##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549




---

Form 10-K

|  |  |                                                                                             
|- |  | --------------------------------------------------------------------------------------------
|þ |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934    
| 
|  |  | For the Fiscal Year ended December 31,
    2002.                                            
| 
|o |  | 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. 333-48900

NRG South Central Generating LLC

(Exact name of Registrant as specified in its
charter)


|                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------
|Delaware                                                           |  | 41-1963217                              
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. Employer
    Identification No.)
|                                                                  
|901 Marquette Avenue, Suite 2300
    Minneapolis, Minnesota        |  | 55402                                   
|(Address of principal executive
    offices)                       |  | (Zip Code)                              

(612) 373-5300

(Registrants telephone number, including
area code)


Securities registered pursuant to
Section 12(b) of the Act:

None


Securities registered pursuant to
Section 12(g) of the Act:

None




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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 þ          No o

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 registrants 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.     þ

Indicate by check mark whether the registrant is
an accelerated filer as defined by Rule 12b-2 of the
Act.     Yes o          No þ

As of the last business day of the most recently
completed second fiscal quarter, no voting or non-voting common
equity was held by non-affiliates.

As of the latest practicable date, NRG Central,
Inc. owned 50% of the outstanding equity interests of NRG South
Central Generating LLC and South Central Generation, Inc. owned
50% of the outstanding equity interests of NRG South Central
Generating LLC. NRG Central, Inc. and South Central Generation,
Inc. are each wholly-owned subsidiaries of NRG Energy, Inc.

Documents Incorporated by Reference:

None




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TABLE OF CONTENTS



|                                                 |                                                                                                           |  |  |  |  |  |  | 
|------------------------------------------------ | --------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                          
|                                                 | Item 1 -- Business                                                                                       
|                                                 | Item 2 -- Properties                                                                                     
|                                                 | Item 3 -- Legal Proceedings                                                                              
|                                                 | Item 4 -- Submission of Matters to a Vote of Security Holders                                            
|PART II                                         
|                                                 | Item 5 -- Market for the Registrants Common Equity and Related Stockholder Matters                      
|                                                 | Item 6 -- Selected Financial Data                                                                        
|                                                 | Item 7 -- Managements Discussion and Analysis of Financial Condition and Results of Operations          
|                                                 | Item 7A -- Quantitative and Qualitative Disclosures About Market Risk                                    
|                                                 | Item 8 -- Financial Statements and Supplementary Data                                                    
|                                                 | Item 9 -- Changes in and Disagreements with Accountants on Accounting and Financial Disclosures          
|PART III                                        
|                                                 | Item 10 -- Directors and Executive Officers of the Registrant                                            
|                                                 | Item 11 -- Executive Compensation                                                                        
|                                                 | Item 12 -- Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|                                                 | Item 13 -- Certain Relationships and Related Transactions                                                
|                                                 | Item 14 -- Controls and Procedures                                                                       
|PART IV                                         
|                                                 | Item 15 -- Exhibits, Financial Statement Schedules and Reports on Form 8-K                               
|                                                 | Item 8 -- Financial Statements and Supplementary Data                                                    
|SIGNATURES                                      
|CERTIFICATIONS                                  
|CERTIFICATIONS                                  
|EXHIBIT INDEX                                   
|Subsidiaries of the NRG South Central           
|Officer Certification                           
|Financial Statements of Louisiana Generating LLC



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##### Table of Contents



INDEX

|           |  |                                                                                                    |    |          |    | 
|---------- |  | -------------------------------------------------------------------------------------------------- | -- | -------- | -- | 
|           |  |                                                                                                    |    | Page No.
|           |  |                                                                                                    |    |         
|Part I    
|Item 1     |  | Business                                                                                           |    |          | 3  | 
|Item 2     |  | Properties                                                                                         |    |          | 15 | 
|Item 3     |  | Legal Proceedings                                                                                  |    |          | 15 | 
|Item 4     |  | Submission of Matters to a Vote of Security
    Holders                                            |    |          | 16 | 
|Part II   
|Item 5     |  | Market for Registrants Common Equity and
    Related Stockholder Matters                          |    |          | 16 | 
|Item 6     |  | Selected Financial Data                                                                            |    |          | 17 | 
|Item 7     |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations          |    |          | 17 | 
|Item 7A    |  | Quantitative and Qualitative Disclosures About
    Market Risk                                     |    |          | 33 | 
|Item 8     |  | Financial Statements and Supplementary Data                                                        |    |          | 34 | 
|Item 9     |  | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosures          |    |          | 34 | 
|Part III  
|Item 10    |  | Directors and Executive Officers of the Registrant                                                 |    |          | 34 | 
|Item 11    |  | Executive Compensation                                                                             |    |          | 35 | 
|Item 12    |  | Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters |    |          | 35 | 
|Item 13    |  | Certain Relationships and Related Transactions                                                     |    |          | 35 | 
|Item 14    |  | Controls and Procedures                                                                            |    |          | 36 | 
|Part IV   
|Item 15    |  | Exhibits, Financial Statement Schedules and
    Reports on Form 8-K                                |    |          | 36 | 
|Signatures |  |                                                                                                    | 82 |         

2



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##### Table of Contents






PART I






|         |         
|-------- | --------
|Item 1  | Business

General

NRG South Central Generating LLC (NRG South
Central), is a Delaware limited liability company formed in
2000. NRG South Central owns approximately 2,500 MW of net
electric generating capacity as of December 31, 2002
through its wholly-owned subsidiaries, Louisiana Generating LLC
(Louisiana Generating), NRG New Roads Holdings LLC, NRG
Sterlington Power LLC (NRG Sterlington), Big Cajun I
Peaking Power LLC (Big Cajun 1 Peaking), NRG Bayou Cove LLC
and NRG Bayou Peaking Power LLC (together, NRG Bayou Cove). NRG
South Centrals headquarters and principal executive
offices are located at 901 Marquette Avenue, Suite 2300,
Minneapolis, Minnesota 55402. NRG South Centrals phone
number is (612) 373-5300.

NRG South Central is an indirect wholly-owned
subsidiary of NRG Energy, Inc. (NRG Energy). NRG Energy is an
energy company, primarily engaged in the ownership and operation
of power generation facilities and the sale of energy, capacity
and related products in the United States and internationally.
NRG Energy is a wholly owned subsidiary of Xcel Energy Inc.
(Xcel Energy). 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 non-regulated businesses, the largest of which is NRG
Energy.

Due to a number of reasons, including the overall
down-turn in the energy industry, NRG Energys financial
condition has deteriorated significantly. As a direct
consequence, in 2002 NRG Energy entered into discussions with
its creditors in anticipation of a comprehensive restructuring.
NRG Energy is working toward this goal by selective divestiture
of non-core assets, consolidation of management, reorganization
and redirection of power marketing philosophy and activities and
an overall financial restructuring that will improve liquidity
and reduce debt. In connection with its restructuring efforts,
it is likely that NRG Energy (and certain of its subsidiaries)
will file for Chapter 11 bankruptcy protection. If NRG
Energy seeks protection under Chapter 11 of the Bankruptcy
Code, it is likely that NRG Energy would also seek such
protection for certain wholly-owned subsidiaries, which may
include NRG South Central. For more information about NRG
Energys restructuring process, refer to the Form 10-K
filed by NRG Energy on March 31, 2003.

As a part of the comprehensive restructuring, NRG
Energys financial and legal restructuring advisors have
been assisting the management of NRG South Central in the
preparation of a comprehensive financial and operational
restructuring for NRG South Central. NRG South Central and its
advisors have been meeting regularly to discuss restructuring
issues relating to NRG South Central with an ad hoc committee of
its bondholders (the NRG South Central Bondholder Committee).
NRG South Central, its management and its financial and legal
advisors have engaged in discussions with the NRG Project
Bondholder Committee regarding the terms and conditions of a
restructuring of the debt of NRG South Central.

NRG South Central, NRG Energy and Xcel Energy
file periodic reports and other documents with the Securities
and Exchange Commission. The public may read and copy the
materials filed with the SEC at the SECs Public Reference
Room at 450 Fifth Street, NW, Washington, DC 20549. The
public may also obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. In
addition, electronic copies of these periodic filings are
available through the Commissions web site at www.sec.gov.

Liquidity Issues



| |                                                                                                
| | -----------------------------------------------------------------------------------------------
| | Liquidity Issues of NRG Energy and it
    Subsidiaries  Current Status and Chain of
    Events

In December 2001, Moodys Investor Service
(Moodys) placed NRG Energys long-term senior
unsecured debt rating on review for possible downgrade. In
response, Xcel Energy and NRG Energy put into effect a plan to
preserve NRG Energys investment grade rating and improve
its financial condition. This plan

3



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included financial support to NRG Energy from
Xcel Energy; marketing certain NRG Energy assets for sale;
canceling and deferring capital spending; and reducing corporate
expenses.


In response to a possible downgrade, during 2002,
Xcel Energy contributed $500 million to NRG Energy, and NRG
Energy and its subsidiaries sold assets and businesses that
provided NRG Energy in excess of $286 million in cash and
eliminated approximately $432.0 million in debt. NRG Energy
also cancelled or deferred construction of approximately
3,900 MW of new generation projects. On July 26, 2002,
Standard & Poors (S&P) downgraded NRG
Energys senior unsecured bonds to below investment grade,
and three days later Moodys also downgraded NRG
Energys senior unsecured debt rating to below investment
grade. Since July 2002, NRG Energy senior unsecured debt, as
well as the secured NRG Northeast Generating LLC bonds and the
secured NRG South Central Generating LLC bonds and Secured LSP
Energy (Batesville) bonds were downgraded multiple times. After
NRG Energy failed to make payments due under certain unsecured
bond obligations on September 16, 2002, both Moodys
and S&P lowered their ratings on NRG Energys and its
subsidiaries unsecured bonds once again. Currently, NRG
Energys unsecured bonds carry a rating of between CCC and
D at S&P and between Ca and C at Moodys, depending on
the specific debt issue.

As a result of the downgrade of NRG Energys
credit rating, declining power prices, increasing fuel prices,
the overall down-turn in the energy industry, and the overall
down-turn in the economy, NRG Energy has experienced severe
financial difficulties. These difficulties have caused NRG
Energy to, among other things, miss scheduled principal and
interest payments due to its corporate lenders and bondholders,
prepay for fuel and other related delivery and transportation
services and provide performance collateral in certain
instances. NRG Energy has also recorded asset impairment charges
of approximately $3.1 billion, related to various operating
projects as well as for projects that were under construction
which NRG Energy has stopped funding.

NRG Energy and its subsidiaries (including NRG
South Central) have failed to timely make several interest
and/or principal payments on its indebtedness. These missed
payments have resulted in cross-defaults of numerous other
non-recourse and limited recourse debt instruments of NRG Energy
and have caused the acceleration of multiple debt instruments of
NRG Energy, rendering such debt immediately due and payable. For
more specific information regarding NRG Energys liquidity
issues, refer to Liquidity Issues in Item 1 of
Form 10-K filed by NRG Energy on March 31, 2003.

In addition to the payment defaults described
above, prior to the downgrades many corporate guarantees and
commitments of NRG Energy and its subsidiaries required that
they be supported or replaced with letter of credit or cash
collateral within 5 to 30 days of a ratings downgrade below
Baa3 or BBB- by Moodys or Standard & Poors,
respectively. As a result of the downgrades on July 26 and
July 29, NRG Energy received demands to post collateral
aggregating approximately $1.1 billion. NRG Energy is
presently working with various secured project lender groups
with respect to the issue of posting collateral and is working
toward establishing a comprehensive plan of restructuring.

In August 2002, NRG Energy retained financial and
legal restructuring advisors to assist its management in the
preparation of such comprehensive financial and operational
restructuring. NRG Energy and its advisors have been meeting
regularly to discuss restructuring issues with an ad hoc
committee of its bondholders and a steering committee of its
bank lenders (the Ad Hoc Creditors Committees). In November
2002, NRG Energy and Xcel Energy presented a comprehensive plan
of restructuring to the Ad Hoc Creditors Committees. The
restructuring plan has served as a basis for continuing
negotiations between the Ad Hoc Creditors Committees, NRG Energy
and Xcel Energy related to a consensual plan of reorganization
for NRG Energy. If a comprehensive plan of restructuring is
ultimately agreed to, it is highly probable that such a plan
would be implemented through the commencement of a voluntary
Chapter 11 bankruptcy proceeding. If NRG Energy seeks
protection under Chapter 11 of the Bankruptcy Code, it is
likely that NRG Energy would also seek such protection for
certain wholly-owned subsidiaries, which may include NRG South
Central. For more specific information regarding NRG
Energys restructuring efforts, refer to Liquidity
Issues in Item 1 of Form 10-K filed by NRG
Energy on March 31, 2003.

4



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On November 22, 2002, five former NRG Energy
executives filed an involuntary Chapter 11 petition against
NRG Energy in U.S. Bankruptcy Court for the District of
Minnesota. Under provisions of federal law, NRG Energy has the
full authority to continue to operate its business as if the
involuntary petition had not been filed unless and until a court
hearing on the validity of the involuntary petition is resolved
adversely to NRG Energy. On December 16, 2002, NRG Energy
responded to the involuntary petition, contesting the
petitioners claims and filing a motion to dismiss the
case. On February 19, 2003, NRG Energy announced that it
had reached a settlement with the petitioners. The U.S.
Bankruptcy Court for the District of Minnesota will hear NRG
Energys motion to approve the settlement and dismiss the
involuntary petition. Two of NRG Energys creditors have
objected to the motion to dismiss. There can be no assurance
that the court will dismiss the involuntary petition. The
Bankruptcy Court has discretion in the review and approval of
the settlement agreement. There is a risk that the Bankruptcy
Court may, among other things, reject the settlement agreement
or enter an order for relief under Chapter 11.

On March 26, 2003, Xcel Energy announced
that its board of directors had approved a tentative settlement
agreement with holders of most of NRG Energys long-term
notes and the steering committee representing NRGs bank
lenders. The settlement is subject to certain conditions,
including the approval of at least a majority in dollar amount
of the NRG Energy bank lenders and long-term noteholders and
definitive documentation. There can be no assurance that such
approvals will be obtained. The terms of the settlement call for
Xcel Energy to make payments to NRG Energy over the next
13 months totaling up to $752 million for the benefit
of NRG Energys creditors in consideration for their waiver
of any existing and potential claims against Xcel Energy. Under
the settlement, Xcel Energy will make the following payments:
(i) $350 million at or shortly following the
consummation of a restructuring of NRG Energys debt. It is
expected this payment would be made prior to year-end 2003;
(ii) $50 million on January 1, 2004. At Xcel
Energys option, it may fill this requirement with either
cash or Xcel Energy common stock or any combination thereof; and
(iii) $352 million in April 2004.

NRG South
Central Indebtedness and Liquidity Issues

On March 30, 2000, NRG South Central issued
$800 million of senior secured bonds in two tranches. 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 on the bonds is payable in arrears on each
March 15 and September 15. Principal payments are made
semi-annually. The proceeds of the bonds were used to finance
NRG South Centrals acquisition of the Cajun
generating facilities on March 31, 2000. On
December 13, 2000, NRG South Central commenced an exchange
offer of these bonds for registered bonds that contain similar
terms and conditions. The exchange offer closed on
January 19, 2001 with all bonds being exchanged. As of
December 31, 2002 there remains $750.8 million of
outstanding senior secured bonds, which are classified as
current. NRG South Central Generating LLC secured bonds
currently carry a rating of D at S&P and Caa1 at
Moodys.

The debt agreements of NRG South Central
generally restrict its ability to pay dividends, make
distributions or otherwise transfer funds to NRG Energy under
certain circumstances such as failure to maintain a required
minimum debt service ratio. As of December 31, 2002, NRG
South Central did not meet the minimum debt service coverage
ratios, and therefore is restricted from making payments to NRG
Energy.

NRG South Central Generating is also precluded
from making payments to NRG Energy due to unfunded debt service
reserve accounts. Prior to the NRG Energy downgrades (see
above), the debt service reserve accounts were funded with
letters of guarantee from NRG Energy. Following the downgrade,
these accounts were required to be funded with cash from NRG
Energy within five to thirty days. The accounts were not funded
with cash from NRG Energy within the respective cure period, and
an event of default occurred, thereby giving the lenders the
right to accelerate the project financings. As a result of this
default, the long-term portion of the debt has been reclassified
as a current liability, as it is potentially callable within the
next twelve months. NRG South Central has approximately
$46.0 million of unfunded debt service reserve commitments
as of March 31, 2003.

5



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##### Table of Contents



NRG South Central and its subsidiaries have
failed to timely make the following interest and/or principal
payments on its indebtedness:

|                                 |  |        |       |      |  |          |       |          |  |           |           |          |  |   |      |  |  |   |      |  |  |  |           | 
|-------------------------------- |  | ------ | ----- | ---- |  | -------- | ----- | -------- |  | --------- | --------- | -------- |  | - | ---- |  |  | - | ---- |  |  |  | --------- | 
|                                 |  | Amount |       |      |  |          |       | Interest |  | Principal |           |         
|Debt ($ in millions)             |  | Issued |       | Rate |  | Maturity |       | Due      |  | Due       |           | Date Due
|                                 |  |        |       |      |  |          |       |          |  |           |           |         
|Non-Recourse Debt (secured)      |  |        |       |      |  |          |       |          |  |           |           |          |  |   |      |  |  |   |      |  |  |  |           | 
|NRG South Central Generating LLC |  | $      | 500.0 |      |  |          | 8.962 | %        |  |           | 3/15/2016 |          |  | $ | 20.2 |  |  | $ | 12.8 |  |  |  | 9/16/2002 | 
|                                 |  | $      | 500.0 |      |  |          | 8.962 | %        |  |           | 3/15/2016 |          |  |   |     |  |  | $ | 12.8 |  |  |  | 3/17/2003 | 
|NRG South Central Generating LLC |  | $      | 300.0 |      |  |          | 9.479 | %        |  |           | 9/15/2024 |          |  | $ | 14.2 |  |  |   |     |  |  |  | 9/16/2002 | 

In January 2003, the NRG South Central
bondholders unilaterally withdrew $35.6 million from a
restricted revenue account relating to the September 15,
2002 interest payment and fees; and on March 17, 2003 South
Central bondholders were paid $34.4 million due in relation
to the March semi-annual interest payment, but the
$12.8 million principal payment was deferred. As of
March 31, 2003, NRG South Central had cash and cash
equivalents, including amounts in restricted cash, of
approximately $77.4 million.

The assets of Big Cajun I Peaking, NRG
Sterlington and NRG Bayou Cove have not been pledged as
collateral under the NRG South Central Generating LLC
secured bonds. The assets of Big Cajun I Peaking,
NRG Sterlington and NRG Bayou Cove have, however, been
pledged as collateral under the $325,000,000 Series A
Floating Rate Senior Secured Bonds due 2019, issued by
NRG Peaker Finance Company LLC (the Peaker financing
facility). The Peaker financing facility is currently in
default due to the triggering of its cross-default provisions
upon NRG Energys default with respect to other debt
instruments. At this point, the Peaker financing facility has
not been accelerated by its creditors.

As a part of the comprehensive restructuring of
NRG Energy, NRG Energys financial and legal
restructuring advisors have been assisting the management of
NRG South Central in the preparation of a comprehensive
financial and operational restructuring for NRG South
Central. NRG South Central and its advisors have been
meeting regularly to discuss restructuring issues relating to
NRG South Central with an ad hoc committee of its bondholders
(the NRG South Central Bondholder Committee). NRG South Central,
its management and its financial and legal advisors have engaged
in discussions with the NRG South Central Bondholder Committee
regarding the terms and conditions of a restructuring of the
debt of NRG South Central.

NRG South Central Generating Assets



| |                 
| | ----------------
| | Big Cajun Assets

The Cajun Facilities, located in New Roads,
Louisiana, consist of two plants referred to as Big Cajun I
and Big Cajun II. As of December 31, 2002, the
aggregate net capable capacity of the Cajun facilities was 1,709
MW.



| |             
| | ------------
| | Big Cajun I.

Big Cajun I, Units 1 and 2, both of
which are 100% owned by Louisiana Generating, are natural
gas-fired generating facilities with a net capable capacity of
110 MW each. Big Cajun I is used for
intermediate/peaking load seasonal operation and typically runs
from May through September. As currently configured, Big
Cajun I produces approximately 1% of the annual electric
output (as measured in kWh) from the Cajun facilities.



| |              
| | -------------
| | Big Cajun II.

Big Cajun II, Units 1, 2 and 3, are coal-fired
generating facilities. Units 1 and 2 are 100% owned by
Louisiana Generating and have a net capable capacity of 580 and
575 MW, respectively. Unit 3 has a net capable
capacity of 575 MW, of which 58% is owned by Louisiana
Generating. Entergy Gulf States owns the remaining portion. Big
Cajun II is a base load facility and runs throughout the
year. As currently configured, Big Cajun II produces
approximately 99% of the annual electric output (as measured in
kWh) from the Cajun facilities.

6



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##### Table of Contents





| |                    
| | -------------------
| | Big Cajun I Peaking

During June, 2001 construction concluded with
respect to an approximately 238 MW expansion of the Cajun
facilities. NRG South Central formed Big Cajun I Peaking
Power, a wholly owned subsidiary, to develop, construct and own
the expansion project. The energy and capacity generated by the
expansion project is being marketed by NRG Power Marketing,
a wholly owned subsidiary of NRG Energy. Louisiana
Generating purchases the capacity and is entitled to all energy
from Big Cajun I Peaking. The assets of Big Cajun I
Peaking have been pledged as collateral under the Peaker
financing facility.



| |                        
| | -----------------------
| | Other Generating Assets



| |                
| | ---------------
| | NRG Sterlington

NRG Sterlington owns and operates an
approximately 200 MW simple cycle gas peaking facility
located in Sterlington, Louisiana. Louisiana Generating
purchases the capacity and is entitled to all energy from NRG
Sterlington. The assets of NRG Sterlington have been
pledged as collateral under the Peaker financing facility.



| |               
| | --------------
| | NRG Bayou Cove

NRG Bayou Cove was formed to construct, own and
operate an approximately 320 MW gas-fired peaking
generating facility located in Jennings, Louisiana. The facility
became commercially operational in August 2002. The assets of
NRG Bayou Cove have been pledged as collateral under the
Peaker financing facility.

NRG South Central Subsidiaries and
Operations

Through its subsidiaries, Louisiana Generating
and Big Cajun I 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 June 2001. The Cajun facilities also include 100% interest in
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 South Central
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 South Central, and four have
entered into two to four year power purchase agreements. In
addition, NRG South Central 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 200 MW simple cycle gas peaking facility in
Sterlington, Louisiana. Louisiana Generating purchases the
capacity and is entitled to all energy from
NRG 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 (SRW Cogen), that owns and operates an approximately
450 MW natural gas-fired cogeneration plant at the DuPont
Companys Sabine River Works petrochemical facility near
Orange, Texas. Subsidiaries of Conoco, Inc. owned the other 50%
interest in SRW Cogen. Commercial operation of the plant
commenced in November 2001. On November 5, 2002, the
investment in SRW Cogen was sold to Conoco, Inc for a
nominal amount and assumption of outstanding obligations.

7



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##### Table of Contents



During September 2001, NRG Bayou Cove was
established as a non-guarantor subsidiary of NRG South
Central Generating. NRG Bayou Cove was formed to construct,
own and operate approximately 320 MW gas-fired peaking
generating facility located near Jennings, Louisiana. The
facility became commercially operational in August 2002.

NRG Energys energy marketing
subsidiary, NRG Power Marketing Inc. (NRG Power Marketing),
provides a full range of energy management services for many of
NRG Energys generation facilities. These services are
provided under bilateral contracts or agency agreements pursuant
to which NRG Power Marketing manages the sales and
purchases of energy, capacity and ancillary services, procures
the fuel (coal and natural gas) and associated transportation
and manages the emission allowance credits for these facilities.
NRG Power Marketing has continued to provide these services
since NRG Energy lost its investment grade ratings in July
2002, and because of NRG Energys credit and liquidity
limitations, NRG Power Marketing has scaled back its
activities. Since July 2002, NRG Power Marketing has
focused primarily on procuring fuel for, and marketing the power
from, NRG Energys North American generation
facilities in the spot and short-term markets.

Regulation



| |                                                  
| | -------------------------------------------------
| | Environmental and Safety Laws and
    Regulations

NRG South Central is subject to a broad
range of federal, state and local environmental and safety laws
and regulations applicable to the development, ownership and
operation of its projects. These laws and regulations impose
requirements relating to discharges of substances to the air,
water and land, the handling, storage and disposal of hazardous
substances and wastes and the cleanup of properties affected by
pollutants. These laws and regulations generally require that
NRG South Central obtain a number of governmental permits
and approvals before construction or operation of a power plant
commences and, after completion, that its facilities operate in
compliance with those permits and applicable legal requirements.
NRG South Central could also be held responsible under
these laws for the cleanup of pollutants released at its
facilities or at off-site locations where it has sent wastes.

NRG South Central strives at all times to
comply with the terms of all environmental and safety laws,
regulations, permits and licenses and NRG South Central
believes that all of its operating plants are in material
compliance with applicable environmental and safety
requirements. NRG South Central also does not expect that
its liability under environmental laws for the cleanup of
contamination at its plants or off-site waste disposal
facilities will have a material effect on the results of its
operations. NRG South Central cannot assure you, however,
that in the future it will not incur material environmental
liabilities, that it will obtain all necessary permits for its
operations or that it will operate in full compliance with
environmental and safety laws and regulations at all times. In
addition, regulatory compliance for the construction of new
facilities is a costly and time-consuming process. Intricate and
rapidly changing environmental regulations may require major
capital expenditures for permitting and create a risk of
expensive delays or material impairment of project value if
projects cannot function as planned due to changing regulatory
requirements or local opposition. Environmental laws have become
increasingly stringent over time, particularly with regard to
the regulation of air emissions from NRG South
Centrals plants, which requires regular major capital
expenditures for power plant upgrades and modifications.
Therefore, it is NRG South Centrals policy 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
and safety requirements pertaining to the management and
operation of its assets. (See Item 7 
Managements Discussion and Analysis of Financial Condition
and Results of Operations  Environmental Matters).



| |                  
| | -----------------
| | Energy Regulation

Various federal and state laws pertaining to
power generation and sales also affect NRG South Central.
The Federal Power Act regulates the sale of electricity in the
wholesale market. The Federal Energy Regulatory Commission
(FERC) is an independent agency within The Department of
Energy that regulates the transmission and wholesale sale of
electricity in interstate commerce under the authority of The
Federal

8



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##### Table of Contents



Power Act. FERC is also responsible for licensing
and inspecting private, municipal and state-owned hydro electric
projects. FERC determines whether a public utility qualifies for
exempt wholesale generator status (EWG) under The Public
Utility Holding Company Act, which was amended by The Energy
Policy Act of 1992.


Federal Power Act.The Federal Power Act gives FERC
exclusive rate-making jurisdiction over wholesale sales of
electricity and transmission of electricity in interstate
commerce. FERC regulates the owners of facilities used for the
wholesale sale of electricity and its transmission in interstate
commerce as public utilities under the Federal Power
Act. The Federal Power Act also gives FERC jurisdiction to
review certain transactions and numerous other activities of
public utilities (such as the granting of waivers of certain of
the accounting, record-keeping and reporting requirements that
are imposed on public utilities with cost-based rate schedules).

Under the Federal Power Act, an entity that sells
electricity in the wholesale market is a public utility, subject
to FERCs jurisdiction. Public utilities are required to
obtain FERCs acceptance of their rate schedules for
wholesale sales of electricity. Because NRG South Centrals
operating subsidiaries sell energy and capacity in the wholesale
market, they are deemed to be public utilities for purposes of
the Federal Power Act. In most cases, FERC has granted the NRG
South Central operating companies the authority to sell
electricity at market-based rates. In New England, New York, PJM
(Pennsylvania, New Jersey, Maryland, Delaware and parts of the
Midwest) the Midwest and California, FERC has established
Independent System Operators (ISOs) which file market based rate
tariffs, subject to FERC Approval. These tariffs/market rules
dictate how the wholesale markets are to operate and how
entities with market based rates shall be compensated within
those markets. The ISOs in these regions also control access to,
pricing of and the operation of the transmission grid within
their footprint. Outside of ISO controlled regions, NRG South
Central is allowed to sell at market based rates as determined
by willing buyers and sellers. Access to, pricing for and
operation of the transmission grid in such regions is controlled
by the local transmission owning utility according to their Pro
Forma Open Access Transmission Tariff (OATT) filed with and
approved by FERC.

Usually, FERCs orders which grant NRG South
Central market-based rate authority reserve the right to revoke
or revise the market-based rate authority on a prospective basis
if FERC subsequently determines that NRG South Central possesses
excessive market power. If NRG South Central lost its
market-based rate authority, NRG South Central may be required
to obtain FERCs acceptance of a cost-of-service rate
schedule and may become subject to the accounting,
record-keeping and reporting requirements that are imposed only
on utilities with cost-based rate schedules. It should be noted,
however, that NRG South Central does have the right at any time
to petition FERC to grant cost of service based rates pursuant
to Section 205 of the Federal Power Act.

Public Utility Holding Company Act (PUHCA).The Public Utility Holding Company
Act, known as PUHCA, provides that any entity that owns,
controls or has the power to vote 10% or more of the outstanding
voting securities of an electric utility company, or
a holding company for an electric utility company, is subject to
regulation under PUHCA.

Registered holding companies under PUHCA are
required to limit their utility operations to a single,
integrated utility system and divest any other operations that
are not functionally related to the operation of the utility
system. In addition, a company that is a subsidiary of a holding
company registered under PUHCA is subject to financial and
organizational regulation, including approval by the SEC of
certain financings and transactions. Under the Energy Policy Act
of 1992, however, FERC can determine that a company engaged
exclusively in the business of owning or operating an eligible
facility used for the generation of electric energy for sale at
wholesale is an EWG. Accordingly, it is exempt from PUHCA
requirements. In the case of facilities previously operated by
regulated utilities, FERC can make an exempt wholesale generator
determination only after the state utility commission finds that
allowing the facility or facilities to be eligible for exempt
wholesale generator status will benefit consumers, is in the
public interest, and does not violate state law. Each of NRG
South Centrals operating subsidiaries has been designated
by FERC as an EWG or is otherwise exempt from PUHCA because it
is a Qualifying Facility under the Public Utility Regulatory
Policy Act of 1978.

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NRG South Central does not expect to engage in
any activities that will subject it to regulation under PUHCA.
If NRG South Central were to lose its EWG status, it would
become subject to regulation under PUHCA. It would be difficult
for NRG South Central to comply with PUHCA absent a substantial
restructuring.



| |                        
| | -----------------------
| | State Energy Regulation

With the exception of the provision of utility
services by certain utilities in New Orleans and certain
municipal utilities, the Louisiana Public Service Commission, or
LPSC, regulates all public utilities within Louisiana. The
jurisdiction of the, Louisiana Public Service Commission (LPSC),
over these public utilities generally includes authority to
regulate the rates, services and securities of any entity
furnishing electric service in the state. However, Louisiana law
does not specifically address the status of entities providing
electricity exclusively in the wholesale market. The LPSC has
recognized that FERC has jurisdiction over wholesale rates.
However, the 11 distribution cooperatives to which
Louisiana Generating sells a majority of the energy and capacity
generated by the Cajun facilities will continue to be regulated
by the LPSC.

NRG South Centrals Louisiana Generating
production facilities provide a substantial amount of their
power production to four Louisiana power distribution
cooperatives under multi-year Form C contracts.
Those contracts are currently set to expire in 2004. NRG South
Central has negotiated replacement contracts with the
cooperatives having terms of five to ten years. Those
replacements are subject to LPSC and FERC approval. The LPSC is
currently evaluating those contracts. FERC action will follow
LPSC action on these contracts. There can be no assurance that
the LPSC or FERC will ultimately approve those contracts as
negotiated or at all.

Competition

The entire independent power industry in the
United States is in turmoil. Many of NRG South Centrals
competitors have announced plans to scale back their growth,
sell assets, and restructure their finances. The results of the
wholesale restructuring of the independent power industry are
impossible to predict, but they may include consolidation within
the industry, the sale or liquidation of certain competitors,
the re-regulation of certain markets, and the long-term
reduction in new investment into the industry. Under any
scenario, however, NRG South Central anticipates that it will
continue to face competition from numerous companies in the
industry, some of which may have more extensive operating
experience, larger staffs, and greater financial resources than
NRG South Central presently possesses.

Many companies in the regulated utility industry,
with which the independent power industry is closely linked, are
also restructuring or reviewing their strategies. Several of
these companies are discontinuing going forward with unregulated
investments, seeking to divest of their unregulated subsidiaries
or attempting to have their regulated subsidiaries acquire their
unregulated subsidiaries. This may lead to an increased
competition between the regulated utilities and the unregulated
power producers within certain markets. In such instances, NRG
South Central may compete with regulated utilities in the
development of market designs and rulemaking.

FERC, however, is attempting to level the
competitive playing field between regulated utilities and
unregulated energy suppliers by providing open,
non-discriminatory access to electricity markets and the
transmission grid. In April 1996, FERC issued Orders 888 and 889
that required all public utilities to file open
access transmission tariffs that give wholesale
generators, as well as other wholesale sellers and buyers of
electricity, access to transmission facilities on a
non-discriminatory basis. This led to the formation of the ISOs
described above. On December 20, 1999, FERC issued
Order 2000, encouraging the creation of Regional
Transmission Organizations (RTOs). Finally, on July 31,
2002, FERC issued its Notice of Proposed Rulemaking regarding
Standard Market Design. All three orders were intended to
eliminate market discrimination by incumbent vertically
integrated utilities and to provide for open access to the
transmission grid.

The full effect of these changes on NRG South
Central is uncertain at this time, because in many parts of the
United States, it has not been determined how entities will
attempt to comply with FERCs initiatives. At

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this time, five ISOs have been approved and are
operational; New England (ISO-NE), New York (NYISO),
Pennsylvania, NJ, Maryland, DE and parts of the midwest
(collectively PJM), Central Midwest (MISO), South Central
(SPP) and in California (CA ISO). Two of these ISOs, PJM
and MISO, have been found to also qualify as RTOs. Three other
entities have also requested that FERC approve their
organizations as RTOs; WestConnect (Desert Southwest); RTO West
(Pacific Northwest and Rockies) and Setrans (Southeast).


In the Southeast, Entergy and Southern Company
continue to support their RTO, Setrans. The future of Setrans is
uncertain given the recent loss of Santee Cooper.

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 dis-aggregation 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 caps
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 imposed price caps. These types of price caps and
other mechanisms in New York, California, the New England Power
Pool and elsewhere may adversely impact the profitability of NRG
Energys and NRG South Centrals generation facilities
that sell energy into the 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 caps by
independent system operators.

Power Markets

NRG South Central sells energy and capacity
generated primarily from the Cajun facilities to cooperative
customers under mostly fixed-price long term agreements in the
southeast power markets, primarily in Louisiana. In addition,
through NRG Power Marketing, NRG South Central sells excess
energy and capacity into neighboring regions.



| |                       
| | ----------------------
| | Southeast Power Market

The southeast power market consists of Louisiana,
Mississippi, Tennessee, Alabama, Georgia, Arkansas, northwest
Florida and east Texas. State public utilities commissions and
state assemblies within the southeast power market have been
slower than other parts of the country to restructure the
electricity industry. Most states in the southeast power market,
including Louisiana, have decided not to pursue retail
competition immediately, deciding instead to observe the impact
of direct retail access on other states that have taken a more
aggressive approach towards restructuring. Texas is the only
state in the southeast power market that is has implemented
industry restructuring legislation.

The southeast power market is currently a
bilateral market functioning without an independent
system operator, a power pool or a price exchange. Therefore,
all scheduling, coordination and market pricing are determined
on a control area basis by each market entity rather than by a
single pool market clearing house.

11



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Significant Customers

Cajun Electric was a rural electric generation
and transmission cooperative formed in 1962 and was wholly-owned
by its members, the distribution cooperatives. The distribution
cooperatives purchased their electric energy requirements from
Cajun Electric for more than 20 years under long-term, all
requirements power supply agreements. Following NRG South
Centrals acquisition of the Cajun facilities, all 11 of
the distribution cooperatives continued to purchase their
electric energy requirements from Louisiana Generating. For the
years ended December 31, 2002 and 2001, revenues derived
from agreements with the distribution cooperatives accounted for
approximately 72.6% and 70.9% of NRG South Centrals total
revenues, respectively. In total, NRG South Central derived
approximately 80.8% and 78.4% of its revenues for the years
ended December 31, 2002 and 2001, from long-term,
all-requirements power supply agreements with the distribution
cooperatives and other wholesale customers.

During 2002, two customers accounted for 32.8% of
NRG South Centrals gross revenues, Southwest Louisiana
Electric Membership Corporation (16.9%) and Dixie Electric
Membership Corporation (15.9%). During 2001, two customers
accounted for 32.1% of NRG South Centrals gross revenues,
Southwest Louisiana Electric Membership Corporation (16.4%) and
Dixie Electric Membership Corporation (15.7%).

Employees

As of December 31, 2002, Louisiana
Generating had 197 union and 134 non-union employees. With
respect to union employees, all such employees are covered by
current labor agreements with either the United Steelworkers of
America or the International Brotherhood of Electrical Workers.
These agreements were renewed in March 2001 and expire
April 1, 2006. No significant labor stoppages or disputes
have been experienced by NRG South Central. NRG South Central
does not have any employees.

Seasonality and Price Volatility

Annual and quarterly operating results can be
significantly affected by weather and price volatility.
Significant other events, such as the war in Iraq and the
precipitous decline in natural gas inventories and productive
capacity, have combined to increase fuel and power price
volatility.

Sources and Availability of Raw
Materials

NRG South Centrals raw material
requirements primarily include various forms of fossil fuel
energy sources, including natural gas and coal. NRG South
Central obtains its natural gas and coal from multiple sources
and availability is generally not an issue, although localized
shortages can and do occur. The prices of natural gas and coal
are subject to macro- and micro-economic forces that can change
dramatically in both the short term and the long term. For
example, the prices of natural gas and oil have been
particularly high during the winter of 2002-2003 due to weather
volatility and geo-political uncertainty in the Middle East.
Natural gas and coal represented approximately 54.4% of NRG
South Centrals cost of operations during the year ended
December 31, 2002.



| |                                   
| | ----------------------------------
| | Coal Supplier and
    Transporters

Louisiana Generating has a coal supply agreement
with Triton Coal for a term of five years, which began in March
2000. Triton Coal headquartered in Gillette, Wyoming, operates
two coal mines in the Powder River Basin in Wyoming.

