<PAGE>
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    --------
                                    FORM 10-K

                        FOR ANNUAL AND TRANSITION REPORTS
                     PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934 
    FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934
    For the transition period from to

                         COMMISSION FILE NUMBER: 1-9208

                       COGENERATION CORPORATION OF AMERICA
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             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                                                  <C>
                            DELAWARE                                                               59-2076187
 (State or other jurisdiction of incorporation or organization)                       (I.R.S. Employer Identification No.)

ONE CARLSON PARKWAY, SUITE 240; MINNEAPOLIS, MINNESOTA              55447-4454                   (612) 745-7900
            (Address of principal executive offices)                (Zip Code)       (Telephone number, including area code)
</TABLE>

Securities registered pursuant to Section 12(b) of the Act:
         NONE

Securities registered pursuant to Section 12(g) of the Act:
         COMMON STOCK, PAR VALUE $.01 PER SHARE

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. /X/ Yes / / No

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

         As of March 2, 1999, there were outstanding 6,856,769 shares of Common
Stock. Based on the last sales price at which such stock was sold on that date,
the approximate aggregate market value of the shares of Common Stock held by
non-affiliates of the Company was $27,170,911.

      Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. |X| Yes |_| No

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<PAGE>


                       DOCUMENTS INCORPORATED BY REFERENCE

         The information required for the following items is incorporated by
reference to the 1999 Definitive Proxy Statement of Cogeneration Corporation of
America ("CogenAmerica"):

         Item 10 -- Directors and Executive Officers of the Registrant
         Item 11 -- Executive Compensation
         Item 12 -- Security Ownership of Certain Beneficial Owners and 
                    Management
         Item 13 -- Certain Relationships and Related Transactions


                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                                              PAGE
                                                                                                             NUMBER
                                                                                                             ------
<S>      <C>         <C>                                                                                     <C>

         PREFACE:    SELECTED DEFINITIONS .................................................................    2

Part I
         Item 1.     Business .............................................................................    5
         Item 2.     Properties ...........................................................................   29
         Item 3.     Legal Proceedings ....................................................................   29
         Item 4.     Submission of Matters to a Vote of Security Holders ..................................   31

Part II
         Item 5.     Market for the Registrant's Common Equity and Related
                     Stockholder Matters ..................................................................   32
         Item 6.     Selected Financial Data ..............................................................   34
         Item 7.     Management's Discussion and Analysis of Financial Condition
                     and Results of Operations ............................................................   34
         Item 7A.    Quantitative and Qualitative Disclosures about Market Risk ...........................   52
         Item 8.     Financial Statements and Supplementary Data ..........................................   53
         Item 9.     Changes in and Disagreements with Accountants on Accounting
                     and Financial Disclosure .............................................................   54

Part III
         Item 10.    Directors and Executive Officers of the Registrant....................................   55
         Item 11.    Executive Compensation ...............................................................   55
         Item 12.    Security Ownership of Certain Beneficial Owners and Management .......................   55
         Item 13.    Certain Relationships and Related Transactions .......................................   55

Part IV
         Item 14.    Exhibits, Financial Statement Schedules, and Reports on Form 8-K .....................   56

Consolidated Financial Statements ............................................................. F-1 through F-28

Index to Exhibits .........................................................................................   59
</TABLE>



                                       1
<PAGE>



PREFACE: SELECTED DEFINITIONS

         When used in this report, the following terms will have the meanings
indicated.

         "Aquila" means Aquila Energy Marketing Corporation.

         "Authority" means the Philadelphia Municipal Power Authority.

         "Bankruptcy Court" means the U.S. Bankruptcy Court for the District of 
New Jersey.

         "Btu" means British thermal unit.

         "Chase" means Chase Manhattan Bank N.A.

         "CogenAmerica" or "the Company" means Cogeneration Corporation of 
America.

         "CogenAmerica Funding" means CogenAmerica Funding Inc.

         "CogenAmerica Morris" means CogenAmerica Morris Inc.

         "CogenAmerica Newark" means CogenAmerica Newark Inc.

         "CogenAmerica Parlin" means CogenAmerica Parlin Inc.

         "CogenAmerica Pryor" means CogenAmerica Pryor Inc.

         "CogenAmerica Schuylkill" means CogenAmerica Schuylkill Inc.

         "Co-Investment Agreement" means the Co-Investment Agreement dated 
April 30, 1996 between NRG Generating (U.S.) Inc. (currently known as 
CogenAmerica) and NRG Energy.

         "Common Stock" means CogenAmerica's common stock, par value $.01 per 
share.

         "DuPont" means E.I. du Pont de Nemours and Company.

         "Dynegy" means Dynegy Marketing and Trade.

         "EPA" means the U.S. Environmental Protection Agency.

         "Equistar" means Equistar Chemicals,  LP, a joint venture of Lyondell  
Petrochemical  Company,  Millennium Chemicals and Occidental Chemical 
Corporation.

         "EWG" means an "exempt wholesale generator," as that term is defined in
PUHCA.

         "Exchange Act" means the Securities Exchange Act of 1934, as amended.

         "FERC" means the Federal Energy Regulatory Commission.

         "Grays Ferry Partnership" means the Grays Ferry Cogeneration 
Partnership.

         "Grays Ferry PPAs" means the power purchase agreements with PECO.


                                       2
<PAGE>


         "Grays Ferry Project" means the 150 MW cogeneration facility located in
Philadelphia, Pennsylvania.

         "JCP&L" means Jersey Central Power and Light Company.

         "kWh" means Kilowatt hour.

         "MCPC" means Mid-Continent Power Company, LLC.

         "MeesPierson Credit Agreement" means the Credit Agreement dated
December 17, 1997 between NRG Generating (U.S.) Inc. (currently known as
CogenAmerica) and MeesPierson Capital Corporation.

         "MW" means megawatt.

         "Morris ESA" means the Morris energy service agreement dated June 3,
1997 between CogenAmerica Morris LLC and Millennium Petrochemicals Incorporated.

         "Morris LLC" means CogenAmerica Morris LLC.

         "Morris Project" means the 117 MW cogeneration facility in Morris,
Illinois.

         "National Ambient Air Quality Standard" means those ambient air quality
standards required under the Clean Air Act.

         "Newark Boxboard" means The Newark Group, Inc.

         "Newark and Parlin Credit Agreement" means the Credit Agreement dated
May 17, 1996 between NRG Generating (Newark) Cogeneration Inc. (currently known
as CogenAmerica Newark), NRG Generating (Parlin) Cogeneration Inc. (currently
known as CogenAmerica Parlin), Credit Suisse, Greenwich Funding Corporation and
any Purchasing Lender, as amended.

         "Newark Project" means the 58 MW cogeneration facility in Newark, New
Jersey.

         "1990 Amendments" means the Clean Air Act Amendments of 1990.

         "NMO" means NRG Morris Operations, Inc.

         "NOx" means nitrogen oxide.

         "NPI" means NRG Parlin, Inc.

         "NRG Energy" means NRG Energy, Inc.

         "O'Brien" means O'Brien Environmental Energy, Inc.

         "OES" means O'Brien Energy Services Company.

         "OG&E" means Oklahoma Gas and Electric Company.

         "OPCI" means O'Brien (Philadelphia) Cogeneration, Inc.


                                       3
<PAGE>


         "Parlin Project" means the 122 MW cogeneration facility in Parlin, New
Jersey.

         "PECO" means PECO Energy Company.

         "PJM" means the Pennsylvania - New Jersey - Maryland interconnected
power pool.

         "Plan" means the plan of reorganization of O'Brien, discussed more
fully in "Item 1. Business --General" of this report.

         "POI" means Power Operations, Inc.

         "PPA" means a power purchase agreement.

         "PRP" means a potentially responsible party.

         "Pryor Project" means the 110 MW cogeneration facility in Pryor, 
Oklahoma.

         "PSO" means Public Service Company of Oklahoma.

         "PUHCA" means Public Utility Holding Company Act of 1935, as amended.

         "PUMA" means, collectively, CogenAmerica's subsidiaries that operate in
the United Kingdom and are held by NRG Generating Ltd., a wholly-owned
subsidiary of CogenAmerica.

         "PUPCO" means Philadelphia United Power Corporation.

         "PURPA" means the Public Utility Regulatory Policies Act of 1978, as
amended.

         "PWD" means the Philadelphia Water Department.

         "PWD Project" means the two standby/peak shaving facilities with an
aggregate capacity of 22 MW in Philadelphia, Pennsylvania.

         "QF" means a "qualifying small power production facility" or a
"qualifying cogeneration facility" as these terms are defined in PURPA.

         "RCRA" means the Resource Conservation and Recovery Act of 1976.

         "SEC" means the Securities and Exchange Commission.

         "Securities Act" means the Securities Act of 1933, as amended.

         "Supplemental Loan Agreement" means the Supplemental Loan Agreement
dated December 10, 1997 between NRG Energy, NRG Generating (U.S.) Inc.
(currently known as CogenAmerica) and NRGG Funding Inc. (currently known as
CogenAmerica Funding).

         "TPEC" means Trigen-Philadelphia Energy Corporation, a wholly-owned
subsidiary of Trigen.

         "Trigen" means Trigen Energy Corporation.



                                       4
<PAGE>



                                                      PART I

         ALL DOLLAR AMOUNTS, EXCEPT PER SHARE AMOUNTS, SET FORTH IN THIS PART I
ARE IN THOUSANDS.

ITEM 1.           BUSINESS.

         CERTAIN OF THE STATEMENTS MADE IN THIS ITEM 1 AND IN OTHER PORTIONS OF
THIS REPORT AND IN DOCUMENTS INCORPORATED BY REFERENCE HEREIN CONSTITUTE
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT, AND SECTION 21E OF THE EXCHANGE ACT. THE FORWARD-LOOKING STATEMENTS
INCLUDED IN THIS REPORT ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND ARE SUBJECT
TO RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE THE ACTUAL RESULTS,
PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO DIFFER MATERIALLY FROM HISTORICAL
RESULTS OR FROM ANY RESULTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING
STATEMENTS. SUCH FACTORS INCLUDE, WITHOUT LIMITATION, THOSE DISCUSSED IN
"BUSINESS -- RISK FACTORS" HEREIN. SEE "BUSINESS -- RISK FACTORS -- RISKS
ASSOCIATED WITH FORWARD-LOOKING STATEMENTS."

         FOR DEFINITIONS OF CERTAIN CAPITALIZED TERMS USED BUT NOT DEFINED IN
THIS ITEM I, PLEASE SEE THE SELECTED DEFINITIONS IMMEDIATELY PRECEDING THIS ITEM
1.

GENERAL

         CogenAmerica, formerly known as NRG Generating (U.S.) Inc. and O'Brien
Environmental Energy, Inc., is an independent power producer primarily in the
business of developing, owning and managing the operation of cogeneration
projects which produce electricity and thermal energy for sale under long-term
contracts with industrial and commercial users and public utilities. The Company
is currently focusing on natural gas-fired cogeneration projects with long-term
contracts for substantially all of the output of such projects including "inside
the fence" projects on the premises of the project's steam/energy hosts. The
Company's strategy is to develop, acquire and manage the operation of such
cogeneration projects and to provide U.S. industrial facilities and utilities
with reliable and competitively priced energy from the Company's power projects.

         CogenAmerica has substantial expertise in the development and
management of the operation of cogeneration power projects. The Company's
current project portfolio consists of: (i) the Parlin Project; (ii) the Newark
Project; (iii) the Morris Project; (iv) the Pryor Project; (v) an 83% interest
in the PWD Project; and (vi) a one-third interest in the Grays Ferry Project.
All of the Company's cogeneration projects commenced commercial operation in the
1990s.

         When still known as O'Brien, the Company emerged from bankruptcy on
April 30, 1996, under the Plan approved by the Bankruptcy Court. O'Brien had
filed a voluntary petition for reorganization under Chapter 11 of the United
States Bankruptcy Code on September 28, 1994. In connection with the
consummation of the Plan, all of the shares of O'Brien Class A and Class B
Common Stock were canceled and replaced by a new issue of common stock, par
value $.01 per share. At that time the Company changed its name to NRG
Generating (U.S.) Inc. In addition, NRG Energy advanced approximately $71,200
under loan agreements with the Company and purchased approximately 41.86% of the
Common Stock for aggregate consideration of approximately $21,200. NRG Energy
also purchased certain subsidiaries of the Company for $7,500 and funded a cash
distribution to the O'Brien stockholders aggregating $7,500. NRG Energy's
financial backing of the Plan enabled the Company to provide for full and
immediate payment of all undisputed pre-petition claims as well as a provision
for post-petition interest. In addition, pursuant to the Plan, NRG Energy and
the Company entered into a Co-Investment 



                                       5
<PAGE>


Agreement, pursuant to which NRG Energy has agreed to offer to the Company
ownership interests in certain power projects which are initially developed by
NRG Energy or with respect to which NRG Energy has entered into a binding
acquisition agreement with a third party. See "Business -- Project Development
-- Co-Investment Agreement with NRG Energy."

         The Company was incorporated in Florida in 1981 and subsequently merged
with a Delaware corporation in 1984. Prior to the merger, the Company was part
of a group of several affiliated companies which had served the power generation
market since 1915.

         The following chart summarizes certain information concerning each of
the Company's projects. See "Business -- Products and Services -- Energy Segment
-- Parlin Project," "-- Newark Project," "-- Morris Project," "--Pryor Project,"
"-- PWD Project" and "-- Grays Ferry Project."


<TABLE>
<CAPTION>
                           PARLIN         NEWARK         MORRIS          PRYOR           PWD        GRAYS FERRY
                           PROJECT        PROJECT        PROJECT        PROJECT        PROJECT        PROJECT
                        -------------- -------------- -------------- -------------- -------------- --------------
<S>                        <C>             <C>           <C>            <C>             <C>           <C>   
Capacity (1)               122 MW          58 MW         117 MW         110 MW          22 MW         150 MW

Ownership                  100.0%         100.0%       100.0% (2)        100%         83.0% (3)        33.3%

Availability (4)            95.7%          95.4%          100%           93.7%       Standby (5)        93%

Ownership date              June         November       November       October       September       January
                            1991           1990           1998          1998            1993           1998

Type                     Gas-Fired,     Gas-Fired,     Gas-Fired,     Gas-Fired,       Diesel       Gas-Fired,
                          Combined       Combined       Combined       Combined        Standby       Combined
                            Cycle          Cycle          Cycle          Cycle                         Cycle

Power purchaser            JCP&L;         JCP&L;        Equistar       OG&E; PSO      Authority        PECO
                         DuPont (6)       Newark
                                         Boxboard

Expiration year of
power purchase              2011           2015           2023           2007           2013           2017
contract

Steam purchaser            DuPont         Newark        Equistar        Various          --          TPEC (7)
                                         Boxboard

Expiration year of
steam purchase              2021           2015           2023          Various          --            2022
contract

Fuel provider               JCP&L          JCP&L        Equistar        Aquila;          PWD          Aquila
                                                                        Dynegy

Expiration year of
fuel supply                 2011           2015           2023          Annual          2013           2013
contract

Operator                   POI (8)        POI (8)        NMO (8)        Cogen-         OES (9)      PUPCO (10)
                                                                       America
</TABLE>


(1)  Reflects the nameplate capacity of the project. Nameplate capacity may not
      represent the actual output for a facility at any particular time.

(2)   Equistar has notified the Morris Project of its intention to exercise an
      option to purchase a 5% membership interest in Morris LLC, the owner of
      the Morris Project. A final agreement for the purchase has not been
      executed. See "Business -- Products and Services -- Energy Segment --
      Morris Project."

(3)   The Company owns substantially all of the assets constituting the PWD
      Project except for its principal project agreements, which are held by
      OPCI. All of the common stock of OPCI is held by the Company and all of
      the 


                                       6
<PAGE>



      preferred stock of OPCI is held by an unrelated third party. The terms
      of the preferred stock entitle the preferred stockholder to receive
      dividends equal to 17% of OPCI's earnings (as determined in accordance
      with the terms of the preferred stock).

(4)   Reflects availability (as defined in the PPA for the project) during 1998.
      The Morris Project began commercial operation in November 1998 and the
      Pryor Project was acquired in October 1998. The Grays Ferry Project began
      commercial operation in January 1998.

