves...............................................    23,555       23,703
Development costs.........................................     5,741       13,891
Foreign tax loss carryforwards............................    23,630       25,063
Differences between book and tax basis of contracts.......    82,972           --
Other.....................................................     4,940        6,129
--------     --------
Total deferred tax assets.................................   140,838       68,786
========     ========
Net deferred tax liability................................  $445,736     $ 55,642
========     ========

The effective income tax rates for the years ended December 31, 2001 and
2000 differ from the statutory federal income tax rate of 35% as follows:

2001                    2000
--------------------    ---------------------

Income before income taxes........................    $298,608                $ 275,673
========                =========
Tax at 35%........................................     104,512       35.0%       96,486         35%
State taxes (net of federal benefit)..............       7,576        2.5%       29,541      10.72%
Foreign operations................................     (29,386)     (9.8)%      (10,692)    (3.88)%
Tax credits.......................................     (48,788)    (16.3)%      (34,083)   (12.36)%
Permanent differences, reserves, other............        (510)     (0.2)%       11,486       4.16%
--------    --------    ---------    --------
Income Tax Expense................................    $ 33,404       11.2%    $  92,738      33.64%
========    ========    =========    ========

For the year ended December 31, 2001, income tax expense was $33.4 million,
compared to an income tax expense of $92.7 million for the year ended December
31, 2000, a decrease of $59.3 million. The decrease in tax expense compared to
2000 was primarily due to increased IRC Section 29 energy credits, a reduction
in

74

the state effective tax rate, and a higher percentage of NRG's overall earnings
derived from foreign projects in lower tax jurisdictions. For the year ended
December 31, 2001, NRG Energy's overall effective tax rate was 11.2%, compared
to 33.6% for the same period in 2000. For the year ended December 31, 2001, NRG
Energy's overall effective income tax rate before recognition of tax credits was
27.5% compared to 46.0%, for the same period in 2000.

The effective income tax rate for the year ended December 31, 2000 differs
from the statutory federal income tax rate of 35% primarily due to state tax,
foreign tax and tax credits as shown above.

NRG Energy intends to reinvest the earnings of foreign operations except to
the extent the earnings are subject to current U.S. income taxes. Accordingly,
U.S. income taxes and foreign withholding taxes have not been provided on a
cumulative amount of un-remitted earnings of foreign subsidiaries of
approximately $346 million and $238 million at December 31, 2001 and 2000,
respectively. The additional U.S. income tax and foreign withholding tax on the
un-remitted foreign earnings, if repatriated, would be offset in whole or in
part by foreign tax credits. Thus, it is not practicable to estimate the amount
of tax that might be payable.

NOTE 11 -- BENEFIT PLANS AND OTHER POSTRETIREMENT BENEFITS PENSION BENEFITS

Substantially all of NRG Energy's employees participate in defined benefit
pension plans. The majority of the employees participate in Xcel Energy's
noncontributory, defined benefit pension plan which was formerly sponsored by
NSP. Other employees participate in noncontributory, defined benefit pension
plans that are sponsored by NRG Energy or NRG Energy affiliates. Benefits are
generally based on a combination of an employee's years of service and earnings.
Some formulas also take into account Social Security benefits. Plan assets
principally consist of the common stock of public companies, corporate bonds and
U.S. government securities. In addition, NRG Energy provides postretirement
health and welfare benefits (health care and death benefits) for certain groups
of its employees. Generally, these are groups that were acquired in recent years
and for whom prior benefits are being continued (at least for a certain period
of time or as required by union contracts). Cost sharing provisions vary by
acquisition group and terms of any applicable collective bargaining agreements.
Certain former NRG retirees are covered under the legacy Xcel plan, which was
terminated for non-bargaining employees retiring after 1998 and for bargaining
employees retiring after 1999.

Xcel's pension and other postretirement health and welfare benefit
obligations and assets/(liability) at December 31, 2001 and 2000 were as
follows:

PENSION BENEFITS              OTHER BENEFITS
------------------------    --------------------------
2001          2000         2001           2000
----------    ----------    --------    --------------
(THOUSANDS OF DOLLARS)

Benefit obligation at Dec. 31.............  $1,366,912    $1,275,815    $191,114       $170,932
Fair value of plan assets at Dec. 31......   2,090,846     2,411,238      30,767         32,127
Accrued asset (liability) at Dec. 31......     224,907       113,551     (90,566)       (91,165)

NRG Energy's net annual periodic pension cost includes the following
components:

COMPONENTS OF NET PERIODIC BENEFIT COST

PENSION BENEFITS           OTHER BENEFITS
--------------------    ------------------------
2001        2000       2001          2000
--------    --------    ------    --------------
(THOUSANDS OF DOLLARS)

Service cost benefits earned...................  $  6,931    $  5,769    $  910        $  833
Interest cost on benefit obligation............     9,802       6,728     1,439         1,270
Amortization of prior service cost.............       427         394      (129)         (104)
Expected return on plan assets.................   (15,748)    (11,227)       --            --
Recognized actuarial (gain)/loss...............    (6,549)     (5,355)      (51)          (28)
--------    --------    ------        ------
Net periodic benefit cost (credit)........  $ (5,137)   $ (3,691)   $2,169        $1,971
========    ========    ======        ======

75

A comparison of the pension benefit obligation and pension assets at
December 31, 2001 and 2000 for all of NRG's plans on a combined basis is as
follows:

RECONCILIATION OF FUNDED STATUS

PENSION BENEFITS          OTHER BENEFITS
---------------------    --------------------
2001         2000        2001        2000
---------    --------    --------    --------
(THOUSANDS OF DOLLARS)

Benefit obligation at Jan. 1.......................    $  90,572    $ 24,289    $ 18,194    $    421
Service cost.......................................        6,931       5,769         910         833
Interest cost......................................        9,802       6,728       1,439       1,270
Employee contributions.............................          570          --           7           6
Plan amendments....................................        1,446          --        (278)         --
Actuarial (gain)/loss..............................        8,407       5,357       1,806        (755)
Acquisitions.......................................       31,404      52,800       3,212      16,445
Benefit payments...................................       (6,402)     (4,371)       (107)        (26)
---------    --------    --------    --------
Benefit obligation at Dec. 31......................    $ 142,730    $ 90,572    $ 25,183    $ 18,194
=========    ========    ========    ========
Fair value of plan assets at Jan. 1................    $ 171,177    $ 47,078    $     --    $     --
Actual return on plan assets.......................       (4,424)     90,058          --          --
Employee contributions.............................           --          --           7           6
Employer contributions.............................           14          --         100          20
Benefit payments...................................       (6,402)     (4,371)       (107)        (26)
Acquisitions.......................................       17,334      38,412          --          --
---------    --------    --------    --------
Fair value of plan assets at Dec. 31.............    $ 177,699    $171,177    $     --    $     --
=========    ========    ========    ========
Funded status at Dec. 31 - excess of assets over
obligation.......................................    $  35,376    $ 80,605    ($25,183)   ($18,194)
Unrecognized prior service cost....................        5,400       4,381      (1,497)     (1,348)
Unrecognized net gain..............................      (65,031)    (98,874)      1,419      (2,106)
---------    --------    --------    --------
Accrued asset (liability) at Dec. 31...............    $ (24,255)   $(13,888)   ($25,261)   ($21,648)
=========    ========    ========    ========

AMOUNT RECOGNIZED IN THE BALANCE SHEET

PENSION BENEFITS         OTHER BENEFITS
--------------------    --------------------
2001        2000        2001        2000
--------    --------    --------    --------
(THOUSANDS OF DOLLARS)

Accrued benefit liability.....................    $(24,255)   $(13,888)   $(25,261)   $(18,199)
Intangible asset..............................      (1,121)         --          --          --
--------    --------    --------    --------
Net amount recognized -- asset (liability)....    $(25,376)   $(13,888)   $(25,261)   $(18,199)
========    ========    ========    ========

PENSION BENEFITS    OTHER BENEFITS
----------------    --------------
2001      2000     2001     2000
------    ------    -----    -----

Weighted-average assumption as of December 31,
Discount Rate.............................................     7.25      7.75      7.25     7.75
Expected return on plan assets............................     9.50      8.50      9.00     8.00
Rate of compensation increase.............................     4.50      4.50        --       --

Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. A one-percentage-point change in
assumed health care cost trend rates would have the following effect:

1-PERCENTAGE-      1-PERCENTAGE-
POINT INCREASE     POINT DECREASE
--------------     --------------

Effect on total of service and interest cost components.....       $  304            $  (217)
Effect on postretirement benefit obligation.................        2,620             (2,086)

76

NRG Energy participates in Xcel Energy's defined contribution 401(K) plan
that covers substantially all employees. Total contributions to the plan were
approximately $1.7 million, $1.1 million and $0.5 million for the years ended
December 31, 2001, 2000 and 1999, respectively.

NRG EQUITY PLAN

During 1998 and 1999, NRG Energy's employees were eligible to participate
in its Equity Plan (the Plan). The Plan granted, to employees, phantom equity
units that were intended to simulate Stock options. Grant size was based on the
participant's position in NRG Energy and base salary. Equity unit valuations
were performed annually by an outside valuation firm. The value of an equity
unit was the approximate value per share of NRG Energy's stockholder equity as
of the valuation date, less the value of Xcel Energy's (formerly NSP) equity
investments. The units were awarded to employees annually at the respective
year's calculated share price (grant price). The Plan provided employees with a
cash pay out for the unit's appreciation in value over the vesting period. The
Plan had a seven year vesting schedule with actual payments beginning after the
end of the third year and continuing at 20% each year for the subsequent five
years. During 2001, 2000 and 1999, NRG Energy recorded compensation expense of
approximately $0, $6.0 million and $13.0 million, respectively, for the Plan.

The Plan included a change of control provision, which allowed all shares
to vest if NRG Energy's ownership were to change. Subsequent to the completion
of NRG Energy's initial public offering in June 2000, the Plan was converted to
a new stock option plan (see Note 14).

401(K) PLANS

NRG Energy also assumed several contributory, defined contribution employee
savings plans as a result of its 2000 and 1999 acquisition activity. These plans
comply with Section 401(k) of the Internal Revenue Code and cover substantially
all of our employees who are not covered by Xcel Energy's 401(k) Plan. NRG
Energy matches specified amounts of employee contributions to the plan. Employer
contributions made to these plans were approximately $1.5 million, $1.1 million
and $0.3 million in 2001, 2000 and 1999, respectively.

PENSION AND OTHER BENEFITS -- 2001 ACQUISITIONS

During 2001, NRG Energy acquired several generating assets and assumed
benefit obligations for a number of employees associated with those
acquisitions. The plans assumption included noncontributory defined benefit
pension plans, matched 401(k) savings plans, and contributory post-retirement
welfare plans. Of the 2001 acquisitions where these obligations were assumed,
approximately 79% percent of such employees are represented by one local union
under collective bargaining agreements, which expire on July 1, 2004. Plan
liability and expense amounts for these acquisitions are included in the pension
and postretirement health care amounts shown above.

PENSION AND OTHER BENEFITS

NRG Energy assumed the Hsin Yu Energy Development Co., LTD. defined pension
obligation upon NRG Energy's approximate 60% acquisition of Hsin Yu Development
Co. LTD during fiscal year 2001. The approximate net periodic benefit cost for
the year related to this plan was $0.07 million.

NRG Energy also assumed the pension obligation related to Killingholme due
to NRG Energy's acquisition of the gas-fired combined cycle, baseload facility
in March of 2000. Pension costs relating to this plan for FY 2001 were
approximately $0.5 million.

NOTE 12 -- SALES TO SIGNIFICANT CUSTOMERS

During 2001, sales to two customers accounted for 26.7% and 13.8% of total
revenues from majority owned operations in 2001. During 2000, sales to two
customers accounted for 22.2% and 12.2% of total

77

revenues from majority owned operations in 2000. Sales to three customers
accounted for 21.0%, 19.7% and 10.5% of total revenues from majority owned
operations in 1999.

NOTE 13 -- FINANCIAL INSTRUMENTS

The estimated December 31 fair values of NRG Energy's recorded financial
instruments are as follows:

2001                       2000
------------------------    -----------------------
CARRYING        FAIR        CARRYING       FAIR
AMOUNT        VALUE         AMOUNT        VALUE
----------    ----------    ----------    ---------
(IN THOUSANDS)

Cash and Cash equivalents......................    $  186,107    $  186,107    $   95,243    $  95,243
Restricted cash................................       161,842       161,842        12,135       12,135
Notes receivable, including current portion....       777,602       777,602        77,012       77,012
Long-term debt, including current portion......     8,343,986     8,217,452     3,797,318    3,838,627

For cash and cash equivalents and restricted cash, the carrying amount
approximates fair value because of the short-term maturity of those instruments.
The fair value of notes receivable is based on expected future cash flows
discounted at market interest rates. The fair value of long-term debt is
estimated based on the quoted market prices for the same or similar issues.

DERIVATIVE FINANCIAL INSTRUMENTS

Foreign currency exchange rates

At December 31, 2001 and 2000, NRG Energy had various foreign currency
exchange instruments with combined notional amounts of $46.3 million and $8.8
million, respectively. These foreign currency exchange instruments were hedges
of expected future cash flows. If the hedges had been terminated at December 31,
2001 and 2000, NRG Energy would have owed the counterparties $2.4 million and
$0.7 million, respectively.

Interest rates

At December 31, 2001 and 2000, NRG Energy had various interest-rate swap
agreements with combined notional amounts of $2.4 billion and $530 million,
respectively. These contracts are used to manage NRG Energy's exposure to
changes in interest rates. If these swaps had been terminated at December 31,
2001 and 2000, NRG Energy would have owed the counterparties $81.5 million and
$28.9 million, respectively.

Energy related commodities

At December 31, 2001 and 2000 NRG Energy had various energy related
commodities financial instruments with combined notional amounts of $1.0 billion
and $309.0 million, respectively. These financial instruments take the form of
fixed price, floating price or indexed sales or purchases, and options, such as
puts, calls, basis transactions and swaps. These contracts are used to manage
NRG Energy's exposure to commodity price variability in electricity, emission
allowances and natural gas, oil and coal used to meet fuel requirements. If
these contracts were terminated at December 31, 2001 and 2000, NRG Energy would
have received $224.1 million and $52.8 million from counterparties,
respectively.

Credit Risk

Management believes that NRG Energy's exposure to credit risk due to
nonperformance by the counter-parties to its hedging contracts is insignificant,
based on the investment grade rating of the counterparties. Counter-parties
consist principally of financial institutions and major energy companies. NRG
Energy actively manages its exposure to counter-party risk. NRG Energy has an
established credit policy in place to minimize overall credit risk. Important
elements of this policy include ongoing financial reviews of all counterparties,
established credit limits, as well as monitoring, managing and mitigating credit
exposure.

78

Enron Bankruptcy

During the fourth quarter of 2001, NRG Energy recorded a net after-tax
expense of approximately $6.7 million related to Enron Corp.'s bankruptcy. This
amount includes a $14.2 million after-tax charge to establish bad debt reserves,
which was partially offset by a $7.5 million after-tax gain on a credit swap
agreement entered into as part of NRG Energy's credit risk management program.
NRG Energy has fully provided for its exposure to Enron; however, as with any
receivable, NRG Energy will pursue collection of all amounts outstanding through
the ordinary course of business.

In addition, an Enron subsidiary, NEPCO, is serving as the construction
contractor for two greenfield development projects, the Kendall and Nelson
projects (2,336 MW combined) currently under construction in Illinois. Enron
guaranteed NEPCO's obligations under the construction contracts. To date, the
actual construction and engineering work on both projects has continued without
disruption and NRG Energy expects the projects to achieve commercial operations
on schedule. NRG Energy believes its overall construction costs for these two
projects will increase by approximately $22 per kilowatt, as a result of the
need to restructure the underlying construction contracts following the Enron
bankruptcy.

NOTE 14 -- CAPITAL STOCK

SALE OF STOCK

In March 2001, NRG Energy completed the sale of 18.4 million shares of
common stock for an initial price of $27 per share. The offering was completed
with all 18.4 million shares of common stock being sold including the
over-allotment shares of 2.4 million. NRG Energy received gross proceeds from
the issuance of $496.6 million. Net proceeds from the issuance were $473.4
million after deducting underwriting discounts, commissions and estimated
offering expenses. The net proceeds were used in part to reduce amounts
outstanding under NRG Energy's short-term bridge credit agreement, which was
used to finance in part NRG Energy's acquisition of the LS Power assets. At
December 31, 2001, there were approximately 50,939,875 shares of common stock,
and 147,605,000 shares of Class A common stock issued and outstanding.

In June 2000, NRG Energy sold 32.4 million shares of common stock at $15
per share. Net proceeds from the offering were $453.7 million. NRG Energy has
authorized capital stock consisting of 550,000,000 shares of common stock, and
250,000,000 shares of Class A common stock. At December 31, 2000, there were
approximately 32,396,000 shares of common stock, and 147,605,000 shares of Class
A common stock issued and outstanding.

INCENTIVE COMPENSATION PLAN

In June 2000, NRG Energy adopted a new incentive compensation plan (the New
Stock Plan), which was approved by shareholders in June 2001 and which will be
administered by a committee appointed by the Board of Directors. The New Stock
Plan provides for awards in the form of stock options, stock appreciation
rights, restricted stock, performance units, performance shares, or cash based
awards as determined by the Board of Directors. All officers, certain other
employees, and non-employee directors are eligible to participate in the plan.
Nine million shares of common stock are authorized for issuance under the Stock
Plan. Initially, only stock option grants will be made to certain officers,
independent directors and employees under the plan.

Each new option granted is valued at the fair market value per share at
date of grant. The difference between the option price and the market value of
the stock at the date of grant, if any, of each option on the date of grant is
recorded as compensation expense over a vesting period. Options granted prior to
June 2001 vest over a period of five years, with 25% vesting in each of the
years two through five and generally expire ten years from the date of grant.
Options granted in June 2001 and subsequently, vest over a four year period,
with 25% vesting each year and generally expire ten years from the date of
grant. The board's independent directors' options vested immediately upon being
granted. The average exercise price of vested options at December 31, 2001 and
2000 was $14.39 and $9.51, respectively, all of which were granted in
replacement of units previously outstanding under the equity plan. Compensation
expense related to options granted totaled $1.9 million and $7.3 million, for
the year ended December 31, 2001 and 2000, respectively.

79

At December 31, 2000, no employee stock options were exercisable. Other
options currently granted under the equity plan will fully vest periodically and
become exercisable through the year 2005 at prices ranging from $5.75 to $17.25.
Stock option transactions were (shares in thousands):

WEIGHTED-
AVERAGE
EXERCISE
SHARES        PRICE
------      ---------

Outstanding at January 1, 2000..............................       --         $   --
Granted.....................................................    4,304           9.51
Exercised...................................................       --             --
Canceled or expired.........................................       --             --
Other, contingent share issuance............................       --             --
-----         ------
Outstanding at December 31, 2000............................    4,304           9.51
-----         ------
Exercisable December 31, 2000...............................       --         $   --
-----         ------
Outstanding at January 1, 2001..............................    4,304         $ 9.51
Granted.....................................................    3,437          20.19
Exercised...................................................     (145)          6.97
Canceled or expired.........................................     (169)         14.66
Other, contingent share issuance............................       --             --
-----         ------
Outstanding at December 31, 2001............................    7,427          14.39
-----         ------
Exercisable at December 31, 2001............................    1,368           7.45
-----         ------

The following table summarizes information about stock options outstanding
at December 31, 2001 (in thousands of shares):

OPTIONS OUTSTANDING        OPTIONS EXERCISABLE
-----------------------    ------------------------
WEIGHTED-
AVERAGE      WEIGHTED-                   WEIGHTED-
REMAINING      AVERAGE                     AVERAGE
TOTAL          LIFE       EXERCISE        TOTAL       EXERCISE
RANGE OF EXERCISE PRICES             OUTSTANDING    (IN YEARS)      PRICE      EXERCISABLE      PRICE
------------------------             -----------    ----------    ---------    -----------    ---------

$ 3.18 - $ 6.36...........................         635          1.7         $ 5.75           329        $ 5.75
$ 6.36 - $ 9.54...........................       2,371          5.0           8.14         1,024          7.77
$ 9.54 - $15.90...........................       2,211          9.1          14.43            --            --
$15.90 - $19.08...........................          62          9.4          17.77            --            --
$19.08 - $22.26...........................          36          9.5          21.45            --            --
$22.26 - $25.44...........................       2,050          9.3          23.49            15         22.95
$25.44 - $28.62...........................           2          8.6          25.62            --            --
$28.62 - $31.80...........................          60          9.2          31.80            --            --
-----          ---         ------         -----        ------
Total...................................       7,427          7.2         $14.39         1,368        $ 7.45
=====          ===         ======         =====        ======

The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option-pricing model, with the following
weighted-average assumptions used for grants in 2001 and 2000.

2001     2000
-----    -----

Dividends per year..........................................       --       --
Expected volatility.........................................    60.54    50.26
Risk-free interest rate.....................................     5.47     5.01
Expected life (years).......................................        7        7

Using the Black-Scholes option-pricing model, the weighted-average fair
value of NRG Energy's stock options granted for 2001 and 2000 is $13.26 and
$14.38 per share, respectively.

80

NRG Energy accounts for its stock option plan in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees,"
under which, no compensation cost has been recognized. Had compensation cost
been determined consistent with SFAS No. 123, "Accounting for Stock-Based
Compensation" (SFAS No. 123), NRG Energy's net income and per share amounts
would have approximated the following pro forma amounts for the years ended
December 31:

2001        2000
--------    --------

Net income..................................................    As reported    $265,204    $182,935
Pro Forma    $260,404     182,279
Earnings per share data:
Basic earnings per share....................................    As reported    $   1.36    $   1.10
Pro Forma        1.34        1.10
Diluted earnings per share..................................    As reported        1.35        1.10
Pro Forma        1.33        1.09

The effects of applying SFAS No. 123 on pro forma disclosures of net income
and earnings per share for the years ended December 31, 2001 and 2000 are not
likely to be representative of the pro forma effects on net income and earnings
per share in future years for the following reasons: 1) the number of future
shares to be issued under this plan is not known, 2) the effect of an additional
year of vesting no options granted in prior years is not considered in the
assumptions as of December 31, 2001 and 3) the assumptions used to determine the
fair value can vary significantly.

NOTE 15 -- EARNINGS PER SHARE

Basic earnings per common share were computed by dividing net income by the
weighted average number of Class A common stock and common stock shares
outstanding during each year. Shares issued during the year are weighted for the
portion of the year that they were outstanding. Diluted earnings per share is
computed in a manner consistent with that of basic earnings per share while
giving effect to all potentially dilutive common shares that were outstanding
during the period. The dilutive effect of the potential exercise of outstanding
options to purchase shares of common stock is calculated using the treasury
stock method. The dilutive effect of the issuance of common stock in the future
due to the outstanding warrants (11.5 million shares) to buy NRG Energy common
stock issued in connection with NRG Energy's Corporate Units issuance in March
2001 is calculated using the treasury stock method. The reconciliation of basic
earnings per common share to diluted earnings per share is shown in the
following table (in thousands, except per share data):

FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------
2001                             2000                            1999
------------------------------   ------------------------------   -----------------------------
PER SHARE                        PER SHARE                       PER SHARE
INCOME    SHARES     AMOUNT      INCOME    SHARES     AMOUNT     INCOME    SHARES     AMOUNT
------    ------    ---------    ------    ------    ---------   ------    ------    ---------

Basic earnings per share
Income before
extraordinary items...  $265,204   194,929    $ 1.36     $182,935   165,861     $1.10     $57,195   147,605     $.39
Effect of dilutive
securities:
Warrants (corporate
units)..................        --        --        --           --        --        --          --        --       --
Stock options.........        --     1,510    $(0.01)          --     1,128        --          --        --       --
--------   -------    ------     --------   -------     -----     -------   -------     ----
Diluted earnings per
share...................  $265,204   196,439    $ 1.35     $182,935   166,989     $1.10     $57,195   147,605     $.39
========   =======    ======     ========   =======     =====     =======   =======     ====

As of December 31, 2001, 2000 and 1999, 2,077,180, 2,700 and 0 options,
respectively, have been excluded from the dilutive calculation above as their
exercise price exceeded the average fair market value of NRG Energy's common
stock.

81

NOTE 16 -- CASH FLOW INFORMATION

Detail of supplemental disclosures of cash flow and non-cash investing and
financing information was:

2001           2000          1999
-----------    ----------    ----------
(THOUSANDS OF DOLLARS)

Interest paid (net of amount capitalized)...............    $   385,885    $  248,325    $   82,891
Taxes paid/(refunds)....................................    $    57,055    $   20,923    $  (54,384)
-----------    ----------    ----------
Detail of businesses and assets acquired:
Current assets (including restricted cash)............    $   184,874    $   97,970    $  110,821
Fair value of non-current assets......................      4,779,530     1,896,113     1,433,370
Liabilities assumed, including deferred taxes.........     (2,151,287)      (81,126)      (24,826)
-----------    ----------    ----------
Cash paid net of cash acquired........................    $ 2,813,117    $1,912,957    $1,519,365
===========    ==========    ==========

NOTE 17 -- COMMITMENTS AND CONTINGENCIES

OPERATING LEASE COMMITMENTS

NRG Energy leases certain of its facilities and equipment under operating
leases, some of which include escalation clauses, expiring on various dates
through 2010. Rental expense under these operating leases was $9.7 million, $2.3
million and $2.2 million in 2001, 2000 and 1999, respectively. Future minimum
lease commitments under these leases for the years ending after December 31,
2001 are as follows:

(THOUSANDS OF
DOLLARS)
-------------

2002........................................................       $10,742
2003........................................................         9,844
2004........................................................         9,267
2005........................................................         8,355
2006........................................................         7,956
Thereafter..................................................        41,615
-------
Total.....................................................       $87,779
=======

CAPITAL COMMITMENTS

NRG Energy's management expects future capital expenditures related to
projects listed below, as well as construction and the purchase of turbines, to
total approximately $7.5 billion in the years 2002 through 2006. NRG Energy
anticipates funding its ongoing capital requirements through the issuance of
debt, equity and equity like instruments, preferred stock and operating cash
flows.

NRG Energy has contractually agreed to the monetization of certain tax
credits generated from landfill gas sales through the year 2007.

FirstEnergy.  In November 2001, NRG Energy signed purchase agreements to
acquire or lease four coal-fired generating facilities totaling approximately
2,535 MW and two ash disposal sites from subsidiaries of FirstEnergy
Corporation. The four generating facilities are located in Ohio, along the shore
of Lake Erie, and are the approximately 376 MW Ashtabula facility in Ashtabula,
Ohio, the approximately 249 MW Lake Shore facility in downtown Cleveland, the
approximately 1,262 MW Eastlake facility near Cleveland and the approximately
648 MW Bay Shore facility near Toledo. NRG Energy is also acquiring all of the
equity interests in Bay Shore Power Company, which is a subsidiary of
FirstEnergy and the owner of a 136 MW petroleum coke-fired steam generating
project currently undergoing testing and commissioning on the Bay Shore facility
site. NRG Energy is working to close these acquisitions in the second quarter of
2002. In connection with the acquisition of these facilities, NRG Energy is
entering into a Transition Power Purchase Agreement with FirstEnergy, pursuant
to which NRG Energy will supply to FirstEnergy approximately 95% of the output
from the facilities through 2005.

82

Conectiv.  In June 2001, NRG Energy extended purchase agreements that were
entered into with a subsidiary of Conectiv to acquire 794 MW of coal and
oil-fired electric generating capacity and other assets in New Jersey and
Pennsylvania, including an additional 66 MW of the Conemaugh Generating Station
and an additional 42 MW of the Keystone Generating Station. By their terms these
purchase agreements became terminable by either party after February 28, 2002,
and on April 1, 2002 NRG Energy exercised its right to terminate the agreements.

CALIFORNIA LIQUIDITY CRISIS

NRG Energy's California generation assets include a 57.67% interest in
Crockett Cogeneration, a 39.5% interest in the Mt. Poso facility and a 50%
interest in the West Coast Power partnership with Dynegy.

In March 2001, the California PX filed for bankruptcy under Chapter Eleven
of the Bankruptcy Code, and in April 2001, Pacific Gas & Electric Company (PG&E)
also filed for bankruptcy under Chapter Eleven. PG&E's filing delayed collection
of receivables owed to the Crockett facility. In September 2001, PG&E filed a
proposed plan of reorganization. Under the terms of the proposed plan, which is
subject to challenge by interested parties, unsecured creditors such as NRG
Energy's California affiliates would receive 60% of the amounts owed upon
approval of the plan. The remaining 40% would be paid in negotiable debt with
terms from 10 to 30 years. The California Power Exchange's (PX) ability to repay
its debt is dependent on the extent to which it receives payments from PG&E and
SCE. On December 21, 2001, the California bankruptcy court affirmed the Crockett
Power Purchase Agreement (it had previously affirmed Mt. Poso's agreement) with
PG&E and, in respect of the Crockett Power Purchase Agreement, approved a
twelve-month repayment schedule of all past due amounts totaling $49.6 million,
plus interest. The first payment of $6.2 million, including accrued interest,
was received on December 31, 2001.

NRG Energy's share of the net amounts owed to West Coast Power by the
California ISO and PX totaled approximately $85.1 million as of December 31,
2001 compared to $101.8 million at December 31, 2000. These amounts reflect NRG
Energy's share of (a) total amounts owed to West Coast Power less (b) amounts
that are currently treated as disputed revenues and are not recorded as accounts
receivable in the financial statements of West Coast Power LLC, and reserves
taken against accounts receivable that have been recorded in the financial
statements. The decrease is primarily attributed to cash collections from the
California ISO during the fourth quarter of 2001.

CONTRACTUAL COMMITMENTS

In connection with the acquisition of certain generating facilities NRG
Energy entered into various long-term transition agreements and standard offer
agreements that obligated NRG Energy to provide its customers, primarily the
previous owners of the acquired facilities, with a certain portion of the energy
and capacity output of the acquired facilities.

During 1999, NRG Energy acquired the Huntley and Dunkirk generating
facilities from Niagara Mohawk Power Corporation (NiMo). In connection with this
acquisition, NRG Energy entered into a 4-year agreement with NiMo that requires
NRG Energy to provide to NiMo pursuant to a predetermined schedule fixed
quantities of energy and capacity at a fixed price.

During 1999, NRG Energy acquired certain generating facilities from
Connecticut Light and Power Company (CL&P). NRG also entered into a 4-year
standard offer agreement that requires NRG Energy to provide to CL&P a portion
of its load requirements through the year 2003 at a substantially fixed rate.

During 2000, NRG Energy acquired the non-nuclear generating assets of Cajun
Electric. Upon acquisition of the facilities, NRG Energy entered into various
long-term power purchase agreements with the former customers of Cajun Electric,
primarily distribution cooperatives and municipalities. These agreements specify
that NRG Energy provide these customers with all requirements necessary to
satisfy the energy and capacity needs of their retail load.

Also during 2000, NRG Energy acquired the Killingholme generating
facilities from National Power plc. In connection with this acquisition, NRG
Energy entered into certain agreements to provide the natural gas to
83

operate the facility which generally sells its power into the spot market. NRG
Energy has entered into two gas purchase agreements, the first being a 5-year
agreement that provides approximately 30% of the generating facilities natural
gas requirements and the second agreement being a 10-year agreement that
provides approximately 70% of the generating facilities natural gas
requirements. NRG Energy has also entered into a 5-year fixed price agreement to
resell up to 15% of the gas it has contracted for at a slightly higher price.

Also during 2000, NRG Energy acquired the Flinders Power operations in
South Australia. Upon the closing of the acquisition, NRG Energy assumed a gas
purchase and sales agreement relating to the Osborne generating plant with a
remaining life of 18-years. These agreements require NRG Energy to purchase a
specified quantity of natural gas from a third party supplier at a fixed price
for 18-years and resell the natural gas to Osborne at a fixed price for
13-years. The sales price is substantially lower than the purchase price. NRG
Energy has recorded the liability associated with this out of the market
contract in the amount of approximately $66 million in other long-term
obligations and deferred income on its balance sheet. In addition, NRG Energy
has entered into a contract for differences agreement which provides for the
sale of energy into the South Australian power pool through the year 2002. The
agreement provides for a swap of the variable market price to a fixed price.

During 2001, NRG Energy acquired a portfolio of projects located in
Delaware, Maryland and Pennsylvania from Conectiv. Upon closing of the
acquisition, NRG Energy assumed a power purchase agreement. This agreement,
which is not project specific, requires NRG Energy to deliver and Conectiv to
purchase 500 MW of electric energy around the clock at a specified price through
2005. The sales price of the contracted electricity was substantially lower than
the fair value that the electricity on the merchant market at the date of
acquisition. NRG Energy has recorded the liability associated with the out of
market contract on the balance sheet in the amount of approximately $89.4
million as of December 31, 2001. Approximately $45.1 million is recorded in
other current liabilities and approximately $44.3 million in other long-term
obligations and deferred income. The difference will be amortized into income
over the life of the agreement.

ENVIRONMENTAL REGULATIONS

As part of acquiring existing generating assets, NRG Energy has inherited
environmental liabilities. Generally, potential liabilities are identified and
researched during due diligence processes and funds are reserved in the
financial pro forma to address them as circumstances dictate. Often, potential
implementation plans are changed, delayed or abandoned due to one or more of the
following conditions: (a) extended negotiations with regulatory agencies, (b) a
delay in promulgating rules critical to dictating the design of expensive
control systems, (c) changes in governmental/regulatory personnel, (d) changes
in governmental priorities (i.e., events of September 11th, 2001), or (e)
selection of a less expensive compliance option than originally envisioned. The
following paragraphs present an update on capital investments associated with
existing environmental liabilities.

WEST COAST REGION

Environmental expenditures at the Encina Generating Station include the
installation of Selective Catalytic Reduction (SCR) emission control technology
on all five units. These SCRs are mandated by the San Diego County Air Pollution
Control District Rule 69 and by the December 13, 2001 Rule 69 Regular Variance
Order 3732. Units 4 & 5 were retrofit with SCRs beginning in late 2001 and
scheduled to end in spring 2002. SCR emission control installations on Units 1,
2 & 3 are scheduled to be phased in beginning in fall 2002 and ending in spring
2003. The cost for all five SCR retrofits is estimated at approximately $39
million.

NORTHEAST REGION

The total budgeted capital expenditures during the first 5 years of the
Con-Ed, NIMO, Somerset and CLP assets acquired by NRG Energy were in the range
of $60 million dollars. During the years 1999-2001, NRG Energy recorded
approximately $4 million of expenditures on environmental matters related to
inherited

84

liabilities associated with these assets. These expenditures were incurred as a
result of moving forward with efforts to address NRG Energy's inherited remedial
obligations, studies related to establishing strategies for complying with the
NO(X) budget program, and other matters required as part of consent orders
transferred to NRG Energy as part of acquisition packages. As the company
progresses in its negotiations to close out consent order issues, an increased
rate of expenditure is anticipated. NRG Energy estimates approximately $7.5
million to close out the remaining issues associated with remedial
investigations/clean-ups at Somerset, Arthur Kill, Astoria, Middletown, Norwalk
Harbor, Devon, and Montville. In response to liabilities associated with these
activities, accruals have been established when reasonable estimates are
possible. As of December 31, 2001 and 2000, NRG Energy has established such
accruals in the amount of approximately $5.0 million and $6.0 million,
respectively. NRG Energy has not used discounting in determining its accrued
liabilities for environmental remediation and no claims for possible recovery
from third party issuers or other parties related to environmental costs have
been recognized in NRG Energy's consolidated financial statements. NRG Energy
adjusts the accruals when new remediation responsibilities are discovered and
probable costs become estimable, or when current remediation estimates are
adjusted to reflect new information. During the years 2001, 2000 and 1999, NRG
Energy recorded expenses of approximately $15.3 million, $3.4 million and $0.3
million of expenditures related to environmental matters, respectively.

The balance of the estimated $60 million in capital expenditures over the
next five years is most notably for landfill construction, installation of NO(X)
controls, installation of best available technology for minimizing environmental
impacts associated with impingement and entrainment of fish and larvae,
particulate matter control improvements, and spill prevention controls.

MID-ATLANTIC REGION

Capital expenditures over the next five years related to resolving
environmental concerns at the Indian River Generating Station are centered
around possible closure of the existing landfill and construction of a new
cell(s) to replace it, possible addition of a cooling tower, and the addition of
controls to reduce NO(X) emissions. Currently, cost estimates for addressing the
first two items vary widely with NRG Energy's success in selling ash and in NRG
Energy's negotiations with the Delaware Natural Resources and Environment
Commission (DNREC). If ash sales are poor, it is estimated that NRG Energy could
spend up to $11 million over the five-year timeframe to close/construct sections
of the landfill; if sales are robust, expenditures related to
closure/construction are expected to be minimal. In the unlikely event NRG
Energy is unable reach agreement with DNREC on extension of a variance, NRG
Energy estimates a $40 million cooling tower could be required; if negotiations
are successful, a cooling tower can be avoided.

NRG Energy has also budgeted funds for installation of NO(X) controls at
both the Indian River and Vienna Generating Stations.

SOUTH CENTRAL REGION

Approximately $35 million over the next five years has been budgeted for
the addition of NO(X) controls to Units 1-3 at Big Cajun II; $5-10 million over
the same time period is for NO(X) controls on the steam boilers at Big Cajun I.
Approximately $4-5 million will be spent over the next two years to reduce
particulate matter emissions during start-up of the Big Cajun II boilers and
$3-5 million for expanding the existing bottom ash pond at the Big Cajun II
plant site.

NORTH CENTRAL REGION

No capital expenditures related to environmental liabilities have been
budgeted at this time.

LEGAL ISSUES

New York Environmental Litigation

In January 2002 the New York Attorney General and the New York Department
of Environmental Control filed suit in the western district of New York against
NRG Energy and Niagara Mohawk Power Corporation, the prior owner of the Huntley
and Dunkirk facilities in New York. The lawsuit relates to
85

physical changes made at those facilities prior to NRG Energy's assumption of
ownership. The complaint alleges that these changes represent major
modifications undertaken without the required permits having been obtained.
Although NRG Energy has a right to indemnification by the previous owner for
fines, penalties, assessments and related losses resulting from the previous
owner's failure to comply with environmental laws and regulations, NRG Energy
could be enjoined from operating the facilities if the facilities are found not
to comply with applicable permit requirements.

In July 2001, Niagara Mohawk Power Corporation filed a declaratory judgment
action in the Supreme Court for the State of New York, County of Onondaga,
against NRG Energy and its wholly-owned subsidiaries, Huntley Power LLC and
Dunkirk Power LLC. Niagara Mohawk Power Corporation requests a declaration by
the Court that, pursuant to the terms of the Assets Sales Agreement under which
NRG Energy purchased the Huntley and Dunkirk generating facilities from Niagara
Mohawk (the ASA), defendants have assumed liability for any costs for the
installation of emissions controls or other modifications to or related to the
Huntley or Dunkirk plants imposed as a result of violations or alleged
violations of environmental law. Niagara Mohawk Power Corporation also requests
a declaration by the Court that, pursuant to the ASA, defendants have assumed
all liabilities, including liabilities for natural resource damages, arising
from emissions or releases of pollutants from the Huntley and Dunkirk plants,
without regard to whether such emissions or releases occurred before, on or
after the closing date for the purchase of the Huntley and Dunkirk plants. NRG
Energy has counterclaimed against Niagara Mohawk Power Corporation, and the
parties have exchanged discovery requests.

California Litigation

NRG Energy and other power generators and power traders have been named as
defendants in certain private plaintiff class actions filed in the Superior
Court of the State of California for the County of San Diego in San Diego,
California in November 2000 (Pamela R. Gordon v. Reliant Energy, Inc., et al.
and Ruth Hendricks v. Dynegy Power Marketing Inc., et al). NRG Energy has also
been named in another suit filed in January 2001 in San Diego County and brought
by three California water districts, as consumers of electricity (Sweetwater
Authority v. Dynegy, Inc., et al.), and in two suits filed in San Francisco
County, one brought by the San Francisco City Attorney on behalf of the people
of the State of California (The People of the State of California v. Dynegy
Power Marketing, Inc., et al.) and one brought by Pier 23 Restaurant as a class
action (Pier 23 Restaurant v. PG&E Energy Trading, et al.). Certain NRG Energy
affiliates in NRG Energy's West Coast power partnership with Dynegy (Cabrillo I
and II, Long Beach Generation and El Segundo Power) have been named as
defendants in a state court action in Los Angeles County (Bustamonte v. Dynegy,
Inc., et al.).

Although the complaints contain a number of allegations, the basic claim is
that, by underbidding forward contracts and exporting electricity to surrounding
markets, the defendants, acting in collusion, were able to drive up wholesale
prices on the Real Time and Replacement Reserve markets, through the Western
Coordinating Council and otherwise. The complaints allege that the conduct
violated California antitrust and unfair competition laws. NRG Energy does not
believe that it has engaged in any illegal activities, and intends to vigorously
defend these lawsuits. These six civil actions brought against NRG Energy and
other power generators and power traders in California have been consolidated
and assigned to the presiding judge of the San Diego County Superior Court, and
a pretrial conference has been scheduled for March 2002. While these cases are
in too preliminary a stage to speculate on their outcome, if they were
ultimately resolved adversely to the defendants it could have a material adverse
effect on NRG Energy's results of operations and financial condition.

Shareholder Litigation

On February 15, 2002, Xcel Energy announced its intention to commence an
exchange offer to acquire all of the outstanding publicly held shares of NRG
Energy. On the same day, eight separate civil actions were filed in the Court of
Chancery of the State of Delaware in and for New Castle County by owners of NRG
common stock, against Xcel Energy, NRG Energy, and NRG Energy's directors. The
complaints contain a number of allegations, but the basic claim is that Xcel
proposes to acquire the remaining ownership of NRG
86

for inadequate consideration and without full and complete disclosure of all
material information, in breach of defendants' fiduciary duties. The complaints
request the court to enjoin the proposed transaction and, in the event the
exchange offer is consummated, to award damages to plaintiffs.

NOTE 18 -- SEGMENT REPORTING

NRG Energy conducts its business within six segments: Independent Power
Generation in North America, Independent Power Generation outside North America
(Europe, Asia Pacific and Other Americas regions), Alternative Energy and
Thermal projects. NRG Energy's Revenues from majority owned operations
attributable to Europe and Asia Pacific primarily relate to operations in the
United Kingdom and Australia, respectively. These segments are distinct
components 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 (primarily interest expense) that have
not been allocated to the operating segments.

POWER GENERATION
----------------------------------------------------
OTHER
NORTH AMERICA    EUROPE    ASIA PACIFIC    AMERICAS
-------------    ------    ------------    --------
(THOUSANDS OF DOLLARS)

2001
OPERATING REVENUES AND EQUITY EARNINGS
Revenues from majority-owned operations.............   $1,835,221     $490,885     $239,085     $   34,690
Inter-segment revenues..............................           --          --            --             --
Equity in earnings of unconsolidated affiliates.....      187,579      31,977        13,228          3,886
----------     --------     --------     ----------
Total operating revenues and equity earnings........    2,022,800     522,862       252,313         38,576
----------     --------     --------     ----------
Operating Income....................................      563,584     113,038        22,252         12,608
----------     --------     --------     ----------
Net Income..........................................   $  261,317     $64,345      $ 12,427     $    1,381
==========     ========     ========     ==========

ALTERNATIVE
ENERGY        THERMAL        OTHER         TOTAL
-----------     -------        -----         -----

OPERATING REVENUES AND EQUITY EARNINGS
Revenues from majority-owned operations.............   $   77,629     $  108,319    $   10,920    $2,796,749
Inter-segment revenues..............................        1,859             --            --         1,859
Equity in earnings of unconsolidated affiliates.....      (26,638)            --            --       210,032
----------     ----------    ----------    ----------
Total operating revenues and equity earnings........       52,850        108,319        10,920     3,008,640
----------     ----------    ----------    ----------
Operating Income....................................      (25,688)        18,666        10,362       714,822
----------     ----------    ----------    ----------
Net Income (Loss)...................................   $   35,013     $   10,219    $ (119,498)   $  265,204
==========     ==========    ==========    ==========

Total assets as of December 31, 2001, for North America, Europe, Asia
Pacific and Other Americas total $9.6 billion, $1.9 billion, $882 million and
$508 million, respectively.

POWER GENERATION
------------------------------------------------------
OTHER
NORTH AMERICA     EUROPE     ASIA PACIFIC    AMERICAS
-------------     ------     ------------    --------
(THOUSANDS OF DOLLARS)

2000
OPERATING REVENUES AND EQUITY EARNINGS
Revenues from majority-owned operations............   $1,578,706     $  197,718    $   94,681    $      291
Inter-segment revenues.............................           --             --            --            --
Equity in earnings of unconsolidated affiliates....      138,655          9,098         3,456         5,704
----------     ----------    ----------    ----------
Total operating revenues and equity earnings.......    1,717,361        206,816        98,137         5,995
----------     ----------    ----------    ----------
Operating Income...................................      596,919         32,573         6,297         2,268
----------     ----------    ----------    ----------
Net Income.........................................   $  241,846     $    9,706    $    9,343    $    3,607
==========     ==========    ==========    ==========

87

ALTERNATIVE
ENERGY        THERMAL        OTHER         TOTAL
-----------     -------        -----         -----

OPERATING REVENUES AND EQUITY EARNINGS
Revenues from majority-owned operations............   $   39,379     $   87,802    $   17,789    $2,016,366
Inter-segment revenues.............................        2,256             --            --         2,256
Equity in earnings of unconsolidated affiliates....      (17,300)          (249)           --       139,364
----------     ----------    ----------    ----------
Total operating revenues and equity earnings.......       24,335         87,553        17,789     2,157,986
----------     ----------    ----------    ----------
Operating Income (Loss)............................      (28,898)        20,303       (56,389)      573,073
----------     ----------    ----------    ----------
Net Income (Loss)..................................   $   14,637     $    7,590    $ (103,794)   $  182,935
==========     ==========    ==========    ==========

Total assets as of December 31, 2000, for North America, Europe, Asia
Pacific and Other Americas total $4.4 billion, $828 million, $599 million and
$141 million, respectively.

POWER GENERATION
-------------------------------------------------
OTHER
NORTH AMERICA   EUROPE    ASIA PACIFIC   AMERICAS
-------------   ------    ------------   --------
(THOUSANDS OF DOLLARS)

1999
OPERATING REVENUES AND EQUITY EARNINGS
Revenues from majority-owned operations.............    $319,598      $   --      $  3,155     $    189
Inter-segment revenues..............................          --          --            --           --
Equity in earnings of unconsolidated affiliates.....      31,052      22,840         9,915        5,879
--------      -------     --------     --------
Total operating revenues and equity earnings........     350,650      22,840        13,070        6,068
--------      -------     --------     --------
Operating Income....................................     114,628       9,168         7,901        2,916
--------      -------     --------     --------
Net Income (Loss)...................................    $ 71,850      $9,509      $ 15,028     $  3,502
========      =======     ========     ========

ALTERNATIVE
ENERGY       THERMAL      OTHER        TOTAL
-----------    -------      -----        -----

OPERATING REVENUES AND EQUITY EARNINGS
Revenues from majority-owned operations.............    $ 26,934      $76,277     $  5,402     $431,555
Inter-segment revenues..............................         963          --            --          963
Equity in earnings of unconsolidated affiliates.....      (2,205)         19            --       67,500
--------      -------     --------     --------
Total operating revenues and equity earnings........      25,692      76,296         5,402      500,018
--------      -------     --------     --------
Operating Income (Loss).............................     (13,288)     18,746       (30,551)     109,520
--------      -------     --------     --------
Net Income (Loss)...................................    $ 10,243      $6,506      $(59,443)    $ 57,195
========      =======     ========     ========

All operating revenues are from external customers located in the United
States except $764.7 million and $292 million of revenues in 2001 and 2000,
respectively, which came from external customers outside of the United States.
NRG Energy's equity in earnings of unconsolidated affiliates, primarily
independent power projects, includes $54.1 million in 2001, $19.2 million in
2000 and $38.6 million in 1999 from non-regulated projects located outside of
the United States. NRG Energy's investments in affiliates outside of the United
States were $519 million in 2001, $566 million in 2000 and $606 million in 1999.
In addition, NRG Energy's majority owned foreign assets of $2.8 billion in 2001
and $796 million in 2000, contributed earnings of $49.2 million in 2001, $30.1
million in 2000 and $0 in 1999.

Total assets as of December 31, 1999, for North America, Europe, Asia
Pacific and Other Americas total $2.8 billion, $179 million, $346 million and
$117 million, respectively.

NOTE 19 -- JOINTLY OWNED PLANTS

On March 31, 2000, NRG Energy acquired a 58% interest in the Big Cajun II,
Unit 3 generation plant. Entergy Gulf States owns the remaining 42%. Big Cajun
II, Unit 3 is operated and maintained by Louisiana Generating pursuant to a
joint ownership participation and operating agreement. Under this agreement,

88

Louisiana Generating and Entergy Gulf States are each entitled to their
ownership percentage of the hourly net electrical output of Big Cajun II, Unit
3. All fixed costs are shared in proportion to the ownership interests. Fixed
costs include the cost of operating common facilities. All variable costs are
incurred in proportion to the energy delivered to the owners. NRG Energy's
income statement includes its share of all fixed and variable costs of operating
the unit. NRG Energy's 58% share of the original cost included in Property,
Plant and Equipment and construction in progress at December 31, 2001 and 2000,
was $179.6 million and $179.1 million, respectively. The corresponding
accumulated depreciation and amortization at December 31, 2001 and 2000, was
$7.8 million and $3.4 million, respectively.

In August 2001, NRG Energy completed the acquisition of a 77% interest in
the 520 MW gas fired electric generating facility located in McClain County,
Oklahoma from Duke energy North America LLC (McClain generating facility). The
remaining 23% of the McClain generating facility is owned and operated by the
Oklahoma Municipal Power Authority (OMPA) pursuant to a joint ownership and
operating agreement. Under this agreement, NRG McClain LLC operates the facility
and NRG Energy and OMPA are entitled to their ownership ratio of the net
available output of the McClain facility. All fixed costs are shared in
proportion to the ownership interests. All variable costs are incurred in
proportion to the energy delivered to the owners. NRG Energy's income statement
includes its share of all fixed and variable costs of operating the facilities.
NRG Energy's 77% share of the original cost included in Property, Plant and
Equipment and construction in progress at December 31, 2001 was $276.6 million.
The corresponding accumulated depreciation and amortization at December 31,
2001, was $3.1 million.

In June 2001, NRG Energy completed the acquisition of an approximately 3.7%
interest in both the Keystone and Conemaugh coal-fired generating facilities.
The Keystone and Conemaugh facilities are located near Pittsburgh, Pennsylvania
and are jointly owned by a consortium of energy companies. NRG Energy purchase
its interests from Conectiv, Inc. Keystone and Conemaugh are operated by GPU
Generation, Inc. which sold its assets and operating responsibilities to Sithe
Energies. Keystone and Conemaugh both consist of two operational coal-fired
steam power units with a combined net output of 1,700 MW, four diesel units with
a combined net output of 11 MW and an on-site landfill. The units are operated
pursuant to a joint ownership participation and operating agreement. Under this
agreement each joint owner is entitled to its ownership ratio of the net
available output of the facility. All fixed costs are shared in proportion to
the ownership interests. All variable costs are incurred in proportion to the
energy delivered to the owners. NRG Energy's income statement includes its share
of all fixed and variable costs of operating the facilities. NRG Energy's 3.70%
and 3.72% share of the Keystone and Conemaugh facilities original cost included
in Property, Plant and Equipment and construction in progress at December 31,
2001 was $52.9 million and $60.9 million, respectively. The corresponding
accumulated depreciation and amortization at December 31, 2001, for Keystone and
Conemaugh was $1.3 million and $1.5 million, respectively.