Louisiana Generating has a coal transportation
agreement with Burlington Northern and Santa Fe Railway and
American Commercial Marine Services Company (ACMSC) for a
term of five years, which began in March 2000. Burlington
Northern and Santa Fe Railway, headquartered in Fort Worth,
Texas, transport a variety of manufacturing, agricultural and
natural resource commodities, chemicals, consumer and food
products, and motor vehicles and automotive parts. ACMSC,
headquartered in Jeffersonville, Indiana, is a general cargo
stevedore and warehousing logistics specialist which operates a
bulk dry cargo and liquid barge line, and terminal offering rail
and truck trans-loading for a variety of commodities including
steel, paper,

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lumber and coal. ACMSC filed for Chapter 11
bankruptcy protection in February 2003 and is currently
operating as a debtor in possession under bankruptcy. Louisiana
Generating cannot determine the impact of this bankruptcy on
Louisiana Generating at this time.




| |                   
| | ------------------
| | Natural Gas Supply

The Cajun facilities include a 17.5 mile natural
gas pipeline with interconnections to Bridgeline Gas
Distribution LLC, Acadian Gas Pipeline System and Texas Eastern
Transmission Corporation. Under the power sales agreement, NRG
Power Marketing may acquire natural gas and gas transportation
rights for NRG South Centrals benefit.

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,
contemplates, believes, and similar
terms. Forward-looking statements are only predictions or
expectations and actual results may differ materially from the
expectations expressed in any forward-looking statement. While
NRG South Central believes that the expectations expressed in
such forward-looking statements are reasonable, NRG South
Central 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:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The possibility of a bankruptcy filing in the
    near future, either by NRG South Central, NRG Energy and/or one
    or more of its other subsidiaries, the entry of an order for
    relief by the Minnesota Bankruptcy Court in respect of a pending
    involuntary Chapter 11 petition in that court with respect
    to NRG Energy, or the filing of an involuntary bankruptcy
    petition in another court by a requisite number of creditors of
    NRG South Central, NRG Energy or any other subsidiary, as the
    case may be;
|
| |  | NRG Energys ability or the ability of any
    of its subsidiaries to reach agreements with its lenders,
    creditors and other stakeholders regarding a comprehensive
    restructuring of NRG Energy;                                                                                                                                                                                                                                                                                                                                   
|
| |  | Cost and other effects of legal and
    administrative proceedings, settlements, investigations and
    claims;                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | NRG Energys ability to sell assets in the
    amounts and on the time table assumed;                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | General economic conditions including inflation
    rates and monetary 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;                                                                                                                                                                                                                            
|
| |  | The effect on the U.S. economy as a consequence
    of an invasion of Iraq and other potential actions relating to
    the U.S. governments efforts to suppress terrorism;                                                                                                                                                                                                                                                                                                                                                                
|
| |  | Trade, monetary, fiscal, taxation, and
    environmental policies of governments, agencies and similar
    organizations in geographic areas where NRG South Central 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;                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | Customer financial conditions, including solvency
    and the ability to pay invoices when due and the outcome of the
    bankruptcy filing by American Commercial Marine Services Company.                                                                                                                                                                                                                                                                                                                                                
|
| |  | 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;                                                                                                                                                                                                                                                                            

13



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Factors affecting the availability or cost of
    capital such as changes in: interest rates; market perceptions
    of the power generation industry, the NRG South Central or its
    subsidiary; or credit ratings;                                                                                                                                                                                                                                
|
| |  | Inability of NRG South Central to adequately
    control or hedge against commodity price volatility due to
    constraints or limitations on available working capital or
    market credit.                                                                                                                                                                                                                                                         
|
| |  | 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;                                                                                                                                                                                                                                                                                                                                       
|
| |  | Technological developments that result in
    competitive disadvantages and create the potential for
    impairment of existing assets;                                                                                                                                                                                                                                                                                                               
|
| |  | Limitations on NRG South Centrals ability
    to control projects in which NRG South Central has less than
    100% interest;                                                                                                                                                                                                                                                                                                                        
|
| |  | Limited operating history at recently acquired or
    constructed 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
    commercial agreements, obtaining regulatory and permitting
    approvals, local opposition, construction delays and other
    factors beyond NRG South Centrals control;                                                                                                                                                             
|
| |  | Factors associated with various investments
    including competition, operating risks, dependence on certain
    suppliers and customers, and environmental and energy
    regulations;                                                                                                                                                                                                                                                              
|
| |  | Changes in government regulation or the
    implementation of new government regulations, or the outcome of
    any litigation which could adversely affect the continued
    deregulation of the electric industry;                                                                                                                                                                                                                                  
|
| |  | Changes in market design or implementation of
    rules that affect NRG South Centrals ability to transmit
    or sell power in any market.                                                                                                                                                                                                                                                                                                          
|
| |  | Other business or investment considerations that
    may be disclosed from time to time in NRG South Centrals
    Securities and Exchange Commission filings or in other publicly
    disseminated written documents.                                                                                                                                                                                                                                

NRG South Centrals undertakes no obligation
to 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 NRG South
Centrals actual results to differ materially from those
contemplated in any forward-looking statements included in this
Form 10-K should not be construed as exhaustive.

14



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|         |           
|-------- | ----------
|Item 2  | Properties

Listed below are descriptions of NRG South
Centrals interests in facilities and operations as of
December 31, 2002:

Competitive Power Production
Facilities

|                              |        |             |      |          |  |            |     |           |  |               |      |      |  |  |             |             |  |  |         |                      | 
|----------------------------- | ------ | ----------- | ---- | -------- |  | ---------- | --- | --------- |  | ------------- | ---- | ---- |  |  | ----------- | ----------- |  |  | ------- | -------------------- | 
|                              |        | Earlier of  |      |          |  |            |     |           |  |              
|                              |        | Commercial  |      | Net      |  |            |     |           |  |              
|                              |        | Operation   |      | Capable  |  |            |     |           |  |              
|                              |        | or Date of  |      | Capacity |  | Percentage |     |           |  |              
|Name and Location of Facility |        | Acquisition |      | (MW)     |  | Ownership  |     | Fuel Type |  | Dispatch Type
|                              |        |             |      |          |  |            |     |           |  |              
|Big Cajun I                   |        |             |      |          |  |            |     |           |  |               |      |      |  |  |             |             |  |  |         |                     
|                              | Unit 1 |             |      | 1972     |  |            |     | 110       |  |               |      | 100% |  |  |             | Natural Gas |  |  |         | Intermediate/Peaking | 
|                              | Unit 2 |             |      | 1972     |  |            |     | 110       |  |               |      | 100% |  |  |             | Natural Gas |  |  |         | Intermediate/Peaking | 
|Big Cajun II                  |        |             |      |          |  |            |     |           |  |               |      |      |  |  |             |             |  |  |         |                     
|                              | Unit 1 |             |      | 1981     |  |            |     | 580       |  |               |      | 100% |  |  |             | Coal        |  |  |         | Base Load            | 
|                              | Unit 2 |             |      | 1981     |  |            |     | 575       |  |               |      | 100% |  |  |             | Coal        |  |  |         | Base Load            | 
|                              | Unit 3 |             |      | 1983     |  |            |     | 334       |  |               |      | 58%  |  |  |             | Coal        |  |  |         | Base Load            | 
|Sterlington                   |        |             | 2000 |          |  |            | 202 |           |  |               | 100% |      |  |  | Natural Gas |             |  |  | Peaking |                     
|Big Cajun I Peaking           |        |             | 2001 |          |  |            | 238 |           |  |               | 100% |      |  |  | Natural Gas |             |  |  | Peaking |                     
|Bayou Cove                    |        |             | 2002 |          |  |            | 320 |           |  |               | 100% |      |  |  | Natural Gas |             |  |  | Peaking |                     

Other Facilities

NRG New Roads Holdings LLC owns certain assets
acquired in conjunction with the purchase of the Cajun
facilities, including land, mineral rights and a 540 MW General
Electric steam turbine generator.




Item 3  Legal
Proceedings

Pointe Coupee Parish Police Jury and
Louisiana Generating, LLC v. United States Environmental
Protection Agency and Christine Todd Whitman, Administrator,
Adversary Proceeding No. 02-61021 on the docket of the
United States Court of Appeals for the Fifth
Circuit

On December 2, 2002, a Petition for Review
was filed to appeal the United States Environmental Protection
Agencys approval of the Louisiana Department of
Environmental Qualitys (DEQ) revisions to the
Baton Rouge State Implementation Plan (SIP). Pointe
Coupee and NRG Energys subsidiary, Louisiana Generating,
object to the approval of SIP Section 4.2.1. Permitting NOx
Sources that purports to require DEQ to obtain offsets of major
increases in emissions of nitrogen oxides (NOx) associated with
major modifications of existing facilities or construction of
new facilities both in the Baton Rouge Ozone Nonattainment Area
and in four adjoining attainment parishes referred to as the
Region of Influence, including Pointe Coupee Parish. The
plaintiffs challenge is based on DEQs failure to
comply with Administrative Procedures Act requirements related
to rulemaking and EPAs regulations which prohibit EPA from
approving a SIP not prepared in accordance with state law. The
court granted a sixty (60) day stay of this proceeding on
February 25, 2003 to allow the parties to conduct
settlement discussions. At this time, NRG Energy is unable to
predict the eventual outcome of this matter or the potential
loss contingencies, if any, to which the Company may be subject.

In the Matter of Louisiana Generating, LLC,
Adversary Proceeding No. 2002-1095 1-EQ on the docket of
the Louisiana Division of Administrative Law.

During 2000, DEQ issued a Part 70 Air Permit
modification to Louisiana Generating to construct and operate
two 240 MW natural gas-fired turbines. The Part 70 Air Permit
set emissions limits for the criteria air pollutants, including
NOx, based on the application of Best Available Control
Technology (BACT). The BACT limitation for NOx was
based on the guarantees of the manufacturer,
Siemens-Westinghouse. Louisiana Generating sought an interim
emissions limit to allow Siemens-Westinghouse time to install
additional control equipment. To establish the interim limit,
DEQ issued a Compliance Order and Notice of Potential Penalty,
No. AE-CN-02-0022, on September 8, 2002, which is, in
part, subject to the referenced

15



---



##### Table of Contents



administrative hearing. DEQ alleged that
Louisiana Generating did not meet its NOx emissions limit on
certain days, did not conduct all opacity monitoring and did not
complete all record keeping and certification requirements.
Louisiana Generating intends to vigorously defend certain claims
and any future penalty assessment, while also seeking an
amendment of its limit for NOx. An initial status conference has
been held with the Administrative Law Judge and quarterly
reports will be submitted to describe progress, including
settlement and amendment of the limit. In addition, NRG Energy
may assert breach of warranty claims against the manufacturer.
With respect to the administrative action described above, at
this time NRG Energy is unable to predict the eventual outcome
of this matter or the potential loss contingencies, if any, to
which the Company may be subject.




| |                           
| | --------------------------
| | NRG Sterlington Power, LLC

During 2002, NRG Sterlington conducted a review
of the Sterlington Power Facilitys Part 70 Air Permit
obtained by the facilitys former owner and operator, Koch
Power, Inc. Koch had outlined a plan to install eight
25 megawatt (MW) turbines to reach a 200 MW limit in
the permit. Due to the inability of several units to reach their
nameplate capacity, Koch determined that it would need
additional units to reach the electric output target. In August
2000, NRG Sterlington acquired the remaining interests in the
facility not originally held on a passive basis and sought the
transfer of the Part 70 Air Permit along with a
modification to incorporate two 17.5 MW turbines installed
by Koch and to increase the total number of turbines to ten. The
permit modification was issued February 13, 2002. During
further review, NRG Sterlington determined that a ninth unit had
been installed prior to issuance of the permit modification. In
keeping with its environmental policy, it disclosed this matter
to DEQ during April, 2002. Additional information was provided
during July 2002. As DEQ has not acted to date to institute an
enforcement proceeding, NRG Energy suspects that it may not.
However, as it is not time barred from doing so, NRG Energy is
unable at this time to predict the eventual outcome or potential
loss contingencies, if any, to which the Company may be subject.



| |                           
| | --------------------------
| | NRG Energy Credit Defaults

NRG Energy and various of its subsidiaries are in
default under various of their credit facilities, financial
instruments, construction agreements and other contracts, which
have given rise to liens, claims and contingencies against them
and may in the future give rise to additional liens, claims and
contingencies against them. In addition, NRG Energy and various
of its subsidiaries have entered into various guarantees, equity
contribution agreements, and other financial support agreements
with respect to the obligations of their affiliates, which have
given rise to liens, claims and contingencies against them and
may in the future give rise to additional liens, claims and
contingencies against the party or parties providing the
financial support. NRG Energy cannot at this time predict the
outcome or financial impact of these matters.

There are no other material legal proceedings
pending, to which NRG South Central or any of its subsidiaries
are a party. There are no other material legal proceedings to
which an officer or director is a party or has a material
interest adverse to NRG South Central 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 South Central is or would be a party.






|         |                                                        
|-------- | -------------------------------------------------------
|Item 4  | Submission of Matters to a Vote of Security
    Holders

No matters were considered during the year ended
December 31, 2002.




PART II






|         |                                                                              
|-------- | -----------------------------------------------------------------------------
|Item 5  | Market for the Registrants Common
    Equity and Related Stockholder Matters

Quarterly Stock Data

There is no established public market for the
common equity of NRG South Central.

16



---



##### Table of Contents



Holders

NRG Central, Inc. owns 50% of the outstanding
equity interests of NRG South Central Generating LLC and South
Central Generation, Inc. owns 50% of the outstanding equity
interests of NRG South Central Generating LLC. NRG Central, Inc.
and South Central Generation, Inc. are each wholly-owned
subsidiaries of NRG Energy, Inc.

Distributions on Common Equity

NRG South Central has not paid and does not
currently intent to distribute any earnings as distributions.






|         |                        
|-------- | -----------------------
|Item 6  | Selected Financial Data

The following table presents selected financial
data of NRG South Central. 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, |           | For the Period            
|                                    |            |                         |           | March 30, 2000 (Inception)
|                                    |            | 2002                    |           | 2001                       |  | through December 31, 2000
|                                    |            |                         |           |                            |  |                          
|                                    |            |                        
|                                    |            | (In thousands)         
|Total operating revenues and equity |            |                         |           |                            |  |                           |           |         |  |  |           |        
|                                    | Earnings   |                         | $         | 396,720                    |  |                           | $         | 396,960 |  |  | $         | 309,063 | 
|Total operating costs and expenses  |            |                         | 494,577   |                            |  |                           | 313,998   |         |  |  | 227,941   |        
|Net (Loss)/ Income                  |            |                         | (171,874  | )                          |  |                           | 10,108    |         |  |  | 26,016    |        
|Total Assets                        |            |                         | 1,400,344 |                            |  |                           | 1,341,279 |         |  |  | 1,207,376 |        
|Long-term debt, including current   |            |                         |           |                            |  |                           |           |         |  |  |           |        
|                                    | Maturities |                         |           | 750,750                    |  |                           |           | 763,500 |  |  |           | 788,750 | 






|         |                                                                                          
|-------- | -----------------------------------------------------------------------------------------
|Item 7  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations

Overview

Due to the factors discussed below, as well as
other matters discussed herein, NRG South Centrals
financial condition has deteriorated significantly in the recent
past. See Liquidity below. As a result, NRG South
Central does not contemplate that it will have sufficient funds
to make required principal and interest payments on its
corporate debt, which means that NRG South Central will remain
in default of the various corporate level debt obligations
discussed more fully herein including the secured NRG South
Central Generating LLC bonds. In the absence of a consensual
plan of reorganization, it is highly likely that NRG South
Central, in conjunction with NRG Energy, will be required to
commence a voluntary chapter 11 bankruptcy proceeding to allow
it to implement its own plan of reorganization. The commencement
of a voluntary chapter 11 bankruptcy proceeding without a
consensual plan of reorganization will increase the possibility
of a prolonged bankruptcy proceeding.

Industry Dynamics

An unregulated merchant power company in the
United States can be characterized in two ways, as a generator
or as an energy merchant, with some companies having
characteristics of both. In the United States, generators are
either outgrowths of regulated utilities, developers or are
independent aggregators of plants divested by utilities.
Generators have grown through acquisitions or the construction
of new power plants. Energy merchants have emphasized risk
management and trading skills over the ownership of physical
assets. Energy deregulation paved the way for development of
these companies, with utilities in some regions forced to sell
off some of their generating capacity and buy electricity on the
wholesale market or through power procurement agreements.

17



---



##### Table of Contents



Both generators and energy merchants prospered in
the late 1990s. Starting in 1999, however, a number of
factors began to arise which had a negative effect on the
business model for merchant power companies. These factors
included:

California
When California restructured its electricity industry in the
mid-1990s, it required utilities to sell generation assets
and buy electricity on the wholesale spot market, without the
stability of long-term contracts. At the time, California had
adequate supplies of power, but the State of California was
experiencing unusually high electricity demand growth while new
capacity additions were not keeping pace. Supply began to lag
behind demand, and previously moderate weather gave way to dryer
conditions, reducing hydroelectric supply. Shortages and
blackouts ensued in 1999 and 2000. Meanwhile, as wholesale
electricity prices moved higher, utilities were not allowed to
pass higher costs on to consumers under Californias
regulatory regime. Unable to bear the financial burden, PG&E
sought Chapter 11 protection and California took over the
role of procuring electricity for the utilities. Politicians
have criticized the electricity generators and the energy
merchants, accusing them of improperly manipulating supply,
demand and prices. Merchant power companies in California are
now embroiled in protracted litigation with California and
private parties, which is discouraging new investment.

Economy
The United States economy, already headed towards a recession by
mid-2001, suffered a heavy blow on September 11, 2001.
This, along with a decrease in economically driven electricity
demand, exacerbated the drop in stock valuations of the energy
merchants. Other regions of the world economy have suffered
problems as well, which has exposed companies with international
assets to losses based on severe currency fluctuations.

Weather
On the whole, the summer of 2001, the winter of 2001/ 2002 and
the summer of 2002 were mild in the United States. This together
with excessive new construction in many markets has driven down
energy prices significantly.

Enron
The bankruptcy of Enron has devastated the merchant power
industry. The public and political perception created by Enron
put a stigma on the industry, drove investors away and increased
scrutiny of the industry. Enron also played a key role in the
energy trading markets, providing a widely used electronic
trading platform that accounted for an enormous amount of
trading volume. No other company has stepped in to fill this
role, and as a result the electricity markets have become far
less efficient and liquid.

Credit
ratings The credit rating
agencies were sharply criticized for not foreseeing Enrons
problems. As a result, the agencies have been quick to
scrutinize the rest of the industry, and have tightened their
criteria for creditworthiness. The agencies have downgraded
most, if not all, of the industry participants. Many of these
downgrades were severe  ratings at times were dropped
several notches at once, or dropped more than once in a span of
weeks. This has resulted in most of the energy companies,
generators and merchants having non-investment grade credit
ratings at this time.

Oversupply
As wholesale electricity prices and market liquidity increased
in the late 1990s the industry went on a building boom.
Through 2001 capital was readily available for the industry,
encouraging companies to build new generation facilities. The
years 2000 and 2001 saw record megawatt capacity additions in
the United States, and record years were on the horizon for 2002
and 2003. Even with steady economic growth this would have
created an oversupply of generation. Limited economic growth and
recession have exacerbated the oversupply situation.

18



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##### Table of Contents



Results of Operations



| |                                                                                      
| | -------------------------------------------------------------------------------------
| | For the Year Ended December 31, 2002
    compared to the Year Ended December 31, 2001

|                                      |                            |                   |       |                   |   |  |       |              |    |                     |       |       |  |  |       |      |   |   |       |        |   |  |          |          |   
|------------------------------------- | -------------------------- | ----------------- | ----- | ----------------- | - |  | ----- | ------------ | -- | ------------------- | ----- | ----- |  |  | ----- | ---- | - | - | ----- | ------ | - |  | -------- | -------- | --
|                                      |                            |                   |       |                   |   |  |       |             
|                                      |                            | Year Ended        |       | Year Ended        |   |  |       |             
|                                      |                            | December 31, 2002 |       | December 31, 2001 |   |  |       |             
|                                      |                            |                   |       |                   |   | 
|(Millions of Dollars)                 |                            |                   |       | % of revenue      |   |  |       | % of revenue |    | Increase/(decrease)
|                                      |                            |                   |       |                   |   |  |       |              |    |                    
|                                      |                            |                   |       |                   |   |  |       |              |    |                     |       |      
|Operating Revenue and equity earnings |                            | $                 | 396.7 |                   |   |  | 100.0 | %            |    | $                   | 397.0 |       |  |  | 100.0 | %    |   | $ | (0.3  | )      |   |  | (0.1     | %)      
|                                      |                            |                   |       |                   |   |  |       |              |    |                     |       |       |  |  |       |      |   |   |       |        |   |  |          |         
|Coal                                  |                            |                   | 132.1 |                   |   |  | 33.3  | %            |    |                     | 129.4 |       |  |  | 32.6  | %    |   |   | 2.7   |        |   |  | 2.1      | %       
|Natural Gas                           |                            |                   | 9.9   |                   |   |  | 2.5   | %            |    |                     | 6.2   |       |  |  | 1.5   | %    |   |   | 3.7   |        |   |  | 59.7     | %       
|Other Fuels                           |                            |                   | 0.9   |                   |   |  | 0.2   | %            |    |                     | 1.1   |       |  |  | 0.3   | %    |   |   | (0.2  | )      |   |  | (18.2    | %)      
|Purchased Energy                      |                            |                   | 77.5  |                   |   |  | 19.5  | %            |    |                     | 94.0  |       |  |  | 23.7  | %    |   |   | (16.5 | )      |   |  | (17.6    | %)      
|                                      |                            |                   |       |                   |   |  |       |              |    |                     |       |       |  |  |       |      |   |   |       |        |   |  |          |         
|                                      | Fuel Expense               |                   |       | 220.4             |   |  |       | 55.5         | %  |                     |       | 230.7 |  |  |       | 58.1 | % |   |       | (10.3  | ) |  |          | (4.5     | %)
|                                      |                            |                   |       |                   |   |  |       |              |    |                     |       |       |  |  |       |      |   |   |       |        |   |  |          |         
|Labor and benefits                    |                            |                   | 15.2  |                   |   |  | 3.8   | %            |    |                     | 15.7  |       |  |  | 4.0   | %    |   |   | (0.5  | )      |   |  | (3.2     | %)      
|Parts and supplies                    |                            |                   | 24.4  |                   |   |  | 6.2   | %            |    |                     | 21.0  |       |  |  | 5.3   | %    |   |   | 3.4   |        |   |  | 16.2     | %       
|Property taxes                        |                            |                   | 2.4   |                   |   |  | 0.6   | %            |    |                     | 9.2   |       |  |  | 2.3   | %    |   |   | (6.8  | )      |   |  | (73.9    | %)      
|                                      |                            |                   |       |                   |   |  |       |              |    |                     |       |       |  |  |       |      |   |   |       |        |   |  |          |         
|                                      | Operations and maintenance |                   |       | 42.0              |   |  |       | 10.6         | %  |                     |       | 45.9  |  |  |       | 11.6 | % |   |       | (3.9   | ) |  |          | (8.5     | %)
|                                      |                            |                   |       |                   |   |  |       |              |    |                     |       |       |  |  |       |      |   |   |       |        |   |  |          |         
|                                      | Cost of operations         |                   |       | 262.4             |   |  |       | 66.1         | %  |                     |       | 276.6 |  |  |       | 69.7 | % |   |       | (14.2  | ) |  |          | (5.1     | %)
|Depreciation and amortization         |                            |                   | 36.0  |                   |   |  | 9.1   | %            |    |                     | 29.9  |       |  |  | 7.5   | %    |   |   | 6.1   |        |   |  | 20.4     | %       
|General and administrative            |                            |                   | 7.9   |                   |   |  | 2.0   | %            |    |                     | 7.6   |       |  |  | 1.9   | %    |   |   | 0.3   |        |   |  | 3.9      | %       
|Special charges                       |                            |                   | 139.9 |                   |   |  | 35.3  | %            |    |                     |      |       |  |  | 0.0   | %    |   |   | 139.9 |        |   |  | 100      | %       
|Sale of Equity Investments            |                            |                   | 48.4  |                   |   |  | 12.2  | %            |    |                     |      |       |  |  | 0.0   | %    |   |   | 48.4  |        |   |  | 100      | %       
|Interest                              |                            |                   | 74.9  |                   |   |  | 18.9  | %            |    |                     | 72.7  |       |  |  | 18.3  | %    |   |   | 2.2   |        |   |  | 3.0      | %       
|Other (income) expense                |                            |                   | (0.9  | )                 |   |  | (0.2  | %)           |    |                     | 0.1   |       |  |  | 0.0   | %    |   |   | (1.0  | )      |   |  | (1,000.0 | %)      
|                                      |                            |                   |       |                   |   |  |       |              |    |                     |       |       |  |  |       |      |   |   |       |        |   |  |          |         
|                                      | Net (Loss) Income          |                   | $     | (171.9            | ) |  |       | (43.3        | %) |                     | $     | 10.1  |  |  |       | 2.5  | % |   | $     | (182.0 | ) |  |          | (1,802.0 | %)
|                                      |                            |                   |       |                   |   |  |       |              |    |                     |       |       |  |  |       |      |   |   |       |        |   |  |          |         

Operating
Revenues

The revenue amounts consisted primarily of
revenue from sales under long-term agreements. The decrease in
revenues for 2002 compared to 2001 is primarily due to lower
merchant power sales caused by lower demand and spark spreads
and lower capacity sales under co-op contracts offset by
increased capacity sales at Sterlington and the addition of
Bayou Cove.

Operating
Costs and Expenses

Cost of operations consists of expenses for fuel,
plant operations and maintenance and net losses on non-hedge
energy contracts. The decrease in cost of operations for 2002
compared to 2001 is primarily due to a decrease in purchased
energy costs. NRG South Central typically buys electricity to
fulfill its obligations to customers, if it is more economical
than producing electricity. The adverse change in overall market
conditions greatly decreased the cost per kilowatt hour
purchased. The decrease in fuel expense is offset by an increase
in operating expenses due to a full year of operation at Big
Cajun I and the addition of Bayou Cove.



| |                              
| | -----------------------------
| | Depreciation and Amortization

The increase in depreciation expense for 2002
compared to 2001 is due to a full year of depreciation at
Sterlington and Big Cajun I Peaking and the addition of
Bayou Cove.

19



---



##### Table of Contents





| |                                       
| | --------------------------------------
| | General and Administrative
    Expense

NRG South Central entered into an agreement with
NRG Energy for corporate support and services. Under the
agreement, NRG Energy will provide services, as requested, in
areas such as human resources, accounting, finance, treasury,
tax, office administration, information technology, engineering,
construction management, environmental, legal and safety.
General and administrative expense include payments to NRG
Energy for corporate services, cost for legal and other contract
services, expenses related to office administration, as well as
costs for employee benefits. The increase in general and
administrative expense for 2002 compared to 2001 is primarily
due to financial consulting fees incurred in the fourth quarter
of 2002.



| |                
| | ---------------
| | Special Charges

During the third quarter of 2002, NRG South
Central experienced credit rating downgrades, defaults under
certain credit agreements, increased collateral requirements and
reduced liquidity. NRG South Central applied the provisions of
SFAS No. 144 to the asset carrying values of its projects
factoring in the probability of different courses of action
available to NRG South Central given its financial position and
liquidity constraints significantly affected by NRG South
Centrals downgrade at the end of July 2002. In applying
those provisions, NRG South Centrals management compared
the asset carrying value to total future estimated undiscounted
cash flows related to those projects. As a result, NRG South
Central determined that Bayou Cove Peaking Power, a wholly-owned
subsidiary of NRG Bayou Cove, and the turbine generator held at
NRG South Centrals New Roads Holdings subsidiary, became
impaired during the third quarter of 2002 and should be written
down to fair market value. The impairment of $138.6 million
was recognized as special charges in the third quarter of 2002
statement of operations, as restated during fourth quarter of
2002. See Item 15  Notes 3 and 18 to the
Consolidated Financial Statements and Notes of this
Form 10-K for additional information.

In addition to asset impairment charges, NRG
South Central incurred $1.4 million of expected severance
costs associated with the combining of various functions and
restructuring costs consisting of advisor fees. These costs were
also recorded as special charges.



| |                                      
| | -------------------------------------
| | Sale of Equity Method
    Investments

In September 2002, NRG Energy agreed to sell its
indirect 50% interest in SRW Cogeneration LP (SRW), to its
partner in SRW, Conoco, Inc. in consideration for a nominal
amount and Conocos agreement to terminate or assume all of
the obligations of NRG Energy in relation to SRW. SRW owns a
cogeneration facility in Orange County, Texas. NRG South Central
recorded a charge of approximately $48 million during the
quarter ended September 30, 2002 to write down the carrying
value of its investment due to the pending sale. The sale closed
on November 5, 2002.



| |                 
| | ----------------
| | Interest Expense

The increase in interest expense for 2002
compared to 2001 is primarily due to the increase in debt as a
result of the financing of Bayou Cove. See Item 15 
Note 6 to the Consolidated Financial Statements and Notes
of this Form 10-K for additional information.

20



---



##### Table of Contents





| |                                                                                      
| | -------------------------------------------------------------------------------------
| | For the Year Ended December 31, 2001
    compared to the Year Ended December 31, 2000

This analysis will primarily compare NRG South
Centrals revenue and expense items for the 12 months
ended December 31, 2001 with the 3 months ended
March 30, 2000 (predecessor results of operations) combined
with the 9 months ended December 31, 2000 (successor
results of operations).

|                                      |                            |                   |       |                   |  |  |       |              |   |                     |       |       |  |  |       |      |   |   |      |       |   |  |       |       |   
|------------------------------------- | -------------------------- | ----------------- | ----- | ----------------- |  |  | ----- | ------------ | - | ------------------- | ----- | ----- |  |  | ----- | ---- | - | - | ---- | ----- | - |  | ----- | ----- | --
|                                      |                            |                   |       |                   |  |  |       |             
|                                      |                            | Year Ended        |       | Year Ended        |  |  |       |             
|                                      |                            | December 31, 2001 |       | December 31, 2000 |  |  |       |             
|                                      |                            |                   |       |                   |  | 
|(Millions of Dollars)                 |                            |                   |       | % of revenue      |  |  |       | % of revenue |   | Increase/(decrease)
|                                      |                            |                   |       |                   |  |  |       |              |   |                    
|                                      |                            |                   |       |                   |  |  |       |              |   |                     |       |      
|Operating Revenue and equity earnings |                            | $                 | 397.0 |                   |  |  | 100.0 | %            |   | $                   | 386.5 |       |  |  | 100.0 | %    |   | $ | 10.5 |       |   |  | 2.7   | %    
|                                      |                            |                   |       |                   |  |  |       |              |   |                     |       |       |  |  |       |      |   |   |      |       |   |  |       |      
|Coal                                  |                            |                   | 129.4 |                   |  |  | 32.6  | %            |   |                     | 131.9 |       |  |  | 34.1  | %    |   |   | (2.5 | )     |   |  | (1.9  | %)   
|Natural Gas                           |                            |                   | 6.2   |                   |  |  | 1.5   | %            |   |                     | 10.8  |       |  |  | 2.8   | %    |   |   | (4.6 | )     |   |  | (42.6 | %)   
|Other Fuels                           |                            |                   | 1.1   |                   |  |  | 0.3   | %            |   |                     | 0.9   |       |  |  | 0.2   | %    |   |   | 0.2  |       |   |  | 22.2  | %    
|Purchased Energy                      |                            |                   | 94.0  |                   |  |  | 23.7  | %            |   |                     | 76.3  |       |  |  | 19.7  | %    |   |   | 17.7 |       |   |  | 23.2  | %    
|                                      |                            |                   |       |                   |  |  |       |              |   |                     |       |       |  |  |       |      |   |   |      |       |   |  |       |      
|                                      | Fuel Expense               |                   |       | 230.7             |  |  |       | 58.1         | % |                     |       | 219.9 |  |  |       | 55.9 | % |   |      | 10.8  |   |  |       | 4.9   | % 
|                                      |                            |                   |       |                   |  |  |       |              |   |                     |       |       |  |  |       |      |   |   |      |       |   |  |       |      
|Labor and benefits                    |                            |                   | 15.7  |                   |  |  | 4.0   | %            |   |                     | 14.2  |       |  |  | 3.7   | %    |   |   | 1.5  |       |   |  | 10.6  | %    
|Parts and supplies                    |                            |                   | 21.0  |                   |  |  | 5.3   | %            |   |                     | 20.0  |       |  |  | 5.2   | %    |   |   | 1.0  |       |   |  | 5.0   | %    
|Property taxes                        |                            |                   | 9.2   |                   |  |  | 2.3   | %            |   |                     | 6.2   |       |  |  | 1.6   | %    |   |   | 3.0  |       |   |  | 48.4  | %    
|                                      |                            |                   |       |                   |  |  |       |              |   |                     |       |       |  |  |       |      |   |   |      |       |   |  |       |      
|                                      | Operations and maintenance |                   |       | 45.9              |  |  |       | 11.6         | % |                     |       | 40.4  |  |  |       | 10.5 | % |   |      | 5.5   |   |  |       | 13.6  | % 
|                                      |                            |                   |       |                   |  |  |       |              |   |                     |       |       |  |  |       |      |   |   |      |       |   |  |       |      
|                                      | Cost of operations         |                   |       | 276.6             |  |  |       | 69.7         | % |                     |       | 260.3 |  |  |       | 67.3 | % |   |      | 16.3  |   |  |       | 6.3   | % 
|Depreciation and amortization         |                            |                   | 29.9  |                   |  |  | 7.5   | %            |   |                     | 30.4  |       |  |  | 7.9   | %    |   |   | (0.5 | )     |   |  | (1.6  | %)   
|General and administrative            |                            |                   | 7.6   |                   |  |  | 1.9   | %            |   |                     | 8.0   |       |  |  | 2.1   | %    |   |   | (0.4 | )     |   |  | (5.0  | %)   
|Interest                              |                            |                   | 72.7  |                   |  |  | 18.3  | %            |   |                     | 56.0  |       |  |  | 14.5  | %    |   |   | 16.7 |       |   |  | 29.8  | %    
|Other (income) expense                |                            |                   | 0.1   |                   |  |  | 0.0   | %            |   |                     | (1.4  | )     |  |  | (0.4  | %)   |   |   | 1.5  |       |   |  | 107.1 | %    
|                                      |                            |                   |       |                   |  |  |       |              |   |                     |       |       |  |  |       |      |   |   |      |       |   |  |       |      
|                                      | Net (Loss) Income          |                   | $     | 10.1              |  |  |       | 2.5          | % |                     | $     | 33.2  |  |  |       | 8.6  | % |   | $    | (23.1 | ) |  |       | (69.6 | %)
|                                      |                            |                   |       |                   |  |  |       |              |   |                     |       |       |  |  |       |      |   |   |      |       |   |  |       |      



| |                   
| | ------------------
| | Operating Revenues

The revenue amounts consisted primarily of
revenue from sales under long-term agreements for both years.
The increase in revenue for 2001 compared to 2000 is due
primarily to a 0.4% increase MWhs sold which were
partially offset by a decrease in contracted sales.



| |                             
| | ----------------------------
| | Operating Costs and Expenses

Cost of operations consist of expenses for fuel,
plant operations and maintenance, and net losses on non-hedge
energy contracts. The increase in fuel expense for 2001 compared
to 2000 is due primarily to a slight increase in coal and gas
per MWh cost.



| |                              
| | -----------------------------
| | Depreciation and Amortization

This expense primarily relates to the acquisition
costs of the Cajun facilities, which are being depreciated over
twenty-five to forty years.



| |                                       
| | --------------------------------------
| | General and Administrative
    Expense

NRG South Central entered into an agreement with
NRG Energy for corporate support and services. Under the
agreement, NRG Energy will provide services, as requested, in
areas such as human resources, accounting, finance, treasury,
tax, office administration, information technology, engineering,
construction management, environmental, legal and safety.
General and administrative expense include payments to NRG

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Energy for corporate services, costs for legal
and other contract services, expenses related to office
administration, as well as costs for employee benefits.




| |                 
| | ----------------
| | Interest Expense

Interest expense relates to the amortization of
deferred finance costs and interest on the senior secured bonds
issued to finance the acquisition of the Cajun facilities.

Critical Accounting Policies and
Estimates

NRG South Centrals discussion and analysis
of its financial condition and results of operations are based
upon NRG South Central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
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 South Central evaluates
its estimates utilizing historic experience, consultation with
experts and other methods NRG South Central considers reasonable
in particular circumstances. In any case, actual results may
differ significantly from NRG South Centrals estimates.
Any effects on NRG South Central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 South Centrals significant accounting
policies are summarized in Item 15  Note 2
of the Consolidated Financial Statements. The following table
identifies certain of the significant accounting policies listed
in Item 15  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 South Centrals management in their
application, have a significant impact on NRG South
Centrals consolidated financial statements. NRG South
Central identifies its most critical accounting policies as
those that are the most pervasive and important to the portrayal
of NRG South Central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                                                                                                                                                                                                                                                                                                 
|                                              |  |                                                                                                                                                                                                                                                                                                                                               
|Capitalization Practices/ Purchase Accounting |  |  Determination of beginning and ending
    of capitalization periods
     Allocation of purchase prices to identified assets                                                                                                                                                                                                                
|Asset Valuation and Impairment                |  |  Recoverability of investment through
    future operations
     Regulatory and political environments and
    requirements
     Estimated useful lives of assets
     Environmental obligations and operational
    limitations
     Estimates of future cash flows
     Estimates of fair value
     Judgment about triggering events

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|                                  |  |                                                                                                                                                                                                                                                                      
|--------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Accounting Policy                 |  | Judgments/Uncertainties Affecting Application                                                                                                                                                                                                                        
|                                  |  |                                                                                                                                                                                                                                                                      
|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
     Regulatory and political environments and
    requirements
|Litigation Claims and Assessments |  |  Impacts of court decisions
     Estimates of ultimate liabilities arising from legal
    claims                                                                                                                                                                   

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

Capitalization
Practices and Purchase Accounting

As of December 31, 2002, NRG South Central
has a carrying value of approximately $1.1 billion of net
property, plant and equipment, $1.0 million of which is
under construction, representing approximately 81% of total
assets. These amounts represent the estimated fair values at the
date of acquisition and construction. 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 South Central, the carrying value reflects
the application of NRG South Centrals property, plant and
equipment policies which incorporate estimates, assumptions and
judgments by management relative to the capitalized costs and
useful lives of NRG South Centrals generating facilities.
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 or when construction
is terminated. Capitalized interest was approximately
$6.3 million in 2002. 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 South Centrals Management
Committee. 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.
Capitalized costs are charged to expense if a project is
abandoned or management otherwise determines the cost to be
unrecoverable.