(5)   The PWD Project consists of two standby/peak shaving facilities which are
      used only as back-up sources of electricity by the power purchaser.

(6)   A portion of the power from the Parlin Project is sold to NPI, a
      wholly-owned subsidiary of NRG Energy, and NPI resells this portion of the
      power at retail to DuPont under an agreement extending until 2021.

(7)   TPEC is a wholly-owned subsidiary of Trigen, a partner in the Grays Ferry
      Partnership.

(8)   POI and NMO are wholly-owned subsidiaries of NRG Energy. NRG Energy owns
      approximately 45.2% of the Company's Common Stock.

(9)   On November 5, 1998 the Company sold OES, a wholly-owned subsidiary of the
      Company. OES continues to serve as operator of this project under the
      terms of the existing operations and maintenance contract.

(10)  PUPCO is a wholly-owned subsidiary of Trigen.


PRODUCTS AND SERVICES

         During fiscal 1998, the Company operated principally in two industry
segments: (i) energy -- the development, ownership and operation of cogeneration
projects and standby/peak shaving projects through wholly-owned subsidiaries and
limited liability companies; and (ii) equipment sales, rental and service -- the
sale and rental of power generating, cogenerating and standby/peak shaving
equipment and associated services. The Company has determined and previously
announced that its equipment sales, rental and service business is no longer a
part of its strategic plan. On November 5, 1998 the Company sold OES, a
wholly-owned subsidiary of the Company, in a stock transaction to an unrelated
third party. The Company is currently pursuing alternatives for the disposition
of PUMA, which comprises the remaining operations of the equipment sales, rental
and service segment. See Note 18 of the Notes to the Consolidated Financial
Statements for financial information with respect to industry segments.

     ENERGY SEGMENT

         OVERVIEW. Cogeneration involves the sequential production of two or
more forms of usable energy (E.G., electricity and thermal energy) using a
single fuel source, thereby substantially increasing fuel efficiency. The key
elements to the successful development and operation of a cogeneration project
are permit applications, contracts for sales of electricity and thermal energy,
contracts or arrangements for fuel supply and project operation, and project
financing and construction. The Company attempts to design and develop its
projects so that they qualify for the benefits of PURPA, which exempts QFs from
rate, financial and similar utility regulation and requires public utilities to
purchase power generated by these projects. Electricity may be sold to utilities
and end users of electrical power, including large industrial facilities, and
possibly to power marketers. Thermal energy from cogeneration plants may be sold
to commercial enterprises and other institutions. Large industrial users of
thermal energy include plants in the chemical processing, petroleum refining,
food processing, pharmaceutical and paper industries. The Company owns equity
interests in five operating cogeneration projects discussed below -- the Parlin,
Newark, Morris, Pryor and Grays Ferry Projects. Revenues from these projects
collectively accounted for 65.0%, 60.2%, 49.1% and 63.9% of the Company's total
revenues for 1998, 1997, the 1996 transition period and 1996, respectively.


                                       7
<PAGE>

         The Company owns an 83% equity interest in one operating standby/peak
shaving generator project, the PWD Project. Revenues from this project accounted
for 5.6%, 6.5%, 5.2% and 4.2% of the Company's total revenues for 1998, 1997,
the 1996 transition period and 1996, respectively. Large electrical demand
customers use a standby/peak shaving project's power generation equipment as a
back-up source of electricity. The availability of an alternative energy source
allows these customers to benefit from discounted interruptible energy tariffs
from their primary electricity provider. Standby/peak shaving generators
typically are required to be available and be capable of providing a specified
amount of electricity during peak periods within a limited time.

         Each of these projects is currently producing revenues under long-term
contracts. Business interruption insurance and performance guarantees from the
third-party operators have been obtained for the cogeneration projects in
connection with the financing of such projects. These arrangements are
negotiated and closed prior to commencement of project operations. Taken as a
whole, these arrangements reduce the risks associated with any past and future
equipment problems or unscheduled plant shutdowns. For example, in the event of
an unscheduled outage, the Company and any other project owners generally are
entitled, pursuant to its business interruption insurance policy, to the net
profit which it is prevented from earning from the particular project, including
all charges and expenses which continue during the period of interruption, less
the applicable deductible amounts.

         NEWARK PROJECT. The Newark Project is a 58 MW gas-fired combined cycle
cogeneration project located in Newark, New Jersey that utilizes one General
Electric Frame 6B combustion turbine with an air inlet chiller system. The
Newark Project commenced operation in November 1990. CogenAmerica Newark, a
wholly-owned subsidiary of the Company, owns all of the Newark Project. As a QF,
the Newark Project sells up to 58 MW of electric power to JCP&L and provides up
to 75,000 pounds per hour of steam to Newark Boxboard. In September 1998 the
Company completed an upgrade of the electrical and steam production systems and
increased the electrical production capacity from 52 MW to 58 MW. The upgrade
added a mechanical chiller unit to cool inlet air to the combustion turbine
which increased the capacity to supply steam and electricity to Newark Boxboard.
The Newark Project accounted for approximately $17,541 and $17,319 in revenues,
representing approximately 23.7% and 26.7% of the Company's consolidated
revenues, during the years ended December 31, 1998 and 1997, respectively.

         PARLIN PROJECT. The Parlin Project is a 122 MW gas-fired combined cycle
cogeneration project located in Parlin, New Jersey that utilizes two General
Electric Frame 6B turbine generators. The Parlin Project commenced operation in
June 1991. CogenAmerica Parlin, a wholly-owned subsidiary of the Company, owns
all of the Parlin Project. As an EWG, the Parlin Project sells up to 114 MW of
electric power to JCP&L and provides up to 150,000 pounds per hour of steam to
DuPont. In addition, the Parlin Project sells up to 9 MW of power to NPI, a
wholly-owned subsidiary of NRG Energy, which power NPI resells to DuPont. The
Parlin Project accounted for approximately $21,527 and $21,685 in revenues,
representing approximately 29.1% and 33.5% of the Company's consolidated
revenues, during the years ended December 31, 1998 and 1997, respectively.

         MORRIS PROJECT. The Morris Project is a 117 MW gas-fired cogeneration
project located near Morris, Illinois that utilizes three General Electric Frame
6 combustion turbines and three heat recovery steam generators. The Morris
Project commenced operation in November 1998. CogenAmerica Morris LLC, a
wholly-owned subsidiary of CogenAmerica Funding, currently 


                                       8
<PAGE>

owns all of the Morris Project. The Morris Project sells as a QF up to an
average of 78 MW of electric power and up to 720,000 pounds per hour of steam to
Equistar. The Morris Project designed redundancy into the energy production
capability of the facility in order to meet Equistar's steam and electric
demand, and as a result the Morris Project expects that it will be able to make
periodic sales of energy to other customers on a merchant basis.

         In the Morris ESA, Equistar was granted an option to purchase up to 10%
of the Morris Project. In February 1998, Equistar gave notice of its intention
to purchase a 5% membership interest in the Morris Project.
The parties have not finalized an acquisition agreement.

         The Morris Project accounted for approximately $5,779 in
revenues, representing approximately 7.8% of the Company's consolidated
revenues, during the year ended December 31, 1998. The Morris Project commenced
commercial operations in November 1998. The Morris facility experienced two
unscheduled outages in January 1999 which resulted in service and business
interruptions to Equistar. CogenAmerica, Equistar and NRG Energy as provider of
construction management services and operation and maintenance services, are
currently investigating the matter and are examining their respective rights and
obligations with respect to each other and with respect to potentially
responsible third parties, including insurers. CogenAmerica's investigation and
discussions with Equistar are continuing. The company does not believe that
there will be a material adverse impact on the financial statements, however, no
assurance can be given as the ultimate outcome of this matter.

         GRAYS FERRY PROJECT. The Grays Ferry Project is a 150 MW dual-fueled
(natural gas and fuel oil) combined-cycle cogeneration plant located in
Philadelphia, Pennsylvania that commenced operation in January 1998. The Grays
Ferry Partnership owns 100% of the Grays Ferry Project. The Grays Ferry
Partnership is a general partnership that is one-third owned by each of
CogenAmerica Schuylkill, a wholly-owned subsidiary of the Company,
Trigen-Schuylkill Cogeneration Inc., an affiliate of Trigen, and Adwin
(Schuylkill) Cogeneration, Inc., an affiliate of PECO. As a QF, the Grays Ferry
Project sells all of its electric power to PECO and provides all of its steam to
TPEC.

         In March 1998, PECO declared that the Grays Ferry PPAs were ineffective
and ceased paying in full for electricity. The Grays Ferry Partnership
instituted a lawsuit against PECO and obtained a preliminary injunction
requiring PECO to make electricity payments in full while the litigation
proceeds. The Grays Ferry Partnership recorded revenue of approximately $78,126
from PECO in 1998. PECO claims it was not obligated to pay approximately $34,500
of such revenue. The Company has recorded $4,758 of equity in earnings of
affiliates representing its pro rata share of the Grays Ferry Partnership's net
income for the year ended December 31, 1998. On March 9, 1999 the court issued
an order for partial summary judgment in favor of the Grays Ferry Partnership,
ruling that PECO's attempted termination of the Grays Ferry PPA was improper.
See "Business - Risk Factors -- Grays Ferry Litigation/Default" and "Item 3. --
Legal Proceedings."

         PRYOR PROJECT. The Pryor Project is a 110 MW combined cycle facility
located in Pryor, Oklahoma. Oklahoma Loan Acquisition Corporation ("OLAC"), a
wholly-owned subsidiary of the Company, owns 100% of the Pryor Project. The
Company acquired all of the capital stock of OLAC on October 9, 1998 from MCPC,
which was 50% owned by NRG Energy and 50% owned by Decker Energy, International
and associated entities. The facility sells power to OG&E on a dispatchable
basis and steam to a number of industrial users including Georgia-Pacific. The
facility also sells electricity to PSO when not dispatched by OG&E. Subsequent
to the 


                                       9
<PAGE>


acquisition, the Pryor Project accounted for approximately $3,235 in revenues,
representing approximately 4.4% of the Company's consolidated revenues, during
the year ended December 31, 1998.

         PWD PROJECT. The PWD Project comprises two standby peak shaving 
facilities (each of which has a number of gas and diesel generator sets) 
located at the PWD's Northeast and Southwest waste water treatment plants in 
Philadelphia, Pennsylvania. Each facility has a capacity of approximately 11 
MW for an aggregate capacity of 22 MW. The PWD Project's Northeast unit 
commenced operation in May 1993, and its Southwest unit commenced operation 
in September 1993. OPCI sells the short-start-time capacity of the two units 
to the Authority, and the Authority has the right to demand energy from the 
PWD Project at any time on thirty minutes' notice. The biogas portion of each 
unit (approximately 1 MW in each case) operates as a QF, but the standby 
generators do not. The PWD Project accounted for approximately $4,134 and 
$4,206 in revenues, representing approximately 5.6% and 6.5% of the Company's 
consolidated revenues, during the years ended December 31, 1998 and 1997, 
respectively.

         The Company owns substantially all of the assets constituting the PWD
Project except for its principal project agreements, which are held by OPCI. All
of the common stock of OPCI is held by the Company and all of the preferred
stock of OPCI is held by an unrelated third party. The terms of the preferred
stock entitle the preferred stockholder to receive dividends equal to 17% of
OPCI's earnings (as determined in accordance with the terms of the preferred
stock).

     EQUIPMENT SALES, RENTAL AND SERVICE SEGMENT

         In 1998, the Company operated its equipment sales, rental and service
segment principally through two subsidiaries: OES, which, until it was sold in
November 1998, served the United States market; and NRG Generating Limited, a
holding company for a number of subsidiaries that operate in the United Kingdom
under the common name of PUMA. Revenues from this segment accounted for 29.4%,
33.3%, 41.8% and 28.2% of the Company's consolidated revenues for 1998, 1997,
the 1996 transition period and 1996, respectively.

         The Company has determined and previously announced that its equipment
sales, rental and services business is not a part of its strategic plan.
Accordingly, on November 5, 1998 the Company sold OES to an unrelated third
party for $2,000. The Company is currently pursuing several avenues for the
disposition of PUMA, which is not expected to have a material adverse effect on
the Company's financial position or results of operations.

         PUMA designs and assembles diesel and natural gas fueled power
generation systems ranging in size from 5 kilowatts to 5 MW. These products are
engineered and sold for use in prime power base load applications as well as for
standby or main failure emergency situations. Major markets for these products
include commercial buildings, governmental institutions such as schools,
hospitals and public facilities, industrial manufacturing or production plants,
shipyards, the entertainment industry and offshore drilling operations. PUMA
also designs and manufactures custom electrical control and distribution
subsystems. These include medium voltage cubicle switchboards, main distribution
systems, control instrumentation panels and packaged substations. This equipment
receives and distributes power through a building, ship or other self-contained
structure. PUMA exports many of its products primarily through established
distributors and dealers in local areas for delivery to markets such as Europe,
the Far East, including Hong Kong and mainland China, together with the Middle
East and South America. The revenues from the Company's operations in the U.K.
are attributable solely to the equipment sales and services segment of the
Company's business. The revenues from such operations accounted for 63% of 


                                       10
<PAGE>


that particular segment's revenue in 1998. See Note 18 of the Notes to the
audited Consolidated Financial Statements for financial information with respect
to the Company's domestic and foreign operations.

PROJECT DEVELOPMENT ACTIVITIES

   GENERAL

         The Company, its subsidiaries and affiliates develop, own and manage
the operation of power projects which produce electricity and/or thermal energy
for sale to industrial and commercial users and to public utilities. The Company
follows a disciplined and focused approach to its development efforts.
Specifically, the Company focuses its development activities on both the
acquisition of operating cogeneration and power generation facilities and the
development of greenfield inside-the-fence cogeneration projects.

         In pursuing new opportunities, the Company plans to adhere to the
following stringent selection criteria:

         PROFITABILITY. The Company does not plan to pursue new greenfield
projects or acquisitions merely for the sake of growth, but rather seeks to grow
with the addition of profitable projects.

         MID-SIZE PROJECTS. The Company plans to focus on middle market size
projects.

         DOMESTIC FOCUS. The Company intends to seek opportunities for the
foreseeable future exclusively in the U.S., thus avoiding any exposure to
foreign political and currency exchange rate risk.

         MANAGEMENT INPUT AND CONTROL. The Company seeks to have sole ownership
of future projects. However, to the extent that a potential partner offers
complementary skills and resources, the Company will consider partnering with
such a firm, provided that the Company has significant managerial and strategic
input. The Company does not plan to pursue purely passive minority stakes.

         LONG-TERM CONTRACTS. The Company seeks to develop projects that include
medium to long-term off-take contracts with creditworthy commercial or
industrial offtakers.

         FUEL RISK. The Company attempts to structure off-take contracts for
new projects to avoid the risk of fluctuations in fuel prices.

         In addition to its internal project development efforts, the Company is
party to the Co-Investment Agreement with NRG Energy. Pursuant to this
agreement, NRG Energy has agreed to offer to the Company the opportunity to
acquire ownership interests in certain power projects initially developed by NRG
Energy or with respect to which NRG Energy has entered into a binding
acquisition agreement with a third party. The Company continues to believe this
Agreement will not serve as the primary source of future project development
activities. However, NRG Energy continues to express its commitment to support
the business development activities of the Company. See "Business -- Project
Development Activities -- Co-Investment Agreement with NRG Energy."


                                       11
<PAGE>


    POTENTIAL PROJECTS

         The Company from time to time identifies and considers potential
opportunities to develop additional projects as well as to acquire projects in
operation or under development that are owned by third parties.

         As a project developer, the Company is responsible for the evaluation,
design, installation and operation of a project. The Company also assumes the
responsibility for evaluating project alternatives, obtaining financing,
insurance and all necessary licenses, permits and certifications, conducting
contract negotiations with offtakers, and arranging turnkey construction. In
connection with obtaining financing, the Company may negotiate for credit
support facilities with equipment suppliers, turnkey construction firms and
financial institutions.

         The Company anticipates that in the ordinary course of its business it
will investigate and/or pursue opportunities with respect to various potential
projects which will not be completed. Moreover, in certain instances the Company
may not generate any revenue from such projects and may not be able to recover
its investment in such projects, each of which could have a material adverse
effect on the Company.