NOTE 20 -- DECOMMISSIONING FUNDS

NRG Energy is required by the State of Louisiana Department of
Environmental Quality ("DEQ") to rehabilitate NRG Energy's Big Cajun II ash and
wastewater impoundment areas, subsequent to the Big Cajun II facilities' removal
from service. On July 1, 1989, a guarantor trust fund (the "Solid Waste Disposal
Trust Fund") was established to accumulate the estimated funds necessary for
such purpose. Approximately $1.1 million was initially deposited in the Solid
Waste Disposal Trust Fund in 1989, and $116,000 has been funded annually
thereafter, based upon an estimated future rehabilitation cost (in 1989 dollars)
of approximately $3.5 million and the remaining estimated useful life of the Big
Cajun II facilities. Cumulative contributions to the Solid Waste Disposal Trust
Fund and earnings on the investments therein are accrued as a decommissioning
liability. At December 31, 2001 and 2000, the carrying value of the trust fund
investments and the related accrued decommissioning liability was approximately
$4.3 million and $3.9 million, respectively. The trust fund investments are
comprised of various debt securities of the United States and are carried at
amortized cost, which approximates their fair value.

89

NOTE 21 -- ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITY

On January 1, 2001, NRG Energy adopted Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (SFAS No. 133), as amended by SFAS No. 137 and SFAS No. 138. SFAS
No. 133 requires NRG Energy to record all derivatives on the balance sheet at
fair value. Changes in the fair value of non-hedge derivatives will be
immediately recognized in earnings. Changes in fair values of derivatives
accounted for as hedges will either be recognized in earnings as offsets to the
changes in fair value of related hedged assets, liabilities and firm commitments
or, for forecasted transactions, deferred and recorded as a component of other
accumulated comprehensive income (OCI) until the hedged transactions occur and
are recognized in earnings. The ineffective portion of a hedging derivative
instrument's change in fair value will be immediately recognized in earnings.
NRG Energy also formally assesses both at inception and at least quarterly
thereafter, whether the derivatives that are used in hedging transactions are
highly effective in offsetting the changes in either the fair value or cash
flows of the hedged item. This assessment includes all components of each
derivative's gain or loss unless otherwise noted. When it is determined that a
derivative ceases to be a highly effective hedge, hedge accounting is
discontinued.

SFAS No. 133 applies to NRG Energy's long-term power sales contracts,
long-term gas purchase contracts and other energy related commodities financial
instruments used to mitigate variability in earnings due to fluctuations in spot
market prices, hedge fuel requirements at generation facilities and protect
investments in fuel inventories. SFAS No. 133 also applies to various interest
rate swaps used to mitigate the risks associated with movements in interest
rates and foreign exchange contracts to reduce the effect of fluctuating foreign
currencies on foreign denominated investments and other transactions. At
December 31, 2001, NRG Energy had various commodity contracts extending through
December 2003, and several fixed-price gas and electricity purchase contracts
extending through 2018.

ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table summarizes the effects of SFAS No. 133 on NRG Energy's
Other Comprehensive Income balance as of December 31, 2001:

ENERGY       INTEREST    FOREIGN
COMMODITIES      RATE      CURRENCY     TOTAL
-----------    --------    --------    --------
(GAINS/(LOSSES) IN $ THOUSANDS)

OCI balance at December 31, 2000.............     $     --      $    --     $    --     $     --
Initial adoption of SFAS No. 133...........       (6,567)     (16,064)         --      (22,631)
Unwound from OCI during period:
- due to unwinding of previously deferred
amounts..................................      (25,789)         662        (167)     (25,294)
Mark to market of hedge contracts..........      167,224      (46,002)     (2,196)     119,026
--------      --------    -------     --------
OCI balance at December 31, 2001.............      134,868      (61,404)     (2,363)      71,101
========      ========    =======     ========
Gains/(Losses) expected to unwind from OCI
during next 12 months......................       24,157       (7,636)     (2,196)      14,325

The adoption of SFAS No. 133 on January 1, 2001, resulted in an after-tax
unrealized loss of $22.6 million recorded to OCI related to previously deferred
net losses on derivatives designated as cash flow hedges. During the year ended
December 31, 2001, NRG Energy reclassified gains of $25.3 million from OCI to
current-period earnings. This amount is recorded on the same line in the
statement of operations in which the hedged item is recorded. Also during the
year ended December 31, 2001, NRG Energy recorded an after-tax gain in OCI of
approximately $119.0 million related to changes in the fair values of
derivatives accounted for as hedges. The net balance in OCI relating to SFAS No.
133 as of December 31, 2001 was an unrecognized gain of approximately $71.1
million. NRG Energy expects $14.3 million of the deferred net gains on
derivative instruments accumulated in OCI to be recognized as earnings during
the next twelve months.

90

STATEMENT OF OPERATIONS

The following tables summarize the effects of SFAS No. 133 on NRG Energy's
statement of operations for the period ended December 31, 2001:

ENERGY       FOREIGN
COMMODITIES    CURRENCY     TOTAL
-----------    --------    -------
(GAINS/(LOSSES) IN $ THOUSANDS)

Revenue from majority owned subsidiaries................      $(8,138)       $ --      $(8,138)
Equity in earnings of unconsolidated subsidiaries.......        4,662          --        4,662
Cost of operations......................................       17,556          --       17,556
Other income............................................           --         252          252
-------        ----      -------
Total Statement of Operations impact before tax....      $14,080        $252      $14,332
=======        ====      =======

ENERGY RELATED COMMODITIES

NRG Energy is exposed to commodity price variability in electricity,
emission allowances and natural gas, oil and coal used to meet fuel
requirements. In order to manage these commodity price risks, NRG Energy enters
into financial instruments, which may take the form of fixed price, floating
price or indexed sales or purchases, and options, such as puts, calls, basis
transactions and swaps. Certain of these transactions have been designated as
cash flow hedges. NRG Energy has accounted for these derivatives by recording
the effective portion of the cumulative gain or loss on the derivative
instrument as a component of OCI in shareholders' equity. NRG Energy recognizes
deferred gains and losses into earnings in the same period or periods during
which the hedged transaction affects earnings. Such reclassifications are
included on the same line of the statement of operations in which the hedged
item is recorded.

No ineffectiveness was recognized on commodity cash flow hedges during the
period ended December 31, 2001.

NRG Energy's pre-tax earnings for the year ended December 31, 2001 were
increased by an unrealized gain of $14.1 million associated with changes in the
fair value of energy related derivative instruments not accounted for as hedges
in accordance with SFAS No. 133.

During the year ended December 31, 2001, NRG Energy reclassified gains of
$25.8 million from OCI to current-period earnings and expects to reclassify an
additional $24.2 million of deferred gains to earnings during the next twelve
months on energy related derivative instruments accounted for as hedges.

INTEREST RATES

To manage interest rate risk, NRG Energy has entered into interest-rate
swaps that effectively fix the interest payments of certain floating rate debt
instruments. Interest-rate swap agreements are accounted for as cash flow
hedges. The effective portion of the cumulative gain or loss on the derivative
instrument is reported as a component of OCI in shareholders' equity and
recognized into earnings as the underlying interest expense is incurred. Such
reclassifications are included on the same line of the statement of operations
in which the hedged item is recorded.

No ineffectiveness was recognized on interest rate cash flow hedges during
the period ended December 31, 2001.

During the year ended December 31, 2001, NRG Energy reclassified losses of
$0.7 million from OCI to current-period earnings and expects to reclassify $7.6
million of deferred losses to earnings during the next twelve months on interest
rate swaps accounted for as hedges.

FOREIGN CURRENCY EXCHANGE RATES

To preserve the U.S. dollar value of projected foreign currency cash flows,
NRG Energy may hedge, or protect those cash flows if appropriate foreign hedging
instruments are available.

91

No ineffectiveness was recognized on foreign currency cash flow hedges
during the period ended December 31, 2001.

NRG Energy's pre-tax earnings for the year ended December 31, 2001 were
increased by an unrealized gain of $0.3 million associated with foreign currency
hedging instruments not accounted for as hedges in accordance with SFAS No. 133.

During the year ended December 31, 2001, NRG Energy reclassified gains of
$0.2 million from OCI to current period earnings and expects to reclassify $2.2
million of deferred losses to earnings during the next twelve months on foreign
currency swaps accounted for as hedges.

NOTE 22 -- UNAUDITED QUARTERLY FINANCIAL DATA

Summarized quarterly unaudited financial data is as follows:

QUARTER ENDED 2001
-------------------------------------------------------------
MAR 31     JUNE 30     SEPT 30      DEC 31     TOTAL YEAR(1)
--------    --------    --------    --------    -------------
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)

Revenues and equity earnings............    $643,166    $722,900    $963,302    $679,272     $3,008,640
Operating Income........................     127,024     153,363     309,370     125,065        714,822
Net income..............................      35,178      49,114     141,580      39,332        265,204
Earnings per share:
Basic.................................    $    .19    $    .25    $    .71    $    .20     $     1.36
Diluted...............................         .19         .25         .71         .20           1.35

QUARTER ENDED 2000
-------------------------------------------------------------
MAR 31     JUNE 30     SEPT 30      DEC 31     TOTAL YEAR(1)
--------    --------    --------    --------    -------------
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)

Revenues and equity earnings............    $323,027    $522,009    $624,798    $688,152     $2,157,986
Operating income........................      62,937     154,128     227,209     128,799        573,073
Net income..............................       8,746      43,581      88,604      42,004        182,935
Earnings per share:
Basic.................................    $    .06    $    .28    $    .49    $    .23     $     1.10
Diluted...............................         .06         .28         .49         .23           1.10

---------------
(1) The sum of earnings per share for the four quarters may not equal earnings
per share for the total year due to changes in the average number of common
shares outstanding.

During the fourth quarter of the year ended December 31, 2001, NRG Energy
recorded a $24.5 million income tax benefit as a result of state income tax
planning strategies and a higher percentage of NRG Energy's overall earnings
derived from foreign projects in lower tax jurisdictions, than expected
throughout the year. Also during the fourth quarter of 2001, NRG Energy recorded
a net after-tax expense of $6.7 million related to Enron's bankruptcy. This
amount includes a $14.2 million after-tax charge to establish bad debt reserves,
which was partially offset by a $7.5 million after-tax gain on a credit swap
agreement entered into as part of NRG's credit risk management program.

NOTE 23 -- SUBSEQUENT EVENT

In February 2002, Xcel Energy announced its intention to commence an
exchange offer by which Xcel Energy would acquire all of the outstanding
publicly held shares of NRG Energy. In the announcement Xcel Energy stated its
intention to close this transaction in April 2002 and stated that in the offer,
NRG Energy shareholders would receive 0.4846 shares of Xcel Energy common stock
in a tax-free exchange for each outstanding share of NRG Energy common stock.

92

NRG ENERGY, INC.

SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999

COLUMN A                     COLUMN B              COLUMN C              COLUMN D        COLUMN E
--------------------------------------    ------------    ------------------------    -------------    ----------
ADDITIONS
------------------------
BALANCE AT     CHARGED TO    CHARGED TO                     BALANCE AT
BEGINNING OF    COSTS AND       OTHER                          END OF
DESCRIPTION                     PERIOD        EXPENSES      ACCOUNTS      DEDUCTIONS        PERIOD
-----------                  ------------    ----------    ----------     ----------      ----------
(IN THOUSANDS)

Allowance for doubtful accounts,
deducted from accounts receivable in
the balance sheet:
2001................................      $21,199        $12,808            --         $   (45)       $33,962
2000................................          186         25,885            --          (4,872)        21,199
1999................................          100            116            --             (30)           186

93

ITEM 9 -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES

None.

PART III

ITEM 10 -- DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The name, age and title of each of the executive officers and directors of
NRG Energy as of March 6, 2002 are as set forth below:

NAME                     AGE                               TITLE
----                     ---                               -----

David H. Peterson        60     Chairman of the Board, President, Chief Executive Officer
and Director
James J. Bender          45     Senior Vice President and General Counsel
Brian B. Bird            39     Vice President and Treasurer
Leonard A. Bluhm         56     Executive Vice President and Chief Financial Officer
Jay M. Carpenter         40     Senior Vice President, NRG Energy, Inc. Managing Director
and Chief Executive Officer, Asia Pacific
W. Mark Hart             51     Senior Vice President, NRG Energy, Inc. and President NRG
Europe and Latin America
Roy R. Hewitt            56     Vice President, Administrative Services
Craig A. Mataczynski     41     Senior Vice President, NRG Energy, Inc. President and Chief
Executive Officer, NRG North America
John A. Noer             55     Senior Vice President, NRG Energy Inc. and President, NRG
Worldwide Operations
William T. Pieper        36     Vice President and Controller
Renee Sass               36     Vice President, Strategic Planning and Portfolio Assessment
Wayne H. Brunetti        59     Director, President and CEO Xcel Energy Inc.
Luella G. Goldberg       65     Director, Former Acting President and Chair of the Board of
Trustees Wellesley College
Pierson M. Grieve        73     Director, Retired Chairman and CEO Ecolab, Inc.
William A. Hodder        70     Director, Retired Chairman and CEO Donaldson Company Inc.
James J. Howard          66     Director, Retired Chairman of the Board Xcel Energy, Inc.
Gary R. Johnson          55     Director, Vice President and General Counsel Xcel Energy
Inc.
Richard C. Kelly         55     Director, President-Enterprises Xcel Energy Inc.
Edward J. McIntyre       51     Director, Vice President and CFO Xcel Energy Inc.

David H. Peterson has been Chairman of the Board of NRG Energy since
January 1994, Chief Executive Officer since November 1993, President since 1989
and a Director since 1989. Mr. Peterson was also Chief Operating Officer of NRG
Energy from June 1992 to November 1993. Prior to joining NRG Energy, Mr.
Peterson was Vice President, Non-Regulated Generation for Northern States Power,
and he has served in various other management positions with Northern States
Power during the last 20 years.

James J. Bender has been Senior Vice President and General Counsel of NRG
Energy since June 2000, prior to which he had been Vice President, General
Counsel and Secretary of NRG Energy since June 1997. He served as the General
Counsel of the Polymers Division of Allied Signal Inc. from May 1996 until June
1997. From June 1994 to May 1996, Mr. Bender was employed at NRG Energy, acting
as Senior Counsel until December 1994 and as Assistant General Counsel and
Corporate Secretary from December 1994 to May 1996.

Brian B. Bird has been Vice President and Treasurer of NRG Energy since
June 1999 and Treasurer since June 1997, prior to which he was Director of
Corporate Finance and Treasury for Deluxe Corporation in Shoreview, Minnesota
from September 1994 to May 1997. Mr. Bird was Manager of Finance for the
Minnesota Vikings professional football team from March 1993 to September 1994.
Mr. Bird held several financial management positions with Northwest Airlines in
Minneapolis, Minnesota from 1988 to March 1993.

94

Leonard A. Bluhm has been Executive Vice President and Chief Financial
Officer of NRG Energy since January 1997. Immediately prior to that, he served
as the first President and Chief Executive Officer of Cogeneration Corporation
of America. Mr. Bluhm was Vice President, Finance of NRG Energy from January
1993 through April 1996. Mr. Bluhm was Chief Financial Officer of Cypress Energy
Partners, a wholly-owned project subsidiary of NRG Energy, from April 1992 to
January 1993, prior to which he was Director, International Operations and
Manager, Acquisitions and Special Projects of NRG Energy from 1991. Mr. Bluhm
previously served for 20 years in various financial positions with Northern
States Power.

Jay M. Carpenter was appointed Senior Vice President, Asia Pacific of NRG
Energy and Managing Director and CEO of NRG Asia Pacific on January 1, 2002,
following the retirement of Keith G. Hilless. Prior to that he was Executive
Director, Business Development of NRG Asia Pacific since February 1999. Before
joining NRG Energy Mr. Carpenter was Director of Special Projects for Epic
Energy Pty Ltd, a natural gas transmission company located in Australia. Mr.
Carpenter has over 15 years of experience in the energy industry.

W. Mark Hart is Senior Vice President, Europe and Latin America of NRG
Energy. Prior to joining NRG Energy, in March 2001, Mr. Hart was vice president
of Canadian Operations at Newmont Mining Company and vice president of Business
Processes and Operations for Europe, South America and Asia. Before that he
managed mining operations, engineering and machinery with Cyprus Amax Minerals
Company where he served as Senior Vice President of U.S. Operations and
President and Chief Executive Officer of Australia. He has also worked for
American Electric Power Fuel Supply, Standard Oil Company's minerals division
and Consolidated Coal Company.

Roy R. Hewitt has been Vice President, Administrative Services at NRG
Energy since February 1999. He has over 30 years experience in the power
industry including 24 years with Northern States Power and eight years with NRG
Energy. Mr. Hewitt joined NRG Energy in 1994 as a member of the senior
management team with NRG's Gladstone Power Station project in Queensland,
Australia. In 1996, he returned to NRG Energy's corporate headquarters as
Executive Director, Human Resources. In 1997, Mr. Hewitt returned to Australia
as Managing Director of the Gladstone Project and later served as Executive
Director, Operations and Engineering for NRG Energy's Asia-Pacific region
headquartered in Brisbane, Australia.

Craig A. Mataczynski has been Senior Vice President, North America of NRG
Energy and President and Chief Executive Officer of NRG North America, since
July 1998. From December 1994 until July 1998, Mr. Mataczynski served as Vice
President, U.S. Business Development of NRG Energy. From May 1993 to January
1995, Mr. Mataczynski served as President of NEO Corporation, NRG Energy's
wholly owned subsidiary that develops small electric generation projects within
the United States. Prior to joining NRG Energy, Mr. Mataczynski worked for
Northern States Power from 1982 to 1994 in various positions, including
Director, Strategy and Business Development and Director, Power Supply Finance.

John A. Noer has been Senior Vice President of NRG Energy and President of
NRG Worldwide Operations since January 1, 2000. Immediately prior to that he
served as President-NSP Combustion and Hydro Generation for Northern States
Power Company and as a director of NRG Energy since June 1997. Mr. Noer was
President and CEO of Northern States Power Wisconsin, a wholly owned subsidiary
of Northern States Power, since January 1993. Prior to joining Northern States
Power Wisconsin, Mr. Noer was President of Cypress Energy Partners, a project
subsidiary of NRG Energy, from March 1992 to January 1993. Prior to joining
Cypress Energy Partners, Mr. Noer held various management positions with
Northern States Power since joining the company in September 1968.

William T. Pieper has been Vice President and Controller of NRG Energy
since June 2001. He has also held the positions of Controller, Assistant
Controller and Manager of International Accounting since joining NRG Energy in
March 1995. Prior to joining NRG Energy, Mr. Pieper practiced as a Certified
Public Accountant for six years with the firm of KPMG.

Renee J. Sass has been Vice President, Strategic Planning and Portfolio
Assessment since June 2001, prior to which she was Executive Director, Finance
and Assistant Treasurer. Mrs. Sass has been with NRG

95

Energy since 1991 holding a number of finance and business development
positions. From 1988 to 1991, Ms. Sass was with Ernst & Young's Utility
Consulting Group in Washington D.C.

Wayne H. Brunetti has been President and CEO of Xcel Energy Inc. since
August 2000. Prior to assuming his current position in August 2000, Mr. Brunetti
was Vice Chairman, President and Chief Executive Officer of NCE. Mr. Brunetti
was Vice Chairman, President and Chief Operating Officer of Public Service
Company of Colorado before it merged with Southwestern Public Service Company to
form NCE. Mr. Brunetti joined Public Service Company of Colorado as president
and chief operating officer in 1994. Mr. Brunetti has been a Director of NRG
Energy since August 2000.

Luella G. Goldberg is a member of the boards of directors of TCF Financial,
Hormel Foods Corporation, the ING Group, Communications Systems, Inc., and the
University of Minnesota Carlson School of Management (Board of Overseers). From
1985 to 1993, Ms. Goldberg served as chair of the Wellesley College Board of
Trustees. She served as acting president of the college from July 1993 to
October 1993 and is now a Trustee Emerita. Ms. Goldberg is also a Trustee of the
University of Minnesota Foundation, and served as a chair for the Foundation's
Board of Trustees from 1996 to 1998. Ms. Goldberg has been a Director of NRG
Energy since June 2000.

Pierson M. (Sandy) Grieve is a member of the boards of directors of The St.
Paul Companies, Inc., Mesaba Aviation and Bank of Naples. Mr. Grieve is a
partner at Palladium Equity Partners, New York, New York. Mr. Grieve served as
chairman and CEO of Ecolab, Inc. from 1983 to 1995 after moving to Minnesota
from his position as President and CEO of Questor Corp., Toledo, Ohio. Mr.
Grieve has been a Director of NRG Energy since June 2000.

William A. Hodder is a member of the boards of directors of SUPERVALU, Inc.
and the University of Minnesota Carlson School of Management (Board of
Overseers). Mr. Hodder served as chairman and CEO of Donaldson Company, Inc.
from 1994 to 1996 and Chairman, President and CEO from 1982 to 1994. Mr. Hodder
joined Donaldson as President in 1973. Mr. Hodder has been a Director of NRG
Energy since June 2000.

James J. Howard was Chairman of Xcel Energy from August 2000 until his
retirement in August 2001. Mr. Howard served as Chairman, President and CEO of
Northern States Power from 1994 until August 2000. Mr. Howard joined NSP as
President and CEO in 1987. Before joining NSP, Mr. Howard was President and
Chief Operating Officer of Ameritech. Mr. Howard is also Chairman of the Federal
Reserve Bank of Minneapolis, a Director of Ecolab Inc., Honeywell International
Inc. and Walgreen Co. Mr. Howard has been a Director of NRG Energy since June
2000.

Gary R. Johnson has been a Director of NRG Energy since 1993 and has been
Vice President and General Counsel of Xcel Energy since August 2000. Mr. Johnson
served as Vice President and General Counsel of Northern States Power from
November 1991 to August 2000. Prior to November 1991, Mr. Johnson was Vice
President-Law of Northern States Power from January 1989, acting Vice President
from September 1988 and Director of Law from February 1987, and he has served in
various management positions with Northern States Power during the last 20
years.

Richard C. Kelly has been a Director of NRG Energy since August 2000. Mr.
Kelly is President -- Enterprises of Xcel Energy, and was formerly Executive
Vice President, financial and support services, and Chief Financial Officer for
NCE from 1997 to August 2000. Before that, Mr. Kelly was Senior Vice President
of Finance, Treasurer and Chief Financial Officer for Public Service Company of
Colorado, which he joined in 1968.

Edward J. McIntyre has been a Director of NRG Energy since 1993. Mr.
McIntyre has been Vice President and Chief Financial Officer of Xcel Energy
since August 2000, and prior to that was Vice President and Chief Financial
Officer of Northern States Power from January 1993. Mr. McIntyre served as
President and Chief Executive Officer of Northern States Power-Wisconsin, a
wholly-owned subsidiary of Northern States Power, from July 1990 to December
1992, as Vice President Gas Utility from November 1985 to June 1990, and he has
served in various other management positions since joining Northern States Power
in 1973.
96

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Under federal securities laws, NRG Energy's directors and executive
officers are required to report, within specified monthly and annual due dates,
their initial ownership in NRG Energy's securities and subsequent acquisitions,
dispositions or other transfers of interest in such securities. NRG Energy is
required to disclose whether it has knowledge that any person required to file
such a report may have failed to do so in a timely manner. To the knowledge of
NRG Energy, all of its directors and officers subject to such reporting
obligations have satisfied their reporting obligations in full for 2001.

ITEM 11 -- EXECUTIVE COMPENSATION

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

COMPENSATION PHILOSOPHY

The Compensation Committee of the Board of Directors (the "Committee")
consists of four members, two of which are independent.

The purpose of the Committee is to, on a regular basis, review, approve,
and where applicable, make recommendations to the Board of Directors concerning
executive officer compensation. The Committee's philosophy regarding executive
compensation is that such compensation should be directly aligned with
improvements in corporate performance and increased shareholder value. The
Committee's guidelines, which are intended to reflect such philosophy, include:

- Providing a competitive total compensation package that enables the
Company to attract and retain key executive talent.

- Aligning compensation with the Company's annual and long-term
business strategies and objectives.

- Providing variable compensation opportunities that are directly
linked to the Company's performance and shareholder return.

For the fiscal year 2001, the Compensation Committee evaluated the
competitiveness of its executive compensation based on information obtained by
assessing data contained in the proxy statements of similar competitive power
production companies. The competitive comparisons were made against a peer group
of ten power generation companies. In determining the peer group, emphasis was
placed on companies with non-regulated power generation operations that are
reasonably similar in size to that of NRG. The Committee utilized such
information to assess the Company's position in each individual aspect of
executive compensation, including base salary, annual incentive compensation and
long-term incentive compensation.

ELEMENTS OF COMPENSATION

Compensation for the Company's executive officers for the fiscal year 2001
consisted of the following elements: base salary, annual incentive compensation,
and long-term incentive compensation.

Base Salary. Annual base salary is designed to compensate executive
officers for their sustained performance. For the fiscal year 2001, annual base
salaries for executive officers were established by reviewing base pay levels
for each executive's position in the peer group proxy analysis. The base salary
recommendations also incorporate the executive officer's individual performance,
the general contributions of the executive officer to overall corporate
performance, and the level of achievement by the executive officer in respect to
specific annual goals. In general, the 2001 base salary levels for executive
officers, including the Chief Executive Officer, Mr. Peterson, were increased in
accordance with comparable market data. The base salary amounts paid to the
executive officers for the fiscal year 2001 are reflected in the salary column
of the Summary Compensation Table.

Annual Incentive Compensation. Annual incentive compensation is designed to
compensate executive officers for satisfying certain Company goals and is
determined as a percentage of each such executive officer's

97

annual base salary. Annual incentive compensation for the executive officers for
the fiscal year 2001 was determined in accordance with median levels of annual
incentive awards for comparable positions, as set forth in the peer group proxy
analysis. For the fiscal year 2001, the target incentive for annual incentive
compensation for executive officers ranged from 55% to 75% of base salary, with
Mr. Peterson's target incentive being 75% of base salary. Annual incentive
payout opportunities range from 0% to 200% of the target incentive. Target
incentives for the executive officers for the fiscal year 2001, were based on
some or all of the following factors: net income, business development and
safety goals. Mr. Peterson's target incentive was based on 95% net income and 5%
of safety goal. Overall the Company achieved the maximum net income and safety
goal for 2001 with a net income growth of 45% from the fiscal year ending
December 31, 2000. As such, Mr. Peterson received the maximum payout available
for his annual incentive compensation. The annual incentive compensation paid to
the executive officers for the fiscal year 2001, is reflected in the bonus
column of the Summary Compensation Table.

Long-Term Incentive Compensation. Prior to the completion of the Company's
initial public offering and the adoption of the NRG 2000 Long-Term Incentive
Compensation Plan (the "2000 Plan"), each of which occurred in May 2000, the
Company offered the NRG Equity Plan (the "Equity Plan") to its executive
officers and other selected employees. The Equity Plan was established in 1993
to promote the achievement of long-term financial objectives by linking the
long-term incentive compensation of the employees to the achievement of value
creation, as well as to attract and retain employees of outstanding competence,
encourage teamwork among employees and provide employees with an opportunity for
long-term capital accumulation. Under the Equity Plan, the Company made grants
of "equity units", which were intended to simulate stock options. Grants of
equity units were made annually at the discretion of the Board of Directors with
a grant price consistent with the most recent valuation of equity units.

In connection with the Company's initial public offering, the Company
established the 2000 Plan, the principal components of which are non-qualified
stock options. As such, the Company discontinued the Equity Plan. All
outstanding, non-vested equity units for active employee participants were
terminated and replaced with a comparable stock option grant.

Under the 2000 Plan the Incentive Plan Subcommittee will approve a target
number of option shares for each executive officer, with such targets to be
based in part on proxy information and a base salary multiple to determine the
long-term incentive compensation. It is intended that NRG's CEO will make a
recommendation to the Incentive Plan Subcommittee as to the number of options to
be granted and the Incentive Plan Subcommittee will be responsible for reviewing
and approving all such recommendations and stock option grants to executive
officers. Options granted will have an exercise price equal to the fair market
value of the common stock of the Company on the date of grant, and typically,
will be exercisable over a four-year period in increments of 25% per year.
Initial grants may include a one-year waiting period prior to the vesting of
such options.

DISCUSSION OF COMPENSATION IN EXCESS OF $1 MILLION PER YEAR

The Company has considered the implications of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), enacted under the
Revenue Reconciliation Act of 1993, which precludes a public corporation from
taking tax deduction for individual compensation in excess of $1 million for its
Chief Executive Officer or any of its four other highest-paid officers.
Additionally, the Company has considered the exemptions to such limitation,
specifically for compensation that is performance based within the meaning of
such Section, which are also provided in Section 162(m).

In order to qualify compensation derived by executive officers from stock
options as performance-based compensation, as contemplated by the Internal
Revenue Service, the NRG Energy, Inc. 2000 Long-Term Incentive Compensation Plan
was approved by the Board of Directors and the shareholders of the Company.
Additionally, in order to qualify bonus payments to executives under Section
162(m) and preserve the deductibility of such payments, the Annual Incentive
Plan for Designated Officers has been approved by the Committee, the Board, and
the shareholders of the Company.

98

Regardless, in the future, the Company may award compensation to its
executive officers that may not qualify under Section 162(m) as deductible
compensation. The Company will continue to consider all elements of expense in
providing such compensation, including the impact of Section 162(m).

Chair              Member           Member             Member
Pierson M. Grieve  James J. Howard  William A. Hodder  Richard C. Kelly

DIRECTOR COMPENSATION

NRG Energy does not award directors who are also employees of NRG Energy or
employees of Xcel Energy any separate compensation or other consideration,
direct or indirect, for service as a director. During 2001, directors not
employed by NRG Energy or Xcel Energy ("Non-Employee Directors") received annual
fees of $35,000 plus $1,000 for each Board of Directors meeting attended in
person, $800 for each committee meeting attended in person and reasonable travel
expenses. Committee chairs received an additional $200 per meeting attended in
person. Non-Employee Directors participating in meetings of the Board of
Directors or a committee by telephone received 50% of such meeting fees.

In connection with NRG Energy's initial public offering, each of the
Non-Employee Directors received a grant of stock options to purchase 5,000
shares of Common Stock pursuant to the 2000 Plan at an exercise price equal to
$15, the initial public offering price of a share of Common Stock. Such options
vest in four equal annual installments, beginning on the second anniversary of
the date of each such grant. NRG Energy also granted stock options to each of
the Non-Employee Directors in June 2001 for the purchase of 5,000 shares of
Common Stock at an exercise price equal to the fair market value of the Common
Stock on the date of such grant, pursuant to the 2000 Plan.

Each of the Non-Employee Directors participates in NRG Energy's Independent
Director Deferral Plan (the "Deferral Plan"). The Deferral Plan allows
Non-Employee Directors to defer all or a portion of his or her annual fees,
meeting fees and other fees paid in connection with service on the Board of
Directors to a cash deferral account, a stock unit account or a combination of
such accounts. The Deferral Plan provides for a 20% premium on fees deferred
into a stock unit account. Fees deferred under the Deferral Plan are paid out in
cash upon the retirement of the Non-Employee Director from service on the
Company's Board of Directors or upon two payout commencement dates other than
retirement, as determined by the Non-Employee Director. Payout of fees deferred
under the Deferral Plan are made in installments, with a minimum of two and
maximum of ten such installments, or in a lump sum.

Each of NRG Energy's directors has an indemnification agreement that
entitles him or her to indemnification for claims asserted against them in their
capacity as directors to the fullest extent NRG Energy's permitted by Delaware
law.

99

TOTAL STOCKHOLDER RETURN COMPARISON

The graph below compares the NRG Energy's cumulative total stockholder
return on Common Stock with the cumulative total return of the Standard & Poor's
500 Composite Stock Price Index and an index of comparable peer issuers (the
"Peer Group Index") from May 31, 2000, the first date on which the Common Stock
began trading on the New York Stock Exchange, to December 31, 2001, NRG Energy's
fiscal year end (assuming a $100 investment in each vehicle on May 31, 2000 and
the reinvestment of all dividends).

The Peer Group Index consists of the following publicly traded companies in
the global power generation industry: AES Corp., Calpine Corp., Dynegy, Inc. and
Mirant Corp. The former Peer Group consisted of the following publicly traded
companies in the global power generation industry: AES Corp., Calpine Corp.,
Dynegy, Inc., Orion Power Holdings, Inc. and Mirant Corp. The former Peer Group
differs from the current Peer Group because Orion Power Holdings, Inc. is no
longer publically traded. In accordance with the rules of the SEC, the returns
are indexed to a value of $100 at May 31, 2000, and the returns of each company
in the Peer Group Index have been weighted according to their market
capitalization at December 31, 2000.

[PERFORMANCE GRAPH]

TIME PERIOD
-----------------------------------------------------------------------------------------
5/31/00   6/30/00   8/31/00   10/31/00   12/31/00   2/28/01   4/30/01   6/29/01   8/31/01
-------   -------   -------   --------   --------   -------   -------   -------   -------

NRG..................  $100.00   $109.16   $157.89   $156.39    $167.29    $166.62   $215.04   $132.81   $110.68
Peer Group Index.....   100.00    105.02    148.03    141.65     152.56     140.88    169.08    135.58    114.53
S&P 500..............   100.00    102.47    107.13    101.04      93.53      87.28     87.95     86.19     79.80

TIME PERIOD
-------------------
10/31/01   12/31/01
--------   --------

NRG..................  $106.29     $93.23
Peer Group Index.....    83.99      62.33
S&P 500..............    74.60      80.82

100

COMPENSATION OF EXECUTIVE OFFICERS

The following tables set forth cash and non-cash compensation for each of
the last three fiscal years ended December 31, for the individual who served as
the Company's Chief Executive Officer during 2001 and each of the four next most
highly compensated executive officers (collectively, the "Named Executive
Officers").

SUMMARY COMPENSATION TABLE

ANNUAL COMPENSATION                 LONG-TERM COMPENSATION
--------------------------------   -------------------------------------
AWARDS              PAYOUTS
-----------------------   -----------
(A)                        (B)       (C)          (D)                   (F)          (G)           (H)          (I)
(E)                  NUMBER OF
OTHER                 SECURITIES
ANNUAL                 UNDERLYING
COMPEN-   RESTRICTED    OPTIONS                   ALL OTHER
NAME AND                                                   SATION      STOCK       AND SARS       LTIP        COMPEN-
PRINCIPAL POSITION         YEAR   SALARY ($)   BONUS ($)   ($)(1)    AWARDS ($)      (#)       PAYOUTS ($)   SATION ($)
------------------         ----   ----------   ---------   -------   ----------   ----------   -----------   ----------

David H. Peterson.......   2001    $491,670    $750,000    $13,689      --         265,500             --     $ 9,902(8)
Chairman, President &      2000     397,340     474,000     28,678      --         120,000      1,212,067      22,923(3)
Chief Executive Officer    1999     367,992     192,970      6,131      --              --        155,995      33,201
Craig A. Mataczynski....   2001     316,680     321,038      7,752      --         105,000             --       8,125(9)
Senior Vice President-     2000     278,340     276,500      6,303      --          60,000        186,250       3,059(4)
North America              1999     246,250     150,000      4,706      --              --         15,533      15,251
John Noer(2)............   2001     270,009     297,000     12,663      --          78,000             --       4,649(10)
Senior Vice President-     2000     259,992     256,750      6,554      --          60,000             --       2,464(5)
Worldwide Operations       1999          --          --         --      --              --             --          --
James J. Bender.........   2001     287,510     319,000     13,110      --          84,000             --       6,815(11)
Senior Vice President &    2000     256,242     256,750      7,131      --          60,000        186,636       2,609(6)
General Counsel            1999     213,746     100,000      6,528      --              --         19,729       6,172
Leonard A. Bluhm........   2001     218,761     242,000      7,350      --          85,000             --       4,760(12)
Executive Vice             2000     204,175     202,438      8,508      --          60,000        391,887       2,467(7)
President & Chief          1999     194,590      72,150      5,265      --              --         50,489      12,814
Financial Officer

---------------
(1) Represents amounts reimbursed during the fiscal year for the payment of
taxes on fringe benefits.

(2) Mr. Noer was hired on January 1, 2000. Prior to such date, Mr. Noer was
employed by NSP.

(3) Includes $7,000 of universal life insurance premiums; $13,478 of imputed
income on life insurance; $1,279 of contributions to the Northern States
Power Company Employee Stock Ownership Plan; $900 of matching contributions
to the NSP Retirement Savings Plan; and $266 of deferred compensation
excess. Does not include $5,789 of incentive pension make-up earned in 1999
and paid in 2000.

(4) Includes $384 of term life insurance premiums; $1,226 of contributions to
the Northern States Power Company Employee Stock Ownership Plan; $900 of
matching contributions to the NSP Retirement Savings Plan; and $549 of
deferred compensation excess. Does not include $4,500 for incentive pension
make-up earned in 1999 and paid in 2000.

(5) Includes $1,279 of contributions to the Northern States Power Company
Employee Stock Ownership Plan; $900 of matching contributions to the NSP
Retirement Savings Plan; and $2,464 of deferred compensation excess. Does
not include $1,320 for incentive pension make-up earned in 1999 and paid in
2000.

(6) Includes $318 of term life insurance premiums; $1,279 of contributions to
the Northern States Power Company Employee Stock Ownership Plan; $900 of
matching contributions to the NSP Retirement Savings Plan; and $112 of
deferred compensation excess. Does not include $3,000 for incentive pension
make-up earned in 1999 and paid in 2000.

(7) Includes $288 of term life insurance premiums; $1,279 of contributions to
the Northern States Power Company Employee Stock Ownership Plan; and $900
of matching contributions to the NSP Retirement Savings Plan. Does not
include $2,165 for incentive pension make-up earned in 1999 and paid in
2000.

(8) Includes $7,000 of universal life insurance premiums; $1,502 of Employee
Stock Ownership Plan contributions; $1,400 of 401(k) Plan matching
contributions.

101

(9) Includes $1,502 of Employee Stock Ownership Plan contributions; $327 of
term life insurance premiums; $5,297 of 401(k) Plan matching contributions
and $999 of Deferred Compensation excess.

(10) Includes $1,502 of Employee Stock Ownership Plan contributions; $1,400 of
401(k) Plan matching contributions, and $1,747 of Deferred Compensation
excess.

(11) Includes $1,502 of Employee Stock Ownership Plan contributions; $16 of term
life insurance premiums; and $5,297 of 401(k) Plan matching contributions.

(12) Includes $1,502 of Employee Stock Ownership Plan contributions; $1,858 of
term life insurance premiums and $1,400 of 401(k) Plan matching
contributions.

OPTIONS AND STOCK APPRECIATION RIGHTS (SARS)

The following table indicates for each of the Named Executive Officers the
extent to which the Company used stock options and SARs for executive
compensation purposes in 2001 and the potential value of such stock options and
SARs as determined pursuant to the SEC rules.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS                                               FOR OPTION TERM
-----------------------------------------------------------------------------------------------   -------------------------
(A)                     (B)                    (C)                (D)          (E)           (F)           (G)
NUMBER OF              % OF TOTAL
SECURITIES UNDERLYING       OPTIONS/SARS       EXERCISE OR
OPTIONS/SARS        GRANTED TO EMPLOYEES   BASE PRICE    EXPIRATION
NAME               GRANTED(#)(1)          IN FISCAL YEAR       ($/SHARE)       DATE       5%($)(2)      10%($)(2)
----           ---------------------   --------------------   -----------   ----------   -----------   -----------

David H. Peterson.....         177,000                 5.15%             $23.50       06/19/11    $2,644,719    $6,675,081
88,500                 2.58%             $13.96       12/21/11    $  775,533    $1,966,710
Craig A.
Mataczynski.........          70,000                 2.04%             $23.50       06/19/11    $1,045,934    $2,639,863
35,000                 1.02%             $13.96       12/21/11    $  306,708    $  777,795
John A. Noer..........          52,000                 1.51%             $23.50       06/19/11    $  776,979    $1,961,041
26,000                 0.76%             $13.96       12/21/11    $  227,840    $  577,790
James J. Bender.......          56,000                 1.63%             $23.50       06/19/11    $  836,747    $2,111,890
28,000                 0.81%             $13.96       12/21/11    $  245,366    $  622,236
Leonard A. Bluhm......          55,000                 1.60%             $23.50       06/19/11    $  821,805    $2,074,178
30,000                 0.87%             $13.96       12/21/11    $  262,892    $  666,681

---------------
(1) Amounts shown represent stock options granted to the Named Executive
Officers for compensation purposes in 2001 under the NRG Energy, Inc. 2000
Long-Term Incentive Compensation Plan and do not include options held by the
Named Executive Officers to purchase shares of stock of Xcel Energy or stock
options granted to the Named Executive Officers to replace equity units held
under the NRG Equity Plan, which is described below in the Compensation
Committee Report on Executive Compensation. The options set forth in the
table above were granted with an exercise price equal to the Fair Market
Value Closing Price of a share of NRG Energy common stock on the day of the
grant and will vest and become fully exercisable on the fourth anniversary
of the date of the grant. All options expire 10 years from the date of the
grant.

(2) The hypothetical potential appreciation shown in columns (f) and (g) for the
Named Executive Officers is required by the SEC rules. The amounts in these
columns do not represent either the historical or anticipated future
performance of the Company's Common Stock level of appreciation.

102

The following table indicates for each of the Named Executive Officers the
number and value of all exercisable and unexercisable options and SARs held by
the Named Executive Officers as of December 31, 2001.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES

(A)                   (B)            (C)                     (D)                             (E)
NUMBER OF SECURITIES            VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED               IN-THE-MONEY
SHARES                               OPTIONS/SARS                    OPTIONS/SARS
ACQUIRED ON       VALUE                AT FY-END(#)                    AT FY-END($)
NAME              EXERCISE(#)    REALIZED($)     EXERCISABLE/UNEXERCISABLE(1)    EXERCISABLE/UNEXERCISABLE(2)
----              -----------    ------------    ----------------------------    ----------------------------

David H. Peterson.......          --               --                308,415                        $2,542,754
697,780                        $2,613,092
Craig A. Mataczynski....      13,074         $302,875                 44,294                        $  353,079
246,961                        $  126,666
John A. Noer............          --               --                     --                        $       --
60,000                        $   30,000
James J. Bender.........          --               --                 54,025                        $  436,933
177,769                        $  492,348
Leonard A. Bluhm........          --               --                 43,690                        $  372,754
193,601                        $1,111,298

---------------
(1) Includes stock options granted to the Named Executive Officers to replace
equity units held under the NRG Equity Plan but does not include Xcel Energy
options.

(2) Option values were calculated based on a $15.50 closing price of Common
Stock, as reported on the New York Stock Exchange on December 31, 2001.

(3) Does not include 8,672 shares and 1,524 shares of NSP Nonqualified Stock
Options having values of $15,192 and $3,146, respectively, sold by David H.
Peterson in calendar year 2001.

103

PENSION PLAN TABLES

NRG Energy participates in Xcel Energy's noncontributory, defined benefit
pension plan. Such plan covers substantially all of NRG Energy's employees. As
of January 1, 1999, the pension benefit formula that applies to the Named
Executive Officers was changed and each Named Executive Officer, together with
all other affected nonbargaining employees, was given an opportunity to choose
between two retirement programs, the traditional program and the pension equity
program. Messrs. Peterson, Bluhm and Noer have selected the traditional program
and Messrs. Mataczynski and Bender have selected the pension equity program.

Under the traditional program applicable to certain of the Named Executive
Officers, the pension benefit is computed by taking the highest average
compensation below the integration level times 1.1333% plus the highest average
compensation above the integration level times 1.6333%. The result is multiplied
by credited service. The integration level is one-third of the social security
wage base. The annual compensation used to calculate average compensation is
base salary for the year. After an employee has reached 30 years of service, no
additional years of service are used in determining the pension benefit under
the traditional program. The benefit amounts under the traditional program are
computed in the form of a straight-life annuity.

Under the pension equity program applicable to certain of the Named
Executive Officers, the formula for determining the pension benefit is average
compensation times credited years of service times 10%. The annual compensation
used to calculate average compensation is base salary for the year plus bonus
compensation paid in that same year. There is no maximum on the number of years
of service used to determine the pension benefit. The benefit amounts under the
pension equity program are computed in the form of a lump sum.

Both programs feature a retirement spending account, which credits $1,400
plus interest annually. The opening balance as of January 1, 1999 was $1,400,
multiplied by years of service.

The employment agreement between Mr. Peterson and NRG Energy provides that
Mr. Peterson will receive the accumulated value of his pension payments had he
begun payments at his earliest retirement eligibility. Additionally, the
employment agreement provides that, in the event that Mr. Peterson elects a lump
sum payment, the value of his benefits will be calculated based on both his and
his spouse's mortality, subject to certain financial performance measures. Such
calculation of benefits is different from the single mortality basis used for
other employees.

104

The following table illustrates the approximate retirement benefits payable
to employees retiring at the normal retirement age of 65 years under the
traditional program applicable to certain of the Named Executive Officers:

ESTIMATED ANNUAL BENEFITS FOR YEARS OF SERVICE INDICATED
YEARS OF SERVICE
AVERAGE COMPENSATION                 -----------------------------------------------------------------------------
(LAST 4 YEARS)                       5            10            15            20            25            30
--------------------                 -------      --------      --------      --------      --------      --------

$  50,000...................    $ 4,500      $  9,000      $ 13,500      $ 19,000      $ 25,000      $ 31,500
100,000...................      8,500        17,000        25,500        35,000        45,500        56,000
150,000...................     12,500        25,000        38,000        51,500        66,000        80,500
200,000...................     16,500        33,500        50,000        68,000        86,500       105,000
250,000...................     21,000        41,500        62,500        84,000       107,000       129,500
300,000...................     25,000        49,500        74,500       100,500       127,500       154,000
350,000...................     29,000        58,000        87,000       117,000       147,500       178,500
400,000...................     33,000        66,000        99,000       133,000       168,000       203,000
450,000...................     37,000        74,000       111,500       149,500       188,500       227,500
500,000...................     41,000        82,500       123,500       166,000       209,000       252,000
550,000...................     45,500        90,500       136,000       182,000       229,500       276,500
600,000...................     49,500        98,500       148,000       198,500       250,000       301,000
650,000...................     53,500       107,000       160,500       215,000       270,000       325,500
700,000...................     57,500       115,000       172,500       231,000       290,500       350,000
750,000...................     61,500       123,000       185,000       247,500       311,000       374,500
800,000...................     65,500       131,500       197,000       264,000       331,500       399,000
850,000...................     70,000       139,500       209,500       280,000       352,000       423,500
900,000...................     74,000       147,500       221,500       296,500       372,500       448,000
950,000...................     78,000       156,000       234,000       313,000       392,500       472,500
1,000,000...................     82,000       164,000       246,000       329,000       413,000       497,000
1,050,000...................     86,000       172,000       258,500       345,500       433,500       521,500
1,100,000...................     90,000       180,500       270,500       362,000       454,000       546,000
1,150,000...................     94,500       188,500       283,000       378,000       474,500       570,500
1,200,000...................     98,500       196,500       295,000       394,500       495,000       595,000

105

The following table illustrates the approximate retirement benefits payable
to employees retiring at the normal retirement age of 65 years under the pension
equity program applicable to certain of the Named Executive Officers if paid in
the form of a straight-line annuity:

ESTIMATED ANNUAL BENEFITS FOR YEARS OF SERVICE INDICATED
YEARS OF SERVICE
AVERAGE COMPENSATION                 -----------------------------------------------------------------------------
(LAST 4 YEARS)                       5            10            15            20            25            30
--------------------                 -------      --------      --------      --------      --------      --------

$  50,000...................    $ 3,500      $  7,000      $ 11,000      $ 15,500      $ 20,500      $ 26,500
100,000...................      6,000        12,000        18,500        25,500        33,000        41,500
150,000...................      8,500        17,000        26,000        35,500        46,000        57,000
200,000...................     11,000        22,000        33,500        45,500        58,500        72,000
250,000...................     13,500        27,000        41,500        56,000        71,000        87,000
300,000...................     16,000        32,500        49,000        66,000        83,500       102,500
350,000...................     18,500        37,500        56,500        76,000        96,500       117,500
400,000...................     21,000        42,500        64,000        86,000       109,000       133,000
450,000...................     23,500        47,500        71,500        96,500       121,500       148,000
500,000...................     26,000        52,500        79,500       106,500       134,500       163,000
550,000...................     28,500        57,500        87,000       116,500       147,000       178,500
600,000...................     31,000        62,500        94,500       127,000       159,500       193,500
650,000...................     33,500        67,500       102,000       137,000       172,500       208,500
700,000...................     36,000        73,000       109,500       147,000       185,000       224,000
750,000...................     39,000        78,000       117,000       157,000       197,500       239,000
800,000...................     41,500        83,000       125,000       167,500       210,500       254,500
850,000...................     44,000        88,000       132,500       177,500       223,000       269,500
900,000...................     46,500        93,000       140,000       187,500       235,500       284,500
950,000...................     49,000        98,000       147,500       197,500       248,500       300,000
1,000,000...................     51,500       103,000       155,000       208,000       261,000       315,000
1,050,000...................     54,000       108,000       163,000       218,000       273,500       330,500
1,100,000...................     56,500       113,500       170,500       228,000       286,500       345,500
1,150,000...................     59,000       118,500       178,000       238,000       299,000       360,500
1,200,000...................     61,500       123,500       185,500       248,500       311,500       376,000

The approximate credited years of service as of December 31, 2001, for the
Named Executive Officers were as follows:

Mr. Peterson................................................    37.83
Mr. Mataczynski.............................................    19.42
Mr. Noer....................................................    32.67
Mr. Bender..................................................     6.33
Mr. Bluhm...................................................    30.42

EMPLOYMENT AGREEMENTS

DAVID H. PETERSON EMPLOYMENT AGREEMENT

NRG Energy has entered into an employment agreement with Mr. Peterson which
provides that Mr. Peterson will be employed as NRG Energy's highest level
executive officer. The term of the agreement expires June 27, 2004. During the
term of the agreement, Mr. Peterson's base salary will be reviewed at least
annually by the Compensation Committee of the Board of Directors for possible
increase. The agreement provides that Mr. Peterson will receive retirement and
welfare benefits no less favorable than those provided to any other officer of
NRG Energy. In addition, the agreement provides for participation in a
supplemental executive retirement plan such that the aggregate value of the
retirement benefits that Mr. Peterson and his spouse will receive at the end of
the term of the agreement under all of NRG Energy's defined benefit pension
plans and those of NRG Energy's affiliates will not be less than the aggregate
value of the benefits he would

106

have received had he continued, through the end of the term of the agreement, to
participate in the NSP Deferred Compensation Plan, the NSP Excess Benefit Plan
and the NSP Pension Plan. Such retirement benefits include amounts to compensate
Mr. Peterson for the monthly defined benefit payments he would have received
during the term of the agreement and prior to the date of his termination of
employment if monthly benefit payments had commenced following the month in
which he first became eligible for early retirement under the Xcel Energy
Pension Plan.

The agreement also provides for certain additional benefits to be paid upon
Mr. Peterson's death. If Mr. Peterson's employment is terminated by NRG Energy
without cause, or by Mr. Peterson with good reason, in each case as defined in
the agreement, Mr. Peterson will continue to receive his salary, bonus at the
greater of target bonus or actual bonus for the last plan year prior to
termination, incentive compensation with cash replacing equity based awards and
benefits under the agreement as if he had remained employed until the end of the
term of the agreement and then retired, at which time he will be treated as
eligible for retiree welfare benefits and other benefits provided to the retired
senior executives. However, if the termination of employment is a result of a
change of control, as defined in the Equity Plan, the compensation and benefits
will be continued for the longer of 30 months or through the end of the
employment period.

