<PAGE>
                                                                    Exhibit 99.2





LOUISIANA GENERATING LLC
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND THE
PERIOD FROM MARCH 30, 2000 THROUGH DECEMBER 31, 2000
<PAGE>
LOUISIANA GENERATING LLC
INDEX TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>

                                                                         PAGE(S)

<S>                                                                      <C>
Report of Independent Accountants                                          2

Financial Statements:

  Balance Sheets as of December 31, 2002 and 2001                          3

  Statements of Operations for the years ended December 31, 2002
  and 2001 and 2001 and the period from March 30, 2000 through
  December 31, 2000                                                        4

  Statements of Cash Flows for the years ended December 31, 2002
  and 2001 and 2001 and the period from March 30, 2000 through
  December 31, 2000                                                        5

  Statements of Member's Equity for the years ended December 31,
  2002 and 2001 and the period from March 30, 2000 through
  December 31, 2000                                                        6

Notes to Financial Statements                                            7-26
</TABLE>
<PAGE>
LOUISIANA GENERATING LLC
BALANCE SHEETS
AS OF DECEMBER 31, 2002 AND 2001
(In thousands)
--------------------------------------------------------------------------------

Report of Independent Accountants

To the Management Committee of
Louisiana Generating LLC:

In our opinion, the accompanying balance sheets and the related statements of
operations, of member's equity and of cash flows present fairly, in all material
respects, the financial position of Louisiana Generating LLC at December 31,
2002 and 2001, and the results of its operations and its cash flows for the two
years in the period ended December 31, 2002 and for the period from 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 financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company and its parent, NRG South Central LLC as well
as NRG Energy, Inc., are experiencing credit and liquidity constraints and have
various credit arrangements that are in default. As a direct consequence, during
2002 NRG Energy, Inc. and the Company's parent entered into discussion with its
creditors to develop a comprehensive restructuring plan. In connection with
these restructuring efforts, it is likely that NRG Energy, Inc. and certain of
its subsidiaries, including the Company, 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
Minneapolis, Minnesota

March 28, 2003



       The accompanying notes are an integral part of the financial statements.

                                        2
<PAGE>
LOUISIANA GENERATING LLC
BALANCE SHEETS
AS OF DECEMBER 31, 2002 AND 2001
(In thousands)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                       ASSETS                             2002            2001
<S>                                                                    <C>             <C>
Current assets:
    Cash                                                               $       --      $    3,208
    Cash - restricted                                                     109,336              --
    Accounts receivable                                                    46,089          43,353
    Accounts receivable - affiliates                                           --          16,814
    Note receivable - current                                               3,000              --
    Inventory                                                              63,394          51,986
    Prepaid expenses                                                        2,927           2,368
                                                                       ----------      ----------

      Total current assets                                                224,746         117,729

Property, plant and equipment, net of accumulated depreciation of
      $75,357 and $47,513                                                 964,220         981,262
Deferred financing costs, net of accumulated amortization of
      $1,179 and $750                                                       9,540           9,969
Decommissioning fund investments                                            4,617           4,336
Other assets, net of accumulated amortization of $123 and $78               2,274           2,306
                                                                       ----------      ----------

      Total assets                                                     $1,205,397      $1,115,602
                                                                       ==========      ==========

                         LIABILITIES AND MEMBER'S EQUITY

Liabilities:
    Current liabilities:
      Note payable to member                                           $  750,750      $   65,500
      Accounts payable                                                      3,420             314
      Accounts payable - affiliates                                        59,558              --
      Accrued fuel and purchased power expense                             10,140          26,115
      Accrued interest - affiliates                                        55,413          20,453
      Other current liabilities                                            11,355          11,355
                                                                       ----------      ----------

      Total current liabilities                                           890,636         123,737

    Note payable to member                                                     --         738,000
    Other non-current liabilities                                           6,238           5,600
                                                                       ----------      ----------

      Total liabilities                                                   896,874         867,337

Member's equity                                                           308,523         248,265
                                                                       ----------      ----------

      Total liabilities and member's equity                            $1,205,397      $1,115,602
                                                                       ==========      ==========
</TABLE>



       The accompanying notes are an integral part of the financial statements.