Impairment of
Long Lived Assets

NRG South Central evaluates property, plant and
equipment and intangible assets for impairment whenever
indicators of impairment exist. 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, through considering project specific
assumptions for long-term power pool prices, escalated future
project operating costs and expected plant operations. 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

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the fair value of the assets by factoring in the
probability weighting of different courses of action available
to NRG South Central. Generally, fair value will be determined
using valuation techniques such as the present value of expected
future cash flows. Assets to be disposed of are reported at the
lower of the carrying amount or fair value less the cost to
sell. As of December 31, 2002, net income from continuing
operations was reduced by $138.6 million due to impairments
recorded in 2002. Asset impairment evaluations are, by nature
highly subjective.


Revenue
Recognition and Uncollectible Receivables

NRG South Central 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. Revenues from the sale of
electricity are recorded based upon the output delivered and
capacity provided at rates specified under contract terms or
prevailing market rates. Under fixed-price contracts, revenues
are recognized as products or services are delivered. Revenues
and related costs under cost reimbursable contract provisions
are recorded as costs are incurred. Anticipated future losses on
contracts are charged against income when identified. NRG South
Central uses the equity method of accounting to recognize its
pro rata share of the net income or loss of its unconsolidated
investments. NRG South Central 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 South Central 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
South Central to record all derivatives on the balance sheet at
fair value. Changes in the fair value of non-hedge derivatives
are immediately recognized in earnings. Changes in the fair
value of derivatives accounted for as hedges are either
recognized in earnings as an offset to the changes 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 South Central 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. 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 South Central has
entered into. In determining the fair value of these
derivative/financial instruments NRG South Central uses
estimates, various assumptions, judgment of management and when
considered appropriate third party experts in determining the
fair value of these derivatives.

Off Balance-Sheet Items

As of December 31, 2002, NRG South Central
does not have any significant relationships with structured
finance or special purpose entities that provide liquidity,
financing or incremental market risk or credit risk.

Liquidity and Capital Resources

Liquidity
Issues of NRG Energy and it Subsidiaries  Current
Status and Chain of Events

In December 2001, Moodys Investor Service
(Moodys) placed NRG Energys long-term senior
unsecured debt rating on review for possible downgrade. In
response, Xcel Energy and NRG Energy put into effect a plan to
preserve NRG Energys investment grade rating and improve
its financial condition. This plan included financial support to
NRG Energy from Xcel Energy; marketing certain NRG Energy assets
for sale; canceling and deferring capital spending; and reducing
corporate expenses.

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In response to a possible downgrade, during 2002,
Xcel Energy contributed $500 million to NRG Energy, and NRG
Energy and its subsidiaries sold assets and businesses that
provided NRG Energy in excess of $286 million in cash and
eliminated approximately $432.0 million in debt. NRG Energy
also cancelled or deferred construction of approximately 3,900
MW of new generation projects. On July 26, 2002, Standard
& Poors (S&P) downgraded NRG Energys senior
unsecured bonds to below investment grade, and three days later
Moodys also downgraded NRG Energys senior unsecured
debt rating to below investment grade. Since July 2002, NRG
Energy senior unsecured debt, as well as the secured NRG
Northeast Generating LLC bonds and the secured NRG South Central
Generating LLC bonds and Secured LSP Energy (Batesville) bonds
were downgraded multiple times. After NRG Energy failed to make
payments due under certain unsecured bond obligations on
September 16, 2002, both Moodys and S&P lowered
their ratings on NRG Energys and its subsidiaries
unsecured bonds once again. Currently, NRG Energys
unsecured bonds carry a rating of between CCC and D at S&P
and between Ca and C at Moodys, depending on the specific
debt issue.

As a result of the downgrade of NRG Energys
credit rating, declining power prices, increasing fuel prices,
the overall down-turn in the energy industry, and the overall
down-turn in the economy, NRG Energy has experienced severe
financial difficulties. These difficulties have caused NRG
Energy to, among other things, miss scheduled principal and
interest payments due to its corporate lenders and bondholders,
prepay for fuel and other related delivery and transportation
services and provide performance collateral in certain
instances. NRG Energy has also recorded asset impairment charges
of approximately $3.1 billion, related to various operating
projects as well as for projects that were under construction
which NRG Energy has stopped funding.

NRG Energy and its subsidiaries (including NRG
South Central) have failed to timely make several interest
and/or principal payments on its indebtedness. These missed
payments have resulted in cross-defaults of numerous other
non-recourse and limited recourse debt instruments of NRG Energy
and have caused the acceleration of multiple debt instruments of
NRG Energy, rendering such debt immediately due and payable. For
more specific information regarding NRG Energys liquidity
issues, refer to Liquidity Issues in Item 1 of
Form 10-K filed by NRG Energy on March 31, 2003.

In addition to the payment defaults described
above, prior to the downgrades many corporate guarantees and
commitments of NRG Energy and its subsidiaries required that
they be supported or replaced with letter of credit or cash
collateral within 5 to 30 days of a ratings downgrade below
Baa3 or BBB- by Moodys or Standard & Poors,
respectively. As a result of the downgrades on July 26 and
July 29, NRG Energy received demands to post collateral
aggregating approximately $1.1 billion. NRG Energy is
presently working with various secured project lender groups
with respect to the issue of posting collateral and is working
toward establishing a comprehensive plan of restructuring.

In August 2002, NRG Energy retained financial and
legal restructuring advisors to assist its management in the
preparation of such comprehensive financial and operational
restructuring. NRG Energy and its advisors have been meeting
regularly to discuss restructuring issues with an ad hoc
committee of its bondholders and a steering committee of its
bank lenders (the Ad Hoc Creditors Committees). In November
2002, NRG Energy and Xcel Energy presented a comprehensive plan
of restructuring to the Ad Hoc Creditors Committees. The
restructuring plan has served as a basis for continuing
negotiations between the Ad Hoc Creditors Committees, NRG Energy
and Xcel Energy related to a consensual plan of reorganization
for NRG Energy. If a comprehensive plan of restructuring is
ultimately agreed to, it is highly probable that such a plan
would be implemented through the commencement of a voluntary
Chapter 11 bankruptcy proceeding. If NRG Energy seeks
protection under Chapter 11 of the Bankruptcy Code, it is
likely that NRG Energy would also seek such protection for
certain wholly-owned subsidiaries, which may include NRG South
Central. For more specific information regarding NRG
Energys restructuring efforts, refer to Liquidity
Issues in Item 1 of Form 10-K filed by NRG
Energy on March 31, 2003.

On November 22, 2002, five former NRG Energy
executives filed an involuntary Chapter 11 petition against
NRG Energy in U.S. Bankruptcy Court for the District of
Minnesota. Under provisions of federal law, NRG Energy has the
full authority to continue to operate its business as if the
involuntary petition had not

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been filed unless and until a court hearing on
the validity of the involuntary petition is resolved adversely
to NRG Energy. On December 16, 2002, NRG Energy responded
to the involuntary petition, contesting the petitioners
claims and filing a motion to dismiss the case. On
February 19, 2003, NRG Energy announced that it had reached
a settlement with the petitioners. The U.S. Bankruptcy Court for
the District of Minnesota will hear NRG Energys motion to
approve the settlement and dismiss the involuntary petition. Two
of NRG Energys creditors have objected to the motion to
dismiss. There can be no assurance that the court will dismiss
the involuntary petition. The Bankruptcy Court has discretion in
the review and approval of the settlement agreement. There is a
risk that the Bankruptcy Court may, among other things, reject
the settlement agreement or enter an order for relief under
Chapter 11.


On March 26, 2003, Xcel Energy announced
that its board of directors had approved a tentative settlement
agreement with holders of most of NRG Energys long-term
notes and the steering committee representing NRGs bank
lenders. The settlement is subject to certain conditions,
including the approval of at least a majority in dollar amount
of the NRG Energy bank lenders and long-term noteholders and
definitive documentation. There can be no assurance that such
approvals will be obtained. The terms of the settlement call for
Xcel Energy to make payments to NRG Energy over the next
13 months totaling up to $752 million for the benefit
of NRG Energys creditors in consideration for their waiver
of any existing and potential claims against Xcel Energy. Under
the settlement, Xcel Energy will make the following payments:
(i) $350 million at or shortly following the
consummation of a restructuring of NRG Energys debt. It is
expected this payment would be made prior to year-end 2003; (ii)
$50 million on January 1, 2004. At Xcel Energys
option, it may fill this requirement with either cash or Xcel
Energy common stock or any combination thereof; and
(iii) $352 million in April 2004.

NRG South
Central Indebtedness and Liquidity Issues

On March 30, 2000, NRG South Central issued
$800 million of senior secured bonds in two tranches. 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 on the bonds is payable in arrears on each
March 15 and September 15. Principal payments are made
semi-annually. The proceeds of the bonds were used to finance
NRG South Centrals acquisition of the Cajun generating
facilities on March 31, 2000. On December 13, 2000,
NRG South Central commenced an exchange offer of these bonds for
registered bonds that contain similar terms and conditions. The
exchange offer closed on January 19, 2001 with all bonds
being exchanged. As of December 31, 2002 there remains
$750.8 million of outstanding senior secured bonds, which
are classified as current. NRG South Central Generating LLC
secured bonds currently carry a rating of D at S&P and Caa1
at Moodys.

The debt agreements of NRG South Central
generally restrict its ability to pay dividends, make
distributions or otherwise transfer funds to NRG Energy under
certain circumstances such as failure to maintain a required
minimum debt service ratio. As of December 31, 2002, NRG
South Central did not meet the minimum debt service coverage
ratios, and therefore is restricted from making payments to NRG
Energy.

NRG South Central Generating is also precluded
from making payments to NRG Energy due to unfunded debt service
reserve accounts. Prior to the NRG Energy downgrades (see
above), the debt service reserve accounts were funded with
letters of guarantee from NRG Energy. Following the downgrade,
these accounts were required to be funded with cash from NRG
Energy within five to thirty days. The accounts were not funded
with cash from NRG Energy within the respective cure period, and
an event of default occurred, thereby giving the lenders the
right to accelerate the project financings. As a result of this
default, the long-term portion of the debt has been reclassified
as a current liability, as it is potentially callable within the
next twelve months. NRG South Central has approximately
$46.0 million of unfunded debt service reserve commitments
as March 31, 2003.

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NRG South Central and its subsidiaries have
failed to timely make the following interest and/or principal
payments on its indebtedness:

|                                 |  |        |       |      |  |          |       |          |  |           |           |          |  |   |      |  |  |   |      |  |  |  |           | 
|-------------------------------- |  | ------ | ----- | ---- |  | -------- | ----- | -------- |  | --------- | --------- | -------- |  | - | ---- |  |  | - | ---- |  |  |  | --------- | 
|                                 |  | Amount |       |      |  |          |       | Interest |  | Principal |           |         
|Debt ($ in millions)             |  | Issued |       | Rate |  | Maturity |       | Due      |  | Due       |           | Date Due
|                                 |  |        |       |      |  |          |       |          |  |           |           |         
|Debt (secured)                   |  |        |       |      |  |          |       |          |  |           |           |          |  |   |      |  |  |   |      |  |  |  |           | 
|NRG South Central Generating LLC |  | $      | 500.0 |      |  |          | 8.962 | %        |  |           | 3/15/2016 |          |  | $ | 20.2 |  |  | $ | 12.8 |  |  |  | 9/16/2002 | 
|                                 |  | $      | 500.0 |      |  |          | 8.962 | %        |  |           | 3/15/2016 |          |  |   |     |  |  | $ | 12.8 |  |  |  | 3/17/2003 | 
|NRG South Central Generating LLC |  | $      | 300.0 |      |  |          | 9.479 | %        |  |           | 9/15/2024 |          |  | $ | 14.2 |  |  |   |     |  |  |  | 9/16/2002 | 

In January 2003, the NRG South Central
bondholders unilaterally withdrew $35.6 million from a
restricted revenue account relating to the September 15,
2002 interest payment and fees; and on March 17, 2003 South
Central bondholders were paid $34.4 million due in relation
to the March semi-annual interest payment, but the
$12.8 million principal payment was deferred. As of
March 31, 2003, NRG South Central had cash and cash
equivalents, including amounts in restricted cash, of
approximately $77.4 million.

The assets of Big Cajun I Peaking, NRG
Sterlington and NRG Bayou Cove have not been pledged as
collateral under the NRG South Central Generating LLC secured
bonds. The assets of Big Cajun I Peaking, NRG Sterlington
and NRG Bayou Cove have, however, been pledged as collateral
under the $325,000,000 Series A Floating Rate Senior
Secured Bonds due 2019, issued by NRG Peaker Finance Company LLC
(the Peaker financing facility). The Peaker
financing facility is currently in default due to the triggering
of its cross-default provisions upon NRG Energys default
with respect to other debt instruments. At this point, the
Peaker financing facility has not been accelerated by its
creditors.

As a part of the comprehensive restructuring of
NRG Energy, NRG Energys financial and legal restructuring
advisors have been assisting the management of NRG South Central
in the preparation of a comprehensive financial and operational
restructuring for NRG South Central. NRG South Central and its
advisors have been meeting regularly to discuss restructuring
issues relating to NRG South Central with an ad hoc committee of
its bondholders (the NRG South Central Bondholder Committee).
NRG South Central, its management and its financial and legal
advisors have engaged in discussions with the NRG South Central
Bondholder Committee regarding the terms and conditions of a
restructuring of the debt of NRG South Central.



| |           
| | ----------
| | Cash Flows

|                                                        |  |                                 |         |      |  |      |         |   |  |   |        | 
|------------------------------------------------------- |  | ------------------------------- | ------- | ---- |  | ---- | ------- | - |  | - | ------ | 
|                                                        |  |                                
|                                                        |  | For the Year Ended December 31,
|                                                        |  |                                
|(Thousands of Dollars)                                  |  | 2002                            |         | 2001 |  | 2000
|                                                        |  |                                 |         |      |  |     
|Net cash provided by/(used in) operating
    Activities |  | $                               | 130,631 |      |  | $    | (10,542 | ) |  | $ | 46,178 | 

Net cash provided by operations for the year
ended December 31, 2002 increased in comparison to 2001,
primarily due to NRG South Centrals efforts to conserve
cash by deferring the payments of interest on bonds and credit
facilities and managing its cash flows more closely. In
addition, NRG South Central has deferred payments to affiliates.
Net cash provided by operating activities decreased for the year
ended December 31, 2001 in comparison to 2000, primarily
due to adverse changes in working capital components.

|                                      |  |                                 |          |      |  |      |        |   |  |   |            |  
|------------------------------------- |  | ------------------------------- | -------- | ---- |  | ---- | ------ | - |  | - | ---------- | -
|                                      |  |                                
|                                      |  | For the Year Ended December 31,
|                                      |  |                                
|(Thousands of Dollars)                |  | 2002                            |          | 2001 |  | 2000
|                                      |  |                                 |          |      |  |     
|Net cash used in investing activities |  | $                               | (124,567 | )    |  | $    | (8,866 | ) |  | $ | (1,059,040 | )

Net cash used in investing for the year ended
December 31, 2002 increased in comparison to 2001. The
increase is due to an increase in restricted cash to meet the
requirements under debt service reserve commitments. Net cash
used in investing activities for the year ended
December 31, 2001 decreased in comparison to 2000. The
decrease was due to reduced capital expenditures and the
acquisition of the Cajun facilities in 2000.

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|                                                        |  |                                 |        |      |  |      |        |  |  |   |           | 
|------------------------------------------------------- |  | ------------------------------- | ------ | ---- |  | ---- | ------ |  |  | - | --------- | 
|                                                        |  |                                
|                                                        |  | For the Year Ended December 31,
|                                                        |  |                                
|(Thousands of Dollars)                                  |  | 2002                            |        | 2001 |  | 2000
|                                                        |  |                                 |        |      |  |     
|Net cash (used in)/provided by financing
    activities |  | $                               | (8,962 | )    |  | $    | 19,470 |  |  | $ | 1,016,008 | 

Net cash used in financing for the year ended
December 31, 2002 increased in comparison to 2001. The
increase is primarily due to the repayment of the revolving
credit facility during 2002. Net cash provided by financing
activities for the year ended December 31, 2001 decreased
in comparison to 2000. The decrease is primarily due to less
member contributions and lower proceeds received upon issuance
of debt in 2001.

Capital Commitments



| |                                     
| | ------------------------------------
| | Prospective Capital
    Requirements

Management forecasts capital expenditures, which
includes minor refurbishments, environmental compliance and
normal and major maintenance, to total approximately
$10-$15 million in the year 2003. NRG South Central
anticipates funding its ongoing capital requirements through
operating cash flows and existing cash. NRG Energys
capital expenditure program is subject to continuing review and
modification. The timing and actual amount of expenditures may
differ significantly based upon plant operating history,
unexpected plant outages, changes in the regulatory environment,
the availability of cash and restructuring efforts.



| |                                                       
| | ------------------------------------------------------
| | Contractual Obligations and Commercial
    Commitments

NRG South Central has a variety of contractual
obligations and other commercial commitments that represent
prospective cash requirements in addition to its capital
expenditure program. The following is a summarized table of
contractual obligations. See additional discussion in
Item 15  Notes 6, 12 and 17 to the
Consolidated Financial Statements.

|                                   |  |                                                        |         |       |  |       |         |       |  |         |     |  |  |   |    |  |  |   |     | 
|---------------------------------- |  | ------------------------------------------------------ | ------- | ----- |  | ----- | ------- | ----- |  | ------- | --- |  |  | - | -- |  |  | - | --- | 
|                                   |  |                                                       
|                                   |  | Payments Due by Period Subsequent to December 31, 2002
|                                   |  |                                                       
|                                   |  |                                                        |         | Short |  | 1-3   |         | 4-5   |  | After  
|(Thousands of Dollars)             |  | Total                                                  |         | Term  |  | Years |         | Years |  | 5 Years
|                                   |  |                                                        |         |       |  |       |         |       |  |        
|Long term debt                     |  | $                                                      | 750,750 |       |  | $     | 750,750 |       |  | $       |     |  |  | $ |    |  |  | $ |     | 
|Note payable  affiliate           |  |                                                        | 105,491 |       |  |       | 105,491 |       |  |         |     |  |  |   |    |  |  |   |     | 
|Operating leases                   |  |                                                        | 672     |       |  | $     | 297     |       |  | $       | 172 |  |  | $ | 43 |  |  | $ | 160 | 
|                                   |  |                                                        |         |       |  |       |         |       |  |         |     |  |  |   |    |  |  |   |     | 
|Total contractual cash obligations |  | $                                                      | 856,913 |       |  | $     | 856,538 |       |  | $       | 172 |  |  | $ | 43 |  |  | $ | 160 | 
|                                   |  |                                                        |         |       |  |       |         |       |  |         |     |  |  |   |    |  |  |   |     | 

|                             |  |                                                                |         |       |  |       |         |       |  |         |  |  |  |   |  |  |  |   |  | 
|---------------------------- |  | -------------------------------------------------------------- | ------- | ----- |  | ----- | ------- | ----- |  | ------- |  |  |  | - |  |  |  | - |  | 
|                             |  |                                                               
|                             |  | Amount of Commitment Expiration Period as of December 31, 2002
|                             |  |                                                               
|                             |  | Total                                                          |         |      
|                             |  | Amounts                                                        |         | Short |  | 1-3   |         | 4-5   |  | After  
|(Thousands of Dollars)       |  | Committed                                                      |         | Term  |  | Years |         | Years |  | 5 Years
|                             |  |                                                                |         |       |  |       |         |       |  |        
|Guarantees                   |  | $                                                              | 359,100 |       |  | $     | 359,100 |       |  | $       |  |  |  | $ |  |  |  | $ |  | 
|                             |  |                                                                |         |       |  |       |         |       |  |         |  |  |  |   |  |  |  |   |  | 
|Total commercial commitments |  | $                                                              | 359,100 |       |  | $     | 359,100 |       |  | $       |  |  |  | $ |  |  |  | $ |  | 
|                             |  |                                                                |         |       |  |       |         |       |  |         |  |  |  |   |  |  |  |   |  | 

NRG South Central guarantees the purchase and
sale of fuel, emission credits and power generation to and from
third parties in connection with the operation of some of NRG
South Centrals generation facilities. As of
December 31, 2002, NRG South Centrals obligations
pursuant to its guarantees of the performance of its
subsidiaries totaled approximately $39.7 million.

In June 2002, NRG Peaker Finance Company LLC
issued $325 million of secured bonds to make loans to
affiliates which own natural gas fired peaker
electric generating projects. As of December 31, 2002,
$319.4 million remains outstanding. NRG Peaker Finance
Company LLC advanced an unsecured loan in the amount of
$107.4 million to Bayou Cove through a project loan
agreement. The remaining $217.6 million was advanced to NRG
Rockford LLC and Rockford II LLC, indirect wholly owned
subsidiaries of NRG Energy, Inc. As of December 31, 2002,
Bayou Cove had an intercompany loan outstanding in the amount of
$105.5 million. The principal and interest payments, in
addition to the obligation to pay fees and other finance
expenses, in connection with the bonds are jointly and severally
guaranteed by each of the three projects. As a

28



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result, NRG South Centrals obligation
pursuant to its guarantee of the secured bonds is
$319.4 million as of December 31, 2002.


Louisiana Generating is a guarantor of the bonds
issued on March 30, 2000 to acquire the Cajun facilities.

Other Contingencies



| |                                    
| | -----------------------------------
| | EWG Status for Big Cajun
    Peaker

In April 2002, NRG Energy discovered that filings
with the Federal Energy Regulatory Commission (FERC) to
exempt NRG Energys Big Cajun Peaking facility in Louisiana
from regulation by the Securities and Exchange Commission (SEC)
under the Public Utility Holding Company Act (PUHCA), and to
sell power from the facility at market-based rates, had not been
made. NRG Energy made those filings on April 17, 2002 and
has discussed the situation with FERC and the SEC. While NRG
Energy does not expect any material legal or regulatory action
to be taken by those agencies, the failure to have made these
filings could be viewed as an event of default under certain of
NRG Energys debt facilities, including its $2 billion
construction and acquisition revolving credit facility and
$1 billion unsecured corporate revolving line of credit.
Accordingly, NRG Energy sought and has received from its
construction and acquisition facility lenders a waiver of any
event of default occurring as a result of Big Cajun Peaking
Powers failure to file for exemption from regulation under
PUHCA, and has sought and received from its corporate revolver
lenders an amendment to its corporate revolving line of credit
to provide that such failure to obtain or maintain exemption
from regulation under PUHCA will not cause an event of default
under that facility. While the construction and acquisition
revolver waiver and the corporate revolver amendment were being
discussed and finalized with its lenders, NRG Energy did not
borrow under either of these credit facilities. The waiver under
the construction and acquisition facility continues indefinitely
unless a default arising out of any possible PUHCA violation
occurs. On September 20, 2002, FERC issued its letter order
finding Big Cajun Peaking to be an exempt wholesale generator as
defined in Section 32 of PUHCA effective as of
April 17, 2002.

Derivative Instruments

The tables below disclose the derivative
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, 2002 based on whether fair values are
determined by quoted market prices or more subjective means; and
indicates the maturities of contracts at December 31, 2002.



| |                    
| | -------------------
| | Derivative Activity

|                                                                           |  |       |      |  
|-------------------------------------------------------------------------- |  | ----- | ---- | -
|Gains/(Losses)                                                             |  |      
|(Thousands of dollars)                                                     |  | Total
|                                                                           |  |      
|Fair value of contracts outstanding at the
    beginning of the period     |  | $     | (18  | )
|Contracts realized or otherwise settled during
    the period              |  |       | 822  |  
|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                                               |  |       | (827 | )
|                                                                           |  |       |      |  
|Fair value of contracts outstanding at the end of
    the period           |  | $     | (23  | )
|                                                                           |  |       |      |  

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##### Table of Contents





| |                      
| | ---------------------
| | Sources of Fair Value

|                                                     |  |                                       |    |           |  |             |   |           |  |       |   |  |  |   |   |  |  |   |    | 
|---------------------------------------------------- |  | ------------------------------------- | -- | --------- |  | ----------- | - | --------- |  | ----- | - |  |  | - | - |  |  | - | -- | 
|                                                     |  |                                      
|                                                     |  | Fair Value of Contracts at Period End
|                                                     |  |                                      
|                                                     |  | Maturity                              |    |           |  | Maturity in |   | Total    
|Maturity schedule                                    |  | Less than                             |    | Maturity  |  | Maturity    |   | excess of |  | Fair 
|(Thousands of dollars)                               |  | 1 Year                                |    | 1-3 Years |  | 4-5 Years   |   | 5 Years   |  | Value
|                                                     |  |                                       |    |           |  |             |   |           |  |      
|Prices actively quoted                               |  | $                                     | 23 |           |  | $           |  |           |  | $     |  |  |  | $ |  |  |  | $ | 23 | 
|Prices provided by other external sources            |  |                                       |   |           |  |             |  |           |  |       |  |  |  |   |  |  |  |   |   | 
|Prices based on models & other valuation
    methods |  |                                       |   |           |  |             |  |           |  |       |  |  |  |   |  |  |  |   |   | 
|                                                     |  |                                       |    |           |  |             |   |           |  |       |   |  |  |   |   |  |  |   |    | 
|                                                     |  | $                                     | 23 |           |  | $           |  |           |  | $     |  |  |  | $ |  |  |  | $ | 23 | 
|                                                     |  |                                       |    |           |  |             |   |           |  |       |   |  |  |   |   |  |  |   |    | 

Environmental Matters



| |                                     
| | ------------------------------------
| | Environmental Regulatory
    Matters

The construction and operation of power projects
are subject to stringent environmental and safety protection and
land use laws and 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 become more
stringent and NRG South Centrals facilities are not
exempted from coverage, NRG South Central could be required to
make extensive modifications to further reduce potential
environmental impacts. Also, NRG South Central could be held
responsible under environmental and safety laws for the cleanup
of pollutant releases at its facilities or at off-site locations
where it has sent wastes.

NRG South Central and its subsidiaries strive to
exceed the standards of compliance with applicable environmental
and safety regulations. Nonetheless, NRG South Central expects
that future liability under or compliance with environmental and
safety requirements could have a material effect on its
operations or competitive position. 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 possible changes to environmental and
safety regulations, regulatory interpretations or enforcement
policies. In general, the effect of future laws or regulations
is expected to require the addition of pollution control
equipment or the imposition of restrictions on NRG South
Centrals operations.

NRG South Central establishes accruals where
reasonable estimates of probable environmental and safety
liabilities are possible. NRG South Central 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. For more
information on Environmental Matters see
Item 15  Note 12 to the Consolidated
Financial Statements.



| |                                        
| | ---------------------------------------
| | U.S. Federal Regulatory
    Initiatives

Several federal regulatory and legislative
initiatives are being undertaken in the U.S. to further limit
and control pollutant emissions from fossil-fuel-fired
combustion units. Although the exact impact of these initiatives
is not known at this time, all of NRG South Centrals power
plants will be affected in some manner by the expected changes
in federal environmental laws and regulations. In Congress,
legislation has been proposed that would impose annual caps on
U.S. power plant emissions of nitrogen oxides (NOX),
sulfur dioxide (SO2), mercury, and, in some
instances, carbon dioxide (CO2). NRG South Central is
currently participating in the debates around such legislative
proposals as a member of the Electric Power Supply Association.
Federal legislation relating to NOX, SO2
and mercury is likely in the next two years. The prospects for
passage of the legislation relating to CO2 is more
uncertain. The U.S. Environmental Protection Agency
(USEPA) is scheduled to propose in December 2003 and
finalize in December 2004 rules governing mercury emissions from
power plants. In support of this schedule, USEPA and critical
stakeholders, some of which are aligned with NRG South
Centrals interests, are presently conducting a thorough
review of existing power plant mercury emissions data. Since
these mercury rules have not yet been proposed and legislation
has

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not yet supplanted them, it is not possible for
NRG South Central to determine the extent to which the rules
will affect its domestic operations.


During the first quarter of 2002, USEPA proposed
new rules governing cooling water intake structures at existing
power facilities. These rules are scheduled to be finalized by
February 16, 2004. The proposed rules specify certain
location, design, construction, and capacity standards for
cooling water intake structures at existing power plants using
the largest amounts of cooling water. These rules will require
implementation of the best technology available for minimizing
adverse environmental impacts unless a facility shows that such
standards would result in very high costs or little
environmental benefit. The proposed rules would require NRG
South Central facilities that withdraw water in amounts greater
than 50 million gallons per day to submit with wastewater
permit applications certain surveys, plans, operational
measures, and restoration measures that combined would act to
minimize adverse environmental impacts. These anticipated
cooling water intake structure rules could have a material
effect on NRG South Centrals operations.

Other Federal initiatives that could affect NRG
South Central and that would govern regional haze, fine
particulate matter, and ozone are underway, but under extended
compliance implementation timeframes ranging from 2009 and
beyond.



| |                                    
| | -----------------------------------
| | Regional Regulatory
    Initiatives

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 South Central
participated in development of the revisions, which require the
reduction of NOX emissions at the gas-fired Big Cajun
I Power Station and coal-fired Big Cajun II Power Station to 0.1
pounds NOX per million Btu heat input and 0.21 pounds
NOX per million Btu heat input, respectively. 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
combustion controls to be passed through to the cooperatives.
The capital cost of combustion controls required at the Big
Cajun II Generating Station to meet the States
NOXregulations will total about $10.0 million
each for Units 1 & 2. Unit 3 has already made such changes.
The capital cost of combustion controls required at the Big
Cajun I Generating Station to meet the States NOx
regulations will total about $5 million to $10 million
for the Unit 1 & 2 steam boilers.



| |                         
| | ------------------------
| | Site Remediation Matters

Under various federal, state and local
environmental laws and regulations, a current or previous owner
or operator of any facility, including an electric generating
facility, may be required to investigate and remediate releases
or threatened releases of hazardous or toxic substances or
petroleum products located at the facility, and may be held
liable to a governmental entity or to third parties for property
damage, personal injury and investigation and remediation costs
incurred by the party in connection with any releases or
threatened releases. These laws, including the Comprehensive
Environmental Response, Compensation and Liability Act of 1980,
as amended by the Superfund Amendments and Reauthorization Act
of 1986, impose liability without regard to whether the owner
knew of or caused the presence of the hazardous substances, and
courts have interpreted liability under such laws to be strict
(without fault) and joint and several. The cost of
investigation, remediation or removal of any hazardous or toxic
substances or petroleum products could be substantial. NRG South
Central has not been named as a potentially responsible party
with respect to any off-site waste disposal matter.

Liabilities associated with closure, post-closure
care and monitoring of the ash ponds owned and operated on site
at the Big Cajun II Generating Station are addressed through the
use of a trust fund maintained by NRG South Central (one of the
instruments allowed by the Louisiana Department of Environmental
Quality for providing financial assurance for expenses
associated with closure and post-closure care of the ponds). The
value of the trust fund is approximately $4.6 million at
December 31, 2002 and NRG South Central is making annual
payments to the fund in the amount of about $116,000.

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Recent Accounting Developments

In June 2001, the FASB issued SFAS No. 143,
Accounting for Asset Retirement Obligations(SFAS No. 143). 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. The liability
is initially capitalized as part of the cost of the related
tangible long-lived asset and thus depreciated over the
assets useful life. Accretion of the liabilities due to
the passage of time will be an operating expense. Retirement
obligations associated with long-lived assets included within
the scope of SFAS No. 143 are those for which a legal
obligation exists under enacted laws, statutes written or oral
contracts, including obligations arising under the doctrine of
promissory estoppel. NRG South Central adopted SFAS No. 143
on January 1, 2003. NRG South Central is in the process of
evaluating the impact of adopting SFAS No. 143 on its
financial condition.

In April 2002, the FASB issued SFAS No. 145,
Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical
Corrections,(SFAS No. 145) that supercedes
previous guidance for the reporting of gains and losses from
extinguishment of debt and accounting for leases, among other
things. SFAS No. 145 requires that only gains and losses
from the extinguishment of debt that meet the requirements for
classification as Extraordinary Items, as prescribed
in Accounting Principles Board Opinion No. 30, should be
disclosed as such in the financial statements. Previous guidance
required all gains and losses from the extinguishment of debt to
be classified as Extraordinary Items. This portion
of SFAS No. 145 is effective for fiscal years beginning
after May 15, 2002, with restatement of prior periods
required. NRG South Central has no extraordinary gains or losses
resulting from extinguishment of debt during the three years
ended December 31, 2002 that will require restatement upon
adoption of this part of the statement.

In addition, SFAS No. 145 amends SFAS
No. 13, Accounting for Leases,(SFAS
No. 13) as it relates to accounting by a lessee for certain
lease modifications. Under SFAS No. 13, if a capital lease
is modified in such a way that the change gives rise to a new
agreement classified as an operating lease, the assets and
obligation are removed, a gain or loss is recognized and the new
lease is accounted for as an operating lease. Under SFAS
No. 145, capital leases that are modified so the resulting
lease agreement is classified as an operating lease are to be
accounted for under the sale-leaseback provisions of SFAS
No. 98, Accounting for Leases.These
provisions of SFAS No. 145 were effective for transactions
occurring after May 15, 2002

SFAS No. 145 will be applied as required.
Adoption of SFAS No. 145 is not expected to have a material
impact on NRG South Central.

In June 2002, the FASB issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities, (SFAS No. 146), SFAS No. 146
addresses financial accounting and reporting for costs
associated with exit or disposal activities and nullifies
Emerging Issues Task Force (EITF) Issue No. 94-3,
Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring).SFAS No. 146
applies to costs associated with an exit activity that does not
involve an entity newly acquired in a business combination or
with a disposal activity covered by SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets. The provisions of SFAS No. 146 are
effective for exit or disposal activities that are initiated
after December 31, 2002 , with early application
encouraged. SFAS No. 146 will be applied as required.

In November 2002, the FASB issued FASB
Interpretation No. 45, Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. The initial
recognition and initial measurement provisions of this
interpretation are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002,
irrespective of the guarantors fiscal year-end. The
disclosure requirements are effective for financial statements
of interim or annual periods ending after December 15,
2002. The interpretation addresses the disclosures to be made by
a guarantor in its interim and annual financial statements about
its obligations under guarantees. The interpretation also
clarifies the requirements related to the recognition of a
liability by a guarantor at the inception of the guarantee for
the obligations the guarantor has undertaken in issuing the
guarantee. See Note 17.

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In January 2003, the FASB issued FASB
Interpretation No. 46, Consolidation of Variable
Interest Entities(FIN No. 46). FIN No. 46
requires an enterprises consolidated financial statements
to include subsidiaries in which the enterprise has a
controlling interest. Historically, that requirement has been
applied to subsidiaries in which an enterprise has a majority
voting interest, but in many circumstances the enterprises
consolidated financial statements do not include the
consolidation of variable interest entities with which it has
similar relationships but no majority voting interest. Under FIN
No. 46 the voting interest approach is not effective in
identifying controlling financial interest. Assets of entities
consolidated upon adoption of the new standard will be initially
recorded at their carrying amounts at the date the requirements
of the new rule first apply. If determining carrying amounts as
required is impractical, then the assets are to be measured at
fair value the first date the new rule applies. Any difference
between the net amount of any previously recognized interest in
the newly consolidated entity should be recognized as the
cumulative effect of an accounting change. FIN No. 46
becomes effective in the third quarter of 2003. FIN No. 46
is not expected to have a significant impact on NRG South
Central.






|          |                                                               
|--------- | --------------------------------------------------------------
|Item 7A  | Quantitative and Qualitative Disclosures
    About Market Risk

Interest Rate Risk

NRG South Central may use interest rate hedging
contracts to mitigate the risks associated with movements in
interest rates and, when deemed appropriate, may enter into swap
agreements effectively converting floating rate obligations into
fixed rate obligations. NRG South Central and its subsidiaries
have primarily fixed rate long-term debt outstanding at
December 31, 2002. As a result, NRG South Central is not
significantly exposed to losses due to fluctuations in interest
rates.

Commodity Price Risk

NRG South Central is exposed to commodity price
variability in electricity, emission allowances and natural gas
and coal used to meet fuel requirements. To manage earnings
volatility associated with these commodity price risks, NRG
South Central, through its affiliate NRG Power Marketing, may
enter into commodity contracts, which may take the form of fixed
price, floating price or indexed forward sales or purchases, and
options, such as puts, calls and basis transactions.

Through NRG Power Marketing, NRG South Central
utilizes an undiversified Value-at-Risk (VAR) model
to determine the maximum potential three-day loss in the fair
value of the commodity price related financial instruments for
the forward 12 months. The VAR for NRG South Central
assumes a 95% confidence interval and reflects NRG South
Centrals merchant strategy, the generation assets, load
obligations and bilateral physical and financial transactions of
NRG South Central. The volatility estimate is based on the
implied volatility for at the money daily call options for
forward markets where NRG South Central has exposure. This model
encompasses the Entergy region.

The estimated maximum potential three-day loss in
fair value of the commodity price related financial instruments,
calculated using the VAR model is approximately
$6.3 million and $5.1 million for the year ended
December 31, 2002 and 2001, respectively. The average, high
and low amounts for the year ended December 31, 2002 were
$4.3 million, $6.6 million and $2.3 million,
respectively.

Credit Risk

NRG South Central 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. Through NRG Energys Treasury
department, NRG South Central maintains credit policies intended
to minimize overall credit risk and actively monitors these
policies to reflect changes in scope of operations. Standard
credit reviews are required for all of its counter parties. NRG
South Central does not believe its exposure to credit risk is
significant.