In accordance with the terms of the agreement, Mr. Peterson has agreed not
to compete with the business of NRG Energy during the period of his employment
and for one year after his termination or resignation. Mr. Peterson has also
agreed not to solicit any of NRG Energy's customers for any business purpose
that competes with NRG Energy's business during the period of his employment or
two years after his termination or resignation. Finally, during the period of
his employment and for two years after his termination or resignation, Mr.
Peterson has agreed not to disclose any of NRG Energy's confidential information
to any person not authorized by NRG Energy to receive such confidential
information.

JAMES J. BENDER, LEONARD A. BLUHM, CRAIG A. MATACZYNSKI AND JOHN A. NOER
SEVERANCE AGREEMENTS

Messrs. Bender, Bluhm, Mataczynski and Noer are participants in the
Company's Executive officer and Key Personnel Severance Plan (the "Plan"). In
June and July 2001, the Company executed severance plan agreements with Messrs.
Bender, Bluhm, Mataczynski and Noer pursuant to the Plan. Each such agreement
remains in effect until the third anniversary of its effective date. Each
agreement has an effective date of May 31, 2001, except for the Company's
agreement with Mr. Noer, which has an effective date of January 15, 2001. The
severance agreements provide that if the employment of Messrs. Bender, Bluhm,
Mataczynski, or Noer is terminated due to his death or disability, he will
receive his base salary and accrued vacation through the date of termination or
resignation. Each such agreement further provides that if any of Messrs. Bender,
Bluhm, Mataczynski or Noer is terminated for cause, or if any of them
voluntarily resigns without good cause, he will receive his base salary and
accrued vacation through the date of termination or resignation, plus all other
amounts to which he is entitled under any compensation plans of the Company, at
the time such payments are due.

Each such agreement further provides for the payment of severance benefits
in the event that any of Messrs. Bender, Bluhm, Mataczynski or Noer is
terminated by the Company without cause, or if any of them terminates his
employment within three months of a material change or reduction in his job
responsibilities with the Company or as a result of a material breach by the
Company of the compensation or benefit terms of the severance agreement. The
severance benefits payable include the payment of two times the participant's
base salary, plus two times the participant's average annual bonus earned over
the two full years prior to the date of termination, or two times the
participant's target annual bonus established for the bonus plan year in which
the participant's termination occurs, whichever is greater.

Severance benefits are also payable to each of Messrs. Bender, Bluhm,
Mataczynski and Noer if, within six months prior to, or twelve months after, the
effective date of a Change in Control (as defined in the Company's Severance
Plan) of the Company, his employment with the Company ends as a result of either
an involuntary termination of his employment by the Company for reasons other
than cause, or by voluntary termination by him for cause. Whether or not a
particular transaction constitutes a change of control is to be determined by
the Board of Directors of the Company. In the event of a Change in Control of
the Company,

107

the severance benefits payable include the payment of three times the
participant's base salary, plus three times the participant's average annual
bonus earned over the two full years prior to the date of termination, or three
times the participant's target annual bonus established for the bonus plan year
in which the participant's termination occurs, whichever is greater.

Under the terms of each such agreement, each of Messrs. Bender, Bluhm,
Mataczynski and Noer has agreed not to compete with the Company's business
during the course of his employment and for one year after his resignation or
termination, unless there has been a Change of Control of the Company.
Additionally, Messrs. Bender, Bluhm, Mataczynski and Noer have agreed not to
disclose any of the Company's confidential and proprietary information. This
description of the Plan is qualified in its entirety by reference to the form of
the Plan, which is filed as Exhibit 10.41.

ITEM 12 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

BENEFICIAL OWNERSHIP OF SHARES OF COMMON STOCK
AND CLASS A COMMON STOCK

The following table lists the beneficial ownership of Common Stock and
Class A Common Stock owned as of March 6, 2002, by (i) the directors and
nominees of the Company, (ii) the executive officers named in the Summary
Compensation Table that follows and (iii) all the directors and executive
officers of the Company as a group. The following table also lists the
beneficial ownership of Common Stock and Class A Common Stock owned as of March
6, 2002 by each person known by the Company to beneficially own more than five
percent (5%) of the outstanding shares of Common Stock and Class A Common Stock.

NUMBER OF SHARES
NAME OF BENEFICIAL OWNER            CLASS OF STOCK       BENEFICIALLY OWNED(1)    PERCENT OF CLASS
------------------------         --------------------    ---------------------    ----------------

David H. Peterson....................  Common Stock                     314,415(2)               *
Pierson M. Grieve....................  Common Stock                      55,000                  *
Luella G. Goldberg...................  Common Stock                      10,000                  *
William A. Hodder....................  Common Stock                      25,000                  *
Wayne H. Brunetti....................  Common Stock                       5,500                  *
James J. Howard......................  Common Stock                       3,000                  *
Gary R. Johnson......................  Common Stock                       1,000                  *
Richard C. Kelly.....................  Common Stock                       4,000                  *
Edward J. McIntyre...................  Common Stock                       1,000(12)              *
Craig A. Mataczynski.................  Common Stock                      46,294(3)               *
John A. Noer.........................  Common Stock                         600                  *
James J. Bender......................  Common Stock                      55,028(4)               *
Leonard A. Bluhm.....................  Common Stock                      93,365(5)               *
Xcel Energy Inc.(6)..................  Common Stock                          --(7)              --
Class A Common Stock         147,604,500                100%(8)
Massachusetts Financial Services
Company(9).........................  Common Stock                   2,885,772(10)            5.6%
Capital Group International, Inc.(14)
and Capital Guardian Trust.........  Common Stock                   8,139,810(13)           16.0%
Directors and executive officers as a
group..............................  Common Stock                     671,598(11)              *

---------------
(1) The number of shares beneficially owned by each person or entity is
determined under the rules of the Securities and Exchange Commission (the
"SEC"), and the information is not necessarily indicative of beneficial
ownership for any other purpose. Under such rules, each person or entity is
considered the beneficial owner of any shares: (a) to which such person or
entity has sole or shared voting power or investment power and (b) that
such person or entity has the right to acquire within 60 days through the
exercise of stock options or other similar rights. Unless otherwise
indicated, each person or entity has sole investment and voting power (or
such person shares such powers with his or her spouse) with respect to the
shares set forth in the table above.

108

(2) Includes 308,415 shares subject to options that are exercisable within 60
days.

(3) Includes 44,294 shares subject to options that are exercisable within 60
days.

(4) Includes 54,028 shares subject to options that are exercisable within 60
days, does not include 100 shares owned by Mr. Bender's wife. Mr. Bender
disclaims beneficial ownership of the shares owned by his wife.

(5) Includes 91,665 shares subject to options that are exercisable within 60
days.

(6) The address for Xcel Energy Inc. is 800 Nicollet Mall, Suite 3000,
Minneapolis, Minnesota, 55402-2023.

(7) Pursuant to an option agreement, which is more fully described below under
the heading "Relationships and Related Transactions," Xcel Energy and its
affiliates have a continuing option to purchase shares of Common Stock to
the extent necessary to maintain or restore an ownership percentage of 80%
of the outstanding shares of Common Stock and Class A Common Stock on a
combined basis.

(8) Xcel Energy currently owns an approximate 74% interest in the Common Stock
and Class A Common Stock of the Company on a combined basis, which
represents 96.7% of the total voting power of the Common Stock and Class A
Common Stock on a combined basis.

(9) The address for Massachusetts Financial Services Company is 500 Boylston
Street, Boston, Massachusetts, 02116.

(10) Based on the Schedule 13G filed with the SEC on February 12, 2002.

(11) Includes 568,005 shares subject to options that are exercisable within 60
days.

(12) Does not include 1,500 shares owned by Mr. McIntyre's wife.

(13) Based on Schedule 13G/A filed with the SEC on February 11, 2002.

(14) The address of Capital Group International is 11100 Santa Monica Blvd., Los
Angeles, CA 90025.

ITEM 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

RELATIONSHIPS AND RELATED TRANSACTIONS

NRG Energy was initially incorporated in Minnesota in 1989, and was
reincorporated in Delaware in 1992, as a wholly owned subsidiary of NSP. The
Company became publicly traded on May 31, 2000. In August 2000, NSP merged with
NCE to form Xcel Energy. Following the completion in March 2001 of a public
offering by NRG Energy of 18.4 million shares of Common Stock (the "March 2001
Offering"), Xcel Energy owns an approximate 74% interest in the Common Stock and
Class A Common Stock of NRG Energy on a combined basis, representing 96.7% of
the total voting power of the Common Stock and Class A Common Stock on a
combined basis. In addition, 4 directors of NRG Energy are executive officers of
Xcel Energy.

NRG Energy and Xcel Energy have entered into material transactions and
agreements with one another and are expected to enter into material transactions
and agreements from time to time in the future. Material agreements and
transactions currently existing or currently proposed between NRG Energy and
Xcel Energy are described below.

OPERATING AGREEMENTS

NRG Energy has two agreements with Xcel Energy for the purchase of thermal
energy. Under the terms of the agreements, Xcel Energy charges NRG Energy for
certain costs (fuel, labor, plant maintenance and auxiliary power) incurred by
Xcel Energy to produce thermal energy. NRG Energy paid $7.1 million in 2001
under these agreements. One of the agreements expires on December 31, 2002, and
the other expires on December 31, 2006. NRG Energy and Xcel Energy have executed
a new agreement, expiring on December 31, 2010, to replace the agreement that
would have expired on December 31, 2002; this new agreement will not become
effective until it is approved by the Minnesota Public Utilities Commission.

NRG Energy has a renewable 10-year agreement with Xcel Energy, expiring on
December 31, 2006, under which Xcel Energy agrees to purchase refuse-derived
fuel for use in certain of its boilers, and NRG Energy agrees to pay Xcel Energy
a burn incentive. Under this agreement, NRG Energy received from Xcel Energy
$1.6 million in 2001, and NRG Energy paid to Xcel Energy $2.8 million in 2001.

NRG Energy has entered into an operation and maintenance agreement with
Xcel Energy with respect to its Elk River and Becker Facilities, under which NRG
Energy receives a base management fee and is

109

reimbursed for costs it incurs. The operation and maintenance agreement also
provides for a management incentive fee payable to NRG, based upon the financial
performance of the facilities. NRG Energy earned a total management fee, in
addition to reimbursed expenses, of $1.9 million in 2001. This agreement expires
on December 31, 2003.

NRG Energy and Xcel Energy have entered into an asset purchase agreement
for the sale of Xcel Energy's Elk River and Becker Facilities to NRG Energy. The
boards of directors of Xcel Energy and NRG have approved the transaction. The
Minnesota Public Utilities Commission has approved Xcel Energy's request for the
transfer of assets. Xcel Energy expects that the transaction will be completed
by the second quarter of 2002.

REIMBURSEMENT FOR ADMINISTRATIVE SERVICES

NRG Energy reimburses Xcel Energy for certain overhead and administrative
costs, including benefits administration, engineering support, accounting, and
other shared services. Employees of NRG Energy participate in certain employee
benefit plans of Xcel Energy. NRG Energy paid Xcel Energy $12.2 million in 2001
as reimbursement for certain overhead costs and the cost of services provided.

TREECYCLE AGREEMENT

In February 2001, a wholly-owned subsidiary of NRG Energy, NRG Processing
Solutions LLC (NRG PS), entered into agreements with Xcel Energy to provide for
the assignment by Xcel Energy to NRG PS of various leases and contracts with
respect to Xcel Energy's Treecycle business unit. The Treecycle operation
manages wood waste from Xcel Energy's line-clearance operations in the
Minneapolis and St. Paul metropolitan area. In conjunction with this transfer,
NRG Energy and Xcel Energy have also entered into a one-year processing
agreement whereby NRG PS agreed to process Xcel Energy's wood waste until
December 31, 2001, for a minimum fee of $500,000. Such agreements were approved
by the Minnesota Public Utilities Commission in April 2001. The agreements were
not renewed. During the year ended December 31, 2001, NRG Energy received the
minimum fee of $500,000 from Xcel Energy.

CONSULTING SERVICES AGREEMENT

NRG Energy has an agreement with Utility Engineering Corporation, a wholly
owned subsidiary of Xcel Energy, under which Utility Engineering provides
consulting services to NRG Energy. Consulting services are provided from time to
time at NRG Energy's request. NRG Energy paid $1.4 million to Utility
Engineering for consulting services in 2001.

TAX ALLOCATION AGREEMENT

NRG Energy was formerly a member of Xcel Energy's consolidated tax group
for United States federal income tax purposes. Following the completion of the
March 2001 Offering, Xcel Energy owns equity securities representing less than
80% of NRG Energy's value and, accordingly, NRG Energy is no longer a member of
Xcel Energy's consolidated tax group. The responsibility for payment of taxes
and the allocation between Xcel Energy and NRG Energy of tax benefits and
liabilities was previously governed by a tax sharing agreement between NRG
Energy and Xcel Energy. Such tax sharing agreement was replaced by a tax
allocation agreement, which became effective as of December 2000, that
formalizes the various practices which arose under the previous tax sharing
agreement and reflects the change in NRG Energy's status from a wholly-owned
subsidiary of Xcel Energy to a majority-owned subsidiary.

OPTION AGREEMENT

NRG Energy has entered into an option agreement with Xcel Energy under
which NRG Energy has granted to Xcel Energy and its affiliates a continuing
option to purchase additional shares of Common Stock. In the event that NRG
Energy issues equity securities, Xcel Energy and its affiliates may exercise
options to purchase shares of Common Stock to the extent necessary to maintain
or restore an ownership percentage of 80% of the outstanding shares of Common
Stock and Class A Common Stock on a combined basis. Such
110

option agreement expires if and when Xcel Energy and its affiliates beneficially
own less than 30% of the outstanding Common Stock and Class A Common Stock on a
combined basis.

Following the March 2001 Offering, Xcel Energy's ownership in NRG Energy
was reduced to approximately 74% of the outstanding shares of Common Stock and
Class A Common Stock on a combined basis. Xcel Energy waived its rights under
such option agreement in connection with the March 2001 offering. This option
agreement would terminate upon completion of Xcel Energy's exchange offer for
NRG Energy common stock.

REGISTRATION RIGHTS AGREEMENT

NRG Energy has entered into a registration rights agreement with Xcel
Energy, under which NRG Energy has agreed to register the shares of Common Stock
issuable upon conversion of shares of Class A Common Stock held by Xcel Energy
and its affiliates under the following circumstances:

- Demand Rights.  Upon the written request of Xcel Energy, NRG Energy will
register shares of Common Stock held by Xcel Energy and its affiliates
specified in its request for resale under an appropriate registration
statement filed and declared effective by the SEC. Xcel Energy may make a
demand so long as:

- it requests registration of shares with an anticipated aggregate
offering price of at least $20 million;

- it has made no more than four previous requests for the registration of
common stock; and

- NRG Energy has not completed a registered offering of Common Stock
within the 180 day period before Xcel Energy's request.

- Piggyback Rights.  If at any time NRG Energy registers newly issued
shares of Common Stock or registers outstanding shares of Common Stock
for resale on behalf of any holder of Common Stock, Xcel Energy and its
affiliates may elect to include in such registration any shares of Common
Stock it holds. If the offering is an underwritten offering, the managing
underwriter may exclude up to 75% of the shares of Xcel Energy and its
affiliates if market factors dictate, but only if Xcel Energy and its
affiliates is not exercising a demand right, described above, and only if
all other shares being sold by other stockholders are excluded first.

- Termination.  The registration rights agreement will terminate upon the
earlier of seven years from the date of the agreement or the date on
which all remaining shares of Common Stock held by Xcel Energy and its
affiliates, or issuable to Xcel Energy and its affiliates upon conversion
of Class A Common Stock, may be sold in any 90-day period in compliance
with Rule 144 under the Securities Act. This registration rights
agreement will terminate upon the completion of Xcel Energy's tender
offer for the exchange of NRG Energy's common stock.

111

PART IV

ITEM 14 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)(1)  Consolidated Financial Statements
Included in Part II.

(a)(2)  Supplemental Financial Statement Schedules

Exhibit 99.1 contains the financial statements of West Coast Power
LLC.

All other financial statement schedules have been omitted because
either they are not required or the information required to be set
forth therein is included in the Consolidated Financial Statements
or in the Notes thereto.

(a)(3)  Exhibits

3.1     Amended and Restated Certificate of Incorporation.(9)
3.2     By-Laws.(9)
4.1     Indenture, dated as of January 31, 1996, between the Company
and Norwest Bank Minnesota, National Association, As
Trustee.(1)
4.2     Indenture, dated as of June 1, 1997, between the Company and
Norwest Bank Minnesota, National Association.(1)
4.3     Form of Exchange Notes.(1)
4.4     Indenture between the Company and Norwest Bank Minnesota,
National Association, as Trustee dated as of May 25,
1999.(4)
4.5     Indenture, dated as of November 8, 1999, between the Company
and Norwest Bank Minnesota, National Association as
Trustee.(7)
4.6     Indenture, dated as of February 22, 2000, between the
Company, NRG Northeast Generating LLC and Chase Manhattan
Bank, as Trustee.(8)
4.7     NRG Energy Pass-Through Trust 2000-1, $250,000,000 8.70%
Remarketable or Redeemable Securities ("ROARS") due March
15, 2005.(8)
4.8     Trust Agreement, dated March 20, 2000, between the Company
and The Bank of New York, as Trustee.(8)
4.9     Indenture, dated March 20, 2000, between the Company and The
Bank of New York, as Trustee, 160,000,000 pounds sterling
Reset Senior Notes due March 15, 2020.(8)
4.10    Form of Common Stock Certificate.(9)
4.11    Indenture, dated September 11, 2000, between the Company and
Wells Fargo Bank Minnesota, National Association, as
Trustee.(10)
4.12    Form of Supplemental Indenture to be used in connection with
the issuance of Debentures.(11)
4.13    Form of Indenture.(11)
4.14    Form of Purchase Contract Agreement between the Company and
the Purchase Contract Agent to be named therein.(11)
4.15    Form of Corporate Unit Certificate.(11)
4.16    Form of Pledge Agreement among the Company, the Collateral
Agent and the Unit Agent, each to be named therein.(11)
4.17    Form of Remarketing Agreement among the Company, the
Purchase Contract Agent and the Remarketing Agent, each to
be named therein.(11)
4.18    Indenture, dated March 13, 2001, between the Company and The
Bank of New York, a New York banking corporation, as
Trustee.(12)

112

4.19    First Supplement Indenture, dated March 13, 2001, between
the Company and The Bank of New York, a New York banking
corporation, as Trustee.(12)
4.20    364-Day Revolving Credit Agreement dated as of March 8,
2002, among NRG Energy, Inc., The Financial Institutions
Party hereto and ABN AMRO Bank N.V., as agent.
4.21    $2.0 billion credit agreement dated May 8, 2001 among NRG
Finance Company LLC and certain financial institutions named
therein.(14)
4.22    $600 million credit agreement among NRG Energy and certain
financial institutions named therein.(14)
10.1     Employment Contract, dated as of June 28, 1995, between the
Company and David H. Peterson.(1)
10.2     Note Agreement, dated August 20, 1993, between the Company,
Energy Center, Inc. and each of the purchasers named
therein.(1)
10.3     Master Shelf and Revolving Credit Agreement, dated August
20, 1993, between the Company, Energy Center, Inc., The
Prudential Insurance Registrants of America and each
Prudential Affiliate, which becomes party thereto.(1)
10.4     Energy Agreement, dated February 12, 1988, between the
Company (formerly known as Norenco Corporation) and Waldorf
Corporation (the "Energy Agreement").(1)
10.5     First Amendment to the Energy Agreement, dated August 27,
1993.(1)
10.6     Second Amendment to the Energy Agreement, dated January 31,
1996.(1)
10.7     Third Amendment to the Energy Agreement, dated August 25,
1997.(1)
10.8     Construction, Acquisition and Term Loan Agreement, dated
September 2, 1997, between NEO Landfill Gas, Inc, as
Borrower, the lenders named on the signature pages, Credit
Lyonnais New York Branch, as Construction/Acquisition Agent
and Lyon Credit Corporation, as Term Agent.(1)
10.9     Guaranty, dated September 12, 1997, by the Company in favor
of Credit Lyonnais New York Branch, as agent for the
Construction/Acquisition Lenders.(1)
10.10    Construction, Acquisition and Term Loan Agreement, dated
September 2, 1997, between Minnesota Methane LLC, as
Borrower, the lenders named on the signature pages, Credit
Lyonnais New York Branch, as Construction/Acquisition Agent
and Lyon Credit Corporation, as Term Agent.(1)
10.11    Guaranty, dated September 12, 1997, by the Company in favor
of Credit Lyonnais New York Branch, as agent for the
Construction/Acquisition Lenders.(1)
10.12    Non Operating Interest Acquisition Agreement dated as of
September 12, 1997, between the Company and NEO
Corporation.(1)
10.13    Employment Agreements, dated April 15, 1998, between the
Company and certain officers.(3)
10.14    Wholesale Standard Offer Service Agreement, dated October
13, 1998, between Blackstone Valley Electric Company,
Eastern Edison Company, Newport Electric Corporation and NRG
Power Marketing, Inc.(5)
10.15    Asset Sales Agreement, dated December 23, 1998, between the
Company and Niagara Mohawk Power Corporation.(5)
10.16    First Amendment to Wholesale Standard Offer Service
Agreement, dated January 15, 1999, between Blackstone Valley
Electric Company, Eastern Edison Company, Newport Electric
Corporation and NRG Power Marketing, Inc.(5)
10.17    Generating Plant and Gas Turbine Asset Purchase and Sale
Agreement for the Arthur Kill generating plants and Astoria
gas turbines, dated January 27, 1999, between the Company
and Consolidated Edison Company of New York, Inc.(5)

113

10.18    Transition Energy Sales Agreement, dated June 1, 1999,
between Arthur Kill Power LLC and Consolidated Edison
Company of New York, Inc.(5)
10.19    Transition Power Purchase Agreement, dated June 1, 1999,
between Astoria Gas Turbine Power LLC and Consolidated
Edison Company of New York, Inc.(5)
10.20    Transition Power Purchase Agreement, dated June 11, 1999,
between Niagara Mohawk Power Corporation and Huntley Power
LLC.(5)
10.21    Transition Power Purchase Agreement, dated June 11, 1999,
between Niagara Mohawk Power Corporation and Dunkirk Power
LLC.(5)
10.22    Power Purchase Agreement, dated June 11, 1999, between
Niagara Mohawk Power Corporation and Dunkirk Power LLC.(5)
10.23    Power Purchase Agreement, dated June 11, 1999, between
Niagara Mohawk Power Corporation and Huntley Power LLC.(5)
10.24    Amendment to the Asset Sales Agreement, dated June 11, 1999,
between the Company and Niagara Mohawk Power Corporation.(5)
10.25    Transition Capacity Agreement, dated June 25, 1999, between
Astoria Gas Turbine Power LLC and Consolidated Edison
Company of New York, Inc.(5)
10.26    Transition Capacity Agreement, dated June 25, 1999, between
Arthur Kill Power LLC and Consolidated Edison Company of New
York, Inc.(5)
10.27    First Amendment to the Employment Agreement of David H.
Peterson, dated June 27, 1999.(6)
10.28    Second Amendment to the Employment Agreement of David H.
Peterson, dated August 26, 1999.(6)
10.29    Third Amendment to the Employment Agreement of David H.
Peterson, dated October 20, 1999.(6)
10.30    [Swap] Master Agreement, dated June 11, 1999, between
Niagara Mohawk Power Corporation and NRG Power Marketing,
Inc.(6)
10.31    Standard Offer Service Wholesale Sales Agreement, dated
October 29, 1999, between the Connecticut Light And Power
Company and NRG Power Marketing, Inc.(6)
10.32    Amended Agreement for the Sale of Thermal Energy, dated
January 1, 1983, between the Company (formerly known as
Norenco Corporation) and Northern States Power and Norenco
Corporation.(9)
10.33    Operations and Maintenance Agreement, dated November 1,
1996, between the Company and Northern States Power.(9)
10.34    Agreement for the Sale of Thermal Energy and Wood Byproduct,
dated December 1, 1986, between Northern States Power and
Norenco Corporation.(9)
10.35    Federal and State Income Tax Sharing Agreement, dated April
4, 1991, between Northern States Power Company and NRG
Group, Inc.(9)
10.36    Support Agreement, dated March 27, 2000, between Northern
States Power Company and CitiCorp USA Inc.(9)
10.37    Administrative Services Agreement, dated January 1, 1992,
between Northern States Power Company and NRG Thermal
Corporation.(9)
10.38    Form of Option Agreement with Northern States Power
Company.(9)
10.39    Form of Registration Rights Agreement with Northern States
Power Company.(9)
10.40    Form of Indemnification Agreement.(9)
10.41    Form of Severance Agreement entered into between NRG Energy
and each of the following executive officers; James Bender,
Leonard Bluhm, Craig Mataczynski, and John Noer.(14)

114

21       Subsidiaries of the Company.
23.1     Consent of PricewaterhouseCoopers LLP.
99.1     Financial Statements of "West Coast Power"

---------------
(1) Incorporated herein by reference to the Company's Registration Statement on
Form S-1, as amended, Registration No. 333-33397.

(2) Incorporated herein by reference to the Company's annual report on Form
10-K for the year ended December 31, 1997.

(3) Incorporated herein by reference to the Company's quarterly report on Form
10-Q for the quarter ended March 31, 1998.

(4) Incorporated herein by reference to the Company's current report on Form
8-K filed on May 27, 1999.

(5) Incorporated herein by reference to the Company's quarterly report on Form
10-Q for the quarter ended June 30, 1999.

(6) Incorporated herein by reference to the Company's quarterly report on Form
10-Q for the quarter ended September 31, 1999.

(7) Incorporated herein by reference to the Company's current report on Form
8-K filed on November 16, 1999.

(8) Incorporated herein by reference to the Company's annual report on Form
10-K for the year ended December 31, 1999.

(9) Incorporated herein by reference to the Company's Registration Statement on
Form S-1, as amended, Registration No. 333-35096.

(10) Incorporated herein by reference to the Company's current report on Form
8-K filed on September 13, 2000.

(11) Incorporated herein by reference to the Company's Registration Statement on
Form S-3, as amended, Registration No. 333-52508.

(12) Incorporated herein by reference to the Company's current report on Form
8-K filed on March 15, 2001.

(13) Incorporated herein by reference to the Company's quarterly report on Form
10-Q for the quarter ended March 31, 2001.

(14) Incorporated herein by reference to the Company's quarterly report on Form
10-Q for the quarter ended June 30, 2001.
(b)      Reports on Form 8-K

On February 1, 2001, NRG Energy filed a Form 8-K reporting under Item
5 -- Other Events.

NRG Energy reported its financial results for the year ended
December 31, 2000.

On February 9, 2001, NRG Energy filed a Form 8-K reporting under Item
2 -- Acquisition or Disposition of Assets.

NRG Energy announced the closing of its acquisition of a 5,633
megawatt portfolio of operating projects and projects in
construction and advanced development from LS Power, LLC and its
partners.

On March 5, 2001, NRG Energy filed a Form 8-K reporting under Item
5 -- Other Events.

NRG Energy filed as exhibit 99.1 the audited financial statements
of NRG Energy, Inc. for the year ended December 31, 2000.

On March 9, 2001, NRG Energy filed a Form 8-K reporting under Item
7 -- Exhibits.

NRG Energy filed an opinion of Gibson, Dunn & Gutcher LLP
regarding certain tax matters in connection with its Form S-3
Registration Statement No. 333-52508.

On March 15, 2001, NRG Energy filed a Form 8-K reporting under Item
5 -- Other Events

115

NRG Energy filed certain exhibits under Item 7 -- Exhibits in
connection with its Registration Statement No. 333-52508.

On April 3, 2001, NRG Energy filed a Form 8-K reporting under Item
5 -- Other Events

NRG Energy announced that on March 23, 2001, NRG Energy Inc.
announced its appointment of W. Mark Hart to the position of
Senior Vice President, NRG Energy and NRG Europe and Latin
America.

On April 10, 2001, NRG Energy filed a Form 8-K reporting under Item
5 -- Other Events

On April 5, 2001, NRG Energy completed the offering of
$350,000,000 of its 7.75% senior notes due 2011 and $340,000,000
of its 8.625% Senior Notes due 2031. In connection with NRG
Energy's December 2000 Registration Statement on Form S-3 (file
No. 333-52508), NRG Energy filed certain exhibits under Item
7 -- Exhibits

On April 30, 2001, NRG Energy filed a Form 8-K reporting under Item
5 -- Other Events

On April 25, 2001, NRG Energy reported its financial results for
the three months ended March 31, 2001

On June 18, 2001, NRG Energy filed a Form 8-K under Item 5 -- Other
Events

On June 15, 2001, NRG Energy reported that it is on track to
achieve its stated goal of increasing earnings and megawatt
ownership

On July 2, 2001, NRG Energy filed a Form 8-K under Item
2 -- Acquisition or Disposition of assets

On June 22, 2001, NRG Energy reported that it acquired 1,081
megawatts of baseload electric generating plants from Delmarva
Power and Light a subsidiary of Wilmington, Delaware-based
Conectiv

On July 18, 2001, NRG Energy filed a Form 8-K under Item 5 -- Other
Events

On July 16, 2001, NRG Energy completed the offering of
$340,000,000 of its 6.75% senior notes due 2006 and $160,000,000
of its 8.625% Senior Notes due 2031

On July 30, 2001, NRG Energy filed a Form 8-K reporting under Item
5 -- Other Events

On July 25, 2001, NRG Energy reported its financial results for
the second quarter of 2001

On July 30, 2001, NRG Energy filed a form 8-K reporting under Item
5 -- Other Events

On July 26, 2001, NRG Energy reported that the Federal Energy
Regulatory Commission has instructed its staff to convene a
technical conference to "further explore issues related to the
competitive effects" resulting from NRG Energy's proposed
acquisition of the and New Haven Harbor stations in Connecticut.
The action will result in the acquisition being delayed beyond its
previously expected close in the third quarter of 2001

On September 21, 2001, NRG Energy filed a Form 8-K reporting under Item
5 -- Other Events

On September 20, 2001, NRG Energy reported that it is on target to
reach its forecasted EPS of $1.35 and announced that it acquired a
50% interest in the Saguaro Station from Edison Mission Energy and
further announced that it has decided to stop pursuing the
acquisition of two Connecticut plants from Wisvest Connecticut LLC

On October 15, 2001, NRG Energy filed a Form 8-K reporting under Item
5 -- Other Events

On October 11, 2001, NRG Energy reported its financial results for
the third quarter of 2001

On December 3, 2001, NRG Energy filed a Form 8-K reporting under Item
5 -- Other Events

On November 29, 2001, NRG Energy announced that it signed asset
purchase and sale agreements with subsidiaries of First Energy
Corporation to acquire a 2,535 MW portfolio of generating assets

On January 31, 2002, NRG Energy filed a Form 8-K reporting under Item
5 -- Other Events

On January 29, 2002 NRG Energy reported its financial results for
the year ended December 31, 2001

116

On February 26, 2002, NRG Energy filed a Form 8-K reporting under Item
5 -- Other Events

On February 26, 2002 NRG Energy filed its audited financial
statements for the year ended December 31, 2001

117

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 on March 28, 2002.

NRG ENERGY, INC.

By:     /s/ LEONARD A. BLUHM
------------------------------------
Leonard A. Bluhm
Executive Vice President and
Chief Financial Officer

POWER OF ATTORNEY:

Each person whose signature appears below constitutes and appoints David H.
Peterson and Leonard A. Bluhm, each or any of them, such person's true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution for such person and in such person's name, place and stead, in
any and all capacities, to sign any and all amendments to this report on Form
10-K, and to file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing necessary or desirable to be done in
and about the premises, as fully to all intents and purposes as such person,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
any of them or his or their substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.

In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the registrant in the capacities indicated on
March 28, 2002.

SIGNATURE                                      TITLE                         DATE
---------                                      -----                         ----

/s/ DAVID H. PETERSON                Chairman of the Board, President and     March 28, 2002
---------------------------------------------    Chief Executive Officer
David H. Peterson                  (Principal Executive Officer)

/s/ LEONARD A. BLUHM                 Executive Vice President and Chief       March 28, 2002
---------------------------------------------    Financial Officer
Leonard A. Bluhm                   (Principal Financial Officer)

/s/ WILLIAM T. PIEPER                Vice President and Controller            March 28, 2002
---------------------------------------------    (Principal Accounting Officer)
William T. Pieper

/s/ WAYNE H. BRUNETTI                Director                                 March 28, 2002
---------------------------------------------
Wayne H. Brunetti

/s/ LUELLA G. GOLDBERG                Director                                 March 28, 2002
---------------------------------------------
Luella G. Goldberg

/s/ PIERSON M. GRIEVE                Director                                 March 28, 2002
---------------------------------------------
Pierson M. Grieve

/s/ WILLIAM A. HODDER                Director                                 March 28, 2002
---------------------------------------------
William A. Hodder

118

SIGNATURE                                      TITLE                         DATE
---------                                      -----                         ----

/s/ JAMES J. HOWARD                 Director                                 March 28, 2002
---------------------------------------------
James J. Howard

/s/ GARY R. JOHNSON                 Director                                 March 28, 2002
---------------------------------------------
Gary R. Johnson

/s/ RICHARD C. KELLY                 Director                                 March 28, 2002
---------------------------------------------
Richard C. Kelly

/s/ EDWARD J. MCINTYRE                Director                                 March 28, 2002
---------------------------------------------
Edward J. McIntyre

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT.

An annual report will be sent to security holders and will be
supplementally filed with the Commission. Such annual report to security holders
will not be deemed "filed" with the Commission or otherwise subject to the
liabilities of Section 18 of the Securities Exchange Act of 1934.

119

EXHIBIT 4.20

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

364-DAY REVOLVING CREDIT AGREEMENT

DATED AS OF

MARCH 8, 2002

AMONG

NRG ENERGY, INC.

THE FINANCIAL INSTITUTIONS PARTY HERETO,
AS BANKS

AND

ABN AMRO BANK N.V.,
AS ADMINISTRATIVE AGENT,

SALOMON SMITH BARNEY, INC.,

AS SYNDICATION AGENT,

BARCLAYS BANK PLC

AS CO-SYNDICATION AGENT

AND

THE ROYAL BANK OF SCOTLAND PLC AND BAYERISCHE HYPO-UND VEREINSBANK
AG, NEW YORK BRANCH

AS CO-DOCUMENTATION AGENTS

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

i

TABLE OF CONTENTS

SECTION 1.                 DEFINITIONS; INTERPRETATION............................................................1
Section 1.1                Definitions...................................................................1
Section 1.2                Interpretation...............................................................11
SECTION 2.                 THE REVOLVING CREDIT..................................................................12
Section 2.1                The Loan Commitment..........................................................12
Section 2.2                [Intentionally Omitted]......................................................12
Section 2.3                Applicable Interest Rates....................................................12
Section 2.4                Minimum Borrowing Amounts....................................................14
Section 2.5                Manner of Borrowing Loans and Designating Interest Rates Applicable
to Loans.....................................................................14
Section 2.6                Interest Periods.............................................................16
Section 2.7                Maturity of Loans............................................................17
Section 2.8                Prepayments..................................................................17
Section 2.9                Default Rate.................................................................17
Section 2.10               The Notes....................................................................18
Section 2.11               Funding Indemnity............................................................18
Section 2.12               Commitment Terminations......................................................19
SECTION 3.                 FEES..................................................................................19
Section 3.1                Fees.........................................................................19
SECTION 4.                 PLACE AND APPLICATION OF PAYMENTS.....................................................20
Section 4.1                Place and Application of Payments............................................20
SECTION 5.                 REPRESENTATIONS AND WARRANTIES........................................................20
Section

5.1                Corporate Organization and Authority.........................................20
Section 5.2                Subsidiaries.................................................................21
Section 5.3                Corporate Authority and Validity of Obligations..............................21
Section 5.4                Financial Statements.........................................................21
Section 5.5                No Litigation; No Labor Controversies........................................21
Section 5.6                Taxes........................................................................22
Section 5.7                Approvals....................................................................22
Section 5.8                Validity of Notes............................................................22
Section 5.9                ERISA........................................................................22
Section 5.10               Government Regulation........................................................22
Section 5.11               Margin Stock; Use of Proceeds................................................22
Section 5.12               Licenses and Authorizations; Compliance with Laws............................23
Section 5.13               Ownership of Property; Liens.................................................23
Section 5.14               No Burdensome Restrictions; Compliance with Agreements.......................23
Section 5.15               Full Disclosure..............................................................23
Section 5.16               Solvency.....................................................................23
SECTION 6.                 CONDITIONS PRECEDENT..................................................................23

ii

Section 6.1                Initial Credit Event.........................................................24
Section 6.2                All Credit Events............................................................25
SECTION 7.                 COVENANTS.............................................................................26
Section 7.1                Corporate Existence; Subsidiaries............................................26
Section 7.2                Maintenance..................................................................26
Section 7.3                Taxes........................................................................26
Section 7.4                ERISA........................................................................26
Section 7.5                Insurance....................................................................27
Section 7.6                Financial Reports and Other Information......................................27
Section 7.7                Bank Inspection Rights.......................................................29
Section 7.8                Conduct of Business..........................................................29
Section 7.9                Liens........................................................................29
Section 7.10               Use of Proceeds; Regulation U................................................30
Section 7.11               Mergers, Consolidations and Sales of Assets..................................30
Section 7.12               Consolidated Net Worth.......................................................31
Section 7.13               Indebtedness to Consolidated Capitalization..................................31
Section 7.14               Interest Coverage Ratio......................................................31
Section 7.15               Compliance with Laws.........................................................31
Section 7.16               PUHCA........................................................................31
Section 7.17               Subordinated Note............................................................32
SECTION 8.                 EVENTS OF DEFAULT AND REMEDIES........................................................32
Section 8.1                Events of Default............................................................32
Section 8.2                Non-Bankruptcy Defaults......................................................34
Section 8.3                Bankruptcy Defaults..........................................................34
Section 8.4                [Intentionally Omitted]......................................................34
Section 8.5                Notice of Default............................................................34
Section 8.6                Expenses.....................................................................34
SECTION 9.                 CHANGE IN CIRCUMSTANCES...............................................................34
Section 9.1                Change of Law................................................................34
Section 9.2                Unavailability of Deposits or Inability to Ascertain, or Inadequacy
of, LIBOR....................................................................35
Section 9.3                Increased Cost and Reduced Return............................................35
Section 9.4                Lending Offices..............................................................37
Section 9.5                Discretion of Bank as to Manner of Funding...................................37
SECTION 10.                THE ADMINISTRATIVE AGENT..............................................................37
Section 10.1               Appointment and Authorization of Administrative Agent........................38
Section 10.2               Administrative Agent and its Affiliates......................................38
Section 10.3               Action by Administrative Agent...............................................38
Section 10.4               Consultation with Experts....................................................39
Section 10.5               Liability of Administrative Agent; Credit Decision...........................39
Section 10.6               Indemnity....................................................................39
Section 10.7               Resignation of Administrative Agent and Successor Administrative
Agent........................................................................40

iii

SECTION 11.                MISCELLANEOUS.........................................................................40
Section 11.1               Withholding Taxes............................................................40
Section 11.2               No Waiver of Rights..........................................................41
Section 11.3               Non-Business Day.............................................................42
Section 11.4               Documentary Taxes............................................................42
Section 11.5               Survival of Representations..................................................42
Section 11.6               Survival of Indemnities......................................................42
Section 11.7               Set-Off......................................................................42
Section 11.8               Notices......................................................................43
Section 11.9               Counterparts.................................................................44
Section 11.10              Successors and Assigns.......................................................44
Section 11.11              Participants and Note Assignees..............................................44
Section 11.12              Assignment of Commitments by Banks...........................................46
Section 11.13              Amendments...................................................................47
Section 11.14              Nonliability of Agents and Lenders...........................................48
Section 11.15              Headings.....................................................................48
Section 11.16              Legal Fees, Other Costs and Indemnification..................................49
Section 11.17              Entire Agreement.............................................................49
Section 11.18              Construction.................................................................49
Section 11.19              Governing Law................................................................49
Section 11.20              Submission to Jurisdiction; Waiver of Jury Trial.............................49
Section 11.21              Rights and Liabilities of Documentation Agents and  Syndication
Agents.......................................................................50
Section 11.22              Confidentiality..............................................................50

EXHIBITS

A        -                 Form of Note
B        -                 Form of Compliance Certificate

SCHEDULES

SCHEDULE 1                 Pricing Grid
SCHEDULE 2                 Commitments
SCHEDULE 4                 Administrative Agent Notice and Payment Info
SCHEDULE 5.2               Schedule of Existing Subsidiaries
SCHEDULE 5.5               Litigation and Labor Controversies

iv

364-DAY REVOLVING CREDIT AGREEMENT

364-DAY REVOLVING CREDIT AGREEMENT, dated as of March 8, 2002 among NRG
Energy, Inc., a Delaware corporation (the "Borrower"), the financial
institutions from time to time party hereto (each a "Bank," and collectively the
"Banks"), and ABN AMRO Bank N.V. in its capacity as administrative agent for the
Banks hereunder (in such capacity, the "Administrative Agent").

WITNESSETH THAT:

WHEREAS, the Borrower desires to obtain the several commitments of the
Banks to make available a revolving credit for loans (the "Revolving Credit"),
as described herein; and

WHEREAS, the Banks are willing to extend such commitments subject to
all of the terms and conditions hereof and on the basis of the representations
and warranties hereinafter set forth;

NOW, THEREFORE, in consideration of the recitals set forth above and
for other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto hereby agree as follows:

SECTION 1. DEFINITIONS; INTERPRETATION.

Section 1.1 Definitions. The following terms when used herein have the
following meanings:

"Adjusted LIBOR" is defined in Section 2.3(b) hereof.

"Administrative Agent" is defined in the first paragraph of this
Agreement and includes any successor Administrative Agent pursuant to Section
10.7 hereof.

"Affiliate" means, as to any Person, any other Person which directly or
indirectly controls, or is under common control with, or is controlled by, such
Person. As used in this definition, "control" (including, with their correlative
meanings, "controlled by" and "under common control with") means possession,
directly or indirectly, of power to direct or cause the direction of management
or policies of a Person (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise), provided that, in any
event for purposes of this definition: (i) any Person which owns directly or
indirectly 5% or more of the securities having ordinary voting power for the
election of directors or other governing body of a corporation or 5% or more of
the partnership or other ownership interests of any other Person (other than as
a limited partner of such other Person) will be deemed to control such
corporation or other Person; and (ii) each director and executive officer of the
Borrower or any Subsidiary shall be deemed an Affiliate of the Borrower and each
Subsidiary.

"Agreement" means this 364-Day Revolving Credit Agreement, including
all Exhibits and Schedules hereto, as it may be amended, supplemented or
otherwise modified from time to time in accordance with the terms hereof.

"Applicable Margin" means, at any time (i) with respect to Base Rate
Loans, the Base Rate Margin and (ii) with respect to Eurocurrency Loans, the
Eurocurrency Margin.

"Applicable Telerate Page" is defined in Section 2.3(b) hereof.

"Authorized Representative" means those persons shown on the list of
officers provided by the Borrower pursuant to Section 6.1(e) hereof, or on any
updated such list provided by the Borrower to the Administrative Agent, or any
further or different officer of the Borrower so named by any Authorized
Representative of the Borrower in a written notice to the Administrative Agent.

"Bank" is defined in the first paragraph of this Agreement.

"Base Rate" is defined in Section 2.3(a) hereof.

"Base Rate Loan" means a Loan bearing interest prior to maturity at a
rate specified in Section 2.3(a) hereof.

"Base Rate Margin" means the percentage set forth in Schedule 1 hereto
beside the then applicable Level Status.

"Borrower" is defined in the first paragraph of this Agreement.

"Borrowing" means the total of Loans of a single type advanced,
continued for an additional Interest Period, or converted from a different type
into such type by the Banks on a single date and for a single Interest Period.
Borrowings of Loans are made and maintained ratably from each of the Banks
according to their Percentages. A Borrowing is "advanced" on the day Banks
advance funds comprising such Borrowing to the Borrower, is "continued" on the
date a new Interest Period for the same type of Loan commences for such
Borrowing, and is "converted" when such Borrowing is changed from one type of
Loan to the other, all as requested by the Borrower pursuant to Section 2.5(a).

"Bridge Credit Agreement" means that certain Credit Agreement dated as
of June 22, 2001 among NRG Energy, Inc., the financial institutions party
thereto and Credit Suisse First Boston as administration agent, as from time to
time amended.

"Business Day" means any day other than a Saturday or Sunday on which
Banks are not authorized or required to close in Chicago, Illinois or New York,
New York and, if the applicable Business Day relates to the borrowing or payment
of a Eurocurrency Loan, on which dealings in U.S. Dollars may be carried on by
the Administrative Agent in the interbank eurodollar market.

"Capital Lease" means at any date any lease of Property which, in
accordance with GAAP, would be required to be capitalized on the balance sheet
of the lessee.

2

"Capitalized Lease Obligations" means, for any Person, the amount of
such Person's liabilities under Capital Leases determined at any date in
accordance with GAAP.

"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder.

"Commitments" means the Revolving Credit Commitments.

"Compliance Certificate" means a certificate in the form of Exhibit B
hereto.

"Consolidated Capitalization" means Consolidated Net Worth plus
Indebtedness of the Borrower.

"Consolidated Current Liabilities" means such liabilities of the
Borrower on a consolidated basis as shall be determined in accordance with GAAP
to constitute current liabilities.

"Consolidated EBIT" means, for any period, for the Borrower, (A) the
sum of the amounts for such period of (i) Consolidated Net Income, (ii) to the
extent deducted in arriving at Consolidated Net Income, net federal, state and
local income taxes in respect of such period of the Borrower and its
Subsidiaries, (iii) to the extent deducted in arriving at Consolidated Net
Income, Consolidated Interest Expense, and (iv) extraordinary non-cash losses of
the Borrower and its Subsidiaries less (B) extraordinary non-cash gains of the
Borrower and its Subsidiaries, all as determined on a consolidated basis in
accordance with GAAP.

"Consolidated EBITDA" means, with reference to any period, for the
Borrower, the sum of the amounts for such period of (i) Consolidated EBIT, (ii)
to the extent deducted in arriving at Consolidated Net Income, depreciation and
depletion expense for the Borrower and its Subsidiaries, and (iii) to the extent
deducted in arriving at Consolidated Net Income, amortization expense for the
Borrower and its Subsidiaries, all as determined on a consolidated basis in
accordance with GAAP.

"Consolidated Interest Expense" means, with reference to any period,
the sum of all interest charges (including imputed interest charges with respect
to Capitalized Lease Obligations and all amortization of debt discount and
expense and other deferred financing charges) of the Borrower and its
Subsidiaries for such period determined on a consolidated basis in accordance
with GAAP plus (ii) all fees payable in respect of the issuance of standby
letters of credit for the account of the Borrower or its Subsidiaries.

"Consolidated Net Income" means, for any period, the net income (or net
loss) of the Borrower for such period computed on a consolidated basis in
accordance with GAAP.

"Consolidated Net Tangible Assets" means, as of the date of
determination thereof, Consolidated Total Assets as of such date less the sum of
(i) Consolidated Current Liabilities and (ii) Intangible Assets.

3

"Consolidated Net Worth" means, as of the date of determination
thereof, the amount which would be reflected as stockholders' equity upon a
consolidated balance sheet of the Borrower (determined in accordance with GAAP)
prior to making any adjustment thereto (i) as a result of application of the
Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 133, Accounting for Derivative Instruments and Hedging Activities
or (ii) in connection with the account entitled "other comprehensive income" on
such balance sheet.

"Consolidated Total Assets" means, as of the date of determination
thereof, the total amount of all assets of the Borrower determined on a
consolidated basis in accordance with GAAP.

"Contingent Performance Guarantee" means a Performance Guarantee as to
which (i) the guarantor's obligation cannot be reasonably quantified, and (ii)
neither the Borrower nor any Subsidiary has information which raises a
reasonable possibility that a demand under such Performance Guarantee may be
made prior to, or within 18 months after, the Termination Date. A Contingent
Performance Guarantee which for any reason fails to meet the criteria set forth
in either clause (i) or (ii) of this definition shall immediately cease to be
deemed a Contingent Performance Guarantee for purposes of this Agreement.

"Contractual Obligation" means, as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or undertaking to
which such Person is a party or by which it or any of its Property is bound.

"Controlled Group" means all members of a controlled group of
corporations and all trades and businesses (whether or not incorporated) under
common control that, together with the Borrower or any of its Subsidiaries, are
treated as a single employer under Section 414 of the Code.

"Credit Documents" means this Agreement, the Notes and the Fee Letter.

"Credit Event" means the advancing of any Loan or the continuation of
or conversion into a Eurocurrency Loan.

"Documentation Agents" means The Royal Bank Of Scotland PLC and
Bayerische Hypo-Und Vereinsbank AG, New York Branch in their capacity as
documentation agents.

"Default" means any event or condition the occurrence of which would,
with the passage of time or the giving of notice, or both, constitute an Event
of Default.

"EBITDA" in any period for any Subsidiary of the Borrower means such
Subsidiary's net income (or net loss) for such period plus (A) to the extent
deducted in arriving at such net income, (i) net federal, state and local income
taxes in respect of such period, (ii) interest expense, (iii) depreciation and
depletion expense, (iv) amortization expense, and (v) extraordinary non-cash
losses less (B) extraordinary non-cash gains, all as determined on a

4

consolidated basis for such Subsidiary and its subsidiaries only but otherwise
in accordance with GAAP.

"Effective Date" means March 8, 2002.

"ERISA" is defined in Section 5.9 hereof.

"Eurocurrency Loan" means a Loan bearing interest prior to maturity at
the rate specified in Section 2.3(b) hereof.

"Eurocurrency Margin" means the percentage set forth in Schedule 1
hereto beside the then applicable Level Status.

"Eurocurrency Reserve Percentage" is defined in Section 2.3(b) hereof.

"Event of Default" means any of the events or circumstances specified
in Section 8.1 hereof.

"Existing Credit Agreement" means that certain 364-Day Revolving Credit
Agreement dated as of March 9, 2001 among NRG Energy, Inc., ABN AMRO Bank N.V.,
as administrative agent, and the banks from time-to-time party thereto, as
amended or otherwise modified from time to time.

"Facility Fee Rate" means the percentage set forth in Schedule 1 hereto
beside the then applicable Level Status.

"Federal Funds Rate" means the fluctuating interest rate per annum
described in part (x) of clause (ii) of the definition of Base Rate set forth in
Section 2.3(a) hereof.

"Fee Letters" means those certain letters between the Borrower and ABN
AMRO Bank N.V., and/or Salomon Smith Barney Inc., dated as of February 22, 2002
pertaining to certain fees to be paid by the Borrower.

"FinCo" means NRG Finance Company I LLC, a Delaware special purpose
limited liability company which is a Wholly-Owned Subsidiary of the Borrower and
whose sole purpose is to facilitate the financing of a revolving working
capital, acquisition and construction loan facility.

"FinCo Revolving Loan Facility" means a revolving working capital,
acquisition and construction loan facility (i) under which FinCo is the sole
borrower, (ii) as to which FinCo's obligations are or may be Guaranteed by some
or all of the Borrower's Project Finance Subsidiaries whose projects or turbines
are being financed by FinCo and for which there is no other financing on a
senior basis being provided by any other Person, and (iii) which is unsecured by
any assets of, or stock or other equity interest of or owned by, the Borrower or
its Subsidiaries, other than (x) assets and/or the stock or other equity
interest of FinCo, and (y) assets and/or the stock or other equity interest of
such Project Finance Subsidiaries; provided, 

5

however, that any Guaranty of the Indebtedness of FinCo or any security therefor
given by or in respect of a Project Finance Subsidiary to the extent permitted
hereunder may continue in existence only until the financing received by the
Project Finance Subsidiary from FinCo has been repaid.

"GAAP" means generally accepted accounting principles as in effect in
the United States from time to time, applied by the Borrower and its
Subsidiaries on a basis consistent with the preparation of the Borrower's
financial statements furnished to the Banks.