                                       3
<PAGE>
LOUISIANA GENERATING LLC
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001 AND THE PERIOD FROM MARCH 30,
2000 (INCEPTION) THROUGH DECEMBER 31, 2000

(In thousands)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                            2002            2001            2000
<S>                                      <C>             <C>             <C>
Revenues                                 $ 399,458       $ 401,935       $ 309,010
Operating costs                            281,190         273,245         205,188
                                         ---------       ---------       ---------

      Operating margin                     118,268         128,690         103,822

Depreciation and amortization               29,671          27,211          20,335
General and administrative expenses          5,284           6,601           5,175
Special Charges                                208              --              --
                                         ---------       ---------       ---------

      Operating income                      83,105          94,878          78,312

Other income (expense), net                    779            (334)            651
Interest expense                           (71,220)        (72,665)        (55,981)
                                         ---------       ---------       ---------

Net income                               $  12,664       $  21,879       $  22,982
                                         =========       =========       =========
</TABLE>



       The accompanying notes are an integral part of the financial statements.


                                       4
<PAGE>
LOUISIANA GENERATING LLC
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001 AND FOR THE PERIOD FROM MARCH 30,
2000 (INCEPTION) THROUGH DECEMBER 31, 2000
(In thousands)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                   2002              2001              2000
<S>                                                            <C>               <C>               <C>
Cash flows from operating activities:
    Net income                                                 $    12,664       $    21,879       $    22,982
    Adjustments to reconcile net income to net cash
        provided by (used in) operating activities:
      Depreciation and amortization                                 29,671            27,211            20,335
      Special charges                                                   50                --                --
      Amortization of deferred financing costs                         441               427               324
      Changes in assets and liabilities:
        Accounts receivable                                         (2,736)            9,291           (52,644)
        Inventories                                                (11,408)          (27,772)            8,872
        Prepaid expenses                                              (559)             (838)           (1,330)
        Accounts payable                                             3,106            (2,125)            2,439
        Accounts payable and receivable - affiliates, net           76,360           (54,896)             (330)
        Accrued interest - affiliates                               34,960              (844)           21,297
        Accrued fuel and purchased power expense                   (15,975)           11,944            14,171
        Other current liabilities                                    1,505             4,895             5,183
        Changes in other assets and liabilities                        344               286             1,413
                                                               -----------       -----------       -----------
      Net cash provided by (used in) operating activities          128,423           (10,542)           42,712
                                                               -----------       -----------       -----------

Cash flows from investing activities:

    Business acquisition, net of liabilities assumed                    --                --        (1,030,353)
    Proceeds from disposition of property and equipment                 --                --             9,017
    Capital expenditures                                           (12,231)           (8,866)           (5,333)
    Increase in note receivable                                     (3,000)               --                --
    Increase in restricted cash                                   (109,336)               --                --
                                                               -----------       -----------       -----------
      Net cash used in investing activities                       (124,567)           (8,866)       (1,026,669)
                                                               -----------       -----------       -----------

Cash flows from financing activities:

    Proceeds from issuance of long-term debt                            --                --           800,000
    Contributions by members                                        47,594             5,051           230,353
    Net proceeds/payments on revolver                              (40,000)           40,000                --
    Payment of long-term borrowings                                (12,750)          (25,250)          (11,250)
    Distributions to members                                            --                --           (32,000)
    Checks in excess of cash                                        (1,908)               --                --
    Deferred financing costs                                            --              (331)               --
                                                               -----------       -----------       -----------
      Net cash (used in) provided by financing activities           (7,064)           19,470           987,103
                                                               -----------       -----------       -----------

Net (decrease) increase in cash and cash equivalents                (3,208)               62             3,146
Cash and cash equivalents at beginning of year                       3,208             3,146                --
                                                               -----------       -----------       -----------
Cash and cash equivalents at end of year                       $        --       $     3,208       $     3,146
                                                               ===========       ===========       ===========

Supplemental disclosures of cash flows information
    Interest paid                                              $    36,260       $    73,035       $    33,510
    Liabilities assumed in acquisition                                  --                --             4,833
</TABLE>



       The accompanying notes are an integral part of the financial statements.