33



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##### Table of Contents








|         |                                                
|-------- | -----------------------------------------------
|Item 8  | Financial Statements and Supplementary
    Data

The consolidated financial statements and
schedule are listed in Part IV, Item 15 of this
Form 10-K.






|         |                                                                                              
|-------- | ---------------------------------------------------------------------------------------------
|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

|                      |  |     |    |       |  |                                                                        
|--------------------- |  | --- | -- | ----- |  | -----------------------------------------------------------------------
|Name                  |  | Age |    | Title
|                      |  |     |    |      
|Richard C. Kelly      |  |     | 57 |       |  | President and Management Committee Member                              
|Scott J. Davido       |  |     | 41 |       |  | Vice President, Assistant Secretary and
    Management Committee Member
|Stanley M. Marks      |  |     | 56 |       |  | Vice President                                                         
|George P. Schaefer    |  |     | 52 |       |  | Treasurer                                                              
|Robert A. Sagedy, Jr. |  |     | 35 |       |  | Management Committee Member (Independent)                              
|William T. Pieper     |  |     | 37 |       |  | Controller                                                             

Richard C. Kellyhas
been President and a Management Committee Member of NRG South
Central since October 2002. Mr. Kelly has also been a
Director of NRG Energy since August 2000. During 2002,
Mr. Kelly became the President and Chief Operating Officer
of NRG Energy. Mr. Kelly has been President 
Enterprises of Xcel Energy since August 2000, and was formerly
Executive Vice President of financial and support services and
Chief Financial Officer for New Century Energy 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.

Scott J. Davidohas
been Vice President, Assistant Secretary and Management
Committee Member of NRG South Central since October 2002. Mr.
Davido has also been Senior Vice President, General Counsel at
NRG Energy since October 2002. He served as Executive Vice
President, Chief Financial Officer, Treasurer and Secretary of
The Elder-Beerman Stores Corp. from 1999 to May 2002 and Senior
Vice President, General Counsel from 1997 to 1999.
Mr. Davido was a Partner, Business Practice Group with
Jones, Day, Reavis & Pogue in Pittsburgh, Pennsylvania
from January 1997 to December 1997 and an Associate, Business
Practice Group from September 1987 to December 1996.

Stanley M. Markshas
been Vice President of NRG South Central Generating LLC since
October 2002, Vice President of NRG North America-Western Region
since August 1998 and was previously Managing Director of Asset
Management of NRG Energy from February 1998. Prior to joining
NRG Energy, Mr. Marks was Vice President 
Finance of Pacific Generation Company. Prior to joining Pacific
Generation in 1995 Mr. Marks worked for PacifiCorp for
14 years. During that time Mr. Marks served, among
other positions, as Vice President  Finance, Electric
Operations and Vice President  Controller.

George P. Schaeferhas been Treasurer of NRG South
Central since December 2002. Mr. Schaefer has also been
Treasurer of NRG Energy since December 2002. Prior to December
2002, Mr. Schaefer served as Senior Vice President, Finance
and Treasurer for PSEG Global, Inc. for one year, Vice President
of Enron North America from 2000 to 2001 and Vice President and
Treasurer of Reliant Energy International from 1995 to 2000.
Mr. Schaefer was the Vice President, Business Development
for Entergy Power Group from 1993 through 1995 and held the
Senior Vice President, Structured Finance Group position with
General Electric Capital Corporation from 1982 through 1993.

Robert A. Sagedy, Jr.has been a Management Committee Member
of NRG South Central since November 2002. Since September 1999,
Mr. Sagedy has been Vice President  Client
Services for Entity

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Services Group, LLC, a company that provides
independent director, Delaware Resident Trustee, Passive
Investment Company and Offshore services to its clients. From
mid-1996 until August 1999, Mr. Sagedy was a Certified
Public Accountant with Heffler, Raqdetich & Saitta LLP.
NRG South Central pays Entity Services (SPV), LLC, a
wholly-owned subsidiary of Entity Services Group, LLC, an annual
fee of $1200 for Mr. Sagedys services.


William T. Pieperhas been Vice President and Controller
of NRG Energy since June 2001. In this capacity, Mr. Pieper
has principal responsibility for all accounting matters at NRG
Energy and its subsidiaries, including NRG South Central. 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.






|          |                       
|--------- | ----------------------
|Item 11  | Executive Compensation

All of NRG South Centrals executive
officers are employees of NRG Energy, NRG South Centrals
parent company, or Xcel Energy, NRG Energys parent
company, and do not receive additional compensation for their
service to NRG South Central. See Form 10-K filed by NRG
Energy on March 31, 2003 for information regarding
executive compensation at NRG Energy, and Form 10-K filed
by Xcel Energy on March 31, 2003 for information regarding
executive compensation at Xcel Energy.






|          |                                                                                                       
|--------- | ------------------------------------------------------------------------------------------------------
|Item 12  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder
    Matters

As of the latest practicable date, NRG Central,
Inc. owned 50% of the outstanding equity interests of NRG South
Central Generating LLC and South Central Generation, Inc. owned
50% of the outstanding equity interests of NRG South Central
Generating LLC. NRG Central, Inc. and South Central Generation,
Inc. are each wholly-owned subsidiaries of NRG Energy, Inc.






|          |                                                   
|--------- | --------------------------------------------------
|Item 13  | Certain Relationships and Related
    Transactions

NRG Energys energy marketing subsidiary,
NRG Power Marketing Inc. (NRG Power Marketing), provides a full
range of energy management services for many of NRG
Energys generation facilities. These services are provided
under bilateral contracts or agency agreements pursuant to which
NRG Power Marketing manages the sales and purchases of energy,
capacity and ancillary services, procures the fuel (coal and
natural gas) and associated transportation and manages the
emission allowance credits for these facilities. NRG Power
Marketing has continued to provide these services since NRG
Energy lost its investment grade ratings in July 2002, and
because of NRG Energys credit and liquidity limitations,
NRG Power Marketing has scaled back its activities. Since July
2002, NRG Power Marketing has focused primarily on procuring
fuel for, and marketing the power from, NRG Energys North
American generation facilities in the spot and short-term
markets.

NRG South Central and certain of its subsidiaries
entered into an operation and maintenance agreement with NRG
Operating Services, Inc., (NRG Operating Services) a
wholly-owned subsidiary of NRG Energy. The agreement is
perpetual in term until terminated in writing by NRG South
Central or its subsidiaries or until earlier terminated upon an
event of default. Under the agreement, at the request of NRG
South Central and certain of its subsidiaries, NRG Operating
Services manages, oversees and supplements the operation and
maintenance of the Cajun facilities.

During the years ended December 31, 2002 and
2001, and for the period March 30, 2000 (Inception) through
December 31, 2000, NRG South Central and certain of its
subsidiaries incurred no operating and maintenance costs from
NRG Operating Services.

NRG South Central entered into an agreement with
NRG Energy for corporate support and services. The agreement is
perpetual in term until terminated in writing by NRG South
Central or until earlier terminated upon an event of default.
Under the agreement, NRG Energy will provide services, as
requested, in areas such as human resources, accounting,
finance, treasury, tax, office administration, information
technol-

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##### Table of Contents



ogy, engineering, construction management,
environmental, legal and safety. Under the agreement, NRG Energy
is paid for personnel time as well as out-of-pocket costs.


During the years ended December 31, 2002 and
2001, and for the period March 30, 2000 (Inception) through
December 31, 2000, NRG South Central incurred approximately
$0.8 million, $0.6 million and $0.5 million,
respectively, for corporate support and services.

As of December 31, 2002 and 2001, NRG South
Central has an accounts payable-affiliates balance of
approximately $126.5 million and $27.2 million,
respectively, which consisted primarily of a payable to NRG
Energy for capitalized development costs incurred prior to the
acquisition of the Cajun facilities, construction costs related
to Bayou Cove, financing costs related to Bayou Cove in
connection with the Peaker facility and operating expenses paid
on behalf of NRG South Central as described in the paragraphs
above.




Item 14  Controls and
Procedures

The President and Treasurer (the Certifying
Officers) have evaluated NRG South Centrals disclosure
controls and procedures as defined in the rules of the SEC
within 90 days of the filing date of this report and have
determined that, except to the extent indicated otherwise in
this paragraph, disclosure controls and procedures were
effective in ensuring that material information required to be
disclosed by NRG South Central in the reports filed under the
Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the
SECs rules and forms. During the fourth quarter of 2002,
the Certifying Officers determined that there were certain
deficiencies in the internal controls relating to financial
reporting at NRG South Central caused by NRG South
Centrals pending financial restructuring and business
realignment. During the second half of 2002, there were material
changes and vacancies in senior NRG South Central management
positions and a diversion of NRG South Centrals financial
and management resources to restructuring efforts. These
circumstances detracted from NRG South Centrals ability
through its internal controls to timely monitor and accurately
assess the impact of certain transactions, as would be expected
in an effective financial reporting control environment. NRG
South Central has dedicated and will continue to dedicate in
2003 resources to make corrections to those control
deficiencies. Notwithstanding the foregoing and as indicated in
the certification accompanying the signature page to this
report, the Certifying Officers have certified that, to the best
of their knowledge, the financial statements, and other
financial information included in this report on Form 10-K,
fairly present in all material respects the financial
conditions, results of operations and cash flows of NRG South
Central as of, and for the periods presented in this report.

NRGs South Centrals Certifying
Officers are primarily responsible for the accuracy of the
financial information that is represented in this report. To
meet their responsibility for financial reporting, they have
established internal controls and procedures which, subject to
the disclosure in the foregoing paragraph, they believe are
adequate to provide reasonable assurance that NRG South
Centrals assets are protected from loss. There were no
significant changes in internal controls or in other factors
that could significantly affect these controls subsequent to the
date of the Certifying Officers evaluation.




PART IV




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

(a) Documents filed as part of this report.

(1) Consolidated Financial Statements

The following consolidated financial statements
of NRG South Central and related notes thereto, together with
the report thereon of PricewaterhouseCoopers LLP, appearing on
pages 38 through 81 are included herein:

Consolidated Balance Sheets 
December 31, 2002 and 2001.

Consolidated Statements of Operations 
December 31, 2002, 2001 and 2000.

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##### Table of Contents



Consolidated Statements of Cash Flows 
December 31, 2002, 2001 and 2000.

Consolidated Statements of Members
Equity  December 31, 2002, 2001 and 2000.

Notes to Consolidated Financial Statements.

(2) Consolidated Financial Statement
Schedules

None.

(3) Exhibits: See Exhibit Index
submitted as a separate section of this report.

(b) Reports on Form 8-K. NRG South
Central filed reports on Form 8-K on the following dates
over the last fiscal year: August 1, 2002, October 4,
2002, October 24, 2002, November 21, 2002 and
November 27, 2002.

(c) Exhibits Required by Item 601 of
Regulation S-K.

Reference is made to Item 15(a)(3) above.

(d) Consolidated Financial Statement
Schedule.

Reference is made to Item 15(a)(2) above.

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##### Table of Contents






Item 8  Financial
Statements and Supplementary Data

|                                           |  |          |    | 
|------------------------------------------ |  | -------- | -- | 
|                                           |  | Page No.
|                                           |  |         
|Report of Independent Accountants          |  |          | 39 | 
|Report of Independent Accountants          |  |          | 40 | 
|Consolidated Balance Sheets                |  |          | 41 | 
|Consolidated Statements of Operations      |  |          | 43 | 
|Consolidated Statements of Cash Flows      |  |          | 44 | 
|Consolidated Statements of Members Equity |  |          | 45 | 
|Notes to Consolidated Financial Statements |  |          | 46 | 

38



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##### Table of Contents



REPORT OF INDEPENDENT ACCOUNTANTS

To the Management Committee of

NRG South Central Generating LLC:


In our opinion, the accompanying consolidated
balance sheets and the related consolidated statements of
operations, of members equity and of cash flows present
fairly, in all material respects, the financial position of NRG
South Central Generating LLC and its subsidiaries at
December 31, 2002 and 2001, and the results of their
operations and their cash flows for the two years in the period
ended December 31, 2002 and for the period March 30,
2000 (Inception) through December 31, 2000 in conformity
with accounting principles generally accepted in the United
States of America. 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 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.

The accompanying consolidated financial
statements have been prepared assuming that the Company will
continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company and its ultimate
Parent, NRG Energy, Inc., are experiencing credit and liquidity
constraints and the Companys senior secured bonds are in
default. As a direct consequence, during 2002 the Company
entered into discussion with its creditors to develop a
comprehensive restructuring plan. In connection with its
restructuring efforts, it is likely that the Company and certain
of its subsidiaries will file for Chapter 11 bankruptcy
protection. These conditions raise substantial doubt about the
Companys ability to continue as a going concern.
Managements plans in regard to these matters are also
described in Note 1. The consolidated financial statements do
not include any adjustments that might result from the outcome
of this uncertainty.

As discussed in Note 2 to the consolidated
financial statements, the Company adopted Statement of Financial
Accounting Standards No. 142, Goodwill and Other
Intangible Assets, for the year ended December 31,
2002. As discussed in Notes 2 and 3 to the consolidated
financial statements, the Company adopted Statement of Financial
Accounting Standards No. 144, Accounting for
Impairment or Disposal of Long-Lived Assets, on
January 1, 2002. As discussed in Note 7 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.



|                           | 
|-------------------------- | 
|PRICEWATERHOUSECOOPERS LLP | 




PricewaterhouseCoopers LLP


Minneapolis, Minnesota


March 28, 2003


39



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##### Table of Contents



REPORT OF INDEPENDENT ACCOUNTANTS

To the Management Committee of

NRG South Central Generating LLC:


In our opinion, the accompanying carve-out
statement of certain revenue and expenses presents fairly, in
all material respects, the certain revenue and expenses shown
therein of the Cajun Electric (Cajun Facilities) business
acquired by Louisiana Generating LLC for the period
January 1, 2000 through March 30, 2000, in conformity
with accounting principles generally accepted in the United
States of America. This financial statement is the
responsibility of NRG South Central Generating LLCs
management; our responsibility is to express an opinion on this
financial statement based on our audit. We conducted our audit
of this statement 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 statement of certain revenue and
expenses is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statement, assessing the accounting
principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We
believe our audit provides a reasonable basis for the opinion
expressed above.

As described in Note 13, the accompanying
carve-out financial statement was prepared to present certain
revenue and expenses related to the Cajun Facilities and is not
intended to be a complete presentation of revenue and expenses
of Cajun Electric Power Cooperative, Inc.

PricewaterhouseCoopers LLP

Minneapolis, Minnesota


March 28, 2003


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##### Table of Contents



NRG SOUTH CENTRAL GENERATING LLC

CONSOLIDATED BALANCE SHEETS

|                     |                                                                                         |                |           |           |  |   |           |           | 
|-------------------- | --------------------------------------------------------------------------------------- | -------------- | --------- | --------- |  | - | --------- | --------- | 
|                     |                                                                                         |               
|                     |                                                                                         | December 31,  
|                     |                                                                                         |               
|                     |                                                                                         | 2002           |           | 2001     
|                     |                                                                                         |                |           |          
|                     |                                                                                         |               
|                     |                                                                                         | (In thousands)
|ASSETS              
|Current Assets:      |                                                                                         |                |           |           |  |   |           |          
|                     | Cash and cash equivalents                                                               |                | $         | 310       |  |   | $         | 3,208     | 
|                     | Restricted cash                                                                         |                |           | 109,336   |  |   |           |          | 
|                     | Accounts receivable                                                                     |                |           | 46,338    |  |   |           | 44,122    | 
|                     | Notes Receivable                                                                        |                |           | 3,000     |  |   |           |          | 
|                     | Inventory                                                                               |                |           | 64,364    |  |   |           | 52,916    | 
|                     | Derivative instruments valuation                                                        |                |           | 112       |  |   |           |          | 
|                     | Prepaid expenses                                                                        |                |           | 3,236     |  |   |           | 2,627     | 
|                     |                                                                                         |                |           |           |  |   |           |          
|Total current assets |                                                                                         |                | 226,696   |           |  |   | 102,873   |          
|                     |                                                                                         |                |           |           |  |   |           |          
|                     | Equity investments in affiliates                                                        |                |           |          |  |   |           | 50,233    | 
|                     | Property, plant & equipment, net of
    accumulated depreciation of $83,242 and $50,556 |                |           | 1,131,896 |  |   |           | 1,166,512 | 
|                     | Decommissioning fund investments                                                        |                |           | 4,617     |  |   |           | 4,336     | 
|                     | Deferred financing costs, net of accumulated
    amortization of $1,853 and $750        |                |           | 30,028    |  |   |           | 9,969     | 
|                     | Other assets, net of accumulated amortization of
    $720 and $458.                     |                |           | 7,107     |  |   |           | 7,356     | 
|                     |                                                                                         |                |           |           |  |   |           |          
|                    
|Total Assets         |                                                                                         | $              | 1,400,344 |           |  | $ | 1,341,279 |          
|                     |                                                                                         |                |           |           |  |   |           |          

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NRG SOUTH CENTRAL GENERATING LLC

CONSOLIDATED BALANCE SHEETS 
(Continued)

|                                          |                                          |                |           |         |  |   |           |        | 
|----------------------------------------- | ---------------------------------------- | -------------- | --------- | ------- |  | - | --------- | ------ | 
|                                          |                                          |               
|                                          |                                          | December 31,  
|                                          |                                          |               
|                                          |                                          | 2002           |           | 2001   
|                                          |                                          |                |           |        
|                                          |                                          |               
|                                          |                                          | (In thousands)
|LIABILITIES AND MEMBERS EQUITY          
|Current Liabilities:                      |                                          |                |           |         |  |   |           |       
|                                          | Current portion of long-term debt        |                | $         | 750,750 |  |   | $         | 25,500 | 
|                                          | Note payable  affiliate                 |                |           | 105,491 |  |   |           |       | 
|                                          | Revolving line of credit                 |                |           |        |  |   |           | 40,000 | 
|                                          | Accounts payable                         |                |           | 9,814   |  |   |           | 324    | 
|                                          | Accounts payable-affiliates              |                |           | 126,522 |  |   |           | 27,246 | 
|                                          | Accrued fuel and purchased power expense |                |           | 10,303  |  |   |           | 26,599 | 
|                                          | Accrued interest                         |                |           | 55,413  |  |   |           | 20,453 | 
|                                          | Accrued interest  affiliate             |                |           | 514     |  |   |           |       | 
|                                          | Derivative instruments valuation         |                |           | 135     |  |   |           |       | 
|                                          | Other current liabilities                |                |           | 11,514  |  |   |           | 12,026 | 
|                                          |                                          |                |           |         |  |   |           |       
|Total current liabilities                 |                                          |                | 1,070,456 |         |  |   | 152,148   |       
|                                          |                                          |                |           |         |  |   |           |       
|Long-term debt                            |                                          |                |          |         |  |   | 738,000   |       
|Other non-current liabilities             |                                          |                | 6,238     |         |  |   | 5,600     |       
|Derivative instruments valuation          |                                          |                |          |         |  |   | 18        |       
|                                          |                                          |                |           |         |  |   |           |       
|Total liabilities                         |                                          |                | 1,076,694 |         |  |   | 895,766   |       
|Commitments and contingencies             |                                          |                |           |         |  |   |           |       
|Members Equity                           |                                          |                | 323,650   |         |  |   | 445,513   |       
|                                          |                                          |                |           |         |  |   |           |       
|Total Liabilities and Members
    Equity |                                          | $              | 1,400,344 |         |  | $ | 1,341,279 |       
|                                          |                                          |                |           |         |  |   |           |       

See accompanying notes to consolidated financial
statements.

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##### Table of Contents



NRG SOUTH CENTRAL GENERATING LLC

CONSOLIDATED STATEMENTS OF
OPERATIONS

|                                               |                                              |                                              |          |               |         |                |        |               |         |   |        |         |         |   |       |        |        | 
|---------------------------------------------- | -------------------------------------------- | -------------------------------------------- | -------- | ------------- | ------- | -------------- | ------ | ------------- | ------- | - | ------ | ------- | ------- | - | ----- | ------ | ------ | 
|                                               |                                              |                                              |          |               |         | For the Period |        | (Predecessor)
|                                               |                                              |                                              |          |               |         | March 30, 2000 |        | Carve-Out    
|                                               |                                              |                                              |          | (Inception)   |         | For the Three 
|                                               |                                              | Year Ended December 31,                      |          | Through       |         | Months Ended  
|                                               |                                              |                                              |          | December 31,  |         | March 30,     
|                                               |                                              | 2002                                         |          | 2001          |         | 2000           |        | 2000         
|                                               |                                              |                                              |          |               |         |                |        |              
|                                               |                                              |                                              |          | (See Note 13)
|                                               |                                              | (In thousands)                               |          |              
|Operating Revenues                             |                                              |                                              |          |               |         |                |        |               |         |   |        |         |         |   |       |       
|                                               | Revenues from majority owned operations      |                                              | $        | 399,866       |         |                | $      | 399,395       |         |   | $      | 309,063 |         |   | $     | 77,406 |       
|                                               | Equity (losses) of unconsolidated affiliates |                                              |          | (3,146        | )       |                |        | (2,435        | )       |   |        |        |         |   |       |       |       
|                                               |                                              |                                              |          |               |         |                |        |               |         |   |        |         |         |   |       |       
|                                               |                                              | Total operating revenues and equity earnings |          |               | 396,720 |                |        |               | 396,960 |   |        |         | 309,063 |   |       |        | 77,406 | 
|Operating Costs and Expenses                   |                                              |                                              |          |               |         |                |        |               |         |   |        |         |         |   |       |       
|                                               | Cost of operations                           |                                              |          | 262,361       |         |                |        | 276,554       |         |   |        | 201,617 |         |   |       | 58,628 |       
|                                               | Depreciation and amortization                |                                              |          | 35,964        |         |                |        | 29,878        |         |   |        | 20,712  |         |   |       | 9,647  |       
|                                               | General and administrative expenses          |                                              |          | 7,948         |         |                |        | 7,566         |         |   |        | 5,612   |         |   |       | 2,423  |       
|                                               | Sale of equity method investment             |                                              |          | 48,375        |         |                |        |              |         |   |        |        |         |   |       |       |       
|                                               | Special charges                              |                                              |          | 139,929       |         |                |        |              |         |   |        |        |         |   |       |       |       
|                                               |                                              |                                              |          |               |         |                |        |               |         |   |        |         |         |   |       |       
|Operating (Loss) Income                        |                                              |                                              | (97,857  | )             |         |                | 82,962 |               |         |   | 81,122 |         |         |   | 6,708 |       
|Other Income (Expense)                         |                                              |                                              |          |               |         |                |        |               |         |   |        |         |         |   |       |       
|                                               | Other income, net                            |                                              |          | 923           |         |                |        | (189          | )       |   |        | 875     |         |   |       | 521    |       
|                                               | Interest expense                             |                                              |          | (74,940       | )       |                |        | (72,665       | )       |   |        | (55,981 | )       |   |       |       |       
|                                               |                                              |                                              |          |               |         |                |        |               |         |   |        |         |         |   |       |       
|Excess of Revenues Over Costs and
    Expenses |                                              |                                              |          |               |         |                |        |               |         |   |        |         |         | $ | 7,229 |       
|                                               |                                              |                                              |          |               |         |                |        |               |         |   |        |         |         |   |       |       
|Net (Loss) Income                              |                                              | $                                            | (171,874 | )             |         | $              | 10,108 |               |         | $ | 26,016 |         |         |   |       |       
|                                               |                                              |                                              |          |               |         |                |        |               |         |   |        |         |         |   |       |       

See accompanying notes to consolidated financial
statements.

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NRG SOUTH CENTRAL GENERATING LLC

CONSOLIDATED STATEMENTS OF CASH
FLOWS

|                                                                       |                                                                                       |                                               |          |              |         |           |         |         |         |   |            |            |         |  
|---------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | --------------------------------------------- | -------- | ------------ | ------- | --------- | ------- | ------- | ------- | - | ---------- | ---------- | ------- | -
|                                                                       |                                                                                       |                                               |          |              |         | March 30,
|                                                                       |                                                                                       |                                               |          | 2000        
|                                                                       |                                                                                       | Year Ended                                    |          | (Inception) 
|                                                                       |                                                                                       | December 31,                                  |          | through     
|                                                                       |                                                                                       |                                               |          | December 31,
|                                                                       |                                                                                       | 2002                                          |          | 2001         |         | 2000     
|                                                                       |                                                                                       |                                               |          |              |         |          
|                                                                       |                                                                                       |                                              
|                                                                       |                                                                                       | (In thousands)                               
|Cash Flows from Operating
    Activities:                              |                                                                                       |                                               |          |              |         |           |         |         |         |   |            |           
|                                                                       | Net (loss) income                                                                     |                                               | $        | (171,874     | )       |           | $       | 10,108  |         |   | $          | 26,016     |        
|                                                                       | Adjustments to reconcile net income to net cash
    provided by operating activities: |                                               |          |              |         |           |         |         |         |   |            |            |        
|                                                                       |                                                                                       | Equity in losses of unconsolidated affiliates |          |              | 3,146   |           |         |         | 2,435   |   |            |            |        |  
|                                                                       |                                                                                       | Depreciation and amortization                 |          |              | 35,964  |           |         |         | 29,878  |   |            |            | 20,712  |  
|                                                                       |                                                                                       | Loss on sale of equity method investments     |          |              | 48,375  |           |         |         |        |   |            |            |        |  
|                                                                       |                                                                                       | Special charges                               |          |              | 138,578 |           |         |         |        |   |            |            |        |  
|                                                                       |                                                                                       | Amortization of deferred finance costs        |          |              | 1,103   |           |         |         | 427     |   |            |            | 487     |  
|                                                                       |                                                                                       | Unrealized loss on energy contracts           |          |              | 5       |           |         |         | 18      |   |            |            |        |  
|                                                                       |                                                                                       | Changes in assets and liabilities:            |          |              |         |           |         |         |         |   |            |            |         |  
|                                                                       |                                                                                       | Accounts receivable                           |          |              | (2,216  | )         |         |         | 8,522   |   |            |            | (52,644 | )
|                                                                       |                                                                                       | Inventory                                     |          |              | (11,448 | )         |         |         | (28,702 | ) |            |            | 8,872   |  
|                                                                       |                                                                                       | Prepaid expenses                              |          |              | (609    | )         |         |         | (792    | ) |            |            | (1,376  | )
|                                                                       |                                                                                       | Accounts payable                              |          |              | 9,490   |           |         |         | (2,483  | ) |            |            | 2,807   |  
|                                                                       |                                                                                       | Accounts payable  affiliates                 |          |              | 58,220  |           |         |         | (45,605 | ) |            |            | 2,988   |  
|                                                                       |                                                                                       | Accrued interest                              |          |              | 35,474  |           |         |         | (857    | ) |            |            | 21,310  |  
|                                                                       |                                                                                       | Accrued fuel and purchased power expense      |          |              | (16,296 | )         |         |         | 12,054  |   |            |            | 14,545  |  
|                                                                       |                                                                                       | Other current assets and liabilities          |          |              | 2,160   |           |         |         | 4,271   |   |            |            | 6,478   |  
|                                                                       |                                                                                       | Other assets and liabilities                  |          |              | 559     |           |         |         | 184     |   |            |            | (4,017  | )
|                                                                       |                                                                                       |                                               |          |              |         |           |         |         |         |   |            |           
|Net Cash Provided by (Used in) Operating
    Activities                |                                                                                       |                                               | 130,631  |              |         |           | (10,542 | )       |         |   | 46,178     |           
|                                                                       |                                                                                       |                                               |          |              |         |           |         |         |         |   |            |           
|Cash Flows from Investing
    Activities:                              |                                                                                       |                                               |          |              |         |           |         |         |         |   |            |           
|                                                                       | Capital expenditures                                                                  |                                               |          | (12,231      | )       |           |         | (8,866  | )       |   |            | (12,130    | )      
|                                                                       | Increase in notes receivable                                                          |                                               |          | (3,000       | )       |           |         |        |         |   |            |           |        
|                                                                       | Increase in restricted cash                                                           |                                               |          | (109,336     | )       |           |         |        |         |   |            |           |        
|                                                                       | Business acquisition, net of liabilities assumed                                      |                                               |          |             |         |           |         |        |         |   |            | (1,055,927 | )      
|                                                                       | Proceeds from disposition of property and
    equipment                               |                                               |          |             |         |           |         |        |         |   |            | 9,017      |        
|                                                                       |                                                                                       |                                               |          |              |         |           |         |         |         |   |            |           
|Net Cash Used in Investing
    Activities                              |                                                                                       |                                               | (124,567 | )            |         |           | (8,866  | )       |         |   | (1,059,040 | )         
|                                                                       |                                                                                       |                                               |          |              |         |           |         |         |         |   |            |           
|Cash Flows from Financing
    Activities:                              |                                                                                       |                                               |          |              |         |           |         |         |         |   |            |           
|                                                                       | Contributions by members                                                              |                                               |          | 48,000       |         |           |         | 5,051   |         |   |            | 269,668    |        
|                                                                       | Distributions to members                                                              |                                               |          |             |         |           |         |        |         |   |            | (32,000    | )      
|                                                                       | Proceeds from issuance of long-term debt                                              |                                               |          |             |         |           |         |        |         |   |            | 800,000    |        
|                                                                       | Net (payments)/proceeds on revolver                                                   |                                               |          | (40,000      | )       |           |         | 40,000  |         |   |            |           |        
|                                                                       | Repayments of long-term borrowings                                                    |                                               |          | (12,750      | )       |           |         | (25,250 | )       |   |            | (11,250    | )      
|                                                                       | Repayment of note payable  affiliate                                                 |                                               |          | (1,862       | )       |           |         |        |         |   |            |           |        
|                                                                       | Checks in excess of cash                                                              |                                               |          | (2,350       | )       |           |         |        |         |   |            |           |        
|                                                                       | Deferred financing costs                                                              |                                               |          |             |         |           |         | (331    | )       |   |            | (10,410    | )      
|                                                                       |                                                                                       |                                               |          |              |         |           |         |         |         |   |            |           
|Net Cash (Used in) Provided by Financing
    Activities                |                                                                                       |                                               | (8,962   | )            |         |           | 19,470  |         |         |   | 1,016,008  |           
|                                                                       |                                                                                       |                                               |          |              |         |           |         |         |         |   |            |           
|Net (decrease)/Increase in Cash and Cash
    Equivalents               |                                                                                       |                                               | (2,898   | )            |         |           | 62      |         |         |   | 3,146      |           
|Cash and Cash Equivalents at Beginning of
    Period                   |                                                                                       |                                               | 3,208    |              |         |           | 3,146   |         |         |   |           |           
|                                                                       |                                                                                       |                                               |          |              |         |           |         |         |         |   |            |           
|Cash and Cash Equivalents at End of
    Period                         |                                                                                       | $                                             | 310      |              |         | $         | 3,208   |         |         | $ | 3,146      |           
|                                                                       |                                                                                       |                                               |          |              |         |           |         |         |         |   |            |           
|Supplemental Disclosures of Cash Flow
    Information                  |                                                                                       |                                               |          |              |         |           |         |         |         |   |            |           
|Interest Paid                                                          |                                                                                       | $                                             | 39,466   |              |         | $         | 73,048  |         |         | $ | 33,485     |           
|Supplemental Disclosures of Non-Cash
    Information                   |                                                                                       |                                               |          |              |         |           |         |         |         |   |            |           
|Capital expenditures paid by affiliate                                 |                                                                                       | $                                             | 127,247  |              |         | $         |        |         |         | $ |           |           
|Deferred finance costs funded through accounts
    payable  affiliate |                                                                                       | $                                             | 21,162   |              |         | $         |        |         |         | $ |           |           
|Non-cash equity contributions                                          |                                                                                       | $                                             | 2,011    |              |         | $         | 103,592 |         |         | $ | 72,650     |           
|                                                                       |                                                                                       | $                                             |         |              |         | $         |        |         |         | $ |            |           
|Liabilities assumed in acquisitions                                    |                                                                                       | $                                             |         |              |         | $         |        |         |         | $ | 4,833      |           

See accompanying notes to consolidated financial
statements.

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NRG SOUTH CENTRAL GENERATING LLC

CONSOLIDATED STATEMENTS OF MEMBERS
EQUITY

|                                           |                                                                     |                             |         |             |         |               |          |          |   |   |   |      |   |   |         |          |         | 
|------------------------------------------ | ------------------------------------------------------------------- | --------------------------- | ------- | ----------- | ------- | ------------- | -------- | -------- | - | - | - | ---- | - | - | ------- | -------- | ------- | 
|                                           |                                                                     |                             |         |             |         | Accumulated   |          |         
|                                           |                                                                     | Members                    |         | Accumulated |         | Other         |          | Total   
|                                           |                                                                     | Contributions/              |         | Income      |         | Comprehensive |          | Members
|                                           |                                                                     | Distributions               |         | (Loss)      |         | Income        |          | Equity  
|                                           |                                                                     |                             |         |             |         |               |          |         
|                                           |                                                                     |                            
|                                           |                                                                     | (In thousands)             
|Balances at March 30, 2000
    (Inception) |                                                                     | $                           |        |             |         | $             |         |          |   | $ |  |      |   | $ |        |         
|                                           |                                                                     |                             |         |             |         |               |          |          |   |   |   |      |   |   |         |         
|                                           | Net income                                                          |                             |         |            |         |               |          | 26,016   |   |   |   |     |   |   |         | 26,016   |        
|                                           |                                                                     | Members contributions, net |         |             | 300,746 |               |          |          |  |   |   |      |  |   |         |          | 300,746 | 
|                                           |                                                                     |                             |         |             |         |               |          |          |   |   |   |      |   |   |         |         
|Balances at December 31, 2000              |                                                                     | $                           | 300,746 |             |         | $             | 26,016   |          |   | $ |  |      |   | $ | 326,762 |         
|                                           |                                                                     |                             |         |             |         |               |          |          |   |   |   |      |   |   |         |         
|                                           | Cumulative effect upon adoption of SFAS 133                         |                             |         |            |         |               |          |         |   |   |   | 500  |   |   |         | 500      |        
|                                           | Impact of SFAS 133 for year ended
    December 31, 2001             |                             |         |            |         |               |          |         |   |   |   | (500 | ) |   |         | (500     | )      
|                                           | Net income                                                          |                             |         |            |         |               |          | 10,108   |   |   |   |     |   |   |         | 10,108   |        
|                                           |                                                                     |                             |         |             |         |               |          |          |   |   |   |      |   |   |         |         
|                                           | Total comprehensive income for the year ended
    December 31, 2001 |                             |         |             |         |               |          |          |   |   |   |      |   |   |         | 10,108   |        
|                                           | Members contributions, net                                         |                             |         | 108,643     |         |               |          |         |   |   |   |     |   |   |         | 108,643  |        
|                                           |                                                                     |                             |         |             |         |               |          |          |   |   |   |      |   |   |         |         
|Balances at December 31, 2001              |                                                                     | $                           | 409,389 |             |         | $             | 36,124   |          |   | $ |  |      |   | $ | 445,513 |         
|                                           |                                                                     |                             |         |             |         |               |          |          |   |   |   |      |   |   |         |         
|                                           | Net loss                                                            |                             |         |            |         |               |          | (171,874 | ) |   |   |     |   |   |         | (171,874 | )      
|                                           |                                                                     |                             |         |             |         |               |          |          |   |   |   |      |   |   |         |         
|                                           | Total comprehensive income for the year ended
    December 31, 2002 |                             |         |             |         |               |          |          |   |   |   |      |   |   |         | (171,874 | )      
|                                           | Members contributions, net                                         |                             |         | 50,011      |         |               |          |         |   |   |   |     |   |   |         | 50,011   |        
|                                           |                                                                     |                             |         |             |         |               |          |          |   |   |   |      |   |   |         |         
|Balances at December 31, 2002              |                                                                     | $                           | 459,400 |             |         | $             | (135,750 | )        |   | $ |  |      |   | $ | 323,650 |         
|                                           |                                                                     |                             |         |             |         |               |          |          |   |   |   |      |   |   |         |         

See accompanying notes to consolidated financial
statements.

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NRG SOUTH CENTRAL GENERATING LLC

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

Note 1  Organization

NRG South Central Generating LLC (NRG South
Central), a Delaware Corporation formed in 2000, is an indirect
wholly-owned subsidiary of NRG Energy, Inc. (NRG Energy). NRG
South Central owns 100% of Louisiana Generating LLC (Louisiana
Generating), NRG New Roads Holding LLC (New Roads), NRG
Sterlington Power LLC (Sterlington), Big Cajun I Peaking
Power LLC (Big Cajun Peaking), NRG Sabine River Works LP LLC
(Sabine River Works LP), NRG Sabine River Works GP LLC (Sabine
River Works GP) and NRG Bayou Cove Peaking Power LLC (Bayou
Cove). NRG South Centrals members are NRG Central
U.S. LLC (NRG Central) and South Central Generation Holding
LLC (South Central Generation). NRG Central and South Central
Generation are wholly owned subsidiaries of NRG Energy, each of
which owns a 50% interest in NRG South Central.

NRG South Central was formed for the purpose of
financing, acquiring, owning, operating and maintaining through
its subsidiaries and affiliates the facilities owned by
Louisiana Generating and any other facilities that it or its
subsidiaries may acquire in the future.

Pursuant to a competitive bidding process,
following the Chapter 11 bankruptcy proceeding of Cajun
Electric Power Cooperative, Inc. (Cajun Electric), Louisiana
Generating acquired the non-nuclear electric power generating
assets of Cajun Electric. New Roads was formed for the purpose
of holding assets that Louisiana Generating acquired from Cajun
Electric which are not necessary for the operation of the newly
acquired generating facilities and, with respect to some of
these assets, may not be held by Louisiana Generating under
applicable federal regulations. 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 200 MW simple cycle gas
peaking facility in Sterlington, Louisiana. Louisiana Generating
purchases the capacity and is entitled to all energy from
Sterlington. In December 2000, Sabine River Works LP and Sabine
River Works GP acquired a 49% limited partnership interest and a
1% general partnership, respectively, in SRW Cogeneration
Limited Partnership, a Delaware Limited Partnership that owns
and operates an approximately 450 MW natural gas-fired
cogeneration plant located near Orange, Texas. Big Cajun Peaking
was formed to develop, construct and own a 238 MW gas-fired
peaking generating facility located in New Roads, Louisiana.
Bayou Cove was formed to develop, construct and own a 320 MW
gas-fired peaking generating facility located in Bayou Cove,
Louisiana. Bayou Cove is operated as a merchant power facility.