"Guaranty" by any Person means all obligations (other than endorsements
in the ordinary course of business of negotiable instruments for deposit or
collection) of such Person guaranteeing or in effect guaranteeing any
Indebtedness, dividend or other obligation (including, without limitation,
limited or full recourse obligations in connection with sales of receivables or
any other Property and Performance Guarantees) of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, all obligations incurred through an agreement, contingent or
otherwise, by such Person: (i) to purchase such Indebtedness or obligation or
any Property or assets constituting security therefor, (ii) to advance or supply
funds (x) for the purchase or payment of such Indebtedness or obligation, or (y)
to maintain working capital or other balance sheet condition, or otherwise to
advance or make available funds for the purchase or payment of such Indebtedness
or obligation, or (iii) to lease property or to purchase Securities or other
property or services primarily for the purpose of assuring the owner of such
Indebtedness or obligation of the ability of the primary obligor to make payment
of the Indebtedness or obligation, or (iv) otherwise to assure the owner of the
Indebtedness or obligation of the primary obligor against loss in respect
thereof. For the purpose of all computations made under this Agreement, the
amount of a Guaranty in respect of any obligation shall be deemed to be equal to
the maximum aggregate amount of such obligation or, if the Guaranty is limited
to less than the full amount of such obligation, the maximum aggregate potential
liability under the terms of the Guaranty. Notwithstanding anything in this
definition to the contrary, a Person's support of its subsidiary's obligation to
(a) make equity contributions or (b) pay liquidated damages under an operating
and maintenance agreement should such subsidiary fail to comply with the terms
thereof shall not be considered a "Guaranty" by such Person.

"Indebtedness" means and includes, for any Person, all obligations of
such Person, without duplication, which are required by GAAP to be shown as
liabilities on its balance sheet, and in any event shall include all of the
following whether or not so shown as liabilities: (i) obligations of such Person
for borrowed money, (ii) obligations of such Person representing the deferred
purchase price of property or services, (iii) obligations of such Person
evidenced by notes, acceptances, or other instruments of such Person or arising
out of letters of credit issued for such Person's account, (iv) obligations,
whether or not assumed, secured by Liens or payable out of the proceeds or
production from Property now or hereafter owned or acquired by such Person, (v)
Capitalized Lease Obligations of such Person and (vi) obligations for which such
Person is obligated pursuant to a Guaranty, provided that Contingent Performance
Guarantees of the Borrower shall not be deemed "Indebtedness" for purposes of
this Agreement. All calculations of the Indebtedness of any Person (and the
components thereof) shall be performed 

6

on a consolidated basis, provided that Indebtedness shall not include
obligations which are required by GAAP to be shown as liabilities on such
Person's balance sheet but which are non-recourse to such Person.

"Interest Coverage Ratio" means, for any period of four consecutive
fiscal quarters of the Borrower ending with the most recently completed fiscal
quarter, the ratio of Consolidated EBITDA for such four consecutive fiscal
quarters to the sum of Consolidated Interest Expense for such four consecutive
fiscal quarters.

"Interest Period" is defined in Section 2.6 hereof.

"Intangible Assets" means, as of the date of determination thereof, all
assets of the Borrower properly classified as intangible assets determined on a
consolidated basis in accordance with GAAP.

"Lending Office" is defined in Section 9.4 hereof.

"Level I Status" means Borrower's S&P Rating is A- or higher and its
Moody's Rating is A3 or higher.

"Level II Status" means Level I Status does not exist, but Borrower's
S&P Rating is BBB+ or higher and its Moody's Rating is Baa1 or higher.

"Level III Status" means neither Level I Status nor Level II Status
exists, but Borrower's S&P Rating is BBB or higher and its Moody's Rating is
Baa2 or higher.

"Level IV Status" means neither Level I Status, Level II Status, nor
Level III Status exists, but Borrower's S&P Rating is BBB- or higher and its
Moody's Rating is Baa3 or higher.

"Level V Status" means none of Level I Status, Level II Status, Level
III Status, nor Level IV Status exists.

"Level Status" means which of Level I Status, Level II Status, Level
III Status, Level IV Status or Level V Status then exists based upon the then
applicable Ratings.

"LIBOR" is defined in Section 2.3(b) hereof.

"LIBOR Index Rate" is defined in Section 2.3(b) hereof.

"Lien" means any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, including, but not
limited to, the security interest lien arising from a mortgage, encumbrance,
pledge, conditional sale, security agreement or trust receipt, or a lease,
consignment or bailment for security purposes. The term "Lien" shall also
include reservations, exceptions, encroachments, easements, rights of way,
covenants, conditions, restrictions, leases and other title exceptions and
encumbrances affecting Property. For the purposes of this 

7

definition, a Person shall be deemed to be the owner of any Property which it
has acquired or holds subject to a conditional sale agreement, Capital Lease or
other arrangement pursuant to which title to the Property has been retained by
or vested in some other Person for security purposes, and such retention of
title shall constitute a "Lien."

"Loan" is defined in Section 2.1 hereof and, as so defined, includes a
Base Rate Loan or Eurocurrency Loan, each of which is a "type" of Loan
hereunder.

"Material Adverse Effect" means any material adverse change in, or any
adverse development which materially affects or could reasonably be expected to
materially affect, the business, condition (financial or otherwise), results of
operations, or prospects of the Borrower and its Subsidiaries, taken as a whole,
or the ability of the Borrower to perform its obligations under the Credit
Documents, provided, that a downgrade of Borrower's S&P Rating and/or Moody's
Rating shall not, in and of itself, be deemed a "Material Adverse Effect" for
purposes of this Agreement.

"Material Subsidiary" means a Subsidiary (which, solely for purposes of
this definition shall also include foreign Subsidiaries and also Wholly-Owned
Subsidiaries of any Subsidiary (whether domestic or foreign)) of the Borrower
whose (i) total assets represent at least 5% of the total consolidated assets of
the Borrower, or (ii) EBITDA for the last four fiscal quarters contributed at
least 5% of the Consolidated EBITDA of the Borrower for such period, all as
determined based upon the most recent financial statements delivered pursuant to
Section 7.6 (as determined in accordance with GAAP), provided, that none of
Killingholme, Neo Corporation, NRGenerating Holdings (No. 4) B.V., Kladno Power
No.1 B.V., Kladno Power No.2 B.V., Pacific Generation Company nor any of their
Subsidiaries shall be deemed a Material Subsidiary.

"Minimum Consolidated Net Worth" means an amount, as of any
determination thereof, equal to the sum of $1,500,000,000 plus 25% of
Consolidated Net Income for the period from and including January 1, 2002 to
such determination date but which amount shall in no event be less than
$1,500,000,000.

"Moody's Rating" means the rating assigned by Moody's Investors
Service, Inc. and any successor thereto that is a nationally recognized rating
agency to the outstanding senior unsecured non-credit enhanced long-term debt
obligations of a Person (or if neither Moody's Investors Service, Inc. nor any
such successor shall be in the business of rating long-term indebtedness, a
nationally recognized rating agency in the U.S. as mutually agreed between the
Required Banks and Borrower). Any reference in this Agreement to any specific
rating is a reference to such rating as currently defined by Moody's Investors
Service, Inc. (or such a successor) and shall be deemed to refer to the
equivalent rating if such rating system changes.

"Note" is defined in Section 2.10(a) hereof.

"Obligations" means all fees payable hereunder, all obligations of the
Borrower to pay principal or interest on Loans and all other payment obligations
of the Borrower arising under or in relation to any Credit Document.

8

"Percentage" means, for each Bank, the percentage of the Revolving
Credit Commitments represented by such Bank's Revolving Credit Commitment or, if
the Revolving Credit Commitments have been terminated, the percentage held by
such Bank of the aggregate principal amount of all outstanding Obligations.

"Performance Guarantee" means a guarantee issued by the Borrower or a
Subsidiary that the Borrower or such Subsidiary will cause some action (other
than the payment of money) to be performed, whether by performing the action
itself or paying others to perform such action.

"Person" means an individual, partnership, corporation, association,
trust, unincorporated organization or any other entity or organization,
including a government or any agency or political subdivision thereof.

"Plan" means at any time an employee pension benefit plan covered by
Title IV of ERISA or subject to the minimum funding standards under Section 412
of the Code that is either (i) maintained by a member of the Controlled Group or
(ii) maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
a member of the Controlled Group is then making or accruing an obligation to
make contributions or has within the preceding five plan years made
contributions.

"PBGC" is defined in Section 5.9 hereof.

"Project Finance Subsidiary" means any special purpose Subsidiary of
the Borrower formed solely to facilitate the financing of the assets of such
Subsidiary, and as to which the recourse of any creditors of such Subsidiary is
limited solely to such assets and the stock or other equity interest of such
Subsidiary.

"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible, whether now owned or
hereafter acquired.

"Rating" means the rating given to senior unsecured non-credit enhanced
debt obligations of the Borrower by Moody's Investors Service, Inc. and Standard
& Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. and any
successors thereto.

"Reference Banks" means ABN AMRO Bank N.V., and one other
representative of the Banks. In the event that any of such Banks ceases to be a
"Bank" hereunder or fails to provide timely quotations of interest rates to the
Administrative Agent as and when required by this Agreement, then such Bank
shall be replaced by a new reference bank jointly designated by the
Administrative Agent and the Borrower.

"Replaceable Bank" is defined in Section 11.13(iii).

"Replacement Bank" is defined in Section 11.13(iii).

"Required Banks" means, as of the date of determination thereof, Banks
holding in the aggregate at least 662/3% of the Percentages.

9

"Revolving Credit Commitment" is defined in Section 2.1 hereof.

"SEC" means the Securities and Exchange Commission.

"Security" has the same meaning as in Section 2(l) of the Securities
Act of 1933, as amended.

"S&P Rating" means the rating assigned by Standard & Poor's Ratings
Group, a division of The McGraw-Hill Companies, Inc. and any successor thereto
that is a nationally recognized rating agency to the outstanding senior
unsecured non-credit enhanced long-term debt obligations of a Person (or, if
neither such division nor any successor shall be in the business of rating
long-term indebtedness, a nationally recognized rating agency in the U.S. as
mutually agreed between the Required Banks and Borrower). Any reference in this
Agreement to any specific rating is a reference to such rating as currently
defined by Standard & Poor's Ratings Group, a division of The McGraw-Hill
Companies, Inc. (or such a successor) and shall be deemed to refer to the
equivalent rating if such rating system changes.

"Solvent" means, with respect to any Person, that (a) the fair value of
such Person's assets is in excess of the total amount of such Person's debts, as
determined in accordance with the United States Bankruptcy Code, (b) the present
fair saleable value of such Person's assets is in excess of the amount that will
be required to pay such Person's debts as they become absolute and matured, (c)
such Person's assets do not constitute unreasonably small capital to carry out
its business as now conducted or as proposed to be conducted; (d) such Person
does not intend to incur debts beyond its ability to pay such debts as they
mature (taking into account the timing and amounts of cash to be received by it
and the amounts to be payable on or in respect of its obligations); (e) such
Person does not believe that final judgments against it in actions for money
damages presently pending will be rendered at a time when, or in an amount such
that, it will be unable to satisfy any such judgments promptly in accordance
with their terms (taking into account the maximum reasonable amount of such
judgments in any such actions and the earliest reasonable time at which such
judgments might be rendered); and (f) such Person's cash flow, after taking into
account all other anticipated uses of its cash (including the payments on or in
respect of debt referred to in clause (d) above), will at all times be
sufficient to pay all such judgments promptly in accordance with their terms. As
used in this definition, the term "debts" includes any legal liability, whether
matured or unmatured, liquidated or unliquidated, absolute, fixed or contingent,
as determined in accordance with the United States Bankruptcy Code.

"Subordinated Note" means that certain Subordinated Convertible Note
dated as of February 28, 2002 issued by the Borrower in favor of Xcel Energy,
Inc., a Minnesota corporation, which Subordinated Convertible Note shall be in
form and substance satisfactory to the Administrative Agent.

"Subsidiary" means, as to the Borrower, any active, domestic
corporation or other entity of which one hundred percent (100%) of the
outstanding stock or comparable equity interests having ordinary voting power
for the election of the Board of Directors of such corporation or similar
governing body in the case of a non corporation (irrespective of whether or not,
at the 

10

time, stock or other equity interest of any other class or classes of such
corporation or other entity shall have or might have voting power by reason of
the happening of any contingency) is at the time directly owned by the Borrower.

"Syndication Agents" means Salomon Smith Barney, Inc. and Barclays Bank
PLC in their capacity as syndication agents. "Telerate Service" means Bridge
Telerate (or such other service as may be nominated by the British Bankers'
Association as the information vendor for the purpose of displaying British
Bankers' Association Interest Settlement Rates for deposits in U.S. Dollars).

"Termination Date" means March 7, 2003.

"Termination Event" means (i) a Reportable Event described in Section
4043 of ERISA and the regulations issued thereunder (other than a Reportable
Event not subject to the provision for 30-day notice to the PBGC under such
regulations), or (ii) the withdrawal of any member of the Controlled Group from
a Plan during a plan year in which it was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA, or (iii) the filing of a notice of intent to
terminate a Plan or the treatment of a Plan amendment as a termination under
Section 4041 of ERISA, or (iv) the institution of proceedings to terminate a
Plan by the PBGC, or (v) any other event or condition that might constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Plan.

"Utilization" means the percentage obtained by dividing the aggregate
outstanding principal amount of Loans on any date (after giving effect to any
Borrowings and repayments occurring on such date) by the Commitments in effect
on such date (after giving effect to any reductions thereof on such date).

"U.S. Dollars" and "$" each means the lawful currency of the United
States of America.

"Voting Stock" of any Person means capital stock of any class or
classes or other equity interests (however designated) having ordinary voting
power for the election of directors or similar governing body of such Person.

"Welfare Plan" means a "welfare plan," as defined in Section 3(1) of
ERISA.

"Wholly-Owned" when used in connection with any Subsidiary of the
Borrower means a Subsidiary of which all of the issued and outstanding shares of
stock or other equity interests (other than directors' qualifying shares as
required by law) shall be owned by the Borrower and/or one or more of its
Wholly-Owned Subsidiaries.

Section 1.2 Interpretation. The foregoing definitions shall be equally
applicable to both the singular and plural forms of the terms defined. All
references to times of day in this Agreement shall be references to Chicago,
Illinois time unless otherwise specifically provided. Where the character or
amount of any asset or liability or item of income or expense is required to be
determined or any consolidation or other accounting computation is required to
be made for 

11

the purposes of this Agreement, the same shall be done in accordance with GAAP,
to the extent applicable, except where such principles are inconsistent with the
specific provisions of this Agreement.

SECTION 2. THE REVOLVING CREDIT.

Section 2.1 The Loan Commitment. General Terms. Subject to the terms
and conditions hereof, each Bank severally and not jointly agrees to make a loan
or loans (individually a "Loan" and collectively "Loans") to the Borrower from
time to time on a revolving basis in U.S. Dollars up to the amount of its
revolving credit commitment set forth on Schedule 2 hereto (such amount, as
reduced pursuant to Section 2.12 or changed as a result of one or more
assignments under Section 11.12 or 11.13(b), its "Revolving Credit Commitment"
and, cumulatively for all the Banks, the "Revolving Credit Commitments") before
the Termination Date. The aggregate amount of Loans at any time outstanding
shall not exceed the Revolving Credit Commitments in effect at such time. Each
Borrowing of Loans shall be made ratably from the Banks in proportion to their
respective Percentages. As provided in Section 2.5(a) hereof, the Borrower may
elect that each Borrowing of Loans be either Base Rate Loans or Eurocurrency
Loans. Loans may be repaid and the principal amount thereof reborrowed before
the Termination Date, subject to all the terms and conditions hereof. The
initial amount of Revolving Credit Commitments under this Agreement equals
$1,000,000,000.

Section 2.2 [Intentionally Omitted].

Section 2.3 Applicable Interest Rates.

(a) Base Rate Loans. Each Base Rate Loan made or maintained by
a Bank shall bear interest during each Interest Period it is
outstanding computed on the basis of a year of 365 or 366 days, as
applicable, and actual days elapsed on the unpaid principal amount
thereof from the date such Loan is advanced, continued or created by
conversion from a Eurocurrency Loan until maturity (whether by
acceleration or otherwise) at a rate per annum equal to the sum of the
Applicable Margin plus the Base Rate from time to time in effect,
payable on the last day of its Interest Period and at maturity (whether
by acceleration or otherwise).

"Base Rate" means for any day the greater of:

(i) the rate of interest announced by the
Administrative Agent at its offices in Chicago, Illinois, from
time to time as its prime rate, or equivalent, for U.S. Dollar
loans as in effect on such day, with any change in the Base
Rate resulting from a change in said prime rate to be
effective as of the date of the relevant change in said prime
rate; and

(ii) the sum of (x) the rate determined by the
Administrative Agent to be the prevailing rate per annum
(rounded upwards, if necessary, to the nearest one
hundred-thousandth of a percentage point) at approximately
10:00 a.m. (New 

12

York time) (or as soon thereafter as is practicable) on such
day (or, if such day is not a Business Day, on the immediately
preceding Business Day) for the purchase at face value of
overnight Federal funds, as published by the Federal Reserve
bank of New York, in an amount comparable to the principal
amount owed to the Administrative Agent for which such rate is
being determined, plus (y) 1/2 of 1% (0.50%).

(b) Eurocurrency Loans. Each Eurocurrency Loan made or
maintained by a Bank shall bear interest during each Interest Period it
is outstanding (computed on the basis of a year of 360 days and actual
days elapsed) on the unpaid principal amount thereof from the date such
Loan is advanced, continued, or created by conversion from a Base Rate
Loan until maturity (whether by acceleration or otherwise) at a rate
per annum equal to the sum of the Applicable Margin plus the Adjusted
LIBOR applicable for such Interest Period, payable on the last day of
the Interest Period and at maturity (whether by acceleration or
otherwise), and, if the applicable Interest Period is longer than three
months, on each day occurring every three months after the commencement
of such Interest Period. All payments of principal and interest on a
Loan (whether a Base Rate Loan or Eurocurrency Loan) shall be made in
U.S. Dollars.

"Adjusted LIBOR" means, for any Borrowing of Eurocurrency
Loans, a rate per annum determined in accordance with the following
formula:

Adjusted LIBOR =                   LIBOR
------------------------------------
1 - Eurocurrency Reserve Percentage

"LIBOR" means, for an Interest Period, (a) the LIBOR Index
Rate for such Interest Period as from time to time quoted by the
Telerate Service, if such rate is available, and (b) if the LIBOR Index
Rate is not quoted by the Telerate Service, the arithmetic average of
the rates of interest per annum (rounded upwards, if necessary, to the
nearest one-sixteenth of one percent) at which deposits in U.S. Dollars
in immediately available funds are offered to each Reference Bank at
11:00 a.m. (London, England time) two (2) Business Days before the
beginning of such Interest Period by major banks in the interbank
eurocurrency market for delivery on the first day of and for a period
equal to such Interest Period in an amount equal or comparable to the
principal amount of the Eurocurrency Loan scheduled to be made by the
Administrative Agent as part of such Borrowing.

"LIBOR Index Rate" means, for any Interest Period, the rate
per annum (rounded upwards, if necessary, to the next higher
one-sixteenth of one percent) for deposits in U.S. Dollars for delivery
on the first day of and for a period equal to such Interest Period in
an amount equal or comparable to the principal amount of the Loan
scheduled to be made by the Administrative Agent as part of such
Borrowing, which appears on the Applicable Telerate Page, as of 11:00
a.m. (London, England time) on the day two (2) Business Days before the
commencement of such Interest Period.

13

"Applicable Telerate Page" means the display page designated
as "Page 3750" on the Telerate Service (or such other page as may
replace such pages, as appropriate, on that service or such other
service as may be nominated by the British Bankers' Association as the
information vendor for the purpose of displaying British Bankers'
Association Interest Settlement Rates for deposits in U.S. Dollars).

"Eurocurrency Reserve Percentage" means the daily average for
the applicable Interest Period of the maximum rate, expressed as a
decimal, at which reserves (including, without limitation, any
supplemental, marginal and emergency reserves) are imposed during such
Interest Period by the Board of Governors of the Federal Reserve System
(or any successor) on "eurocurrency liabilities," as defined in such
Board's Regulation D (or in respect of any other category of
liabilities that includes deposits by reference to which the interest
rate is determined or any category of extensions of credit or other
assets that include loans by non-United States offices of any Bank to
United States residents), subject to any amendments of such reserve
requirement by such Board or its successor, taking into account any
transitional adjustments thereto. For purposes of this definition, the
Eurocurrency Loans shall be deemed to be "eurocurrency liabilities" as
defined in Regulation D without benefit or credit for any prorations,
exemptions or offsets under Regulation D.

(c) Rate Determinations. The Administrative Agent shall
determine each interest rate applicable to Obligations, and a
determination thereof by the Administrative Agent shall be conclusive
and binding except in the case of manifest error.

Section 2.4 Minimum Borrowing Amounts. Each Borrowing of Base Rate
Loans and Eurocurrency Loans denominated in U.S. Dollars shall be in an amount
not less than $1,000,000 and in integral multiples of $1,000,000.

Section 2.5 Manner of Borrowing Loans and Designating Interest Rates
Applicable to Loans.

(a) Notice to the Administrative Agent. The Borrower shall
give written notice to the Administrative Agent by no later than 10:00
a.m. (Chicago time) (i) at least three (3) Business Days before the
date on which the Borrower requests the Banks to advance a Borrowing of
Eurocurrency Loans and (ii) on the date the Borrower requests the Banks
to advance a Borrowing of Base Rate Loans. The Loans included in each
Borrowing shall bear interest initially at the type of rate specified
in such notice of a new Borrowing. Thereafter, the Borrower may from
time to time elect to change or continue the type of interest rate
borne by each Borrowing or, subject to Section 2.4's minimum amount
requirement for each outstanding Borrowing, a portion thereof, as
follows: (i) if such Borrowing is of Eurocurrency Loans, on the last
day of the Interest Period applicable thereto, the Borrower may
continue part or all of such Borrowing as Eurocurrency Loans for an
Interest Period or Interest Periods specified by the Borrower or
convert part or all of such Borrowing into Base Rate Loans, (ii) if
such Borrowing is of Base Rate Loans, on any Business Day, the Borrower
may convert all or part of such 

14

Borrowing into Eurocurrency Loans for an Interest Period or Interest
Periods specified by the Borrower. The Borrower shall give all such
notices requesting the advance, continuation, or conversion of a
Borrowing to the Administrative Agent by telephone or facsimile (which
notice shall be irrevocable once given and, if by telephone, shall be
promptly confirmed in writing). Notices of the continuation of a
Borrowing of Eurocurrency Loans for an additional Interest Period or of
the conversion of part or all of a Borrowing of Eurocurrency Loans into
Base Rate Loans or of Base Rate Loans into Eurocurrency Loans must be
given by no later than 10:00 a.m. (Chicago time) at least three (3)
Business Days before the date of the requested continuation or
conversion. All such notices concerning the advance, continuation, or
conversion of a Borrowing shall specify the date of the requested
advance, continuation or conversion of a Borrowing (which shall be a
Business Day), the amount of the requested Borrowing to be advanced,
continued, or converted, the type of Loans to comprise such new,
continued or converted Borrowing and, if such Borrowing is to be
comprised of Eurocurrency Loans, the Interest Period applicable
thereto. The Borrower agrees that the Administrative Agent may rely on
any such telephonic or facsimile notice given by any person it in good
faith believes is an Authorized Representative without the necessity of
independent investigation, and in the event any such notice by
telephone conflicts with any written confirmation, such telephonic
notice shall govern if the Administrative Agent has acted in reliance
thereon. There may be no more than five different Interest Periods in
effect at any one time.

(b) Notice to the Banks. The Administrative Agent shall give
prompt telephonic or facsimile notice to each Bank of any notice from
the Borrower received pursuant to Section 2.5(a) above. The
Administrative Agent shall give notice to the Borrower and each Bank by
like means of the interest rate applicable to each Borrowing of
Eurocurrency Loans and the amount thereof.

(c) Borrower's Failure to Notify. Any outstanding Borrowing of
Base Rate Loans shall, subject to Section 6.2 hereof, automatically be
continued for an additional Interest Period on the last day of its then
current Interest Period unless the Borrower has notified the
Administrative Agent within the period required by Section 2.5(a) that
it intends to convert such Borrowing into a Borrowing of Eurocurrency
Loans or notifies the Administrative Agent within the period required
by Section 2.8(a) that it intends to prepay such Borrowing. If the
Borrower fails to give notice pursuant to Section 2.5(a) above of the
continuation or conversion of any outstanding principal amount of a
Borrowing of Eurocurrency Loans before the last day of its then current
Interest Period within the period required by Section 2.5(a) and has
not notified the Administrative Agent within the period required by
Section 2.8(a) that it intends to prepay such Borrowing, such Borrowing
shall automatically be converted into a Borrowing of Base Rate Loans,
subject to Section 6.2 hereof.

(d) Disbursement of Loans. Not later than 11:00 a.m. (Chicago
time) on the date of any requested advance of a new Borrowing of
Eurocurrency Loans, and not later than 12:00 noon (Chicago time) on the
date of any requested advance of a new Borrowing of Base Rate Loans,
subject to Section 6 hereof, each Bank shall make 

15

available its Loan comprising part of such Borrowing in funds
immediately available at the principal office of the Administrative
Agent in Chicago, Illinois. The Administrative Agent shall make
available to the Borrower Loans at the Administrative Agent's principal
office in Chicago, Illinois or such other office as the Administrative
Agent has previously agreed to, in writing, with the Borrower.

(e) Administrative Agent Reliance on Bank Funding. Unless the
Administrative Agent shall have been notified by a Bank before the date
on which such Bank is scheduled to make payment to the Administrative
Agent of the proceeds of a Loan (which notice shall be effective upon
receipt) that such Bank does not intend to make such payment, the
Administrative Agent may assume that such Bank has made such payment
when due and the Administrative Agent may in reliance upon such
assumption (but shall not be required to) make available to the
Borrower the proceeds of the Loan to be made by such Bank and, if any
Bank has not in fact made such payment to the Administrative Agent,
such Bank shall, on demand, pay to the Administrative Agent the amount
made available to the Borrower attributable to such Bank together with
interest thereon in respect of each day during the period commencing on
the date such amount was made available to the Borrower and ending on
(but excluding) the date such Bank pays such amount to the
Administrative Agent at a rate per annum equal to the Federal Funds
Rate. If such amount is not received from such Bank by the
Administrative Agent immediately upon demand, the Borrower will, on
demand, repay to the Administrative Agent the proceeds of the Loan
attributable to such Bank with interest thereon at a rate per annum
equal to the interest rate applicable to the relevant Loan.

Section 2.6 Interest Periods. As provided in Section 2.5(a) hereof, at
the time of each request to advance, continue, or create by conversion a
Borrowing of Eurocurrency Loans, the Borrower shall select an Interest Period
applicable to such Loans from among the available options. The term "Interest
Period" means the period commencing on the date a Borrowing of Loans is
advanced, continued, or created by conversion and ending: (a) in the case of
Base Rate Loans, on the last Business Day of the calendar quarter in which such
Borrowing is advanced, continued, or created by conversion (or on the last day
of the following calendar quarter if such Loan is advanced, continued or created
by conversion on the last Business Day of a calendar quarter), and (b) in the
case of Eurocurrency Loans, 1, 2, 3, or 6 months thereafter; provided, however,
that:

(a) any Interest Period for a Borrowing of Base Rate Loans
that otherwise would end after the Termination Date shall end on the
Termination Date;

(b) for any Borrowing of Eurocurrency Loans, the Borrower may
not select an Interest Period that extends beyond the Termination Date;

(c) whenever the last day of any Interest Period would
otherwise be a day that is not a Business Day, the last day of such
Interest Period shall be extended to the next succeeding Business Day,
provided that, if such extension would cause the last day of an
Interest Period for a Borrowing of Eurocurrency Loans to occur in the
following calendar 

16

month, the last day of such Interest Period shall be the immediately
preceding Business Day; and

(d) for purposes of determining an Interest Period for a
Borrowing of Eurocurrency Loans, a month means a period starting on one
day in a calendar month and ending on the numerically corresponding day
in the next calendar month; provided, however, that if there is no
numerically corresponding day in the month in which such an Interest
Period is to end or if such an Interest Period begins on the last
Business Day of a calendar month, then such Interest Period shall end
on the last Business Day of the calendar month in which such Interest
Period is to end.

Section 2.7 Maturity of Loans. Unless an earlier maturity is provided
for hereunder (whether by acceleration or otherwise), each Loan shall mature and
become due and payable by the Borrower on the Termination Date.

Section 2.8 Prepayments.

(a) The Borrower may prepay without premium or penalty and in
whole or in part (but, if in part, then: (i) if such Borrowing is of
Base Rate Loans, in an amount not less than $1,000,000, (ii) if such
Borrowing is of Eurocurrency Loans in an amount not less than
$1,000,000, and (iii) in an amount such that the minimum amount
required for a Borrowing pursuant to Section 2.4 hereof remains
outstanding) any Borrowing of Eurocurrency Loans upon three Business
Days prior notice to the Administrative Agent or, in the case of a
Borrowing of Base Rate Loans, notice delivered to the Administrative
Agent no later than 10:00 a.m. (Chicago time) on the date of
prepayment, such prepayment to be made by the payment of the principal
amount to be prepaid and accrued interest thereon to the date fixed for
prepayment. In the case of Eurocurrency Loans, such prepayment may only
be made on the last day of the Interest Period then applicable to such
Loans. The Administrative Agent will promptly advise each Bank of any
such prepayment notice it receives from the Borrower. Any amount paid
or prepaid before the Termination Date may, subject to the terms and
conditions of this Agreement, be borrowed, repaid and borrowed again.

(b) If the aggregate principal amount of outstanding Loans
shall at any time for any reason exceed the Revolving Credit
Commitments then in effect, the Borrower shall, immediately and without
notice or demand, pay the amount of such excess to the Administrative
Agent for the ratable benefit of the Banks as a prepayment of the
Loans. Immediately upon determining the need to make any such
prepayment the Borrower shall notify the Administrative Agent of such
required prepayment.

(c) Each such prepayment shall be accompanied by a payment of
all accrued and unpaid interest on the Loans prepaid and shall be
subject to Section 2.11.

Section 2.9 Default Rate. At any time (i) an Event of Default has
occurred and is continuing, or (ii) after the occurrence of any event or
circumstance which has a Material 

17

Adverse Effect, each Obligation shall bear interest, computed on the basis of a
year of 360 days and actual days elapsed (except for Base Rate Loans bearing
interest based on the rate described in clause (i) of the definition of Base
Rate, in which case such Loan shall bear interest computed on the basis of a
year of 365 or 366 days, as applicable, and the actual number of days elapsed)
from the date such Event of Default arises or such event or circumstance having
a Material Adverse Effect occurs, as applicable, until paid in full, payable on
demand, at a rate per annum equal to:

(a) for any Obligation other than a Eurocurrency Loan, the sum
of two percent (2%) plus the Base Rate Margin plus the Base Rate from
time to time in effect; and

(b) for any Eurocurrency Loan, the sum of two percent (2%)
plus the rate of interest in effect thereon at the time of such default
until the end of the Interest Period applicable thereto and,
thereafter, at a rate per annum equal to the sum of two percent (2%)
plus the Base Rate Margin plus the Base Rate from time to time in
effect.

Section 2.10 The Notes.

(a) The Loans made to the Borrower by a Bank shall be
evidenced by a single promissory note of the Borrower issued to such
Bank in the form of Exhibit A hereto. Each such promissory note is
hereinafter referred to as a "Note" and collectively such promissory
notes are referred to as the "Notes."

(b) Each Bank shall record on its books and records or on a
schedule to its Note the amount of each Loan advanced, continued, or
converted by it, all payments of principal and interest and the
principal balance from time to time outstanding thereon, the type of
such Loan, and, for any Eurocurrency Loan, the Interest Period and the
interest rate applicable thereto. The record thereof, whether shown on
such books and records of a Bank or on a schedule to any Note, shall be
prima facie evidence as to all such matters; provided, however, that
the failure of any Bank to record any of the foregoing or any error in
any such record shall not limit or otherwise affect the obligation of
the Borrower to repay all Loans made to it hereunder together with
accrued interest thereon. At the request of any Bank and upon such Bank
tendering to the Borrower the Note to be replaced, the Borrower shall
furnish a new Note to such Bank to replace any outstanding Note, and at
such time the first notation appearing on a schedule on the reverse
side of, or attached to, such Note shall set forth the aggregate unpaid
principal amount of all Loans, if any, then outstanding thereon.

Section 2.11 Funding Indemnity. If any Bank shall incur any loss, cost
or expense (including, without limitation, any loss of profit, and any loss,
cost or expense incurred by reason of the liquidation or re-employment of
deposits or other funds acquired by such Bank to fund or maintain any
Eurocurrency Loan or the relending or reinvesting of such deposits or amounts
paid or prepaid to such Bank) as a result of:

18

(a) any payment (whether by acceleration or otherwise),
prepayment or conversion of a Eurocurrency Loan on a date other than
the last day of its Interest Period,

(b) any failure (because of a failure to meet the conditions
of Section 6 or otherwise) by the Borrower to borrow or continue a
Eurocurrency Loan, or to convert a Base Rate Loan into a Eurocurrency
Loan, on the date specified in a notice given pursuant to Section
2.5(a) or established pursuant to Section 2.5(c) hereof,

(c) any failure by the Borrower to make any payment of
principal on any Eurocurrency Loan (x) when due (whether by
acceleration or otherwise), or (y) on the date specified in a notice of
prepayment, or

(d) any acceleration of the maturity of a Eurocurrency Loan as
a result of the occurrence of any Event of Default hereunder,

then, upon the demand of such Bank, the Borrower shall pay to such Bank such
amount as will reimburse such Bank for such loss, cost or expense. If any Bank
makes such a claim for compensation, it shall provide to the Borrower, with a
copy to the Administrative Agent, a certificate executed by an officer of such
Bank setting forth the amount of such loss, cost or expense in reasonable detail
(including an explanation of the basis for and the computation of such loss,
cost or expense) and the amounts shown on such certificate if reasonably
calculated shall be conclusive absent manifest error.

Section 2.12 Commitment Terminations. The Borrower shall have the right
at any time and from time to time, upon five (5) Business Days prior written
notice to the Administrative Agent, to terminate the Revolving Credit
Commitments without premium or penalty, in whole or in part, any partial
termination to be (i) in an amount not less than $5,000,000, and (ii) allocated
ratably among the Banks in proportion to their respective Percentages, provided
that the Revolving Credit Commitments may not be reduced to an amount less than
the amount of all Loans then outstanding. The Administrative Agent shall give
prompt notice to each Bank of any such termination of Commitments. Any
termination of Revolving Credit Commitments pursuant to this Section 2.12 may
not be reinstated.

SECTION 3. FEES.

Section 3.1 Fees.

(a) Certain Fees. The Borrower shall pay, or cause to be paid,
to ABN AMRO Bank N.V. and/or Salomon Smith Barney Inc. the fees set
forth in the Fee Letters at the times specified in the Fee Letters for
payment of such amounts.

(b) Facility Fee. For the period from the Effective Date to
and including the Termination Date, the Borrower shall pay to the
Administrative Agent for the ratable account of the Banks in accordance
with their Percentages a facility fee accruing at a rate per annum
equal to the Facility Fee Rate on the average daily amount of the

19

Commitments (whether used or unused), or if the Commitments have
expired or terminated, on the principal amount of Loans. Such facility
fee is payable in arrears on the last Business Day of each calendar
quarter and on the Termination Date, unless the Revolving Credit
Commitments are terminated in whole on an earlier date, in which event
the fee for the period to but not including the date of such
termination shall be paid in whole on the date of such termination.

(c) Fee Calculations. All fees payable under this Agreement
shall be payable in U.S. Dollars and shall be computed on the basis of
a year of 360 days, for the actual number of days elapsed. All
determinations of the amount of fees owing hereunder (and the
components thereof) shall be made by the Administrative Agent and shall
be conclusive absent manifest error.

SECTION 4. PLACE AND APPLICATION OF PAYMENTS.

Section 4.1 Place and Application of Payments. All payments of
principal of and interest on the Loans, and of all other amounts payable by the
Borrower under this Agreement, shall be made by the Borrower to the
Administrative Agent by no later than 12:00 Noon (Chicago time) on the due date
thereof at the principal office of the Administrative Agent in New York, New
York pursuant to the payment instructions set forth on Part A of Schedule 4
hereof (or such other location in the United States as the Administrative Agent
may designate to the Borrower). Any payments received after such time shall be
deemed to have been received by the Administrative Agent on the next Business
Day. All such payments shall be made free and clear of, and without deduction
for, any set-off, counterclaim, levy, withholding or any other deduction of any
kind in U.S. Dollars, in immediately available funds at the place of payment.
The Administrative Agent will promptly thereafter cause to be distributed like
funds relating to the payment of principal or interest on Loans or applicable
fees ratably to the Banks and like funds relating to the payment of any other
amount payable to any Person to such Person, in each case to be applied in
accordance with the terms of this Agreement.

SECTION 5. REPRESENTATIONS AND WARRANTIES.

The Borrower hereby represents and warrants to each Bank as to itself
and, where the following representations and warranties apply to Subsidiaries,
as to each of its Subsidiaries, as follows:

Section 5.1 Corporate Organization and Authority. The Borrower and each
of its Subsidiaries is duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization, except where such failure to
be in good standing would not, individually or in the aggregate, have a Material
Adverse Effect. Each is duly qualified to transact business in each jurisdiction
in which such qualification is required, whether by reason of ownership or
leasing of property or the conduct of business or otherwise, except where
failure to be so qualified would not, individually or in the aggregate, have a
Material Adverse Effect. Each has the power and authority required to own, lease
and operate its properties and to conduct 

20

its business as currently conducted, except where failure to have such power and
authority would not, individually or in the aggregate, have a Material Adverse
Effect.

Section 5.2 Subsidiaries. Schedule 5.2 (as updated quarterly pursuant
to Section 7.6(b) hereof or otherwise from time to time in writing by the
Borrower) hereto identifies each Subsidiary and the jurisdiction of its
incorporation. All of the issued and outstanding shares of capital stock of each
Subsidiary are validly issued and outstanding and fully paid and nonassessable
except as set forth on Schedule 5.2 hereto. All such shares owned by the
Borrower are owned beneficially, and of record, and, except in the case of (i)
Liens granted in connection with the FinCo Revolving Loan Facility, and (ii) any
Project Finance Subsidiary, free of any Lien.

Section 5.3 Corporate Authority and Validity of Obligations. The
Borrower has full right and authority to enter into this Agreement and the other
Credit Documents to which it is a party, to make the borrowings herein provided
for, to issue its Notes in evidence thereof, and to perform all of its
obligations under the Credit Documents to which it is a party. Each Credit
Document to which it is a party has been duly authorized, executed and delivered
by the Borrower and constitutes valid and binding obligations of the Borrower
enforceable in accordance with its terms. No Credit Document, nor the
performance or observance by the Borrower of any of the matters or things
therein provided for, contravenes any provision of law or any charter or by-law
provision of the Borrower or any material Contractual Obligation of or affecting
the Borrower or any of its Properties or results in or requires the creation or
imposition of any Lien on any of the Properties or revenues of the Borrower.

Section 5.4 Financial Statements. All financial statements heretofore
delivered to the Banks showing historical performance of the Borrower for each
of the Borrower's fiscal years ending on or before December 31, 2000, and for
the Borrower's quarter ended September 30, 2001 have been prepared in accordance
with generally accepted accounting principles applied on a basis consistent,
except as otherwise noted therein, with that of the previous fiscal year. Each
of such financial statements fairly presents on a consolidated basis the
financial condition of the Borrower as of the dates thereof and the results of
operations for the periods covered thereby. The Borrower and its Subsidiaries
have no material contingent liabilities other than those disclosed in such
financial statements referred to in this Section 5.4 or in comments or footnotes
thereto, or in any report supplementary thereto, heretofore furnished to the
Banks. Since December 31, 2000, no event or circumstance has occurred which has
had or is reasonably expected to have a Material Adverse Effect.

Section 5.5 No Litigation; No Labor Controversies.

(a) Except as set forth on Schedule 5.5 (as updated quarterly
pursuant to Section 7.6(b) hereof or otherwise from time to time in
writing by the Borrower), there is no litigation or governmental
proceeding pending, or to the knowledge of the Borrower, threatened,
against the Borrower or any Subsidiary which, if adversely determined,
could (individually or in the aggregate) have a Material Adverse
Effect.

21

(b) Except as set forth on Schedule 5.5 (as updated quarterly
pursuant to Section 7.6(b) hereof or otherwise from time to time in
writing by the Borrower), there are no labor controversies pending or,
to the best knowledge of the Borrower, threatened against the Borrower
or any Subsidiary which could (individually or in the aggregate) have a
Material Adverse Effect.

Section 5.6 Taxes. The Borrower and its Subsidiaries have filed all
United States federal tax returns, and all other tax returns, required to be
filed and have paid all taxes due pursuant to such returns or pursuant to any
assessment received by the Borrower or any Subsidiary, except such taxes, if
any, as are being contested in good faith and for which adequate reserves have
been provided. No notices of tax liens have been filed and no claims are being
asserted concerning any such taxes, which liens or claims are material to the
financial condition of the Borrower or any of its Subsidiaries (individually or
in the aggregate). The charges, accruals and reserves on the books of the
Borrower and its Subsidiaries for any taxes or other governmental charges are
adequate.

Section 5.7 Approvals. Except as contemplated by Section 7.15, no
authorization, consent, license, exemption, filing or registration with any
court or governmental department, agency or instrumentality (including under the
Public Utility Holding Company Act of 1935, as amended), nor any approval or
consent of the stockholders of the Borrower or any Subsidiary or from any other
Person, is necessary for the valid execution, delivery or performance by the
Borrower or any Subsidiary of any Credit Document to which it is a party.

Section 5.8 Validity of Notes. When executed, authenticated and
delivered pursuant to the provisions of this Agreement against payment of the
consideration therefor, the Notes will be duly issued and will constitute legal,
valid and binding obligations of the Borrower, enforceable in accordance with
their terms, except for the effect of bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting the rights of
creditors generally, and will rank pari passu with all other outstanding
unsecured indebtedness of the Borrower.

Section 5.9 ERISA. With respect to each Plan, the Borrower and each
other member of the Controlled Group has fulfilled its obligations under the
minimum funding standards of and is in compliance in all material respects with
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
with the Code to the extent applicable to it and has not incurred any liability
to the Pension Benefit Guaranty Corporation ("PBGC") or a Plan under Title IV of
ERISA other than a liability to the PBGC for premiums under Section 4007 of
ERISA. The Borrower does not have any contingent liabilities for any
post-retirement benefits under a Welfare Plan, other than liability for
continuation coverage described in Part 6 of Title I of ERISA.

Section 5.10 Government Regulation. Neither the Borrower nor any
Subsidiary is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.

Section 5.11 Margin Stock; Use of Proceeds. Neither the Borrower nor
any Subsidiary is engaged principally, or as one of its primary activities, in
the business of extending credit for 

22

the purpose of purchasing or carrying margin stock ("margin stock" to have the
same meaning herein as in Regulation U of the Board of Governors of the Federal
Reserve System). The proceeds of the Loans are to be used solely for the
purposes set forth in and permitted by Section 7.10. The Borrower will not use
the proceeds of any Loan in a manner that violates any provision of Regulation U
or X of the Board of Governors of the Federal Reserve System.

Section 5.12 Licenses and Authorizations; Compliance with Laws. The
Borrower and each of its Subsidiaries has all necessary licenses, permits and
governmental authorizations to own and operate its Properties and to carry on
its business as currently conducted and contemplated. The Borrower and each of
its Subsidiaries is in compliance with all applicable laws, regulations,
ordinances and orders of any governmental or judicial authorities except for any
such law, regulation, ordinance or order which, the failure to comply therewith,
could not reasonably be expected to have a Material Adverse Effect.

Section 5.13 Ownership of Property; Liens. The Borrower and each
Subsidiary has good title to or valid leasehold interests in all its Property.
None of the Borrower's Property is subject to any Lien, except as permitted in
Section 7.9.

Section 5.14 No Burdensome Restrictions; Compliance with Agreements.
Neither the Borrower nor any Subsidiary is (a) party or subject to any law,
regulation, rule or order, or any Contractual Obligation that (individually or
in the aggregate) could have a Material Adverse Effect or (b) in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in, nor has any event occurred (and is continuing) that
constitutes or would (whether or not with the giving of notice and/or with the
passage of time and/or the fulfillment of any other requirement) constitute, to
the knowledge of the Borrower, a default or any breach or failure to perform by
the Borrower under, any indenture, mortgage, loan agreement, lease or other
agreement or instrument to which it is a party, which default could have a
Material Adverse Effect.

Section 5.15 Full Disclosure. All information heretofore furnished by
the Borrower to the Administrative Agent or any Bank for purposes of or in
connection with the Credit Documents or any transaction contemplated thereby is,
and all such information hereafter furnished by the Borrower to the
Administrative Agent or any Bank will be, true and accurate in all material
respects and not misleading on the date as of which such information is stated
or certified.

Section 5.16 Solvency. The Borrower, on both an individual and on a
consolidated basis, is Solvent.

SECTION 6. CONDITIONS PRECEDENT.

The obligation of each Bank to advance, continue, or convert any Loan
shall be subject to the following conditions precedent:

23

Section 6.1 Initial Credit Event. Before or concurrently with the
initial Credit Event:

(a) The Administrative Agent shall have received for each Bank
(i) the favorable written opinion of (x) in-house counsel to the
Borrower, and (y) a New York law enforceability opinion from Borrower's
counsel, each in form and substance satisfactory to the Administrative
Agent and its counsel;

(b) The Administrative Agent shall have received for each Bank
copies of (i) the Articles of Incorporation, together with all
amendments, and a certificate of good standing, for the Borrower, both
certified as of a date not earlier than 20 days prior to the date
hereof by the appropriate governmental officer of the Borrower's
jurisdiction of incorporation and (ii) the Borrower's bylaws (or
comparable constituent documents) and any amendments thereto, certified
in each instance by its Secretary or an Assistant Secretary;

(c) The Administrative Agent shall have received for each Bank
copies of resolutions of the Borrower's Board of Directors authorizing
the execution and delivery of the Credit Documents and the consummation
of the transactions contemplated thereby together with specimen
signatures of the persons authorized to execute such documents on the
Borrower's behalf, all certified in each instance by its Secretary or
Assistant Secretary;

(d) The Administrative Agent shall have received for each Bank
such Bank's duly executed Note of the Borrower dated the date hereof
and otherwise in compliance with the provisions of Section 2.10(a)
hereof;

(e) The Administrative Agent shall have received for each Bank
a list of the Borrower's Authorized Representatives and such other
documents as any Bank may reasonably request;

(f) The Borrower shall have provided evidence satisfactory to
the Administrative Agent that contemporaneously with the first Credit
Event hereunder, the Existing Credit Agreement and the Bridge Credit
Agreement each shall have terminated and the Borrower shall have no
further obligations thereunder (except obligations which by their terms
survive the termination of the Existing Credit Agreement and the Bridge
Credit Agreement);

(g) The Administrative Agent shall have received a certificate
by the chief financial officer, treasurer, vice president of finance or
corporate controller of the Borrower certifying (i) that on the date of
such initial Credit Event that no Default or Event of Default has
occurred and is continuing, (ii) that the conditions set forth in this
Section 6.1 have been satisfied, and (iii) based on the financial
statements most recently delivered under the Existing Credit Agreement,
which of its Subsidiaries is a Material Subsidiary;

24

(h) The Borrower shall provide a certificate confirming that
it has received at least $300,000,000 in loans evidenced by the
Subordinated Note;

(i) The Administrative Agent shall have received the favorable
written opinion of counsel to the Administrative Agent;

(j) Each Bank shall have received from the Borrower the fees
payable by it in connection herewith;

(k) All legal matters incident to the execution and delivery
of the Credit Documents shall be satisfactory to the Banks;

The Administrative Agent shall have received such other certifications,
opinions, financial or other information, approvals and documents as the
Administrative Agent or any Bank may reasonably request, all in form and
substance satisfactory to the Administrative Agent or such Bank (as the case may
be).

Section 6.2 All Credit Events. As of the time of each Credit Event
hereunder (including the initial Credit Event):

(a) The Administrative Agent shall have received the notice
required by Section 2.5 hereof;

(b) Each of the representations and warranties set forth in
Section 5 hereof shall be and remain true and correct in all material
respects as of said time, taking into account any amendments to such
Section (including, without limitation, any amendments to the Schedules
referenced therein) made after the date of this Agreement in accordance
with its provisions, except that if any such representation or warranty
relates solely to an earlier date it need only remain true as of such
date, provided that solely for purposes of this Section 6.2(b) the
representations relating to the Borrower's Subsidiaries set forth in
Section 5.2 hereof shall be deemed representations relating only to the
Borrower's Material Subsidiaries;

(c) The Borrower shall be in full compliance with all of the
terms and conditions hereof, and no Default or Event of Default shall
have occurred and be continuing or would occur as a result of such
Credit Event;

(d) No event of default by the Borrower has been declared and
is continuing under any existing debt agreements; and

(e) Such Credit Event shall not violate any order, judgment or
decree of any court or other authority or any provision of law or
regulation applicable to any Bank (including, without limitation,
Regulation U of the Board of Governors of the Federal Reserve System).

25

Each request for a Borrowing hereunder shall be deemed to be a
representation and warranty by the Borrower on the date of such Credit Event as
to the facts specified in paragraphs (b) and (c) of this Section 6.2, provided,
that solely in the case of a Credit Event which is a continuation of a previous
Borrowing, the Borrower shall not be deemed to have made any representation or
warranty with regard to the matters set forth in Section 5.5(a) and (b) hereof.

SECTION 7. COVENANTS.

The Borrower covenants and agrees that, so long as any Loan is
outstanding hereunder, or any Commitment is available to or in use by the
Borrower hereunder, except to the extent compliance in any case is waived in
writing by the Required Banks:

Section 7.1 Corporate Existence; Subsidiaries. The Borrower shall, and
shall cause each of its Subsidiaries to, preserve and maintain its corporate
existence, subject to the provisions of Section 7.11 hereof.

Section 7.2 Maintenance. The Borrower will, and will cause each of its
Subsidiaries to, maintain, preserve and keep its plants, Properties and
equipment necessary to the proper conduct of its business in reasonably good
repair, working order and condition and will from time to time make all
reasonably necessary repairs, renewals, replacements, additions and betterments
thereto so that at all times such plants, Properties and equipment shall be
reasonably preserved and maintained, and the Borrower will cause each of its
Subsidiaries to do so in respect of Property owned or used by it; provided,
however, that nothing in this Section 7.2 shall prevent the Borrower or a
Subsidiary from discontinuing the operation or maintenance of any such
Properties if such discontinuance is not disadvantageous to the Banks or the
holders of the Notes, and is, in the judgment of the Borrower, desirable in the
conduct of its business or the business of its Subsidiary.

Section 7.3 Taxes. The Borrower will duly pay and discharge, and will
cause each of its Subsidiaries duly to pay and discharge, all taxes, rates,
assessments, fees and governmental charges upon or against it or against its
Properties, in each case before the same becomes delinquent and before penalties
accrue thereon, unless and to the extent that the same is being contested in
good faith by appropriate proceedings and reserves in conformity with GAAP have
been provided therefor on the books of the Borrower.