                                       5
<PAGE>
LOUISIANA GENERATING LLC
STATEMENT OF MEMBER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001 AND THE PERIOD FROM MARCH 30,
2000 (INCEPTION) THROUGH DECEMBER 31, 2000
(In thousands)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                         ACCUMULATED
                                             MEMBER                         OTHER           TOTAL
                                          CONTRIBUTIONS/  ACCUMULATED   COMPREHENSIVE      MEMBER'S
(In thousands)                            DISTRIBUTIONS     INCOME         INCOME          EQUITY
<S>                                       <C>             <C>           <C>               <C>
Balances at March 30, 2000 (Inception)      $      --      $      --      $      --       $      --

Net income and comprehensive
      income for 2000                                         22,982             --          22,982
Member contributions, net                     198,353             --                        198,353
                                            ---------      ---------      ---------       ---------

Balances at December 31, 2000               $ 198,353      $  22,982      $      --       $ 221,335
                                            =========      =========      =========       =========

Cumulative effect upon adoption
      of SFAS 133                                  --             --            500             500
Impact of SFAS 133 for year
      ended December 31, 2001                      --             --           (500)           (500)
Net income                                                    21,879             --          21,879
                                                                                          ---------
    Comprehesive income for 2001                                                             21,879
Member contributions, net                       5,051                            --           5,051
                                            ---------      ---------      ---------       ---------

Balances at December 31, 2001               $ 203,404      $  44,861      $      --       $ 248,265
                                            =========      =========      =========       =========

Net income and comprehensive
      income for 2002                                         12,664                         12,664
Member contributions, net                      47,594                                        47,594
                                            ---------      ---------      ---------       ---------

Balances at December 31, 2002               $ 250,998      $  57,525      $      --       $ 308,523
                                            =========      =========      =========       =========
</TABLE>



       The accompanying notes are an integral part of the financial statements.


                                       6
<PAGE>
LOUISIANA GENERATING LLC
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

1.    ORGANIZATION

      Louisiana Generating LLC (Louisiana Generating or the Company) is an
      indirect wholly owned subsidiary of NRG Energy, Inc. (NRG). NRG South
      Central owns 100% of Louisiana Generating LLC. 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, each of which owns a 50%
      interest in NRG South Central.

      Louisiana Generating was formed for the purpose of acquiring, owning,
      operating and maintaining the electric generating facilities acquired from
      Cajun Electric Power Cooperative, Inc. (Cajun Electric).

      Pursuant to a competitive bidding process, following the Chapter 11
      bankruptcy proceeding of Cajun Electric, Louisiana Generating acquired the
      non-nuclear electric power generating assets of Cajun Electric.

      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 non-recourse
      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.

      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


                                       7
<PAGE>
LOUISIANA GENERATING LLC
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

      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.

      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


                                       8
<PAGE>
LOUISIANA GENERATING LLC
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

      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 and Louisiana Generating LLC 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, NRG South Central 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'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 is also precluded from making payments to NRG Energy due
      to unfunded debt service reserve accounts. Prior to the NRG Energy
      downgrades , 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.


                                       9
<PAGE>
LOUISIANA GENERATING LLC
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

      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 the 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 South Central, including the Company 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, including the Company'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.

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

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      NATURE OF OPERATIONS

      Louisiana Generating was formed for the purpose of acquiring, owning,
      operating and maintaining the electric generating facilities acquired from
      Cajun Electric Power Cooperative, Inc. (Cajun Electric).

      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,
      the Company 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
      member's equity as previously reported.


                                       10

<PAGE>
LOUISIANA GENERATING LLC
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

      CASH AND CASH EQUIVALENTS

      The Company 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 consists of coal, spare parts and fuel oil and is stated at the
      lower of weighted average cost or market (Note 6).

      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:

<TABLE>
<S>                                                               <C>
      Facilities, machinery and equipment                         10 to 40 years
      Office furnishings and equipment                            3 to 10 years
</TABLE>

      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 are less than its
      carrying value. An impairment charge is measured by the difference between
      an asset's carrying amount and fair value. Fair values may be determined
      by a variety of valuation methods, including appraisals, sales prices of
      similar assets and present value techniques.


                                       11
<PAGE>
LOUISIANA GENERATING LLC
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

      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.

      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, the Company 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, the Company 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 the Company 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 contract, 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.

      POWER MARKETING ACTIVITIES

      The Company has entered into a contract with a marketing affiliate for the
      sale of energy, capacity and ancillary services produced, which enables
      the affiliate to engage in forward sales and hedging transactions to
      manage the Company'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. The Company receives the
      net transaction price on all contracts that are physically settled by its
      marketing affiliate.