On March 31, 2000, for approximately
$1,055.9 million, Louisiana Generating acquired 1,708 MW of
electric power generation facilities located in New Roads,
Louisiana (Cajun facilities). The acquisition was financed
through a combination of project level long-term debt issued by
NRG South Central and equity contributions from NRG South
Centrals members. Louisiana Generating is a guarantor of
the bonds issued on March 30, 2000 to acquire the Cajun
facilities. The acquisition was accounted for under the purchase
method of accounting with the aggregate purchase price allocated
among the acquired assets and liabilities assumed.

Pursuant to a project development agreement
between NRG Energy and Koch Power, Inc., NRG Energy agreed in
April 1999 to participate in the development of an approximately
200 MW simple cycle gas peaking facility in Sterlington,
Louisiana. Development of the facility had been commenced by
Koch Powers affiliate, Koch Power Louisiana LLC, a
Delaware limited liability company. In August 2000, NRG Energy
acquired 100% of Koch Power Louisiana from Koch Power, and
renamed it NRG Sterlington Power LLC and contributed the
subsidiary to NRG South Central. In August, 2001, the facility
became commercially operational. NRG Sterlington Power was
designated as an unrestricted subsidiary of NRG South Central
pursuant to the indenture for NRG South Centrals senior
secured bonds.

Big Cajun I Peaking Power LLC was formed in
July 2000 for the purpose of developing, owning and operating an
approximately 238 MW simple cycle natural gas peaking facility
expansion project at the Big

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NRG SOUTH CENTRAL GENERATING LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Cajun I site in New Roads, Louisiana. The
peaking facility was completed in June 2001. The energy and
capacity generated by the expansion project is used to help meet
Louisiana Generatings obligations under the Cajun
facilities power purchase agreements, with any excess
power and capacity being marketed by NRG Power Marketing. Big
Cajun I Peaking Power was designated as an unrestricted
subsidiary of NRG South Central pursuant to the indenture for
NRG South Centrals senior secured bonds.

During November 2000, NRG Energy acquired a 49%
limited partnership interest and a 1% general partnership
interest in SRW Cogeneration Limited Partnership (SRW
Cogeneration) for $15 million and contributed the
partnership interests to NRG Sabine River Works LP LLC and NRG
Sabine River Works GP LLC, Delaware limited liability companies
wholly owned by NRG South Central. SRW Cogeneration completed
the facility which became commercially operational in November
2001. The approximately 450 MW natural gas-fired cogeneration
plant is located at the DuPont Companys Sabine River Works
petrochemical facility near Orange, Texas. Subsidiaries of
Conoco, Inc. own the other 49% and 1% general partnership
interests in SRW Cogeneration. On November 5, 2002, the
investment in SRW Cogen was sold to Conoco, Inc for a nominal
value and the assumption of certain outstanding obligations.
(Note 16).

NRG Bayou Cove LLC was formed in September 2001
for the purpose of developing, owning and operating an
approximately 320 MW gas-fired peaking generating facility
located near Jennings, Louisiana.

Recent
Developments

In December 2001, Moodys Investor Service
(Moodys) placed NRG Energys long-term senior
unsecured debt rating on review for possible downgrade. In
response, Xcel Energy and NRG Energy put into effect a plan to
preserve NRG Energys investment grade rating and improve
its financial condition. This plan included financial support to
NRG Energy from Xcel Energy; marketing certain NRG Energy assets
for sale; canceling and deferring capital spending; and reducing
corporate expenses.

In response to a possible downgrade, during 2002,
Xcel Energy contributed $500 million to NRG Energy, and NRG
Energy and its subsidiaries sold assets and businesses that
provided NRG Energy in excess of $286 million in cash and
eliminated approximately $432.0 million in debt. NRG Energy
also cancelled or deferred construction of approximately
3,900 MW of new generation projects. On July 26, 2002,
Standard & Poors (S&P) downgraded NRG
Energys senior unsecured bonds to below investment grade,
and three days later Moodys also downgraded NRG
Energys senior unsecured debt rating to below investment
grade. Since July 2002, NRG Energy senior unsecured debt, as
well as the secured NRG Northeast Generating LLC bonds and the
secured NRG South Central Generating LLC bonds and Secured LSP
Energy (Batesville) bonds were downgraded multiple times. After
NRG Energy failed to make payments due under certain unsecured
bond obligations on September 16, 2002, both Moodys
and S&P lowered their ratings on NRG Energys and its
subsidiaries unsecured bonds once again. Currently, NRG
Energys unsecured bonds carry a rating of between CCC and
D at S&P and between Ca and C at Moodys, depending on
the specific debt issue.

As a result of the downgrade of NRG Energys
credit rating, declining power prices, increasing fuel prices,
the overall down-turn in the energy industry, and the overall
down-turn in the economy, NRG Energy has experienced severe
financial difficulties. These difficulties have caused NRG
Energy to, among other things, miss scheduled principal and
interest payments due to its corporate lenders and bondholders,
prepay for fuel and other related delivery and transportation
services and provide performance collateral in certain
instances. NRG Energy has also recorded asset impairment charges
of approximately $3.1 billion, related to various operating
projects as well as for projects that were under construction
which NRG Energy has stopped funding.

NRG Energy and its subsidiaries (including NRG
South Central) have failed to timely make several interest
and/or principal payments on its indebtedness. These missed
payments have resulted in cross-defaults

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NRG SOUTH CENTRAL GENERATING LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

of numerous other non-recourse and limited
recourse debt instruments of NRG Energy and have caused the
acceleration of multiple debt instruments of NRG Energy,
rendering such debt immediately due and payable.

In addition to the payment defaults described
above, prior to the downgrades many corporate guarantees and
commitments of NRG Energy and its subsidiaries required that
they be supported or replaced with letter of credit or cash
collateral within 5 to 30 days of a ratings downgrade below
Baa3 or BBB- by Moodys or Standard & Poors,
respectively. As a result of the downgrades on July 26 and
July 29, NRG Energy received demands to post collateral
aggregating approximately $1.1 billion. NRG Energy is
presently working with various secured project lender groups
with respect to the issue of posting collateral and is working
toward establishing a comprehensive plan of restructuring.

In August 2002, NRG Energy retained financial and
legal restructuring advisors to assist its management in the
preparation of such comprehensive financial and operational
restructuring. NRG Energy and its advisors have been meeting
regularly to discuss restructuring issues with an ad hoc
committee of its bondholders and a steering committee of its
bank lenders (the Ad Hoc Creditors Committees). In November
2002, NRG Energy and Xcel Energy presented a comprehensive plan
of restructuring to the Ad Hoc Creditors Committees. The
restructuring plan has served as a basis for continuing
negotiations between the Ad Hoc Creditors Committees, NRG Energy
and Xcel Energy related to a consensual plan of reorganization
for NRG Energy. If a comprehensive plan of restructuring is
ultimately agreed to, it is highly probable that such a plan
would be implemented through the commencement of a voluntary
Chapter 11 bankruptcy proceeding. If NRG Energy seeks
protection under Chapter 11 of the Bankruptcy Code, it is
likely that NRG Energy would also seek such protection for
certain wholly-owned subsidiaries, which may include NRG South
Central.

On November 22, 2002, five former NRG Energy
executives filed an involuntary Chapter 11 petition against
NRG Energy in U.S. Bankruptcy Court for the District of
Minnesota. Under provisions of federal law, NRG Energy has the
full authority to continue to operate its business as if the
involuntary petition had not been filed unless and until a court
hearing on the validity of the involuntary petition is resolved
adversely to NRG Energy. On December 16, 2002, NRG Energy
responded to the involuntary petition, contesting the
petitioners claims and filing a motion to dismiss the
case. On February 19, 2003, NRG Energy announced that it
had reached a settlement with the petitioners. The U.S.
Bankruptcy Court for the District of Minnesota will hear NRG
Energys motion to approve the settlement and dismiss the
involuntary petition. Two of NRG Energys creditors have
objected to the motion to dismiss. There can be no assurance
that the court will dismiss the involuntary petition. The
Bankruptcy Court has discretion in the review and approval of
the settlement agreement. There is a risk that the Bankruptcy
Court may, among other things, reject the settlement agreement
or enter an order for relief under Chapter 11.

On March 26, 2003, Xcel Energy announced
that its board of directors had approved a tentative settlement
agreement with holders of most of NRG Energys long-term
notes and the steering committee representing NRGs bank
lenders. The settlement is subject to certain conditions,
including the approval of at least a majority in dollar amount
of the NRG Energy bank lenders and long-term noteholders and
definitive documentation. There can be no assurance that such
approvals will be obtained. The terms of the settlement call for
Xcel Energy to make payments to NRG Energy over the next
13 months totaling up to $752 million for the benefit
of NRG Energys creditors in consideration for their waiver
of any existing and potential claims against Xcel Energy. Under
the settlement, Xcel Energy will make the following payments:
(i) $350 million at or shortly following the consummation
of a restructuring of NRG Energys debt. It is expected
this payment would be made prior to year-end 2003; (ii)
$50 million on January 1, 2004. At Xcel Energys
option, it may fill this requirement with either cash or Xcel
Energy common stock or any combination thereof; and (iii)
$352 million in April 2004.

48



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##### Table of Contents



NRG SOUTH CENTRAL GENERATING LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

NRG South
Central Indebtedness and Liquidity Issues

On September 15, 2002 NRG South Central
failed to make approximately $47 million in combined
principal and interest payments on the 8.962% Series A-1
senior secured bonds due 2016 and 9.479% Series B-1 senior
secured bonds due 2024. NRG South Central had 15 days to
make principal and interest payments to NRG South Centrals
A-1 and B-1 Series bond holders to avoid an event of default on
these bonds. The 15 day grace period to make payment ended
October 1, 2002 and NRG South Central did not make the
required payments. As a result, the Company is in default on
these bonds. On November 21, 2002, the bond trustee, on
behalf of bondholders, accelerated the approximately
$750 million of debt under the NRG South Central
Generating, LLC facility, rendering the debt immediately due and
payable. In January 2003, the South Central Generating
bondholders unilaterally withdrew $35.6 million from a
restricted revenue account relating to the September 15,
2002 interest payment and fees. On March 17, 2003
semi-annual principal and interest of approximately
$47 million came due. An amount of $34.4 million was
withdrawn from a restricted revenue account relating to the
interest portion of this payment, and the approximately
$12.8 million principal portion was deferred. NRG South
Central remains in default on these notes, as a result, the debt
has been classified as current at December 31, 2002. NRG
South Central Generating LLCs secured bonds currently
carry a rating of D at S&P and Caa1 at Moodys

The debt agreements of NRG South Central
generally restrict its ability to pay dividends, make
distributions or otherwise transfer funds to NRG Energy. As of
December 31, 2002, NRG South Central did not meet the
minimum debt service coverage ratios required to make payments
to NRG Energy and NRG South Central is in default on its credit
agreements.

NRG South Central Generating is also precluded
from making payments to NRG Energy due to unfunded debt service
reserve accounts. Prior to the NRG Energy downgrades (see
above), the debt service reserve accounts were funded with
letters of guarantee from NRG Energy. Following the downgrade,
these accounts were required to be funded with cash from NRG
Energy within five to thirty days. The accounts were not funded
with cash from NRG Energy within the respective cure period, and
an event of default occurred, thereby giving the lenders the
right to accelerate the project financings. As a result of this
default, the long-term portion of the debt has been reclassified
as a current liability, as it is potentially callable within the
next twelve months. NRG South Central has approximately
$46.6 million of unfunded debt service reserve commitments
at December 31, 2002.

NRG South Central expects to have cash available
for operations through 2003. This forecast does not assume
further investment by Xcel Energy in NRG Energy, further
contributions to NRG South Central from NRG Energy, or
modification of NRG South Centrals current debt
obligations. In the event that NRG Energy and NRG South Central
are unable to work through the issues as described above and are
unable to obtain adequate financing on terms acceptable to NRG
Energy and NRG South Central to continue their operations, NRG
Energy and NRG South Central may have to file bankruptcy. NRG
Energy and NRG South Centrals inability to obtain timely
waivers and avoid defaults on their credit obligations could
lead to additional involuntary bankruptcy proceedings. In any
case, there is substantial doubt as to NRG South Centrals
ability to continue as a going concern.

As a part of the comprehensive restructuring of
NRG Energy, NRG Energys financial and legal restructuring
advisors have been assisting the management of NRG South Central
in the preparation of a comprehensive financial and operational
restructuring for NRG South Central. NRG South Central and its
advisors have been meeting regularly to discuss restructuring
issues relating to NRG South Central with an ad hoc committee of
its bondholders (the NRG South Central Bondholder Committee).
NRG South Central, its management and its financial and legal
advisors have engaged in discussions with the NRG Project
Bondholder Committee regarding the terms and conditions of a
restructuring of the debt of NRG South Central.

49



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##### Table of Contents



NRG SOUTH CENTRAL GENERATING LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The accompanying consolidated financial
statements have been prepared assuming NRG South Central will
continue as a going concern. The financial consolidated
statements do not include any adjustments that might result from
the outcome of this uncertainty.

Note 2  Summary of Significant
Accounting Policies

Principles of
Consolidation

The consolidated financial statements include the
accounts of NRG South Central and its subsidiaries. All
significant intercompany transactions have been eliminated in
consolidation. Accounting policies for all of NRG South
Centrals operations are in accordance with accounting
principles generally accepted in the United States of America.
Investments in projects which NRG South Central 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.

Nature of
operations

The principal business of NRG South Central is
the ownership and operation, through its subsidiaries and
affiliates, of power generation facilities and the sale of
energy, capacity and related products.

Use of
Estimates in Financial Statements

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 reported amounts of assets and
liabilities at the date of the financial statements and reported
amounts of revenue and expenses during the reporting period.
Actual results may differ from those estimates.

In recording transactions and balances resulting
from business operations, NRG South Central uses estimates based
on the best information available. Estimates are used for such
items as plant depreciable lives, uncollectible accounts and the
valuation of long-term energy commodities contracts, among
others. In addition, estimates are used to test long-lived
assets for impairment and to determine fair value of impaired
assets. 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

Reclassifications

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

Cash and Cash
Equivalents

NRG South Central considers cash to include cash
and short-term investments with original maturities of three
months or less.

Restricted
Cash

Restricted cash consists primarily of funds held
in trust accounts to satisfy the requirements of certain debt
agreements. The use of cash is restricted due to debt covenant
violations which occurred during 2002. As of December 31,
2002, the restricted cash balance was $109 million.

Inventory

Inventory consisting of coal, spare parts and
fuel oil is stated at the lower of weighted average cost or
market (Note 4).

50



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##### Table of Contents



NRG SOUTH CENTRAL GENERATING LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Prepaid
Expenses

Prepaid expenses include insurance, taxes and
other prepayments.

Property,
Plant and Equipment

Property, plant and equipment are stated at cost.
Significant additions or improvements extending asset lives are
capitalized, while repairs and maintenance that do not improve
or extend the life of the respective asset are charged to
expense as incurred, including planned major maintenance.
Depreciation is computed on a straight-line basis over the
following estimated useful lives:

|                                    |  |  |                 | 
|----------------------------------- |  |  | --------------- | 
|Facilities, machinery and equipment |  |  | 10 to 40  years | 
|Office furnishings and equipment    |  |  | 3 to 10 years   | 

The assets and related accumulated depreciation
amounts are adjusted for asset retirements and disposals with
the resulting gain or loss included in Operations.

Asset
Impairments

Long-lived assets that are held and used are
reviewed for impairment whenever events or changes in
circumstances indicate carrying values may not be recoverable.
Such reviews were performed in accordance with SFAS No. 144
Accounting for the Impairment or Disposal of Long-Lived
Assets, (SFAS No. 144) in 2002 and SFAS 121
Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of (SFAS No. 121) in
prior years. An impairment loss is recognized if the total
future estimated undiscounted cash flows expected from an asset
is less than its carrying value. An impairment charge is
measured by the difference between an assets carrying
amount and fair value. Fair values are determined by a variety
of valuation methods, including appraisals, sales prices of
similar assets and present value techniques.

Investments accounted for by the equity method
are reviewed for impairment in accordance with APB Opinion
No. 18, The Equity Method of Accounting for
Investments in Common Stock. APB Opinion No. 18
requires that a loss in value of an investment that is other
than a temporary decline should be recognized. NRG South Central
identifies and measures loss in value of equity investments
based upon a comparison of fair value to carrying value.

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 or
when a project is terminated or construction ceased. Capitalized
interest was approximately $6.3 million in 2002 and zero in
2001 and 2000.

Capitalized
Project Costs

Development costs and capitalized project costs
include third party professional services, permits, and other
costs that 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. Capitalized costs are charged to expense if a
project is abandoned or management otherwise determines the
costs to be unrecoverable.

51



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NRG SOUTH CENTRAL GENERATING LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Debt Issuance
Costs

Debt issuance costs are capitalized and amortized
as interest expense on a basis which approximates the effective
interest method over the terms of the related debt.

Intangible
Assets

During the first quarter of 2002, NRG South
Central adopted SFAS No. 142  Goodwill
and Other Intangible Assets (SFAS No. 142),which
requires new accounting for intangible assets. Intangible assets
with finite lives will be amortized over their economic useful
lives and periodically reviewed for impairment. As of
December 31, 2002 and 2001, NRG South Central had
approximately $1.6 million and $1.7 million,
respectively, of intangible assets, which are included as part
of other assets. Intangible assets represent contractual rights
held by NRG South Central and are amortized over their economic
useful lives and reviewed for impairment on a periodic basis.

Revenue
Recognition

Revenues from the sale of electricity are
recorded based upon the output delivered and capacity provided
at rates specified under contract terms or prevailing market
rates. Under fixed-price contracts, revenues are recognized as
products or services are delivered. Revenues and related costs
under cost reimbursable contract provisions are recorded as
costs are incurred. Anticipated future losses on contracts are
charged against income when identified.

The equity method of accounting is applied to
investments in partnerships, because the ownership structure
prevents NRG South Central from exercising a controlling
influence over operating and financial policies of the projects.
Under this method, equity in pretax income or losses are
reflected as equity in earnings of unconsolidated affiliates.



| |                           
| | --------------------------
| | Power Marketing Activities

NRG South Central has entered into a contract
with NRG Power Marketing for the sale of energy, capacity and
ancillary services produced and the procurement and management
of fuel and emission allowances, which enables the affiliate to
engage in forward purchases, sales and hedging transactions to
manage NRG South Centrals electricity price exposure. Net
gains or losses on hedges by the marketing affiliate, which are
physically settled, are recognized in the same manner as the
hedged item. NRG South Central receives the net transaction
price on all contracts that are physically settled by its
marketing affiliate.



| |             
| | ------------
| | Income Taxes

NRG South Centrals net income or loss for
income tax purposes, along with any associated tax credits, is
included in the tax returns of NRG Energy. Accordingly, no
provision has been made for federal or state income taxes in the
accompanying financial statements.



| |                              
| | -----------------------------
| | Concentrations of Credit Risk

Financial instruments which potentially subject
NRG South Central to concentrations of credit risk consist
primarily of cash, accounts receivable, notes receivable and
investments in debt securities. 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 South Central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 South Central
believes the credit risk posed by industry concentration is
offset by the diversification and creditworthiness of its
customer base.

52



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NRG SOUTH CENTRAL GENERATING LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                        
| | ---------------------------------------
| | 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 fair value of long term debt is estimated based
on quoted market prices and similar instruments with equivalent
credit quality.



| |                                                       
| | ------------------------------------------------------
| | Summary of Cajun Electric (Predecessor)
    Cash Flows

Summarized cash flows from operating and
investing activities for Cajun Electric (Predecessor) for the
three months ended March 30, 2000 were as follows:

|                                                  |                                                  |                                           |       |        |        |  
|------------------------------------------------- | ------------------------------------------------ | ----------------------------------------- | ----- | ------ | ------ | -
|                                                  |                                                  | Three Months Ended                       
|                                                  |                                                  | March 30, 2000                           
|                                                  |                                                  |                                          
|                                                  |                                                  | (In thousands)                           
|Cash flows from operating activities:             |                                                  |                                           |       |       
|Excess of revenues over costs and expenses        |                                                  | $                                         | 7,229 |       
|Adjustments to reconcile net margins to net cash: |                                                  |                                           |       |       
|                                                  | Depreciation and amortization                    |                                           |       | 9,647  |       
|                                                  | Asset dispositions                               |                                           |       | 15     |       
|                                                  | Changes in accounts receivable                   |                                           |       | 2,133  |       
|                                                  | Changes in fuel and prepayments                  |                                           |       | (4,153 | )     
|                                                  | Changes in accounts payable and accrued expenses |                                           |       | 6,058  |       
|                                                  |                                                  |                                           |       |       
|                                                  |                                                  | Net cash provided by operating activities |       |        | 20,929 |  
|                                                  |                                                  |                                           |       |       
|Cash flows for investing activities               |                                                  |                                           |       |       
|                                                  | Capital expenditures                             |                                           |       | (1,142 | )     
|                                                  |                                                  |                                           |       |       
|                                                  |                                                  | Net cash used in investing activities     |       | $      | (1,142 | )
|                                                  |                                                  |                                           |       |       



| |                              
| | -----------------------------
| | New Accounting Pronouncements

In June 2001, the FASB issued SFAS No. 143,
Accounting for Asset Retirement Obligations(SFAS No. 143). 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. The liability
is initially capitalized as part of the cost of the related
tangible long-lived asset and thus depreciated over the
assets useful life. Accretion of the liabilities due to
the passage of time will be an operating expense. Retirement
obligations associated with long-lived assets included within
the scope of SFAS No. 143 are those for which a legal
obligation exists under enacted laws, statutes written or oral
contracts, including obligations arising under the doctrine of
promissory estoppel. NRG South Central is required to adopt SFAS
No. 143 on January 1, 2003. NRG South Central is in
the process of evaluating the impact of adopting SFAS
No. 143 on its financial condition.

In April 2002, the FASB issued SFAS No. 145,
Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical
Corrections,(SFAS No. 145) that supercedes
previous guidance for the reporting of gains and losses from
extinguishment of debt and accounting for leases, among other
things. SFAS No. 145 requires that only gains and losses
from the extinguishment of debt that meet the requirements for
classification as Extraordinary Items, as prescribed
in Accounting Principles Board Opinion No. 30, should be
disclosed as such in the financial statements. Previous guidance
required all gains and losses from the extinguishment of debt to
be classified as Extraordinary Items. This portion
of SFAS No. 145 is effective for fiscal years beginning
after May 15, 2002, with restatement of prior periods

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NRG SOUTH CENTRAL GENERATING LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

required. NRG South Central has no extraordinary
gains or losses resulting from extinguishment of debt during the
three years ended December 31, 2002 that will require
restatement upon adoption of this part of the statement.

In addition, SFAS No. 145 amends SFAS
No. 13, Accounting for Leases, (SFAS
No. 13) as it relates to accounting by a lessee for certain
lease modifications. Under SFAS No. 13, if a capital lease
is modified in such a way that the change gives rise to a new
agreement classified as an operating lease, the assets and
obligation are removed, a gain or loss is recognized and the new
lease is accounted for as an operating lease. Under SFAS
No. 145, capital leases that are modified so the resulting
lease agreement is classified as an operating lease are to be
accounted for under the sale-leaseback provisions of SFAS
No. 98, Accounting for Leases.These
provisions of SFAS No. 145 were effective for transactions
occurring after May 15, 2002. SFAS No. 145 will be
applied as required. Adoption of SFAS No. 145 is not
expected to have a material impact on NRG South Central.

In June 2002, the FASB issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities, (SFAS No. 146), SFAS No. 146
addresses financial accounting and reporting for costs
associated with exit or disposal activities and nullifies
Emerging Issues Task Force (EITF) Issue No. 94-3,
Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring).SFAS No. 146
applies to costs associated with an exit activity that does not
involve an entity newly acquired in a business combination or
with a disposal activity covered by SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets. The provisions of SFAS No. 146 are
effective for exit or disposal activities that are initiated
after December 31, 2002.

In November 2002, the FASB issued FASB
Interpretation No. 45, Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. The initial
recognition and initial measurement provisions of this
interpretation are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002,
irrespective of the guarantors fiscal year-end. The
disclosure requirements are effective for financial statements
of interim or annual periods ending after December 15,
2002. The interpretation addresses the disclosures to be made by
a guarantor in its interim and annual financial statements about
its obligations under guarantees. The interpretation also
clarifies the requirements related to the recognition of a
liability by a guarantor at the inception of the guarantee for
the obligations the guarantor has undertaken in issuing the
guarantee. See Note 17.

In January 2003, the FASB issued FASB
Interpretation No. 46, Consolidation of Variable
Interest Entities(FIN No. 46). FIN No. 46
requires an enterprises consolidated financial statements
to include subsidiaries in which the enterprise has a
controlling interest. Historically, that requirement has been
applied to subsidiaries in which an enterprise has a majority
voting interest, but in many circumstances the enterprises
consolidated financial statements do not include the
consolidation of variable interest entities with which it has
similar relationships but no majority voting interest. Under FIN
No. 46 the voting interest approach is not effective in
identifying controlling financial interest. Assets of entities
consolidated upon adoption of the new standard will be initially
recorded at their carrying amounts at the date the requirements
of the new rule first apply. If determining carrying amounts as
required is impractical, then the assets are to be measured at
fair value the first date the new rule applies. Any difference
between the net amount of any previously recognized interest in
the newly consolidated entity should be recognized as the
cumulative effect of an accounting change. FIN No. 46
becomes effective in the third quarter of 2003. Fin No. 46
is not expected to have a significant impact on NRG South
Central.



|         |                
|-------- | ---------------
|Note 3  | Special Charges

The credit rating downgrades, defaults under
certain credit agreements, increased collateral requirements and
reduced liquidity experienced by NRG South Central during the
third quarter of 2002 were triggering events which,
pursuant to SFAS No. 144, required the Company to review
the recoverability of its long-lived

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NRG SOUTH CENTRAL GENERATING LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

assets. As a result, NRG South Central determined
that Bayou Cove Peaking Power, a wholly-owned subsidiary of NRG
Bayou Cove, and the turbine generator held at NRG South
Centrals New Roads Holdings subsidiary, became impaired
during the third quarter of 2002 and should be written down to
fair market value. During 2002, NRG South Central recorded
impairment charges of $126.6 million and $12.0 million
on NRG Bayou Cove and the turbine generator, respectively. The
impairment of assets was recognized as special charges in the
third quarter of 2002 statement of operations, as restated
during the fourth quarter of 2002 (Note 18).

To determine whether an asset was impaired, NRG
South Central compared the asset carrying values to total future
estimated undiscounted cash flows. Separate analyses were
completed for assets or groups of assets at the lowest level for
which identifiable cash flows were largely independent of the
cash flows of other assets and liabilities. The estimates of
future cash flow included only future cash flows, net of
associated cash outflows, directly associated with and expected
to arise as a result of NRG Energys assumed use and
eventual disposition of the asset. Cash flow estimates
associated with assets in service were based on the assets
existing service potential.

If an asset was determined to be impaired based
on the cash flow testing performed, an impairment loss was
recorded to write down the asset to its fair value. Estimates of
fair value were based on present value techniques. The fair
value represents a discounted cash flow amount over the
remaining life of each project that reflects project-specific
assumptions for long-term power pool prices, escalated future
project operating costs, and expected plant operation given
assumed market conditions.

Additional asset impairments may be recorded by
NRG South Central in periods subsequent to December 31,
2002, given the changing business conditions and the resolution
of the pending restructuring plan. Management is unable to
determine the possible magnitude of any additional asset
impairments, but they could be material.

In addition to asset impairment charges, NRG
South Central incurred $1.4 million of expected severance costs
associated with the combining of various functions and
restructuring costs consisting of advisor fees. These costs were
also recognized as special charges in the statement of
operations.



|         |          
|-------- | ---------
|Note 4  | Inventory

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

|            |  |                |        |              |  |   |        | 
|----------- |  | -------------- | ------ | ------------ |  | - | ------ | 
|            |  | December 31,   |        | December 31,
|            |  | 2002           |        | 2001        
|            |  |                |        |             
|            |  |               
|            |  | (In thousands)
|Coal        |  | $              | 48,001 |              |  | $ | 36,571 | 
|Spare Parts |  |                | 15,523 |              |  |   | 15,582 | 
|Fuel oil    |  |                | 840    |              |  |   | 763    | 
|            |  |                |        |              |  |   |        | 
|Total       |  | $              | 64,364 |              |  | $ | 52,916 | 
|            |  |                |        |              |  |   |        | 

55



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##### Table of Contents



NRG SOUTH CENTRAL GENERATING LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|         |                              
|-------- | -----------------------------
|Note 5  | Property, Plant and Equipment

Property, plant and equipment consists of the
following:

|                                    |  |                |           |              |  |   |           |  
|----------------------------------- |  | -------------- | --------- | ------------ |  | - | --------- | -
|                                    |  | December 31,   |           | December 31,
|                                    |  | 2002           |           | 2001        
|                                    |  |                |           |             
|                                    |  |               
|                                    |  | (In thousands)
|Land                                |  | $              | 15,579    |              |  | $ | 14,308    |  
|Facilities, machinery and equipment |  |                | 1,194,138 |              |  |   | 1,157,357 |  
|Office furnishings and equipment    |  |                | 4,433     |              |  |   | 3,618     |  
|Construction in progress            |  |                | 988       |              |  |   | 41,785    |  
|Less: Accumulated depreciation      |  |                | (83,242   | )            |  |   | (50,556   | )
|                                    |  |                |           |              |  |   |           |  
|Property, plant and equipment (net) |  | $              | 1,131,896 |              |  | $ | 1,166,512 |  
|                                    |  |                |           |              |  |   |           |  

Note 6  Long and Short-Term
Debt

On March 30, 2001, NRG South Central entered
into a 364-day, $40 million floating rate working capital
revolving credit facility. NRG South Central extended this
facility in March 2002 for an additional 3 months, on
substantially similar terms. NRG South Central paid down the
outstanding balance in June 2002 with funds received from NRG
Energy in an equity contribution, and the facility was not
renewed.

On March 30, 2000, NRG South Central issued
$800 million of senior secured bonds in two tranches. 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 on the bonds is payable in arrears on each
March 15 and September 15. Principal payments are made
semi-annually on each March 15 and September 15. The
proceeds of the bonds were used to finance NRG South
Centrals acquisition of the Cajun generating facilities on
March 31, 2000. On December 13, 2000, NRG South
Central commenced an Exchange offer of these bonds with
registered bonds that contain similar terms and conditions. The
Exchange offer was closed on January 19, 2001 with all
bonds being exchanged. As of December 31, 2002 and 2001,
there remains $750.8 million and $763.5 million of
outstanding bonds, respectively. On September 15, 2002, NRG
South Central missed a $47 million principal and interest
payment. The 15-day grace period to make payment related to this
issue passed and NRG South Central did not make the required
payments. On November 21, 2002, the bond trustee, on behalf of
bondholders, accelerated the approximately $750 million of
debt under the NRG South Central Generating, LLC facility,
rendering the debt due and payable. In January 2003, the South
Central Generating bondholders unilaterally withdrew
$35.6 million from the restricted revenue account, relating
to the September 15, 2002, interest payment and fees. On
March 17, 2003 South Central bondholders were paid
$34.4 million due in relation to the semi-annual interest
payment and the $12.8 million principal payment was
deferred. NRG South Central remains in default on these notes,
as a result, the debt has been classified as current at
December 31, 2002. NRG South Central Generating LLCs
secured bonds currently carry a rating of D at S&P and Caa1
at Moodys

NRG South Centrals obligations in respect
to the bonds are secured by a security interest in NRG
Centrals and South Central Generations interests in
NRG South Central and its membership interest in Louisiana
Generating; all of the assets related to the Cajun facilities,
including its rights under all intercompany notes between NRG
South Central and Louisiana Generating but excluding those
assets transferred to New Roads at the time of acquisition; the
revenue account and the debt service reserve account.

Louisiana Generating issued a guarantee in favor
of the bondholders, which unconditionally and irrevocably
guarantees the payment of principal, of premium (if any) and of
interest on the bonds. The guarantee is a guarantee of payment
and the bond trustee is entitled to make demands for payment
under the guarantee any time that amounts due and payable on the
bonds have not been paid.

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NRG SOUTH CENTRAL GENERATING LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The obligations of Louisiana Generating are
secured by a mortgage with respect to Big Cajun I and II and an
interest in:



| |   |                                                                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | All of Louisiana Generatings interest in
    the Cajun facilities and substantially all personal property
    associated with the Cajun facilities except for fixtures not
    located at the Cajun facilities and the assets transferred to
    New Roads at the time of the acquisition;            
|
| |  | Substantially all contracts, associated with the
    Cajun facilities to which Louisiana Generating is a party, and
    all consents to the assignment of these contracts that have been
    obtained;                                                                                                 
|
| |  | All licenses, permits and governmental approvals
    associated with the Cajun facilities;                                                                                                                                                                                                             
|
| |  | All insurance policies associated with the Cajun
    facilities and all monies paid to Louisiana Generating on these
    policies;                                                                                                                                                                     
|
| |  | All revenues of the Cajun facilities, including
    revenues from power sales contracts entered into by NRG Power
    Marketing or any other entity which has entered into a power
    marketing agreement with Louisiana Generating associated with
    the Cajun facilities; and the revenue account.

Optional
Redemption

NRG South Central may redeem the bonds in whole
or in part at any time at a redemption price equal to:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 100% of the principal amount of the bonds being
    redeemed, plus                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | interest on the bonds being redeemed, accrued and
    unpaid to, but excluding, the date of redemption, plus                                                                                                                                                                                                                                                                                                                                                          
|
| |  | a make whole premium based on an amount equal to
    the excess, if any, of (a) the discounted present value of
    all interest and principal payments scheduled to become due in
    respect to the bonds to be redeemed (such discounted present
    value to be determined on the basis of a discount rate equal to
    (i) the treasury rate and (ii) 50 basis points), over
    (b) the outstanding principal amount of the applicable
    bonds to be redeemed.

On June 18, 2002, NRG Peaker Finance Company
LLC (NRG Peaker), a wholly owned subsidiary of NRG and affiliate
of NRG South Central, issued $325 million of senior secured
bonds. Interest on the bonds is payable on March 10,
June 10, September 10, and December 10 of each
year commencing on September 10, 2002. The Peaker projects
which secure the senior secured bonds are a combination of
several indirect wholly owned subsidiaries of NRG Energy, Inc.,
which include the following entities: Bayou Cove Peaking Power
LLC (Bayou Cove), Big Cajun I Peaking Power LLC (Big Cajun
Peaking), NRG Rockford LLC and Rockford II LLC and NRG
Sterlington Power LLC (Sterlington). Three of these entities,
Bayou Cove, Big Cajun Peaking, and Sterlington, are wholly owned
non-guarantor subsidiaries of the NRG South Central. NRG Peaker
Finance Company LLC advanced unsecured loans in the amounts of
$107.4 million to Bayou Cove through project loan
agreements. The project owners used the gross proceeds of the
loans to (1) reimburse NRG Energy for construction and/or
acquisition costs for the peaker projects previously paid by NRG
Energy, (2) pay to XL Capital Assurance (XLCA) the premium
for the Bond Policy, (3) provide funds to NRG Peaker to
collateralize a portion of NRG Energys contingent guaranty
obligations and (4) pay transaction costs incurred in
connection with the offering of the bonds (including
reimbursement of NRG Energy for the portion of such costs
previously paid by NRG Energy). As of December 31, 2002,
Bayou Cove, had an affiliate loan outstanding in the amount of
$105.5 million, in connection with the NRG Peaker bonds.
The note bears a fixed interest rate of 6.673%. On the maturity
date of June 10, 2019, the principal and accrued interest
is due. NRG Peaker bonds are in default; therefore, the
affiliate loan outstanding has been classified as current as of
December 31, 2002. Pursuant to the issuance of the bonds,
approximately $21.2 million of deferred finance costs were
allocated to Bayou Cove, Big Cajun Peaking and Sterlington.

57



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NRG SOUTH CENTRAL GENERATING LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

These costs represent prepayment of a credit
insurance policy (Bond Policy) with XL Capital Assurance. This
Bond Policy is a financial guaranty insurance policy that
guarantees payment of scheduled principal and interest payments
on the bonds.

The bonds are secured by a pledge of membership
interests in NRG Peaker and a security interest in all of its
assets, which initially consisted of notes evidencing loans to
the affiliate project owners, including Bayou Cove, Big Cajun
Peaking and Sterlington. The project owners jointly and
severally guarantied the entire principal amount of the bonds
and interest on such principal amount. The project owner
guaranties are secured by a pledge of the membership interest in
three of five project owners, including Bayou Cove, and a
security interest in substantially all of the project
owners assets related to the peaker projects, including
equipment, real property rights, contracts and permits. NRG
Energy has entered into a contingent guaranty agreement in favor
of the collateral agent for the benefit of the secured parties,
under which it agreed to make payments to cover scheduled
principal and interest payments on the bonds and regularly
scheduled payments under the interest rate swap agreement, to
the extent that the net revenues from the peaker projects are
insufficient to make such payments, in specified circumstances.
This financing contains a cross-default provision related to the
failure by NRG Energy to make payment of principal, interest or
other amounts due on debt for borrowed money in excess of
$50 million of payment defaults by NRG Energy, a covenant
that was violated in October 2002. In addition, liens were
placed against the Bayou Cove facility resulting in an
additional default. NRG Peaker is in the process of getting such
liens released. On October, 22 2002, XL Capital issued a
notice on default on the Peaker financing facility. On
December 10, 2002, $16.0 million in interest,
principal, and swap payments were made from NRG Energys
restricted cash accounts. As a result, $319.4 million in
principal remains outstanding as of December 31, 2002.

NRG Peaker also entered into an interest rate
swap agreement pursuant to which it agreed to make fixed rate
interest payments and receive floating rate interest payments.
The interest rate swap counter-party will have a security
interest in the collateral for the bonds and the collateral for
the project owner guaranties. Net payments to be made by NRG
Peaker under the interest rate swap agreement are guaranteed
pursuant to a separate financial guaranty insurance policy, the
issuer of which has a security interest in the collateral for
the bonds and the collateral for the project owner guaranties.
NRG Peaker was in compliance with this agreement at
December 31, 2002.

Note 7  Derivative Instruments
and Hedging Activity

On January 1, 2001, NRG South Central
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 South
Central to record all derivatives on the balance sheet at fair
value. Changes in the fair value of non-hedge derivatives are
immediately recognized in earnings. Changes in fair values of
derivatives accounted for as hedges are either 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
accumulated other 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 is immediately recognized in earnings. NRG
South Central also formally assesses, both at inception and at
least quarterly thereafter, whether the derivatives 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 gains or losses 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 South
Central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

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NRG SOUTH CENTRAL GENERATING LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

investments in fuel inventories. At
December 31, 2002, NRG South Central had various commodity
contracts extending through 2003. None of these contracts are
designated as hedging instruments.