Section 7.4 ERISA. The Borrower will promptly pay and discharge all
obligations and liabilities arising under ERISA of a character which if unpaid
or unperformed might result in the imposition of a Lien against any of its
properties or assets and will promptly notify the Administrative Agent of (i)
the occurrence of any reportable event (as defined in ERISA) affecting a Plan,
other than any such event of which the PBGC has waived notice by regulation,
(ii) receipt of any notice from PBGC of its intention to seek termination of any
Plan or appointment of a trustee therefor, (iii) its intention to terminate or
withdraw from any Plan, and (iv) the occurrence of any event affecting any Plan
which could result in the incurrence by the Borrower of any material liability,
fine or penalty, or any material increase in the contingent liability of the
Borrower under any post-retirement Welfare Plan benefit. The Administrative

26

Agent will promptly distribute to each Bank any notice it receives from the
Borrower pursuant to this Section 7.4.

Section 7.5 Insurance. The Borrower will insure, and keep insured, and
will cause each of its Subsidiaries to insure, and keep insured, with good and
responsible insurance companies, all insurable Property owned by it of a
character usually insured by companies similarly situated and operating like
Property, as well as adequate business interruption insurance. To the extent
usually insured (subject to self-insured retentions) by companies similarly
situated and conducting similar businesses, the Borrower will also insure, and
cause each of its Subsidiaries to insure, employers' and public and product
liability risks with good and responsible insurance companies. The Borrower will
upon request of the Administrative Agent furnish to the Administrative Agent a
summary setting forth the nature and extent of the insurance maintained pursuant
to this Section 7.5.

Section 7.6 Financial Reports and Other Information.

(a) The Borrower will maintain a system of accounting in
accordance with GAAP and will furnish to the Banks and their respective
duly authorized representatives such information respecting the
business and financial condition of the Borrower and its subsidiaries
as any Bank may reasonably request; and without any request, the
Borrower will furnish each of the following to each Bank:

(i) within 120 days after the end of each fiscal year
of the Borrower, (A) a copy of the Borrower's audited
financial statements for such fiscal year, including the
consolidated balance sheet of the Borrower for such year and
the related statement of income and statement of cash flow, as
certified by independent public accountants of recognized
national standing selected by the Borrower in accordance with
GAAP with such accountants unqualified opinion to the effect
that the financial statements have been prepared in accordance
with GAAP and present fairly in all material respects in
accordance with GAAP the consolidated financial position of
the Borrower and its subsidiaries as of the close of such
fiscal year and the results of their operations and cash flows
for the fiscal year then ended and that an examination of such
accounts in connection with such financial statements has been
made in accordance with generally accepted auditing standards
and accordingly, such examination included such tests of the
accounting records and such other auditing procedures as were
considered necessary in the circumstances; (B) a copy of the
Borrower's unaudited consolidating financials for such fiscal
year, including a consolidating unaudited balance sheet of the
Borrower, and the related statement of income and shall use
its best efforts to provide a statement of cash flow in a
format acceptable to the Administrative Agent; all of the
foregoing prepared by the Borrower in reasonable detail in
accordance with GAAP and certified by the Borrower's chief
financial officer, treasurer, vice president of finance or
corporate controller as fairly presenting the financial
condition as at the dates thereof and the results of
operations for the periods covered thereby;

27

(ii) within 60 days after the end of each of the
first three quarterly fiscal periods of the Borrower, a
condensed consolidated unaudited balance sheet of the
Borrower, and the related statement of income and statement of
cash flow, as of the close of such period, all of the
foregoing prepared by the Borrower in reasonable detail in
accordance with GAAP and certified by the Borrower's chief
financial officer, treasurer, vice president of finance or
corporate controller as fairly presenting the financial
condition as at the dates thereof and the results of
operations for the periods covered thereby (subject to year
end adjustments);

(iii) within the period provided in subsection (i)
above, the written statement of the accountants who certified
the audit report thereby required that in the course of their
audit they have obtained no knowledge of any Default or Event
of Default, or, if such accountants have obtained knowledge of
any such Default or Event of Default, they shall disclose in
such statement the nature and period of the existence thereof;

(iv) promptly after the sending or filing thereof,
copies of all proxy statements, financial statements and
reports the Borrower sends to its shareholders, and copies of
all other regular, periodic and special reports and all
registration statements the Borrower files with the SEC or any
successor thereto, or with any national securities exchanges;

(v) as soon as possible and in any event within five
days after the Borrower or any member of the Controlled Group
knows that any Termination Event with respect to any Plan has
occurred, a statement of the chief financial officer of the
Borrower describing such Termination Event and the action, if
any, that the Borrower or such member of the Controlled Group,
as the case may be, proposes to take with respect thereto;

(b) Each financial statement furnished to the Banks pursuant
to subsection (i) or (ii) of Section 7.6(a) shall be accompanied by (A)
a written certificate signed by the Borrower's chief financial officer,
vice president of finance, corporate controller or treasurer (i) to the
effect that no Default or Event of Default has occurred during the
period covered by such statements or, if any such Default or Event of
Default has occurred during such period, setting forth a description of
such Default or Event of Default and specifying the action, if any,
taken by the Borrower to remedy the same, (ii) to the effect that the
representations and warranties contained in Section 5 hereof are true
and correct in all material respects as though made on the date of such
certificate (other than those made solely as of an earlier date, which
need only remain true as of such date), taking into account any
amendments to such Section (including, without limitation, any
amendments to the Schedules referenced therein) made after the date of
this Agreement in accordance with its provisions and except as
otherwise described therein, and (iii) notifying the Banks (x) of any
litigation or governmental proceeding of the type described in Section
5.5 hereof or (y) of any change in the information set forth on the
Schedules hereto and (B) a Compliance Certificate in the form of
Exhibit B hereto 

28

showing the Borrower's compliance with the covenants set forth in
Sections 7.9, 7.11, 7.12, 7.13 and 7.14 hereof.

(c) The Borrower will (i) promptly (and in any event within
three Business Days after an officer of the Borrower has knowledge
thereof) give notice to the Administrative Agent and each Bank (x) of
the occurrence of any Default or Event of Default, (y) of any payment
default or payment event of default aggregating $50,000,000 or more
under any Contractual Obligation of the Borrower or (z) of any change
in the Rating of Borrower by Moody's or SP and (ii) promptly (and in
any event within ten Business Days after an officer of the Borrower has
knowledge thereof) give notice to the Administrative Agent and each
Bank of the occurrence of any event or circumstance which has had or
which is reasonably expected to have a Material Adverse Effect.

Section 7.7 Bank Inspection Rights. Upon reasonable notice from any
Bank, the Borrower will, at the Borrower's expense (such expenses to be
reasonably incurred), permit such Bank (and such Persons as any Bank may
designate) during normal business hours to visit and inspect, under the
Borrower's guidance, any of the properties of the Borrower or any of its
Subsidiaries, to examine all of their books of account, records, reports and
other papers, to make copies and extracts therefrom, and to discuss their
respective affairs, finances and accounts with their respective officers,
employees and with their independent public accountants (and by this provision
the Borrower authorizes such accountants to discuss with the Banks (and such
Persons as any Bank may designate subject to confidentiality agreements
reasonably acceptable to the Borrower) the finances and affairs of the Borrower
and its Subsidiaries) all at such reasonable times and as often as may be
reasonably requested; provided, however, that except upon the occurrence and
during the continuation of any Default or Event of Default, not more than one
such set of visits and inspections may be conducted each calendar quarter.

Section 7.8 Conduct of Business. The Borrower will not engage in any
line of business other than business associated with or related to energy
generation, transmission, marketing and distribution or other infrastructure
lines of business.

Section 7.9 Liens. The Borrower shall cause the Obligations to at all
times rank at least pari passu with all other senior unsecured obligations of
the Borrower. The Borrower will not create, incur, permit to exist or to be
incurred any Lien of any kind on any Property owned by the Borrower; provided,
however, that this Section 7.9 shall not apply to nor operate to prevent:

(a) Liens upon any Property acquired by the Borrower to secure
any Indebtedness (which for purposes of this Section 7.9(a) shall
include non-recourse obligations) of the Borrower incurred to finance
or refinance the purchase price of such Property (including Property
which was initially purchased with equity), provided that any such Lien
shall apply only to the Property that was so acquired and the aggregate
principal amount of Indebtedness secured by such Liens shall not exceed
the cost or value of the acquired Property;

29

(b) Other Liens not to exceed 10% of Consolidated Net Tangible
Assets;

(c) Liens on the stock or other equity interests (i) granted
in connection with the FinCo Revolving Loan Facility and (ii) of
Project Finance Subsidiaries; and

(d) Any extension, renewal or replacement (or successive
extensions, renewals or replacements) in whole or in part of any Lien
referred to in the foregoing paragraphs (a) through (c), inclusive.

Section 7.10 Use of Proceeds; Regulation U. The proceeds of each
Borrowing will be used by the Borrower to repay indebtedness outstanding under
the Existing Credit Agreement, for working capital and general corporate
purposes, and, subject to the limitation set forth in the following sentence, to
repay Indebtedness. The Borrower will not (i) have Loans outstanding at any one
time in excess of $250,000,000, the proceeds of which were used directly or
indirectly to repay or otherwise secure Indebtedness of the Borrower or its
Subsidiaries (other than Loans used to repay the Obligations or indebtedness
under the Existing Credit Agreement), or (ii) use any part of the proceeds of
any of the Borrowings directly or indirectly to purchase or carry any Margin
Stock (as defined in Section 5.11 hereof) or to extend credit to others for the
purpose of purchasing or carrying any such Margin Stock.

Section 7.11 Mergers, Consolidations and Sales of Assets.

(a) The Borrower will not consolidate with or merge into any
other Person or sell, convey, transfer or lease its properties and
assets substantially as an entirety to any Person, and the Borrower
shall not permit any Person to consolidate with or merge into the
Borrower, unless: (i) immediately prior to and immediately following
such consolidation, merger, sale or lease, and after giving effect
thereto, no Default or Event of Default shall have occurred and be
continuing; and (ii) the Borrower is the surviving or continuing
corporation, or the surviving or continuing corporation that acquires
by sale, conveyance, transfer or lease (a) has a Rating equal to or
better than the Rating of the Borrower in effect prior to such
consolidation or merger and (y) is incorporated in the United States
and expressly assumes the payment and performance of all Obligations of
the Borrower under the Credit Documents pursuant to documentation in
form and substance satisfactory to the Required Banks.

(b) Except for the sale of the properties and assets of the
Borrower substantially as an entirety pursuant to subsection (a) above,
and other than assets required to be sold to conform with governmental
regulations, the Borrower shall not sell or otherwise dispose of any
assets (other than short-term, readily marketable investments purchased
for cash management purposes with funds not representing the proceeds
of other asset sales) if on a pro forma basis, the aggregate net book
value of all such sales during the most recent 12-month period would
exceed ten percent (10%) of Consolidated Net Tangible Assets computed
as of the end of the most recent fiscal quarter preceding such sale;
provided, however, that any such sales shall be disregarded for
purposes of this ten percent (10%) limitation if the proceeds are
invested in assets in similar or related

30

lines of business of the Borrower and, provided further, that the
Borrower may sell or otherwise dispose of assets in excess of such ten
percent (10%) if the proceeds from such sales or dispositions, which
are not reinvested as provided above, are retained by the Borrower as
cash or cash equivalents at all times until invested in assets in
similar or related lines of business of the Borrower.

(c) Notwithstanding anything in this Agreement to the
contrary, the Borrower may not sell its equity interest in any Material
Subsidiary unless prior to such sale the Borrower has delivered to the
Administrative Agent a certificate pursuant to which the Borrower
certifies that both immediately prior, and immediately after giving
effect, to such sale no Default or Event of Default has occurred and is
continuing and no event or circumstance has occurred which has had, or
which is reasonably expected to have, a Material Adverse Effect.

Section 7.12 Consolidated Net Worth. The Borrower will at all times
cause its Consolidated Net Worth to be equal to or greater than the Minimum
Consolidated Net Worth.

Section 7.13 Indebtedness to Consolidated Capitalization. The Borrower
will at the end of each of its fiscal quarters maintain a ratio of its
Indebtedness (excluding, for purposes of the numerator of this ratio,
Indebtedness evidenced by the Subordinated Note) to Consolidated Capitalization
of not more than 0.68 to 1.00. For purposes of this covenant, (i) only fifty
percent (50%) of any Indebtedness of the Borrower constituting Performance
Guarantees of obligations of the Borrower's Affiliates shall be deemed
Indebtedness, provided that if any demand has been made on such guarantee, the
full amount of such guarantee shall be included in calculating Indebtedness, and
(ii) the amount of Indebtedness which may be excluded per the immediately
preceding clause (i) shall not exceed $1,000,000,000.

Section 7.14 Interest Coverage Ratio. The Borrower will maintain an
Interest Coverage Ratio of not less than 2.00 to 1.00, as determined at the end
of each fiscal quarter.

Section 7.15 Compliance with Laws. Without limiting any of the other
covenants of the Borrower in this Section 7, the Borrower will conduct, and
cause each of its Subsidiaries to conduct, its business, and otherwise be, in
compliance with all applicable laws, regulations, ordinances, writs, judgments,
injunctions, decrees, awards and orders of any governmental or judicial
authorities; provided, however, that the Borrower shall not be required to
comply with any such law, rule, regulation, ordinance, writ, judgments,
injunction, decree, award or order if the failure to comply therewith could not
reasonably be expected to have a Material Adverse Effect.

Section 7.16 PUHCA. The Borrower has obtained, and will maintain in
full force and effect, all necessary approvals, if any, under the Public Utility
Holding Company Act of 1935, as amended, in connection with the Borrower's
performance under the Credit Documents.

31

Section 7.17 Subordinated Note. On or before December 31, 2002 Xcel
Energy Inc., a Minnesota corporation shall have converted all loans outstanding
under the Subordinated Note to common stock of the Borrower pursuant to the
terms set forth in the Subordinated Note.

SECTION 8. EVENTS OF DEFAULT AND REMEDIES.

Section 8.1 Events of Default. Any one or more of the following shall
constitute an Event of Default:

(a) The Borrower shall (i) fail to make when due any payment
of principal on the Notes, or (ii) fail to make when due, and
continuance of such failure for three or more Business Days, payment of
interest on the Notes or any fee or other amount required to be made
pursuant to the Credit Documents;

(b) Any representation or warranty made or deemed to have been
made by or on behalf of the Borrower in the Credit Documents or on
behalf of the Borrower in any certificate, statement, report or other
writing furnished by or on behalf of the Borrower to the Administrative
Agent pursuant to the Credit Documents or any other instrument,
document or agreement shall prove to have been false or misleading in
any material respect on the date as of which the facts set forth are
stated or certified or deemed to have been stated or certified;

(c) The Borrower shall fail to comply with any of the
covenants set forth in Sections 7.1 (as to Borrower and its Material
Subsidiaries only), 7.5 (as to Borrower and its Material Subsidiaries
only), 7.6(c), and 7.7 through and including 7.17 hereof;

(d) The Borrower shall fail to comply with any agreement,
covenant, condition, provision or term contained in the Credit
Documents (and such failure shall not constitute an Event of Default
under any of the other provisions of this Section 8) and such failure
to comply shall continue for 30 calendar days after the earlier to
occur of (i) notice thereof to the Borrower by the Administrative Agent
and (ii) first actual knowledge thereof by an officer of the Borrower;

(e) The Borrower or a Material Subsidiary shall become
insolvent or shall generally not pay its debts as they mature or shall
apply for, shall consent to, or shall acquiesce in the appointment of a
custodian, trustee or receiver of the Borrower or a Material Subsidiary
or for a substantial part of the property thereof or, in the absence of
such application, consent or acquiescence, a custodian, trustee or
receiver shall be appointed for the Borrower or a Material Subsidiary
or for a substantial part of the Property of a Borrower or a Material
Subsidiary and shall not be discharged within 60 days;

(f) Any bankruptcy, reorganization, debt arrangement or other
proceedings under any bankruptcy or insolvency law shall be instituted
by or against the Borrower or a Material Subsidiary, and, if instituted
against the Borrower or a Material Subsidiary, 

32

shall have been consented to or acquiesced in by the Borrower or a
Material Subsidiary, or shall remain undismissed for 60 days, or an
order for relief shall have been entered against the Borrower or a
Material Subsidiary, or the Borrower or a Material Subsidiary shall
take any corporate action to approve institution of, or acquiescence
in, such a proceeding;

(g) Any dissolution or liquidation proceeding shall be
instituted by or against the Borrower or a Material Subsidiary and, if
instituted against the Borrower or a Material Subsidiary, shall be
consented to or acquiesced in by the Borrower or shall remain for 60
days undismissed, or the Borrower or a Material Subsidiary shall take
any corporate action to approve institution of, or acquiescence in,
such a proceeding;

(h) A judgment or judgments, decrees or orders of any court,
tribunal, arbitrator, administrative or other governmental body or
entity for the payment of money in excess of the sum of $50,000,000 in
the aggregate shall be rendered against the Borrower or any Material
Subsidiary (excluding the amount thereof covered by insurance as to
which the insurance provider has acknowledged its liability in writing)
or any of the Borrower's or a Material Subsidiary's Properties and (i)
enforcement proceedings have been commenced with respect to such
judgment, decree or order, or (ii) such judgment, decree or order (x)
shall remain unvacated and undischarged and unstayed for 60 consecutive
days, or (y) ceases to be contested in good faith by appropriate
proceedings;

(i) The institution by the Borrower of steps to terminate any
Plan if in order to effectuate such termination, the Borrower would be
required to make a contribution to such Plan, or would incur a
liability or obligation to such Plan, in excess of $50,000,000, or the
institution by the PBGC of steps to terminate any Plan;

(j) Either (A) a default shall occur under that certain Credit
Agreement dated as of November 30, 1999 among NRG Energy, Inc., the
banks party thereto and Australia and New Zealand Banking Group
Limited, as Administrative Agent, as such agreement may from time to
time be restated, amended or otherwise modified or any substitute or
replacement credit agreement with respect thereto (the "LC Agreement"),
and as a result of such default is (x) the termination of the
commitments under the LC Agreement, (y) the Borrower is required to
provide cash collateral pursuant to the LC Agreement, or (z) the bank
and/or the agent under the LC Agreement exercise any right or remedy
thereunder, or (B) (i) a default in payment of any principal of or any
interest aggregating $50,000,000 or more on Indebtedness of the
Borrower or a Material Subsidiary or under any indenture or other
instrument under which any such evidence of Indebtedness has been
issued or (ii) a default shall occur under any bond, debenture, note or
other evidence of Indebtedness of the Borrower or a Material Subsidiary
or under any indenture or other instrument under which any such
evidence of Indebtedness has been issued and such default shall
continue for a period of time sufficient to permit the holder or
beneficiary of such indebtedness or a trustee therefor to cause the
acceleration of the maturity of any such indebtedness of principal of
or any interest aggregating $50,000,000 or more or any mandatory
unscheduled prepayment, purchase or funding thereof; or

33

(k) if at any time without the unanimous consent of the Banks,
Xcel Energy Inc., a Minnesota corporation, or its successors, ceases to
own a majority of the Voting Stock of the Borrower, it being agreed
that an Event of Default pursuant to this subsection (k) may only be
waived by the unanimous consent of the Banks.

Section 8.2 Non-Bankruptcy Defaults. When any Event of Default other
than those described in subsections (e), (f) or (g) of Section 8.1 hereof has
occurred and is continuing, the Administrative Agent shall, if so directed by
the Required Banks by written notice to the Borrower: (a) terminate the
remaining Commitments and all other obligations of the Banks hereunder on the
date stated in such notice (which may be the date thereof); and (b) declare the
principal of and the accrued interest on all outstanding Notes to be forthwith
due and payable and thereupon all outstanding Notes, including both principal
and interest thereon, shall be and become immediately due and payable together
with all other amounts payable under the Credit Documents without further
demand, presentment, protest or notice of any kind. The Administrative Agent,
after giving notice to the Borrower pursuant to Section 8.1(c), 8.1(d) or this
Section 8.2, shall also promptly send a copy of such notice to the other Banks,
but the failure to do so shall not impair or annul the effect of such notice.

Section 8.3 Bankruptcy Defaults. When any Event of Default described in
subsections (e), (f) or (g) of Section 8.1 hereof has occurred and is
continuing, then all outstanding Notes shall immediately and automatically
become due and payable together with all other amounts payable under the Credit
Documents without presentment, demand, protest or notice of any kind and the
obligation of the Banks to extend further credit pursuant to any of the terms
hereof shall immediately and automatically terminate.

Section 8.4 [Intentionally Omitted]

Section 8.5 Notice of Default. The Administrative Agent shall give
notice to the Borrower under Section 8.1(d) hereof promptly upon being requested
to do so by any Bank and shall thereupon notify all the Banks thereof.

Section 8.6 Expenses. The Borrower agrees to pay to the Administrative
Agent and each Bank, and any other holder of any Note outstanding hereunder, all
reasonable costs and expenses incurred or paid by the Administrative Agent or
such Bank or any such holder, including attorneys' fees and court costs, in
connection with any Default or Event of Default by the Borrower hereunder or in
connection with the enforcement of any of the Credit Documents.

SECTION 9. CHANGE IN CIRCUMSTANCES.

Section 9.1 Change of Law. Notwithstanding any other provisions of this
Agreement or any Note if at any time after the date hereof any change in
applicable law or regulation or in the interpretation thereof makes it unlawful
for any Bank to make, continue to maintain or convert a Borrowing into
Eurocurrency Loans or to perform its obligations as contemplated hereby, such
Bank shall promptly give notice thereof to the Borrower and such Bank's
obligations to make, maintain or convert a Borrowing into Eurocurrency Loans
under this 

34

Agreement shall terminate until it is no longer unlawful for such Bank to make
or maintain Eurocurrency Loans. The Borrower shall prepay on demand the
outstanding principal amount of any such affected Eurocurrency Loans, together
with all interest accrued thereon at a rate per annum equal to the interest rate
applicable to such Loan; provided, however, subject to all of the terms and
conditions of this Agreement, the Borrower may then elect to borrow the
principal amount of the affected Eurocurrency Loans from such Bank by means of
Base Rate Loans from such Bank, which Base Rate Loans shall not be made ratably
by the Banks but only from such affected Bank.

Section 9.2 Unavailability of Deposits or Inability to Ascertain, or
Inadequacy of, LIBOR. If on or prior to the first day of any Interest Period for
any Borrowing of Loans:

(a) the Administrative Agent determines that deposits in U.S.
Dollars (in the applicable amounts) are not being offered to it in the
federal funds or eurocurrency interbank market, as applicable, for such
Interest Period, or that by reason of circumstances affecting the
federal funds or interbank eurocurrency market, as applicable, adequate
and reasonable means do not exist for ascertaining the applicable
Federal Funds Rate or LIBOR; or

(b) Banks having 25% or more of the aggregate amount of the
Revolving Credit Commitments reasonably determine and so advise the
Administrative Agent that the Federal Funds Rate or LIBOR, as
applicable, as reasonably determined by the Administrative Agent will
not adequately and fairly reflect the cost to such Banks or Bank of
funding their or its Loans or Loan for such Interest Period;

then the Administrative Agent shall forthwith give notice thereof to the
Borrower and the Banks, whereupon until the Administrative Agent notifies the
Borrower that the circumstances giving rise to such suspension no longer exist,
the obligations of the Banks or of the relevant Bank to make Base Rate Loans
bearing interest at the Federal Funds Rate or Eurocurrency Loans in the currency
so affected, as applicable, shall be suspended.

Section 9.3 Increased Cost and Reduced Return.

(a) If, on or after the date hereof, the adoption of any
applicable law, rule or regulation, or any change therein, or any
change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by any Bank
(or its Lending Office) with any request or directive (whether or not
having the force of law but, if not having the force of law, compliance
with which is customary in the relevant jurisdiction) of any such
authority, central bank or comparable agency:

(i) shall subject any Bank (or its Lending Office) to
any tax, duty or other charge with respect to its Eurocurrency
Loans, its Notes, or its obligation to make Eurocurrency
Loans, or shall change the basis of taxation of payments to
any Bank (or its Lending Office) of the principal of or
interest on its Eurocurrency 

35

Loans, or any other amounts due under this Agreement in
respect of its Eurocurrency Loans or its obligation to make
Eurocurrency Loans (except for changes in the rate of tax on
the overall net income or profits of such Bank or its Lending
Office imposed by the jurisdiction in which such Bank or its
lending office is incorporated in which such Bank's principal
executive office or Lending Office is located); or

(ii) shall impose, modify or deem applicable any
reserve, special deposit or similar requirement (including,
without limitation, any such requirement imposed by the Board
of Governors of the Federal Reserve System, but excluding with
respect to any Eurocurrency Loans any such requirement
included in an applicable Eurocurrency Reserve Percentage)
against assets of, deposits with or for the account of, or
credit extended by, any Bank (or its Lending Office) or shall
impose on any Bank (or its Lending Office) or on the interbank
market any other condition affecting its Eurocurrency Loans,
its Notes, or its obligation to make Eurocurrency Loans;

and the result of any of the foregoing is to increase the cost to such Bank (or
its Lending Office) of making or maintaining any Eurocurrency Loan, or to reduce
the amount of any sum received or receivable by such Bank (or its Lending
Office) under this Agreement or under its Notes with respect thereto, by an
amount deemed by such Bank to be material, then, within fifteen (15) days after
demand by such Bank (with a copy to the Administrative Agent), the Borrower
shall be obligated to pay to such Bank such additional amount or amounts as will
compensate such Bank for such increased cost or reduction. In the event any law,
rule, regulation or interpretation described above is revoked, declared invalid
or inapplicable or is otherwise rescinded, and as a result thereof a Bank is
determined to be entitled to a refund from the applicable authority for any
amount or amounts which were paid or reimbursed by Borrower to such Bank
hereunder, such Bank shall, so long as no Event of Default has occurred and is
then continuing, refund such amount or amounts to Borrower without interest.

(b) If, after the date hereof, any Bank or the Administrative
Agent shall have determined that the adoption of any applicable law,
rule or regulation regarding capital adequacy, or any change therein
(including, without limitation, any revision in the Final Risk-Based
Capital Guidelines of the Board of Governors of the Federal Reserve
System (12 CFR Part 208, Appendix A; 12 CFR Part 225, Appendix A) or of
the Office of the Comptroller of the Currency (12 CFR Part 3, Appendix
A), or in any other applicable capital rules heretofore adopted and
issued by any governmental authority), or any change in the
interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Lending
Office) with any request or directive regarding capital adequacy
(whether or not having the force of law but, if not having the force of
law, compliance with which is customary in the applicable jurisdiction)
of any such authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on such Bank's capital,
or on the capital of any corporation controlling such Bank, as a
consequence of its obligations hereunder to a level below that 

36

which such Bank could have achieved but for such adoption, change or
compliance (taking into consideration such Bank's policies with respect
to capital adequacy) by an amount deemed by such Bank to be material,
then from time to time, within fifteen (15) days after demand by such
Bank (with a copy to the Administrative Agent), the Borrower shall pay
to such Bank such additional amount or amounts as will compensate such
Bank for such reduction.

(c) Each Bank that determines to seek compensation under this
Section 9.3 shall notify the Borrower and the Administrative Agent of
the circumstances that entitle the Bank to such compensation pursuant
to this Section 9.3 and will designate a different Lending Office if
such designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the sole judgment of such Bank, be
otherwise disadvantageous to such Bank. A certificate of any Bank
claiming compensation under this Section 9.3 and setting forth the
additional amount or amounts to be paid to it hereunder shall be
conclusive in the absence of manifest error. In determining such
amount, such Bank may use any reasonable averaging and attribution
methods.

(d) If any Bank (other than ABN AMRO Bank N.V.) has demanded
compensation or given notice of its intention to demand compensation
under this Section 9.3 or the Borrower is required to pay any
additional amount to any Bank under Section 9.3, the Borrower shall
have the right, with the assistance of the Administrative Agent, to
seek a substitute Bank or Banks reasonably satisfactory to the
Administrative Agent (which may be one or more of the Banks) to replace
such Bank under this Agreement and on the date of replacement, the
Borrower shall pay all accrued interest and fees to the Bank being
replaced. The Bank to be so replaced shall cooperate with the Borrower
and substitute Bank to accomplish such substitution, provided that all
of such Bank's Loan Commitment is replaced.

Section 9.4 Lending Offices. Each Bank may, at its option, elect to
make its Loans hereunder at the branch, office or affiliate specified on the
appropriate signature page hereof or in the assignment agreement which any
assignee bank executes pursuant to Section 11.12 hereof (each a "Lending
Office") for each type of Loan available hereunder or at such other of its
branches, offices or affiliates as it may from time to time elect and designate
in a written notice to the Borrower and the Administrative Agent.

Section 9.5 Discretion of Bank as to Manner of Funding. Notwithstanding
any other provision of this Agreement, each Bank shall be entitled to fund and
maintain its funding of all or any part of its Loans in any manner it sees fit,
it being understood, however, that for the purposes of this Agreement all
determinations hereunder shall be made as if each Bank had actually funded and
maintained each Eurocurrency Loan through the purchase of deposits of U.S.
Dollars in the eurocurrency interbank market having a maturity corresponding to
such Loan's Interest Period and bearing an interest rate equal to LIBOR for such
Interest Period.

37

SECTION 10. THE ADMINISTRATIVE AGENT.

Section 10.1 Appointment and Authorization of Administrative Agent.
Each Bank hereby appoints ABN AMRO Bank N.V. as the Administrative Agent under
the Credit Documents and hereby authorizes the agent to take such action as
Administrative Agent on its behalf and to exercise such powers under the Credit
Documents as are delegated to the Administrative Agent by the terms thereof,
together with such powers as are reasonably incidental thereto. The
Administrative Agent shall have no duties or responsibilities except those
expressly set forth in this Agreement and the Credit Documents. The duties of
the Administrative Agent shall be mechanical and administrative in nature; the
Administrative Agent shall not have by reason of this Agreement or any other
Credit Document a fiduciary relationship in respect of any Bank, the holder of
any Note or any other Person; and nothing in this Agreement or any other Credit
Document, expressed or implied, is intended to or shall be so construed as to
impose upon the Administrative Agent any obligations in respect of this
Agreement or any other Credit Document except as expressly set forth herein or
therein.

Section 10.2 Administrative Agent and its Affiliates. The
Administrative Agent shall have the same rights and powers under this Agreement
and the other Credit Documents as any other Bank and may exercise or refrain
from exercising the same as though it were not the Administrative Agent, and the
Administrative Agent and its affiliates may accept deposits from, lend money to,
and generally engage in any kind of business with the Borrower or any Affiliate
of the Borrower as if it were not the Administrative Agent under the Credit
Documents. The term "Bank" as used herein and in all other Credit Documents,
unless the context otherwise clearly requires, includes the Administrative Agent
in its individual capacity as a Bank. References in Section 2 hereof to the
Administrative Agent's Loans, or to the amount owing to the Administrative Agent
for which an interest rate is being determined, refer to the Administrative
Agent in its individual capacity as a Bank.

Section 10.3 Action by Administrative Agent. If the Administrative
Agent receives from the Borrower a written notice of an Event of Default
pursuant to Section 7.6(c)(i) hereof, the Administrative Agent shall promptly
give each of the Banks written notice thereof. The obligations of the
Administrative Agent under the Credit Documents are only those expressly set
forth therein. Without limiting the generality of the foregoing, the
Administrative Agent shall not be required to take any action hereunder with
respect to any Default or Event of Default, except as expressly provided in
Sections 8.2 and 8.5. In no event, however, shall the Administrative Agent be
required to take any action in violation of applicable law or of any provision
of any Credit Document, and the Administrative Agent shall in all cases be fully
justified in failing or refusing to act hereunder or under any other Credit
Document unless it shall be first indemnified to its reasonable satisfaction by
the Banks against any and all costs, expense, and liability which may be
incurred by it by reason of taking or continuing to take any such action. The
Administrative Agent shall be entitled to assume that no Default or Event of
Default exists unless notified to the contrary by a Bank or the Borrower. In all
cases in which this Agreement and the other Credit Documents do not require the
Administrative Agent to take certain actions, the Administrative Agent shall be
fully justified in using its discretion in failing to take or in taking any
action hereunder and thereunder.

38

Section 10.4 Consultation with Experts. The Administrative Agent may
consult with legal counsel, independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken by it in good faith in accordance with the advice of such counsel,
accountants or experts.

Section 10.5 Liability of Administrative Agent; Credit Decision.
Neither the Administrative Agent nor any of its directors, officers, agents, or
employees shall be liable for any action taken or not taken by it in connection
with the Credit Documents (i) with the consent or at the request of the Required
Banks or (ii) in the absence of its own gross negligence or willful misconduct.
Neither the Administrative Agent nor any of its directors, officers, agents or
employees shall be responsible for or have any duty to ascertain, inquire into
or verify: (i) any statement, warranty or representation made in connection with
this Agreement, any other Credit Document or any Credit Event; (ii) the
performance or observance of any of the covenants or agreements of the Borrower
or any other party contained herein or in any other Credit Document; (iii) the
satisfaction of any condition specified in Section 6 hereof, except receipt of
items required to be delivered to the Administrative Agent; or (iv) the
validity, effectiveness, genuineness, enforceability, perfection, value, worth
or collectability hereof or of any other Credit Document or of any other
documents or writing furnished in connection with any Credit Document; and the
Administrative Agent makes no representation of any kind or character with
respect to any such matter mentioned in this sentence. The Administrative Agent
may execute any of its duties under any of the Credit Documents by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
Banks, the Borrower, or any other Person for the default or misconduct of any
such agents or attorneys-in-fact selected with reasonable care. The
Administrative Agent shall not incur any liability by acting in reliance upon
any notice, consent, certificate, other document or statement (whether written
or oral) believed by it to be genuine or to be sent by the proper party or
parties. In particular and without limiting any of the foregoing, the
Administrative Agent shall have no responsibility for confirming the accuracy of
any Compliance Certificate or other document or instrument received by it under
the Credit Documents. The Administrative Agent may treat the payee of any Note
as the holder thereof until written notice of transfer shall have been filed
with the Administrative Agent signed by such payee in form satisfactory to the
Administrative Agent. Each Bank acknowledges that it has independently and
without reliance on the Administrative Agent or any other Bank, and based upon
such information, investigations and inquiries as it deems appropriate, made its
own credit analysis and decision to extend credit to the Borrower in the manner
set forth in the Credit Documents. It shall be the responsibility of each Bank
to keep itself informed as to the creditworthiness of the Borrower and any other
relevant Person, and the Administrative Agent shall have no liability to any
Bank with respect thereto.

Section 10.6 Indemnity. The Banks shall ratably, in accordance with
their respective Percentages, indemnify and hold the Administrative Agent, and
its directors, officers, employees, agents and representatives harmless from and
against any liabilities, losses, costs or expenses suffered or incurred by it
under any Credit Document or in connection with the transactions contemplated
thereby, regardless of when asserted or arising, except to the extent they are
promptly reimbursed for the same by the Borrower and except to the extent that
any event giving rise to a claim was caused by the gross negligence or willful
misconduct of the party seeking to 

39

be indemnified. The obligations of the Banks under this Section 10.6 shall
survive termination of this Agreement.

Section 10.7 Resignation of Administrative Agent and Successor
Administrative Agent. The Administrative Agent may resign at any time by giving
written notice thereof to the Banks and the Borrower. Upon any such resignation
of the Administrative Agent, the Required Banks shall have the right to appoint
a successor Administrative Agent with the consent of the Borrower, provided,
that at any time an Event of Default has occurred and is continuing, no such
consent shall be required. If no successor Administrative Agent shall have been
so appointed by the Required Banks, and shall have accepted such appointment,
within thirty (30) days after the retiring Administrative Agent's giving of
notice of resignation, then the retiring Administrative Agent may, on behalf of
the Banks, with the consent of the Borrower, appoint a successor Administrative
Agent, which shall be any Bank hereunder or any commercial bank organized under
the laws of the United States of America or of any State thereof and having a
combined capital and surplus of at least $200,000,000. Upon the acceptance of
its appointment as the Administrative Agent hereunder, such successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights and duties of the retiring or removed Administrative Agent under the
Credit Documents, and the retiring Administrative Agent shall be discharged from
its duties and obligations thereunder. After any retiring Administrative Agent's
resignation hereunder as Administrative Agent, the provisions of this Section 10
and all protective provisions of the other Credit Documents shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent.

SECTION 11. MISCELLANEOUS.

Section 11.1 Withholding Taxes.

(a) Payments Free of Withholding. Subject to Section 11.1(b)
hereof, each payment by the Borrower under this Agreement or the other
Credit Documents shall be made without withholding for or on account of
any present or future taxes (other than overall net income taxes on the
recipient). If any such withholding is so required, the Borrower shall
make the withholding, pay the amount withheld to the appropriate
governmental authority before penalties attach thereto or interest
accrues thereon and forthwith pay such additional amount as may be
necessary to ensure that the net amount actually received by each Bank
and the Administrative Agent free and clear of such taxes (including
such taxes on such additional amount) is equal to the amount which that
Bank or the Administrative Agent (as the case may be) would have
received had such withholding not been made. If the Administrative
Agent or any Bank pays any amount in respect of any such taxes,
penalties or interest the Borrower shall reimburse the Administrative
Agent or that Bank for that payment on demand in the currency in which
such payment was made. If the Borrower pays any such taxes, penalties
or interest, it shall deliver official tax receipts evidencing that
payment or certified copies thereof to the Bank or Administrative Agent
on whose account such withholding was made (with a copy to the
Administrative Agent if not the recipient of the original) on or before
the thirtieth day after payment. If any Bank or the Administrative
Agent determines it has 

40

received or been granted a credit against or relief or remission for,
or repayment of, any taxes paid or payable by it because of any taxes,
penalties or interest paid by the Borrower and evidenced by such a tax
receipt, such Bank or Administrative Agent shall, to the extent it can
do so without prejudice to the retention of the amount of such credit,
relief, remission or repayment, pay to the Borrower such amount as such
Bank or Administrative Agent determines is attributable to such
deduction or withholding and which will leave such Bank or
Administrative Agent (after such payment) in no better or worse
position than it would have been in if the Borrower had not been
required to make such deduction or withholding. Nothing in this
Agreement shall interfere with the right of each Bank and the
Administrative Agent to arrange its tax affairs in whatever manner it
thinks fit nor oblige any Bank or the Administrative Agent to disclose
any information relating to its tax affairs or any computations in
connection with such taxes.

(b) U.S. Withholding Tax Exemptions. Each Bank that is not a
United States person (as such term is defined in Section 7701(a)(30) of
the Code) shall submit to the Borrower and the Administrative Agent on
or before the earlier of the date the initial Borrowing is made
hereunder and thirty (30) days after the date hereof, two duly
completed and signed copies of either Form W8BEN (relating to such Bank
and entitling it to a complete exemption from withholding under the
Code on all amounts to be received by such Bank, including fees,
pursuant to the Credit Documents and the Loans) or Form W8ECI (relating
to all amounts to be received by such Bank, including fees, pursuant to
the Credit Documents and the Loans) of the United States Internal
Revenue Service. Thereafter and from time to time, each Bank shall
submit to the Borrower and the Administrative Agent such additional
duly completed and signed copies of one or the other of such Forms (or
such successor forms as shall be adopted from time to time by the
relevant United States taxing authorities) as may be (i) requested by
the Borrower in a written notice, directly or through the
Administrative Agent, to such Bank and (ii) required under then-current
United States law or regulations to avoid or reduce United States
withholding taxes on payments in respect of all amounts to be received
by such Bank, including fees, pursuant to the Credit Documents or the
Loans.

(c) Inability of Bank to Submit Forms. If any Bank determines,
as a result of any change in applicable law, regulation or treaty, or
in any official application or interpretation thereof, that it is
unable to submit to the Borrower or Administrative Agent any form or
certificate that such Bank is obligated to submit pursuant to
subsection (b) of this Section 11.1 or that such Bank is required to
withdraw or cancel any such form or certificate previously submitted or
any such form or certificate otherwise becomes ineffective or
inaccurate, such Bank shall promptly notify the Borrower and
Administrative Agent of such fact and the Bank shall to that extent not
be obligated to provide any such form or certificate and will be
entitled to withdraw or cancel any affected form or certificate, as
applicable.

Section 11.2 No Waiver of Rights. No delay or failure on the part of
the Administrative Agent or any Bank or on the part of the holder or holders of
any Note in the exercise of any power or right under any Credit Document shall
operate as a waiver thereof, nor as an 

41

acquiescence in any default, nor shall any single or partial exercise thereof
preclude any other or further exercise of any other power or right, and the
rights and remedies hereunder of the Administrative Agent, the Banks and the
holder or holders of any Notes are cumulative to, and not exclusive of, any
rights or remedies which any of them would otherwise have.

Section 11.3 Non-Business Day. If any payment of principal or interest
on any Loan or of any other Obligation shall fall due on a day which is not a
Business Day, interest or fees (as applicable) at the rate, if any, such Loan or
other Obligation bears for the period prior to maturity shall continue to accrue
on such Obligation from the stated due date thereof to and including the next
succeeding Business Day, on which the same shall be payable.

Section 11.4 Documentary Taxes. The Borrower agrees that it will pay
any documentary, stamp or similar taxes payable in respect to any Credit
Document, including interest and penalties, in the event any such taxes are
assessed, irrespective of when such assessment is made and whether or not any
credit is then in use or available hereunder.

Section 11.5 Survival of Representations. All representations and
warranties made herein or in certificates given pursuant hereto shall survive
the execution and delivery of this Agreement and the other Credit Documents, and
shall continue in full force and effect with respect to the date as of which
they were made as long as any credit is in use or available hereunder.

Section 11.6 Survival of Indemnities. All indemnities and all other
provisions relative to reimbursement to the Banks of amounts sufficient to
protect the yield of the Banks with respect to the Loans, including, but not
limited to, Section 2.11, Section 9.3 and this Section 11.16 hereof, shall
survive the termination of this Agreement and the other Credit Documents and the
payment of the Loans and all other Obligations. If and to the extent any
indemnification or reimbursement obligation of the Borrower under the Credit
Documents is deemed unenforceable for any reason, the Borrower hereby agrees to
make the maximum contribution to the payment and satisfaction of the underlying
obligation permissible under applicable law.

Section 11.7 Set-Off.

(a) In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon
the occurrence of any Event of Default, each Bank, each Affiliate of a
Bank, and each subsequent holder of any Note is hereby authorized by
the Borrower at any time or from time to time, without notice to the
Borrower or to any other Person, any such notice being hereby expressly
waived, to set off and to appropriate and to apply any and all deposits
(general or special, including, but not limited to, Indebtedness
evidenced by certificates of deposit, whether matured or unmatured, and
in whatever currency denominated) and any other Indebtedness at any
time held or owing by that Bank, its Affiliate or that subsequent
holder to or for the credit or the account of the Borrower, whether or
not matured, against and on account of the obligations and liabilities
of the Borrower to that Bank, its Affiliate or that subsequent holder
under the Credit Documents, including, but not limited to, all claims
of any nature 

42

or description arising out of or connected with the Credit Documents,
irrespective of whether or not (a) that Bank, its Affiliate or that
subsequent holder shall have made any demand hereunder or (b) the
principal of or the interest on the Loans or Notes and other amounts
due hereunder shall have become due and payable pursuant to Section 8
and although said obligations and liabilities, or any of them, may be
contingent or unmatured.

(b) Each Bank agrees with each other Bank a party hereto that
if such Bank shall receive and retain any payment, whether by set-off
or application of deposit balances or otherwise, on any of the Loans in
excess of its ratable share of payments on all such obligations then
outstanding to the Banks, then such Bank shall purchase for cash at
face value, but without recourse, ratably from each of the other Banks
such amount of the Loans, or participations therein, held by each such
other Bank (or interest therein) as shall be necessary to cause such
Bank to share such excess payment ratably with all the other Banks;
provided, however, that if any such purchase is made by any Bank, and
if such excess payment or part thereof is thereafter recovered from
such purchasing Bank, the related purchases from the other Banks shall
be rescinded ratably and the purchase price restored as to the portion
of such excess payment so recovered, but without interest unless the
purchasing Bank is required to pay interest thereon, in which case each
Bank returning funds to such purchasing Bank shall pay its pro rata
share of such interest.

Section 11.8 Notices. Except as otherwise specified herein, all notices
under the Credit Documents shall be in writing (including facsimile or other
electronic communication) and shall be given to a party hereunder at its address
or facsimile number set forth below or such other address or facsimile number as
such party may hereafter specify by notice to the Administrative Agent and the
Borrower, given by courier, by United States certified or registered mail, or by
other telecommunication device capable of creating a written record of such
notice and its receipt. Notices under the Credit Documents to the Banks shall be
addressed to their respective addresses, facsimile or telephone numbers set
forth on the signature pages hereof or in the assignment agreement which any
assignee bank executes pursuant to Section 11.12 hereof or at such other address
as shall be designated by such party in a written notice to the other parties,
and to the Borrower and to the Administrative Agent to:

If to the Borrower:

NRG Energy, Inc.
1221 Nicollet Mall
Suite 700
Minneapolis, MN 55403-2445
Attention: Treasurer
Facsimile: (612) 373-5341
Telephone: (612) 373-5306

If to the Administrative Agent:

Notices shall be sent to the applicable address set forth on Part B of
Schedule 4 hereto.

43

With copies of all such notices to:

ABN AMRO Bank N.V.
135 South LaSalle Street
Suite 710
Chicago, Illinois 60603
Attention: David B. Bryant
Facsimile: (312) 904-1466
Telephone: (312) 904-2799

Each such notice, request or other communication shall be effective (i) if given
by facsimile, when such facsimile is transmitted to the facsimile number
specified in this Section 11.8 or on the signature pages hereof and a
confirmation of receipt of such facsimile has been received by the sender, (ii)
if given by courier, when delivered, (iii) if given by mail, three business days
after such communication is deposited in the mail, registered with return
receipt requested, addressed as aforesaid or (iv) if given by any other means,
when delivered at the addresses specified in this Section 11.8; provided that
any notice given pursuant to Section 2 hereof shall be effective only upon
receipt.

Section 11.9 Counterparts. This Agreement may be executed in any number
of counterpart signature pages, and by the different parties on different
counterparts, each of which when executed shall be deemed an original but all
such counterparts taken together shall constitute one and the same instrument.
This Agreement may also be executed by facsimile signature, and each such
facsimile signature shall for all intents and purposes be deemed and original
signature of the signatory thereof.

Section 11.10 Successors and Assigns. This Agreement shall be binding
upon the Borrower and its successors and assigns, and shall inure to the benefit
of each of the Banks and the benefit of their respective successors and assigns,
including any subsequent holder of any Note. The Borrower may not assign any of
its rights or obligations under any Credit Document without the written consent
of all of the Banks.

Section 11.11 Participants and Note Assignees. Each Bank shall have the
right at its own cost to grant participations (to be evidenced by one or more
agreements or certificates of participation) in its rights and/or obligations in
the Loans made and/or Revolving Credit Commitments held by such Bank at any time
and from time to time, and to assign its rights under such Loans or the Note
evidencing such Loans to a federal reserve bank; provided that (i) no such
participation or assignment shall relieve any Bank of any of its obligations
under this Agreement, (ii) no such assignee or participant shall have any rights
under this Agreement except as provided in this Section 11.11, and (iii) the
Administrative Agent shall have no obligation or responsibility to such
participant or assignee, except that nothing herein is intended to affect the
rights of an assignee of a Note to enforce the Note assigned. Any party to which
such a participation or assignment has been granted shall have the benefits of
Section 2.11 and Section 9.3, but shall not be entitled to receive any greater
payment under either such Section 

44

than the Bank granting such participation would have been entitled to receive in
connection with the rights transferred. Any agreement pursuant to which any Bank
may grant such a participating interest shall provide that such Bank shall
retain the sole right and responsibility to enforce the obligations of the
Borrower hereunder, including, without limitation, the right to approve any
amendment, modification or waiver of any provision of this Agreement; provided
that such participation agreement may provide that such Bank will not agree to
any modification, amendment or waiver of this Agreement that would (A) increase
any Revolving Credit Commitment of such Bank if such increase would also
increase the participant's obligations, (B) forgive any amount of or postpone
the date for payment of any principal of or interest on any Loan or of any fee
payable hereunder in which such participant has an interest or (C) reduce the
stated rate at which interest or fees in which such participant has an interest
accrue hereunder.

45

Section 11.12 Assignment of Commitments by Banks.

(a) Each Bank shall have the right at any time, with the
written consent of the Borrower and Administrative Agent (which consent
shall not be unreasonably withheld or delayed), to assign all or any
part of its Revolving Credit Commitment (including the same percentage
of its Note and outstanding Loans) to one or more other Persons;
provided that such assignment is in an amount of at least $10,000,000
or the entire Revolving Credit Commitment of such Bank, and if such
assignment is not for such Bank's entire Revolving Credit Commitment
then such Bank's Revolving Credit Commitment after giving effect to
such assignment shall not be less than $10,000,000; and provided
further that (i) neither the consent of the Borrower nor of the
Administrative Agent shall be required for any Bank to assign all or
part of its Revolving Credit Commitment to any Affiliate of the
assigning Bank or another Bank and (ii) the consent of the Borrower
shall not be required if an Event of Default then exists. Each such
assignment shall set forth the assignee's address for notices to be
given under Section 11.8 hereof hereunder and its designated Lending
Office pursuant to Section 9.4 hereof. Upon any such assignment,
delivery to the Administrative Agent of an executed copy of such
assignment agreement and the forms referred to in Section 11.1 hereof,
if applicable, and the payment of a $3,500 recordation fee to the
Administrative Agent, the assignee shall become a Bank hereunder, all
Loans and the Revolving Credit Commitment it thereby holds shall be
governed by all the terms and conditions hereof and the Bank granting
such assignment shall have its Revolving Credit Commitment, and its
obligations and rights in connection therewith, reduced by the amount
of such assignment; provided, however, in the event a Bank assigns all
or any portion of its Revolving Credit Commitment to an Affiliate of
such Bank or at the request of the Borrower pursuant to Section
11.13(b), no recordation fee shall be required hereunder.
Notwithstanding any other provision set forth in this Agreement, any
Bank may at any time create a security interest in all or any portion
of its rights under this Agreement (including, without limitation, the
Loans owing to it and the Note held by it) in favor of any Federal
Reserve Bank in accordance with Regulation A of the Board of Governors
of the Federal Reserve System without notice to, or the consent of, the
Borrower or the Administrative Agent.

(b) Notwithstanding anything to the contrary contained in this
Agreement, any Bank (a "Granting Lender") may grant to a special
purpose funding vehicle (an "SPC") of such Granting Lender identified
as such in writing from time to time by the Granting Lender to the
Administrative Agent and the Borrower, the option to provide to the
Borrower all or any part of any Loan that such Granting Lender would
otherwise be obligated to make to the Borrower pursuant to this
Agreement; provided that (i) nothing herein shall constitute a
commitment by any such SPC to make any Loan, (ii) if such SPC elects
not to exercise such option or otherwise fails to provide all or any
part of such Loan, the Granting Lender shall be obligated to make such
Loan pursuant to the terms hereof and (iii) no SPC or Granting Lender
shall be entitled to receive any greater amount pursuant to Section 2.3
or 2.8 than the Granting Lender would have been entitled to receive had
the Granting Lender not otherwise granted such SPC the option to
provide 

46

any Loan to the Borrower. The making of a Loan by an SPC hereunder
shall utilize the Commitment of the Granting Lender to the same extent,
and as if, such Loan were made by such Granting Lender. Each party
hereto hereby agrees that no SPC shall be liable for any indemnity or
similar payment obligation under this Agreement for which a Bank would
otherwise be liable so long as, and to the extent that, the related
Granting Lender provides such indemnity or makes such payment. In
furtherance of the foregoing, each party hereto hereby agrees (which
agreement shall survive the termination of this Agreement) that, prior
to the date that is one year and one day after the payment in full of
all outstanding commercial paper or other senior indebtedness of any
SPC, it will not institute against or join any other person in
instituting against such SPC any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under the laws of
the United States or any State thereof. Notwithstanding the foregoing,
the Granting Lender unconditionally agrees to indemnify the Borrower,
the Administrative Agent and each Bank against all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever that
may be incurred by or asserted against the Borrower, the Administrative
Agent or such Bank, as the case may be, in any way relating to or
arising as a consequence of any such forbearance or delay in the
initiation of any such proceeding against its SPC. Each party hereto
hereby acknowledges and agrees that no SPC shall have the rights of a
Bank hereunder, such rights being retained by the applicable Granting
Lender. Accordingly, and without limiting the foregoing, each party
hereby further acknowledges and agrees that no SPC shall have any
voting rights hereunder and that the voting rights attributable to any
Loan made by an SPC shall be exercised only by the relevant Granting
Lender and that each Granting Lender shall serve as the administrative
agent and attorney-in-fact for its SPC and shall on behalf of its SPC
receive any and all payments made for the benefit of such SPC and take
all actions hereunder to the extent, if any, such SPC shall have any
rights hereunder. In addition, notwithstanding anything to the contrary
contained in this Agreement, any SPC may with notice to, but without
the prior written consent of any other party hereto, assign all or a
portion of its interest in any Loans to the Granting Lender. This
Section may not be amended without the prior written consent of each
Granting Lender, all or any part of whose Loan is being funded by an
SPC at the time of such amendment.