    CO-INVESTMENT AGREEMENT WITH NRG ENERGY

         Pursuant to the Co-Investment Agreement, NRG Energy has agreed to offer
to the Company ownership interests in certain power projects which were
initially developed by NRG Energy or with respect to which NRG Energy has
entered into a binding acquisition agreement with a third party. If any eligible
project reaches certain contract milestones (which include the execution of a
binding PPA and fuel supply agreement and the completion of a feasibility and
engineering study) by April 30, 2003, NRG Energy has agreed to offer to sell to
the Company all of NRG Energy's ownership interest in such project. Eligible
projects include, with certain exceptions and exclusions, proposed or existing
electric power plants within the U.S. which NRG Energy initially develops or in
which NRG Energy proposes to acquire an ownership interest. NRG Energy is
obligated under the Co-Investment Agreement to offer to the Company, during the
three-year period ending on April 30, 1999, projects with an aggregate equity
value of at least $60,000 or a minimum of 150 net MW. As of the date hereof,
ownership interests in projects with an aggregate of more than 240 net MW have
been offered under the Co-Investment Agreement, including the 117 MW Morris
Project and the 110 MW Pryor Project.

         Among the exclusions from the Co-Investment Agreement are (i) any
ownership interest in a project which is below a level that would cause the
project (or its owners) to be in violation of the relevant PPA or applicable
state or federal law upon the generation of electricity for sale by such
project, (ii) any indirect ownership interest held by NRG Energy in an eligible
project arising from NRG Energy's direct or indirect ownership of equity
interests in the Company, (iii) any ownership interest in a facility below 25 MW
in capacity, and (iv) any ownership interest that is retained in order to later
be sold in an "exempt transaction." Exempt transactions include (i) any sale or
disposition of all or a portion of an ownership interest that is consummated as
a result of a foreclosure or conveyance in lieu of foreclosure of liens or
security interests (other than by NRG Energy) encumbering the eligible project
or such ownership interest, (ii) any sale or disposition of an ownership
interest to a third party that is or will become a participant in the eligible
project (such as a local or industry investor, a financial institution or a fuel
or equipment supplier), provided that the obligation to sell the interest is
incidental to the provision of services or the contribution of assets to the
eligible project and is created prior to the execution and 


                                       12
<PAGE>

delivery of a binding PPA and fuel supply agreement and the completion of an
engineering and feasibility study with respect to the project, and (iii) any
sale or disposition of an ownership interest to another person as part of a
larger transaction involving the sale of all or substantially all of the assets
of NRG Energy or the sale of an equity interest in NRG Energy, provided that the
person acquiring the ownership interest agrees to be bound by the Co-Investment
Agreement with respect to such ownership interest (if such ownership interest
has not previously been offered for sale to CogenAmerica pursuant to the
Co-Investment Agreement). In January 1998, the Company initiated an arbitration
proceeding pursuant to the terms of the Co-Investment Agreement to resolve a
dispute with NRG Energy concerning the rights and obligations of the Company and
NRG Energy with respect to the Pryor Project. The arbitration proceeding was
resolved in favor of the Company and the Company closed on its acquisition of
the project on October 9, 1998.

         NRG Energy has agreed to finance the Company's purchase of ownership
interests that may be offered pursuant to its Co-Investment Agreement at
commercially competitive terms to the extent funds are unavailable to the
Company on comparable terms from other sources. The Co-Investment Agreement
requires any such financing to be recourse to the Company and secured by a lien
on the ownership interest acquired. The Company is required to repay such
financing from the net proceeds of any offerings of equity or debt securities of
the Company (when market conditions permit such offerings to be made on
favorable terms) after taking into account the working capital and other cash
requirements of the Company, as determined by its Board of Directors.

REGULATION OF THE COMPANY'S PROJECTS

         In connection with the development and operation of its projects, the
Company is significantly affected by federal, state and local energy laws and
regulations.

   SIGNIFICANCE OF QF STATUS

         With the exception of the Parlin Project and part of the PWD Project,
all of the Company's existing electric generating facilities are QFs. Under
PURPA, QFs receive certain regulatory and economic benefits. Specifically, the
owners of QFs generally receive exemption from the application of PUHCA, rate
and other utility regulation under the Federal Power Act, and state laws
concerning the rates and the financial and organizational regulation of electric
utilities. In addition, PURPA obligates utilities to purchase power offered by
QFs at an individual utility's "incremental cost of alternative electric
energy," which is sometimes referred to as the "avoided cost standard" and which
is defined as the cost that the utility avoids by not generating the power
itself or purchasing it from another source.

         In order to maintain QF status, a generating project must meet certain
technological criteria. QFs are required to generate sequentially electricity
and thermal energy (generally in the form of steam) under standards prescribed
by the FERC. As part of this requirement, every QF is required under FERC
regulations to meet certain standards on a calendar year basis relating to the
facility's overall thermal efficiency (i.e., conversion of the energy content of
fuel into useful electricity and steam) and relative production of electricity
versus steam. These standards are referred to collectively as the "operating and
efficiency standards."

         QFs that are qualifying small power production facilities are required
to produce a certain amount of their electric power using biomass, waste,
renewable resources or geothermal resources as their primary energy source and
are generally subject to size restrictions.


                                       13
<PAGE>


         In addition to the technological requirements for QF status, under FERC
regulations no more than 50% of the attributable equity interest in a QF may be
owned by an electric utility.

         The failure of a QF to meet any of the requirements for QF status can
result in material adverse consequences to the owner of the facility. Under FERC
precedent, for any calendar year in which a QF fails to meet the applicable
requirements for QF status, the owner of the facility is required to refund to
any utility purchasing power from the facility the difference between the
contracted rate for sales of power and the utility's hourly incremental cost of
electric energy during the year in question. In addition, contracts for the
purchase of power from QFs (including some power purchase contracts for the
Company's facilities) frequently provide for termination of the contract or
other adverse consequences in the event that the facility is not continuously
maintained as a QF. Finally, in the event that a QF is permanently unable to
meet the criteria for QF status it risks the loss of all of its regulatory
exemptions, most notably the exemption from PUHCA. See "Business -- Risk Factors
-- Loss of QF Status" and "-- Risks Associated with Becoming a Holding Company
under PUHCA."

   SIGNIFICANCE OF EWG STATUS

         One alternative to QF status is for the owner of a generating project
to become an EWG. PUHCA, as amended by the Energy Policy Act of 1992, defines an
EWG as a person determined by the FERC to be "engaged directly (or indirectly)
and exclusively in the business of ...selling electric energy at wholesale" and
meetinG certain other criteria. An EWG is completely exempt from PUHCA, and all
companies are free to acquire EWGs without restrictions. Moreover EWGs are
permitted to own QFs. The Company has elected to obtain EWG status for its
Parlin Project.

         Because the Parlin Project is not a QF, CogenAmerica Parlin is not
exempt from wholesale rate regulation and has therefore filed rates with the
FERC as a public utility under the Federal Power Act. In the event that
CogenAmerica Parlin lost EWG status, the Company would suffer material adverse
consequences under PUHCA. See "Business -- Risk Factors -- Risks Associated with
Becoming a Holding Company under PUHCA."

   SPECIAL STATUS OF PWD PROJECT

         The PWD Project consists of two identical generation facilities located
at separate but proximate sites, each facility consisting of approximately 1 MW
of biogas-fired generating equipment and 10 MW of natural gas-fired generating
equipment. The owner of the principal project agreements of the PWD Project,
OPCI, sells all power produced by the biogas-fired units to a retail customer,
the Authority. In addition, OPCI is obligated to provide the Authority with 20
MW of standby power from the natural gas fired generating units upon thirty
minutes' notice.

         The biogas-fired generating units collectively constitute a QF.
However, the standby natural gas-fired generation units included within the PWD
Project are not part of the PWD QF and therefore do not carry with them any of
the regulatory exemptions that otherwise accompany QF status. Nevertheless, the
Company believes that the ownership of the natural gas-fired generating units by
OPCI does not make it an "electric utility company" under PUHCA, by virtue of 17
CFR 250 of the SEC's regulations. See "Business -- Risk Factors -- Risks
Associated witH Becoming a Holding Company under PUHCA."


                                       14
<PAGE>


ENVIRONMENTAL LAW AND REGULATIONS

         In addition to the regulations described above, the Company and its
projects are subject to a number of comprehensive environmental laws and
regulations, affecting both present and future operations. The laws and
regulations applicable to the Company primarily relate to the discharge of
emissions into the water and air, but can also include wetlands preservation,
waste disposal and noise abatement. Frequently, these laws and regulations
require a lengthy and complex process of obtaining licenses, permits and
approvals from federal, state and local agencies as well as ongoing reporting
and compliance obligations. Compliance may require modification of a project
which may increase its cost, extend its completion date or otherwise adversely
affect a project before or after its completion. Additional or modified
licenses, permits and approvals may be required for any physical or operational
changes to the Company's facilities. For some conditions, environmental laws
also may impose cleanup or other remediation obligations. In many instances,
state laws impose requirements on the Company that are similar to, and in some
cases more stringent than, the requirements under federal law. Noncompliance
with environmental laws and regulations can result in the imposition of civil or
criminal fines or penalties. The current environmental requirements under which
the Company's projects operate are subject to amendment, and the Company cannot
predict what effect compliance with such amendments may have on the Company's
business or operations.

         As discussed below, the Company believes its facilities are in
substantial compliance with applicable environmental requirements. To date,
compliance with these environmental regulations has not had a material effect on
the Company's earnings and has not required the Company to expend significant
capital.

         In the future, the environmental requirements likely to have the
greatest impact on the Company's business and operations are the air quality
emission limitations under the Clean Air Act. As originally enacted, the Clean
Air Act set guidelines for emission standards for major pollutants (e.g., sulfur
dioxide and NOx) from newly constructed stationary sources. The Clean Air Act
provides for the regulation, largely through state implementation of federal
requirements, of emissions of regulated substances from certain facilities and
operations, including an obligation to obtain preconstruction and operating
permits for sources of certain air emissions. Each state in which the Company's
plants are located implements the requirements of the Clean Air Act through its
own state air pollution control statute and implementing regulations. For
example, the requirements of the Clean Air Act are implemented in New Jersey
through the New Jersey State Air Pollution Act, in Pennsylvania through the
Pennsylvania Air Pollution Control Act, in Illinois through the Illinois
Environmental Protection Act, and in Oklahoma through the Oklahoma Clean Air
Act. Each of the states implements these requirements through regulations
promulgated by the EPA and the respective state agencies.

         In November 1990, significant amendments to the Clean Air Act were
adopted by Congress. The 1990 Amendments attempt to reduce emissions from
existing sources, particularly previously exempted older power plants. Although
the EPA is still implementing the requirements mandated by the 1990 Amendments,
the Company believes that air quality regulations in the U.S. will become even
more stringent. Currently, the Company believes that all of the Company's
operating plants are in compliance in all material respects with applicable
federal and state performance standards under the Clean Air Act, the 1990
Amendments and the state statutory and regulatory air quality requirements of
the states in which they are located.

         The 1990 Amendments require the EPA to establish technology-based
emission standards 


                                       15
<PAGE>

for hazardous air pollutants. "Electric utility steam generating units" greater
than 25 MW have been excluded from regulation pending completion of an EPA study
of hazardous air pollutant emissions from these units to determine whether such
regulation is "appropriate and necessary." The final report, issued in February
1998, concluded that regulation of hazardous air pollutant emissions from those
units is not necessary with a few possible exceptions. The EPA has decided to
conduct further studies of certain utility emissions and will determine at a
later date whether regulation of those emissions is appropriate. The EPA plans
to issue hazardous air pollutant regulations for combustion sources not included
within the scope of the EPA's electric utility study by November 2000. Depending
on whether they are finalized, these regulations may require the Company to
install additional emission control technology.

         With the exception of the Pryor Project in Oklahoma, each of the
Company's projects are located in an area which does not attain the National
Ambient Air Quality Standard for ozone. Accordingly, these projects will be
subject to stringent preconstruction review requirements if they undertake
"major modifications" to their facilities and they may face more stringent
emissions limitations on NOx, a precursor to ozone formation, than facilities
that are located in areas attaining the ozone standard. Other requirements apply
to "major modifications" to the Pryor Project, as this project is located in an
area which meets the National Ambient Air Quality Standards.

         Additionally, the EPA and several states are in the process of
developing more stringent emission limitations to control ground-level ozone
across the entire eastern U.S. that may ultimately affect all of the Company's
projects. In November 1997, the EPA proposed a rule that would require 22 states
in the eastern U.S., including Illinois, New Jersey and Pennsylvania, to make
substantial reductions in NOx emissions. If finalized as proposed, this rule
potentially could result in the adoption of new NOx emission standards by the
affected states. If more stringent NOx standards are adopted by states in which
the Company has facilities, the Company could be required to install additional
NOx emission control technology at such facilities. In addition, the EPA
recently lowered the current National Ambient Air Quality Standards for
ground-level ozone and particulate matter, and these new standards will be
implemented by the states over the next several years. To comply with the new
standards, additional control technology requirements may be required at the
Company's existing facilities. The Company does not believe that the effect of
any such additional requirements, if implemented, would have a material adverse
effect on its financial condition or operations.

         Section 112(r) of the Clean Air Act requires facilities in certain
industries, including electricity generation, to prepare and submit a Risk
Management Plan to the EPA which examines certain release scenarios and provides
for the public review of this information. The New Jersey Toxic Catastrophe
Prevention Act ("TCPA") requires owners of facilities that use an
"extraordinarily hazardous substance" to prepare a comprehensive risk management
plan covering their use of such substances. The Company's Parlin and Newark
Project facilities in New Jersey are subject to these requirements because
anhydrous ammonia is used in the air pollution control systems operating at the
facility. The TCPA requirements are more stringent than the federal
requirements. Although Illinois does not currently have a state program similar
to the TCPA applicable to the electricity generation industry, the state is
currently developing a program with similar requirements. Pennsylvania does not
currently have a similar state program requiring risk management plans for
electricity generating units. The Company believes that it is in material
compliance with the Clean Air Act and TCPA requirements concerning risk
management programs.


                                       16
<PAGE>


         In addition to the regulations described above, the 1990 Amendments
established the North East Ozone Transport Region, which required northeastern
states, including New Jersey and Pennsylvania, to work together to determine
whether to adopt more stringent controls on the pollutants that contribute to
the formation of low-level ozone (i.e., volatile organic compounds and NOx).
Pursuant to a September 27, 1994 Memorandum of Understanding between the member
states of the North East Ozone Transport Region, New Jersey and Pennsylvania
have each proposed regulations to implement a region-wide budget for NOx
emissions. While some of the Company's operating plants will be subject to this
new rule (as presently drafted), and thus subject to stricter emission
limitations, the Company believes that the new rules will not have a material
impact on its ability to maintain its present level of operations.

         The Federal Clean Water Act (the "Clean Water Act"), the New Jersey
Water Pollution Control Act (the "Water Pollution Control Act"), the
Pennsylvania Clean Streams Law ("the Clean Streams Law"), the Illinois
Environmental Protection Act ("the Illinois Environmental Protection Act"), and
other water quality laws and regulations in other states establish rules
regulating the discharge of pollutants into surface and ground waters.
Typically, these water quality laws establish requirements for municipally-owned
sewage treatment plants, including pretreatment requirements for industrial
users of those plants. Each local municipal sewage authority has established
regulations governing connections to and discharges into its sewer system and
treatment plants. In accordance with these regulations, the Company is required
to obtain permits for the discharge of its wastewater and storm water runoff.
The Company believes that it is in substantial compliance with applicable
discharge requirements under the Clean Water Act, the Water Pollution Control
Act, the Clean Streams Law, the Illinois Environmental Protection Act, and other
State water quality regulations.

         The Resource Conservation and Recovery Act ("RCRA") regulates the
generation, treatment, storage, handling, transportation and disposal of solid
and hazardous wastes. The Company generates certain non-hazardous and hazardous
wastes that are subject to the requirements of RCRA and similar state statutes.
The Company believes that it is in substantial compliance with both the RCRA and
the similar state statutes.