Accumulated
Other Comprehensive Income

The following table summarizes the effects of
SFAS No. 133 on the Companys Accumulated Other
Comprehensive Income balance as of December 31, 2002 and
2001, respectively:

|                                                                     |                                                        |              |   |      |  |   |   |      |  
|-------------------------------------------------------------------- | ------------------------------------------------------ | ------------ | - | ---- |  | - | - | ---- | -
|                                                                     |                                                        |             
|                                                                     |                                                        | Energy      
|                                                                     |                                                        | Commodities 
|                                                                     |                                                        |             
|                                                                     |                                                        |             
|                                                                     |                                                        | Year Ended  
|                                                                     |                                                        | December 31,
|                                                                     |                                                        |             
|Gains/(Losses) in $ thousands                                        |                                                        | 2002         |   | 2001
|                                                                     |                                                        |              |   |     
|Beginning Balance                                                    |                                                        | $            |  |      |  | $ |  |     
|                                                                     | Initial adoption of SFAS No. 133.                      |              |   |     |  |   |   | 500  |  
|                                                                     | Unwound from OCI during period:                        |              |   |     |  |   |   |     |  
|                                                                     |  due to forecasted transaction no longer
    probable |              |   |     |  |   |   |     |  
|                                                                     |  due to unwinding of previously deferred
    amounts  |              |   |     |  |   |   | (500 | )
|                                                                     | Mark to market of hedge contracts                      |              |   |     |  |   |   |     |  
|                                                                     |                                                        |              |   |      |  |   |   |     
|Ending Balance                                                       |                                                        | $            |  |      |  | $ |  |     
|                                                                     |                                                        |              |   |      |  |   |   |     
|Gains/(Losses) expected to unwind from OCI during
    next 12 months |                                                        | $            |  |      |  | $ |  |     

The adoption of SFAS No. 133 on
January 1, 2001, resulted in an after-tax unrealized gain
of $0.5 million related to previously deferred net gains on
derivatives designated as hedges. During the year ended
December 31, 2001, NRG South Central reclassified gains of
$0.5 million from OCI to current-period earnings. The net
balance in OCI relating to SFAS No. 133 as of
December 31, 2002 and 2001 was $0. NRG South Central has no
derivative instruments classified as hedges and no deferred
gains or losses in OCI at December 31, 2002.

Statement of
Operations

The following tables summarize the effects of
SFAS No. 133 on NRG South Centrals statement of
operations for the period ended December 31, 2002 and 2001,
respectively:

|                                         |                                      |              |     |      |   |   |     |     |  
|---------------------------------------- | ------------------------------------ | ------------ | --- | ---- | - | - | --- | --- | -
|                                         |                                      |             
|                                         |                                      | Energy      
|                                         |                                      | Commodities 
|                                         |                                      |             
|                                         |                                      |             
|                                         |                                      | December 31,
|                                         |                                      |             
|Gains/(Losses) in $ thousands            |                                      | 2002         |     | 2001
|                                         |                                      |              |     |     
|Revenue from majority owned subsidiaries |                                      | $            | 92  |      |   | $ | 21  |    
|Cost of operations                       |                                      |              | (97 | )    |   |   | (39 | )  
|                                         |                                      |              |     |      |   |   |     |    
|                                         | Total Statement of Operations impact |              | $   | (5   | ) |   | $   | (18 | )
|                                         |                                      |              |     |      |   |   |     |    

During the years ended December 31, 2002 and
2001, respectively, NRG South Central recognized no gain or loss
due to ineffectiveness of commodity cash flow hedges, and no
components of NRG South Centrals derivative
instruments gains or losses were excluded from the
assessment of effectiveness.

NRG South Centrals earnings for the years
ended December 31, 2002 and 2001 were decreased by
unrealized losses of $5,000 and $18,000, respectively,
associated with changes in the fair value of energy related
derivative instruments not accounted for as hedges in accordance
with SFAS No. 133.

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NRG SOUTH CENTRAL GENERATING LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Note 8  Related Party
Transactions

NRG South Central and certain of its subsidiaries
entered into a power sale and agency agreement with NRG Power
Marketing Inc., a wholly owned subsidiary of NRG Energy. The
agreement is effective until December 31, 2030. Under the
agreement, NRG Power Marketing Inc. will (i) have the
exclusive right to manage, market and sell all power not
otherwise sold or committed to or by NRG South Central or its
subsidiaries, (ii) procure and provide to NRG South Central
and certain of its subsidiaries all fuel required to operate its
respective facilities and (iii) market, sell and purchase
all emission credits owned, earned or acquired by NRG South
Central and certain of its subsidiaries. In addition, NRG Power
Marketing Inc. will have the exclusive right and obligation to
direct the power output from the facilities.

Under the agreement, NRG Power Marketing, Inc.
pays to NRG South Central and certain of its subsidiaries gross
receipts generated through sales, less costs incurred by NRG
Power Marketing, Inc. relative to its providing services
(e.g. transmission and delivery costs, fuel cost, taxes,
employee labor, contract services, etc.). The Company incurs no
fees related to these power sales and agency agreements with NRG
Power Marketing.

NRG South Central and certain of its subsidiaries
entered into an operation and maintenance agreement with NRG
Operating Services, Inc., (NRG Operating Services) a
wholly-owned subsidiary of NRG Energy. The agreement is
perpetual in term until terminated in writing by NRG South
Central or its subsidiaries or until earlier terminated upon an
event of default. Under the agreement, at the request of NRG
South Central and certain of its subsidiaries, NRG Operating
Services manages, oversees and supplements the operation and
maintenance of the Cajun facilities.

During the years ended December 31, 2002 and
2001, and for the period March 30, 2000 (Inception) through
December 31, 2000, NRG South Central and its
subsidiaries incurred no operating and maintenance costs from
NRG Operating Services.

NRG South Central entered into an agreement with
NRG Energy for corporate support and services. The agreement is
perpetual in term until terminated in writing by NRG South
Central or until earlier terminated upon an event of default.
Under the agreement, NRG Energy will provide services, as
requested, in areas such as human resources, accounting,
finance, treasury, tax, office administration, information
technology, engineering, construction management, environmental,
legal and safety. Under the agreement, NRG Energy is paid for
personnel time as well as out-of-pocket costs.

During the years ended December 31, 2002 and
2001, and for the period March 30, 2000 (Inception) through
December 31, 2000, NRG South Central incurred approximately
$0.8 million, $0.6 million and $0.5 million,
respectively, for corporate support and services.

As of December 31, 2002 and 2001, NRG South
Central has an accounts payable-affiliates balance of
approximately $126.5 million and $27.2 million,
respectively, which consisted primarily of a payable to NRG
Energy for capitalized development costs incurred prior to the
acquisition of the Cajun facilities, construction costs related
to Bayou Cove and operating expenses paid on behalf of NRG South
Central as described in the paragraphs above.

During 2002, in connection with the Peaker
financing, Louisiana Generating sold 50% of its interest in the
natural gas line to Big Cajun 1 Peakers at a gain of
$400 thousand. The intercompany gain was eliminated in
consolidation.

Note 9  Benefits
Disclosures

Louisiana Generating retained a number of the
administrative and operating personnel of Cajun Electric upon
acquisition of Cajun Electrics generating facilities.
Prior to March 31, 2000, these employees were participants
in the National Rural Electric Cooperative Associations
Retirement and Security Program, a

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NRG SOUTH CENTRAL GENERATING LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

master multiple-employer defined benefit plan.
Effective March 31, 2000, the Cooperatives defined
benefit and 401-K plans were terminated, no pension obligation
was assumed by Louisiana Generating or NRG Energy. Louisiana
Generating sponsors a cash balance pension plan arrangement
whereby the employees are entitled to a pension benefit of
approximately 7% of total payroll. The employees are also
eligible to participate in a 401-K plan that provides for the
matching of specified amounts of employee contributions to the
plan.

For the years ended December 31, 2002 and
2001, and the period March 30, 2000 (Inception) through
December 31, 2000, NRG South Central recorded approximately
$357,000, $264,000 and $1 million, respectively, of pension
expense and approximately $680,800, $458,000 and $265,000,
respectively, of 401-K matching funds.

Note 10  Sales to Significant
Customers

During 2002, two customers accounted for 32.8% of
NRG South Centrals gross revenues, Southwest Louisiana
Electric Membership Corporation (16.9%) and Dixie Electric
Membership Corporation (15.9%). During 2001, two customers
accounted for 32.1% of NRG South Centrals gross revenues,
Southwest Louisiana Electric Membership Corporation (16.4%) and
Dixie Electric Membership Corporation (15.7%). During the period
March 30, 2000 (Inception) through December 31, 2000,
sales to two customers accounted for 32.8% of NRG South
Centrals gross revenues, Southwest Louisiana Electric
Membership Corporation (16.7%) and Dixie Electric Membership
Corporation (16.1%), respectively, of NRG South Centrals
total revenues. During March 2000, NRG South Central entered
into certain power sales agreements with eleven distribution
cooperatives that were customers of Cajun Electric prior to its
acquisition of the Cajun facilities. The initial terms of these
agreements provide for the sale of energy, capacity and
ancillary services for the periods ranging from four to
25 years. In addition, NRG South Central assumed Cajun
Electrics obligations under four long-term power supply
agreements. The terms of these agreements range from 10 to
26 years. These power sales agreements accounted for 80.8%,
78.4% and 81.4%, respectively, of NRG South Centrals total
revenues during the years ended December 31, 2002 and 2001,
and for the period March 30, 2000 (Inception) through
December 31, 2000 (Note 12).

Note 11  Financial
Instruments

The estimated fair values of NRG South
Centrals recorded financial instruments, as of
December 31, are as follows:

|                                          |  |                |         |            |  |          |         |            |  |   |         |  |  |   |         | 
|----------------------------------------- |  | -------------- | ------- | ---------- |  | -------- | ------- | ---------- |  | - | ------- |  |  | - | ------- | 
|                                          |  |                |         |           
|                                          |  | 2002           |         | 2001      
|                                          |  |                |         |           
|                                          |  | Carrying       |         |            |  | Carrying |         |           
|                                          |  | Amount         |         | Fair Value |  | Amount   |         | Fair Value
|                                          |  |                |         |            |  |          |         |           
|                                          |  |               
|                                          |  | (In thousands)
|Cash and cash equivalents                 |  | $              | 310     |            |  | $        | 310     |            |  | $ | 3,208   |  |  | $ | 3,208   | 
|Restricted cash                           |  |                | 109,336 |            |  |          | 109,336 |            |  |   |         |  |  |   |         | 
|Notes receivable                          |  |                | 3,000   |            |  |          | 3,000   |            |  |   |         |  |  |   |         | 
|Note payable  affiliate                  |  |                | 105,491 |            |  |          | 105,491 |            |  |   |         |  |  |   |         | 
|Long-term debt, including current portion |  |                | 750,750 |            |  |          | 525,525 |            |  |   | 763,500 |  |  |   | 749,551 | 
|Decommissioning funds                     |  |                | 4,617   |            |  |          | 4,617   |            |  |   | 4,336   |  |  |   | 4,336   | 

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 note
payable-affiliate and long-term debt is estimated based on the
quoted market prices for these issues. Decommissioning fund
investments are comprised of various debt securities of the
United States and are carried at amortized cost, which
approximates their fair value.

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NRG SOUTH CENTRAL GENERATING LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Energy and
energy related commodities

NRG South Central is exposed to commodity price
variability in electricity, emission allowances, natural gas,
oil and coal used to meet fuel requirements. In order to manage
these commodity price risks, NRG South Central enters into
transactions for physical delivery of particular commodities for
a specific period. These financial instruments are used to hedge
physical deliveries, 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. These transactions
are utilized to:



| |   |                                                                     
| | - | --------------------------------------------------------------------
| |  | Manage and hedge its fixed-price purchase and
    sales commitments;
|
| |  | Reduce its exposure to the volatility of spot
    market prices;    
|
| |  | Hedge fuel requirements at its generation
    facilities; and       
|
| |  | Protect its investment in fuel inventories.                         

Interest
Rates

From time to time, NRG South Central may use
interest rate hedging instruments to protect it from an increase
in the cost of borrowing. As of December 31, 2002 and 2001,
respectively, there were no such instruments outstanding.

Note 12  Commitments and
Contingencies

Operating Lease Commitments

NRG South Central leases certain of its land,
storage space and equipment under operating leases expiring on
various dates through 2015. Rental expense under these operating
leases was approximately $0.5 million, $0.5 million,
and $0.4 million in 2002, 2001, and 2000, respectively.
Future minimum lease commitments under these leases for the
years ending after December 31, 2002 are as follows:

|           |       |                        |     |     | 
|---------- | ----- | ---------------------- | --- | --- | 
|           |       | (Thousands of dollars)
|           |       |                       
|2003       |       | $                      | 297 |    
|2004       |       |                        | 121 |    
|2005       |       |                        | 51  |    
|2006       |       |                        | 23  |    
|2007       |       |                        | 20  |    
|Thereafter |       |                        | 160 |    
|           |       |                        |     |    
|           | Total |                        | $   | 672 | 
|           |       |                        |     |    

Capital Requirements

NRG South Central anticipates funding its ongoing
capital requirements through operating cash flows and existing
cash. NRG South Centrals capital expenditure program is
subject to continuing review and modification. The timing and
actual amount of expenditures may differ significantly based
upon plant operating history, unexpected plant outages, changes
in the regulatory environment, the availability of cash and
restructuring efforts.

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NRG SOUTH CENTRAL GENERATING LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Contractual Commitments

Power Supply
Agreements with the Distribution Cooperatives

During March 2000, Louisiana Generating entered
into certain power supply agreements with eleven distribution
cooperatives to provide energy, capacity and transmission
services. The agreements are standardized into three types,
Form A, B, and C.

Form A
Agreements

Six of the distribution cooperatives entered into
Form A power supply agreements. The Form A agreement
is an all-requirements power supply agreement which has an
initial term of 25 years, commencing on March 31,
2000. After the initial term, the agreement continues on a
year-to-year basis, unless terminated by either party giving
five years advance notice.

Under the Form A power supply agreement,
Louisiana Generating is obligated to supply the distribution
cooperative all of the energy and capacity required by the
distribution cooperative for service to its retail customers
although the distribution cooperative has certain limited rights
under which it can purchase energy and capacity from third
parties.

Louisiana Generating charges the distribution
cooperative a demand charge, a fuel charge and a variable
operation and maintenance charge. The demand charge consists of
two components, a capital rate and a fixed operation and
maintenance rate. The distribution cooperatives have an option
to choose one of two fuel options; all nine have selected the
first option which is a fixed fee through 2004 and determined
using a formula which is based on gas prices and the cost of
delivered coal for the period thereafter. At the end of the
fifteenth year of the contract, the cooperatives may switch to
the second fuel option. The second fuel option consists of a
pass-through of fuel costs, with a guaranteed coal heat rate and
purchased energy costs, excluding the demand component in
purchased power. From time to time, Louisiana Generating may
offer fixed fuel rates which the cooperative may elect to
utilize. The variable operation and maintenance charge is fixed
through 2004 and escalates at either approximately 3% per annum
or in accordance with actual changes in specified indices as
selected by the distribution cooperative. Five of the
distribution cooperatives elected the fixed escalation provision
and one elected the specified indices provision.

The Form A agreement also contains
provisions for special rates for certain customers based on the
economic development benefits the customer will provide and
other rates to improve the distribution cooperatives
ability to compete with service offered by political
subdivisions.

Form B
Agreements

One distribution cooperative selected the
Form B Power Supply Agreement. The term of the Form B
power supply agreement commences on March 31, 2000 and ends
on December 31, 2024. The Form B power supply
agreement allows the distribution cooperative the right to elect
to limit its purchase obligations to base supply or
also to purchase supplemental supply. Base supply is
the distribution cooperatives ratable share of the
generating capacity purchased by Louisiana Generating from Cajun
Electric. Supplemental supply is the cooperatives
requirements in excess of the base supply amount. The
distribution cooperative, which selected the Form B
agreement, also elected to purchase supplemental supply.

Louisiana Generating charges the distribution
cooperative a monthly specific delivery facility charge of
approximately 1.75% of the depreciated net book value of the
specific delivery facilities, including additional investment.
The distribution cooperative may assume the right to maintain
the specific delivery facilities and reduce the charge to 1.25%
of the depreciated net book value of the specific delivery
facilities. Louisiana Generating also charges the distribution
cooperative its ratable share of 1.75% of the depreciated book
value of

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NRG SOUTH CENTRAL GENERATING LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

common delivery facilities, which include
communications, transmission and metering facilities owned by
Louisiana Generating to provide supervisory control and date
acquisition, and automatic control for customers.

For base supply, Louisiana Generating charges the
distribution cooperative a demand charge, an energy charge and a
fuel charge. The demand charge for each contract year is set
forth in the agreement and is subject to increase for
environmental legislation or occupational safety and health laws
enacted after the effective date of the agreement. Louisiana
Generating can increase the demand charge to the extent its cost
of providing supplemental supply exceeds $400 per
kilowatt (kW). The energy charge is fixed through 2004, and
decreased slightly for the remainder of the contract term. The
fuel charge is a pass-through of fuel and purchase energy costs.
The distribution cooperative may elect to be charged based on a
guaranteed coal-fired heat rate of 10,600 British Thermal Units
per kilowatt-hour (Btu/kWh), and it may also select fixed fuel
factors as set forth in the agreement for each year through
2008. The one distribution cooperative which selected this form
of agreement elected to utilize the fixed fuel factors. For the
years after 2008, Louisiana Generating will offer additional
fixed fuel factors for five-year periods that may be elected.
For the years after 2008, the distribution cooperative may also
elect to have its charges computed under the pass-through
provisions with or without the guaranteed coal-fired heat rate.

At the beginning of year six, Louisiana
Generating will establish a rate equal to the ratable share of
$18 million. The amount of the fund will be approximately
$720,000. This fund will be used to offset the energy costs of
the Form B distribution cooperatives which elected the fuel
pass-through provision of the fuel charge, to the extent the
cost of power exceeds $0.04 per kWh. Any funds remaining at the
end of the term of the power supply agreement will be returned
to Louisiana Generating.

Form C
Agreements

Four distribution cooperatives selected the
Form C power supply agreement. The Form C power supply
agreement is identical to the Form A power supply
agreement, except for the following.

The term of the Form C power supply
agreement is for four years following the closing date of the
acquisition of the Cajun facilities. However, three of the
distribution cooperatives have entered into an amended and
restated Form C power purchase agreement that extends the
term of the agreement through March 31, 2014. A fourth
distribution cooperative has entered into a similar amended and
restated Form C agreement that extends the term of its
agreement through March 31, 2009. Approval of these four
agreements is pending at the FERC and the Louisiana Public
Service Commission.

Louisiana Generating will charge the distribution
cooperative a demand rate, a variable operation and maintenance
charge and fuel charge. Louisiana Generating will not offer the
distribution cooperatives which select the Form C agreement
any new incentive rates, but will continue to honor existing
incentive rates. At the end of the term of the agreement, the
distribution cooperative is obligated to purchase the specific
delivery facilities for a purchase price equal to the
depreciated book value.

Louisiana Generating must contract for all
transmission services required to serve the distribution
cooperative and will pass through the costs of transmission
service to the cooperative. Louisiana Generating is required to
supply at its cost, without pass-through, control area services
and ancillary services which transmission providers are not
required to provide.

Louisiana Generating owns and maintains the
substations and other facilities used to deliver energy and
capacity to the distribution cooperative and charges the
cooperative a monthly specific delivery facility charge for such
facilities; any additions to, or new delivery facilities. The
initial monthly charge is 1% of the value of all of the
distribution cooperatives specific delivery facilities.
The cost of additional investment during the term of the
agreement will be added to the initial value of the delivery
facilities to calculate the monthly specific delivery facility
charge.

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NRG SOUTH CENTRAL GENERATING LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Included in the amended and restated Form C
agreements is a provision for an annual $250,000 Economic
Development Contribution to be shared among the four Form C
distribution cooperatives, beginning in April 2004 and extending
through the end of the contract terms.

Other Power
Supply Agreements

Louisiana Generating assumed Cajun
Electrics rights and obligations under two consecutive
long-term power supply agreements with South Western Electric
Power Company (SWEPCO), one agreement with South Mississippi
Electric Power Association (SMEPA) and one agreement with
Municipal Energy Agency of Mississippi (MEAM).

The SWEPCO Operating Reserves and Off-Peak Power
Sale Agreement, terminates on December 31, 2007. The
agreement requires Louisiana Generating to supply 100 megawatts
(MW) of off-peak energy during certain hours of the day to
a maximum of 292,000 megawatt-hours (MWh) per year and an
additional 100 MW of operating reserve capacity and the
associated energy within ten minutes of a phone request during
certain hours to a maximum of 43,800 MWh of operating
reserve energy per year. The obligation to purchase the
100 MW of off-peak energy is contingent on Louisiana
Generatings ability to deliver operating reserve capacity
and energy associated with operating reserve capacity. At
Louisiana Generatings request, it will supply up to
100 MW of non-firm, on peak capacity and associated energy.

The SWEPCO Operating Reserves Capacity and Energy
Power Sale Agreement is effective January 1, 2008 through
December 31, 2026. The agreement requires Louisiana
Generating to provide 50 MW of operating reserve capacity
within 10 minutes of a phone request. In addition, SWEPCO is
granted the right to purchase up to 21,900 MWh/year of
operating reserve energy.

The SMEPA Unit Power Sale Agreement is effective
through May 31, 2009, unless terminated following certain
regulatory changes, changes in fuel costs or destruction of the
Cajun facilities. The agreement requires Louisiana Generating to
provide 75 MW of capacity and the associated energy from
Big Cajun II, Unit 1 and an option for SMEPA to purchase
additional capacity and associated energy if Louisiana
Generating determines that it is available, in 10 MW
increments, up to a total of 200 MW. SMEPA is required to
schedule a minimum of 25 MW plus 37% of any additional
capacity that is purchased. The capacity charge is fixed through
May 31, 2004, and increases for the period June 1,
2004 through May 31, 2009 including transmission costs to
the delivery point and any escalation of expenses. The energy
charge is 110% of the incremental fuel cost for Big Cajun II,
Unit 1.

The MEAM Power Sale Agreement is effective
through May 31, 2010 with an option for MEAM to extend
through September 30, 2015 upon five years advance notice.
The agreement requires Louisiana Generating to provide 20 MW of
firm capacity and associated energy with an option for MEAM to
increase the capacity purchased to a total of 30 MW upon five
years advance notice. The capacity charge is fixed. The
operation and maintenance charge is a fixed amount which
escalates at 3.5% per year. There is a transmission charge which
varies depending upon the delivery point. The price for energy
associated with the firm capacity is 110% of the incremental
generating cost to Louisiana Generating and is adjusted to
include transmission losses to the delivery point.

Coal Supply
Agreement

Louisiana Generating has entered into a coal
supply agreement with Triton Coal. The coal is primarily sourced
from Triton Coals Buckskin and North Rochelle mines
located in the Powder River Basin, Wyoming. The initial term of
the Coal supply agreement ends on March 31, 2005. The
agreement establishes a base price per ton for coal supplied by
Triton Coal. The base price is subjected to adjustment for
changes in the level of taxes or other government fees and
charges, or variations in the caloric value of the coal shipped.
The base price is based on certain annual weighted average
quality specifications, subject to suspension and rejection

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NRG SOUTH CENTRAL GENERATING LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

limits. At the end of the agreement, Triton
retains certain rights to match competitive offers from other
coal vendors, pursuant to the coal supply agreement.

Coal
Transportation Agreement

Louisiana Generating entered into a coal
transportation agreement with Burlington Northern and Santa Fe
Railway and American Commercial Terminal. This agreement
provides for the transport of all of the coal requirements of
Big Cajun II from the mines in Wyoming to Big Cajun II.

Transmission
and Interconnection Agreements

Louisiana Generating assumed Cajun
Electrics existing transmission agreements with Central
Louisiana Electric Company, SWEPCO; and Entergy Services, Inc.,
acting as agent for Entergy Arkansas, Inc., Entergy Gulf States,
Entergy Louisiana, Inc., Entergy Mississippi, Inc., and Entergy
New Orleans, Inc. On June 11, 2002, Entergy Services, Inc.
submitted for filing at the FERC an Interconnection and
Operating Agreement between Louisiana Generating (for Big Cajun
II) and Entergy Gulf States, Inc. and a similar Interconnection
and Operating Agreement between Louisiana Generating (for Big
Cajun Peaking) and Entergy Gulf States, Inc. to be effective the
day after filing. The Cajun facilities are connected to the
transmission system of Entergy Gulf States and power is
delivered to the distribution cooperative at various delivery
points on the transmission systems of Entergy Gulf States,
Entergy Louisiana, Central Louisiana Electric Company and
SWEPCO. Louisiana Generating also assumed from Cajun Electric 20
interchange and sales agreements with utilities and
cooperatives, providing access to a 12 state area.

Environmental Matters

The construction and operation of power projects
are subject to stringent environmental and safety protection and
land use laws and 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 become more
stringent and NRG South Centrals facilities are not
exempted from coverage, NRG South Central could be required to
make extensive modifications to further reduce potential
environmental impacts. Also, NRG South Central could be held
responsible under environmental and safety laws for the cleanup
of pollutant releases at its facilities or at off-site locations
where it has sent wastes.

NRG South Central and its subsidiaries strive to
exceed the standards of compliance with applicable environmental
and safety regulations. Nonetheless, NRG South Central expects
that future liability under or compliance with environmental and
safety requirements could have a material effect on its
operations or competitive position. 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 possible changes to environmental and
safety regulations, regulatory interpretations or enforcement
policies. In general, the effect of future laws or regulations
is expected to require the addition of pollution control
equipment or the imposition of restrictions on NRG South
Centrals operations.

NRG South Central establishes accruals where
reasonable estimates of probable environmental and safety
liabilities are possible. NRG South Central 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.

Under various federal, state and local
environmental laws and regulations, a current or previous owner
or operator of any facility, including an electric generating
facility, may be required to investigate and remediate releases
or threatened releases of hazardous or toxic substances or
petroleum products located at the facility, and may be held
liable to a governmental entity or to third parties for property
damage, personal injury and

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NRG SOUTH CENTRAL GENERATING LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

investigation and remediation costs incurred by
the party in connection with any releases or threatened
releases. These laws, including the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986, impose
liability without regard to whether the owner knew of or caused
the presence of the hazardous substances, and courts have
interpreted liability under such laws to be strict (without
fault) and joint and several. The cost of investigation,
remediation or removal of any hazardous or toxic substances or
petroleum products could be substantial. NRG South Central has
not been named as a potentially responsible party with respect
to any off-site waste disposal matter.

Liabilities associated with closure, post-closure
care and monitoring of the ash ponds owned and operated on site
at the Big Cajun II Generating Station are addressed
through the use of a trust fund maintained by NRG South Central
(one of the instruments allowed by the Louisiana Department of
Environmental Quality for providing financial assurance for
expenses associated with closure and post-closure care of the
ponds). The value of the trust fund is approximately
$4.6 million at December 31, 2002 and NRG South
Central is making annual payments to the fund in the amount of
about $116,000. See Note 15.

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 South Central
participated in development of the revisions, which require the
reduction of NOx emissions at the gas-fired Big Cajun I Power
Station and coal-fired Big Cajun II Power Station to 0.1
pounds NOX per million Btu heat input and 0.21 pounds NOX per
million Btu heat input, respectively. 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 combustion
controls to be passed through to the cooperatives. The capital
cost of combustion controls required at the Big Cajun II
Generating Station to meet the States NOx regulations will
total about $10.0 million each for
Units 1 & 2. Unit 3 has already made
such changes. The capital cost of combustion controls required
at the Big Cajun I Generating Station to meet the
States NOx regulations will total about $5 million to
$10 million for the Unit 1 & 2 steam boilers.

Legal Issues



| |                                                                                                                                                                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Pointe Coupee Parish Police Jury and
    Louisiana Generating, LLC v. United States Environmental
    Protection Agency and Christine Todd Whitman, Administrator,
    Adversary Proceeding No. 02-61021 on the docket of the
    United States Court of Appeals for the Fifth
    Circuit

On December 2, 2002, a Petition for Review
was filed to appeal the United States Environmental Protection
Agencys approval of the Louisiana Department of
Environmental Qualitys (DEQ) revisions to the
Baton Rouge State Implementation Plan (SIP). Pointe
Coupee and NRG Energys subsidiary, Louisiana Generating,
object to the approval of SIP Section 4.2.1. Permitting NOx
Sources that purports to require DEQ to obtain offsets of major
increases in emissions of nitrogen oxides (NOx) associated with
major modifications of existing facilities or construction of
new facilities both in the Baton Rouge Ozone Nonattainment Area
and in four adjoining attainment parishes referred to as the
Region of Influence, including Pointe Coupee Parish. The
plaintiffs challenge is based on DEQs failure to
comply with Administrative Procedures Act requirements related
to rulemaking and EPAs regulations which prohibit EPA from
approving a SIP not prepared in accordance with state law. The
court granted a sixty (60) day stay of this proceeding on
February 25, 2003 to allow the parties to conduct
settlement discussions. At this time, NRG Energy is unable to
predict the eventual outcome of this matter or the potential
loss contingencies, if any, to which the Company may be subject.

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NRG SOUTH CENTRAL GENERATING LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------
| | In the Matter of Louisiana Generating, LLC,Adversary Proceeding
    No. 2002-1095 1-EQ on the Docket of the Louisiana
    Division of Administrative Law

During 2000, DEQ issued a Part 70 Air Permit
modification to Louisiana Generating to construct and operate
two 240 MW natural gas-fired turbines. The Part 70 Air Permit
set emissions limits for the criteria air pollutants, including
Nox, based on the application of Best Available Control
Technology (BACT). The BACT limitation for NO(x) was
based on the guarantees of the manufacturer,
Siemens-Westinghouse. Louisiana Generating sought an interim
emissions limit to allow Siemens-Westinghouse time to install
additional control equipment. To establish the interim limit,
DEQ issued a Compliance Order and Notice of Potential Penalty,
No. AE-CN-02-0022, on September 8, 2002, which is, in
part, subject to the referenced administrative hearing. DEQ
alleged that Louisiana Generating did not meet its NO(x)
emissions limit on certain days, did not conduct all opacity
monitoring and did not complete all record keeping and
certification requirements. Louisiana Generating intends to
vigorously defend certain claims and any future penalty
assessment, while also seeking an amendment of its limit for
NO(x). An initial status conference has been held with the
Administrative Law Judge and quarterly reports will be submitted
to describe progress, including settlement and amendment of the
limit. In addition, NRG Energy may assert breach of warranty
claims against the manufacturer. With respect to the
administrative action described above, at this time NRG South
Central is unable to predict the eventual outcome of this matter
or the potential loss contingencies, if any, to which the
Company may be subject.



| |                           
| | --------------------------
| | NRG Sterlington Power, LLC

During 2002, NRG Sterlington conducted a review
of the Sterlington Power Facilitys Part 70 Air Permit
obtained by the facilitys former owner and operator, Koch
Power, Inc. Koch had outlined a plan to install eight 25
megawatt (MW) turbines to reach a 200 MW limit in the
permit. Due to the inability of several units to reach their
nameplate capacity, Koch determined that it would need
additional units to reach the electric output target. In August
2000, NRG Sterlington acquired the remaining interests in the
facility not originally held on a passive basis and sought the
transfer of the Part 70 Air Permit along with a modification to
incorporate two 17.5 MW turbines installed by Koch and to
increase the total number of turbines to ten. The permit
modification was issued February 13, 2002. During further
review, NRG Sterlington determined that a ninth unit had been
installed prior to issuance of the permit modification. In
keeping with its environmental policy, it disclosed this matter
to DEQ during April, 2002. Additional information was provided
during July 2002. As DEQ has not acted to date to institute an
enforcement proceeding, NRG South Central suspects that it may
not. However, as it is not time barred from doing so, NRG South
Central is unable at this time to predict the eventual outcome
or potential loss contingencies, if any, to which the Company
may be subject.



| |                           
| | --------------------------
| | NRG Energy Credit Defaults

NRG Energy and various of its subsidiaries are in
default under various of their credit facilities, financial
instruments, construction agreements and other contracts, which
have given rise to liens, claims and contingencies against them
and may in the future give rise to additional liens, claims and
contingencies against them. In addition, NRG Energy and various
of its subsidiaries have entered into various guarantees, equity
contribution agreements, and other financial support agreements
with respect to the obligations of their affiliates, which have
given rise to liens, claims and contingencies against them and
may in the future give rise to additional liens, claims and
contingencies against the party or parties providing the
financial support. NRG Energy cannot at this time predict the
outcome or financial impact of these matters.

Note 13  Predecessor Revenues and
Expenses

The accompanying Consolidated Statements of
Operations contains a statement of certain revenues and expenses
of Cajun Electric, the predecessor of Louisiana Generating, on a
carve-out basis for the three months

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NRG SOUTH CENTRAL GENERATING LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

ended March 31, 2000. These results have
been separated by a black line due to the change in
basis of the assets of Cajun Electric on the date of our
acquisition. These results represent certain revenues and
expenses of Cajun Electrics non-nuclear electric
generating business, which were acquired on March 31, 2000.
The carve-out revenues and expenses exclude Cajun
Electrics investment earnings, interest expense,
bankruptcy reorganization costs and income taxes.

Note 14  Jointly Owned
Plant

On March 31, 2000, Louisiana Generating
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, 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
borne in proportion to the energy delivered to the owners. Our
statements of operations include our share of all fixed and
variable costs of operating the unit. NRG South Centrals
58% share of the original cost include in Property, Plant and
Equipment, at December 31, 2002 and 2001 was $189.0 and
$179.7 million, respectively. The corresponding accumulated
depreciation and amortization at December 31, 2002 and 2001
was $12.3 million and $7.8 million, respectively.

Note 15  Decommissioning
Fund

NRG South Central is required by the State of
Louisiana Department of Environmental Quality (DEQ)
to rehabilitate its Big Cajun II ash and wastewater
impoundment areas upon removal from service of the Big
Cajun II facilities. 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. NRG South Centrals predecessor deposited
$1.06 million in the Solid Waste Disposal Trust Fund in
1989, and funded $116,000 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, 2002 and 2001,
the carrying value of the trust fund investments and the related
accrued decommissioning liability was approximately
$4.6 million and $4.3 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. NRG South Central is reviewing
its obligation related to these matters in connection with the
adoption of SFAS No. 143.

Note 16  Sale of Equity Method
Investment

In September 2002, NRG Energy agreed to sell its
indirect 50% interest in SRW Cogeneration LP (SRW), to its
partner in SRW Conoco, Inc. in consideration for Conocos
agreement to terminate or assume all of the obligations of NRG
Energy in relation to SRW. SRW owns a cogeneration facility in
Orange County, Texas. NRG South Central recorded a charge of
approximately $48 million during the third quarter to write
down the carrying value of its investment due to the pending
sale. The sale closed on November 5, 2002.

Note 17  Guarantees

In November 2002, the FASB issued FASB
Interpretation No. 45, Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. The initial
recognition and initial measurement provisions of this
interpretation are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002,
irrespective of the guarantors fiscal year-end. The

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NRG SOUTH CENTRAL GENERATING LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

disclosure requirements are effective for
financial statements of interim or annual periods ending after
December 15, 2002. The interpretation addresses the
disclosures to be made by a guarantor in its interim and annual
financial statements about its obligations under guarantees. The
interpretation also clarifies the requirements related to the
recognition of a liability by a guarantor at the inception of
the guarantee for the obligations the guarantor has undertaken
in issuing the guarantee.

NRG South Central guarantees the purchase and
sale of fuel, emission credits and power generation to and from
third parties in connection with the operation of some of NRG
South Centrals generation facilities. As of
December 31, 2002, NRG South Centrals obligations
pursuant to its guarantees of the performance of its
subsidiaries totaled approximately $39.7 million.

In June 2002, NRG Peaker Finance Company LLC
issued $325 million of secured bonds to make loans to
affiliates which own natural gas fired peaker
electric generating projects. As of December 31, 2002,
$319.4 million remains outstanding. NRG Peaker Finance
Company LLC advanced unsecured loans in the amount of
$107.4 million to Bayou Cove through project loan
agreements. The remaining $217.6 million was advanced to
NRG Rockford LLC and Rockford II LLC, indirect wholly owned
subsidiaries of NRG Energy, Inc. As of December 31, 2002,
Bayou Cove had an intercompany loan outstanding in the amount of
$105.5 million. The principal and interest payments, in
addition to the obligation to pay fees and other finance
expenses, in connection with the bonds are jointly and severally
guaranteed by each of the three projects. As a result, NRG South
Centrals obligation pursuant to its guarantee of the
secured bonds is $319.4 million as of December 31,
2002.

Louisiana Generating is a guarantor of the bonds
issued on March 30, 2000 to acquire the Cajun facilities.

Note 18  Unaudited Quarterly
Financial Data

Subsequent to the issuance of NRG South
Centrals financial statements for the quarter ended
September 30, 2002, NRG South Centrals management
determined that the accounting for certain transactions required
restatement.

NRG South Central determined that it had
misapplied the provisions of SFAS No. 144 related to asset
groupings in connection with the review for impairment of its
long-lived assets during the quarter ended September 30,
2002. SFAS No. 144 requires that for purposes of testing
recoverability, assets be grouped at the lowest level for which
identifiable cash flows are largely independent of the cash
flows of other assets. NRG South Central recalculated the asset
impairment tests in accordance with SFAS No. 144 using the
appropriate asset grouping for independent cash flows for each
generation facility. As a result, NRG South Central concluded
that an asset impairment should have been recorded for its
project known as Bayou Cove Peaking Power LLC. Since NRG South
Central concluded that triggering events that led to the
impairment charge were experienced in the third quarter of 2002,
the asset impairment should have been recorded as of
September 30, 2002. NRG Energy calculated the asset
impairment charge for Bayou Cove Peaking Power LLC to be
$126.5 million.