Section 11.13 Amendments.

(a) Any provision of the Credit Documents may be amended or
waived if, but only if, such amendment or waiver is in writing and is
signed by (a) the Borrower, (b) the Required Banks, and (c) if the
rights or duties of the Administrative Agent are affected thereby, the
Administrative Agent; provided that:

(i) no amendment or waiver pursuant to this Section
11.13 shall (A) increase any Commitment of any Bank without
the consent of such Bank or (B) reduce the stated rate at
which interest or fees accrue or reduce the amount of or
postpone any fixed date for payment of any principal of or
interest on any Loan or of any fee payable hereunder without
the consent of each Bank; and

47

(ii) no amendment or waiver pursuant to this Section
11.13 shall, unless signed by each Bank, change this Section
11.13, or the definition of Required Banks, or affect the
number of Banks required to take any action under the Credit
Documents.

(b) If the Borrower requests an amendment to this Agreement
which requires the approval of all of the Banks and one of the Banks (a
"Replaceable Bank") does not approve it, the Borrower may propose that
another bank which is reasonably acceptable to the Administrative Agent
(a "Replacement Bank") be substituted for and replace the Replaceable
Bank for purposes of this Agreement. If a Replacement Bank is so
substituted for the Replaceable Bank, the Replaceable Bank shall enter
into an assignment agreement with the Replacement Bank, the Borrower
and the Administrative Agent to assign and transfer to the Replacement
Bank, the Replaceable Bank's Commitment hereunder, which shall provide,
among other things, for the payment of all Obligations owing to the
Replaceable Bank; provided, however, if a Replacement Bank cannot be
found, then the Borrower may elect to take out the Replaceable Bank and
reduce the facility accordingly by making a prepayment in the amount of
such Replaceable Bank's outstanding Loans plus all accrued and unpaid
interest thereon and all fees and all other Obligations due and owing
to the Replaceable Bank on the date of replacement. Notwithstanding
anything to the contrary contained herein, in no event shall the
Administrative Agent be a Replaceable Bank.

Section 11.14 Nonliability of Agents and Lenders. The relationship
between the Borrower on the one hand and the Banks, the Administrative Agent and
the Documentation Agents on the other hand shall be solely that of borrower and
lender. Neither the Administrative Agent, the Syndication Agents, the
Documentation Agents nor any Bank shall have any fiduciary duty to the Borrower.
Neither the Administrative Agent, the Syndication Agents, the Documentation
Agents nor any Bank undertakes any responsibility to the Borrower to review or
inform the Borrower of any matter in connection with any phase of the Borrower's
business or operations. The Borrower agrees that neither the Administrative
Agent, the Syndication Agents, the Documentation Agents nor any Bank shall have
liability to the Borrower (whether sounding in tort, contract or otherwise) for
losses suffered by the Borrower in connection with, arising out of, or in any
way related to the transactions contemplated and the relationship established by
the Credit Documents, or any act,. omission or event occurring in connection
therewith, unless it is determined in a final non-appealable judgment by a court
of competent jurisdiction that such losses resulted from the gross negligence or
willful misconduct of the party from which recovery is sought. Neither the
Administrative Agent, the Syndication Agents, the Documentation Agents, any Bank
nor any of their respective Subsidiaries, Affiliates, officers or directors
shall have any liability with respect to, and the Borrower hereby waives,
releases and agrees not to sue for, any special, indirect, consequential or
punitive damages in connection with, arising out of, or in any way related to
any of the Credit Documents or the transactions contemplated thereby.

Section 11.15 Headings. Section headings used in this Agreement are for
reference only and shall not affect the construction of this Agreement.

48

Section 11.16 Legal Fees, Other Costs and Indemnification. The Borrower
agrees to pay on demand all reasonable costs and expenses of the Administrative
Agent and the Syndication Agents in connection with the preparation and
negotiation of the Credit Documents (including past and future reasonable
out-of-pocket expenses incurred by ABN AMRO Bank N.V. or Salomon Smith Barney
Inc. in connection with the syndication of the transaction), including, without
limitation, the reasonable fees and disbursements of counsel to the
Administrative Agent and the Syndication Agents, in connection with the
preparation and execution of the Credit Documents and any amendment, waiver or
consent related hereto, whether or not the transactions contemplated herein are
consummated. The Borrower further agrees to indemnify each Bank, the
Administrative Agent, and their respective Affiliates, directors, agents,
officers and employees, against all losses, claims, damages, penalties,
judgments, liabilities and expenses (including, without limitation, all expenses
of litigation or preparation therefor, whether or not the indemnified Person is
a party thereto) which any of them may incur or reasonably pay or that may be
claimed against any of them by any Person arising out of or relating to any
Credit Document (including any relating to any misrepresentation or false
certification by or on behalf of the Borrower) or any of the transactions
contemplated thereby or the direct or indirect application or proposed
application of the proceeds of any Loan other than those which arise from the
gross negligence or willful misconduct of the party claiming indemnification.
The Borrower, upon demand by the Administrative Agent or a Bank at any time,
shall reimburse the Administrative Agent or Bank for any reasonable costs and
legal or other expenses incurred in connection with investigating or defending
against any of the foregoing or the enforcement of any rights or remedies under
this Agreement, any Note and the other documents to be delivered hereunder,
except if the same is directly due to the gross negligence or willful misconduct
of the party to be indemnified.

Section 11.17 Entire Agreement. The Credit Documents constitute the
entire understanding of the parties thereto with respect to the subject matter
thereof and any prior or contemporaneous agreements, whether written or oral,
with respect thereto are superseded thereby.

Section 11.18 Construction. The parties hereto acknowledge and agree
that neither this Agreement nor the other Credit Documents shall be construed
more favorably in favor of one than the other based upon which party drafted the
same, it being acknowledged that all parties hereto contributed substantially to
the negotiation of this Agreement and the other Credit Documents.

Section 11.19 Governing Law. The validity and interpretation of this
Agreement and the other Credit Documents, and the terms and conditions set forth
herein, shall be governed by and construed in accordance with the laws of the
State of New York, without giving effect to any provisions relating to conflict
of laws other than section 5-1401 of the New York General Obligations Law.

Section 11.20 Submission to Jurisdiction; Waiver of Jury Trial. EACH OF
THE BORROWER, EACH BANK AND THE ADMINISTRATIVE AGENT HEREBY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK AND OF ANY NEW 

49

YORK STATE COURT SITTING IN THE CITY OF NEW YORK FOR PURPOSES OF ALL LEGAL
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH OF THE
BORROWER, EACH BANK AND THE ADMINISTRATIVE AGENT IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT
AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM. EACH OF THE BORROWER, EACH BANK AND THE ADMINISTRATIVE
AGENT HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO ANY CREDIT DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED THEREBY.

Section 11.21 Rights and Liabilities of Documentation Agents and
Syndication Agents. Neither Documentation Agents nor Syndication Agents has any
special rights, powers, obligations, liabilities, responsibilities or duties
under this Agreement as a result of acting in the capacity of Documentation
Agent or Syndication Agent, as applicable, other than those applicable to them
in their capacity as Banks hereunder. Without limiting the foregoing, neither
Documentation Agents nor Syndication Agents shall have or be deemed to have a
fiduciary relationship with any Bank. Each Bank hereby makes the same
acknowledgments and undertakings with respect to Documentation Agents and the
Syndication Agents as it makes with respect to the Administrative Agent and any
directors, officers, agents and employees of the Administrative Agent in
Sections 10.5 and 10.6.

Section 11.22 Confidentiality. The Administrative Agent and the Banks
shall hold all non-public information provided to them by Borrower pursuant to
or in connection with this Agreement in accordance with their customary
procedures for handling confidential information of this nature, but may make
disclosure to any of their examiners, regulators, Affiliates, outside auditors,
counsel and other professional advisors in connection with this Agreement or any
other Credit Document or as reasonably required by any potential bona fide
transferee, participant or assignee, or in connection with the exercise of
remedies under a Credit Document, or to any direct or indirect contractual
counterparty in swap agreements or such contractual counterparty's professional
advisor (so long as such contractual counterparty or professional advisor to
such contractual counterparty agrees to be bound by the provisions of this
Section 11.22), or to any nationally recognized rating agency that requires
access to information about a Bank's investment portfolio in connection with
ratings issued with respect to such Bank, or as requested by any governmental
agency or representative thereof or pursuant to legal process; provided,
however, that unless specifically prohibited by applicable law or court order,
the Administrative Agent and each Bank shall use reasonable efforts to promptly
notify Borrower of any request by any governmental agency or representative
thereof (other than any such request in connection with an examination of the
financial condition of the Administrative Agent or such Bank by such
governmental agency) for disclosure of any such non-public information and,
where practicable, prior to disclosure of such information. Prior to any such
disclosure pursuant to this Section 11.22, the Administrative Agent and each
Bank shall require any such bona fide transferee, participant and assignee
receiving a disclosure of non-public information to agree, for the benefit of
Borrower, in writing to be bound by this Section 11.22; and to require such
Person to require any other Person to whom such Person discloses such non-public
information to be similarly bound by this Section 11.22.

50

[SIGNATURE PAGES FOLLOW]

51

In Witness Whereof, the parties hereto have caused this Agreement to be
duly executed and delivered in New York, New York by their duly authorized
officers as of the day and year first above written.

NRG ENERGY, INC.

By:  _____________________________
Name: Brian B. Bird
Title: Vice President & Treasurer

52

EXHIBIT 21

NRG ENERGY, INC. - 10-K SUBSIDIARY LIST
MARCH 14, 2002

------------------------------------------------------------------------------------------------------------------------------------
SUBSIDIARY NAME                   DATE OF          STATE OF                        DESCRIPTION
INCORPORATION    INCORPORATION
DATE ACQUIRED
------------------------------------------------------------------------------------------------------------------------------------

Arcata Energia Ltda.                           Acquired         Peru            Subsidiary of Cementos Norte Pacasmayo Energia
10/03/2001                         S.A. (CNPE)
------------------------------------------------------------------------------------------------------------------------------------
Arthur Kill Power LLC                        03/11/1999         Delaware        entity holding title to 842-MW Arthur Kill
Generating Station, located on Staten Island, New
York, includes two steam generating units designed
to burn gas and oil
------------------------------------------------------------------------------------------------------------------------------------
Astoria Gas Turbine Power LLC                03/11/1999         Delaware        entity holding title to 614-MW Astoria Gas Turbine
Sites, located in Queens, New York, consist of 20
gas turbines, grouped into 11 units
------------------------------------------------------------------------------------------------------------------------------------
B.L. England Operations Inc.                 05/08/2000         Delaware        to act as a special purpose operating company to
provide O&M services pursuant to a contract with
B.L. England Power LLC
------------------------------------------------------------------------------------------------------------------------------------
B.L. England Power LLC                       05/08/2000         Delaware        entity holding title to 447 MW coal and oil-fired
generating facility in Beesley's Point, New Jersey
------------------------------------------------------------------------------------------------------------------------------------
Berrians I Gas Turbine Power LLC             06/04/2001         Delaware        simple cycle peaking unit whose purpose is to
provide energy during periods of high demand in
the NYC control area and to provide capacity to
help insure the LSE's are able to meet the
requirements set by the NYPSC
------------------------------------------------------------------------------------------------------------------------------------
Big Cajun I Peaking Power LLC                08/03/2000         Delaware        develop, own and operate the Cajun expansion
project
------------------------------------------------------------------------------------------------------------------------------------
Big Cajun II Unit 4 LLC                      09/14/2001         Delaware        electric power generation
------------------------------------------------------------------------------------------------------------------------------------
Brazos Valley Energy LP                      05/24/2001         Delaware        1% owner of 633 MW greenfield natural gas-fired
combined cycle Brazos Valley Energy Project west
of Houston, Texas
------------------------------------------------------------------------------------------------------------------------------------
Brazos Valley Technology LP                  05/24/2001         Delaware        633 MW greenfield natural gas-fired combined cycle
Brazos Valley Energy Project west of Houston, Texas
------------------------------------------------------------------------------------------------------------------------------------
Brimsdown Power Limited                      12/11/1998         United Kingdom  project company for peaking unit associated with
Enfield Energy Centre Limited in England
------------------------------------------------------------------------------------------------------------------------------------
Cabrillo Power I LLC                         12/11/1998         Delaware        owns and operates Encina electric generation
station in San Diego, California
------------------------------------------------------------------------------------------------------------------------------------
Cabrillo Power II LLC                        12/11/1998         Delaware        entity holding title to 17 SDG&E combustion
turbines in San Diego, California
------------------------------------------------------------------------------------------------------------------------------------
Cadillac Renewable Energy LLC                02/27/1997         Delaware        owns Cadillac wood fired power plant in Michigan
------------------------------------------------------------------------------------------------------------------------------------
Camas Power Boiler Limited Partnership       02/06/1990         Oregon          owns waste-wood fired steam boiler in Camas
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
SUBSIDIARY NAME                   DATE OF          STATE OF                        DESCRIPTION
INCORPORATION    INCORPORATION
DATE ACQUIRED
------------------------------------------------------------------------------------------------------------------------------------

Acquired                         paper mill in Washington
11/01/1997
------------------------------------------------------------------------------------------------------------------------------------
Camas Power Boiler, Inc.                     02/06/1990         Oregon          general partner in Camas Boiler Limited Partnership
Acquired
11/01/1997
------------------------------------------------------------------------------------------------------------------------------------
Capistrano Cogeneration Company              10/15/1986         California
Acquired
01/15/2002
------------------------------------------------------------------------------------------------------------------------------------
Carolina Energy, Limited Partnership         01/12/1993         Delaware        holds remaining non-generating assets of the
Acquired                         Carolina Energy transfer station and
11/01/1997                         waste-to-energy facility in North Carolina
------------------------------------------------------------------------------------------------------------------------------------
Carquinez Strait Preservation Trust,         04/15/1994         California      non-profit corporation which provides monetary
Inc.                                           Acquired                         support to the communities surrounding the
11/01/1997                         Crockett cogeneration facility in California
------------------------------------------------------------------------------------------------------------------------------------
Cementos Norte Pacasmayo Energia S.A.        10/31/1997         Peru            Owner of 38 MW hydroelectric facility; 22.5 MW
Acquired                         diesel power plant; and several mini hydropower
10/03/2001                         facilities totaling 5.6 MW in Peru
------------------------------------------------------------------------------------------------------------------------------------
Central and Eastern Europe Power Fund,       11/25/1999         Bermuda         Investment vehicle for power generation projects,
Ltd.                                                                            companies developing power generation projects and
certain transmission and distribution systems in
various countries in Central and Eastern Europe
------------------------------------------------------------------------------------------------------------------------------------
Chickahominy River Energy Corp.              06/02/1988         Virginia        Acquired this

entity as part of the Commonwealth
Acquired                         Atlantic Power LLC closing as well as Hanover
01/11/2002                         Energy Company
------------------------------------------------------------------------------------------------------------------------------------
Clark Power LLC                              11/15/2000         Delaware        Formed to acquire future assets (740 MW gas-fired
Clark power station and related assets in Nevada)
------------------------------------------------------------------------------------------------------------------------------------
Cobee Energy Development LLC                 04/02/1998         Delaware        provides international business development
services in Latin America for Compania Boliviana
de Energia Electrica S.A.
------------------------------------------------------------------------------------------------------------------------------------
Cobee Holdings Inc.                          12/16/1996         Delaware        domestic holding company for Tosli Investments
B.V. in Latin America
------------------------------------------------------------------------------------------------------------------------------------
Cogeneration Corporation of America          12/05/1983         Delaware        develops, owns and operates cogeneration
Acquired                         facilities in U.S.
04/30/1996
------------------------------------------------------------------------------------------------------------------------------------
Collinsville Operations Pty Ltd              11/30/1995         Australia       operates Collinsville coal fired power plant in
Australia
------------------------------------------------------------------------------------------------------------------------------------
Collinsville Power Joint Venture             01/24/1996         Australia       owns Collinsville coal fired power plant in
(unincorporated)                                                                Australia
------------------------------------------------------------------------------------------------------------------------------------
Commonwealth Atlantic Limited                01/13/1989         Virginia        Owns Hanover Energy Company, which owns 100% of
Partnership                                    Acquired                         Chickahominy, which owns 50.04995% of Commonwealth
01/11/2002                         Atlantic Limited Partnership
------------------------------------------------------------------------------------------------------------------------------------
Commonwealth Atlantic Power LLC              07/16/2001         Delaware        Entity to acquire shares in Hanover Energy Company
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
SUBSIDIARY NAME                   DATE OF          STATE OF                        DESCRIPTION
INCORPORATION    INCORPORATION
DATE ACQUIRED
------------------------------------------------------------------------------------------------------------------------------------

Compania Boliviana de Energia Electrica      04/17/1925         Canada (Nova    owns and operates hydroelectric facilities in
S.A.                                           Acquired         Scotia)         Bolivia (Latin America)
12/20/1996
------------------------------------------------------------------------------------------------------------------------------------
Compania Electrica Central Bulo Bulo         09/10/1999         Bolivia         will eventually be the Bulo Bulo project company
S.A.                                                                            owned by Inversiones Bulo Bulo S.A.
------------------------------------------------------------------------------------------------------------------------------------
Conemaugh Power LLC                          05/08/2000         Delaware        entity holding title to 1,711 MW coal fired
generating facility located Conemaugh, Pennsylvania
------------------------------------------------------------------------------------------------------------------------------------
Coniti Holding B.V.                          06/09/1995         Netherlands     international holding company for the Bulo Bulo
Acquired                         project in La Paz, Bolivia
12/19/1996
------------------------------------------------------------------------------------------------------------------------------------
Connecticut Jet Power LLC                    07/30/1999         Delaware        sells electricity
------------------------------------------------------------------------------------------------------------------------------------
Croatia Power Group                          12/16/1999         Cayman Islands  Entity formed to hold interest in 190 MW electric
power generation project in Reijka, Croatia
------------------------------------------------------------------------------------------------------------------------------------
Crockett Cogeneration, A California          01/11/1986         California      owns Crockett cogeneration facility in California
Limited Partnership                            Acquired
11/01/1997
------------------------------------------------------------------------------------------------------------------------------------
Csepel Luxembourg (No. 1) S.a.r.l.           03/28/2001         Luxembourg      Luxembourg holding company for the Csepel project
------------------------------------------------------------------------------------------------------------------------------------
Csepeli Aramtermelo Kft.                     04/01/1996         Hungary         which owns a 389 MW CCGT facility and a 106 MW
Acquired                         steam and hot water generation facility in
06/29/2001                         Budapest, Hungary (Csepel II)
------------------------------------------------------------------------------------------------------------------------------------
Csepeli Eromu Rt.                            05/10/1991         Hungary         Owns a 116 MW thermal and industrial park support
Acquired                         complex in Budapest, Hungary
06/29/2001
------------------------------------------------------------------------------------------------------------------------------------
Deepwater Operations Inc.                    05/08/2000         Delaware        to act as a special purpose operating company to
provide O&M services pursuant to a contract with
Deepwater Power LLC
------------------------------------------------------------------------------------------------------------------------------------
Deepwater Power LLC                          05/08/2000         Delaware        entity holding title to 239 MW fossil fuel
generating facility Pensville, New Jersey
------------------------------------------------------------------------------------------------------------------------------------
Denver City Energy Associates, L.P.          11/06/1996         Delaware        Project company for 487 MW plant located in Denver
Acquired                         City, Texas
01/29/2001
------------------------------------------------------------------------------------------------------------------------------------
Devon Power LLC                              07/30/1999         Delaware        sells electricity and thermal energy 401-MW 
generation capacity located on the Housatonic River 
at Milford, Conn.
------------------------------------------------------------------------------------------------------------------------------------
Dunkirk Power LLC                            03/10/1999         Delaware        entity holding title to Dunkirk Station, a 
four-unit, 600 MW plant, is located 55 miles
southwest of Buffalo, New York
------------------------------------------------------------------------------------------------------------------------------------
Eastern Generation Services (India)          09/09/1997         India           O&M entity for 355 MW Lanco Kondapalli Power Plant
Private Limited                                                                 in the State of Andhra Pradesh, India
------------------------------------------------------------------------------------------------------------------------------------
Eastern Sierra Energy Company                03/28/1988         California      Production of electricity and thermal energy
Acquired
09/20/2001
------------------------------------------------------------------------------------------------------------------------------------
ECK Generating, s.r.o.                       11/30/1995         Czech Republic  owns new 300+ MW coal fired power plant expansion
under construction in Kladno,
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
SUBSIDIARY NAME                   DATE OF          STATE OF                        DESCRIPTION
INCORPORATION    INCORPORATION
DATE ACQUIRED
------------------------------------------------------------------------------------------------------------------------------------

Czech Republic
------------------------------------------------------------------------------------------------------------------------------------
El Segundo Power II LLC                      11/14/2000         Delaware        was formed to acquire future assets (project 
entity to install new units #5, #6 and #7 
at the El Segundo Generating Station in California,
with a target net electrical output of 641 MW)
------------------------------------------------------------------------------------------------------------------------------------
El Segundo Power, LLC                        11/25/1997         Delaware        owns El Segundo gas fired power plant in California
------------------------------------------------------------------------------------------------------------------------------------
Elk River Resource Recovery, Inc.            02/06/1995         Minnesota       inactive - proposed owner of Elk River waste
processing facility in Minnesota
------------------------------------------------------------------------------------------------------------------------------------
Empresa de Generacion Electrica Cahua          Acquired         Peru            Owner of 45 MW of hydroelectric generation in Peru
S.A.                                         10/03/2001
------------------------------------------------------------------------------------------------------------------------------------
Energeticke Centrum Kladno, s.r.o.           09/30/1992         Czech Republic  owns existing coal fired power plant in Kladno,
Acquired                         Czech Republic
08/25/1995
------------------------------------------------------------------------------------------------------------------------------------
Energy Developments Limited                  08/30/1991         Australia       develops, owns and operates power generation and
Acquired         (Queensland)    waste-to-energy projects in Australia, New
02/11/1997                         Zealand, Asia and England
------------------------------------------------------------------------------------------------------------------------------------
Energy Investors Fund, L.P.                  01/06/1988         Delaware        domestic investment company which holds limited
Acquired                         partner interests in Crockett, Curtis/Palmer,
11/01/1997                         Windpower 87 and Windpower 88 projects; also a
funding vehicle for numerous other unrelated 
projects in the U.S.
------------------------------------------------------------------------------------------------------------------------------------
Energy National, Inc.                        09/13/1984         Utah            domestic holding company which holds limited
Acquired                         partner interests in Crockett, Curtis/Palmer,
11/01/1997                         Maine Energy Recovery Company, Penobscot Energy
Recovery Company, PowerSmith, Windpower 87, 
Windpower 88 projects; general partner in Penobscot 
Energy Recovery Co.
------------------------------------------------------------------------------------------------------------------------------------
Enfield Energy Centre Limited                03/05/1993         United Kingdom  owns Enfield gas fired power plant in England
Acquired
12/09/1996
------------------------------------------------------------------------------------------------------------------------------------
Enfield Holdings B.V.                        03/27/1996         Netherlands     international holding company for Enfield Energy
Centre Limited project in England.
------------------------------------------------------------------------------------------------------------------------------------
Enfield Operations (UK) Limited              11/04/1997         United Kingdom  holds employees for Enfield Operations, L.L.C. in
England
------------------------------------------------------------------------------------------------------------------------------------
Enfield Operations, L.L.C.                   08/07/1997         Delaware        operates Enfield gas fired power plant in England
------------------------------------------------------------------------------------------------------------------------------------
ENI Crockett Limited Partnership             04/10/1995         Oregon          limited partner in Crockett Cogeneration, A
Acquired                         California Limited Partnership
11/01/1997
------------------------------------------------------------------------------------------------------------------------------------
Enifund, Inc.                                04/22/1988         Utah            holds property (house at Crockett cogeneration
Acquired                         facility) and provides consulting services to
11/01/1997                         Maine Energy Recovery Company
------------------------------------------------------------------------------------------------------------------------------------
Enigen, Inc.                                 08/17/1987         Utah            general partner in The PowerSmith Cogeneration
Acquired                         Project, Limited Partnership
11/01/1997
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
SUBSIDIARY NAME                   DATE OF          STATE OF                        DESCRIPTION
INCORPORATION    INCORPORATION
DATE ACQUIRED
------------------------------------------------------------------------------------------------------------------------------------

Entrade d.o.o.                               07/14/2000         Slovenia        Slovenian branch of Entrade GmbH
Acquired
10/26/2000
------------------------------------------------------------------------------------------------------------------------------------
Entrade Deutschland GmbH                     06/02/2000         Berlin, Germany German branch of Entrade GmbH
Acquired
10/26/2000
------------------------------------------------------------------------------------------------------------------------------------
Entrade GmbH                                 01/23/1998         Switzerland     Swiss energy trading company
------------------------------------------------------------------------------------------------------------------------------------
Entrade Holdings B.V.                        04/07/2000         Netherlands     international holding company registered to do
business in Switzerland for Entrade GmbH
------------------------------------------------------------------------------------------------------------------------------------
Entrade Poland Sp. z o.o.                                       Poland          Polish branch of Entrade GmbH
------------------------------------------------------------------------------------------------------------------------------------
Entrade s.r.o.                               08/20/2001         Czech Republic  Czech branch of Entrade GmbH
Acquired
09/19/2001
------------------------------------------------------------------------------------------------------------------------------------
ESOCO Crockett, Inc.                         12/09/1992         Oregon          operates Crockett cogeneration facility in
Acquired                         California
11/01/1997
------------------------------------------------------------------------------------------------------------------------------------
ESOCO Fayetteville, Inc.                     08/30/1996         Oregon          inactive - proposed operator of Fayetteville
Acquired                         waste-to-energy facility in North Carolina
11/01/1997
------------------------------------------------------------------------------------------------------------------------------------
ESOCO Molokai, Inc.                          02/06/1990         Utah            inactive - proposed operator of Molokai biomass
Acquired                         fueled power plant in Hawaii
11/01/1997
------------------------------------------------------------------------------------------------------------------------------------
ESOCO Orrington, Inc.                        02/01/1989         Utah            operates Penobscot Energy Recovery Company in Maine
Acquired
11/01/1997
------------------------------------------------------------------------------------------------------------------------------------
ESOCO Soledad, Inc.                          02/06/1990         Utah            inactive - proposed operator of Soledad wood
Acquired                         burning power plant in California
11/01/1997
------------------------------------------------------------------------------------------------------------------------------------
ESOCO Wilson, Inc.                           09/17/1996         Oregon          inactive - proposed operator of Carolina Energy
Acquired                         waste-to-energy facility and transfer station in
11/01/1997                         North Carolina
------------------------------------------------------------------------------------------------------------------------------------
ESOCO, Inc.                                  02/01/1989         Utah            domestic holding company for individual Esoco O&M
Acquired                         companies
11/01/1997
------------------------------------------------------------------------------------------------------------------------------------
European Generating S.a.r.l.                 10/16/2000         Luxembourg      Project holding company for Rybnik project
------------------------------------------------------------------------------------------------------------------------------------
Flinders Coal Pty Ltd                        03/31/2000         Australia       entity holding title to the right to mine at the
Leigh Creek Coalfields, South Australia
------------------------------------------------------------------------------------------------------------------------------------
Flinders Labuan (No. 1) Ltd.                 08/03/2000         Labuan          Holding company for Flinders project in South
Australia
------------------------------------------------------------------------------------------------------------------------------------
Flinders Labuan (No. 2) Ltd.                 08/03/2000         Labuan          Holding company for Flinders project in South
Australia
------------------------------------------------------------------------------------------------------------------------------------
Flinders Osborne Trading Pty Ltd             08/17/2000         Australia       trading entity for gas supply to, and electricity
take from, the 190 MW Osborne Power Station in
South Australia
------------------------------------------------------------------------------------------------------------------------------------
Flinders Power Finance Pty Ltd               08/14/2000         Australia       financecompany borrowing funds for, and on-lending
funds to, the NRG Flinders business in South
Australia (which includes the 760 MW of coal fired
stations in Port Augusta, South Australia)
------------------------------------------------------------------------------------------------------------------------------------
Four Hills, LLC                              08/19/1996         Delaware        landfill gas collection system for Nashua project
in New Hampshire
------------------------------------------------------------------------------------------------------------------------------------
Gladstone Power Station Joint Venture        03/30/1994         Australia       owns Gladstone coal fired power plant in
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
SUBSIDIARY NAME                   DATE OF          STATE OF                        DESCRIPTION
INCORPORATION    INCORPORATION
DATE ACQUIRED
------------------------------------------------------------------------------------------------------------------------------------

(unincorporated) Australia 
------------------------------------------------------------------------------------------------------------------------------------
GPP Investors I, LLC                         06/23/1997         Delaware        Limited partner of 487 MW plant located in
Acquired                         Denver City, Texas
01/29/2001
------------------------------------------------------------------------------------------------------------------------------------
Granite II Holding, LLC                      07/16/1999         Delaware        Holding company for Batesville, Kendall and Denver
Acquired                         City projects acquired from LS Power, LLC
01/29/2001
------------------------------------------------------------------------------------------------------------------------------------
Granite Power Partners II, L.P.              01/31/1996         Delaware        Holding company for all LS Power, LLC's equity
Acquired                         interest in independent power projects acquired by
01/29/2001                         NRG on 1/20/2001.
------------------------------------------------------------------------------------------------------------------------------------
Graystone Corporation                        05/25/1989         Minnesota       general partner in Louisiana Energy Services, L.P.
------------------------------------------------------------------------------------------------------------------------------------
Gunwale B.V.                                 11/19/1979         Netherlands     holds shares in NRGenerating Holdings (No. 4) B.V.
Acquired                         for Loy Yang project in Australia
12/01/1993
------------------------------------------------------------------------------------------------------------------------------------
Hanover Energy Company                       11/15/1988         California      acquired as part of the Commonwealth Atlantic
Acquired                         Power LLC closing along with Chickahominy River
01/11/2002                         Energy Corp.
------------------------------------------------------------------------------------------------------------------------------------
Hsin Yu Energy Development Co., Ltd.           Acquired                         Owner of 170 MW cogeneration facility located at
07/27/2001                         the Hsinchu Science-Based Industrial Park in Taiwan
------------------------------------------------------------------------------------------------------------------------------------
Huntley Power LLC                            03/10/1999         Delaware        entity holding title to the Huntley Station,
located three miles north of Buffalo, is Niagara
Mohawk's largest coal-fired plant and is comprised
of six units with a total nominal rating of 760 MW
------------------------------------------------------------------------------------------------------------------------------------
Indian River Operations Inc.                 05/08/2000         Delaware        to act as a special purpose operating company to
provide O&M services pursuant to a contract with
Indian River Power LLC
------------------------------------------------------------------------------------------------------------------------------------
Indian River Power LLC                       05/08/2000         Delaware        entity holding title to 784 MW coal fired
generating facility located in Millsboro, Delaware
------------------------------------------------------------------------------------------------------------------------------------
Inversiones Bulo Bulo S.A.                   09/10/1999         Bolivia         holding company that will eventually indirectly
own the Bulo Bulo project.
------------------------------------------------------------------------------------------------------------------------------------
Itiquira Energetica S.A.                     09/15/2000         Brazil          entity formed to develop, construct, own and
operate a 156 MW hydroelectric power generation
facility in the State of Mato Grosso, Brazil
------------------------------------------------------------------------------------------------------------------------------------
Jackson Valley Energy Partners, L.P.         05/21/1991         California      owns and operates waste lignite/cogeneration plant
and lignite mining and reclamation operation in
California
------------------------------------------------------------------------------------------------------------------------------------
James River Cogeneration Company               Acquired                         
01/15/2005                        
------------------------------------------------------------------------------------------------------------------------------------
James River Power LLC                        07/16/2001         Delaware        Entity to acquire shares in Capistrano Cogeneration
Company
------------------------------------------------------------------------------------------------------------------------------------
Kanel Kangal Elektrik Limited Sirketi        04/14/1998         Turkey          will own 450 MW coal-fired Kangal plant in 
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
SUBSIDIARY NAME                   DATE OF          STATE OF                        DESCRIPTION
INCORPORATION    INCORPORATION
DATE ACQUIRED
------------------------------------------------------------------------------------------------------------------------------------

central Turkey
------------------------------------------------------------------------------------------------------------------------------------
Kaufman Cogen LP                             05/24/1999         Delaware        project company for power generation project near
Acquired                         Mesquite, Texas.
12/18/2000
------------------------------------------------------------------------------------------------------------------------------------
Keystone Power LLC                           05/08/2000         Delaware        entity holding title to 1,711 MW coal fired
generating facility located near Pittsburgh,
Pennsylvania
------------------------------------------------------------------------------------------------------------------------------------
Kiksis B.V.                                  12/30/1985         Netherlands     inactive - was to be used for first tier Dutch
Acquired                         B.V. for Estonia project
12/01/1993
------------------------------------------------------------------------------------------------------------------------------------
Killingholme Generation Limited              10/11/1999         United Kingdom  project company for Killingholme Power Station in
Acquired                         England
10/11/1999
------------------------------------------------------------------------------------------------------------------------------------
Killingholme Holdings Limited                02/20/2000         United Kingdom  additional holding company formed to hold interest
Acquired                         in Killingholme Power Station through KGL in
03/17/2000                         England
------------------------------------------------------------------------------------------------------------------------------------
Killingholme Power Limited                   05/25/1999         United Kingdom  project company for 665MW gas-fired Killingholme A
Acquired                         combined-cycle, gas-turbine power station in North
03/29/2000                         Lincolnshire, England.
------------------------------------------------------------------------------------------------------------------------------------
Kingston Cogeneration Limited                  Acquired         Canada (Ontario)owns Kingston cogeneration facility in Ontario,
Partnership                                  11/01/1997                         Canada
------------------------------------------------------------------------------------------------------------------------------------
Kissimee Power Partners, Limited             02/18/1992         Delaware        limited partner in Cypress Energy Partners,
Partnership                                                                     Limited Partnership in Florida
------------------------------------------------------------------------------------------------------------------------------------
Kladno Power (No. 1) B.V.                    01/23/1995         Netherlands     international holding company in Energeticke
Centrum Kladno, s.r.o. in Czech Republic
------------------------------------------------------------------------------------------------------------------------------------
Kladno Power (No. 2) B.V.                    01/23/1995         Netherlands     international holding company in Matra Powerplant
Holding B.V. in Czech Republic (ECKG)
------------------------------------------------------------------------------------------------------------------------------------
Kraftwerk Schkopau Betriebsgesellschaft        Acquired         Germany         operates Schkopau coal fired power plant in Germany
mbH                                          01/01/1994
------------------------------------------------------------------------------------------------------------------------------------
Kraftwerk Schkopau GbR                         Acquired         Germany         owns Schkopau coal fired power plant assets in
01/01/1994                         Germany
------------------------------------------------------------------------------------------------------------------------------------
KUSEL Kutahya Seyitomer Elektrik             04/19/2000         Turkey          will own as a part of a consortium Seyitomer 600
Limited Sirketi                                                                 MW lignite-fired plant plant in Turkey
------------------------------------------------------------------------------------------------------------------------------------
Lakefield Junction LLC                       06/30/1998         Delaware        owns peaking plant 550-megawatt (MW) generation
facility consisting of six natural gas-fired
combustion turbine generators
------------------------------------------------------------------------------------------------------------------------------------
Lambique Beheer B.V.                         01/06/1977         Netherlands     international holding company in MIBRAG B.V. and
Acquired                         Mitteldeutsche Braunkohlengesellschaft mbH in
12/01/1993                         Germany
------------------------------------------------------------------------------------------------------------------------------------
Lanco Kondapalli Power Pvt Ltd.              08/21/1995         India           355 MW Lanco Kondapalli Power Plant in the State
Acquired                         of Andhra Pradesh, India
07/16/2001
------------------------------------------------------------------------------------------------------------------------------------
Landfill Power LLC                           05/02/1994         Wyoming         owns and operates Flying Cloud landfill gas fueled
Acquired                         power generation facility in Eden Prairie,
07/01/1994                         Minnesota
------------------------------------------------------------------------------------------------------------------------------------
Langage Energy Park Limited                  11/30/1999         United Kingdom  will own land for project in Plymouth England
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
SUBSIDIARY NAME                   DATE OF          STATE OF                        DESCRIPTION
INCORPORATION    INCORPORATION
DATE ACQUIRED
------------------------------------------------------------------------------------------------------------------------------------

Le Paz Incorporated                          06/01/1990         Minnesota       limited partner in Louisiana Energy Services, L.P.
------------------------------------------------------------------------------------------------------------------------------------
Long Beach Generation LLC                    02/04/1998         Delaware        owns Long Beach gas fired power plant in California
------------------------------------------------------------------------------------------------------------------------------------
Louisiana Energy Services, L.P.              04/09/1990         Delaware        owns uranium enrichment facility under development
in Louisiana
------------------------------------------------------------------------------------------------------------------------------------
Louisiana Generating LLC                     06/14/1996         Delaware        will own Cajun non-nuclear generating assets in
Louisiana (including gas and coal fired
generation) 1,708MW
------------------------------------------------------------------------------------------------------------------------------------
Loy Yang Power Management Pty Ltd            03/25/1997         Australia       operates Loy Yang coal fired power plant in
(Victoria)      Australia
------------------------------------------------------------------------------------------------------------------------------------
Loy Yang Power Partners                      04/17/1997         Australia       Name of Partnership (4 owners) for owns Loy Yang
coal fired power plant in Australia
------------------------------------------------------------------------------------------------------------------------------------
Loy Yang Power Projects Pty Ltd              03/25/1997         Australia       provides technical services to Loy Yang coal fired
(Victoria)      power plant in Australia
------------------------------------------------------------------------------------------------------------------------------------
LS Power Management, LLC                     07/29/1998         Delaware
Acquired
01/29/2001
------------------------------------------------------------------------------------------------------------------------------------
LSP Batesville Funding Corp.                 08/03/1998         Delaware        Finance company for 837 MW plant in Batesville
Acquired                         Mississippi (Are shares still publically traded?)
01/29/2001
------------------------------------------------------------------------------------------------------------------------------------
LSP Batesville Holding, LLC                  07/29/1998         Delaware        Limited partner of 837 MW plant located in
Acquired                         Batesville, Mississippi.
01/29/2001
------------------------------------------------------------------------------------------------------------------------------------
LSP Energy Limited Partnership               02/07/1996         Delaware        Project company for 837 MW plant located in
Acquired                         Batesville Mississippi. (Are shares still
01/29/2001                         publically traded?)
------------------------------------------------------------------------------------------------------------------------------------
LSP Energy, Inc.                             02/01/1996         Delaware        General partner of 837 MW plant located in
Acquired                         Batesville Mississippi
01/29/2001
------------------------------------------------------------------------------------------------------------------------------------
LSP Equipment, LLC                           10/19/1999         Delaware
Acquired
01/29/2001
------------------------------------------------------------------------------------------------------------------------------------
LSP-Denver City, Inc.                        10/01/1996         Delaware        General partner of 487 MW plant located in Denver
Acquired                         City, Texas (Mustang)
01/29/2001
------------------------------------------------------------------------------------------------------------------------------------
LSP-Hardee Energy, LLC                       08/25/2000         Delaware        Project company for 510 MW plant under
Acquired                         construction in Wachula, Florida
01/29/2001
------------------------------------------------------------------------------------------------------------------------------------
LSP-Kendall Energy, LLC                      11/02/1998         Delaware        Project company for 1,160 MW plant under
Acquired                         construction in Minooka, Illinois
01/29/2001
------------------------------------------------------------------------------------------------------------------------------------
LSP-Nelson Energy, LLC                       03/01/1999         Delaware        Project company for 1,160 MW plant located in
Acquired                         Nelson Township, Illinois
01/29/2001
------------------------------------------------------------------------------------------------------------------------------------
LSP-Pike Energy, LLC                         01/21/2000         Delaware        Project company for 1,160 plant in final
Acquired                         development stage located in Holmesville,
01/29/2001                         Mississippi
------------------------------------------------------------------------------------------------------------------------------------
Maine Energy Recovery Company                06/30/1983         Maine           owns waste-to-energy facility in Biddeford, Maine
Acquired
11/01/1997
------------------------------------------------------------------------------------------------------------------------------------
Matra Powerplant Holding B.V.                11/28/1995         Netherlands     international holding company in ECK Generating,
s.r.o. in Czech Republic
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
SUBSIDIARY NAME                   DATE OF          STATE OF                        DESCRIPTION
INCORPORATION    INCORPORATION
DATE ACQUIRED
------------------------------------------------------------------------------------------------------------------------------------

Meriden Gas Turbines LLC                     12/20/2000         Delaware        project entity to hold 540 MW greenfield natural
gas-fired combined cycle electric generating
facility in central Connecticut
------------------------------------------------------------------------------------------------------------------------------------
MESI Fuel Station #1 LLC                     10/28/1999         Delaware        Project company in the business of producing and
selling synthetic fuel from Ken West terminal in
Catlettsburg, Boyd County Kentucky on the Big
Sandy River
------------------------------------------------------------------------------------------------------------------------------------
MIBRAG B.V.                                  12/09/1993         Netherlands     owns 99% of MIBRAG coal mines and coal fired power
plants in Germany
------------------------------------------------------------------------------------------------------------------------------------
MidAtlantic Generation Holding LLC           08/20/2000         Delaware        domestic holding company for MidAtlantic region
------------------------------------------------------------------------------------------------------------------------------------
Mid-Continent Power Company, L.L.C.          12/12/1997         Delaware        owns Mid-Continent Power Company cogeneration
facility in Oklahoma
------------------------------------------------------------------------------------------------------------------------------------
Middletown Power LLC                         07/30/1999         Delaware        sells electricity and thermal energy-856MW
steam-powered plant located beside the Connecticut
River in Middletown, Conn
------------------------------------------------------------------------------------------------------------------------------------
Minnesota Methane Holdings LLC               04/08/1996         Delaware        inactive - domestic holding company
------------------------------------------------------------------------------------------------------------------------------------
Minnesota Methane II LLC                     04/08/1997         Delaware        owns and operates original 3 NEO/Ziegler landfill
gas projects (Edward Kraemer in Burnsville, MN;
Flying Cloud in Eden Prairie, MN and Nashua in New
Hampshire)
------------------------------------------------------------------------------------------------------------------------------------
Minnesota Methane LLC                        09/21/1998         Delaware        owns and operates 18 landfill gas projects in the
Acquired                         U.S. financed by Lyon Credit
07/01/1994
------------------------------------------------------------------------------------------------------------------------------------
Minnesota Waste Processing Company,          11/01/1993         Delaware        owns municipal solid waste processing facility and
L.L.C.                                                                          transfer station in Minnesota
------------------------------------------------------------------------------------------------------------------------------------
Mitteldeutsche Braunkohlengesellschaft       11/30/1993         Germany         operates MIBRAG coal mines and coal fired power
mbH                                                                             plants in Germany
------------------------------------------------------------------------------------------------------------------------------------
MM Albany Energy LLC                         01/08/1997         Delaware        landfill gas fueled power generation for project
in New York
------------------------------------------------------------------------------------------------------------------------------------
MM Biogas Power LLC                          04/08/1996         Delaware        domestic holding company - owns 100% interest in
landfill gas fueled power generation projects not
being financed
------------------------------------------------------------------------------------------------------------------------------------
MM Burnsville Energy LLC                     10/14/1997         Delaware        landfill gas fueled power generation for Edward
Kraemer landfill in Minnesota
------------------------------------------------------------------------------------------------------------------------------------
MM Corona Energy LLC                         01/08/1997         Delaware        landfill gas fueled power generation for O'Brien
project in California
------------------------------------------------------------------------------------------------------------------------------------
MM Cuyahoga Energy LLC                       06/18/1997         Delaware        landfill gas fueled power generation for project
in Cleveland, Ohio
------------------------------------------------------------------------------------------------------------------------------------
MM Ft. Smith Energy LLC                      10/14/1997         Delaware        will sell landfill gas to other companies in
Arkansas - not a GENCO
------------------------------------------------------------------------------------------------------------------------------------
MM Hackensack Energy LLC                     04/08/1997         Delaware        landfill gas fueled power generation for
HMDC/Balefill/Kingsland O'Brien projects in
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
SUBSIDIARY NAME                   DATE OF          STATE OF                        DESCRIPTION
INCORPORATION    INCORPORATION
DATE ACQUIRED
------------------------------------------------------------------------------------------------------------------------------------

Lyndhurst, New Jersey
------------------------------------------------------------------------------------------------------------------------------------
MM Hartford Energy LLC                       05/16/1997         Delaware        landfill gas fueled power generation for project
in Connecticut
------------------------------------------------------------------------------------------------------------------------------------
MM Lopez Energy LLC                          12/13/1996         Delaware        landfill gas fueled power generation for Lopez
Canyon project in Los Angeles, California
------------------------------------------------------------------------------------------------------------------------------------
MM Lowell Energy LLC                         01/08/1997         Delaware        landfill gas fueled power generation for project
in Massachusetts
------------------------------------------------------------------------------------------------------------------------------------
MM Nashville Energy LLC                      06/20/1997         Delaware        landfill gas fueled power generation for project
in Tennessee
------------------------------------------------------------------------------------------------------------------------------------
MM Phoenix Energy LLC                        01/20/1998         Delaware        landfill gas fueled power generation for project
in Arizona
------------------------------------------------------------------------------------------------------------------------------------
MM Prima Deshecha Energy LLC                 01/08/1997         Delaware        landfill gas fueled power generation for project
in Orange County, California
------------------------------------------------------------------------------------------------------------------------------------
MM Prince William Energy LLC                 06/18/1997         Delaware        landfill gas fueled power generation for project
in Virginia
------------------------------------------------------------------------------------------------------------------------------------
MM Riverside LLC                             12/19/1996         Delaware        landfill gas fueled power generation for project
in California
------------------------------------------------------------------------------------------------------------------------------------
MM San Bernardino Energy LLC                 12/30/1998         Delaware        transport landfill gas for re-sale
------------------------------------------------------------------------------------------------------------------------------------
MM San Diego LLC                             01/08/1997         Delaware        landfill gas fueled power generation for Miramar
project in California
------------------------------------------------------------------------------------------------------------------------------------
MM SKB Energy LLC                            06/20/1997         Delaware        landfill gas fueled power generation for project
in Pennsylvania
------------------------------------------------------------------------------------------------------------------------------------
MM Spokane Energy LLC                        01/08/1997         Delaware        landfill gas fueled power generation for project
in Washington
------------------------------------------------------------------------------------------------------------------------------------
MM Tacoma LLC                                12/19/1996         Delaware        landfill gas fueled power generation for project
in Washington
------------------------------------------------------------------------------------------------------------------------------------
MM Tajiguas Energy LLC                       01/20/1998         Delaware        landfill gas fueled power generation for project
in Santa Barbara, California
------------------------------------------------------------------------------------------------------------------------------------
MM Taunton Energy LLC                        01/08/1997         Delaware        landfill gas fueled power generation for project
in Massachusetts
------------------------------------------------------------------------------------------------------------------------------------
MM Tomoka Farms Energy LLC                   03/11/1997         Delaware        landfill gas fueled power generation for Volusia
project in Florida
------------------------------------------------------------------------------------------------------------------------------------
MM Tulare Energy LLC                         05/16/1997         Delaware        landfill gas fueled power generation for Visalia
project in California
------------------------------------------------------------------------------------------------------------------------------------
MM West Covina LLC                           12/04/1995         Delaware        landfill gas fueled power generation for BKK
project in California
------------------------------------------------------------------------------------------------------------------------------------
MM Woodville Energy LLC                      02/11/1998         Delaware        landfill gas fueled power generation for project
in California
------------------------------------------------------------------------------------------------------------------------------------
MM Yolo Power LLC                            02/14/1996         Delaware        landfill gas fueled power generation for project
in California
------------------------------------------------------------------------------------------------------------------------------------
MN San Bernardino Gasco I LLC                06/26/1998         Delaware        landfill gas collection system for project in
California
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
SUBSIDIARY NAME                   DATE OF          STATE OF                        DESCRIPTION
INCORPORATION    INCORPORATION
DATE ACQUIRED
------------------------------------------------------------------------------------------------------------------------------------