                                       12
<PAGE>
LOUISIANA GENERATING LLC
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

      INCOME TAXES

      The net income or loss of the Company for income tax purposes, along with
      any associated tax credits, is included in the tax returns of NRG.
      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 the Company to
      concentrations of credit risk consist primarily of cash, accounts
      receivable and notes receivable. Cash accounts are generally held in
      Federally insured banks. Accounts receivable and notes receivable are
      concentrated within entities engaged in the energy industry. These
      industry concentrations may impact the Company'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, the Company
      believes the credit risk posed by industry concentration is offset by the
      diversification and creditworthiness of its customer base.

      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.

      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
      estoppels. The Company is required to adopt SFAS No. 143 on January 1,
      2003. Louisiana Generating 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. Louisiana
      Generating 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


                                       13
<PAGE>
LOUISIANA GENERATING LLC
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

      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
      Louisiana Generating.

      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 14.

      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 amounts 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.

3.    DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITY

      On January 1, 2001, the Company 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 the Company 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. Derivatives that have been
      designated as hedges of assets,


                                       14
<PAGE>
LOUISIANA GENERATING LLC
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

      liabilities or firm commitments, are accounted for using the fair value
      method. Changes in the fair value of these instruments are recognized in
      earnings as offsets to the changes in the fair value of the related hedged
      assets, liabilities and firm commitments. Derivatives that have been
      designated as hedges of forecasted transactions are accounted for using
      the cash flow method. Changes in the fair value of these instruments are
      deferred and recorded as a component of other accumulated comprehensive
      income (OCI) until the hedged transactions occur and are recognized in
      earnings. SFAS No. 133 applies to the Company's energy and energy related
      commodities financial instruments, long-term power sales contracts and
      long-term gas purchase contracts used to mitigate variability in earnings
      due to fluctuations in spot market prices, hedge fuel requirements at
      generation facilities and protect investment in fuel inventories. These
      activities are conducted by an affiliate of the Company and are allocated
      to the Company. At December 31, 2002, the Company had various commodity
      contracts extending through 2003. None of these contracts are designated
      as hedging instruments.

4.    PROPERTY, PLANT AND EQUIPMENT

      Property, plant and equipment consists of the following at December 31,
      2002 and 2001:

<TABLE>
<CAPTION>
      (In thousands)                               2002              2001
<S>                                            <C>               <C>
      Land                                     $     3,733       $     3,733
      Facilities, machinery and equipment        1,030,747         1,000,608
      Construction in progress                         988            20,815
      Office furnishings and equipment               4,109             3,619
      Accumulated depreciation                     (75,357)          (47,513)
                                               -----------       -----------

      Property, plant and equipment, net       $   964,220       $   981,262
                                               ===========       ===========
      </TABLE>

      Property, plant and equipment consist primarily of the electric generating
      facilities acquired from Cajun Electric. The assets are comprised of Units
      1 and 2 of Big Cajun I and 100% of Units 1 and 2, 58% of Unit 3 of Big
      Cajun II and 100% of Big Cajun 1 Peaking; an energy control center and
      headquarters building; a 17.5 mile gas pipeline system; and certain
      transmission assets and all other substations.

5.    NOTE PAYABLE TO MEMBER

      On March 30, 2000, NRG South Central issued $800 million of senior secured
      bonds in two traunches. The first traunche was for $500 million with a
      coupon of 8.962% and a maturity of 2016. The second traunch 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 will be made semi-annually on each March 15 and September 15 with
      $25,500,000 due in 2002 and 2003, $15,000,000 due in 2004, 2005 and 2006.
      The remaining $667,500,000 is due between March 15, 2007 and September 15,
      2024. The proceeds of the bonds were used to finance the Company's
      acquisition of the Cajun generating facilities on March 31, 2000.
      Effective March 30, 2000, NRG South Central and the Company entered into a
      Guarantor loan agreement that provides for substantially the same terms
      and conditions of the bonds.

      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. NRG South Central made a semi-annual payment


                                       15
<PAGE>
LOUISIANA GENERATING LLC
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

      of $12.7 million on March 15, 2002. As of December 31, 2002 and 2001,
      there remains $750.8 million and $763.5 million of outstanding bonds,
      respectively. As of October 1, 2002, NRG South Central is in default on
      the senior secured bonds.