         The Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA" or "Superfund"), requires cleanup of sites
from which there has been a release or threatened release of hazardous
substances. CERCLA authorizes the EPA and certain other parties to take any
necessary response action at Superfund sites, including ordering potentially
responsible parties ("PRPs") that are liable for the release to take or pay for
such actions. PRPs are broadly defined under CERCLA to include past and present
owners and operators of, as well as generators of wastes sent to, a site.

         In addition, the New Jersey Spill Act ("Spill Act"), the Pennsylvania
Hazardous Site Cleanup Act ("Site Cleanup Act"), and the Illinois Environmental
Protection Act, and other state laws and regulations, like many other state
superfund laws, impose similar liability under state law for discharges of
hazardous substances (including petroleum products) and, under certain
circumstances, authorizes the collection of treble damages from a responsible
party. Similar to CERCLA, PRPs are broadly defined to include owners and
operators of the facility where the discharge occurred, the owners of the
hazardous substance that is discharged, or anyone who has caused or allowed the
discharge to occur. As of the present time, the Company is not subject to
liability for any Superfund or other state superfund matters. However, the
Company generates certain wastes, including hazardous wastes, and sends certain
of its wastes to third-party waste 


                                       17
<PAGE>

disposal sites. As a result, there can be no assurance that the Company will not
incur liability under CERCLA, the Spill Act, the Site Cleanup Act, the Illinois
Environmental Protection Act, or other state statutes in the future.

         State laws and regulations also requires facilities that store
significant quantities of petroleum products or other hazardous substances to
prepare detailed discharge prevention containment and countermeasure plans and
discharge cleanup and removal plans. The Company believes that it is in
substantial compliance with these requirements with respect to its plants.

COMPETITION

         Many organizations, including equipment manufacturers and subsidiaries
of utilities and contractors, as well as other organizations similar to the
Company, have entered the cogeneration market. Many of these organizations have
substantially greater resources than the Company. In addition, obtaining power
contracts with utilities has become more competitive with the increased use of
competitive bidding procedures and the movement towards deregulation of the
electricity energy market. This increased competition may make it more difficult
for the Company to secure future projects, may increase project development
costs and may reduce the Company's operating margins. In addition, increased
competition is leading to the development of a market for merchant plants.
Merchant plants are power generation facilities that sell all or a portion of
their electricity into the competitive market rather than pursuant to long-term
power sales agreements. The operation of a merchant plant is essentially
participation in a commodity market, which creates certain risk exposures,
including, among other things, underlying price volatility, credit risk and
variation in cash flows. Even though many of its potential competitors have
substantially greater resources than the Company, management believes that its
experience, particularly if combined with a strategic alliance with a third
party with regard to larger projects, will enable it to compete effectively.

PRINCIPAL CUSTOMER

         The Company derived 50%, 57%, 46% and 62% of its revenues in 1998,
1997, the 1996 transition period and 1996, respectively, from JCP&L as a result
of the operation of the Newark and Parlin facilities.

         Approximately 53% and 60% of the Company's revenues during 1998 and
1997, respectively, were derived from the operations of the Parlin and Newark
Projects. JCP&L buys substantially all of the power from these projects. For at
least the near-term, the Company will continue to be substantially dependent on
the operations of these projects. A material decrease in the results of
operations for such projects would likely have a material adverse effect on the
Company's results of operations and financial condition. The success of the
Company will continue to depend in part on its ability to diversify its project
portfolio. There can be no assurance that the Company will be successful in its
diversification efforts.

EMPLOYEES

         As of December 31, 1998, the Company had approximately 90 full-time
employees, including 33 in the energy business and approximately 57 in its
equipment, sales and services business.


                                       18


<PAGE>


BACKLOG

         Total production backlog relating to the Company's equipment sales and
services business was $4,054 and $3,900 at December 31, 1998 and 1997,
respectively.

INTELLECTUAL PROPERTY

         The Company and its subsidiaries do not own any patents or trademarks,
but the Company uses the trade name "CogenAmerica." It has applied for federal
trademark registration of its full name and its logo (which includes this trade
name).

RISK FACTORS

     INFLUENCE BY NRG ENERGY

         NRG Energy owns approximately 45.2% of the Company's outstanding Common
Stock. Five of the Company's eight directors are executive officers of NRG
Energy. NRG Energy is a major domestic and international developer of
independent power projects. As a result, persons who simultaneously serve as
directors or executive officers of the Company and as directors or executive
officers of NRG Energy may be subject to conflicts of interest with respect to
business opportunities or other investments which may be of interest to both NRG
Energy and the Company. While the Company's Amended and Restated Articles of
Incorporation impose supermajority requirements in certain circumstances, and
while the Independent Directors Committee of the Board of Directors (the
"Independent Directors' Committee") has exclusive jurisdiction over the
Company's contractual relations and other material transactions with NRG Energy
(including under the Co-Investment Agreement), NRG Energy's share ownership may
permit it effectively to substantially influence the outcome of matters which
may be submitted to a vote of the shareholders, including the election of
directors of the Company (other than the members of the Independent Directors
Committee, who are nominated by the Independent Directors' Committee rather than
by the Board of Directors). NRG Energy also may exert significant influence over
the Company's business and affairs through its representation on the Board of
Directors and its other relationships with the Company, including the
Co-Investment Agreement. See "Business -- Project Development Activities --
Co-Investment Agreement with NRG Energy." A subsidiary of NRG Energy also serves
as the operator of the Company's Parlin and Newark Projects, and another
subsidiary of NRG Energy is serving as the operator of the Company's Morris
Project. A subsidiary of NRG Energy also purchases power from the Parlin Project
and sells such power to DuPont. NRG Energy, in its business relationships with
the Company and in its role as a shareholder of the Company, may have interests
which conflict with those of the Company and the other stockholders of the
Company under certain circumstances.

     SUBSTANTIAL LEVERAGE

         As of December 31, 1998, the Company had approximately $285,096 of
long-term debt, including approximately $219,683 of subsidiary-level
indebtedness. The Company may also incur additional indebtedness in the future.
Accordingly, the Company has significant debt service obligations. The extent of
the Company's leverage may have important consequences for the Company and its
shareholders, including, but not limited to, the following: (i) the ability of
the Company to obtain additional financing for acquisitions, working capital,
capital expenditures or other purposes, if necessary, may be impaired or such
financing may not be available on terms acceptable to the Company; (ii) a
substantial portion of the Company's cash flow will be used to 


                                       19
<PAGE>

pay the Company's interest expense and under certain conditions to repay
indebtedness, which will reduce the funds that would otherwise be available to
the Company for its operations and future business opportunities; (iii) a
substantial decrease in net operating cash flows or an increase in expenses of
the Company could make it difficult for the Company to meet its debt service
obligations and force it to modify its operations; (iv) the Company may be more
highly leveraged than its competitors, which may place it at a competitive
disadvantage; and (v) the Company's high degree of leverage may limit its
flexibility to react to changes in its operating environment or economic
conditions, making it more vulnerable to a downturn in its business or the
economy generally.

     ENERGY PRICE FLUCTUATIONS AND FUEL SUPPLY COSTS

         The Company's PPAs with utilities have typically contained, and may in
the future contain, price provisions which in part are linked to the utilities'
cost of generating electricity. In addition, the Company's fuel supply prices,
with respect to future projects, may be fixed in some cases or may be linked to
fluctuations in energy prices. These circumstances can result, and have
resulted, in volatility in gross margins and reduced operating income, either of
which could have a material adverse effect on the Company's financial position
or results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Results of Operations -- Comparison of
the year ended December 31, 1998, 1997 the 1996 TransitioN Period and 1996 --
Costs and Expenses."

     SEASONALITY

         The Company's quarterly operating results have varied in the past and
may vary significantly in the future depending on many factors, including among
others: unusual weather conditions in the areas served by the Company's
projects, routine or unanticipated maintenance that may require an outage and
general economic conditions. Further, the Company's operating results have been,
and are expected to continue to be, highly sensitive to seasonal variations. The
Company's operations have historically been seasonal in nature with a
disproportionate percentage of revenues and earnings recorded in the Company's
first and third quarters, the winter and summer seasons. Based upon all of the
foregoing factors, the Company believes that its revenues, expenses and
operating results are likely to vary significantly from quarter to quarter in
the future, that period-to-period comparisons of its results of operations may
not be meaningful and that, in any event, such comparisons should not be relied
upon as indications of future performance.

     PROJECT DEVELOPMENT AND CONSTRUCTION RISKS

         The projects that the Company develops are generally large and complex
and require months or years to complete. Among the principal objectives involved
in developing projects are the selection of a site, obtaining commitments from
others to purchase electrical power and steam, negotiating fuel supply
arrangements, obtaining environmental and other governmental permits and
approvals, and arranging project financing and turnkey construction. These
objectives are subject to a host of uncertainties which in many instances cannot
be anticipated. Moreover, these objectives often are achieved independently of
one another, and success in achieving one objective does not necessarily
increase the likelihood of achieving others. There can be no assurance that the
Company will be able to obtain satisfactory projects from its own development
efforts, under the Co-Investment Agreement or from other sources, and
satisfactory project agreements, construction contracts, necessary licenses and
permits or satisfactory financing commitments in respect of such projects, or
that any projects will ultimately be completed. The Company may from time to
time 


                                       20
<PAGE>

devote substantial resources to the pursuit of competitively bid projects that
it is not awarded or projects that ultimately prove to be undesirable
investments. If its development efforts are not successful, the Company may
abandon a project under development. At the time of abandonment, the Company
would expense all capitalized development costs incurred in connection with the
project and could incur additional losses associated with any related contingent
liabilities. Such losses could have a material adverse effect on the Company's
results of operations and financial position.

         The construction, expansion or refurbishment of a cogeneration facility
also involves many risks, including supply interruptions, work stoppages, labor
disputes, weather interferences, unforeseen engineering, environmental and
geological problems and unanticipated cost overruns and start-up problems,
including the breakdown or failure of equipment or processes and performance
below expected levels of output or efficiency. Such risks may result in reduced
revenues or increased expenses and may cause the Company to incur other
unrecovered costs. Moreover, most PPAs permit the purchaser to terminate the
agreement or impose penalties if the commercial operation of the project is not
achieved by a specified date. As a result, any material unremedied delay in, or
unsatisfactory completion of, construction of the Company's projects could have
a material adverse effect on the Company's business or financial condition.
Insurance is maintained to protect against certain of these construction and
start-up risks, warranties are generally obtained for limited periods relating
to the construction of a new plant and its equipment to varying degrees, and
contracts and equipment suppliers are obligated to meet certain performance
levels. Such insurance, warranties or performance guarantees may not be adequate
to cover lost revenues or increased expenses and, as a result, a project may be
unable to fund principal and interest payments under its financing obligations
(if any) and may operate at a loss. A default under such a financing obligation
could result in the Company losing its interest in any such new cogeneration
facility and could have other material adverse effects on the Company's
financial condition or results of operations. This could occur if, for example,
any such default were to result in defaults under other material contracts or
financing obligations of the Company.

     GENERAL OPERATING UNCERTAINTIES

         The operation of a power plant involves many risks, including the
breakdown or failure of power generation equipment, pipelines, transmission
lines or other equipment or processes, fuel interruption, and performance below
expected levels of output or efficiency. Moreover, new plants have no operating
history and may employ recently developed and technologically complex equipment.
Each facility may depend on a single or limited number of entities to purchase
electricity or thermal energy, to supply water, to supply fuel, to transport
fuel, to dispose of wastes or to transport or "wheel" electricity. The failure
of any such power purchaser, steam host, water or fuel supplier, fuel
transporter, wheeling utility or other relevant project participant to fulfill
its contractual obligations, or the occurrence of other unforeseen construction,
start-up or operating difficulties, could have a material adverse effect on the
profitability of the project and on the Company. The foregoing operating risks
may result in lost revenues or increased expenses, including higher maintenance
costs and penalties. Ultimately, the foregoing operating uncertainties can cause
a facility to be unable to perform its obligations under its power and steam
purchase agreements, triggering default provisions in financing agreements which
could render the project insolvent and which could have a material adverse
effect on the ability of the Company to service its debt.


                                       21
<PAGE>


     RISKS INVOLVED IN MAKING MINORITY INVESTMENTS IN PROJECTS

         The Company currently conducts its business primarily through direct
and indirect wholly-owned or majority-owned subsidiaries. However, one of the
Company's current project investments, the Grays Ferry Project, consists of a
minority ownership interest in a project entity, which is operated by one of the
Company's partners. Moreover, future investments in projects may also take the
form of minority interests. The Company's ability to control the development,
construction, acquisition or operation of such projects may be limited. The
Company may be dependent on its co-investors to construct and/or to operate such
projects. There can be no assurance that such co-investors will have the same
level of experience, technical expertise, human resources management and other
attributes as the Company. Any such co-investor may have conflicts of interests,
including those relating to its status as a provider of goods or services to, or
a purchaser of power or other services from, the project. The approval of its
co-investors also may be required for distributions of funds from projects to
the Company.

     DEPENDENCE ON CERTAIN CUSTOMERS AND PROJECTS

         All of the Company's energy segment earnings are derived from six
projects. The Company's projects (including projects in which it may make
minority investments) typically rely on a single customer or a few customers to
purchase all or substantially all of a facility's output, in each case under
long-term agreements that provide the support for any project debt used to
finance such facilities. The failure of any one customer to fulfill its
contractual obligations to a facility could have a material adverse effect on
such facility's financial results and on the Company. As a result, the financial
performance of such facilities is dependent on continued performance by
customers of their obligations under such long-term agreements. Regulatory
developments, including deregulation and industry restructuring activity, may
cause major customers to attempt to renegotiate contracts or otherwise fail to
perform their contractual obligations. In addition, major customers may attempt
to renegotiate contracts or otherwise fail to perform their contractual
obligations if changes in current economic conditions make the terms of such
contracts less favorable to such customers. The occurrence of one or more of
these events could adversely affect the Company's results of operations and
financial condition.

     COMPETITION

         Many organizations, including equipment manufacturers and subsidiaries
of utilities and contractors, as well as other organizations similar to the
Company, have entered the market for the development, ownership and operation of
cogeneration projects. Many of these companies have substantially greater
resources and/or access to the capital required to fund such activities than the
Company. In addition, obtaining power contracts with utilities has become more
competitive with the increased use of competitive bidding procedures and
short-term electric purchases through power marketers and the acceleration of
deregulation in the electric utility market. This increased competition may
adversely affect the Company's ability to secure future projects and
project-level financing, increase project development costs and reduce the
Company's operating margins and returns on any future project investments. Any
such developments could have a material adverse effect on the Company's results
of operations and financial condition. See "Business -- Competition."

     LOSS OF QF STATUS

         With the exception of the Parlin Project and part of the PWD Project,
all of the Company's 


                                       22
<PAGE>

existing electric generating facilities are QFs. In order to maintain QF status,
a generating project must meet certain technological criteria. QFs that are
qualifying cogeneration facilities are required to generate sequentially
electricity and thermal energy (generally in the form of steam) under standards
prescribed by the FERC. As part of this requirement, every QF is required under
FERC regulations to meet certain standards on a calendar year basis relating to
the facility's overall thermal efficiency (i.e., conversion of the energy
content of fuel into useful electricity and steam) and relative production of
electricity versus steam. Accordingly, it is critical for QFs to have steam
sales contracts that require the purchaser to accept amounts of steam which
allow the facility to meet the requisite operating and efficiency standards.
Cessations or material reductions in steam purchases from a cogeneration
facility carry the risk that the facility will fail to meet the FERC's operating
and efficiency standards, resulting in a loss of QF status. Similarly, for QFs a
critical factor in maintaining QF status is the use of enough biomass, waste,
renewable resources or geothermal resources (rather than supplementary fossil
fuels) to meet the requirements of the FERC's regulations concerning primary
energy source.

         The failure of a QF to meet any of the requirements for QF status can
result in material adverse consequences to the owner of the facility. Under
FERC, for any calendar year in which a QF fails to meet the applicable
requirements for QF status, the owner of the facility is required to refund to
any utility purchasing power from the facility the difference between the
contracted rate for sales of power and the utility's hourly incremental cost of
electric energy during the year in question. In addition, contracts for the
purchase of power from QFs (including some power purchase contracts for the
Company's facilities) frequently provide for termination of the contract or
other adverse consequences in the event that the facility is not continuously
maintained as a QF. Finally, in the event that a QF is permanently unable to
meet the criteria for QF status it risks the loss of all of its regulatory
exemptions, most notably the exemption from PUHCA, as discussed below. See
"Business -- Regulation of the Company's Projects -- Significance of QF Status."