A summary of the significant effects of the
restatement on our consolidated statements of operations for the
three and nine months ended September 30, 2002 is as
follows:

|                            |  |                     |         |              |  |              |         |              |  |   |          |   |  |   |          |  
|--------------------------- |  | ------------------- | ------- | ------------ |  | ------------ | ------- | ------------ |  | - | -------- | - |  | - | -------- | -
|                            |  |                     |         |             
|                            |  | Previously Reported |         | As Restated 
|                            |  |                     |         |             
|                            |  | Three               |         | Nine         |  | Three        |         | Nine        
|                            |  | Months Ended        |         | Months Ended |  | Months Ended |         | Months Ended
|                            |  |                     |         |              |  |              |         |             
|                            |  |                    
|                            |  | (In thousands)     
|Revenue and equity earnings |  | $                   | 104,100 |              |  | $            | 292,884 |              |  | $ | 104,100  |   |  | $ | 292,884  |  
|Operating (loss)/income     |  |                     | (35,829 | )            |  |              | 7,366   |              |  |   | (162,357 | ) |  |   | (119,162 | )
|Net loss                    |  |                     | (54,769 | )            |  |              | (46,493 | )            |  |   | (181,297 | ) |  |   | (173,021 | )

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NRG SOUTH CENTRAL GENERATING LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

A summary of the significant effects of the
restatement on our consolidated balance sheet as of
September 30, 2002 is as follows:

|                                                                   |  |                          |           |             |  |   |           | 
|------------------------------------------------------------------ |  | ------------------------ | --------- | ----------- |  | - | --------- | 
|                                                                   |  |                         
|                                                                   |  | As of September 30, 2002
|                                                                   |  |                         
|                                                                   |  | Previously Reported      |           | As Restated
|                                                                   |  |                          |           |            
|                                                                   |  |                         
|                                                                   |  | (In thousands)          
|Property, Plant and Equipment, net of accumulated
    depreciation |  |                          | 1,267,063 |             |  | $ | 1,140,535 | 
|Members equity                                                    |  |                          | 449,031   |             |  |   | 322,503   | 

Summarized quarterly unaudited financial data is
as follows:

|                            |  |                        |        |         |  |         |        |        |  |            |          |   |  |   |         |  |  |   |          |  
|--------------------------- |  | ---------------------- | ------ | ------- |  | ------- | ------ | ------ |  | ---------- | -------- | - |  | - | ------- |  |  | - | -------- | -
|                            |  |                       
|                            |  | Quarter Ended 2002    
|                            |  |                       
|                            |  | Mar 31                 |        | June 30 |  | Sept 30 |        | Dec 31 |  | Total Year
|                            |  |                        |        |         |  |         |        |        |  |           
|                            |  |                       
|                            |  | Restated              
|                            |  |                       
|                            |  | (Thousands of dollars)
|Revenue and equity earnings |  |                        | 89,717 |         |  | $       | 99,067 |        |  | $          | 104,100  |   |  | $ | 103,836 |  |  | $ | 396,720  |  
|Operating income            |  |                        | 22,006 |         |  |         | 21,189 |        |  |            | (162,357 | ) |  |   | 21,305  |  |  |   | (97,857  | )
|Net loss                    |  |                        | 3,778  |         |  |         | 4,498  |        |  |            | (181,297 | ) |  |   | 1,147   |  |  |   | (171,874 | )

|                            |  |                        |        |         |  |         |         |        |  |            |         |  |  |   |        |   |  |   |         | 
|--------------------------- |  | ---------------------- | ------ | ------- |  | ------- | ------- | ------ |  | ---------- | ------- |  |  | - | ------ | - |  | - | ------- | 
|                            |  |                       
|                            |  | Quarter Ended 2001    
|                            |  |                       
|                            |  | Mar 31                 |        | June 30 |  | Sept 30 |         | Dec 31 |  | Total Year
|                            |  |                        |        |         |  |         |         |        |  |           
|                            |  |                       
|                            |  | (Thousands of dollars)
|Revenue and equity earnings |  | $                      | 97,451 |         |  | $       | 105,676 |        |  | $          | 110,185 |  |  | $ | 83,648 |   |  | $ | 396,960 | 
|Operating income            |  |                        | 28,491 |         |  |         | 19,269  |        |  |            | 19,005  |  |  |   | 16,197 |   |  |   | 82,962  | 
|Net loss                    |  |                        | 10,500 |         |  |         | 1,084   |        |  |            | 1,001   |  |  |   | (2,477 | ) |  |   | 10,108  | 



|          |                                                  
|--------- | -------------------------------------------------
|Note 19  | Condensed Consolidating Financial
    Information

The following tables set forth the consolidating
financial statements of NRG South Central Generating LLC (Bond
Issuer); Louisiana Generating LLC (Bond Guarantor); NRG New
Roads Holding LLC, NRG Sterlington Power LLC, Big
Cajun I Peaking Power LLC, NRG Sabine River Works GP LLC,
NRG Sabine River Works LP LLC, NRG Bayou Cove LLC and NRG Bayou
Cove Peaking Power LLC (Unrestricted, Non-guarantor
subsidiaries). The condensed consolidating financial statements
present the unrestricted non-guarantor subsidiaries on a
combined basis. The consolidating financial statements as of and
for the years ended December 31, 2002 and 2001, and the
period March 30, 2000 (Inception) through December 31,
2000 have been derived from the audited historical consolidated
financial statements of NRG South Central.

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NRG SOUTH CENTRAL GENERATING LLC AND
SUBSIDIARIES

CONSOLIDATING BALANCE SHEET

December 31, 2002


|                                 |                                                    |                |         |                  |  |                |           |                 |  |              |           |         |  |   |            |          |   |   |           |         | 
|-------------------------------- | -------------------------------------------------- | -------------- | ------- | ---------------- |  | -------------- | --------- | --------------- |  | ------------ | --------- | ------- |  | - | ---------- | -------- | - | - | --------- | ------- | 
|                                 |                                                    | Unrestricted   |         | Louisiana        |  | South Central  |           |                 |  |             
|                                 |                                                    | Non-Guarantor  |         | Generating LLC   |  | Generating LLC |           |                 |  | Consolidated
|                                 |                                                    | Subsidiaries   |         | (Bond Guarantor) |  | (Bond Issuer)  |           | Eliminations(1) |  | Balance     
|                                 |                                                    |                |         |                  |  |                |           |                 |  |             
|                                 |                                                    |               
|                                 |                                                    | (In thousands)
|ASSETS                          
|Current Assets:                  |                                                    |                |         |                  |  |                |           |                 |  |              |           |         |  |   |            |          |   |   |           |        
|                                 | Cash and cash equivalents                          |                | $       | 310              |  |                | $         |                |  |              | $         |        |  |   | $          |         |   |   | $         | 310     | 
|                                 | Restricted cash                                    |                |         |                 |  |                |           | 109,336         |  |              |           |        |  |   |            |         |   |   |           | 109,336 | 
|                                 | Accounts receivable                                |                |         | 249              |  |                |           | 46,089          |  |              |           |        |  |   |            |         |   |   |           | 46,338  | 
|                                 | Interest receivable  affiliate                    |                |         |                 |  |                |           |                |  |              |           | 55,413  |  |   |            | (55,413  | ) |   |           |        | 
|                                 | Note receivable  current                          |                |         |                 |  |                |           | 3,000           |  |              |           |        |  |   |            |         |   |   |           | 3,000   | 
|                                 | Intercompany note receivable 
    bonds  current |                |         |                 |  |                |           |                |  |              |           | 750,750 |  |   |            | (750,750 | ) |   |           |        | 
|                                 | Inventory                                          |                |         | 970              |  |                |           | 63,394          |  |              |           |        |  |   |            |         |   |   |           | 64,364  | 
|                                 | Derivative instruments valuation  at
    market   |                |         |                 |  |                |           |                |  |              |           | 112     |  |   |            |         |   |   |           | 112     | 
|                                 | Prepaid expenses                                   |                |         | 309              |  |                |           | 2,927           |  |              |           |        |  |   |            |         |   |   |           | 3,236   | 
|                                 |                                                    |                |         |                  |  |                |           |                 |  |              |           |         |  |   |            |          |   |   |           |        
|Total current assets             |                                                    |                | 1,838   |                  |  |                | 224,746   |                 |  |              | 806,275   |         |  |   | (806,163   | )        |   |   | 226,696   |        
|Equity investments in affiliates |                                                    |                |        |                  |  |                |          |                 |  |              | 320,797   |         |  |   | (320,797   | )        |   |   |          |        
|Property, plant & equipment, net |                                                    |                | 168,066 |                  |  |                | 964,220   |                 |  |              |          |         |  |   | (390       | )        |   |   | 1,131,896 |        
|Decommissioning fund investment  |                                                    |                |        |                  |  |                | 4,617     |                 |  |              |          |         |  |   |           |          |   |   | 4,617     |        
|Deferred financing costs, net    |                                                    |                | 20,488  |                  |  |                | 9,540     |                 |  |              |          |         |  |   |           |          |   |   | 30,028    |        
|Other assets, net                |                                                    |                |        |                  |  |                | 2,274     |                 |  |              | 4,833     |         |  |   |           |          |   |   | 7,107     |        
|                                 |                                                    |                |         |                  |  |                |           |                 |  |              |           |         |  |   |            |          |   |   |           |        
|Total Assets                     |                                                    | $              | 190,392 |                  |  | $              | 1,205,397 |                 |  | $            | 1,131,905 |         |  | $ | (1,127,350 | )        |   | $ | 1,400,344 |        
|                                 |                                                    |                |         |                  |  |                |           |                 |  |              |           |         |  |   |            |          |   |   |           |        

72



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##### Table of Contents



NRG SOUTH CENTRAL GENERATING LLC AND
SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS 
(Continued)

|                                          |                                                            |                |         |                  |  |                |           |                 |  |              |           |         |  |   |            |          |   |   |           |         | 
|----------------------------------------- | ---------------------------------------------------------- | -------------- | ------- | ---------------- |  | -------------- | --------- | --------------- |  | ------------ | --------- | ------- |  | - | ---------- | -------- | - | - | --------- | ------- | 
|                                          |                                                            | Unrestricted   |         | Louisiana        |  | South Central  |           |                 |  |             
|                                          |                                                            | Non-Guarantor  |         | Generating LLC   |  | Generating LLC |           |                 |  | Consolidated
|                                          |                                                            | Subsidiaries   |         | (Bond Guarantor) |  | (Bond Issuer)  |           | Eliminations(1) |  | Balance     
|                                          |                                                            |                |         |                  |  |                |           |                 |  |             
|                                          |                                                            |               
|                                          |                                                            | (In thousands)
|LIABILITIES AND MEMBERS EQUITY          
|Current Liabilities:                      |                                                            |                |         |                  |  |                |           |                 |  |              |           |         |  |   |            |          |   |   |           |        
|                                          | Current portion of long-term debt                          |                | $       |                 |  |                | $         |                |  |              | $         | 750,750 |  |   | $          |         |   |   | $         | 750,750 | 
|                                          | Note payable  affiliate                                   |                |         | 105,491          |  |                |           |                |  |              |           |        |  |   |            |         |   |   |           | 105,491 | 
|                                          | Intercompany note payable                                  |                |         |                 |  |                |           | 750,750         |  |              |           |        |  |   |            | (750,750 | ) |   |           |        | 
|                                          | Accounts payable                                           |                |         | 6,394            |  |                |           | 3,420           |  |              |           |        |  |   |            |         |   |   |           | 9,814   | 
|                                          | Accounts payable  affiliates, net                         |                |         | 65,408           |  |                |           | 59,558          |  |              |           | 1,556   |  |   |            |         |   |   |           | 126,522 | 
|                                          | Accrued interest                                           |                |         |                 |  |                |           |                |  |              |           | 55,413  |  |   |            |         |   |   |           | 55,413  | 
|                                          | Accrued interest  affiliates                              |                |         | 514              |  |                |           | 55,413          |  |              |           |         |  |   |            | (55,413  | ) |   |           | 514     | 
|                                          | Accrued fuel, purchased power and transmission
    expense |                |         | 163              |  |                |           | 10,140          |  |              |           |        |  |   |            |         |   |   |           | 10,303  | 
|                                          | Derivative instruments valuation  at
    market           |                |         |                 |  |                |           |                |  |              |           | 135     |  |   |            |         |   |   |           | 135     | 
|                                          | Other current liabilities                                  |                |         | 148              |  |                |           | 11,355          |  |              |           | 11      |  |   |            |         |   |   |           | 11,514  | 
|                                          |                                                            |                |         |                  |  |                |           |                 |  |              |           |         |  |   |            |          |   |   |           |        
|Total current liabilities                 |                                                            |                | 178,118 |                  |  |                | 890,636   |                 |  |              | 807,865   |         |  |   | (806,163   | )        |   |   | 1,070,456 |        
|Other non-current liabilities             |                                                            |                |        |                  |  |                | 6,238     |                 |  |              |          |         |  |   |           |          |   |   | 6,238     |        
|                                          |                                                            |                |         |                  |  |                |           |                 |  |              |           |         |  |   |            |          |   |   |           |        
|Total liabilities                         |                                                            |                | 178,118 |                  |  |                | 896,874   |                 |  |              | 807,865   |         |  |   | (806,163   | )        |   |   | 1,076,694 |        
|Commitments and contingencies             |                                                            |                |         |                  |  |                |           |                 |  |              |           |         |  |   |            |          |   |   |           |        
|Members Equity                           |                                                            |                | 12,274  |                  |  |                | 308,523   |                 |  |              | 324,040   |         |  |   | (321,187   | )        |   |   | 323,650   |        
|                                          |                                                            |                |         |                  |  |                |           |                 |  |              |           |         |  |   |            |          |   |   |           |        
|Total Liabilities and Members
    Equity |                                                            | $              | 190,392 |                  |  | $              | 1,205,397 |                 |  | $            | 1,131,905 |         |  | $ | (1,127,350 | )        |   | $ | 1,400,344 |        
|                                          |                                                            |                |         |                  |  |                |           |                 |  |              |           |         |  |   |            |          |   |   |           |        



---



|    |                                                                                     
|--- | ------------------------------------------------------------------------------------
|(1) | All significant intercompany transactions have
    been eliminated in consolidation.

See notes to consolidated financial statements.

73



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##### Table of Contents



NRG SOUTH CENTRAL GENERATING LLC AND
SUBSIDIARIES

CONSOLIDATING STATEMENT OF
OPERATIONS

For the Year Ended December 31,
2002


|                             |                                              |                                              |          |                  |        |                |        |                 |         |              |          |          |   |   |         |         |         |   |          |         |         | 
|---------------------------- | -------------------------------------------- | -------------------------------------------- | -------- | ---------------- | ------ | -------------- | ------ | --------------- | ------- | ------------ | -------- | -------- | - | - | ------- | ------- | ------- | - | -------- | ------- | ------- | 
|                             |                                              | Unrestricted,                                |          | Louisiana        |        | South Central  |        |                 |         |             
|                             |                                              | Non-Guarantor                                |          | Generating LLC   |        | Generating LLC |        |                 |         | Consolidated
|                             |                                              | Subsidiaries                                 |          | (Bond Guarantor) |        | (Bond Issuer)  |        | Eliminations(1) |         | Balance     
|                             |                                              |                                              |          |                  |        |                |        |                 |         |             
|                             |                                              |                                             
|                             |                                              | (In thousands)                              
|Operating Revenues           |                                              |                                              |          |                  |        |                |        |                 |         |              |          |          |   |   |         |         |         |   |          |        
|                             | Revenues from wholly-owned operations        |                                              | $        | 25,724           |        |                | $      | 399,458         |         |              | $        |         |   |   | $       | (25,316 | )       |   | $        | 399,866 |        
|                             | Equity earnings of unconsolidated affiliates |                                              |          | (3,146           | )      |                |        |                 |         |              |          |          |   |   |         |         |         |   |          | (3,146  | )      
|                             |                                              |                                              |          |                  |        |                |        |                 |         |              |          |          |   |   |         |         |         |   |          |        
|                             |                                              | Total operating revenues and equity earnings |          |                  | 22,578 |                |        |                 | 399,458 |              |          |          |  |   |         |         | (25,316 | ) |          |         | 396,720 | 
|Operating Costs and Expenses |                                              |                                              |          |                  |        |                |        |                 |         |              |          |          |   |   |         |         |         |   |          |        
|                             | Cost of operations                           |                                              |          | 6,470            |        |                |        | 281,190         |         |              |          | 17       |   |   |         | (25,316 | )       |   |          | 262,361 |        
|                             | Depreciation and amortization                |                                              |          | 5,903            |        |                |        | 29,671          |         |              |          |         |   |   |         | 390     |         |   |          | 35,964  |        
|                             | General and administrative expenses          |                                              |          | 1,687            |        |                |        | 5,284           |         |              |          | 977      |   |   |         |        |         |   |          | 7,948   |        
|                             | Sale of equity method investments            |                                              |          | 48,375           |        |                |        |                |         |              |          |         |   |   |         |        |         |   |          | 48,375  |        
|                             | Special charges                              |                                              |          | 138,528          |        |                |        | 208             |         |              |          | 1,193    |   |   |         |        |         |   |          | 139,929 |        
|                             |                                              |                                              |          |                  |        |                |        |                 |         |              |          |          |   |   |         |         |         |   |          |        
|Operating (Loss)/ Income     |                                              |                                              | (178,385 | )                |        |                | 83,105 |                 |         |              | (2,187   | )        |   |   | (390    | )       |         |   | (97,857  | )      
|Other Income/(Expense)       |                                              |                                              |          |                  |        |                |        |                 |         |              |          |          |   |   |         |         |         |   |          |        
|                             | Other income, net                            |                                              |          | 144              |        |                |        | 779             |         |              |          | 70,779   |   |   |         | (70,779 | )       |   |          | 923     |        
|                             | Equity in earnings of subsidiaries           |                                              |          |                 |        |                |        |                |         |              |          | (169,297 | ) |   |         | 169,297 |         |   |          |        |        
|                             | Interest expense                             |                                              |          | (3,720           | )      |                |        | (71,220         | )       |              |          | (70,779  | ) |   |         | 70,779  |         |   |          | (74,940 | )      
|                             |                                              |                                              |          |                  |        |                |        |                 |         |              |          |          |   |   |         |         |         |   |          |        
|Net (Loss) Income            |                                              | $                                            | (181,961 | )                |        | $              | 12,664 |                 |         | $            | (171,484 | )        |   | $ | 168,907 |         |         | $ | (171,874 | )      
|                             |                                              |                                              |          |                  |        |                |        |                 |         |              |          |          |   |   |         |         |         |   |          |        



---



|    |                                                                                     
|--- | ------------------------------------------------------------------------------------
|(1) | All significant intercompany transactions have
    been eliminated in consolidation.

See notes to consolidated financial statements.

74



---



##### Table of Contents



NRG SOUTH CENTRAL GENERATING LLC AND
SUBSIDIARIES

CONSOLIDATING STATEMENT OF CASH
FLOWS

For the Year Ended December 31,
2002


|                                                        |                                                                                                 |                                               |        |                  |         |                |          |                 |         |              |         |          |         |   |         |         |          |   |          |          |         |  
|------------------------------------------------------- | ----------------------------------------------------------------------------------------------- | --------------------------------------------- | ------ | ---------------- | ------- | -------------- | -------- | --------------- | ------- | ------------ | ------- | -------- | ------- | - | ------- | ------- | -------- | - | -------- | -------- | ------- | -
|                                                        |                                                                                                 | Unrestricted                                  |        | Louisiana        |         | South Central  |          |                 |         |             
|                                                        |                                                                                                 | Non-Guarantor                                 |        | Generating LLC   |         | Generating LLC |          |                 |         | Consolidated
|                                                        |                                                                                                 | Subsidiaries                                  |        | (Bond Guarantor) |         | (Bond Issuer)  |          | Eliminations(1) |         | Balance     
|                                                        |                                                                                                 |                                               |        |                  |         |                |          |                 |         |             
|                                                        |                                                                                                 |                                              
|                                                        |                                                                                                 | (In thousands)                               
|Cash Flows from Operating
    Activities:               |                                                                                                 |                                               |        |                  |         |                |          |                 |         |              |         |          |         |   |         |         |          |   |          |         
|                                                        | Net (loss) income                                                                               |                                               | $      | (181,961         | )       |                | $        | 12,664          |         |              | $       | (171,484 | )       |   | $       | 168,907 |          |   | $        | (171,874 | )      
|                                                        | Adjustments to reconcile net income to net cash
    provided by (used in) operating activities: |                                               |        |                  |         |                |          |                 |         |              |         |          |         |   |         |         |          |   |          |          |        
|                                                        |                                                                                                 | Equity in losses of unconsolidated affiliates |        |                  | 3,146   |                |          |                 |        |              |         |          |        |   |         |         |         |   |          |          | 3,146   |  
|                                                        |                                                                                                 | Depreciation and amortization                 |        |                  | 5,903   |                |          |                 | 29,671  |              |         |          |        |   |         |         | 390      |   |          |          | 35,964  |  
|                                                        |                                                                                                 | Loss or sale of equity method investments     |        |                  | 48,375  |                |          |                 |         |              |         |          |         |   |         |         |          |   |          |          | 48,375  |  
|                                                        |                                                                                                 | Special charges                               |        |                  | 138,528 |                |          |                 | 50      |              |         |          |         |   |         |         |          |   |          |          | 138,578 |  
|                                                        |                                                                                                 | Amortization of deferred finance costs        |        |                  | 662     |                |          |                 | 441     |              |         |          |        |   |         |         |         |   |          |          | 1,103   |  
|                                                        |                                                                                                 | Unrealized loss on energy contracts           |        |                  |        |                |          |                 |        |              |         |          | 5       |   |         |         |         |   |          |          | 5       |  
|                                                        |                                                                                                 | Changes in assets and liabilities:            |        |                  |         |                |          |                 |         |              |         |          |         |   |         |         |          |   |          |          |         |  
|                                                        |                                                                                                 | Accounts receivable                           |        |                  | 520     |                |          |                 | (2,736  | )            |         |          |        |   |         |         |         |   |          |          | (2,216  | )
|                                                        |                                                                                                 | Inventory                                     |        |                  | (40     | )              |          |                 | (11,408 | )            |         |          |        |   |         |         |         |   |          |          | (11,448 | )
|                                                        |                                                                                                 | Prepaid expenses                              |        |                  | (50     | )              |          |                 | (559    | )            |         |          |        |   |         |         |         |   |          |          | (609    | )
|                                                        |                                                                                                 | Accounts payable                              |        |                  | 6,384   |                |          |                 | 3,106   |              |         |          |        |   |         |         |         |   |          |          | 9,490   |  
|                                                        |                                                                                                 | Accounts payable  affiliates                 |        |                  | (19,696 | )              |          |                 | 76,360  |              |         |          | 171,257 |   |         |         | (169,701 | ) |          |          | 58,220  |  
|                                                        |                                                                                                 | Accrued interest                              |        |                  | 514     |                |          |                 | 34,960  |              |         |          | 34,960  |   |         |         | (34,960  | ) |          |          | 35,474  |  
|                                                        |                                                                                                 | Interest receivable  affiliate               |        |                  |        |                |          |                 |        |              |         |          | (34,960 | ) |         |         | 34,960   |   |          |          |        |  
|                                                        |                                                                                                 | Intercompany note receivable  revolver       |        |                  |        |                |          |                 |        |              |         |          | 40,000  |   |         |         | (40,000  | ) |          |          |         |  
|                                                        |                                                                                                 | Accrued fuel and purchased power expense      |        |                  | (321    | )              |          |                 | (15,975 | )            |         |          |        |   |         |         |         |   |          |          | (16,296 | )
|                                                        |                                                                                                 | Other current assets and liabilities          |        |                  | 650     |                |          |                 | 1,505   |              |         |          | 5       |   |         |         |          |   |          |          | 2,160   |  
|                                                        |                                                                                                 | Changes in other assets and liabilities       |        |                  |        |                |          |                 | (62     | )            |         |          | 217     |   |         |         | 404      |   |          |          | 559     |  
|                                                        |                                                                                                 |                                               |        |                  |         |                |          |                 |         |              |         |          |         |   |         |         |          |   |          |         
|Net Cash Provided by (used in) Operating
    Activities |                                                                                                 |                                               | 2,614  |                  |         |                | 128,017  |                 |         |              | 40,000  |          |         |   | (40,000 | )       |          |   | 130,631  |         
|                                                        |                                                                                                 |                                               |        |                  |         |                |          |                 |         |              |         |          |         |   |         |         |          |   |          |         
|Cash Flows from Investing
    Activities:               |                                                                                                 |                                               |        |                  |         |                |          |                 |         |              |         |          |         |   |         |         |          |   |          |         
|                                                        | Capital expenditures                                                                            |                                               |        |                 |         |                |          | (12,231         | )       |              |         |         |         |   |         |        |          |   |          | (12,231  | )      
|                                                        | Intercompany note receivable  revolver                                                         |                                               |        |                 |         |                |          |                |         |              |         | (40,000  | )       |   |         | 40,000  |          |   |          |         |        
|                                                        | Increase in note receivable                                                                     |                                               |        |                 |         |                |          | (3,000          | )       |              |         |         |         |   |         |        |          |   |          | (3,000   | )      
|                                                        | Payment received on loan to affiliate                                                           |                                               |        |                 |         |                |          |                |         |              |         | 12,750   |         |   |         | (12,750 | )        |   |          |         |        
|                                                        | Increase in restricted cash                                                                     |                                               |        |                 |         |                |          | (109,336        | )       |              |         |          |         |   |         |         |          |   |          | (109,336 | )      
|                                                        |                                                                                                 |                                               |        |                  |         |                |          |                 |         |              |         |          |         |   |         |         |          |   |          |         
|Net Cash (used in) Provided by Investing
    Activities |                                                                                                 |                                               |       |                  |         |                | (124,567 | )               |         |              | (27,250 | )        |         |   | 27,250  |         |          |   | (124,567 | )       
|                                                        |                                                                                                 |                                               |        |                  |         |                |          |                 |         |              |         |          |         |   |         |         |          |   |          |         
|Cash Flows from Financing
    Activities:               |                                                                                                 |                                               |        |                  |         |                |          |                 |         |              |         |          |         |   |         |         |          |   |          |         
|                                                        | Contributions by members                                                                        |                                               |        |                 |         |                |          | 48,000          |         |              |         | 40,000   |         |   |         | (40,000 | )        |   |          | 48,000   |        
|                                                        | Net (payments)/proceeds on revolver                                                             |                                               |        |                 |         |                |          | (40,000         | )       |              |         | (40,000  | )       |   |         | 40,000  |          |   |          | (40,000  | )      
|                                                        | Repayments of long-term borrowings                                                              |                                               |        |                 |         |                |          | (12,750         | )       |              |         | (12,750  | )       |   |         | 12,750  |          |   |          | (12,750  | )      
|                                                        | Repayment of note payable  affiliate                                                           |                                               |        | (1,862           | )       |                |          |                |         |              |         |         |         |   |         |        |          |   |          | (1,862   | )      
|                                                        | Checks in excess of cash                                                                        |                                               |        | (442             | )       |                |          | (1,908          | )       |              |         |         |         |   |         |        |          |   |          | (2,350   | )      
|                                                        |                                                                                                 |                                               |        |                  |         |                |          |                 |         |              |         |          |         |   |         |         |          |   |          |         
|Net Cash (used in) Provided by Financing
    Activities |                                                                                                 |                                               | (2,304 | )                |         |                | (6,658   | )               |         |              | (12,750 | )        |         |   | 12,750  |         |          |   | (8,962   | )       
|                                                        |                                                                                                 |                                               |        |                  |         |                |          |                 |         |              |         |          |         |   |         |         |          |   |          |         
|Net Increase in Cash and Cash
    Equivalents           |                                                                                                 |                                               | 310    |                  |         |                | (3,208   | )               |         |              |        |          |         |   |        |         |          |   | (2,898   | )       
|Cash and Cash Equivalents, Beginning of
    Period      |                                                                                                 |                                               |       |                  |         |                | 3,208    |                 |         |              |        |          |         |   |        |         |          |   | 3,208    |         
|                                                        |                                                                                                 |                                               |        |                  |         |                |          |                 |         |              |         |          |         |   |         |         |          |   |          |         
|Cash and Cash Equivalents, End of
    Period            |                                                                                                 | $                                             | 310    |                  |         | $              |         |                 |         | $            |        |          |         | $ |        |         |          | $ | 310      |         
|                                                        |                                                                                                 |                                               |        |                  |         |                |          |                 |         |              |         |          |         |   |         |         |          |   |          |         



---



|    |                                                                                     
|--- | ------------------------------------------------------------------------------------
|(1) | All significant intercompany transactions have
    been eliminated in consolidation.

See notes to consolidated financial statements.

75



---



##### Table of Contents



NRG SOUTH CENTRAL GENERATING LLC AND
SUBSIDIARIES

CONSOLIDATING BALANCE SHEET

December 31, 2001


|                     |                                         |                |         |                  |  |                |           |                 |  |              |           |         |  |   |            |          |   |   |           |           | 
|-------------------- | --------------------------------------- | -------------- | ------- | ---------------- |  | -------------- | --------- | --------------- |  | ------------ | --------- | ------- |  | - | ---------- | -------- | - | - | --------- | --------- | 
|                     |                                         | Unrestricted   |         | Louisiana        |  | South Central  |           |                 |  |             
|                     |                                         | Non-Guarantor  |         | Generating LLC   |  | Generating LLC |           |                 |  | Consolidated
|                     |                                         | Subsidiaries   |         | (Bond Guarantor) |  | (Bond Issuer)  |           | Eliminations(1) |  | Balance     
|                     |                                         |                |         |                  |  |                |           |                 |  |             
|                     |                                         |               
|                     |                                         | (In thousands)
|ASSETS              
|Current Assets:      |                                         |                |         |                  |  |                |           |                 |  |              |           |         |  |   |            |          |   |   |           |          
|                     | Cash and cash equivalents               |                | $       |                 |  |                | $         | 3,208           |  |              | $         |        |  |   | $          |         |   |   | $         | 3,208     | 
|                     | Accounts receivable                     |                |         | 769              |  |                |           | 43,353          |  |              |           |        |  |   |            |         |   |   |           | 44,122    | 
|                     | Interest receivable                     |                |         |                 |  |                |           |                |  |              |           | 20,453  |  |   |            | (20,453  | ) |   |           |          | 
|                     | Inventory                               |                |         | 930              |  |                |           | 51,986          |  |              |           |        |  |   |            |         |   |   |           | 52,916    | 
|                     | Prepaid expenses                        |                |         | 259              |  |                |           | 2,368           |  |              |           |        |  |   |            |         |   |   |           | 2,627     | 
|                     |                                         |                |         |                  |  |                |           |                 |  |              |           |         |  |   |            |          |   |   |           |          
|Total current assets |                                         |                | 1,958   |                  |  |                | 100,915   |                 |  |              | 20,453    |         |  |   | (20,453    | )        |   |   | 102,873   |          
|                     | Equity investments in affiliates        |                |         |                 |  |                |           |                |  |              |           | 440,487 |  |   |            | (440,487 | ) |   |           |          | 
|                     | Investment in Projects                  |                |         | 50,233           |  |                |           |                |  |              |           |        |  |   |            |         |   |   |           | 50,233    | 
|                     | Intercompany note receivable  bonds    |                |         |                 |  |                |           |                |  |              |           | 763,500 |  |   |            | (763,500 | ) |   |           |          | 
|                     | Intercompany note receivable  revolver |                |         |                 |  |                |           |                |  |              |           | 40,000  |  |   |            | (40,000  | ) |   |           |          | 
|                     | Property, plant & equipment, net        |                |         | 185,250          |  |                |           | 981,262         |  |              |           |        |  |   |            |         |   |   |           | 1,166,512 | 
|                     | Decommissioning fund investment         |                |         |                 |  |                |           | 4,336           |  |              |           |        |  |   |            |         |   |   |           | 4,336     | 
|                     | Deferred financing costs, net           |                |         |                 |  |                |           | 9,969           |  |              |           |        |  |   |            |         |   |   |           | 9,969     | 
|                     | Other assets                            |                |         |                 |  |                |           | 2,306           |  |              |           | 5,050   |  |   |            |         |   |   |           | 7,356     | 
|                     |                                         |                |         |                  |  |                |           |                 |  |              |           |         |  |   |            |          |   |   |           |          
|Total Assets         |                                         | $              | 237,441 |                  |  | $              | 1,098,788 |                 |  | $            | 1,269,490 |         |  | $ | (1,264,440 | )        |   | $ | 1,341,279 |          
|                     |                                         |                |         |                  |  |                |           |                 |  |              |           |         |  |   |            |          |   |   |           |          



---



|    |                                                                                     
|--- | ------------------------------------------------------------------------------------
|(1) | All significant intercompany transactions have
    been eliminated in consolidation.

76



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##### Table of Contents



NRG SOUTH CENTRAL GENERATING LLC AND
SUBSIDIARIES

CONSOLIDATING BALANCE SHEET 
(Continued)

December 31, 2001


|                                          |                                                            |                |         |                  |  |                |           |                 |   |              |           |         |  |   |            |          |   |   |           |         | 
|----------------------------------------- | ---------------------------------------------------------- | -------------- | ------- | ---------------- |  | -------------- | --------- | --------------- | - | ------------ | --------- | ------- |  | - | ---------- | -------- | - | - | --------- | ------- | 
|                                          |                                                            | Unrestricted   |         | Louisiana        |  | South Central  |           |                 |   |             
|                                          |                                                            | Non-Guarantor  |         | Generating LLC   |  | Generating LLC |           |                 |   | Consolidated
|                                          |                                                            | Subsidiaries   |         | (Bond Guarantor) |  | (Bond Issuer)  |           | Eliminations(1) |   | Balance     
|                                          |                                                            |                |         |                  |  |                |           |                 |   |             
|                                          |                                                            |               
|                                          |                                                            | (In thousands)
|LIABILITIES AND MEMBERS EQUITY          
|Current Liabilities:                      |                                                            |                |         |                  |  |                |           |                 |   |              |           |         |  |   |            |          |   |   |           |        
|                                          | Current portion of long-term debt                          |                | $       |                 |  |                | $         |                |   |              | $         | 25,500  |  |   | $          |         |   |   | $         | 25,500  | 
|                                          | Revolving line of credit                                   |                |         |                  |  |                |           |                |   |              |           | 40,000  |  |   |            |          |   |   |           | 40,000  | 
|                                          | Intercompany note payable                                  |                |         |                 |  |                |           | 65,500          |   |              |           |        |  |   |            | (65,500  | ) |   |           |        | 
|                                          | Accounts payable                                           |                |         | 10               |  |                |           | 314             |   |              |           |        |  |   |            |         |   |   |           | 324     | 
|                                          | Accounts payable  affiliates, net                         |                |         | 44,060           |  |                |           | (16,814         | ) |              |           |        |  |   |            |         |   |   |           | 27,246  | 
|                                          | Accrued interest                                           |                |         |                 |  |                |           | 20,453          |   |              |           | 20,453  |  |   |            | (20,453  | ) |   |           | 20,453  | 
|                                          | Accrued fuel, purchased power and transmission
    expense |                |         | 484              |  |                |           | 26,115          |   |              |           |        |  |   |            |         |   |   |           | 26,599  | 
|                                          | Accrued liabilities                                        |                |         | 665              |  |                |           | 11,355          |   |              |           | 6       |  |   |            |         |   |   |           | 12,026  | 
|                                          |                                                            |                |         |                  |  |                |           |                 |   |              |           |         |  |   |            |          |   |   |           |        
|Total current liabilities                 |                                                            |                | 45,219  |                  |  |                | 106,923   |                 |   |              | 85,959    |         |  |   | (85,953    | )        |   |   | 152,148   |        
|                                          | Long-term debt                                             |                |         |                 |  |                |           |                |   |              |           | 738,000 |  |   |            |         |   |   |           | 738,000 | 
|                                          | Intercompany note payable                                  |                |         |                 |  |                |           | 738,000         |   |              |           |        |  |   |            | (738,000 | ) |   |           |        | 
|                                          | Other long-term liabilities                                |                |         |                 |  |                |           | 5,600           |   |              |           |        |  |   |            |         |   |   |           | 5,600   | 
|                                          | Unrealized loss on FAS 133                                 |                |         |                 |  |                |           |                |   |              |           | 18      |  |   |            |         |   |   |           | 18      | 
|                                          |                                                            |                |         |                  |  |                |           |                 |   |              |           |         |  |   |            |          |   |   |           |        
|Total liabilities                         |                                                            |                | 45,219  |                  |  |                | 850,523   |                 |   |              | 823,977   |         |  |   | (823,953   | )        |   |   | 895,766   |        
|Commitments and contingencies             |                                                            |                |         |                  |  |                |           |                 |   |              |           |         |  |   |            |          |   |   |           |        
|                                          | Members Equity                                            |                |         | 192,222          |  |                |           | 248,265         |   |              |           | 445,513 |  |   |            | (440,487 | ) |   |           | 445,513 | 
|                                          |                                                            |                |         |                  |  |                |           |                 |   |              |           |         |  |   |            |          |   |   |           |        
|Total Liabilities and Members
    Equity |                                                            | $              | 237,441 |                  |  | $              | 1,098,788 |                 |   | $            | 1,269,490 |         |  | $ | (1,264,440 | )        |   | $ | 1,341,279 |        
|                                          |                                                            |                |         |                  |  |                |           |                 |   |              |           |         |  |   |            |          |   |   |           |        



---



|    |                                                                                     
|--- | ------------------------------------------------------------------------------------
|(1) | All significant intercompany transactions have
    been eliminated in consolidation.

See notes to consolidated financial statements.