      On September 16, 2002 the Company 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. The Company had 15 days to make principal and interest payments
      to the Company'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 the Company 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's obligations in respect to the bonds are secured by its
      interest in NRG Central's and South Central's interests in NRG South
      Central and NRG South Central's membership interest in the Company; all of
      the assets related to the Cajun facilities including NRG South Central's
      rights under all intercompany notes between NRG South Central and the
      Company but excluding those assets of NRG New Roads specifically held for
      resale; the revenue account and the debt service reserve account.

      The Company issued a guarantee in favor of the bondholders, which
      unconditionally and irrevocably guarantee the payment of principal, of
      premium (if any) and 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.

      The Company's obligations with respect to the guarantee and the
      intercompany loan are secured by a mortgage with respect to Big Cajun I
      and II and an interest in:

      -     All of the Company's interest in the Cajun facilities and
            substantially all personal property associated with the Cajun
            facilities except for fixtures not located on the Cajun facilities
            and the assets of NRG New Roads specifically held for resale;

      -     Substantially all contracts, associated with the Cajun facilities to
            which the Company 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 the Company 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 the
            Company associated with the Cajun facilities; and the revenue
            account.


                                       16
<PAGE>
LOUISIANA GENERATING LLC
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

      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.

6.    INVENTORY

      Inventory, which is stated at the lower of weighted average cost or
      market, at December 31, 2002 and 2001, consists of:

<TABLE>
<CAPTION>
      (In thousands)                               2002               2001
<S>                                             <C>                <C>
      Coal                                      $48,001            $36,571
      Spare parts                                14,553             14,652
      Fuel oil                                      840                763
                                                -------            -------

            Total                               $63,394            $51,986
                                                =======            =======
</TABLE>

7.    RELATED PARTY TRANSACTIONS

      Louisiana Generating entered into a power sale and agency agreement with
      NRG Power Marketing Inc., a wholly owned subsidiary of NRG. 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 Louisiana
      Generating, (ii) procure and provide to Louisiana Generating all fuel
      required to operate its respective facilities and (iii) market, sell and
      purchase all emission credits owned, earned or acquired by Louisiana
      Generating. In addition, NRG Power Marketing Inc. will have the exclusive
      right and obligation to direct the power output from the facilities.


                                       17
<PAGE>
LOUISIANA GENERATING LLC
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

      Under the agreement, NRG Power Marketing, Inc. pays to Louisiana
      Generating 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, Inc.

      Louisiana Generating entered into an operation and maintenance agreement
      with NRG Operating Services, Inc., (NRG Operating Services) a wholly-owned
      subsidiary of NRG. The agreement is perpetual in term until terminated in
      writing by Louisiana Generating or until earlier terminated upon an event
      of default. Under the agreement, at the request of Louisiana Generating,
      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 the period from
      March 30, 2000 (inception) through December 31, 2000, Louisiana Generating
      incurred no operating and maintenance costs from NRG Operating Services.

      Louisiana Generating and NRG South Central each entered into an agreement
      with NRG Energy for corporate support and services. The agreement is
      perpetual in term until terminated in writing by Louisiana Generating or
      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 the period from
      March 30, 2000 (inception) through December 31, 2000, Louisiana Generating
      incurred approximately $0.2 million, $0.6 million and $0.5 million,
      respectively, for corporate support and services.

      At December 31, 2002 and 2001, the Company had an accounts payable -
      affiliates balance of approximately $59.6 million and an accounts
      receivable - affiliates balance of $16.8 million, respectively, which
      consisted primarily of a payable to NRG Energy for capitalized development
      costs incurred prior to the acquisition of the Cajun facilities and other
      expenses paid on Louisiana Generating's behalf as described in the
      Paragraphs above.

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

8.    BENEFITS DISCLOSURES

      The Company 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 master multiple-employer defined
      benefit plan. Effective March 31, 2000, the Cooperative's defined benefit
      and 401(k) plans were terminated and no on-going pension obligation was
      assumed by the Company or NRG. The Company sponsors a cash balance pension
      plan arrangement whereby the employees are entitled to a pension benefit
      of approximately seven percent 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 from March
      30, 2000 (inception) through December 31, 2000, the Company recorded
      approximately $0.36 million, $0.26 million and


                                       18
<PAGE>
LOUISIANA GENERATING LLC
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

      $1.0 million of pension expense and approximately $680,000 $458,000 and
      $265,000, respectively, of 401(k) matching funds.