     RISKS ASSOCIATED WITH BECOMING A HOLDING COMPANY UNDER PUHCA

         In the event that the Company becomes a "holding company" under PUHCA,
the Company would suffer material adverse consequences. The following situations
would cause the Company to become a holding company under PUHCA: (i) the loss of
QF status for one of the Company's generating projects, which would cause the
subsidiary owning the project to become an "electric utility company" under
PUHCA; (ii) the loss of EWG status for CogenAmerica Parlin, which would also
cause such subsidiary to become an electric utility company under PUHCA; and
(iii) the loss of OPCI's exemption under 17 CFR ss. 250.7(a) of the SEC's
regulations, which would result in OPCI becoming aN electric utility company
under PUHCA. See "Business -- Regulation of the Company's Projects --
Significance of QF Status," "-- Significance of EWG Status" and "-- Special
Status of PWD Project."

         One of the requirements under the FERC's regulations for determining QF
status of a project is that utility ownership be limited to 50% of the equity
interest in the project. Thus, because all of the QFs in which the Company has
an ownership interest are either: (i) more than 50% owned by the Company, or
(ii) partially owned by a utility whose ownership interest together with the
Company's interest exceeds 50%, if the Company became a holding company under
PUHCA the QF status of all of the Company's QF projects could automatically be
lost, at least temporarily. The loss of QF status for these projects could
trigger refund obligations and power sales contract terminations, as described
above, and ultimately could require portions of 


                                       23
<PAGE>

the projects to be divested in order for QF status to be regained. Other
consequences of the Company becoming a holding company under PUHCA are difficult
to predict but could ultimately include a requirement that the Company divest
itself completely of certain of its generating projects and a requirement that
NRG Energy, the owner of 45.2% of the Company's stock, divest itself of its
interest in the Company.

     RESTRUCTURING OF THE ELECTRIC UTILITY INDUSTRY

         The U.S. Congress is considering legislation to repeal PURPA entirely,
or at least to repeal the obligation of utilities to purchase from QFs
thereunder. There is support for grandfathering QF contracts if such legislation
is enacted, and also support for requiring utilities to conduct competitive
bidding for new electric generation if the PURPA purchase obligation is
eliminated. Under PURPA, QFs receive the benefit of exemptions from the Federal
Power Act, PUHCA and certain aspects of state utility regulation. In addition,
PURPA obligates utilities to purchase power offered by QFs at an individual
utility's "incremental cost of alternative electric energy," which is sometimes
referred to as the "avoided cost" standard and which is defined as the cost that
the utility avoids by not generating the power itself or purchasing it
elsewhere. All of the Company's projects other than the Parlin Project and a
part of the PWD Project are QFs. Since the Company benefits from PURPA, the
Company's business could experience a material adverse effect in the event of
the repeal of, or a significant change in, PURPA.

         Various bills have also proposed repeal of PUHCA. Repeal of PUHCA would
allow both independent power producers and vertically integrated utilities to
acquire retail utilities in the U.S. that are geographically widespread, as
opposed to the current requirements of PUHCA which, as interpreted by the SEC,
tend to require that retail electric systems owned by the same entity be capable
of either electric integration or to be operated in geographic proximity. With
the repeal of PURPA and PUHCA, competition for independent power generators from
vertically integrated utilities would likely increase. Any such repeal could
have a material adverse effect on the Company's financial position or results of
operations.

         While the Company does not believe that ongoing federal and state
restructuring efforts necessarily will have a material adverse effect on its
financial position or results of operations, the long term effect of any such
restructuring on the Company cannot be predicted at this time. See "Business --
Regulation of the Company's Projects."

     GRAYS FERRY LITIGATION/DEFAULT

         PECO, the electric power purchaser from the Grays Ferry Project, has
asserted that its PPAs with the Grays Ferry Partnership are not effective based
on an alleged denial of cost recovery by the Pennsylvania Public Utility
Commission. PECO claims that it is not obligated to pay the rates set forth in
the agreements. PECO has further taken the position that, in any event, its
total liability under each of the two PPAs is limited to $25,000 ($50,000 in
aggregate) by the terms of such agreements. The Company and the Grays Ferry
Partnership are in litigation with PECO over its obligations under such
agreements. After initially refusing to pay the rates set forth in the PPAs and
making payments for the electricity purchased from the Grays Ferry Project at
substantially lower rates, PECO has been ordered by the court in which the
litigation is pending to comply with the PPAs pending the outcome of the
litigation. Following the court order, PECO has resumed paying under protest the
full contract rates and, as of December 31, 1998, has paid all amounts then due
under the applicable PPAs. Through December 31, 1998, the Grays Ferry
Partnership has recorded revenue of approximately $78,100 of which $34,500
represents the amount which PECO 


                                       24
<PAGE>


claims it was not obligated to pay. For the year ended December 31, 1998, the
Company has recorded $4,758 of equity in earnings of affiliates representing its
pro rata share of the Grays Ferry Partnership's net income for such period. In
addition, the Company's investment in the Grays Ferry Partnership totaled
$17,603 on December 31, 1998. On March 9, 1999 the court issued an order for
partial summary judgment in favor of the Grays Ferry Partnership, ruling that
PECO's attempted termination of the Grays Ferry PPAs was improper.

         Due to PECO's actions the Grays Ferry Partnership defaulted in the
payment of certain interest due under its principal credit agreement, which
default has since been cured, and the Grays Ferry Partnership continues to be in
default under other provisions of such credit agreement. As a result of such
continuing default, the lenders under the credit agreement have the ability
generally to prevent the Grays Ferry Partnership from distributing or otherwise
disbursing cash held or generated by the Grays Ferry Project. These rights, if
exercised by the lenders, could prevent the Grays Ferry Partnership from meeting
its obligations to suppliers and others and from disbursing or otherwise
distributing cash to its partners during the pendency of the litigation. Any of
these actions by the Grays Ferry Partnership's lenders could materially disrupt
the Grays Ferry Partnership's relations with its suppliers and could have other
potentially material adverse effects on its operations and profitability and,
ultimately, on the Company's earnings and financial position. While the Grays
Ferry Partnership's lenders have allowed the partnership to meet its obligations
to suppliers, the partnership received a notice of default from the lenders on
June 22, 1998, for the failure to timely convert the loan used for construction
purposes to a term loan. This failure occurred due to the event of default
created by the alleged termination of the PPAs by PECO and due to the inability
of the Grays Ferry Partnership to declare either provisional or final acceptance
of the Grays Ferry Project due to the existence of certain unresolved issues
between the Grays Ferry Partnership and Westinghouse Electric Corporation
("Westinghouse") regarding completion and testing of the Grays Ferry Project.
These issues between the partnership and Westinghouse are the subject of an
ongoing arbitration proceeding. Until there is a satisfactory resolution of the
litigation with PECO, the lenders will not allow distributions for the payment
of subordinated fees, payments to the subordinated debt lender or equity
distributions to the partners. In lieu of making these payments, Grays Ferry
Partnership will be required to apply such amounts to the repayment of the loan.
During 1998, $18,700 was applied to the repayment of the loan. The Company
further expects that at the time the litigation is resolved the loan will be
restructured.

         The Company believes that if PECO's position ultimately is sustained,
the Grays Ferry Partnership would cease to be economically viable as currently
structured and the Company's earnings and financial position could be materially
adversely affected in various respects. Such effects could include, without
limitation, a material adjustment to the value of the Company's investment in
the Grays Ferry Project, the loss of future income and cash flows from the
project and other material costs which would not be recovered. See "Item 3.
--Legal Proceedings."

     ENVIRONMENTAL LAW AND REGULATION

         The Company and its projects are subject to a number of comprehensive
environmental laws and regulations, affecting many aspects of its present and
future operations. The laws and regulations applicable to the Company primarily
involve the discharge of emissions into the water and air, but can also include
wetlands preservation, waste disposal and noise abatement. Frequently, these
laws and regulations require a lengthy and complex process of obtaining
licenses, permits and approvals from federal, state and local agencies as well
as ongoing reporting and 


                                       25
<PAGE>

compliance obligations. Compliance may require modification of a project which
may increase its costs, extend its completion date or otherwise adversely affect
a project before or after its completion. Additional or modified licenses,
permits and approvals may be required for any physical or operational changes to
the Company's facilities. For some conditions, environmental laws also may
impose cleanup or other remediation obligations. In many instances, state laws
impose requirements on the Company that are similar to, and in some cases more
stringent than, the requirements under federal law. Noncompliance with
environmental laws and regulations can result in the imposition of civil or
criminal fines or penalties. The current environmental requirements under which
the Company's projects operate are subject to amendment, and the Company cannot
predict what effect compliance with such amendments may have on the Company's
business or operations.

         In the future, the environmental requirements likely to have the
greatest impact on the Company's business and operations are air quality
emission limitations under the Clean Air Act. As originally enacted, the Clean
Air Act set guidelines for emission standards for major pollutants (e.g., sulfur
dioxide and nitrogen oxide ("NOx")) from newly constructed stationary sources.
The Clean Air Act provides for the regulation, largely through state
implementation of federal requirements, of emissions of regulated substances
from certain facilities and operations, including an obligation to obtain
preconstruction and operating permits for sources of certain air emissions. Each
state in which the Company plants are located implements the requirements of the
Clean Air Act through its own state air pollution control statute and
implementing regulations. In New Jersey, for example, the requirements of the
Clean Air Act are implemented through the New Jersey State Air Pollution Act. In
Pennsylvania, the requirements are implemented through the Pennsylvania Air
Pollution Control Act, in Illinois through the Illinois Environmental Protection
Act, and in Oklahoma through the Oklahoma Clean Air Act. Each of the states
implement these requirements through regulations promulgated by the U.S.
Environmental Protection Agency (the "EPA") and the respective state agencies.

         In November 1990, significant amendments to the Clean Air Act were
adopted by Congress (the "1990 Amendments"). The 1990 Amendments attempt to
reduce emissions from existing sources, particularly previously exempted older
power plants. Although the EPA is still implementing the requirements mandated
by the 1990 Amendments, the Company believes that air quality regulations in the
U.S. may become even more stringent.

         The 1990 Amendments require the EPA to establish technology-based
emission standards for hazardous air pollutants. "Electric utility steam
generating units" greater than 25 MW have been excluded from regulation pending
completion of an EPA study of hazardous air pollutant emissions from these units
to determine whether such regulation is "appropriate and necessary." The final
report, issued in February 1998, concluded that regulation of hazardous air
pollutant emissions from those units is not necessary with a few possible
exceptions. The EPA has decided to conduct further studies of certain utility
emissions and will determine at a later date whether regulation of those
emissions is appropriate. The EPA plans to issue hazardous air pollutant
regulations for combustion sources not included within the scope of the EPA's
electric utility study by November 2000. Depending on whether they are
finalized, these regulations may require the Company to install additional
emission control technology.

         The EPA and several states are in the process of developing more
stringent emission limitations to control ground-level ozone. In November 1997,
the EPA proposed a rule that would require 22 states in the Eastern U.S.,
including Illinois, New Jersey and Pennsylvania, to make 


                                       26
<PAGE>

substantial reductions in NOx emissions. If finalized as proposed, this rule
potentially could result in the adoption of new NOx emission standards by the
affected states. If more stringent NOx standards are adopted by states in which
the Company has facilities, the Company could be required to install additional
NOx emission control technology at such facilities. In addition, the EPA
recently lowered the current National Ambient Air Quality Standards for
ground-level ozone and particulate matter, and these new standards will be
implemented by the states over the next several years. To comply with the new
standards, additional control technology requirements may be required at the
Company's existing facilities.

         In addition to the above, the 1990 Amendments established the North
East Ozone Transport Region which required northeastern states, including New
Jersey and Pennsylvania, to work together to determine whether to adopt more
stringent controls on the pollutants that contribute to the formation of
low-level ozone (i.e., volatile organic compounds and oxides of nitrogen).
Pursuant to a September 27, 1994 Memorandum of Understanding between the member
states of the North East Ozone Transport Region, New Jersey and Pennsylvania
have each proposed regulations to implement a region-wide budget for nitrogen
oxide emissions.

     CAPITAL REQUIREMENTS

         The Company's business is capital intensive. The long-term growth of
the Company, which involves the development and acquisition of additional power
generation projects, will require the Company to seek substantial funds through
various forms of financing. There can be no assurance that the Company will be
able to arrange the financing needed for additional projects. Also, limitations
in the Company's credit agreements may limit its ability to finance future
projects on a recourse basis, thereby requiring the Company to finance such
future projects on a substantially nonrecourse basis, which may either be
unavailable, or available on terms which may not be acceptable to the Company.
In order to access capital on a substantially nonrecourse basis in the future,
the Company may have to make larger equity investments in, or provide more
financial support for, its subsidiaries and other project entities. The
Company's ability to arrange financing of additional projects and the costs of
such capital are dependent on numerous factors, including general economic and
capital market conditions, credit availability from banks and other financial
institutions, investor confidence in the Company, its partners and in the
independent power market, the success of current projects, the perceived quality
of new projects and applicable tax and securities laws. If the Company is unable
to secure such financing, or if the terms of such financing are not satisfactory
to the Company, its business could be materially adversely affected. See
"Business -- Project Development Activities."

     RECENT HISTORY OF LOSSES

         The Company filed a voluntary petition for reorganization under Chapter
11 of the U.S. Bankruptcy Code on September 28, 1994. Formerly known as O'Brien,
the Company emerged from bankruptcy on April 30, 1996, under the Plan approved
by the Bankruptcy Court. The Company reported net income of approximately
$8,002, $23,352 and $6,423 for the fiscal years ended December 31, 1998,
December 31, 1997 and the six months ended December 31, 1996, respectively.
However, due in part to costs associated with its bankruptcy proceeding, the
Company incurred losses of approximately $17,713 and $40,919 for the fiscal
years ended June 30, 1996, and June 30, 1995, respectively. These losses and the
Company's bankruptcy had a material adverse effect on the Company's liquidity
and financial position and may continue to adversely affect the Company's
liquidity and results of operations in future periods by, among other things,


                                       27
<PAGE>

rendering it more difficult for the Company to raise capital or otherwise to
conduct project development activities.

     RISKS ASSOCIATED WITH FOREIGN OPERATIONS

         The Company does not generate power outside of the U.S. Its foreign
operations consist of its equipment sales and rental operations based in the
U.K. which sell in various international markets and which are subject to the
risks inherent in doing business in foreign countries, including changes in
currency exchange rates, currency restrictions, changes in duties and quotas,
introduction of tariff or non-tarriff barriers, and economic, political and
regulatory changes. The Company currently does not engage in hedging
transactions. There can be no assurance that any of the factors described above
will not have a material adverse effect on the Company's business, operating
results and financial condition. See "Business -- Products and Services 
-- Equipment Sales, Rentals and Services Segment."

     YEAR 2000

         The Company has implemented a Year 2000 compliance program designed to
ensure that the Company's computer systems and applications will function
properly beyond 1999. The Company believes that it has allocated adequate
resources for this purpose and expects its Year 2000 conversions to be completed
on a timely basis. In light of its compliance efforts, the Company does not
believe that the Year 2000 issue will materially adversely affect operations or
results of operations, and does not expect implementation to have a material
impact on the Company's financial statements. However, there can be no assurance
that the Company's systems will be Year 2000 compliant prior to December 31,
1999, or that the failure of any such system will not have a material adverse
effect on the Company's business, operating results and financial condition. In
addition, to the extent the Year 2000 problem has a material adverse effect on
the business, operations or financial condition of third parties with whom the
Company has material relationships, such as venders, suppliers and customers,
the Year 2000 problem could have a material adverse effect on the Company's
business, results of operations and financial condition.

     RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS

         This Report on Form 10K contains various forward-looking statements and
information that are based on the Company's beliefs and assumptions, as well as
information currently available to the Company. The Company also may make other
such forward-looking statements in the future. Without limiting the generality
of the foregoing, the words "believe," "anticipate," "estimate," "expect,"
"intend," "plan," "seek" and similar expressions, when used in this Report on
Form 10-K or in such other statements are intended to identify forward-looking
statements. All forward-looking statements and information in this Report on
Form 10-K or in such other statements are forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act
and are intended to be covered by the safe harbor created thereby. Such
forward-looking statements are subject to risks, uncertainties and other factors
that may cause the actual results, performance or achievements of the Company to
differ materially from historical results or from any results expressed or
implied by such forward-looking statements. Such risks, uncertainties and other
factors include, without limitation, those discussed above. The Company is
unable to control or predict many of these factors, and investors are cautioned
not to put undue reliance on such forward-looking statements. The Company
disclaims any obligation to update or review any forward-looking statements
contained in this Report on Form 10-K or in any statement referencing the risk
factors and other cautionary statements set forth in 


                                       28
<PAGE>

this Report on Form 10-K, whether as a result of new information, future events
or otherwise.


ITEM 2.  PROPERTIES.

         The Company's corporate headquarters are located in suburban
Minneapolis, Minnesota. On June 4, 1998, the Company entered into a lease with
respect to approximately 6,745 square feet of space for its corporate
headquarters which continues until July 17, 2003.

         The headquarters for PUMA's executive offices and its principal
manufacturing facility (each of which serve the Company's equipment sales,
rentals and services segment) are located in Ash, Canterbury, Kent, United
Kingdom.

         The Newark, PWD, Parlin, Grays Ferry, Pryor and Morris project entities
(each of which is in the Company's energy segment) lease property for the sites
of its facilities from the commercial user of electric or thermal energy for a
nominal fee. The lease terms equal or exceed that of each respective electric or
thermal supply agreement. Management believes that these leased premises are
suitable and adequate for the Company's projects.


ITEM 3.           LEGAL PROCEEDINGS.

         The Company or a subsidiary is party to the following legal
proceedings:

1.    STEVENS, ET AL. V. O'BRIEN ENVIRONMENTAL ENERGY, INC., ET AL., United
      States District Court for the Eastern District of Pennsylvania, Civil
      Action No. 94-cv-4577, filed July 27, 1994. This action was filed by
      certain purchasers of the Class A Common Stock of the Company's
      predecessor, O'Brien Environmental Energy, Inc. ("O'Brien"), during the
      class period of O'Brien's bankruptcy. The plaintiffs alleged various
      violations of the Federal securities laws, claiming that certain material
      misrepresentations and nondisclosures concerning the Company's financial
      conditions and prospects allegedly caused the price of the Common Stock to
      be artificially inflated during the class period. The parties in this
      action have agreed on a proposed settlement, which was filed with the
      District Court for its approval on March 18, 1999. Management does not
      expect the outcome of this litigation to have a material adverse effect on
      the Company.

2.    BLACKMAN AND FRANTZ V. O'BRIEN, United States District Court, Eastern
      District of Pennsylvania, Civil Action No. 94-cv-5686, filed October 25,
      1995. This action was filed by purchasers of O'Brien debentures during the
      class period. The Plaintiffs objected to treatment of the class under the
      Plan. This matter has been consolidated with the Stevens class action case
      described in paragraph number 1 above. The parties in this action have
      agreed on a proposed settlement, and on February 11, 1999, filed the
      proposed settlement with the District Court for its approval. Management
      does not expect the outcome of this litigation to have a material adverse
      effect on the Company.

3.    IN RE: O'BRIEN ENVIRONMENTAL ENERGY, Case No. 94-26723, U.S. Bankruptcy
      Court for the District of New Jersey, filed September 29, 1994. Calpine
      Corporation ("Calpine"), an unsuccessful bidder for the acquisition of
      O'Brien in the bankruptcy case, filed an application for allowance of an
      administrative claim for approximately $4,500 in break-up fees and
      expenses in the bankruptcy case. The Bankruptcy Court denied the
      application 


                                       29
<PAGE>

      in full, by order dated November 27, 1996. Calpine filed an appeal from
      the Bankruptcy Court's order denying its application. On May 29, 1998 the
      United States District Court for the District of New Jersey upheld the
      Bankruptcy Court's order. Calpine filed an appeal with the United States
      Third Circuit Court of Appeals on June 26, 1998. The appeal has been
      briefed, but oral arguments have not yet occurred. Management does not
      expect the outcome of its bankruptcy case to have a material adverse
      effect on the Company.

4.    GRAYS FERRY COGENERATION PARTNERSHIP, TRIGEN-SCHUYLKILL COGENERATION,
      INC., NRGG (SCHUYLKILL) COGENERATION INC. AND TRIGEN-PHILADELPHIA ENERGY
      CORP. V. PECO ENERGY COMPANY, ADWIN (SCHUYLKILL) COGENERATION, INC. AND
      THE PENNSYLVANIA PUBLIC UTILITY COMMISSION, Court of Common Pleas
      Philadelphia County, April Term 1998, No. 544, filed April 9, 1998. This
      action arose out of PECO's notification to the Grays Ferry Partnership
      that PECO believes its PPAs with the Grays Ferry Partnership relating to
      the Grays Ferry Project are no longer effective and PECO's refusal to pay
      the electricity rates set forth in the agreement based on its allegations
      that the Pennsylvania Public Utility Commission has denied cost recovery
      of the PPAs in retail electric rates. The Grays Ferry Partnership's
      complaint against PECO asserts claims which include breach of contract,
      fraud, breach of implied covenant of good faith, conversion, breach of
      fiduciary duties and tortious interference with contract. The Plaintiffs
      are seeking to enjoin PECO from terminating the PPAs and to compel PECO to
      pay the rates set forth therein. The Plaintiffs also are seeking actual
      and punitive damages and attorneys' fees and costs. On April 22, 1998, the
      court allowed the Grays Ferry Partnership to file an amended complaint to
      discontinue the suit against the Pennsylvania Public Utility Commission
      without prejudice. On May 5, 1998, the Grays Ferry Partnership obtained a
      preliminary injunction pending the outcome of the litigation enjoining
      PECO from terminating the PPAs and ordering PECO to comply with the terms
      of the PPAs. The Court of Common Pleas in Philadelphia also ordered PECO
      to abide by all of the terms and conditions of the PPAs and pay the rates
      set forth in the agreements. The Plaintiffs were required to post a bond
      in the amount of $50 in connection with the preliminary injunction. On May
      8, 1998, PECO filed a notice of appeal and a motion to stay the
      preliminary injunction order. On May 13, 1998, the Grays Ferry Partnership
      filed an emergency petition for contempt to compel PECO to pay the amounts
      due and owing under the PPAs. On May 20, 1998, the Court of Common Pleas
      granted the motion for civil contempt and ordered PECO to pay $50 for each
      day that PECO failed to comply with the court's order. The power
      purchaser, in response to the preliminary injunction, has made all past
      due payments and continues to make payments to the Grays Ferry Partnership
      according to the terms of the PPAs, in each case under protest. On August
      10, 1998, Chase filed an unopposed petition to intervene as a co-plaintiff
      in the litigation, which was entered on August 26, 1998. Chase's
      complaint, filed on September 4, 1998, asserted claims against PECO in
      connection with Chase's roles as lender and agent of other lenders under
      the Grays Ferry Project financing credit agreement. On March 9, 1999 the
      Court of Common Pleas issued an order for partial summary judgment in
      favor of the Grays Ferry Partnership, ruling that PECO's attempted
      termination of the Grays Ferry PPAs was improper. Trial is set for March
      29, 1999 to determine damages owed to the Grays Ferry Partnership, as well
      as to decide the remaining claims such as fraud, conversion, breach of the
      implied covenant of good faith and breach of fiduciary duties.


                                       30
<PAGE>


         The Company is subject from time to time to various other claims that
arise in the normal course of business, and management believes that the outcome
of any such matters as currently may be pending (either individually or in the
aggregate) will not have a material adverse effect on the business or financial
condition of the Company.


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

        As previously reported by the registrant, on September 14, 1998, NRG
Energy sent a letter to David H. Peterson, the Company's Chairman, requesting
that he call a special meeting of the Company's stockholders to consider the
removal of Robert T. Sherman, Jr. from the Company's Board of Directors. On such
date NRG Energy also filed preliminary solicitation materials with the SEC
pursuant to Section 14(a) of the Exchange Act, as amended, relating to a
proposed solicitation of proxies and consents from the Company's stockholders to
remove Mr. Sherman from the Company's Board (the "Proxy Solicitation"). On
October 8, 1998, NRG Energy filed definitive solicitation materials with the SEC
relating to the Proxy Solicitation.

         On October 26, 1998, NRG Energy delivered to the Company's registered
agent consents of the holders of more than 50% of the Company's outstanding
Common Stock in favor of Mr. Sherman's removal from the Company's Board of
Directors. The following persons continued to serve as directors of the Company
immediately following the delivery of the consents: David H. Peterson, Julie A.
Jorgensen, Lawrence I. Littman, Craig A. Mataczynski, Spyros S. Skouras, Jr.,
Charles J. Thayer and Ronald J. Will. At a Board of Directors meeting on October
27, 1998, by the affirmative vote of a majority of such directors, Michael
O'Sullivan was appointed to fill the vacancy created by the removal of Mr.
Sherman from the Board.

         At a Special Meeting of the Company's stockholders held on November 12,
1998, the stockholders approved the removal of Mr. Sherman as a director of
the Company, with the holders of 5,314,119 shares, or 77.73% of the outstanding
shares, voting in favor of such removal; the holders of 85,626 shares, or 1.25%
of the outstanding shares, voting against; and 9,139 abstentions. Continuing as
directors were Mr. Peterson, Ms. Jorgensen, Mr. Littman, Mr. Mataczynski, Mr.
Skouras, Mr. Thayer and Mr. Will. On the same day, the Company's Board of
Directors also confirmed the appointment of Michael O'Sullivan to fill the
vacancy on the Board of Directors created by the removal of Mr. Sherman.





                                       31
<PAGE>


                                     PART II


ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
        MATTERS.

     FOR DEFINITIONS OF CERTAIN CAPITALIZED TERMS USED BUT NOT DEFINED IN
THIS ITEM 5 PLEASE SEE THE SELECTED DEFINITIONS THAT IMMEDIATELY PRECEDE ITEM 1.

         The Company's Common Stock has been quoted and traded on the Nasdaq
National Market under the symbol "CGCA" since July 1998 and under the symbol
"NRGG" from November 1997 to July 1998. From March 1997 to November 1997, the
Company's Common Stock was quoted and traded under the symbol "NRGG" on the
Nasdaq SmallCap Market. Prior to March 1997, the Company's Common Stock was not
listed on an exchange or on the Nasdaq Stock Market but traded from time to time
on the pink sheets and on the OTC Bulletin Board. The high and low sales prices
of the Common Stock for the period from March 1997 to December 1998 are shown in
the table below. Such prices may have reflected inter-dealer prices, without
retail mark-ups, mark downs or commissions, and may not necessarily represent
actual transactions.

<TABLE>
<CAPTION>

                                     COGENAMERICA COMMON STOCK PRICE PER SHARE
  -----------------------------------------------------------------------------------------------------------------
                                                PRICE PER 1998 SHARE ($)             PRICE PER 1997 SHARE ($)
                                           ------------------------------------ -----------------------------------
    PERIOD                                        LOW               HIGH              LOW               HIGH
  ---------------------------------------- ------------------ ----------------- ----------------- -----------------
  <S>                                           <C>                <C>               <C>               <C>   
    First Quarter ......................        15.125             19.531            11.250            13.750
    Second Quarter......................        13.313             18.250            11.125            16.000
    Third Quarter.......................         7.250             15.000            14.250            21.000
    Fourth Quarter......................         7.625             10.000            18.000            22.375
</TABLE>


         As of March 2, 1999, the Company had approximately 465 holders of
record of its Common Stock, not including beneficial owners whose shares are
held by banks, brokers and nominees.

         The Company did not pay any cash dividends during fiscal 1998 or 1997.
The Company presently intends to retain all earnings for the operation and
expansion of its business and does not anticipate paying cash dividends on its
Common Stock in the foreseeable future. Any future determination as to the
payment of dividends on the common stock will depend upon future earnings,
results of operations, capital requirements, the financial condition of the
Company and any other factors the Board of Directors of the Company may
consider. Moreover, as a holding company, the Company's ability to pay any
dividends in the future will depend largely on the ability of its operating
subsidiaries and project entities to pay cash dividends or other cash
distributions, which dividends or other cash distributions may be materially
limited by the terms of credit agreements or other material contracts to which
such operating subsidiaries or project entities may be parties.

         Two of the Company's principal operating subsidiaries, CogenAmerica
Newark and CogenAmerica Parlin, are parties to a Credit Agreement which
prohibits the payment of dividends by such subsidiaries to the Company, provided
that such dividend payments may be made out of funds available after the payment
of various costs and expenses set forth in the 


                                       32
<PAGE>


Credit Agreement (including, without limitation, operating costs, various debt
service payments and the funding of various accounts required to be maintained
pursuant to the Credit Agreement) if certain conditions set forth in the Credit
Agreement are satisfied, including, without limitation, the maintenance of a
debt service coverage ratio set forth in the Credit Agreement, the absence of
any default or event of default under the Credit Agreement, and the satisfaction
of certain conditions relating to the composition of the Board of Directors of
the Company.

         Morris LLC (the owner of the Morris Project) is party to a Construction
and Term Loan Agreement which prohibits the payment of distributions or the
return of capital to Morris LLC's members or the authorization to make any other
distribution, payment or delivery of property or cash to its members as such, or
redeem, retire, purchase or otherwise acquire any membership interests, units or
other equity interests of Morris LLC, or any options or rights thereto, or the
setting aside of funds for any of such purposes, except upon the satisfaction of
certain conditions which include (i) the acceptance and commercial operation of
the facility and conversion of the project's construction loan to term loans,
(ii) the absence of any default or event of default under various financing and
project documents, and the absence of the possibility that default will occur as
a result of such disbursement, (iii) the full prior funding of various accounts
required to be maintained by Morris LLC under the Construction and Term Loan
Agreement, and (iv) the maintenance of a required debt service coverage ratio.
The Company and CogenAmerica Funding also are parties to a Supplemental Loan
Agreement with NRG Energy which prohibits CogenAmerica Funding (which owns 100%
of the membership interests of Morris LLC) from paying any distributions or
dividends unless, among other things, the principal and interest then
outstanding does not exceed a prescribed maximum amount and is not projected to
exceed the maximum amount prescribed for the next two interest and principal
payment dates.

         The Company is the borrower under the MeesPierson Credit Agreement,
which prohibits the payment of dividends by the Company without prior written
consent unless the Company provides not less than 30 days prior to the proposed
date of payment of such dividend a letter of credit (in the form and upon the
terms provided in the MeesPierson Credit Agreement) and a certificate signed by
the chief financial officer of the Company that, after giving effect to such
dividend payment, no default or event of default (as defined in therein) would
occur or reasonably be anticipated to occur, and/or be continuing.

         The Grays Ferry Partnership (the owner of the Grays Ferry Project) is
party to a credit agreement, dated March 1, 1996 with Chase which prohibits the
Grays Ferry Partnership from making distributions unless i) the loan under the
agreement has converted to a term loan, ii) a specified debt service coverage
ratio is met, iii) no event of default has occurred and is continuing, and iv)
the distribution would not trigger an event of default. In addition, due to the
ongoing litigation between the Grays Ferry Partnership and PECO, Chase will not
allow any distributions to partners pursuant to Chase's rights under such credit
agreement. See Item 3. "Legal Proceedings."

         CogenAmerica and CogenAmerica Pryor are parties to a loan agreement,
dated October 9, 1998, with NRG Energy as lender, which prohibits the payment of
distributions unless i) CogenAmerica Pryor has sufficient unencumbered funds to
cover two payments of a specified interest payment obligation, ii) no event of
default has occurred and is continuing, and iii) after giving effect to the
proposed distribution, no event of default would occur or reasonably be
anticipated to occur and/or be continuing.


                                       33
<PAGE>


ITEM 6.  SELECTED FINANCIAL DATA.

         The consolidated selected financial data as of and for each of the
periods indicated have been derived from the audited financial statements of the
Company. This data should be read in conjunction with, and is qualified in its
entirety by reference to, the related financial statements and notes included
elsewhere in this Report.