MN San Bernardino Gasco II LLC               08/17/2001         Delaware         Landfill gas collection system for project in 
California.
------------------------------------------------------------------------------------------------------------------------------------
Montauk-NEO Gasco LLC                        08/17/2001         Delaware        Facilitation and marketing of landfill gas
------------------------------------------------------------------------------------------------------------------------------------
Montville Power LLC                          07/30/1999         Delaware        sells electricity and thermal energy -498MW
Montville Station is located on the Thames River
in Uncasville, Conn
------------------------------------------------------------------------------------------------------------------------------------
Mt. Poso Cogeneration Company, A             10/15/1986         California      owns Mt. Poso cogeneration facility in California
California Limited Partnership                 Acquired
11/01/1997
------------------------------------------------------------------------------------------------------------------------------------
NEO Albany, L.L.C.                           09/12/1995         Delaware        landfill gas collection system for project in New
York
------------------------------------------------------------------------------------------------------------------------------------
NEO Burnsville, LLC                          10/25/1996         Delaware        landfill gas collection system for Edward Kraemer
landfill in Minnesota
------------------------------------------------------------------------------------------------------------------------------------
NEO California Power LLC                     09/21/2000         Delaware        entity formed to submit bid to California ISO on
3,000 MW of distributed generation.
------------------------------------------------------------------------------------------------------------------------------------
NEO Chester-Gen LLC                          07/13/2000         Delaware        owns 3.4 MW cogeneration facility at Crozer
Acquired                         Chester Hospital in Chester, Pennsylvania
09/12/2000
------------------------------------------------------------------------------------------------------------------------------------
NEO Corona LLC                               01/08/1997         Delaware        landfill gas collection system for O'Brien project
in California
------------------------------------------------------------------------------------------------------------------------------------
NEO Corporation                              05/27/1993         Minnesota       develops, owns and operates landfill gas,
Acquired                         hydroelectric and small cogeneration projects in
07/01/1994                         the U.S.
------------------------------------------------------------------------------------------------------------------------------------
NEO Cuyahoga, LLC                            10/31/1996         Delaware        landfill gas collection system for project in
Cleveland, Ohio
------------------------------------------------------------------------------------------------------------------------------------
NEO Edgeboro, LLC                            01/06/1997         Delaware        landfill gas collection system for O'Brien project
in New Jersey
------------------------------------------------------------------------------------------------------------------------------------
NEO Erie LLC                                 08/17/1999         Delaware        landfill gas collection system for project in
Denver, Colorado
------------------------------------------------------------------------------------------------------------------------------------
NEO Fitchburg LLC                            01/16/1997         Delaware        landfill gas collection system for project in
Massachusetts
------------------------------------------------------------------------------------------------------------------------------------
NEO Freehold-Gen LLC                         07/13/2000         Delaware        owns 2.1 MW cogeneration facility at Ashbury Park
Press in Freehold, NJ
------------------------------------------------------------------------------------------------------------------------------------
NEO Fresh Kills LLC                          12/20/2001         Delaware        Owns 50% of Fresh Gas LLC (owner of gas collection
system in Fresh Kills, NY).
------------------------------------------------------------------------------------------------------------------------------------
NEO Ft. Smith LLC                            10/14/1997         Delaware        landfill gas collection system for project in
Arkansas
------------------------------------------------------------------------------------------------------------------------------------
NEO Hackensack, LLC                          01/06/1997         Delaware        landfill gas collection system for
HMDC/Balefill/Kingsland O'Brien projects in
Lyndhurst, New Jersey
------------------------------------------------------------------------------------------------------------------------------------
NEO Hartford, LLC                            10/13/1995         Delaware        landfill gas collection system for project in
Connecticut
------------------------------------------------------------------------------------------------------------------------------------
NEO Landfill Gas Holdings Inc.               04/08/1996         Delaware        domestic holding company - provides O&M services
for landfill gas projects
------------------------------------------------------------------------------------------------------------------------------------
NEO Landfill Gas Inc.                        04/08/1996         Delaware        domestic holding company - holds 99% interest in
landfill gas collection system 
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
SUBSIDIARY NAME                   DATE OF          STATE OF                        DESCRIPTION
INCORPORATION    INCORPORATION
DATE ACQUIRED
------------------------------------------------------------------------------------------------------------------------------------

projects financed by Lyon Credit
------------------------------------------------------------------------------------------------------------------------------------
NEO Lopez Canyon LLC                         01/04/1996         Delaware        landfill gas collection system for project in Los
Angeles, California
------------------------------------------------------------------------------------------------------------------------------------
NEO Lowell LLC                               01/16/1997         Delaware        landfill gas collection system for project in
Massachusetts
------------------------------------------------------------------------------------------------------------------------------------
NEO MESI LLC                                 10/12/1999         Delaware        holding company for project company in the
business of producing and selling synthetic fuel
from Ken West terminal in Catlettsburg, Boyd
County Kentucky on the Big Sandy River
------------------------------------------------------------------------------------------------------------------------------------
NEO Nashville LLC                            06/20/1997         Delaware        landfill gas collection system for project in
Tennessee
------------------------------------------------------------------------------------------------------------------------------------
NEO Phoenix LLC                              01/04/1996         Delaware        landfill gas collection system for project in
Arizona
------------------------------------------------------------------------------------------------------------------------------------
NEO Power Services Inc.                      04/11/2000         Delaware        holding company with intangible assets
Acquired
09/12/2000
------------------------------------------------------------------------------------------------------------------------------------
NEO Prima Deshecha LLC                       01/16/1997         Delaware        landfill gas collection system for project in
Orange County, California
------------------------------------------------------------------------------------------------------------------------------------
NEO Prince William, LLC                      10/30/1996         Delaware        landfill gas collection system for project in
Virginia
------------------------------------------------------------------------------------------------------------------------------------
NEO Riverside LLC                            12/19/1996         Delaware        landfill gas collection system for project in
California
------------------------------------------------------------------------------------------------------------------------------------
NEO San Diego LLC                            10/12/1995         Delaware        landfill gas collection system for Miramar project
in California
------------------------------------------------------------------------------------------------------------------------------------
NEO SKB LLC                                  10/14/1997         Delaware        landfill gas collection system for project in
Pennsylvania
------------------------------------------------------------------------------------------------------------------------------------
NEO Spokane LLC                              11/22/1995         Delaware        landfill gas collection system for project in
Washington
------------------------------------------------------------------------------------------------------------------------------------
NEO Tacoma, L.L.C.                           10/31/1995         Delaware        landfill gas collection system for project in
Washington
------------------------------------------------------------------------------------------------------------------------------------
NEO Tajiguas LLC                             12/05/1995         Delaware        landfill gas collection system for project in
Santa Barbara, California
------------------------------------------------------------------------------------------------------------------------------------
NEO Taunton LLC                              01/16/1997         Delaware        landfill gas collection system for project in
Massachusetts
------------------------------------------------------------------------------------------------------------------------------------
NEO Toledo-Gen LLC                           07/13/2000         Delaware        owns 1.0 MW cogeneration facility at Riverside
Acquired                         Hospital in Toledo, Ohio
09/12/2000
------------------------------------------------------------------------------------------------------------------------------------
NEO Tomoka Farms LLC                         12/05/1995         Delaware        landfill gas collection system for Volusia project
in Florida
------------------------------------------------------------------------------------------------------------------------------------
NEO Tulare LLC                               12/05/1995         Delaware        landfill gas collection system for Visalia project
in California
------------------------------------------------------------------------------------------------------------------------------------
NEO West Covina LLC                          07/16/1997         Delaware        landfill gas collection system for BKK project in
California
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
SUBSIDIARY NAME                   DATE OF          STATE OF                        DESCRIPTION
INCORPORATION    INCORPORATION
DATE ACQUIRED
------------------------------------------------------------------------------------------------------------------------------------

NEO Woodville LLC                            02/11/1998         Delaware        landfill gas collection system for project in
California
------------------------------------------------------------------------------------------------------------------------------------
NEO Yolo LLC                                 12/23/1996         Delaware        landfill gas collection system for project in
California
------------------------------------------------------------------------------------------------------------------------------------
NEO-Montauk Genco LLC                        08/17/2001         Delaware        facilitation and marketing of landfill gas
------------------------------------------------------------------------------------------------------------------------------------
NEO-Montauk Genco Management LLC             08/21/2001         Delaware        Entity that owns landfill gas projects
------------------------------------------------------------------------------------------------------------------------------------
Northbrook Acquisition Corp.                 12/23/1994         Delaware        domestic holding company in STS Hydropower Ltd.
------------------------------------------------------------------------------------------------------------------------------------
Northbrook Carolina Hydro, L.L.C.            10/05/1995         Delaware        owns and operates hydroelectric power plants in
North Carolina and South Carolina
------------------------------------------------------------------------------------------------------------------------------------
Northbrook Carolina Hydro II, L.L.C.         12/19/2001         Delaware        Hydroelectric power projects in the U.S.
------------------------------------------------------------------------------------------------------------------------------------
Northbrook Energy, L.L.C.                    11/04/1994         Delaware        develops hydroelectric power projects in the U.S.
Acquired
12/19/1994
------------------------------------------------------------------------------------------------------------------------------------
Northbrook New York LLC                      06/21/1999         Delaware        hydroelectric generation project located in Glen
Acquired                         Park, New York
09/27/1999
------------------------------------------------------------------------------------------------------------------------------------
Northeast Generation Holding LLC             04/29/1999         Delaware        to hold 50% interest in NRG Northeast Generating
LLC
------------------------------------------------------------------------------------------------------------------------------------
Norwalk Power LLC                            07/30/1999         Delaware        sells electricity and thermal energy-353MW on
Manresa Island at the mouth of Norwalk Harbor
------------------------------------------------------------------------------------------------------------------------------------
NR(Gibraltar)                                12/11/1998         Gibraltar       inactive company utilized during the Enfield
transactions in England
------------------------------------------------------------------------------------------------------------------------------------
NRG Affiliate Services Inc.                  01/11/2000         Delaware        sponsor and hold the contracts and 401k plans for
CL&P, Somerset and other entities.
------------------------------------------------------------------------------------------------------------------------------------
NRG Andean Development Ltda.                 01/11/2002         Bolivia         Development office for Andean region.
------------------------------------------------------------------------------------------------------------------------------------
NRG Arthur Kill Operations Inc.              04/29/1999         Delaware        Special purpose operating company to provide O&M
services contract to Arthur Kill Power LLC
------------------------------------------------------------------------------------------------------------------------------------
NRG Ashtabula Generating LLC                 01/16/2002         Delaware        will own the Ashtabula assets
------------------------------------------------------------------------------------------------------------------------------------
NRG Asia Corporate Services Pte Ltd.         11/09/2001         Singapore       Development office for Asia-Pacific region outside
of Australia
------------------------------------------------------------------------------------------------------------------------------------
NRG Asia-Pacific, Ltd.                       04/23/1993         Delaware        provides international business development
services in Australia and the Pacific Rim region
------------------------------------------------------------------------------------------------------------------------------------
NRG Astoria Gas Turbine Operations Inc.      04/29/1999         Delaware        Special purpose operating company to provide O&M
services contract to Astoria Gas Turbine Power LLC
------------------------------------------------------------------------------------------------------------------------------------
NRG Audrain Generating LLC                   10/21/1999         Delaware        Project company for 720 MW natural gas fired plant
Acquired                         under construction in Audrain County Missouri
05/11/2001
------------------------------------------------------------------------------------------------------------------------------------
NRG Audrain Holding LLC                      06/06/2001         Delaware        Holding company for 720 MW natural gas fired plant
under construction in Audrain County Missouri
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
SUBSIDIARY NAME                   DATE OF          STATE OF                        DESCRIPTION
INCORPORATION    INCORPORATION
DATE ACQUIRED
------------------------------------------------------------------------------------------------------------------------------------

NRG Batesville LLC                           08/13/2001         Delaware        as part of the bond indenture, we had to form this
entity to hold the assets and permits.  Going
forward, it will own Big Cajun II Unit 4 LLC
------------------------------------------------------------------------------------------------------------------------------------
NRG Bayou Cove LLC                           09/10/2001         Delaware        electric power generation
------------------------------------------------------------------------------------------------------------------------------------
NRG Bourbonnais Equipment LLC                12/07/2001         Delaware        buy and sell qualified materials in the enterprise
zone (sells to Indeck Bourbonnais LLC) during the
construction of Bourbonnais project.
------------------------------------------------------------------------------------------------------------------------------------
NRG Bourbonnais LLC                          03/02/2000         Illinois
Acquired
08/14/2001
------------------------------------------------------------------------------------------------------------------------------------
NRG Brazos Valley GP LLC                     05/24/2001         Delaware        general partner of Brazos Valley Energy L.P. which
owns 633 MW greenfield natural gas-fired combined
cycle Brazos Valley Energy Project west of
Houston, Texas
------------------------------------------------------------------------------------------------------------------------------------
NRG Brazos Valley LP LLC                     05/24/2001         Delaware        limited partner of Brazos Valley Energy L.P. which
owns 633 MW greenfield natural gas-fired combined
cycle Brazos Valley Energy Project west of
Houston, Texas
------------------------------------------------------------------------------------------------------------------------------------
NRG Brazos Valley Technology LP LLC          05/24/2001         Delaware        99% owner of 633 MW greenfield natural gas-fired
combined cycle Brazos Valley Energy Project west
of Houston, Texas
------------------------------------------------------------------------------------------------------------------------------------
NRG Cabrillo Power Operations Inc.           04/19/1999         Delaware        Special purpose operating company to provide O&M
services contract to Cabrillo Power I LLC and
Cabrillo Power II LLC
------------------------------------------------------------------------------------------------------------------------------------
NRG Cadillac Inc.                            04/15/1997         Delaware        domestic holding company in Cadillac Renewable
Energy LLC
------------------------------------------------------------------------------------------------------------------------------------
NRG Cadillac Operations Inc.                 08/15/1997         Delaware        proposed operator for Cadillac wood fired power
plant in Michigan
------------------------------------------------------------------------------------------------------------------------------------
NRG Capital LLC                              04/09/2001         Delaware        the sole member of the borrower (NRG Finance
Company I LLC) in connection with the $2.5 billion
construction/acquisition revovler
------------------------------------------------------------------------------------------------------------------------------------
NRG Caymans Company                          12/07/1999         Cayman Islands  Cayman Island holding company for Croatia Power
Group
------------------------------------------------------------------------------------------------------------------------------------
NRG Caymans-C                                12/09/1999         Cayman Islands  Cayman Island holding company for SLAP-C
corporation interests
------------------------------------------------------------------------------------------------------------------------------------
NRG Caymans-P                                12/09/1999         Cayman Islands  Cayman Island holding company for SLAP-P
partnership interests
------------------------------------------------------------------------------------------------------------------------------------
NRG Central U.S. LLC                         01/12/2000         Delaware        to hold 50% interest in NRG Central Generating LLC
(issuer in the Cajun deal)
------------------------------------------------------------------------------------------------------------------------------------
NRG Collinsville Operating Services Pty      11/23/1995         Australia       international holding company in Collinsville
Ltd                                                                             Operations Pty Ltd in Australia
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
SUBSIDIARY NAME                   DATE OF          STATE OF                        DESCRIPTION
INCORPORATION    INCORPORATION
DATE ACQUIRED
------------------------------------------------------------------------------------------------------------------------------------

NRG ComLease LLC                             10/03/2000         Delaware        entity used to hold Lease Agreements for placement
of cell towers on NRG owned stacks
------------------------------------------------------------------------------------------------------------------------------------
NRG Connecticut Affiliate Services Inc.      09/23/1999         Delaware        This entity will house the payroll for the four
Connecticut Operations, sponsor the Pension,
401(k), Welfare plans, etc. (NRG Middletown
Operations Inc., NRG Montville Operations Inc.,
NRG Norwalk Harbor Operations Inc., NRG Devon
Operations Inc.)
------------------------------------------------------------------------------------------------------------------------------------
NRG Connecticut Generating LLC               12/09/1999         Delaware        Sole Member of Devon Power LLC, Norwalk Power LLC,
Middletown Power LLC, Montville Power LLC and
Connecticut Jet Power LLC
------------------------------------------------------------------------------------------------------------------------------------
NRG Csepel Energia Kft.                      02/24/1998         Hungary         Provides operations and maintenance services under
Acquired                         contract to the Csepel II
06/29/2001
------------------------------------------------------------------------------------------------------------------------------------
NRG Development Company Inc.                 08/30/1999         Delaware        entity created to limit development exposure on
projects where NRG Energy, Inc. is pursuing the
transaction with certain types of partners on
DOMESTIC transactions
------------------------------------------------------------------------------------------------------------------------------------
NRG Devon Operations Inc.                    08/23/1999         Delaware        special purpose operating company to provide O&M
services contract to Devon Power LLC
------------------------------------------------------------------------------------------------------------------------------------
NRG do Brasil Ltda.                          04/27/2001         Brazil          Brazilian development office
------------------------------------------------------------------------------------------------------------------------------------
NRG Dunkirk Operations Inc.                  04/29/1999         Delaware        Special purpose operating company to provide O&M
services contract to Dunkirk Power LLC
------------------------------------------------------------------------------------------------------------------------------------
NRG Eastern LLC                              04/29/1999         Delaware        to hold 50% interest in NRG Northeast Generating
LLC
------------------------------------------------------------------------------------------------------------------------------------
NRG El Segundo Operations Inc.               01/20/1998         Delaware        proposed operator for El Segundo (and Long Beach
as soon NRG Long Beach Operations Inc. is merged
into this entity) gas fired power plants in
California
------------------------------------------------------------------------------------------------------------------------------------
NRG Energeticky Provoz, s.r.o.               06/06/1997         Czech Republic  O&M company for coal fired power plants in Kladno,
Czech Republic
------------------------------------------------------------------------------------------------------------------------------------
NRG Energy Center Dover LLC                  07/12/2000         Delaware        own  and operate electric generation facility  in
Dover, Delaware.
------------------------------------------------------------------------------------------------------------------------------------
NRG Energy Center Grand Forks LLC            10/27/1999         Delaware        owns assets in connection with a contract to
provide steam at the Grand Forks Air Force Base
------------------------------------------------------------------------------------------------------------------------------------
NRG Energy Center Harrisburg Inc.            04/25/2000         Delaware        entity to provide steam to the central business
district of Harrisburg, PA
------------------------------------------------------------------------------------------------------------------------------------
NRG Energy Center Minneapolis LLC            10/27/1999         Delaware        owns and operates the district heating and cooling
system serving customers in the downtown
Minneapolis area
------------------------------------------------------------------------------------------------------------------------------------
NRG Energy Center Paxton Inc.                04/25/2000         Delaware        will own the cogen and sell steam to NRG 
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
SUBSIDIARY NAME                   DATE OF          STATE OF                        DESCRIPTION
INCORPORATION    INCORPORATION
DATE ACQUIRED
------------------------------------------------------------------------------------------------------------------------------------

Acquired                         Energy Center Harrisburg Inc.
07/12/2000
------------------------------------------------------------------------------------------------------------------------------------
NRG Energy Center Pittsburgh LLC             10/27/1999         Delaware        eventually will own and operate the Pittsburgh
Thermal district heating and cooling plant which
currently serves approx 25 customers in the
Pittsburgh area.  Will be regulated under the
Pennsylania Public Utility Commission Rules
------------------------------------------------------------------------------------------------------------------------------------
NRG Energy Center Rock Tenn LLC              10/27/1999         Delaware        owns assets in connection with the sale of steam
to Rock-Tenn Corporation in St. Paul.
------------------------------------------------------------------------------------------------------------------------------------
NRG Energy Center Round Mountain LLC         01/12/2001         Delaware        will own and operate a 44 MW cogeneration facility
to be locted in Bakersfield, CA
------------------------------------------------------------------------------------------------------------------------------------
NRG Energy Center San Diego LLC              10/27/1999         Delaware        eventually will own and operate San Diego Power &
Cooling, a chilled water plant serving customers
in downtown San Diego area
------------------------------------------------------------------------------------------------------------------------------------
NRG Energy Center San Francisco LLC          07/30/1991         Delaware        provides district heating and cooling services in
Acquired                         California
08/01/1995
------------------------------------------------------------------------------------------------------------------------------------
NRG Energy Center Smyrna LLC                 12/20/2001         Delaware        entity was created so that we could enter into an
operating agreement to operate DEMEC's Warren F.
Beasley Plant (a 45 MW plant located in Smyrna,
Delaware.  This entity will NOT own the plant,
only operate it.
------------------------------------------------------------------------------------------------------------------------------------
NRG Energy Center Washco LLC                 10/27/1999         Delaware        Owns assets in connection with the sale of steam
to Anderson Corporation and the State of Minnesota
Correctional Facility
------------------------------------------------------------------------------------------------------------------------------------
NRG Energy CZ, s.r.o.                        11/01/1995         Czech Republic  provides international business development
services in the Czech Republic and Europe
------------------------------------------------------------------------------------------------------------------------------------
NRG Energy Development B.V.                  04/07/2000         Netherlands     Amsterdam development office
------------------------------------------------------------------------------------------------------------------------------------
NRG Energy Development GmbH                  08/16/1994         Germany         provides international business development
services in Germany and Europe
------------------------------------------------------------------------------------------------------------------------------------
NRG Energy Insurance, Ltd.                   08/09/2001         Cayman Islands  Insurance captive company.
------------------------------------------------------------------------------------------------------------------------------------
NRG Energy Jackson Valley I, Inc.            04/10/1991         California      general partner in Jackson Valley Energy Partners,
L.P.
------------------------------------------------------------------------------------------------------------------------------------
NRG Energy Jackson Valley II, Inc.           04/10/1991         California      limited partner in (i) Jackson Valley Energy
Partners, L.P., (ii) San Joaquin Valley Energy
Partners I, L.P., (iii) San Joaquin Valley Energy
Partners IV, L.P. and (iv) Bioconversion Partners,
L.P.
------------------------------------------------------------------------------------------------------------------------------------
NRG Energy Ltd.                              10/19/1993         United Kingdom  provides international business development
services in the U.K. and Europe
------------------------------------------------------------------------------------------------------------------------------------
NRG Energy PL Sp. z o.o.                     10/01/1999         Poland          provides international business development
services in Poland
------------------------------------------------------------------------------------------------------------------------------------
NRG Energy, Inc.                             05/29/1992         Delaware        develops, builds, acquires, owns and operates
non-regulated energy-related businesses world-wide
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
SUBSIDIARY NAME                   DATE OF          STATE OF                        DESCRIPTION
INCORPORATION    INCORPORATION
DATE ACQUIRED
------------------------------------------------------------------------------------------------------------------------------------

world-wide
------------------------------------------------------------------------------------------------------------------------------------
NRG Equipment Company LLC                    09/15/2000         Illinois        
Acquired
08/14/2001
------------------------------------------------------------------------------------------------------------------------------------
NRG Finance Company I LLC                    02/06/2001         Delaware        Will act as the borrower under the proposed $2
billion construction revolver
------------------------------------------------------------------------------------------------------------------------------------
NRG Flinders Operating Services Pty Ltd      08/14/2000         Australia       operating entity for the NRG Flinders business in
South Australia (which includes 760 MW of coal
fired stations in Port Augusta, South Australia)
------------------------------------------------------------------------------------------------------------------------------------
NRG Gila Bend Holdings Inc.                  07/17/2001         Delaware        this entity will acquire the ownership interests
of Gila Bend Power Partners LLC, a Delaware limited
liability company, which is developing a generating
project in Gila Bend, Arizona
------------------------------------------------------------------------------------------------------------------------------------
NRG Gladstone Operating Services Pty Ltd     09/23/1993         Australia       operates Gladstone coal fired power plant in
Acquired                         Australia
11/01/1993
------------------------------------------------------------------------------------------------------------------------------------
NRG Gladstone Superannuation Pty Ltd         10/29/1993         Australia       holds pension assets for employees of Gladstone
Acquired                         coal fired power plant in Australia
11/02/1993
------------------------------------------------------------------------------------------------------------------------------------
NRG Granite Acquisition LLC                  11/03/2000         Delaware        Acquisition company used to purchase LS Power, LLC's
independent power project portfolio.
------------------------------------------------------------------------------------------------------------------------------------
NRG Huntley Operations Inc.                  04/29/1999         Delaware        Special purpose operating company to provide O&M
services contract to Huntley Power LLC
------------------------------------------------------------------------------------------------------------------------------------
NRG Ilion Limited Partnership                11/09/1990         Delaware        Owns Ilion energy center, NRG Rockford LLC (owner
Acquired                         of Rockford electric generation project), and NRG
08/14/2001                         Rockford Equipment LLC (captive equipment retailer)
------------------------------------------------------------------------------------------------------------------------------------
NRG Ilion LP LLC                             07/10/2001         Delaware        established simply to serve as the limited partner
of Indeck Ilion, LP.
------------------------------------------------------------------------------------------------------------------------------------
NRG International Acquisition                08/31/2001         Delaware        Domestic partnership formed to hold NRG's
Partnership                                                                     international portfolio
------------------------------------------------------------------------------------------------------------------------------------
NRG International Development Inc.           10/14/1999         Delaware        entity created to limit development exposure on
projects where NRG Energy, Inc. is pursuing the
transaction with certain types of partners on
INTERNATIONAL transactions
------------------------------------------------------------------------------------------------------------------------------------
NRG International Holdings (No. 2) GmbH      08/28/2001         Switzerland     Swiss holding company
------------------------------------------------------------------------------------------------------------------------------------
NRG International Holdings GmbH              08/28/2001         Switzerland     Swiss holding company
------------------------------------------------------------------------------------------------------------------------------------
NRG International Holdings LP                                   Guernsey
------------------------------------------------------------------------------------------------------------------------------------
NRG International II Inc.                    12/04/1997         Delaware        domestic holding company
------------------------------------------------------------------------------------------------------------------------------------
NRG International III Inc.                   11/17/2000         Delaware        domestic holding company - Dutch restructuring
------------------------------------------------------------------------------------------------------------------------------------
NRG International Services Company           01/21/1998         Delaware        holds service agreements with expatriates and
international consultants
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
SUBSIDIARY NAME                   DATE OF          STATE OF                        DESCRIPTION
INCORPORATION    INCORPORATION
DATE ACQUIRED
------------------------------------------------------------------------------------------------------------------------------------

NRG International, Inc.                      10/21/1992         Delaware        domestic holding company
------------------------------------------------------------------------------------------------------------------------------------
NRG Kaufman LLC                              12/11/2000         Delaware        holding company for power generation project near
Mesquite, Texas.  The general partner of Kaufman
Cogen LP
------------------------------------------------------------------------------------------------------------------------------------
NRG Lakefield Inc.                           02/05/1999         Delaware        special purpose entity to hold NRG's 50% member
interest in Lakefield Junction LLC
------------------------------------------------------------------------------------------------------------------------------------
NRG Lakefield Junction LLC                   02/17/2000         Delaware        entity formed to act as limited partner in
Lakefield Junction L.P. in order to develop,
construct, own and operate peaking power
generating facility in Martin County, Minnesota
------------------------------------------------------------------------------------------------------------------------------------
NRG Lakeshore Generating LLC                 01/16/2002         Delaware        will own the Lakeshore assets
------------------------------------------------------------------------------------------------------------------------------------
NRG Latin America Inc.                       08/18/1997         Delaware        provides international business development
services in Latin America
------------------------------------------------------------------------------------------------------------------------------------
NRG Louisiana LLC                            04/07/2000         Delaware        Hold for potential Conoco project.
------------------------------------------------------------------------------------------------------------------------------------
NRG McClain LLC                              09/13/2001         Delaware        Entity was formed for McClain project
------------------------------------------------------------------------------------------------------------------------------------
NRG Mesquite LLC                             12/11/2000         Delaware        project company for power generation project near
Mesquite, Texas.  The limited partner of Kaufman
Cogen LP
------------------------------------------------------------------------------------------------------------------------------------
NRG Mextrans Inc.                            09/21/1999         Delaware        This entity will develop a transmission line from
Palo Verde power station through Arizona, into
Mexico and back up into California, per a
Presidential Permit (in development stage).
------------------------------------------------------------------------------------------------------------------------------------
NRG MidAtlantic Affiliate Services Inc.      02/14/2001         Delaware        Payroll company for O&M employees arising out of
Conectiv acquisition.  Will have 300-400 employees
first year.
------------------------------------------------------------------------------------------------------------------------------------
NRG MidAtlantic Generating LLC               05/08/2000         Delaware        holds 50% interest in MidAtlantic Generation
Holding LLC
------------------------------------------------------------------------------------------------------------------------------------
NRG MidAtlantic LLC                          08/23/2000         Delaware        holds 50% interest in MidAtlantic Generation
Holding LLC
------------------------------------------------------------------------------------------------------------------------------------
NRG Middletown Operations Inc.               08/23/1999         Delaware        special purpose operating company to provide O&M
services contract to Middletown Power LLC
------------------------------------------------------------------------------------------------------------------------------------
NRG Montville Operations Inc.                08/23/1999         Delaware        special purpose operating company to provide O&M
services contract to Montville Power LLC
------------------------------------------------------------------------------------------------------------------------------------
NRG Nelson Turbines LLC                      02/19/2002         Delaware        captive retailer for Nelson project
------------------------------------------------------------------------------------------------------------------------------------
NRG New Roads Generating LLC                 07/19/1996         Delaware        inactive - alternative domestic holding company
for Cajun non-nuclear generating assets in
Louisiana (including gas and coal fired generation)
------------------------------------------------------------------------------------------------------------------------------------
NRG New Roads Holdings LLC                   03/07/2000         Delaware        Holding company to hold title to certain Cajun
assets that, due to federal regulatory reasons
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
SUBSIDIARY NAME                   DATE OF          STATE OF                        DESCRIPTION
INCORPORATION    INCORPORATION
DATE ACQUIRED
------------------------------------------------------------------------------------------------------------------------------------

could not be held by Louisiana Generating LLC
------------------------------------------------------------------------------------------------------------------------------------
NRG Newberry Generation LLC                  12/12/2001         Delaware        project entity for the proposed development
(greenfield) of a natural gas combined cycle plant
to be located in Newberry Township, PA.
------------------------------------------------------------------------------------------------------------------------------------
NRG North Central Operations Inc.            04/20/2001         Delaware        Act as the operating company for the north central
region (formed to provide operation and management
services to various NRG Energy, Inc. entities that
own electric generating faclities in the United
States)
------------------------------------------------------------------------------------------------------------------------------------
NRG Northeast Affiliate Services Inc.        05/19/1999         Delaware        manage payroll and benefits for Huntley and
Dunkirk (approximately 330 employees)
------------------------------------------------------------------------------------------------------------------------------------
NRG Northeast Generating LLC                 03/11/1999         Delaware        special purpose holding company entity to
facilitate east coast pool financing
------------------------------------------------------------------------------------------------------------------------------------
NRG Northern Ohio Generating LLC             11/27/2001         Delaware        This entity was set up to act as a holding company
to sign the purchase agreement and will facilitate
financing at a later date.  Will own certain
assets of Eastlake and Bay Shore and will lease
the majority of the Eastlake and Bay Shore assets
(Lessee)
------------------------------------------------------------------------------------------------------------------------------------
NRG Norwalk Harbor Operations Inc.           08/23/1999         Delaware        Special purpose operating company to provide O&M
services contract to Oswego Power LLC and Norwalk
Power LLC
------------------------------------------------------------------------------------------------------------------------------------
NRG Ohio Ash Disposal LLC                    01/16/2002         Delaware        will own the ash disposal assets
------------------------------------------------------------------------------------------------------------------------------------
NRG Operating Services, Inc.                 10/21/1992         Delaware        currently provides O&M services for Artesia,
Cadillac, Collinsville, Gladstone and Minneapolis
Energy Center projects
------------------------------------------------------------------------------------------------------------------------------------
NRG Oswego Harbor Power Operations Inc.      04/29/1999         Delaware        Special purpose operating company to provide O&M
services contract to Oswego Power LLC
------------------------------------------------------------------------------------------------------------------------------------
NRG PacGen Inc.                              10/28/1997         Delaware        domestic holding company which acquired 100% of
the stock of Pacific Generation Company
------------------------------------------------------------------------------------------------------------------------------------
NRG Pacific Corporate Services Pty Ltd       11/19/2001         Australia       Australia corporate services company
------------------------------------------------------------------------------------------------------------------------------------
NRG Pensions Limited                         01/29/2001         United Kingdom  Entity to hold pensions for UK
employees/Killingholme
------------------------------------------------------------------------------------------------------------------------------------
NRG Power Marketing Inc.                     08/18/1997         Delaware        holds power marketing license
------------------------------------------------------------------------------------------------------------------------------------
NRG Power Options Inc.                       02/04/2002         Delaware        develops, owns and operates small cogeneration
projects in the U.S.
------------------------------------------------------------------------------------------------------------------------------------
NRG Processing Solutions LLC                 08/23/2000         Delaware        formed to own certain assets for the intake,
separation, processing and sale of yard waste and
separated organize compost (acquire assets from
SKB Environmental)
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
SUBSIDIARY NAME                   DATE OF          STATE OF                        DESCRIPTION
INCORPORATION    INCORPORATION
DATE ACQUIRED
------------------------------------------------------------------------------------------------------------------------------------

NRG Rockford Acquisition LLC                 07/06/2001         Delaware        Owner of project companies acquired from Indeck
Energy
------------------------------------------------------------------------------------------------------------------------------------
NRG Rockford Equipment II LLC                09/15/2000         Illinois        captive for equipment retailer for Rockford II
Acquired
08/14/2001
------------------------------------------------------------------------------------------------------------------------------------
NRG Rockford Equipment LLC                   02/04/2000         Illinois        captive equipment retailer for Rockford II (no
Acquired                         longer being used)
08/14/2001
------------------------------------------------------------------------------------------------------------------------------------
NRG Rockford II LLC                          09/15/2000         Illinois        owner of Rockford II electric generation project
Acquired
08/14/2001
------------------------------------------------------------------------------------------------------------------------------------
NRG Rockford LLC                             12/14/1999         Illinois        owner of Rockford electric generation project
Acquired
08/14/2001
------------------------------------------------------------------------------------------------------------------------------------
NRG Rocky Road LLC                           10/04/1999         Delaware        special purpose LLC formed to hold the 50%
membership interest in Rocky Road LLC (a potential
acquisition from Dynegy) (single member LLC)
natural gas-fired, simple-cycle peaking facility
in East Dundee, Il.
------------------------------------------------------------------------------------------------------------------------------------
NRG Sabine River Works GP LLC                11/13/2000         Delaware        general partner of the Sabine River 450 MW
gas-fired cogeneration project under construction
in Orange, Texas
------------------------------------------------------------------------------------------------------------------------------------
NRG Sabine River Works LP LLC                11/13/2000         Delaware        limited partner of the Sabine River 450 MW
gas-fired cogeneration project under construction
in Orange, Texas
------------------------------------------------------------------------------------------------------------------------------------
NRG Saguaro Operations Inc.                  07/16/2001         Delaware        operator of the Saguaro Powre Plant in Henderson,
Nevada
------------------------------------------------------------------------------------------------------------------------------------
NRG Services Corporation                     06/06/1996         Delaware        provides payroll and benefits services through
service agreements with individual O&M companies
------------------------------------------------------------------------------------------------------------------------------------
NRG South Central Affiliate Services         02/14/2001         Delaware        Payroll company for O&M employees arising out of
Inc.                                                                            acquisition in the south central region.  Will
have 50 employees first year.  Also would sign the
O&M agreements
------------------------------------------------------------------------------------------------------------------------------------
NRG South Central Generating LLC             01/12/2000         Delaware        special purpose holding company entity to facility
central pool financing
------------------------------------------------------------------------------------------------------------------------------------
NRG South Central Operations Inc.            03/29/2001         Delaware        Act as O&M company for the South Central region.
------------------------------------------------------------------------------------------------------------------------------------
NRG Sterlington Power LLC                    11/13/1998         Delaware        entity holding title to 200 MW simply cycle gas
peaking facility in Sterlington, Louisiana
------------------------------------------------------------------------------------------------------------------------------------
NRG Sunnyside Operations GP Inc.             02/15/1995         Delaware        general partner in Sunnyside Operations Associates
L.P.
------------------------------------------------------------------------------------------------------------------------------------
NRG Sunnyside Operations LP Inc.             02/15/1995         Delaware        limited partner in Sunnyside Operations Associates
L.P.
------------------------------------------------------------------------------------------------------------------------------------
NRG Taiwan Holding Company Limited           07/23/2001         Taiwan          Taiwain holding company for 170 MW cogeneration
facility in Taiwan, with plans for a 245 MW
expansion of the facility and a 490 
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
SUBSIDIARY NAME                   DATE OF          STATE OF                        DESCRIPTION
INCORPORATION    INCORPORATION
DATE ACQUIRED
------------------------------------------------------------------------------------------------------------------------------------

MW greenfield project at the Tainan Science-Based 
Park in Taiwan
------------------------------------------------------------------------------------------------------------------------------------
NRG Telogia Power LLC                        07/18/2001         Delaware        this entity will acquire the stock of Timber
Energy Resources Inc., which owns a 14 MW biomass
plant located in Florida and chip mill located in
Georgia
------------------------------------------------------------------------------------------------------------------------------------
NRG Thermal Corporation                      10/25/1999         Delaware        the sole member of all the llcs under the new
thermal restructuring
------------------------------------------------------------------------------------------------------------------------------------
NRG Thermal Operating Services LLC           10/27/1999         Delaware        at this time has no assets
------------------------------------------------------------------------------------------------------------------------------------
NRG Thermal Services Inc.                    07/05/2000         Delaware        This entity will hold the chiller plant assets and
diesel services business for NRG Energy Center
Harrisburg Inc.
------------------------------------------------------------------------------------------------------------------------------------
NRG Turbines LLC                             08/15/2001         Delaware        owner for financing purposes of certain turbines
prior to their assignment to project companies
------------------------------------------------------------------------------------------------------------------------------------
NRG Valmy Power Holdings LLC                 11/15/2000         Delaware        holding company for 50% interest in Valmy Power LLC
------------------------------------------------------------------------------------------------------------------------------------
NRG Valmy Power LLC                          11/15/2000         Delaware        holding company for 50% interest in Valmy Power LLC
------------------------------------------------------------------------------------------------------------------------------------
NRG Victoria I Pty Ltd                       12/10/1996         Australia       international holding company in NRG Victoria II
Acquired                         Pty Ltd and NRG Victoria III Pty Ltd in Australia
02/11/1997
------------------------------------------------------------------------------------------------------------------------------------
NRG Victoria II Pty Ltd                      12/10/1996         Australia       international holding company in NRG Victoria III
Acquired                         Pty Ltd in Australia
02/11/1997
------------------------------------------------------------------------------------------------------------------------------------
NRG Victoria III Pty Ltd                     12/10/1996         Australia       international holding company in Energy
Acquired                         Developments Limited in Australia
02/11/1997
------------------------------------------------------------------------------------------------------------------------------------
NRG Web Mauritius Limited                    02/24/1998         Maritius        Holding company for Kondapalli project in India
Acquired
07/16/2001
------------------------------------------------------------------------------------------------------------------------------------
NRG West Coast Inc.                          06/02/1999         Delaware        to act as holding company for West coast limited
liability companies
------------------------------------------------------------------------------------------------------------------------------------
NRG Western Affiliate Services Inc.          08/27/1999         Delaware        manage payroll and benefits for El Segundo and
Long Beach
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating (Gibraltar)                     08/11/2000         Gibraltar       Gibraltar entity formed to assist with the
NRGIBV/Australian holding structure through
Luxembourg
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating Energy Trading Ltd.             02/20/2000         United Kingdom  international power marketing entity held under
NRGenerating, Ltd. in England
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating Holdings (No. 1) B.V.           06/12/1995         Netherlands     international holding company in Collinsville
Power Joint Venture in Australia
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating Holdings (No. 11) B.V.          07/08/1996         Netherlands     will own assets for Langage Energy Park project in
Plymouth England
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating Holdings (No. 13) B.V.          03/17/1999         Netherlands     will own land for power plant on greenfield site
at Langage England (f/k/a Plymouth Energy 
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
SUBSIDIARY NAME                   DATE OF          STATE OF                        DESCRIPTION
INCORPORATION    INCORPORATION
DATE ACQUIRED
------------------------------------------------------------------------------------------------------------------------------------

Centre)
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating Holdings (No. 14) B.V.          03/17/1999         Netherlands     international holding company registered to do
business in Estonia
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating Holdings (No. 15) B.V.          03/17/1999         Netherlands     Dutch holding company registered to do business in
England for use with the Killingholme project
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating Holdings (No. 16) B.V.          03/17/1999         Netherlands     inactive - international holding company
registered to do business in [HOLD FOR SHAUN]
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating Holdings (No. 17) B.V.          03/17/1999         Netherlands     Dutch holding company registered to do business in
TURKEY will hold interest in consortium called KUSEL
Kutahya Seyitomer Elektrik Limited Sirketi
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating Holdings (No. 18) B.V.          04/07/2000         Netherlands     international holding company for Rybnik project
in Poland
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating Holdings (No. 19) B.V.          04/07/2000         Netherlands     international holding company for project holding
company in Taiwan
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating Holdings (No. 2) GmbH           08/15/2000         Switzerland     Swiss holding company for Flinders project in
South Australia
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating Holdings (No. 21) B.V.          04/07/2000         Netherlands     International holding company used for the Tosli
Investments B.V. merger.
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating Holdings (No. 23) B.V.          04/07/2000         Netherlands     inactive - international holding company
registered to do business in  HOLD for TAX
(Cubatao)
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating Holdings (No. 24) B.V.          12/15/1995         The Netherlands Former owner of PowerGen's 1/3 interest in
Acquired                         Schkopau and Mibrag
04/12/2001
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating Holdings (No. 3) B.V.           09/04/1995         Netherlands     inactive - Dutch holding company registered to do
business in Australia - hold for Flinders bid in
Australia (development projects) [HOLD for SHAUN]
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating Holdings (No. 3) GmbH           05/16/2001         Switzerland     Swiss holding company
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating Holdings (No. 4) B.V.           09/04/1995         Netherlands     Dutch holding company in Loy Yang Power Partners,
Loy Yang Power Management Pty Ltd and Loy Yang
Power Projects Pty Ltd in Australia
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating Holdings (No. 4) GmbH           05/16/2001         Switzerland     Swiss holding company
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating Holdings (No. 5) B.V.           02/09/1996         Netherlands     Dutch holding company in NRG Energeticky Provoz,
s.r.o. in the Czech Republic
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating Holdings (No. 6) B.V.           02/09/1996         Netherlands     inactive - Dutch holding company registered to do
business in Australia - hold for Ecogen assets in
Victoria / Transalta and AGL) [HOLD for SHAUN]
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating Holdings (No. 7) B.V.           03/27/1996         Netherlands     inactive - international holding company for 

------------------------------------------------------------------------------------------------------------------------------------
SUBSIDIARY NAME                   DATE OF          STATE OF                        DESCRIPTION
INCORPORATION    INCORPORATION
DATE ACQUIRED
------------------------------------------------------------------------------------------------------------------------------------

West Java O&M company in formation in Indonesia
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating Holdings (No. 8) B.V.           03/27/1996         Netherlands     inactive - international holding company for West
Java O&M company in formation in Indonesia
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating Holdings (No. 9) B.V.           03/27/1996         Netherlands     Dutch holding company registered to do business in
Turkey for consotrium called Kanel Kangal Elektrik
Limited Sirketi
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating Holdings GmbH                   12/03/1999         Switzerland     Swiss holding company for SLAP.
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating II (Gibraltar)                  10/06/2000         Gibraltar       inactive - Gibraltar entity formed to assist with
the ___________ holding structure through
Luxembourg
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating III (Gibraltar)                 10/06/2000         Gibraltar       inactive - Gibraltar entity formed to assist with
the ___________ holding structure through
Luxembourg
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating International B.V.              07/15/1993         Netherlands     Dutch holding company
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating IV (Gibraltar)                  08/30/2001         Gibraltar       Gibraltar entity formed to assist with the Foreign
Reorganization holding structure
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating Luxembourg (No. 1) S.a.r.l.     08/08/2000         Luxembourg      Luxembourg holding company.
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating Luxembourg (No. 2) S.a.r.l.     08/08/2000         Luxembourg      Luxembourg holding company.
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating Luxembourg (No. 3) S.a.r.l.                        Luxembourg      Luxembourg entity formed to hold Csepel
Shareholder Loans
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating Luxembourg (No. 4) S.a.r.l.     10/01/1999         Luxembourg      Luxembourg holding company.
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating Luxembourg (No. 5) S.a.r.l.     10/01/1999         Luxembourg      Luxembourg holding company.
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating Luxembourg (No. 6) S.a.r.l.     10/26/2001         Luxembourg      Luxembourg holding company.
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating Rupali B.V.                     06/12/1995         Netherlands     inactive - international holding company for
Rupali oil fired power plant bid in Pakistan
------------------------------------------------------------------------------------------------------------------------------------
NRGenerating, Ltd.                           01/04/2000         United Kingdom  UK holding company for Killingholme structure in
Acquired                         England
01/28/2001
------------------------------------------------------------------------------------------------------------------------------------
O Brien Biogas (Mazzaro), Inc.               02/26/1990         Delaware        landfill gas collection system for project in
Acquired                         Pennsylvania
04/30/1996
------------------------------------------------------------------------------------------------------------------------------------
O Brien Biogas IV LLC                        07/08/1997         Delaware        landfill gas fueled power generation for Edgeboro
project in New Jersey
------------------------------------------------------------------------------------------------------------------------------------
O Brien Cogeneration, Inc. II                12/31/1985         Delaware        general partner in O'Brien California Cogen Limited
Acquired
04/30/1996
------------------------------------------------------------------------------------------------------------------------------------
O Brien Standby Power Energy, Inc.           12/06/1988         Delaware        landfill gas fueled power generation for SKB
Acquired                         project in Pennsylvania
04/30/1996
------------------------------------------------------------------------------------------------------------------------------------
Okeechobee Power I, Inc.                     02/05/1992         Delaware        general partner in Cypress Energy Partners,
Limited Partnership
------------------------------------------------------------------------------------------------------------------------------------
Okeechobee Power II, Inc.                    02/05/1992         Delaware        general partner in Kissimee Power Partners,
Limited Partnership
------------------------------------------------------------------------------------------------------------------------------------
Okeechobee Power III, Inc.                   02/05/1992         Delaware        limited partner in Kissimee Power Partners,
Limited Partnership
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
SUBSIDIARY NAME                   DATE OF          STATE OF                        DESCRIPTION
INCORPORATION    INCORPORATION
DATE ACQUIRED
------------------------------------------------------------------------------------------------------------------------------------

ONSITE Energy, Inc.                          01/22/1986         Oregon          domestic holding company for ONSITE Soledad, Inc.
Acquired                         and ONSITE Marianas Corporation; also indirectly
11/01/1997                         holds general partner interest in Mt. Poso project
and limited partner interest in Turners Falls
project
------------------------------------------------------------------------------------------------------------------------------------
ONSITE Marianas Corporation                  04/06/1988         Commonwealth    inactive - owned and operated Marianas solar
Acquired         of the          energy plant in the Commonwealth of Northern
11/01/1997         Northern        Mariana Islands in Pacific Ocean
Marianas 
Islands
------------------------------------------------------------------------------------------------------------------------------------
ONSITE/US Power Limited Partnership No. 1    10/02/1987         Oregon          inactive - owned Crossroads cogeneration facility
Acquired                         in New Jersey
11/01/1997
------------------------------------------------------------------------------------------------------------------------------------
Orrington Waste, Ltd. Limited                01/13/1993         Oregon          provides waste disposal services to municipalities
Partnership                                    Acquired                         to be delivered to waste disposal operators in
11/01/1997                         Maine, including Penobscot Energy Recovery Company
------------------------------------------------------------------------------------------------------------------------------------
Oswego Harbor Power LLC                      03/30/1999         Delaware        This company was formed for the purpose of
acquiring, operating and owning two, 850 MW
oil-fired operating units and four retired units
------------------------------------------------------------------------------------------------------------------------------------
OU Nrg Energy Est                            07/14/2000         Estonia         provides international business development
services in Estonia
------------------------------------------------------------------------------------------------------------------------------------
P.T. Dayalistrik Pratama                     05/15/1996         Indonesia       will own and construct West Java coal fired power
plant in Indonesia
------------------------------------------------------------------------------------------------------------------------------------
Pacific Crockett Energy, Inc.                02/06/1997         Utah            general partner in Crockett Cogeneration, A
Acquired                         California Limited Partnership
11/01/1997
------------------------------------------------------------------------------------------------------------------------------------
Pacific Crockett Holdings, Inc.              02/14/1991         Oregon          domestic holding company for Pacific Crockett
Acquired                         Energy, Inc.
11/01/1997
------------------------------------------------------------------------------------------------------------------------------------
Pacific Generation Company                   08/03/1984         Oregon          domestic holding company acquired by NRG (formerly
Acquired                         a wholly owned subsidiary of PacifiCorp Holdings,
11/01/1997                         Inc. which developed, built, owned, operated and
managed energy production facilities); also a
limited partner in Camas Power Boiler Limited
Partnership
------------------------------------------------------------------------------------------------------------------------------------
Pacific Generation Development Company       01/12/1995         Oregon          inactive - provided domestic business development
Acquired                         services
11/01/1997
------------------------------------------------------------------------------------------------------------------------------------
Pacific Generation Holdings Company          01/12/1995         Oregon          domestic holding company for Pacific Generation
Acquired                         Funding and Pacific Recycling Energy; holds
limited partner interests in Carolina Energy, Ltd
Ptshp and Project Finance Fund III; and indirectly
holds general partner interest in Kingston Cogen Ltd
Ptshp
------------------------------------------------------------------------------------------------------------------------------------
Pacific Generation Resources Company         11/21/1991         Oregon          domestic holding company which holds limited
Acquired                         partner interest in Long Island Cogeneration,
11/01/1997                         L.P.; holds limited and general partner 
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
SUBSIDIARY NAME                   DATE OF          STATE OF                        DESCRIPTION
INCORPORATION    INCORPORATION
DATE ACQUIRED
------------------------------------------------------------------------------------------------------------------------------------

interests in Curtis/Palmer, Windpower 87 and 
Windpower 88 projects; general partner in ENI 
Chester, Limited Partnership
------------------------------------------------------------------------------------------------------------------------------------
Pacific Kingston Energy, Inc.                12/21/1995         Canada          general partner in Kingston Cogeneration Limited
Acquired         (Ontario)       Partnership
11/01/1997
------------------------------------------------------------------------------------------------------------------------------------
Pacific Orrington Energy, Inc.               11/24/1992         Oregon          holds general and limited partner interests in
Acquired                         Orrington Waste, Ltd., Limited Partnership
11/01/1997
------------------------------------------------------------------------------------------------------------------------------------
Pacific-Mt. Poso Corporation                 06/08/1987         Oregon          general partner in Mt. Poso Cogeneration Company,
Acquired                         A California Limited Partnership
11/01/1997
------------------------------------------------------------------------------------------------------------------------------------
Penobscot Energy Recovery Company,           08/15/1985         Maine           owns waste-to-energy facility in Orrington, Maine
Limited Partnership                            Acquired
11/01/1997
------------------------------------------------------------------------------------------------------------------------------------
Power Operations, Inc.                       11/06/1996         Delaware        provides O&M services for Artesia, Cadillac,
Acquired                         Newark and Parlin projects
01/01/1997
------------------------------------------------------------------------------------------------------------------------------------
Project Finance Fund III, L.P.               10/28/1994         Delaware        funding vehicle for various (primarily)
Acquired                         international operating projects
11/01/1997
------------------------------------------------------------------------------------------------------------------------------------
Prva Regulacna s.r.o.                        08/10/1998         Slovakia        Slovakian branch of Entrade GmbH
Acquired
10/26/2000
------------------------------------------------------------------------------------------------------------------------------------
Pyro-Pacific Operating Company               06/19/1987         California      operates Mt. Poso cogeneration facility in
Acquired                         California
11/01/1997
------------------------------------------------------------------------------------------------------------------------------------
Reid Gardner Power LLC                       11/15/2000         Delaware        605 MW four coal-fired units of the Reid Gardner
power station and certain other related assets in
Nevada
------------------------------------------------------------------------------------------------------------------------------------
Rocky Road Power, LLC                                           Delaware        holding ownership in generation facility in Dundee,
Illinois.
------------------------------------------------------------------------------------------------------------------------------------
Rybnik (Gibraltar)                           09/27/2000         Gibraltar       Gibraltar branch for Rybnik project
------------------------------------------------------------------------------------------------------------------------------------
Rybnik Power B.V.                            03/17/1999         Netherlands     international holding company for Rybnik project
in Poland
------------------------------------------------------------------------------------------------------------------------------------
Saale Energie GmbH                           11/10/1993         Germany         German holding company in Kraftwerk Schkopau
Betriebsgesellschaft mbH, Kraftwerk Schkopau GbR
and Saale Energie Services GmbH
------------------------------------------------------------------------------------------------------------------------------------
Saale Energie Services GmbH                  12/16/1994         Germany         provides consulting services to MIBRAG (Germany)
------------------------------------------------------------------------------------------------------------------------------------
Sachsen Holding B.V.                         02/04/1994         Netherlands     Dutch holding company ifor P.T. Dayalistrik
Pratama in Indonesia
------------------------------------------------------------------------------------------------------------------------------------
Saguaro Power Company, a Limited             04/10/1989         California      owns a combined cycle cogen facility in Henderson,
Partnership                                                                     Nevada
------------------------------------------------------------------------------------------------------------------------------------
Saguaro Power LLC                            07/16/2001         Delaware        get information from David Fisfis
------------------------------------------------------------------------------------------------------------------------------------
San Bernardino Landfill Gas Limited          09/18/1997         California      limited partner to landfill gas collection system
Partnership, a California limited                                               for project in California
partnership
------------------------------------------------------------------------------------------------------------------------------------
San Joaquin Valley Energy I, Inc.            01/21/1992         California      general partner in San Joaquin Valley Energy
Partners I, L.P.
------------------------------------------------------------------------------------------------------------------------------------
San Joaquin Valley Energy IV, Inc.           04/29/1992         California      general partner in San Joaquin Valley Energy
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
SUBSIDIARY NAME                   DATE OF          STATE OF                        DESCRIPTION
INCORPORATION    INCORPORATION
DATE ACQUIRED
------------------------------------------------------------------------------------------------------------------------------------