9.    SALES TO SIGNIFICANT CUSTOMERS

      For the year ended December 31, 2002, sales to two customers, Southwest
      Louisiana Electric Membership Corporation and Dixie Electric Membership
      Corporation, accounted for 16.8 percent and 15.9 percent, respectively of
      the Company's total revenues. For the year ended December 31, 2001, sales
      to two customers, Southwest Louisiana Electric Membership Corporation and
      Dixie Electric Membership Corporation, accounted for 16.4 percent and 15.7
      percent, respectively of the Company's total revenues. For the period from
      March 30, 2000 (inception) through December 31, 2000, sales to two
      customers, Southwest Louisiana Electric Membership Corporation and Dixie
      Electric Membership Corporation, accounted for 16.7 percent and 16.1
      percent, respectively, of the Company's total revenues. During March 2000,
      the Company entered into certain power sales agreements with eleven
      distribution cooperatives that were customers of Cajun Electric prior to
      the 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, the Company
      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 the 80.2 percent, 78.4 percent and
      81.4 percent respectively, of the Company's total revenues during the
      years ended December 31, 2002, 2001 and 2000 (Note 11).

10.   FINANCIAL INSTRUMENTS

      The estimated fair value of Louisiana Generating's recorded financial
      instruments at December 31, 2002 and 2001, are as follows:

<TABLE>
<CAPTION>
                                                      2002                        2001
                                             ----------------------      ----------------------
                                             CARRYING        FAIR        CARRYING        FAIR
      (In thousands)                          AMOUNT        VALUE         AMOUNT        VALUE
<S>                                          <C>           <C>           <C>           <C>
      Cash                                   $     --      $     --      $  3,208      $  3,208
      Restricted cash                         109,336       109,336            --            --
      Notes receivable                          3,000         3,000            --            --
      Long-term debt, including current
            portion                           750,750       525,525       803,500       789,551
      Decommissioning funds                     4,617         4,617         4,336         4,336
</TABLE>

      For cash and cash equivalents and restricted cash, the carrying amount
      approximates fair value because of the short-term maturity of those
      instruments. The fair value of notes receivable is based on expected
      future cash flows discounted at market interest rates. The fair value of
      long-term debt is estimated based on the quoted market prices for similar
      issues. Decommissioning fund investments are comprised of various debt
      securities of the United States of America and are carried at amortized
      cost, which approximates their fair value.

      DERIVATIVE FINANCIAL INSTRUMENTS

      In the normal course of business, Louisiana Generating may employ a
      variety of off-balance sheet instruments to manage its exposure to
      fluctuations in interest rates and energy and energy related commodities
      prices


                                       19
<PAGE>
LOUISIANA GENERATING LLC
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

      INTEREST RATES

      From time to time Louisiana Generating may use interest rate hedging
      instruments to protect it from an increase in the cost of borrowing. At
      December 31, 2002 and 2001, there were no such instruments outstanding.

      ENERGY AND ENERGY RELATED COMMODITIES

      Louisiana Generating 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,
      Louisiana Generating 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 generations facilities; and

      -     Protect its investment in fuel inventories.

11.   COMMITMENTS AND CONTINGENCIES

      OPERATING LEASE COMMITMENTS

         The Company leases certain of its equipment under operating leases
   expiring on various dates through 2006. Rental expense under these
   operating leases was approximately $0.2 million, $0.2 million, and $0.2
   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:

<TABLE>
<CAPTION>
                                            (THOUSANDS
                                            OF DOLLARS)
                                            -----------
<S>                                         <C>
                               2003 .....       $213
                               2004 .....        101
                               2005 .....         31
                               2006 .....          3
                                                ----
                                 Total ..       $348
                                                ====
</TABLE>

      CONTRACTUAL COMMITMENTS

      POWER SUPPLY AGREEMENTS WITH THE DISTRIBUTION COOPERATIVES

      During March 2000, the Company 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 advanced
      notice.


                                       20
<PAGE>
LOUISIANA GENERATING LLC
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

      Under the Form A power supply agreement, the Company 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.