<TABLE>
<CAPTION>


                                                                           SIX MONTHS                 YEAR ENDED               
                                            YEAR ENDED      YEAR ENDED       ENDED       --------------------------------------
(DOLLARS IN THOUSANDS,                      DECEMBER 31,   DECEMBER 31,   DECEMBER 31,     JUNE 30     JUNE 30,     JUNE 30,
EXCEPT PER SHARE AMOUNTS)                      1998           1997          1996 (1)        1996         1995        1994
                                           -------------   ------------   ------------   ---------    ---------    ----------
<S>                                         <C>             <C>             <C>          <C>          <C>          <C>
STATEMENT OF OPERATIONS DATA:

Revenues:
  Energy ................................   $  52,216       $  43,210       $  21,669    $  66,623    $  74,455    $  62,647
  Equipment sales and services ..........      19,342          19,415          15,607       25,344       19,639       24,304
  Rental ................................       2,438           2,179           1,062        1,895        2,362        5,372
  Development fees and other ............          --              --           1,578        2,685        5,791       14,266
                                            ---------       ---------       ---------    ---------    ---------    ---------

    Total ...............................      73,996          64,804          39,916       96,547      102,247      106,589

Income (loss) before extraordinary item..       8,002          23,352           4,780      (17,713)     (40,919)     (16,501)

Net income (loss) .......................       8,002          23,352(4)        6,423      (17,713)     (40,919)     (16,501)

Basic earnings (loss) per share (2):                                     
  Before extraordinary item .............   $    1.17       $    3.59       $    0.75    $   (4.24)   $  (11.02)   $   (4.45)

  Extraordinary item ....................          --              --            0.25           --           --           --
                                            ---------       ---------       ---------    ---------    ---------    ---------
                                            $    1.17       $    3.59       $    1.00    $   (4.24)   $  (11.02)   $   (4.45)
                                            ---------       ---------       ---------    ---------    ---------    ---------
                                            ---------       ---------       ---------    ---------    ---------    ---------

Diluted earnings (loss) per share (2)                                    

  Before extraordinary item .............   $    1.15       $    3.48       $    0.74    $   (4.24)   $  (11.02)   $   (4.45)
  Extraordinary item ....................        --              --              0.25         --           --           --
                                            ---------       ---------       ---------    ---------    ---------    ---------
                                            $    1.15       $    3.48       $    0.99    $   (4.24)   $  (11.02)   $   (4.45)
                                            ---------       ---------       ---------    ---------    ---------    ---------
                                            ---------       ---------       ---------    ---------    ---------    ---------

BALANCE SHEET DATA:                                                      

Total assets ............................   $ 318,674       $ 227,894       $ 173,624    $ 178,162    $ 189,748    $ 237,816
                                                                         
Long-term debt, net of current maturities                                

  Loans due NRG Energy ..................      36,123           4,439          14,388       96,929         --           --
  Nonrecourse long-term debt ............     189,848         143,697         143,972       60,415      3,405 3       60,310
  Recourse long-term debt ...............      45,225          46,323           6,339        6,374         --          7,073
                                                                         
    Total ...............................     271,196         194,459         164,699      163,718      3,405 3       67,383
                                                                     
</TABLE>


(1) Effective July 1, 1996, the Company changed its year end from June 30 to
    December 31.
(2) Net income (loss) per share has been restated for all periods presented to
    reflect the common shares issued under the terms of the Plan.
(3) Excludes $60,310 of long-term project financing which was included in
    current liabilities due to default under the debt agreement.
(4) Reflects a net tax benefit of $20,454 resulting from reduction of a tax 
    valuation allowance. (See Note 16)

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

         THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, THE CONSOLIDATED FINANCIAL STATEMENTS
INCLUDING NOTES THERETO. CERTAIN OF THE STATEMENTS MADE IN THIS MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CONSTITUTE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE
SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT. SUCH FORWARD-LOOKING
STATEMENTS ARE SUBJECT TO RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE
THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO DIFFER
MATERIALLY FROM HISTORICAL RESULTS OR FROM ANY RESULTS EXPRESSED OR IMPLIED BY
SUCH FORWARD-LOOKING STATEMENTS. SUCH FACTORS INCLUDE, WITHOUT LIMITATION, THOSE
DISCUSSED IN "RISK FACTORS" HEREIN. SEE "ITEM 1. BUSINESS -- RISK FACTORS
-- RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS."


                                       34
<PAGE>


         FOR DEFINITIONS OF CERTAIN CAPITALIZED TERMS USED BUT NOT DEFINED IN
THIS ITEM 7, PLEASE SEE THE SELECTED DEFINITIONS THAT IMMEDIATELY PRECEDE ITEM
1.

         EFFECTIVE JULY 1, 1996, THE COMPANY CHANGED ITS YEAR END FROM JUNE 30
TO DECEMBER 31. AS A RESULT, AS USED HEREIN, "1996" REFERS TO THE 12-MONTH
PERIOD ENDED JUNE 30, 1996; THE "1996 TRANSITION PERIOD" REFERS TO THE 6-MONTH
PERIOD ENDED DECEMBER 31, 1996; "1997" AND "1998" REFER TO THE 12-MONTH PERIODS
ENDED DECEMBER 31, 1997, AND 1998, RESPECTIVELY.

         ALL DOLLAR AMOUNTS, EXCEPT PER SHARE AMOUNTS, SET FORTH IN THIS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS ARE IN THOUSANDS.

GENERAL

         CogenAmerica is an independent power producer pursuing
"inside-the-fence" cogeneration projects in the U.S. The Company is engaged
primarily in the business of developing, owning and managing the operation of
cogeneration projects which produce electricity and thermal energy for sale
under long-term contracts with industrial and commercial users and public
utilities. The Company is currently focusing on natural gas-fired cogeneration
projects with long-term contracts for substantially all of the output of such
projects. The Company's strategy is to develop, acquire and manage the operation
of such cogeneration projects and to provide U.S. industrial facilities and
utilities with reliable and competitively priced energy from its power projects.

         CogenAmerica has substantial expertise in the development and operation
of power projects. The Company's current project portfolio consists of:

(i)   a 122 MW cogeneration facility in Parlin, New Jersey, which began
      commercial operation in June 1991 and is owned through its wholly-owned
      subsidiary, CogenAmerica Parlin;

(ii)  a 58 MW cogeneration facility in Newark, New Jersey, which began
      commercial operation in November 1990 and is owned through its
      wholly-owned subsidiary, CogenAmerica Newark;

(iii) a 117 MW cogeneration facility in Morris, Illinois, which began commercial
      operation in November 1998 and is owned through its wholly-owned
      subsidiary, CogenAmerica Morris. See "Business --Products and Services --
      Energy Segment -- Morris Project";

(iv)  a 110 MW cogeneration facility in Pryor, Oklahoma, which had been in
      commercial operation prior to acquisition by the Company in October 1998,
      and is owned through the Company's wholly-owned subsidiary, Oklahoma Loan
      Acquisition Corporation;

(v)   two standby/peak shaving facilities with an aggregate capacity of 22 MW in
      Philadelphia, Pennsylvania, which began commercial operation in September
      1993, the principal project agreements of which are held by O'Brien
      (Philadelphia) Cogeneration, Inc., an 83%-owned subsidiary of the Company;
      and

(vi)  a one-third partnership interest in a 150 MW cogeneration facility located
      at Grays Ferry in Philadelphia, Pennsylvania, which began operation in
      January 1998.


                                       35
<PAGE>


         Each of the projects is currently producing revenues under long-term
power sales agreements that expire at various times. See the chart under
"Business -- General" which summarizes certain contractual arrangements and
other information concerning each of the Company's power projects.

         Energy and capacity payment rates are generally negotiated during the
development phase of a cogeneration project and are finalized prior to securing
project financing and the start of a plant's commercial operation. Pricing
provisions of each of the Company's project power sales agreements contain
unique features. As a result, different rates exist for each plant and customer
pursuant to the applicable power sales agreement.

         However, in general, revenues for each of the Company's cogeneration
projects consist of two components: energy payments and capacity payments.
Energy payments are based on the power plant's actual net electrical output,
expressed in kilowatt-hours of energy, purchased by the customer. Capacity
payments are based on the net electrical output the power plant is capable of
producing (or portion thereof) and which the customer has contracted to have
available for purchase. Energy payments are made for each kilowatt-hour of
energy delivered, while capacity payments, under certain circumstances, are made
whether or not any electricity is actually delivered.

         The projects' energy and capacity payments are generally based on
scheduled prices and/or base prices subject to periodic indexing mechanisms, as
specified in the power sales agreements. In general terms, energy and capacity
payments are intended to recover the variable and fixed costs of operating the
plant, respectively, plus a return.

         A power plant may be characterized as one or more of the following: a
"base-load" facility, a "dispatchable" facility, a combination
"base-load/dispatchable" facility or a "merchant" facility. Such
characterization depends upon the manner in which the plant will be used and the
requirements of the related power sales agreement(s). A "base-load" facility
generally means that the plant is operated continuously to produce a fixed
amount of energy and capacity for one or more customers. A "dispatchable"
facility generally means that the customer(s) purchased the right to a fixed
amount of available capacity, which must be produced if and when requested by
the customer(s). A combination "base-load/dispatchable" facility is a plant that
operates in both modes, with a portion of the plant's capacity designated as
base-load and the remainder available for dispatch. A "merchant" facility
generally refers to a plant that operates and sells its output to various
customers at prevailing market prices rather than pursuant to a long-term power
sales agreement.

         Under a power sales agreement with JCP&L extending into 2011,
CogenAmerica Parlin has committed 114 MW of the Parlin facility's generating
capacity to JCP&L, of which 41 MW are committed as base capacity and 73 MW as
dispatchable capacity. JCP&L must purchase energy from the base capacity
whenever such energy is available from the Parlin facility. Energy from the
dispatchable capacity is purchased by JCP&L only when requested (dispatched) by
JCP&L.

         The Parlin PPA provides for curtailment by JCP&L under such typical
conditions as emergencies, inspection and maintenance. In addition, JCP&L may
also reduce base capacity during periods of low load on the PJM by up to 600
hours in any calendar year, of which 400 may be during on-peak periods, but only
when all PJM member utilities are required to reduce generation to minimum
levels and PJM has requested JCP&L to reduce or interrupt external 


                                       36
<PAGE>


generation purchases. During 1998, JCP&L's curtailment was ten hours. The Parlin
PPA also provides for an annual average heat rate adjustment that will increase
or decrease JCP&L's payments to CogenAmerica Parlin, depending upon whether the
average heat rate of the Parlin Project is below or above average 9,500 Btu per
kWh (higher heating value). The actual adjustment is calculated by applying a
ratio based on this differential to a fuel cost calculation. For the year ended
December 31, 1998 this heat rate adjustment was $92.

         CogenAmerica Newark has a power sales agreement with JCP&L extending
through 2015 whereby it has committed to sell all of the Newark facility's
generating capacity to JCP&L, up to a maximum of 58 MW per hour. The Newark
Project is effectively a base-load unit and JCP&L must purchase the energy
whenever such energy is available from the Newark facility.

         Under the terms of the Newark PPA, JCP&L, in its sole discretion, is
allowed to curtail production at the facility for 700 hours per year provided
that the duration of each curtailment is a minimum of six hours and all
curtailments occur only during Saturdays, Sundays and Holidays. Since contract
inception in 1996, JCP&L has fully utilized this curtailment option annually and
the Company expects JCP&L will continue to do so in future years. JCP&L may also
disconnect from CogenAmerica Newark for emergencies, inspections and maintenance
for up to 400 hours per year if all PJM member utilities are required to reduce
generation to minimum levels and JCP&L has been requested by PJM to reduce or
interrupt external generation purchases. During 1998, JCP&L's curtailment for
these purposes was nine hours. The Newark PPA provides for an annual average
heat rate adjustment that will increase or decrease JCP&L's payments to
CogenAmerica Newark depending upon whether the average heat rate of the Newark
Project is above or below 9,750 Btu per kWh (higher heating value). The actual
adjustment is calculated by applying a ratio based upon this differential to a
fuel cost calculation. For the year ended December 31, 1998 this heat rate
adjustment reduced CogenAmerica Newark revenues by $684.

         Morris LLC has an ESA with Equistar through 2023 to provide base-load
power and steam. Equistar has agreed to purchase the entire requirements of
Equistar's plant (subject to certain exceptions) for electricity up to the full
electric output of two of the three combustion turbines at the Morris Project.
In addition, the Morris Project has an arrangement with the local utility to
provide standby power. Each combustion turbine at the Morris facility has a
nominal rating of 39 MW. The Morris Project designed redundancy into the energy
production capability of the facility in order to meet Equistar's demand. The
cost of installing and maintaining the reserve capacity was taken into account
when the energy services agreement was negotiated.

         CogenAmerica Morris is permitted to arrange for the sale to third
parties of interruptible capacity and/or energy from the third turbine and to
the extent available, any excess power from the two turbines required to supply
Equistar with its actual requirements. CogenAmerica Morris is in the process of
contracting with a third-party power marketer for the sale of this excess
capacity/energy.

         CogenAmerica Pryor has a power sales agreement with OG&E through 2008
to provide 110 MW of dispatchable capacity, with a maximum dispatch of 1,500
hours per year. The facility also sells electricity to PSO when not dispatched
by OG&E. The Pryor Project purchases natural gas from Dynegy and Aquila. Under
the terms of the agreement with PSO, the pricing of energy sales is indexed to a
market fuel rate. Under terms of the agreement with OG&E, energy sales are 
linked to the average cost of fuel.


                                       37
<PAGE>


         The power sales agreements for the Parlin, Newark, and Morris projects
are structured to avoid or minimize the impact on the Company's revenues from
fluctuations in fuel costs. Since the power sales agreements were amended in
April 1996, JCP&L is responsible for the supply and transportation of natural
gas required to operate the Parlin and Newark plants. Thus, revenues from the
Parlin and Newark plants exclude any amounts attributable to recovery of fuel
costs. Prior to the contract amendments, Parlin and Newark cost of revenues
included fuel and related costs and contract provisions for delayed recovery of
such costs in revenues caused variability in the projects' gross profit.

         Under the terms of the Morris ESA with Equistar, Equistar is the fuel
manager and all of the costs of supplying the fuel are effectively a
pass-through to Equistar. As a result, although fuel costs are included in the
Morris Project revenues and costs of revenues, the Company has minimized any
impact on gross profit from fluctuations in the price of natural gas purchases
and supply for the Morris Project.

         The Grays Ferry Project has a gas sales agreement with Aquila providing
for the purchase of natural gas to meet the power plant's requirements. For the
period from commercial operations in January 1998 until the end of the year
2000, the partnership has purchased a natural gas collar with a cap in order to
limit the volatility of natural gas purchases. Beginning in 2001, the price for
natural gas supplied by Aquila is indexed to a market electricity rate.

         During 1998, the Company also sold and rented power generation
equipment and provided related services in the U.S. and international markets
under the names OES and PUMA. As previously announced, the Company has
determined that its equipment sales, rental and service segment, which accounted
for $21,780, $21,594, $16,669 and $27,239 of revenues in 1998, 1997, the 1996
transition period and 1996, respectively, is no longer a part of its strategic
plan. Accordingly, on November 5, 1998 the Company sold OES, a wholly-owned
subsidiary of the Company, in a stock transaction to an unrelated third party
for $2,000. The Company is currently pursuing alternatives for the disposition
of its remaining equipment sales, rental and service business operated by PUMA.
The Company expects that the disposition of PUMA will not have a material
adverse effect on the Company's results of operations or financial condition.
Although OES was sold in 1998, the equipment sales, rental and service segment
has not been reported as a discontinued operation in the financial statements
because specific plans regarding the timing and manner of ultimate disposition
of PUMA are still under consideration.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

         REVENUES

         Energy revenues for 1998 of $52,216 increased from revenues of $43,210
for 1997. Energy revenues primarily reflect billings associated with the Parlin,
Newark, Morris and Pryor Projects and the Company's PWD Project. The increase in
energy revenues was primarily attributable to the acquisition of the Pryor
Project in October 1998, and commencement of Morris operations in November 1998.
Energy revenues in 1997 were negatively impacted by a routine, scheduled major
maintenance outage at the Newark Project in the second quarter of 1997.