77



---



##### Table of Contents



NRG SOUTH CENTRAL GENERATING LLC

AND SUBSIDIARIES


CONSOLIDATING STATEMENT OF
OPERATIONS

For the Year Ended December 31,
2001


|                             |                                              |                                              |         |                  |        |                |        |                 |         |              |        |         |   |   |         |         |         |   |        |         |         | 
|---------------------------- | -------------------------------------------- | -------------------------------------------- | ------- | ---------------- | ------ | -------------- | ------ | --------------- | ------- | ------------ | ------ | ------- | - | - | ------- | ------- | ------- | - | ------ | ------- | ------- | 
|                             |                                              | Unrestricted,                                |         | Louisiana        |        | South Central  |        |                 |         |             
|                             |                                              | Non-Guarantor                                |         | Generating LLC   |        | Generating LLC |        |                 |         | Consolidated
|                             |                                              | Subsidiaries                                 |         | (Bond Guarantor) |        | (Bond Issuer)  |        | Eliminations(1) |         | Balance     
|                             |                                              |                                              |         |                  |        |                |        |                 |         |             
|                             |                                              |                                             
|                             |                                              | (In thousands)                              
|Operating Revenues           |                                              |                                              |         |                  |        |                |        |                 |         |              |        |         |   |   |         |         |         |   |        |        
|                             | Revenues from wholly-owned operations        |                                              | $       | 12,751           |        |                | $      | 401,935         |         |              | $      |        |   |   | $       | (15,291 | )       |   | $      | 399,395 |        
|                             | Equity earnings of unconsolidated affiliates |                                              |         | (2,435           | )      |                |        |                |         |              |        |        |   |   |         |        |         |   |        | (2,435  | )      
|                             |                                              |                                              |         |                  |        |                |        |                 |         |              |        |         |   |   |         |         |         |   |        |        
|                             |                                              | Total operating revenues and equity earnings |         |                  | 10,316 |                |        |                 | 401,935 |              |        |         |  |   |         |         | (15,291 | ) |        |         | 396,960 | 
|Operating Costs and Expenses |                                              |                                              |         |                  |        |                |        |                 |         |              |        |         |   |   |         |         |         |   |        |        
|                             | Cost of operations                           |                                              |         | 18,582           |        |                |        | 273,245         |         |              |        | 18      |   |   |         | (15,291 | )       |   |        | 276,554 |        
|                             | Depreciation and amortization                |                                              |         | 2,667            |        |                |        | 27,211          |         |              |        |        |   |   |         |        |         |   |        | 29,878  |        
|                             | General and administrative expenses          |                                              |         | 682              |        |                |        | 6,601           |         |              |        | 283     |   |   |         |        |         |   |        | 7,566   |        
|                             |                                              |                                              |         |                  |        |                |        |                 |         |              |        |         |   |   |         |         |         |   |        |        
|Operating Income             |                                              |                                              | (11,615 | )                |        |                | 94,878 |                 |         |              | (301   | )       |   |   |        |         |         |   | 82,962 |        
|Other Income/(Expense)       |                                              |                                              |         |                  |        |                |        |                 |         |              |        |         |   |   |         |         |         |   |        |        
|                             | Other income, net                            |                                              |         | 145              |        |                |        | (334            | )       |              |        | 71,642  |   |   |         | (71,642 | )       |   |        | (189    | )      
|                             | Equity in earnings of subsidiaries           |                                              |         |                 |        |                |        |                |         |              |        | 10,409  |   |   |         | (10,409 | )       |   |        |        |        
|                             | Interest expense                             |                                              |         |                 |        |                |        | (72,665         | )       |              |        | (71,642 | ) |   |         | 71,642  |         |   |        | (72,665 | )      
|                             |                                              |                                              |         |                  |        |                |        |                 |         |              |        |         |   |   |         |         |         |   |        |        
|Net Income                   |                                              | $                                            | (11,470 | )                |        | $              | 21,879 |                 |         | $            | 10,108 |         |   | $ | (10,409 | )       |         | $ | 10,108 |        
|                             |                                              |                                              |         |                  |        |                |        |                 |         |              |        |         |   |   |         |         |         |   |        |        



---



|    |                                                                                     
|--- | ------------------------------------------------------------------------------------
|(1) | All significant intercompany transactions have
    been eliminated in consolidation.

See notes to consolidated financial statements.

78



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##### Table of Contents



NRG SOUTH CENTRAL GENERATING LLC

AND SUBSIDIARIES


CONSOLIDATING STATEMENT OF CASH
FLOWS

For the Year Ended December 31,
2001


|                                                                                                |                                                         |                |         |                  |   |                |         |                 |   |              |         |         |   |   |         |         |   |   |         |         |  
|----------------------------------------------------------------------------------------------- | ------------------------------------------------------- | -------------- | ------- | ---------------- | - | -------------- | ------- | --------------- | - | ------------ | ------- | ------- | - | - | ------- | ------- | - | - | ------- | ------- | -
|                                                                                                |                                                         | Unrestricted   |         | Louisiana        |   | South Central  |         |                 |   |             
|                                                                                                |                                                         | Non-Guarantor  |         | Generating LLC   |   | Generating LLC |         |                 |   | Consolidated
|                                                                                                |                                                         | Subsidiaries   |         | (Bond Guarantor) |   | (Bond Issuer)  |         | Eliminations(1) |   | Balance     
|                                                                                                |                                                         |                |         |                  |   |                |         |                 |   |             
|                                                                                                |                                                         |               
|                                                                                                |                                                         | (In thousands)
|Cash Flows from Operating
    Activities:                                                       |                                                         |                |         |                  |   |                |         |                 |   |              |         |         |   |   |         |         |   |   |         |        
|Net income                                                                                      |                                                         | $              | (11,470 | )                |   | $              | 21,879  |                 |   | $            | 10,108  |         |   | $ | (10,409 | )       |   | $ | 10,108  |        
|Adjustments to reconcile net income to net cash
    provided by (used in) operating activities: |                                                         |                |         |                  |   |                |         |                 |   |              |         |         |   |   |         |         |   |   |         |        
|                                                                                                | Loss in earnings of unconsolidated affiliates           |                |         | 2,435            |   |                |         |                |   |              |         |        |   |   |         |        |   |   |         | 2,435   |  
|                                                                                                | Depreciation and amortization                           |                |         | 2,667            |   |                |         | 27,211          |   |              |         |        |   |   |         |        |   |   |         | 29,878  |  
|                                                                                                | Amortization of deferred finance costs                  |                |         |                 |   |                |         | 427             |   |              |         |        |   |   |         |        |   |   |         | 427     |  
|                                                                                                | Unrealized loss on energy contracts                     |                |         |                 |   |                |         |                |   |              |         | 18      |   |   |         |        |   |   |         | 18      |  
|                                                                                                | Distributions in excess of earnings                     |                |         |                 |   |                |         |                |   |              |         |        |   |   |         |        |   |   |         |        |  
|                                                                                                | Changes in assets and liabilities:                      |                |         |                  |   |                |         |                 |   |              |         |         |   |   |         |         |   |   |         |         |  
|                                                                                                | Accounts receivable                                     |                |         | (769             | ) |                |         | 9,291           |   |              |         |        |   |   |         |        |   |   |         | 8,522   |  
|                                                                                                | Inventory                                               |                |         | (930             | ) |                |         | (27,772         | ) |              |         |        |   |   |         |        |   |   |         | (28,702 | )
|                                                                                                | Prepaid expenses                                        |                |         | 46               |   |                |         | (838            | ) |              |         |        |   |   |         |        |   |   |         | (792    | )
|                                                                                                | Accounts payable                                        |                |         | (358             | ) |                |         | (2,125          | ) |              |         |        |   |   |         |        |   |   |         | (2,483  | )
|                                                                                                | Accounts payable  affiliates                           |                |         | 9,158            |   |                |         | (54,896         | ) |              |         | (10,321 | ) |   |         | 10,454  |   |   |         | (45,605 | )
|                                                                                                | Accrued interest                                        |                |         |                 |   |                |         | (844            | ) |              |         | (857    | ) |   |         | 844     |   |   |         | (857    | )
|                                                                                                | Interest receivable                                     |                |         |                 |   |                |         |                |   |              |         | 844     |   |   |         | (844    | ) |   |         |        |  
|                                                                                                | Accrued fuel and purchased power expense                |                |         | 110              |   |                |         | 11,944          |   |              |         |        |   |   |         |        |   |   |         | 12,054  |  
|                                                                                                | Other current liabilities                               |                |         | (630             | ) |                |         | 4,895           |   |              |         | 6       |   |   |         |        |   |   |         | 4,271   |  
|Changes in other assets and liabilities                                                         |                                                         |                | (259    | )                |   |                | 286     |                 |   |              | 202     |         |   |   | (45     | )       |   |   | 184     |        
|                                                                                                |                                                         |                |         |                  |   |                |         |                 |   |              |         |         |   |   |         |         |   |   |         |        
|Net Cash (used in) Provided by Operating
    Activities                                         |                                                         |                |        |                  |   |                | (10,542 | )               |   |              |        |         |   |   |        |         |   |   | (10,542 | )      
|                                                                                                |                                                         |                |         |                  |   |                |         |                 |   |              |         |         |   |   |         |         |   |   |         |        
|Cash Flows from Investing
    Activities:                                                       |                                                         |                |         |                  |   |                |         |                 |   |              |         |         |   |   |         |         |   |   |         |        
|                                                                                                | Investment in subsidiaries                              |                |         |                 |   |                |         |                |   |              |         | (5,051  | ) |   |         | 5,051   |   |   |         |        |  
|                                                                                                | Net intercompany advances                               |                |         |                 |   |                |         |                |   |              |         | (40,000 | ) |   |         | 40,000  |   |   |         |        |  
|                                                                                                | Payment received on loan to affiliate                   |                |         |                 |   |                |         |                |   |              |         | 25,250  |   |   |         | (25,250 | ) |   |         |        |  
|                                                                                                | Proceeds from disposition of property and
    equipment |                |         |                  |   |                |         |                 |   |              |         |        |   |   |         |        |   |   |         |        |  
|                                                                                                | Capital expenditures                                    |                |         |                 |   |                |         | (8,866          | ) |              |         |        |   |   |         |        |   |   |         | (8,866  | )
|                                                                                                |                                                         |                |         |                  |   |                |         |                 |   |              |         |         |   |   |         |         |   |   |         |        
|Net Cash (used in) Provided by Investing
    Activities                                         |                                                         |                |        |                  |   |                | (8,866  | )               |   |              | (19,801 | )       |   |   | 19,801  |         |   |   | (8,866  | )      
|                                                                                                |                                                         |                |         |                  |   |                |         |                 |   |              |         |         |   |   |         |         |   |   |         |        
|Cash Flows from Financing
    Activities:                                                       |                                                         |                |         |                  |   |                |         |                 |   |              |         |         |   |   |         |         |   |   |         |        
|                                                                                                | Contributions by members                                |                |         |                 |   |                |         | 5,051           |   |              |         | 5,051   |   |   |         | (5,051  | ) |   |         | 5,051   |  
|                                                                                                | Net proceeds/payments on revolver                       |                |         |                 |   |                |         | 40,000          |   |              |         | 40,000  |   |   |         | (40,000 | ) |   |         | 40,000  |  
|                                                                                                | Repayments of long-term borrowings                      |                |         |                 |   |                |         | (25,250         | ) |              |         | (25,250 | ) |   |         | 25,250  |   |   |         | (25,250 | )
|                                                                                                | Deferred financing costs                                |                |         |                 |   |                |         | (331            | ) |              |         |        |   |   |         |        |   |   |         | (331    | )
|                                                                                                |                                                         |                |         |                  |   |                |         |                 |   |              |         |         |   |   |         |         |   |   |         |        
|Net Cash Provided by (used in) Financing
    Activities                                         |                                                         |                |        |                  |   |                | 19,470  |                 |   |              | 19,801  |         |   |   | (19,801 | )       |   |   | 19,470  |        
|                                                                                                |                                                         |                |         |                  |   |                |         |                 |   |              |         |         |   |   |         |         |   |   |         |        
|Net Increase in Cash and Cash
    Equivalents                                                   |                                                         |                |        |                  |   |                | 62      |                 |   |              |        |         |   |   |        |         |   |   | 62      |        
|Cash and Cash Equivalents, Beginning of
    Period                                              |                                                         |                |        |                  |   |                | 3,146   |                 |   |              |        |         |   |   |        |         |   |   | 3,146   |        
|                                                                                                |                                                         |                |         |                  |   |                |         |                 |   |              |         |         |   |   |         |         |   |   |         |        
|Cash and Cash Equivalents, End of
    Period                                                    |                                                         | $              |        |                  |   | $              | 3,208   |                 |   | $            |        |         |   | $ |        |         |   | $ | 3,208   |        
|                                                                                                |                                                         |                |         |                  |   |                |         |                 |   |              |         |         |   |   |         |         |   |   |         |        



---



|    |                                                                                     
|--- | ------------------------------------------------------------------------------------
|(1) | All significant intercompany transactions have
    been eliminated in consolidation.

See notes to consolidated financial statements.

79



---



##### Table of Contents



NRG SOUTH CENTRAL GENERATING LLC

AND SUBSIDIARIES


CONSOLIDATING STATEMENT OF
OPERATIONS

For the Period March 30, 2000 (Inception)
through December 31, 2000


|                             |                                       |                |       |                  |  |                |        |                 |   |              |        |         |   |   |         |         |   |   |        |         |  
|---------------------------- | ------------------------------------- | -------------- | ----- | ---------------- |  | -------------- | ------ | --------------- | - | ------------ | ------ | ------- | - | - | ------- | ------- | - | - | ------ | ------- | -
|                             |                                       | Unrestricted   |       | Louisiana        |  | South Central  |        |                 |   |             
|                             |                                       | Non-Guarantor  |       | Generating LLC   |  | Generating LLC |        |                 |   | Consolidated
|                             |                                       | Subsidiaries   |       | (Bond Guarantor) |  | (Bond Issuer)  |        | Eliminations(1) |   | Balance     
|                             |                                       |                |       |                  |  |                |        |                 |   |             
|                             |                                       |               
|                             |                                       | (In thousands)
|Operating Revenues           |                                       |                |       |                  |  |                |        |                 |   |              |        |         |   |   |         |         |   |   |        |        
|                             | Revenues from wholly-owned operations |                | $     | 4,320            |  |                | $      | 309,010         |   |              | $      |        |   |   | $       | (4,267  | ) |   | $      | 309,063 |  
|Operating Costs and Expenses |                                       |                |       |                  |  |                |        |                 |   |              |        |         |   |   |         |         |   |   |        |        
|                             | Cost of operations                    |                |       | 696              |  |                |        | 205,188         |   |              |        |        |   |   |         | (4,267  | ) |   |        | 201,617 |  
|                             | Depreciation and amortization         |                |       | 377              |  |                |        | 20,335          |   |              |        |        |   |   |         |        |   |   |        | 20,712  |  
|                             | General and administrative expenses   |                |       | 265              |  |                |        | 5,175           |   |              |        | 172     |   |   |         |        |   |   |        | 5,612   |  
|                             |                                       |                |       |                  |  |                |        |                 |   |              |        |         |   |   |         |         |   |   |        |        
|Operating Income             |                                       |                | 2,982 |                  |  |                | 78,312 |                 |   |              | (172   | )       |   |   |        |         |   |   | 81,122 |        
|Other Income/(expense)       |                                       |                |       |                  |  |                |        |                 |   |              |        |         |   |   |         |         |   |   |        |        
|                             | Other income, net                     |                |       | 65               |  |                |        | 651             |   |              |        | 56,217  |   |   |         | (56,058 | ) |   |        | 875     |  
|                             | Equity in earnings of subsidiaries    |                |       |                 |  |                |        |                |   |              |        | 26,029  |   |   |         | (26,029 | ) |   |        |        |  
|                             | Interest expense                      |                |       |                 |  |                |        | (55,981         | ) |              |        | (56,058 | ) |   |         | 56,058  |   |   |        | (55,981 | )
|                             |                                       |                |       |                  |  |                |        |                 |   |              |        |         |   |   |         |         |   |   |        |        
|Net Income                   |                                       | $              | 3,047 |                  |  | $              | 22,982 |                 |   | $            | 26,016 |         |   | $ | (26,029 | )       |   | $ | 26,016 |        
|                             |                                       |                |       |                  |  |                |        |                 |   |              |        |         |   |   |         |         |   |   |        |        



---



|    |                                                                                     
|--- | ------------------------------------------------------------------------------------
|(1) | All significant intercompany transactions have
    been eliminated in consolidation.

80



---



##### Table of Contents



NRG SOUTH CENTRAL GENERATING LLC

AND SUBSIDIARIES


CONSOLIDATING STATEMENT OF CASH
FLOWS

For the period March 30, 2000 (Inception)
through December 31, 2000


|                                                        |                                                                                                 |                                                              |         |                  |       |                |            |                 |         |              |            |          |         |   |            |          |         |   |            |            |         |  
|------------------------------------------------------- | ----------------------------------------------------------------------------------------------- | ------------------------------------------------------------ | ------- | ---------------- | ----- | -------------- | ---------- | --------------- | ------- | ------------ | ---------- | -------- | ------- | - | ---------- | -------- | ------- | - | ---------- | ---------- | ------- | -
|                                                        |                                                                                                 | Unrestricted                                                 |         | Louisiana        |       | South Central  |            |                 |         |             
|                                                        |                                                                                                 | Non-Guarantor                                                |         | Generating LLC   |       | Generating LLC |            |                 |         | Consolidated
|                                                        |                                                                                                 | Subsidiaries                                                 |         | (Bond Guarantor) |       | (Bond Issuer)  |            | Eliminations(1) |         | Balance     
|                                                        |                                                                                                 |                                                              |         |                  |       |                |            |                 |         |             
|                                                        |                                                                                                 |                                                             
|                                                        |                                                                                                 | (In thousands)                                              
|Cash Flows from Operating
    Activities:               |                                                                                                 |                                                              |         |                  |       |                |            |                 |         |              |            |          |         |   |            |          |         |   |            |           
|                                                        | Net income                                                                                      |                                                              | $       | 3,047            |       |                | $          | 22,982          |         |              | $          | 26,016   |         |   | $          | (26,029  | )       |   | $          | 26,016     |        
|                                                        | Adjustments to reconcile net income to net cash
    provided by (used in) operating activities: |                                                              |         |                  |       |                |            |                 |         |              |            |          |         |   |            |          |         |   |            |            |        
|                                                        |                                                                                                 | Depreciation and amortization                                |         |                  | 377   |                |            |                 | 20,335  |              |            |          |        |   |            |          |        |   |            |            | 20,712  |  
|                                                        |                                                                                                 | Amortization of deferred finance costs                       |         |                  |      |                |            |                 | 324     |              |            |          | 163     |   |            |          |        |   |            |            | 487     |  
|                                                        |                                                                                                 | Distributions in excess of earnings                          |         |                  |      |                |            |                 |        |              |            |          | 5,971   |   |            |          | (5,971  | ) |            |            |        |  
|                                                        |                                                                                                 | Changes in assets and liabilities:                           |         |                  |       |                |            |                 |         |              |            |          |         |   |            |          |         |   |            |            |         |  
|                                                        |                                                                                                 | Accounts receivable                                          |         |                  |      |                |            |                 | (52,644 | )            |            |          |        |   |            |          |        |   |            |            | (52,644 | )
|                                                        |                                                                                                 | Accounts receivable-affiliates                               |         |                  |       |                |            |                 |        |              |            |          |        |   |            |          |        |   |            |            |        |  
|                                                        |                                                                                                 | Inventory                                                    |         |                  |      |                |            |                 | 8,872   |              |            |          |        |   |            |          |        |   |            |            | 8,872   |  
|                                                        |                                                                                                 | Prepaid expenses                                             |         |                  | (46   | )              |            |                 | (1,330  | )            |            |          |        |   |            |          |        |   |            |            | (1,376  | )
|                                                        |                                                                                                 | Accounts payable                                             |         |                  | 368   |                |            |                 | 2,439   |              |            |          |        |   |            |          |        |   |            |            | 2,807   |  
|                                                        |                                                                                                 | Accounts payable-affiliates                                  |         |                  | 280   |                |            |                 | (330    | )            |            |          | 3,038   |   |            |          |        |   |            |            | 2,988   |  
|                                                        |                                                                                                 | Accrued interest                                             |         |                  |      |                |            |                 | 21,297  |              |            |          | 21,310  |   |            |          | (21,297 | ) |            |            | 21,310  |  
|                                                        |                                                                                                 | Interest receivable                                          |         |                  |      |                |            |                 |        |              |            |          | (21,297 | ) |            |          | 21,297  |   |            |            |        |  
|                                                        |                                                                                                 | Accrued fuel, purchased power expense                        |         |                  | 374   |                |            |                 | 14,171  |              |            |          |        |   |            |          |        |   |            |            | 14,545  |  
|                                                        |                                                                                                 | Other current liabilities                                    |         |                  | 1,295 |                |            |                 | 5,183   |              |            |          |        |   |            |          |        |   |            |            | 6,478   |  
|                                                        |                                                                                                 | Cash provided by changes in other assets and
    liabilities |         |                  |      |                |            |                 | 1,413   |              |            |          | (5,430  | ) |            |          |        |   |            |            | (4,017  | )
|                                                        |                                                                                                 |                                                              |         |                  |       |                |            |                 |         |              |            |          |         |   |            |          |         |   |            |           
|Net Cash Provided By (Used In) Operating
    Activities |                                                                                                 |                                                              | 5,695   |                  |       |                | 42,712     |                 |         |              | 29,771     |          |         |   | (32,000    | )        |         |   | 46,178     |           
|                                                        |                                                                                                 |                                                              |         |                  |       |                |            |                 |         |              |            |          |         |   |            |          |         |   |            |           
|Cash Flows from Investing
    Activities:               |                                                                                                 |                                                              |         |                  |       |                |            |                 |         |              |            |          |         |   |            |          |         |   |            |           
|                                                        | Business acquisition, net of liabilities assumed                                                |                                                              |         | (25,574          | )     |                |            | (1,030,353      | )       |              |            |         |         |   |            |         |         |   |            | (1,055,927 | )      
|                                                        | Investment in subsidiaries                                                                      |                                                              |         |                 |       |                |            |                |         |              |            | (255,944 | )       |   |            | 255,944  |         |   |            |           |        
|                                                        | Proceeds from disposition of property and
    equipment                                         |                                                              |         |                 |       |                |            | 9,017           |         |              |            |         |         |   |            |         |         |   |            | 9,017      |        
|                                                        | Capital expenditures                                                                            |                                                              |         | (6,797           | )     |                |            | (5,333          | )       |              |            |         |         |   |            |         |         |   |            | (12,130    | )      
|                                                        | Payment received on loan to affiliate                                                           |                                                              |         |                 |       |                |            |                |         |              |            | 11,250   |         |   |            | (11,250  | )       |   |            |           |        
|                                                        | Loan to affiliate                                                                               |                                                              |         |                 |       |                |            |                |         |              |            | (800,000 | )       |   |            | 800,000  |         |   |            |           |        
|                                                        |                                                                                                 |                                                              |         |                  |       |                |            |                 |         |              |            |          |         |   |            |          |         |   |            |           
|Net Cash (Used In) Provided By Investing
    Activities |                                                                                                 |                                                              | (32,371 | )                |       |                | (1,026,669 | )               |         |              | (1,044,694 | )        |         |   | 1,044,694  |          |         |   | (1,059,040 | )         
|                                                        |                                                                                                 |                                                              |         |                  |       |                |            |                 |         |              |            |          |         |   |            |          |         |   |            |           
|Cash Flows from Financing
    Activities:               |                                                                                                 |                                                              |         |                  |       |                |            |                 |         |              |            |          |         |   |            |          |         |   |            |           
|                                                        | Contributions by members                                                                        |                                                              |         | 26,676           |       |                |            | 230,353         |         |              |            | 268,583  |         |   |            | (255,944 | )       |   |            | 269,668    |        
|                                                        | Distributions to members                                                                        |                                                              |         |                 |       |                |            | (32,000         | )       |              |            | (32,000  | )       |   |            | 32,000   |         |   |            | (32,000    | )      
|                                                        | Proceeds from long-term borrowings                                                              |                                                              |         |                 |       |                |            | 800,000         |         |              |            | 800,000  |         |   |            | (800,000 | )       |   |            | 800,000    |        
|                                                        | Repayment of long-term borrowings                                                               |                                                              |         |                 |       |                |            | (11,250         | )       |              |            | (11,250  | )       |   |            | 11,250   |         |   |            | (11,250    | )      
|                                                        | Deferred financing costs                                                                        |                                                              |         |                 |       |                |            |                |         |              |            | (10,410  | )       |   |            |         |         |   |            | (10,410    | )      
|Net Cash Provided By (Used In) Financing
    Activities |                                                                                                 |                                                              | 26,676  |                  |       |                | 987,103    |                 |         |              | 1,014,923  |          |         |   | (1,012,694 | )        |         |   | 1,016,008  |           
|                                                        |                                                                                                 |                                                              |         |                  |       |                |            |                 |         |              |            |          |         |   |            |          |         |   |            |           
|Net Increase in Cash and Cash
    Equivalents           |                                                                                                 |                                                              |        |                  |       |                | 3,146      |                 |         |              |           |          |         |   |           |          |         |   | 3,146      |           
|Cash and Cash Equivalents, Beginning of
    Period      |                                                                                                 |                                                              |        |                  |       |                |           |                 |         |              |           |          |         |   |           |          |         |   |           |           
|                                                        |                                                                                                 |                                                              |         |                  |       |                |            |                 |         |              |            |          |         |   |            |          |         |   |            |           
|Cash and Cash Equivalents, End of
    Period            |                                                                                                 | $                                                            |        |                  |       | $              | 3,146      |                 |         | $            |           |          |         | $ |           |          |         | $ | 3,146      |           
|                                                        |                                                                                                 |                                                              |         |                  |       |                |            |                 |         |              |            |          |         |   |            |          |         |   |            |           



---



|    |                                                                                     
|--- | ------------------------------------------------------------------------------------
|(1) | All significant intercompany transactions have
    been eliminated in consolidation.

81



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##### Table of Contents






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.



| |                                              
| | ---------------------------------------------
| | NRG SOUTH CENTRAL GENERATING LLC             
| | (Registrant)                                 
|
| | /s/ RICHARD C. KELLY                         
| |                                              
| | Richard C. Kelly                             
| | President and Management Committee
    Member

Date: April 14, 2003

POWER OF ATTORNEY

Each person whose signature appears below
constitutes and appoints Richard C. Kelly and George Schaefer,
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 April 14, 2003:

|                                               |  |                                                                             |  | 
|---------------------------------------------- |  | --------------------------------------------------------------------------- |  | 
|                                               |  |                                                                            
|Signature                                      |  | Title                                                                      
|                                               |  |                                                                            
|/s/ RICHARD C. KELLYRichard C. Kelly           |  | President (Principal Executive Officer) and
    Management Committee Member
|                                              
|/s/ GEORGE SCHAEFERGeorge Schaefer             |  | Treasurer (Principal Financial Officer)                                    
|                                              
|/s/ SCOTT J. DAVIDOScott J. Davido             |  | Vice President, Assistant Secretary and
    Management Committee Member    
|                                              
|/s/ ROBERT A. SAGEDY, JR.Robert A. Sagedy, Jr. |  | Management Committee Member                                                
|                                              
|/s/ WILLIAM T. PIEPERWilliam T. Pieper         |  | Controller (Principal Accounting Officer)                                  

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 not be sent to security
holders. No proxy material will be sent to security holders.

82



---



##### Table of Contents






CERTIFICATIONS

I, Richard C. Kelly, certify that:

1.     I have reviewed
this annual report on Form 10-K of NRG South Central
Generating LLC;

2.     Based on my
knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this annual
report;

3.     Based on my
knowledge, the financial statements, and other financial
information included in this annual report, fairly present in
all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this annual report;

4.     The
registrants other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and
15d-14) for the registrant and we have:



| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                

5.     The
registrants other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrants auditors and the audit committee of the
registrants board of directors (or persons performing the
equivalent function):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    

6.     The
registrants other certifying officers and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.



| |                                              
| | ---------------------------------------------
| | /s/ RICHARD C. KELLY                         
| |                                              
| | Richard C. Kelly                             
| | President and Management Committee
    Member

Dated: April 14, 2003

83



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##### Table of Contents






CERTIFICATIONS

I, George Schaefer, certify that:

1.     I have reviewed
this annual report on Form 10-K of NRG South Central
Generating LLC;

2.     Based on my
knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this annual
report;

3.     Based on my
knowledge, the financial statements, and other financial
information included in this annual report, fairly present in
all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this annual report;

4.     The
registrants other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and
15d-14) for the registrant and we have:



| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                

5.     The
registrants other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrants auditors and the audit committee of the
registrants board of directors (or persons performing the
equivalent function):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    

6.     The
registrants other certifying officers and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.



| |                    
| | -------------------
| | /s/ GEORGE SCHAEFER
| |                    
| | George Schaefer    
| | Treasurer          

Dated: April 14, 2003

84



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##### Table of Contents






EXHIBIT INDEX

| |   |     |  |                                                                                                                                                                                                                                                                                                          
| | - | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3 | .1  |  | Certificate of Formation of NRG South Central
    Generating LLC(1)                                                                                                                                                                                                                                      
| | 3 | .2  |  | Limited Liability Company Agreement of NRG South
    Central Generating LLC(1)                                                                                                                                                                                                                           
| | 3 | .3  |  | Certificate of Formation of Louisiana Generating
    LLC(1)                                                                                                                                                                                                                                              
| | 3 | .4  |  | Limited Liability Company Agreement of Louisiana
    Generating LLC(1)                                                                                                                                                                                                                                   
| | 3 | .5  |  | Certificate of Formation of NRG New Roads
    Holdings LLC(1)                                                                                                                                                                                                                                            
| | 3 | .6  |  | Limited Liability Company Agreement of NRG New
    Roads Holdings LLC(1)                                                                                                                                                                                                                                 
| | 3 | .7  |  | Certificate of Formation of NRG Sterlington Power
    LLC(1)                                                                                                                                                                                                                                             
| | 3 | .8  |  | Limited Liability Company Agreement of NRG
    Sterlington Power LLC(1)                                                                                                                                                                                                                                  
| | 3 | .9  |  | Certificate of Formation of Big Cajun I
    Peaking Power LLC(1)                                                                                                                                                                                                                                         
| | 3 | .10 |  | Limited Liability Company Agreement of Big
    Cajun I Peaking Power LLC(1)                                                                                                                                                                                                                              
| | 3 | .11 |  | Certificate of Formation of NRG Sabine River
    Works LP LLC(2)                                                                                                                                                                                                                                         
| | 3 | .12 |  | Limited Liability Company Agreement of NRG Sabine
    River Works LP LLC(2)                                                                                                                                                                                                                              
| | 3 | .13 |  | Certificate of Formation of NRG Sabine River
    Works GP LLC(2)                                                                                                                                                                                                                                         
| | 3 | .14 |  | Limited Liability Company Agreement of NRG Sabine
    River Works GP LLC(2)                                                                                                                                                                                                                              
| | 4 | .1  |  | Trust Indenture, dated as of March 30, 2000,
    among NRG South Central Generating LLC, Louisiana Generating LLC
    and The Chase Manhattan Bank, as bond trustee, The Chase
    Manhattan Bank, as depository bank, relating to the Senior
    Secured Bonds(1)                                       
| | 4 | .2  |  | Form of certificate of 8.962% Series A
    Senior Secured Bonds due 2016 (included in Exhibit 4.1)(1)                                                                                                                                                                                                    
| | 4 | .3  |  | Form of certificate of 9.479% Series B
    Senior Secured Bonds due 2024 (included in Exhibit 4.1)(1)                                                                                                                                                                                                    
| | 4 | .4  |  | Form of certificate of 8.962% Series A-1
    Senior Secured Bonds due 2016(2)                                                                                                                                                                                                                            
| | 4 | .5  |  | Form of certificate of 9.479% Series B-1
    Senior Secured Bonds due 2024(2)                                                                                                                                                                                                                            
| | 4 | .6  |  | Exchange and Registration Rights Agreement, dated
    as of March 30, 2000, by and among NRG South Central
    Generating LLC, Louisiana Generating LLC, Chase Securities Inc.
    and Lehman Brothers Inc., on behalf of the Initial Purchasers(1)                                                      
| | 4 | .7  |  | Collateral Agency and Intercreditor Agreement,
    dated as of March 30, 2000, among NRG South Central
    Generating LLC, Louisiana Generating LLC, The Chase Manhattan
    Bank, as bond trustee, The Chase Manhattan Bank, as depositary
    bank and The Chase Manhattan Bank, as collateral agent(1)
| | 4 | .8  |  | Assignment and Security Agreement, dated as of
    March 30, 2000, between NRG South Central Generating LLC
    and The Chase Manhattan Bank, as collateral agent(1)                                                                                                                                     
| | 4 | .9  |  | Guarantor Note, dated as of March 30, 2000,
    by Louisiana Generating LLC in favor of NRG South Central
    Generating LLC(1)                                                                                                                                                                          
| | 4 | .10 |  | Guarantor Loan Agreement, dated as of
    March 30, 2000 among Louisiana Generating LLC and NRG South
    Central Generating LLC(1)                                                                                                                                                                      
| | 4 | .11 |  | Guarantee, dated as of March 30, 2000, by
    Louisiana Generating LLC in favor of The Chase Manhattan Bank(1)                                                                                                                                                                                           
| | 4 | .12 |  | Debt Reserve Guarantee Agreement, dated as of
    March 30, 2000, between NRG Energy, Inc. and The Chase
    Manhattan Bank, as trustee, on behalf of the Holders of the
    Bonds(1)                                                                                                                    
| | 4 | .13 |  | Assignment and Security Agreement, dated as of
    March 30, 2000, between Louisiana Generating LLC and The
    Chase Manhattan Bank, as collateral agent(1)                                                                                                                                             
| | 4 | .14 |  | Assignment and Security Agreement, dated as of
    March 30, 2000, among NRG Power Marketing Inc. and The
    Chase Manhattan Bank, as collateral agent(1)                                                                                                                                               
| | 4 | .15 |  | Pledge and Security Agreement, dated as of
    March 30, 2000, among NRG South Central Generating LLC and
    The Chase Manhattan Bank, as collateral agent(1)                                                                                                                                           



---



##### Table of Contents



| |    |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | -- | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 4  | .16 |  | Indenture dated June 18, 2002, between NRG
    Peaker Finance Company LLC, as Issuer, Bayou Cove Peaking Power
    LLC, big Cajun I Peaking Power LLC, NRG Rockford LLC, NRG
    Rockford II LLC and Sterlington Power LLC, as Guarantors,
    XL Capital Assurance Inc., as Insurer, and Law Debenture Trust
    Company, as Successor Trustee to the Bank of New York
    (incorporated by reference to Exhibit 4.23 to NRG Energy,
    Inc.s Form 10K for the year ended December 31,
    2002).
| | 4  | .17 |  | Common Agreement among XL Capital Assurance Inc.,
    Goldman Sachs Mitsui Marine Derivative Products, L.P., the Bank
    of New York, as Trustee and Collateral Agent, NRG Peaker Finance
    Company LLC and each Project Company Party thereto dated as of
    June 18, 2002, together with Annex A to the Common
    Agreement (incorporated by reference to Exhibit 4.24 to NRG
    Energy, Inc.s Form 10K for the year ended
    December 31, 2002).                                         
| | 4  | .18 |  | Contingent Guaranty Agreement in favor of the
    Bank of New York, dated June 18, 2002 (incorporated by
    reference to Exhibit 4.25 to NRG Energy, Inc.s
    Form 10K for the year ended December 31, 2002).                                                                                                                                                                                                                                                                                    
| | 5  | .1  |  | Form of opinion and consent of Gibson,
    Dunn & Crutcher LLP as to the legality of the
    securities to be issued in this exchange offer(1)                                                                                                                                                                                                                                                                                                                                                      
| | 10 | .1  |  | Working Capital Agreement, dated as of
    April 30, 2000, by NRG South Central Generating LLC, the
    Guarantors, the Lenders and The Bank of Tokyo-Mitsubishi, Ltd.,
    New York Branch, as administrative agent(1)                                                                                                                                                                                                                                                                             
| | 10 | .2  |  | NRG South Central Generating LLC Secured
    Revolving Note, dated as of April 30, 2000, by NRG South
    Central Generating LLC to The Bank of Tokyo-Mitsubishi, Ltd.,
    New York Branch(1)                                                                                                                                                                                                                                                                                                      
| | 10 | .3  |  | Power Sales and Agency Agreement, dated
    March 24, 2000 among NRG Power Marketing Inc. and
    Louisiana Generating LLC(1)                                                                                                                                                                                                                                                                                                                                                                       
| | 10 | .4  |  | Operation and Management Services Agreement,
    dated March 24, 2000, among NRG Operating Services, Inc.
    and Louisiana Generating LLC(1)                                                                                                                                                                                                                                                                                                                                                       
| | 10 | .5  |  | Corporate Services Agreement, dated
    March 24, 2000, among NRG Energy, Inc. and NRG South
    Central Generating(1)                                                                                                                                                                                                                                                                                                                                                                              
| | 10 | .6  |  | Corporate Services Agreement, dated
    March 24, 2000, among NRG Energy, Inc. and Agreement
    Louisiana Generating(1)                                                                                                                                                                                                                                                                                                                                                                            
| | 10 | .7  |  | Corporate Services Agreement, dated
    August 17, 2000, among NRG Energy, Inc. and NRG Sterlington
    Power LLC(1)                                                                                                                                                                                                                                                                                                                                                                                
| | 10 | .8  |  | Corporate Services Agreement, dated
    August 4, 2000, among NRG Energy, Inc. and Big Cajun I
    Peaking Power LLC(1)                                                                                                                                                                                                                                                                                                                                                                             
| | 10 | .9  |  | Coal Transportation Agreement between Louisiana
    Generating, LLC and The Burlington Northern and Santa Fe Railway
    Company and American Commercial Marine Service Company(1)                                                                                                                                                                                                                                                                                                                  
| | 10 | .10 |  | Agreement between Louisiana Generating, LLC and
    Triton Coal Company for the Sale and Purchase of Coal(1)                                                                                                                                                                                                                                                                                                                                                                                        
| | 21 |     |  | Subsidiaries of the NRG South Central                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | 24 | .1  |  | Powers of Attorney (included on signature page)                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 25 | .1  |  | Form T-1 Statement of Eligibility of the
    Chase Manhattan Bank to act as Trustee under the indenture(1)                                                                                                                                                                                                                                                                                                                                                                                          
| | 99 | .1  |  | Officer Certification                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | 99 | .2  |  | Financial statements of Louisiana Generating LLC                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | 99 | .3  |  | Financial statements of Cajun Electric (Cajun
    Facilities) Carve-Out Financial Statements for the years ended
    December 31, 1999 and 1998(3)                                                                                                                                                                                                                                                                                                                                                  



---



|    |                                                                                                
|--- | -----------------------------------------------------------------------------------------------
|(1) | Previously filed with Report on Form S-4
    filed on October 30, 2000 (File No. 333-48900).   
|   
|(2) | Previously filed with Report on Form S-4/A
    filed on December 11, 2000 (File No. 333-48900).
|   
|(3) | Previously filed with Report on Form 10-K on
    April 2, 2001 (File No. 333-48900).           



|   |                                                                     
|-- | --------------------------------------------------------------------
|** | There are no exhibits which relate to
    compensation arrangements.