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

      The Company 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.

      The Company 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 six 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 the Company 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 the Company 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.

      The Company 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. The
      Company also charges the distribution cooperative its ratable share of
      1.75% of the depreciated book value of common delivery facilities, which
      include communications,


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      transmission and metering facilities owned by the Company to provide
      supervisory control and data acquisition, and automatic control for its
      customers.

      For base supply, the Company 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. The Company can increase the
      demand charge to the extent its cost of providing supplemental supply
      exceeds $400/MW. 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 purchased energy costs. The distribution cooperative
      may elect to be charged based on a guaranteed coal fired heat rate of
      10,600 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, the Company 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, the Company will establish a rate fund 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/kWh. Any funds remaining at the end of the term of the power
      supply agreement will be returned to the Company.

      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. The agreement
      can be terminated by the distribution cooperative at any time with 12
      months prior notice given after the first anniversary of the acquisition
      closing date.

      The Company will charge the distribution cooperative a demand rate, a
      variable operation and maintenance charge and a fuel charge. The Company
      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.

      OTHER POWER SUPPLY AGREEMENTS

      The Company 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 the Company to supply 100 MW
      of off-peak energy during certain hours of the day to a maximum of 292,000
      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 the
      Company's ability to


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LOUISIANA GENERATING LLC
NOTES TO FINANCIAL STATEMENTS
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      deliver operating reserve capacity and energy associated with operating
      reserve capacity. At the Company'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 the Company 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 the
      Company 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 the Company 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 the Company 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 the Company and is adjusted to include transmission
      losses to the delivery point.

      COAL SUPPLY AGREEMENT

      The Company 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 Powder River Basin, Wyoming. The Coal supply agreement
      has a term of five years from March 31, 2000. The agreement is for the
      full coal requirements of Big Cajun II. The agreement establishes a base
      price per ton for coal supplied by Triton Coal. The base price is subject
      to adjustment for changes in the level of taxes or other government fees
      and charges, variations in the caloric value of the coal shipped or
      changes in the price of SO(2) emission allowances. The base price is based
      on certain annual weighted average quality specifications, subject to
      suspension and rejection limits. The base price and quality of coal
      specifications guarantee compliance with Big Cajun II's annual SO(2)
      emissions allocation of 44,153 tons commencing in 2000 regardless of the
      burn level.

      COAL TRANSPORTATION AGREEMENT

      The Company entered into a coal transportation agreement with Burlington
      Northern and Santa Fe Railway and American Commercial Terminal. The term
      of the agreement is five years from March 31, 2000. This agreement
      provides for the transportation of all of the coal requirements of Big
      Cajun II from the mines in Wyoming to Big Cajun II.


                                       23
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LOUISIANA GENERATING LLC
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      TRANSMISSION AND INTERCONNECTION AGREEMENTS

      The Company 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.
      The Cajun facilities are connected to the transmission system of Entergy
      Gulf States and power is delivered to the distribution cooperatives at
      various delivery points on the transmission systems of Entergy Gulf
      States, Entergy Louisiana, Central Louisiana Electric Company and SWEPCO.
      The Company 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 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


                                       24
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LOUISIANA GENERATING LLC
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

      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 13.

      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 NO(x) emissions at the gas-fired Big Cajun
      I Power Station and coal-fired Big Cajun II Power Station to 0.1 pounds
      NO(x) per million Btu heat input and 0.21 pounds NO(x) 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 NO(x) 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.

      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 the Company 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 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

                                       25
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LOUISIANA GENERATING LLC
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      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.

12.   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. The Company's statements of operations
      include the Company's share of all fixed and variable costs of operating
      the unit. The Company's 58% share of the original cost included in Plant,
      Property and Equipment at December 31, 2002 and 2001 was $189.0 million
      and $179.7 million, respectively. The corresponding accumulated
      depreciation and amortization was $12.3 million and $7.8 million,
      respectively.

13.   DECOMMISSIONING FUND

      The Company is required by the State of Louisiana Department of
      Environmental Quality 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. The Company'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.


                                       26
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14.   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 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.

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

15.   SPECIAL CHARGES

      The Company incurred $208 thousand of expected severance costs associated
      with the combining of various functions and restructuring costs consisting
      of advisor fees. These costs were recorded as special charges in the
      statement of operations.

                                       27