Partners IV, L.P. and Bioconversion Partners, L.P.
------------------------------------------------------------------------------------------------------------------------------------
San Joaquin Valley Energy Partners I,        04/30/1992         California      owns and operates three biomass waste-fuel power
L.P.                                                                            plants (Chowchilla II, El Nido and Madera) in
California
------------------------------------------------------------------------------------------------------------------------------------
Scudder Latin American Power I-C L.D.C.      07/05/1995         Cayman Islands, investment company which owns (primarily passive)
British West    investments in Latin American power projects
Indies
------------------------------------------------------------------------------------------------------------------------------------
Scudder Latin American Power II-C L.D.C.     12/15/1997         Cayman Islands, investment company which owns (primarily passive)
British West    investments in Latin American power projects -
Indies          phase II
------------------------------------------------------------------------------------------------------------------------------------
Scudder Latin American Power                 12/15/1997         Cayman Islands, investment company which owns (primarily passive)
II-Corporation A                                                British West    investments in Latin American power projects -
Indies          phase II
------------------------------------------------------------------------------------------------------------------------------------
Scudder Latin American Power                 12/15/1997         Cayman Islands, investment company which owns (primarily passive)
II-Corporation B                                                British West    investments in Latin American power projects -
Indies          phase II
------------------------------------------------------------------------------------------------------------------------------------
Scudder Latin American Power II-P L.D.C.     12/15/1997         Cayman Islands, investment company which owns (primarily passive)
British West    investments in Latin American power projects -
Indies          phase II
------------------------------------------------------------------------------------------------------------------------------------
Scudder Latin American Power I-P L.D.C.      07/05/1995         Cayman Islands, investment company which owns (primarily passive)
British West    investments in Latin American power projects
Indies
------------------------------------------------------------------------------------------------------------------------------------
Somerset Operations Inc.                     11/17/1998         Delaware        proposed operator for Somerset coal fired power
plant in Massachusetts
------------------------------------------------------------------------------------------------------------------------------------
Somerset Power LLC                           11/17/1998         Delaware        This company was formed for the purpose of
acquiring, operating and owning the electric
generating plant in Somerset, Massachusetts
------------------------------------------------------------------------------------------------------------------------------------
South Central Generation Holding LLC         01/12/2000         Delaware        to hold 50% interest in NRG Central Generating LLC
(issuer in the Cajun deal)
------------------------------------------------------------------------------------------------------------------------------------
Southwest Generation LLC                     11/15/2000         Delaware        holding company for Clark and Reid Gardner project
companies
------------------------------------------------------------------------------------------------------------------------------------
Southwest Power Holdings LLC                 11/15/2000         Delaware        holding company for Southwest Generation LLC and
Clark and Reid Gardner project in Nevada
------------------------------------------------------------------------------------------------------------------------------------
SRW Cogeneration Limited Partnership         11/29/1999         Delaware        owner of the Sabine River 450 MW gas-fired
Acquired                         cogeneration project in Orange, Texas  
11/27/2000                         
------------------------------------------------------------------------------------------------------------------------------------
Statoil Energy Power/Pennsylvania, Inc.      11/21/1991         Pennsylvania
------------------------------------------------------------------------------------------------------------------------------------
Sterling (Gibraltar)                         02/08/2000         Gibraltar       Gibraltar entity formed to assist with the
NRGenerating, Ltd./UK holding structure through
Luxembourg
------------------------------------------------------------------------------------------------------------------------------------
Sterling Luxembourg (No. 1) s.a.r.l.         02/11/2000         Luxembourg      Luxembourg entity formed to hold Luxco2 as 
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
SUBSIDIARY NAME                   DATE OF          STATE OF                        DESCRIPTION
INCORPORATION    INCORPORATION
DATE ACQUIRED
------------------------------------------------------------------------------------------------------------------------------------

a part of the NRGenerating, Ltd. holding structure 
in the UK
------------------------------------------------------------------------------------------------------------------------------------
Sterling Luxembourg (No. 2) s.a.r.l.         02/11/2000         Luxembourg      Luxembourg entity formed to hold the Swiss branch
as a part of the NRGenerating, Ltd. holding
structure in the UK
------------------------------------------------------------------------------------------------------------------------------------
Sterling Luxembourg (No. 3) s.a.r.l.         03/10/2000         Luxembourg      Luxembourg entity formed as a part of the Sterling
holding structure in the UK.
------------------------------------------------------------------------------------------------------------------------------------
Sterling Luxembourg (No. 4) s.a.r.l.         03/10/2000         Luxembourg      Luxembourg entity formed as a part of the Sterling
holding structure in the UK.
------------------------------------------------------------------------------------------------------------------------------------
STS Hydropower Ltd.                          08/11/1987         Michigan        owns and operates hydroelectric projects in
Acquired                         California, Colorado, Michigan, Virginia and
12/19/1994                         Washington
------------------------------------------------------------------------------------------------------------------------------------
Suncook Energy LLC                           10/14/1997         Delaware        landfill gas fueled power generation for Nashua
project in New Hampshire
------------------------------------------------------------------------------------------------------------------------------------
Sunnyside Operations Associates L.P.         02/15/1995         Delaware        operates waste coal power plant in Utah
------------------------------------------------------------------------------------------------------------------------------------
Sunshine State Power (No. 2) B.V.            02/24/1994         Netherlands     Dutch holding company which holds a 17.5%
undivided interest in Gladstone Power Station
Joint Venture in Australia
------------------------------------------------------------------------------------------------------------------------------------
Sunshine State Power B.V.                    11/11/1993         Netherlands     Dutch holding company which holds a 20% undivided
interest in Gladstone Power Station Joint Venture
in Australia
------------------------------------------------------------------------------------------------------------------------------------
Tacoma Energy Recovery Company               06/24/1999         Delaware        operate and manage power plant for City of Tacoma
------------------------------------------------------------------------------------------------------------------------------------
Telogia Power Inc.                           07/31/2001         Delaware        owns 100% of the stock of Timber Energy Resources,
Inc.
------------------------------------------------------------------------------------------------------------------------------------
Termo Santander Holding (Alpha), L.L.C.                                         entity formed to purchase and thereafter sell
certain equipment to Rocky Road Power, LLC
------------------------------------------------------------------------------------------------------------------------------------
TermoRio S.A.                                10/14/1999         Brazil          1040 MW gas-fired cogeneration project in Rio de
Acquired                         Janeiro State, Brazil
09/06/2001
------------------------------------------------------------------------------------------------------------------------------------
The PowerSmith Cogeneration Project,         09/03/1987         Delaware        owns PowerSmith cogeneration facility in Oklahoma
Limited Partnership                            Acquired
11/01/1997
------------------------------------------------------------------------------------------------------------------------------------
Timber Energy Resources, Inc.                07/18/1984         Texas           owns power plant and chip mill assets in FL & GA
Acquired
08/02/2001
------------------------------------------------------------------------------------------------------------------------------------
Tosli (Gibraltar) B.V.                       05/24/1999         Netherlands     Dutch holding company
------------------------------------------------------------------------------------------------------------------------------------
Tosli Acquisition B.V.                       05/28/1999         Netherlands     Dutch holding company for Itiquira project
------------------------------------------------------------------------------------------------------------------------------------
Turners Falls Limited Partnership              Acquired         Massachusetts   owns Turners Falls cogeneration facility in
11/01/1997                         Massachusetts
------------------------------------------------------------------------------------------------------------------------------------
Valmy Power LLC                              10/16/2000         Delaware        holding company for NRG's 50% interest in the two
coal-fired units of the Valmy power station (which
SPR owns jointly with Idaho Power Company), and
its 100% interest in two related gas and oil fired
units, together with certain other related assets
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
SUBSIDIARY NAME                   DATE OF          STATE OF                        DESCRIPTION
INCORPORATION    INCORPORATION
DATE ACQUIRED
------------------------------------------------------------------------------------------------------------------------------------

Vienna Operations Inc.                       05/08/2000         Delaware        to act as a special purpose operating company to
provide O&M services pursuant to a contract with
Vienna Power LLC
------------------------------------------------------------------------------------------------------------------------------------
Vienna Power LLC                             05/08/2000         Delaware        entity holding title to 170 MW oil fired
generating station located in Vienna, Maryland
------------------------------------------------------------------------------------------------------------------------------------
Wainstones Power Limited                     11/10/1997         United Kingdom  will build, own and operate 800MW combined cycle
gas turbine power plant on greenfield site at
Langage England (f/k/a Plymouth Energy Centre)
------------------------------------------------------------------------------------------------------------------------------------
WCP (Generation) Holdings LLC                06/17/1999         Delaware        Holding company for West Coast Financing
------------------------------------------------------------------------------------------------------------------------------------
West Coast Power LLC                         02/09/1999         Delaware        West coast holding company entity designed to
facilitate west coast asset pool financing (El
Segundo,Long Beach,Cabrill I&II)
------------------------------------------------------------------------------------------------------------------------------------

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration 
Statement on Form S-3 (No. 333-62958) and Form S-8 (No. 333-38892) of NRG 
Energy, Inc. of our report dated February 21, 2002 relating to the consolidated 
financial statements and financial statements schedule, which appears in this 
Form 10-K.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Minneapolis, Minnesota
March 29, 2002

EXHIBIT 99.1

WEST COAST POWER LLC

Consolidated Financial Statements
As of December 31, 2001
Together With Auditors' Report

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Member of West Coast Power LLC:

We have audited the accompanying consolidated balance sheets of West Coast Power
LLC (a Delaware limited liability company) as of December 31, 2001 and 2000, and
the related consolidated statements of operations, member equity and
comprehensive income, and cash flows for each of the three years in the period
ended December 31, 2001. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of West Coast Power LLC as of
December 31, 2001 and 2000, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 2001, in conformity
with accounting principles generally accepted in the United States.

Our audit was made for the purpose of forming an opinion on the basic financial 
statements taken as a whole. The 2001 consolidating information in Note 10 is 
presented for purposes of additional analysis and is not a required part of 
the financial statements. This information has been subjected to the auditing 
procedures applied in our audits of the basic financial statements and, in our 
opinion, is fairly stated in all material respects in relation to the basic 
financial statements taken as a whole.

/s/ Arthur Andersen LLP

Houston, Texas

February 28, 2002 (except with respect 
to the matter discussed in Note 9, 
as to which the date is March 11, 2002)

WEST COAST POWER LLC

CONSOLIDATED BALANCE SHEETS--DECEMBER 31, 2001 AND 2000

2001                      2000
---------------          ---------------
ASSETS

CURRENT ASSETS:
Cash and cash equivalents                                                               $    74,270,040          $    41,617,872
Accounts receivable                                                                         528,762,671              281,495,024
Less- Reserves                                                                           (303,514,340)             (34,895,799)
---------------          ---------------

Accounts receivable, net                                              225,248,331              246,599,225

Inventories                                                                                  43,064,642               30,522,385
Prepaid expenses                                                                              6,198,008                3,164,171
Current derivative asset                                                                     52,354,974                        -
---------------          ---------------

Total current assets                                                  401,135,995              321,903,653

PROPERTY, PLANT AND EQUIPMENT, at cost:
Land                                                                                         56,583,322               56,583,322
Plant and equipment                                                                         510,589,621              483,185,648
Less- Accumulated depreciation                                                              (85,490,052)             (59,719,649)
---------------          ---------------

Property, plant and equipment, net                                    481,682,891              480,049,321

LONG-TERM DERIVATIVE ASSET                                                                     136,022,293                        - 

OTHER ASSETS:
Goodwill, net of accumulated amortization of $12,119,176 and
$9,283,968 for 2001 and 2000, respectively                                                 38,998,481               41,833,689
Deferred financing costs, net of accumulated amortization of
$4,148,106 and $2,313,084 for 2001 and 2000, respectively                                   2,488,844                3,855,127
---------------          ---------------

Total other assets                                                     41,487,325               45,688,816
---------------          ---------------

Total assets                                                      $ 1,060,328,504          $   847,641,790
===============          ===============

LIABILITIES AND MEMBER EQUITY

CURRENT LIABILITIES:
Current maturities of long-term debt                                                    $    18,000,000          $    24,000,000
Accounts payable-
Trade                                                                                       5,425,292               14,799,923
Affiliates                                                                                 52,806,753              165,757,432
Accrued liabilities                                                                           5,983,830               25,714,540
Current derivative liability                                                                 55,659,970                        -
---------------          ---------------

Total current liabilities                                             137,875,845              230,271,895

LONG-TERM DEBT, net of current maturities                                                      132,056,703              193,904,000

LONG-TERM DERIVATIVE LIABILITY                                                                 137,244,131                        - 

COMMITMENTS AND CONTINGENCIES (Note 8)

MEMBER EQUITY                                                                                  653,151,825              423,465,895
---------------          ---------------

Total liabilities and member equity                               $ 1,060,328,504          $   847,641,790
===============          ===============

The accompanying notes are an integral part of these consolidated financial
statements.

WEST COAST POWER LLC

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

2001                     2000                     1999
---------------          ---------------          ---------------

REVENUES                                                          $ 1,830,680,808          $   910,145,395          $   289,578,949
Less- Reserves                                                    (268,618,541)             (34,895,799)             (10,849,362)
---------------          ---------------          ---------------

Net revenues                                      1,562,062,267              875,249,596              278,729,587

OPERATING COSTS:
Nonaffiliate                                                        49,489,040               50,295,186               54,823,242
Affiliate                                                        1,123,221,590              507,402,366              152,117,104
---------------          ---------------          ---------------

Total operating costs                             1,172,710,630              557,697,552              206,940,346
---------------          ---------------          ---------------

Operating margin                                    389,351,637              317,552,044               71,789,241

DEPRECIATION AND AMORTIZATION                                         (30,440,631)             (34,455,219)             (26,397,605)

GENERAL AND ADMINISTRATIVE EXPENSES                                   (14,280,798)              (4,711,184)              (2,077,259)
---------------          ---------------          ---------------

Income from operations                              344,630,208              278,385,641               43,314,377

INTEREST EXPENSE                                                      (32,843,268)             (26,518,883)             (16,616,034)

CHANGE IN FAIR VALUE OF
ELECTRICITY OPTIONS                                                 12,080,525              (12,211,623)                       - 

INTEREST INCOME                                                         2,491,253                5,724,794                2,346,407
---------------          ---------------          ---------------

NET INCOME                                                        $   326,358,718          $   245,379,929          $    29,044,750
===============          ===============          ===============

The accompanying notes are an integral part of these consolidated financial
statements.

WEST COAST POWER LLC

CONSOLIDATED STATEMENTS OF MEMBER EQUITY AND COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

Accumulated
Other
Comprehensive           Member            Comprehensive
Income              Equity               Income
-------------        -------------        -------------

BALANCE, January 1, 1999                                                             $ -        $ 134,850,078        $           - 
Contributions                                                                        -          142,642,634                    - 
Net income                                                                           -           29,044,750           29,044,750
Distributions                                                                        -          (14,540,000)                   -
-------------        -------------        -------------

Comprehensive income for the year ended December 31, 1999                                                             $  29,044,750
=============

BALANCE, December 31, 1999                                                             -          291,997,462        $           - 
Contributions                                                                        -           16,207,956                    - 
Net income                                                                           -          245,379,929          245,379,929
Distributions                                                                        -         (130,119,452)                   -
-------------        -------------        -------------

Comprehensive income for the year ended December 31, 2000                                                             $ 245,379,929
=============

BALANCE, December 31, 2000                                                             -          423,465,895        $           - 
Contributions                                                                        -           10,095,134                    - 
Net income                                                                           -          326,358,718          326,358,718
Distributions                                                                        -         (102,241,088)                   - 
Cumulative effect of change in
accounting principle                                                        (147,551)                   -                    - 
Change in fair value of cash flow hedges                                    (6,411,167)                   -                    - 
Amounts reclassified into income                                             2,031,884                    -                    - 
-------------

Other comprehensive income                                                  (4,526,834)          (4,526,834)          (4,526,834)
-------------        -------------        -------------

Comprehensive income for the year ended December 31, 2001                                                             $ 321,831,884
==============

BALANCE, December 31, 2001                                                 $  (4,526,834)       $ 653,151,825
=============       ==============

The accompanying notes are an integral part of these consolidated financial
statements.

WEST COAST POWER LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 and 1999

2001               2000                1999
-------------       -------------       -------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                 $ 326,358,718       $ 245,379,929       $  29,044,750
Adjustments to reconcile net income to net cash provided by
(used in) operating activities-
Depreciation and amortization                                             30,440,631          34,455,219          26,397,605
Change in fair value of electricity options                              (12,080,525)         12,211,623                   - 
Changes in assets and liabilities that provided
(used) cash-
Accounts receivable, net                                             21,350,894        (187,734,757)        (28,926,358)
Inventories                                                         (12,542,257)        (14,918,903)            (65,213)
Prepaid expenses                                                     (3,033,837)           (562,093)         (1,554,054)
Accounts payable                                                   (125,087,533)        142,266,514          30,514,407
Accrued liabilities                                                  (4,887,962)        (17,405,349)        (84,399,090)
Deferred revenues                                                             -         (21,927,348)         (3,023,449)
Other assets                                                           (468,737)          2,870,000          (5,901,933)
-------------       -------------       -------------

Net cash provided by (used in) operating activities                        220,049,392         194,634,835         (37,913,335)
-------------       -------------       -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures                                                         (27,403,973)        (13,266,570)         (3,523,332)
Business acquisitions, net of cash acquired                                            -                   -        (352,500,064)
-------------       -------------       -------------

Net cash used in investing activities                                      (27,403,973)        (13,266,570)       (356,023,396)
-------------       -------------       -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings                                                      40,000,000          10,000,000         378,366,037
Repayments of borrowings                                                    (107,847,297)        (89,596,000)        (80,866,037)
Loans to affiliates                                                                    -          11,465,643         (11,465,643)
Contributions                                                                 10,095,134          16,207,956         142,642,634
Distributions                                                               (102,241,088)       (130,119,452)        (14,540,000)
-------------       -------------       -------------

Net cash provided by (used in) financing activities                       (159,993,251)       (182,041,853)        414,136,991
-------------       -------------       -------------

NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS                                                              32,652,168            (673,588)         20,200,260

CASH AND CASH EQUIVALENTS, beginning of year                                     41,617,872          42,291,460          22,091,200
-------------       -------------       -------------

CASH AND CASH EQUIVALENTS, end of year                                        $  74,270,040       $  41,617,872       $  42,291,460
=============       =============       =============

SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for interest                                                   $  33,056,514       $  27,315,568       $  15,086,581
=============       =============       =============

The accompanying notes are an integral part of these consolidated financial
statements.

WEST COAST POWER LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BACKGROUND AND NATURE OF OPERATIONS:

Background

Prior to 1999, Dynegy Power Corp. (DPC), a wholly owned subsidiary of Dynegy
Inc. (Dynegy), and NRG Energy, Inc. (NRG), a majority owned subsidiary of
Northern States Power Company until its merger with New Century Energies, Inc.,
to form Xcel Energy, Inc., in August 2000 (collectively, the Sponsors) each held
a 50 percent interest in two limited liability companies: El Segundo Power, LLC
(ESP), and Long Beach Generation LLC (LBG) (collectively, the Historical LLCs).
In May 1999, the Sponsors acquired the assets and liabilities which make up
Cabrillo Power I LLC (Cabrillo I) and Cabrillo Power II LLC (Cabrillo II)
(collectively, the New LLCs). Effective June 30, 1999, the Sponsors formed WCP
Holdings LLC (Holdings) and West Coast Power LLC (WCP), a Delaware limited
liability company. The Sponsors have an equal interest in Holdings and share in
profits and losses equally. WCP is wholly owned by Holdings and serves as a
holding company for the Historical LLCs and New LLCs.

Upon formation of WCP, the assets and liabilities of the Historical LLCs were
contributed to WCP by the Sponsors and were recorded at their historical costs
because the transfer represented a reorganization of entities under common
control. These financial statements include the results of operations of the
Historical LLCs for all of 2001, 2000 and 1999 and the results of operations of
the New LLCs since the date of their acquisition. Operations are governed by the
executive committee with two representatives from each Sponsor.

Nature of Operations

ESP owns a 1,020-megawatt (MW) plant located in El Segundo, California,
consisting of four steam electric generating units. ESP's assets were purchased
from the Southern California Edison Company (SCE) through a competitive bid
process for $88.3 million on April 4, 1998. Historically, the facility had
operated as a merchant plant, selling energy and ancillary services through the
deregulated California wholesale electric market. In 2001, the facility entered
into a long-term power purchase agreement (PPA) with the California Department
of Water Resources (CDWR), as discussed in Note 6, for a portion of the
facility's generation through December 2004. The facility also maintained a
must-run agreement (MRA) with the California Independent System Operator (ISO)
that was terminated by the ISO on December 31, 1999.

LBG owns a 560-MW plant located in Long Beach, California, consisting of seven
60-MW gas turbine generators and two 70-MW steam turbine units. LBG's assets
were purchased from SCE on April 1, 1998, through a competitive bid process for
$29.8 million. Historically, the facility had operated as a merchant plant,
selling energy and ancillary services through the deregulated California
wholesale electric market. In 2001, the facility entered into a long-term PPA
with the CDWR, as discussed in Note 6, for a portion of the facility's
generation through December 2004.

Cabrillo I owns a 965-MW plant located in Carlsbad, California, consisting of
five steam electric generating units and one combustion turbine. Cabrillo I's
assets were purchased from San Diego Gas & Electric (SDG&E) on May 22, 1999, at
a purchase price of $283.4 million. Historically, the facility had operated as a
merchant plant, selling energy and ancillary services through the deregulated
California wholesale electric market. In 2001, the facility entered into a
long-term PPA with the CDWR, as discussed in Note 6, for a portion of the
facility's generation through December 2004. The facility also maintains an MRA
with the ISO.

Cabrillo II owns 17 combustion turbines with an aggregate capacity of 253 MW
located throughout San Diego County, California. Cabrillo II's assets were
purchased on May 22, 1999, from SDG&E through a competitive bid process for a
purchase price of $69.1 million. The facility operates as a merchant plant,
selling energy and ancillary services to the California wholesale electric
market. The facility also maintains an MRA with the ISO.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:             

Basis of Consolidation

The consolidated financial statements include the accounts of WCP after
elimination of intercompany accounts and transactions.

Cash and Cash Equivalents

WCP considers all highly liquid investments with an original maturity of three
months or less to be cash equivalents.

Inventories

Inventories are stated at the lower of market or cost using last-in, first-out
(LIFO) or average cost and are comprised of the following at December 31, 2001
and 2000:

2001            2000
--------------  --------------

Emissions credits (average cost)                         $   7,292,677   $  12,872,541
Materials and supplies (average cost)                       10,810,138      10,372,169
Fuel oil (LIFO)                                             24,961,827       7,277,675
--------------  --------------

$  43,064,642   $  30,522,385
=============   =============

Emission credits represent costs paid by WCP to acquire additional NOx credits.
WCP uses these credits to comply with emission caps imposed by various
environmental laws under which it must operate. As individual credits are used,
costs are recognized as operating expense. See additional discussion below at
"Environmental Costs."

Plant and Equipment

Plant and equipment costs are being depreciated on a straight-line basis over
estimated useful lives of 3 to 29 years.

Impairment of Long-Lived Assets

In the event that facts and circumstances indicate that the carrying amounts of
long-lived assets could be impaired, an evaluation of recoverability is
performed that compares the estimated future undiscounted cash flows associated
with the asset to the asset's carrying amount to determine if a write-down is
required. If this evaluation indicates that the assets will not be recoverable,
the carrying value of WCP's assets would be reduced to their estimated fair
value.

Goodwill

Goodwill represents the excess purchase cost over the estimated fair value of
the assets acquired and liabilities assumed and has been amortized on a
straight-line basis over 3 to 27 year estimated useful lives based on the useful
life of the related plant and equipment.

Overhaul and Maintenance Reserves

Effective January 1, 2001, WCP changed its method of accounting for major
maintenance costs. Prior to 2001, WCP accrued major overhaul and maintenance
costs expected to be incurred that are not covered by the operations and
maintenance (O&M) agreements. Other maintenance and repair costs were charged to
expense as incurred. As of January 1, 2001, WCP capitalizes major overhaul and
maintenance costs over $100,000 that have future benefits and that are not
covered by the O&M agreements as these costs are incurred. These costs are
depreciated individually over the expected life of each overhaul or addition.
Removal costs, parts having an expected life of one year or less and normal,
routine maintenance and repair costs are expensed as incurred. The change had no
material effect on the consolidated financial statements.

Federal Income Taxes

WCP is not a taxable entity for federal income tax purposes. Accordingly, there
is no provision for income taxes in the accompanying consolidated financial
statements.

Revenue Recognition

Revenues from the sale of energy and ancillary services are recorded based upon
output delivered and/or service priced at market or other terms as contractually
stipulated. Revenues received from the MRA are primarily derived from
availability payments and amounts based on reimbursing variable costs.
Historically, WCP's sales have been to the ISO, the California Power Exchange
(PX) and Dynegy Power Marketing, Inc. (DYPM). In March 2001, WCP entered into a
long-term PPA with the CDWR, as discussed at Note 6. Revenues identified as
being subject to future resolution are accounted for as discussed in Note 8.

Environmental Costs

Environmental costs relating to current operations are expensed. Liabilities are
recorded when an environmental assessment indicates that remedial efforts are
probable and the costs can be reasonably estimated. During 2001, the state of
California disallowed the purchase of NOx emission credits, but has allowed
generators to use credits previously purchased. LBG and ESP have the ability to
share emissions credits. When generators' emissions exceed the yearly allowance
of credits and the inventory of previously purchased credits, a fine of $7.50
per pound of excess emissions is assessed to that generator and future credit
allocations are reduced. No such fines were incurred by WCP in 2001.

Cabrillo I executed a variance mitigation agreement (VMA) with the San Diego
County Air Pollution Control District (SDC APCD) in March 2001 as Cabrillo I
would not be able to meet District Rule 69's more stringent NOx emissions
standards in 2001. The SDC APCD board gave Cabrillo I until July 1, 2003, to
meet emission standards and approved the VMA for that time period, which set the
mitigation fee for excess emissions above 419 tons per year at $15,500 per ton.
WCP incurred approximately $11.1 million in mitigation fees during 2001. All
emissions expenses are included in operating costs.

Risk Management Activities

WCP enters into various derivative instruments to hedge the risks associated
with changes in commodity prices and interest rates. WCP uses physical forward
contracts to hedge a portion of its exposure to price fluctuations of natural
gas and electricity. Effective January 1, 2001, hedging gains and losses are
recognized in accordance with Statement of Financial Accounting Standards (SFAS)
No. 133, "Accounting for Derivative Instruments and Hedging Activities." Prior
to the adoption of SFAS No. 133, WCP recognized hedging gains and losses when
the related sales transactions occurred. WCP also entered into interest rate
swap agreements, which effectively exchange variable interest rate debt for
fixed interest rate debt. The agreements are used to reduce the exposure to
possible increases in interest rates. WCP entered into these swap agreements
with major financial institutions.

Concentration of Credit Risk

WCP sells its electricity production to purchasers of electricity in California,
which included the PX (prior to its declaring bankruptcy in January 2001), the
ISO and, beginning in 2001, the CDWR. WCP remains exposed to credit risk on its
outstanding ISO and PX receivables for power delivered from November 2000
through January 2001. Management is continually assessing WCP's exposure related
to its California receivables and establishes reserves to reflect market
uncertainties, as discussed in Notes 8 and 9.

Use of Estimates in Financial Statement Preparation

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires estimates and assumptions that
affect the reported amounts of assets and liabilities as well as certain
disclosures. WCP's financial statements include amounts that are based on
management's best estimates and judgments. Such estimates include, among other
things, estimated reserves for probable contingencies such as those discussed in
Note 8. Actual results could differ from those estimates.

Fair Value of Financial Instruments

WCP's financial instruments consist primarily of cash and cash equivalents,
accounts receivable, accounts payable and debt instruments. The carrying amounts
of cash and cash equivalents, accounts receivable and accounts payable are
representative of their respective fair values due to the short-term maturity of
these instruments. The fair value of WCP's debt instruments is considered to
approximate the carrying amount of these instruments as their interest rates are
based on the London Interbank Offering Rate (LIBOR). Additionally, WCP has
entered into certain interest rate swap agreements in order to fix its effective
interest rate as discussed in Note 7, fair value hedges, and electricity and gas
options as discussed in Note 3.

Adoption of SFAS No. 133

The Financial Accounting Standards Board (FASB) issued and subsequently amended
SFAS No. 133, which became effective January 1, 2001. Provisions in SFAS No.
133, as amended, affect the accounting and disclosure of certain contractual
arrangements and operations of WCP. Under SFAS No. 133, as amended, all
derivative instruments are recognized in the balance sheet at their fair values
and changes in fair value are recognized immediately in earnings, unless the
derivatives qualify and are designated as hedges of future cash flows or qualify
and are designated as normal purchases and sales. For derivatives treated as
hedges of future cash flows, the effective portion of changes in the fair value
of the derivative instrument is recorded in other comprehensive income until the
related hedged items impact earnings. Any ineffective portion of a hedge is
reported in earnings immediately. For derivatives treated as fair value hedges,
changes in the fair value of the derivative and changes in the fair value of the
hedged risk attributable to the related asset, liability or firm commitment are
recorded in current period earnings. If the fair value hedge is effective, the
amounts recorded to income attributable to the derivative and hedged risk will
offset. Derivatives treated as normal purchases or sales are recorded and
recognized in income using accrual accounting. WCP adopted SFAS No. 133 on
January 1, 2001, and recorded a cumulative effect adjustment of approximately
$(0.1) million to other comprehensive income attributable to certain gas and
interest rate cash flow hedges. There was no impact on earnings at adoption.

New Accounting Pronouncements

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." SFAS No. 144 addresses the accounting and
reporting for the impairment or disposal of long-lived assets and supersedes
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," and Accounting Principles Board (APB)
Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events, and Transactions." WCP's adoption of SFAS No. 144 on January
1, 2002, did not have any impact on WCP's consolidated financial position or
results of operations.

During 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets," which discontinues goodwill amortization over its estimated useful
life; rather, goodwill will be subject to at least an annual fair value based
impairment test. WCP is currently analyzing any impact the adoption of SFAS No.
142 effective January 1, 2002, will have on the consolidated financial position
and results of operations for WCP.

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." SFAS No. 143 requires that the fair value of a liability for an
asset retirement obligation be recognized in the period in which it is incurred
with the associated asset retirement costs being capitalized as a part of the
carrying amount of the long-lived asset. SFAS No. 143 also includes disclosure
requirements that provide a description of asset retirement obligations and
reconciliation of changes in the components of those obligations. WCP is
evaluating the future financial effects of adopting SFAS No. 143 and expects to
adopt the standard effective January 1, 2003.

Reclassifications

Certain reclassifications have been made to conform the prior year presentation
to the current year presentation.

3. DERIVATIVES AND HEDGING:

In 2000, WCP had purchased and sold gas and electricity options to manage the
operating margins of its plants during 2001. The purchased gas call options had
a fair value of approximately $1.4 million, and the sold electricity call
options had a fair value of approximately $(12.2) million at December 31, 2000.
The purchased gas calls were designated as cash flow hedges and, accordingly,
changes in the market value of these contracts and the premiums paid were
deferred until the actual natural gas purchases occurred in accordance with
accounting principles generally accepted in the United States prior to the
adoption of SFAS No. 133. The sold electricity options did not qualify for hedge
accounting, and changes in the market value of these contracts were recorded in
income. For the year ended December 31, 2000, WCP had recorded expense of
approximately $12.2 million related to the sold electricity options. During
2001, these options were exercised. As electricity prices decreased
significantly, WCP recognized income of approximately $12.1 million related to
the sold electricity options.

As a result of interpretations of SFAS No. 133 in 2001, WCP determined that the
CDWR contract qualifies for the normal purchases and sales exception. WCP has
entered into other forward purchase sales agreements for physical delivery of
gas and other forward sales agreements for physical delivery of power that
qualify for the normal purchases and normal sales exception to SFAS No. 133.

WCP enters into interest rate swaps which qualify as cash flow hedges. These
interest rate swaps are used to convert the floating interest rate component of
debt to fixed rates as discussed in Note 7.

During the year ended December 31, 2001, there was no material ineffectiveness
from changes in fair value of hedge positions, and no amounts were excluded from
the assessment of hedge effectiveness related to the hedge of future cash flows.
Additionally, no amounts were reclassified to earnings in connection with
forecasted transactions that were no longer considered probable.

The balance in other comprehensive income at December 31, 2001, is expected to
be reclassified to future earnings contemporaneously with the payments of
interest. Of this amount, approximately $3.3 million of expense is estimated to
be reclassified into earnings over the year ending December 31, 2002. The actual
amounts that will be reclassified to earnings over the next year and beyond
could vary materially from these estimates as a result of changes in market
conditions.

WCP has entered into a series of fixed price electricity purchases to hedge the
fair value of its fixed price CDWR PPA. During the year ended December 31, 2001,
there was no ineffectiveness from changes in fair value of hedge positions and
no amounts were excluded from the assessment of hedge effectiveness.
Additionally, no amounts were recognized in relation to firm commitments that no
longer qualified as fair value hedge items.

The value of the fair value hedge at December 31, 2001, is approximately
$(188.4) million and is included in the derivative liability accounts. The
corresponding value of the hedged risk is approximately $188.4 million and is
included in the derivative asset accounts.

4. RELATED PARTIES:

WCP purchases fuel for its plants under natural gas supply agreements (GSAs)
with Dynegy Marketing and Trade (DMT), an affiliate of WCP. Charges for fuel are
based upon similar terms and conditions as could be obtained from third parties.

WCP contracted with DYPM, an affiliate of WCP, to provide all power scheduling,
power marketing and risk management for WCP under an energy management agreement
(the EMA). Additionally, WCP contracted with DMT to provide all scheduling and
marketing of fuel supply for WCP under the EMA.

WCP contracted with NRG West, Inc., an affiliate of WCP, to manage the
operations and management services agreements (OMSA). The services provided
under the OMSA consisted primarily of overseeing the operations and maintenance
efforts of SCE and SDG&E. SCE operated ESP and LBG until April 2000, and SDG&E
operated Cabrillo I and Cabrillo II until May 2001. WCP then entered into O&M
agreements with NRG Cabrillo Power Operations Inc. and NRG El Segundo Operations
Inc., affiliates of WCP, for Cabrillo I and Cabrillo II effective May 2001 and
for ESP and LBG effective April 2000. Fees for services primarily include
recovery of the costs of operating the plant as approved in the annual budget
and a base monthly fee. When the OMSAs were terminated once NRG became operator,
WCP contracted with NRG Development Company, Inc., an affiliate of WCP, to
provide services under the Administrative Management Agreement (the AMA).
Services provided under the AMA include local services not covered under the O&M
agreements, including environmental, engineering, legal and public relations
services. Fees for such services are subject to executive committee approval if
the amounts exceed a certain percentage of the applicable approved budget.

WCP entered into an administrative services management agreement (the ASMA) with
Dynegy Power Management Services, L.P., an affiliate of WCP, which provides
administrative services such as business management and accounting to WCP. Fees
for such services are subject to executive committee approval if the amounts
exceed a certain percentage of the applicable annual approved budget.

In addition to the related-party transactions listed above, WCP paid $14.2
million interest to DMT, as discussed in Note 8.

Affiliates of WCP provide various services for WCP. Charges for these services
are included in WCP's operating and general and administrative expenses and
consisted of the following for 2001, 2000 and 1999:

2001                    2000                   1999
--------------         --------------         --------------

Operating expenses-
Fuel                                                   $1,054,268,850         $  482,937,131         $  147,503,316
EMA charges                                                17,016,988              9,091,528              3,869,387
OMSA, O&M and AMA charges                                  51,935,752             15,373,707                744,401
--------------         --------------         --------------

$1,123,221,590         $  507,402,366         $  152,117,104
==============         ==============         ==============

ASMA fees included in general and administrative
expenses                                               $    1,374,214         $      776,403         $      491,659
==============         ==============         ==============

5. OPERATION AND MAINTENANCE AGREEMENTS:

For the New LLCs' acquisition, WCP was required to enter into an O&M agreement
with SDG&E which expired in May 2001. For 1999, the Historical LLCs were
operated under an O&M agreement with SCE which expired in early 2000. The SDG&E
and SCE O&M agreements were cost-plus agreements based on SDG&E's and SCE's
estimates of the direct and indirect service costs for operating and maintaining
the plant sites. Expenses related to such services of approximately $5.5
million, $14.1 million and $25.9 million were included in nonaffiliate operating
costs in the accompanying consolidated statements of operations for 2001, 2000
and 1999, respectively.

6. POWER PURCHASE AGREEMENT:

WCP entered into a long-term PPA with the CDWR in March 2001. From inception
through December 31, 2001, the CDWR contracted for fixed price capacity sales of
an aggregate of 1,000 MW from WCP's facilities. From January 2002 through
December 31, 2004, the CDWR contracted for fixed price firm energy and fixed
price capacity representing a substantial portion of WCP's capacity. Sales to
CDWR constituted greater than 10 percent of WCP's total revenues in 2001.

7. LONG-TERM DEBT:

WCP entered into a credit agreement with Bank of America Securities LLC, as
agent, to arrange with a syndicate of banks (the Lenders) a five-year, $322.5
million amortizing term loan with a balloon payment and a $40 million working
capital facility line of credit (the Credit Agreement). The Credit Agreement
matures in June 2004. At December 31, 2001, no amounts were outstanding under
the working capital facility. The interest rate on the outstanding loan balance
was LIBOR plus 2.0 percent, which increased on July 1, 2001, to 2.125 percent.

On September 30, 1999, WCP entered into two interest rate swap agreements
related to the credit facility. One agreement effectively fixed the interest
rate at 6.435 percent for the first $60 million and matures June 2004. The
second swap agreement effectively fixed the interest rate at 6.230 percent for
an incremental $40 million and matures in June 2002. At December 31, 2001, the
fair values of the swaps maturing in 2004 and 2002, were approximately $(3.7)
million and $(0.8) million, respectively. These swaps are designated as hedges
of the future cash outflows for interest payments on the debt. WCP paid interest
on the term loan, working capital line of credit and interest rate swaps
totaling approximately $18.6 million in 2001, $27.3 million in 2000 and $13.2
million in 1999.

The Credit Agreement is secured by all of WCP's assets and membership interests.
The Sponsors have provided limited guarantees for environmental capital
expenditures and interest. Environmental capital expenditures, as defined in the
Credit Agreement, will be funded by the Sponsors, who will make capital
contributions or subordinated loans to WCP to the extent necessary for
environmental capital expenditures up to an aggregate of $60 million as of
December 31, 2001. The Sponsors have each provided guarantees of approximately
$25 million associated with minimum insurance requirements under the Credit
Agreement. Additionally, in December 2001, one credit agency's downgrade of
Dynegy's debt triggered a requirement for additional credit assurance. As such,
Dynegy was required by the Lenders to post a $4.5 million letter of credit for
WCP, which expires December 31, 2002. After year-end, this letter of credit was
reduced to approximately $3.3 million following WCP's annual payment on the term
loan.

Future principal maturities under the term loan are as follows:

2002                     $    18,000,000
2003                          18,000,000
2004                         114,056,703
----------------

$   150,056,703
===============

8. COMMITMENTS AND CONTINGENCIES:

California Power and Natural Gas Markets

Beginning in the fourth quarter of 2000, the power and natural gas markets in
California experienced substantial volatility driven principally by a
fundamental imbalance in supply and demand and the retail electricity price caps
imposed on the state's two largest utilities. Both Pacific Gas & Electric
Company (PG&E) and SCE defaulted on payments to the ISO and the PX as well as
other creditors. PG&E has since filed for bankruptcy protection. As a result,
the credit rating of both utilities has been reduced to noninvestment grade, and
the ISO and the PX have defaulted in 2001 on payments due WCP.

WCP is actively seeking the collection of its outstanding accounts receivable.
However, due to previously discussed payment defaults, coupled with the lag time
between receipts of revenues, payment of expenses and the increased fuel cost,
WCP was forced to defer payment for a portion of its fuel cost in 2001. This
deferral of payment caused WCP to be temporarily out of compliance with the
terms of its GSAs. WCP's noncompliance also caused WCP to be temporarily out of
compliance with the terms of its Credit Agreement.

The executive committee of WCP took steps to address WCP's liquidity issues
created by the California market situation as well as the resulting events of
noncompliance under WCP's GSAs and Credit Agreement. These steps included (a) a
negotiated deferral of payments owed under the GSAs, (b) a negotiated
forbearance agreement with certain key creditors and (c) arrangement of
alternative creditworthy purchasers for WCP's prospective operations.

Under the forbearance agreement, which was approved by the Lenders, DMT granted
forbearances with respect to the past events of noncompliance discussed above,
subject to certain parameters as described therein. By December 31, 2001, WCP
had paid in full all outstanding balances under the forbearance agreement,
including interest costs of approximately $14.2 million. WCP is currently in
compliance with its GSAs and its Credit Agreement. With all outstanding balances
to DMT paid as of December 31, 2001, the forbearance agreement terminated on
January 3, 2002.

The state of California, through legislation appropriating funds for power
purchases by the CDWR, has entered the market as a purchaser of electricity for
resale to the utilities. In March 2001, WCP entered into an agreement to sell
power to the CDWR through 2004, as discussed in Note 6. Under this agreement,
the CDWR has always paid timely. Sales made to the ISO, which were backed by the
CDWR and not related to sales under the PPA, were not paid timely. The payments
were not made until after the issuance of the November 7th Federal Energy
Regulatory Commission (FERC) order that required the ISO to bill the CDWR within
15 days and to file a schedule for bringing the remaining balance current within
three months. By December 31, 2001, the ISO had remitted payment for February
and March 2001. Since then, additional payments have been received; however,
outstanding balances remain.

The executive committee of WCP continues to monitor the impact of the California
power and natural gas markets on the financial position and liquidity of WCP. It
believes that the successful execution of the CDWR agreement as well as the
desire of the conflicted parties to resolve, on a long-term basis, the pertinent
issues giving rise to the current situation will provide financial stability for
WCP.

Litigation

Class Action Lawsuits--There have been multiple class action lawsuits filed
which name WCP as a defendant. The six class action lawsuits stem from the
events occurring in the California power market during the summer of 2000. The
complaints allege violations of California's Business and Professions Code,
Unfair Trade Practices Act and various other statutes. Specifically, the named
plaintiffs allege that the defendants, including the owners of in-state
generation and various power marketers, conspired to manipulate the California
wholesale power market to the detriment of California consumers. Included among
the acts forming the basis of the plaintiffs' claims are alleged improper
sharing of generation outage data, improper withholding of generation capacity
and manipulation of power market bid practices. The plaintiffs seek unspecified
treble damages.

The six lawsuits are at preliminary stages. Defendants in the six lawsuits have
yet to file answers. The plaintiffs filed motions to remand five of the cases to
state court. In respect to the sixth case, the parties agreed that, based on a
judge's decision to remand the other five lawsuits, the case should go back to
state court. All six lawsuits will be consolidated before a single California
state court judge.

After the actions were remanded, the parties agreed that the processing of these
multiple actions should be coordinated. On December 12, 2001, the California
Judicial Council resolved a dispute among the parties as to the county in which
the actions should be coordinated, and it assigned the Coordination Proceedings
(No. 4204 and No. 4205) to the Superior Court of California, County of San
Diego. On December 20, 2001, the presiding judge of the San Diego Superior Court
designated Judge Sammartino as the Coordination Trial Judge for the Coordination
Proceedings. On January 17, 2002, Judge Sammartino set a preliminary trial
conference for March 4, 2002, to, among other things, set schedules for (a)
determining legal issues that might expedite disposition of the Coordination
Proceedings, (b) establishing a discovery schedule and (c) resolving matters
pertinent to the class action issue.

The defendants in the six lawsuits have formed various joint defense groups in
an effort to coordinate the defense of the claims and to share certain costs of
defense. WCP believes the allegations are without merit and will vigorously
defend these claims. In the opinion of management, the amount of ultimate
liability with respect to these actions will not have a material adverse effect
on the consolidated financial position or results of operations of WCP.

FERC Orders--In response to the filing of a number of complaints challenging the
level of wholesale prices, the FERC initiated a staff investigation and issued
an order on December 15, 2000, implementing a series of wholesale market reforms
and made subject to refund all spot market sales through the ISO and the PX
markets beginning October 2, 2000. FERC also included an interim price review
procedure for prices above a $150 per MW hour "breakpoint" on sales to the ISO
and through the PX. The order does not prohibit sales above the breakpoint but
the seller was subject to weekly reporting and monitoring requirements. In an
order issued March 9, 2001, the FERC determined that only sales during so-called
"Stage 3" emergency hours would be subject to refund beginning January 1, 2001.
However, sales between October 2, 2000, and December 31, 2000, remained subject
to refund under the FERC's December 15 order. Various parties sought rehearing
of this market mitigation measure and, as explained below, the FERC ruled on the
matter in an order issued on July 25, 2001.

On April 26, 2001, the FERC revised its market mitigation plan, effective May
29, 2001, to cover all emergency hours. The mitigated price was to be in effect
only during reserve deficiency hours. Suppliers charging prices above the
mitigated price during those hours could file to justify those prices.

On June 19, 2001, the FERC again revised its market mitigation plan, effective
June 20, 2001. Pursuant to this plan, the FERC is mitigating prices charged in
all hours throughout the Western Systems Coordinating Council based on the
mitigated price in the ISO markets. During reserve deficiency hours, the
mitigated price is set pursuant to an average index for gas times the heat rate
of the last unit dispatched by the ISO during a "Stage 1" emergency, plus a 10
percent adder for credit risk. Nitrogen oxide charges, start-up costs and
additional fuel costs will be collected through an ISO uplift charge. During
nonreserve deficiency hours, the market clearing price is capped at 85 percent
of the mitigated price. WCP has filed for rehearing and clarification of the
order. The FERC also ordered all parties to participate in a 15-day settlement
conference to determine refunds, which proved unsuccessful. Pursuant to that
order, the settlement judge has issued a refund recommendation to the FERC,
stating that refunds from all market participants since October 2000 probably
total between several hundred million dollars and a billion dollars. The April
26, 2001, and June 19, 2001, orders apply only to sales made on a daily basis;
that is, within 24 hours of delivery. After March 2001, the vast majority of
power sold by WCP is committed to a long-term contract exempt from these orders.

On July 25, 2001, as modified on December 31, 2001, the FERC initiated refund
hearing procedures related to California wholesale spot market sales that
occurred between October 2, 2000, and June 20, 2001. The July 25th order
supercedes prior refund orders issued by the FERC that cover this period. In the
July 25th order, the FERC developed a methodology to redetermine allegedly
competitive market outcomes during each hour of this period. An administrative
law judge has been appointed to determine (a) the mitigated price for 

power during each hour of the refund period, (b) the amount of refunds owed by
each supplier according to the FERC's methodology and (c) the amount currently
owed to each supplier (with separate quantities due from each entity) by the
ISO, the investor-owned utilities and the state of California. Any refunds owed
would then be offset against amounts not paid. Management does not expect the
administrative law judge to issue his findings before August 2002. WCP is
actively participating in these proceedings and is appealing these and related
orders.

On December 19, 2001, the FERC issued an order that in part focused on the
FERC-established price mitigation plan, which includes a formula prescribed by
the FERC to determine maximum rates for wholesale power transactions in spot
markets in the Western Systems Coordinating Council between June 21, 2001, and
September 30, 2002. In this order, the FERC made some changes in this mitigation
plan. Certain of these changes were put in place retroactively and might have
the effect of reducing the applicable maximum rate in past periods. WCP has
sought rehearing or clarification of this decision, pointing out that various
other aspects of the December 19 order, coupled with other recent FERC orders,
indicate that the FERC did not intend to modify past prices under this
mitigation plan.

Because of the complexity and state of this matter, the effect on WCP and
whether it will lead to additional litigation cannot be predicted with
certainty.

In addition to the FERC investigation discussed above, several state and other
federal regulatory investigations and complaints have commenced in connection
with the wholesale electricity prices in California and other neighboring
western states to determine the causes of the high prices and potentially to
recommend remedial action. In California, the California Public Utilities
Commission, the California Electricity Oversight Board, the California Bureau of
State Audits, the California Office of the Attorney General and several
California state legislative committees all have separate ongoing investigations
into the high prices and their causes. With the exception of a report by the
California Bureau of State Audits, none of these investigations has been
completed and no findings have been made in connection with any of them. The
California state audit report concluded that the primary causes of the market
disruptions in California were fundamental flaws in the structure of the power
market.

Additionally, on February 25, 2002, the California Public Utilities Commission
and the California Electricity Oversight Board filed complaints with the FERC
asking that it void or reform power supply contracts between CDWR and, among
others, WCP. The complaints allege that prices under the contracts exceed just
and reasonable prices permitted under the Federal Power Act. While WCP believes
the terms of its contracts are just and reasonable and do not reflect alleged
market manipulation, it cannot predict how the FERC will respond to these
complaints.

Reserves

As of December 31, 2001, WCP has reserved approximately $303.5 million related
to disputed ISO revenues and penalties, disputed PX revenues, potential FERC
refund amounts, accounts receivable collectibility and other miscellaneous
amounts. These reserves are presented as offsets to receivables and revenue in
the accompanying consolidated financial statements and represent management's
best estimate of the probable exposure to losses arising from the ultimate
resolution of the matters discussed above. Although such reserves may change
over time as the market uncertainties are resolved, management believes such
changes will not ultimately be material to WCP's consolidated financial position
or results of operations.

During December 2000, WCP entered into an interim agreement with the ISO. As of
December 31, 2000, WCP had accrued an incremental $35 million in revenues that
management believed to be associated with sales under this agreement. There is
an ongoing reconciliation process between the ISO and WCP regarding this matter
and, accordingly, the $35 million was reserved as contingent. Due to subsequent
information provided by the ISO in 2001, WCP has revised this estimate during
2001 and included it in the above reserve.

For the year ended December 31, 1999, WCP had accrued certain reserves
pertaining to contingent revenues totaling approximately $10.8 million,
increasing reserves from prior periods to approximately $37.8 million at
December 31, 1999. These reserves were provided for various disputes with
customers that were subject to 

contract interpretations, compliance with processes and filed market disputes.
Cash received totaling $11.4 million associated with reserves was loaned in 1999
to the Sponsors until resolution of the disputed items. These reserves were
settled during 2000, and all loans to affiliates were repaid. Adjustments
related to the settlement were applied against the contingent reserves with an
insignificant impact on the consolidated statement of operations in 2000.

9. SUBSEQUENT EVENT:

On March 11, 2002, the California attorney general filed, on behalf of the
people of the state of California, complaints in San Francisco Superior Court
against several energy generators, including those owned by WCP. The complaints
allege that since June 1998, these generators sold power in the open market that
should have been held in emergency reserve for the state. In the aggregate, the
complaints seek more than $150 million in penalties, restitution and return
profits from the several generators. WCP believes the allegations are without
merit and will vigorously defend these claims. In the opinion of management, the
amount of ultimate liability with respect to this action will not have a
material adverse effect on the consolidated financial position or results of
operations of WCP.

10. ACQUISITION OF CABRILLO I AND CABRILLO II:

In May 1999, the Sponsors acquired the assets and liabilities of Cabrillo I and
Cabrillo II from a third party. The acquisition was accounted for using the
purchase method of accounting. Accordingly, the purchase cost, net of working
capital, was allocated to the assets acquired and liabilities assumed based on
their estimated fair values at the date of acquisition. Consideration for the
acquisition included cash paid of $352.5 million and the assumption of
approximately $95.9 million in liabilities.

The following unaudited pro forma information presents a summary of consolidated
results of operations of WCP for the year ended December 31, 1999, as if the
acquisition of the New LLCs by the Sponsors and subsequent transfer to WCP had
occurred on January 1, 1999:

Revenues                         $   300,418,772
Net income                            23,593,479

Consolidating Financial Statements not included.