                                       38

<PAGE>

<TABLE>
<CAPTION>

                                              PROJECT ENERGY REVENUES

                                                           YEAR ENDED                YEAR ENDED
                                                          DECEMBER 31,              DECEMBER 31,
                                                              1998                      1997       
                                                       ------------------         -----------------
             <S>                                         <C>                       <C>
              COGENERATION PROJECTS
                  Parlin                                  $      21,527             $      21,685
                  Newark                                         17,541                    17,319
                  Morris                                          5,779                        --
                  Pryor                                           3,235                        --
              STANDBY/PEAK SHAVING FACILITIES
                  PWD                                             4,134                     4,206
                                                          -------------             -------------
                                                          $      52,216             $      43,210
                                                          -------------             -------------
                                                          -------------             -------------
</TABLE>


         Equipment sales and services revenues for 1998 of $19,342 decreased
from revenues of $19,415 for 1997. The decrease was attributable to the sale of
OES in November 1998. OES accounted for revenues of $5,625 and $6,115 in 1998
and 1997, respectively.

         Rental revenues for 1998 of $2,438 increased from revenues of $2,179
for 1997. The increases were due primarily to higher sales volume due to ice
storms in the northeastern U.S. and Canada. OES rental revenues were $2,391 and
$2,179 in 1998 and 1997, respectively.

         COSTS AND EXPENSES

         Cost of energy revenues for 1998 of $23,462 increased from $14,841 for
1997. The increase was primarily the result of commencement of Morris
operations, the Pryor acquisition and depreciation associated with equipment
capitalized at the Parlin and Newark facilities in 1998.

         Cost of equipment sales and services for 1998 of $16,929 decreased
from $17,037 for 1997. The decrease was primarily due to the sale of OES.

         Cost of rental revenues for 1998 of $1,954 increased from $1,817 for
1997. The increases were primarily due to increased sales volume due to ice
storms in the northeastern U.S. and Canada.

         Gross profit for 1998 of $31,651 increased from $31,109 for 1997. The
increase is primarily attributable to expansion of the Newark Project's rated
capacity from 52 MW to 58 MW and the addition of the Morris and Pryor
operations. The gross profit margin in 1998 was 42.8% as compared to 48.0% in
1997. This decrease was due primarily to the addition of the Morris and Pryor
Projects which have lower operating margins than the Newark and Parlin Projects.
It is expected that competition will continue to put pressure on these margins
in the future as new projects are added.

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

         Selling, general and administrative expenses ("SG&A") for 1998 of
$9,415 decreased from $9,479 in 1997. The decrease is primarily due to lower
insurance costs, offset by higher legal expenses.


                                       39
<PAGE>


         INTEREST AND OTHER INCOME

         Interest and other income for 1998 of $1,715 increased from $1,205 for
1997. The increase is primarily attributable to a gain on the sale of OES.

         EQUITY IN EARNINGS OF AFFILIATES

         Equity in earnings of affiliates for 1998 was $4,784 compared to $105
for 1997. The increase was attributable to earnings from the Grays Ferry
Project, which commenced operations in January 1998. The earnings of the Grays
Ferry Project reflect the contract price of electricity under the terms of the
PPAs. The electric power purchaser has asserted that such PPAs are not effective
and that the power purchaser is not obligated to pay the rates set forth in the
agreements. The Company and the Grays Ferry Partnership are in litigation with
the power purchaser over that issue. For additional information see "Item 3. --
Legal Proceedings."

         INTEREST AND DEBT EXPENSE

         Interest and debt expense for 1998 of $15,855 increased from $14,768
for 1997. The increase is primarily attributable to debt issued to acquire the
Pryor Project, borrowings under the Supplemental Loan Agreement for the Morris
Project, and higher interest rates due to default rate interest.

         INCOME TAXES

         During the 1997 fourth quarter, the Company reduced the valuation
allowance established for tax benefits attributable to net operating loss
carryforwards and other deferred tax assets, resulting in recognition of most
remaining operating loss carryforwards in 1997 fourth quarter earnings.
Consequently, beginning with the 1998 first quarter, income taxes are generally
charged against pre-tax earnings without any reduction for operating loss
carryforwards that continue to be utilized in reducing income taxes currently
payable. Prior to the 1997 fourth quarter, net operating loss carryforwards were
recognized each period as a reduction of income tax expense based on pre-tax
income.

         The higher income tax expense in 1998 was due to the above-mentioned
reduction in the valuation allowance in 1997.

         NET INCOME AND EARNINGS PER SHARE

         Net income for 1998 was $8,002, or diluted earnings per share of $1.15,
compared to net income of $23,352 for 1997, or diluted earnings per share of
$3.48. Net income and earnings per share for 1998 were lower than the prior year
primarily due to the combined effects of the increase in income tax expense as a
result of the income tax benefit recognized in 1997, earnings from the Grays
Ferry Project which commenced operations in January 1998 and the one-time asset
impairment charge recorded in 1997.

 COMPARISON OF 1997, THE 1996 TRANSITION PERIOD AND 1996

         REVENUES

         Energy revenues for 1997, the 1996 transition period and 1996 were
$43,210, $21,669 and $66,623, respectively. Energy revenues primarily reflect
billings associated with the Parlin, Newark and PWD Projects.


                                       40
<PAGE>

<TABLE>
<CAPTION>

                                              PROJECT ENERGY REVENUES

                                              YEAR ENDED             SIX MONTHS ENDED            YEAR ENDED
                                             DECEMBER 31,              DECEMBER 31,                JUNE 30,
                                                 1997                      1996                      1996     
                                          ------------------      ----------------------       ---------------
     <S>                                    <C>                       <C>                       <C>
     COGENERATION PROJECTS
              Parlin                        $       21,685             $      10,327            $      34,867
              Newark                                17,319                     9,259                   26,820
     STANDBY/PEAK SHAVING FACILITIES
              PWD                                    4,206                     2,083                    4,936
                                            --------------             -------------            -------------
                                            $       43,210             $      21,669            $      66,623
                                            --------------             -------------            -------------
                                            --------------             -------------            -------------
</TABLE>


         The revenues at the Parlin and Newark Projects have been affected by
the terms of their PPAs, which were renegotiated effective April 30, 1996 to
make JCP&L responsible for supplying the natural gas at no cost to the projects.
Previously, revenues from the Parlin and Newark Projects had reflected the
impact of unit fuel cost fluctuations on the energy rate calculation under the
Parlin and Newark PPAs. The increase in energy revenues for 1997 as compared to
the 1996 transition period was primarily due to only six months of revenues
reported in the 1996 transition period. The decrease in energy revenues for the
1996 transition period as compared to 1996 was primarily due to only six months
of revenues reported in the 1996 transition period and to the amended PPAs
affecting both the Parlin and Newark Projects.

         Parlin's 1996 revenues were negatively impacted by a voluntary
curtailment of electric output during the first and second quarters in order to
maintain the correct ratio of thermal to electric production after DuPont, the
steam host, significantly decreased its steam demand by moving a business
segment overseas. In addition, Parlin's 1996 revenues were affected by a
decrease in the energy rate under the previous PPA, which rate was adjusted
quarterly based on, in part, the average cost of fuel over the preceding year.

         Equipment sales and service revenues for 1997, the 1996 transition
period and 1996 were $19,415, $15,607 and $25,344, respectively, which
principally reflect the operations of OES, PUMA and American Hydrotherm
Corporation ("American Hydrotherm"). American Hydrotherm was sold in December
1996. Revenues increased for 1997 as compared to the 1996 transition period
primarily due to only six months of revenues reported in the 1996 transition
period and due to higher sales volumes. Revenues decreased for the 1996
transition period as compared to 1996 primarily due to only six months of
revenues reported in the 1996 transition period, offset in part by the inclusion
of nine months of revenues in the period from the operations of PUMA. PUMA
changed its fiscal year end from March 31 to a calendar year end effective on
December 31, 1996.

         OES equipment sales and service revenues for 1997, the 1996 transition
period and 1996 were $6,115, $1,575 and $5,232, respectively.

         Rental revenues for 1997, for the 1996 transition period and 1996 were
$2,179, $1,062 and $1,895, respectively. The fluctuations were primarily due to
only six months of revenues reported in the 1996 transition period.

         There were no development fees and other revenues for 1997. Development
fees and other revenues for the 1996 transition period and 1996 were $1,578 and
$2,685, respectively. 


                                       41
<PAGE>


Revenues decreased for the 1996 transition period as compared to 1996 primarily
due to only six months of revenues reported in the 1996 transition period.

         COSTS AND EXPENSES

         Cost of energy revenues for 1997, the 1996 transition period and 1996
were $14,841, $7,229 and $45,663, respectively. Cost of energy revenues
increased for 1997 primarily due to only six months of costs reported in the
1996 transition period. Cost of energy revenues decreased for the 1996
transition period as compared to 1996 primarily due to only six months of costs
reported in the 1996 transition period and the result of the amended PPAs in
which JCP&L began assuming the cost of fuel for the Parlin and Newark
facilities.

         Cost of equipment sales and service for 1997, for the 1996 transition
period and 1996 were $17,037, $12,365 and $22,153, respectively. The 1997
increase was primarily due to only six months of costs reported in the 1996
transition period, except for the operations of PUMA which included nine months
of costs for the 1996 transition period, and to the recording of $190 of
inventory write-downs in the fourth quarter. Cost of equipment sales and service
decreased for the 1996 transition period as compared to 1996 primarily due to
only six months of costs reported in the 1996 transition period.

         Cost of rental revenues for 1997, for the 1996 transition period and
1996 were $1,817, $834 and $1,406, respectively. The fluctuations were primarily
due to only six months of costs reported in the 1996 transition period.

         There were no development fee expenses and other costs for 1997. Cost
of development fees and other for the 1996 transition period and 1996 were
$1,559 and $2,531, respectively. These costs consist principally of costs
associated with the sale of various projects either under development or in
operation.

         The Company's gross profit was $31,109, $17,929, and $24,794 for 1997,
for the 1996 transition period and for 1996, respectively. The higher gross
margin for 1997 is due to only six months of operations included in the 1996
transition period. The gross margin for the 1996 transition period decreased
from 1996 due to only six months of operations included in the 1996 transition
period and to fluctuations in the recovery of fuel costs through energy revenues
under the Parlin and Newark Project PPAs in effect until April 30, 1996.

         PROVISION FOR IMPAIRED ASSETS

         During the 1997 fourth quarter, the Company recorded provisions for
impaired assets in the aggregate amount of $5,274 for various asset disposals,
write-offs and write-downs. The impairment charge reduced identifiable assets of
the energy segment and the equipment sales, rental and service segment by
approximately $697 and $2,161, respectively, and corporate assets by $2,416. The
components of the charge were as follows:


                                       42
<PAGE>


<TABLE>
<CAPTION>

                                                          EQUIPMENT
                                                        SALES, RENTAL
                                                          & SERVICE     ENERGY     CORPORATE    TOTAL
                                                        -------------   ------     ---------   -------
<S>                                                     <C>             <C>        <C>         <C>
    Assets disposed
       Equipment held for sale                          $       62      $   --     $ 1,491     $1,553
       Property, plant and equipment
          Write-offs                                           551         326         146      1,023
          Equipment sold or scrapped                            --          --         779        779
       Project development costs                                --         371          --        371
       Other                                                    72          --          --         72
                                                        -------------   ------     ---------   -------
                                                               685         697       2,416      3,797
                                                        -------------   ------     ---------   -------
    Assets held and used
         Investment in PoweRent                                500          --          --        500
         Property, plant and equipment                         976          --          --        976
                                                        -------------   ------     ---------   -------
                                                             1,476          --          --      1,476
                                                        -------------   ------     ---------   -------
                                                        $    2,161      $  697     $ 2,416     $5,274
                                                        -------------   ------     ---------   -------
                                                        -------------   ------     ---------   -------
</TABLE>

To improve liquidity, in fiscal 1994 the Company initiated efforts to liquidate
specific power generation equipment that was not in use in an operating project,
rented to a customer or critical to the completion of projects in development.
These assets, consisting mainly of gas and steam turbines, were written down in
fiscal 1994 and 1995 to liquidation values determined by independent appraisal,
reclassified on the balance sheet as "equipment held for sale" and no longer
depreciated. The $3,228 carrying value of the equipment at June 30, 1995 was
reduced to $2,628 and $1,598 at December 31, 1996 and September 30, 1997,
respectively, through periodic sales. In the 1997 fourth quarter, due to lack of
interest by potential buyers, the remaining equipment was scrapped resulting in
an impairment charge of $1,553.

Impairment charges for property, plant and equipment disposals totaled $1,801,
comprised of losses of $779 from disposal of other power generating equipment,
and write-offs of $1,023 for equipment that was determined to be non-useable or
could not be located during asset counts and inspections performed at OES and
the PWD Project. The asset counts and inspections were undertaken as part of the
overall review performed to determine whether OES and PWD Project operations
should be continued. In addition, the PWD Project asset counts were required in
order to pledge the equipment as security for a new corporate revolving credit
facility which the Company entered into with Meespierson Capital Corp. Prior to
the 1997 fourth quarter, physical counts of the equipment were last performed in
fiscal 1995 during the period of bankruptcy reorganization.

The asset impairment charge also included $371 to write-off capitalized project
development costs related to certain development projects that were terminated.

During the 1997 fourth quarter, the Company completed a thorough review of its
business operations and market opportunities to determine whether operations of
the PWD Project and the equipment sales, rental and service businesses should be
continued. The board of directors determined that the PWD Project should be
retained and that the equipment sales, rental and service segment should be
exited.

The equipment sales, rental and service segment has not been reported as a
discontinued operation 


                                       43
<PAGE>

because of uncertainties about the expected timing and manner of disposal.
However, management performed an impairment review of the segment's long-lived
assets as required by SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." Based on an analysis of
estimated future cash flows, the carrying value of OES' generator equipment was
determined to be impaired. Consequently, a provision of $976 was recorded to
write-down the assets to their estimated fair value as determined by management
based on sales values of similar equipment.

Management also evaluated the carrying value of its 50% investment in PoweRent.
Due to PoweRent's low earnings capacity, combined with the expectation of
exiting this business in the near term, the investment was determined to be
permanently impaired. The carrying value of the investment was written down by
$500 based on discussions with potential buyers and management's estimate of the
investment value.

During the year ended June 30, 1996, unrecoverable project development costs of
$180 were written off.

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

         SG&A expenses for 1997, the 1996 transition period and 1996 were
$9,479, $6,149 and $12,612, respectively. SG&A increased for 1997 primarily due
to only six months of costs reported in the 1996 transition period, except for
the operations of PUMA which included nine months of costs for the 1996
transition period, and due to the recording of $914 in the fourth quarter for
various staffing and relocation costs and other reserves. SG&A decreased for the
1996 transition period as compared to 1996 primarily due to only six months of
costs reported in the 1996 transition period. 1996 includes a $3,100 cost
incurred to terminate an interest rate swap agreement in connection with the
Parlin nonrecourse project debt refinancing.

         INTEREST AND OTHER INCOME

         Interest and other income for 1997, the 1996 transition period and 1996
were $1,205, $251 and $508, respectively. Interest and other income increased
for 1997 primarily due to only six months of income reported in the 1996
transition period, the settlement of a legal suit, and the sale of a development
project in Pakistan, offset in part by fees paid to Wexford Management LLC under
a Liquidating Asset Management Agreement entered into in connection with its
emergence from bankruptcy and the sale of unused equipment. Interest and other
income for the 1996 transition period was positively impacted by interest income
earned on escrow account balances established in connection with the nonrecourse
financing on the Parlin and Newark facilities.

         REORGANIZATION COSTS

         Reorganization costs represent all costs incurred after filing
bankruptcy that relate to the Company's reorganization and restructuring
efforts. Reorganization costs for 1996 were $12,101 and consist primarily of
professional and administrative fees and expenses.

         INTEREST AND DEBT EXPENSE

         Interest and debt expense for 1997, the 1996 transition period and 1996
were $14,768, $7,681 and $18,646, respectively. Interest and debt expense
increased for 1997 as compared to 


                                       44
<PAGE>

the 1996 transition period primarily due to only six months of expense reported
in the 1996 transition period. Interest and debt expense decreased for the 1996
transition period as compared to 1996 primarily due to only six months of
expenses reported in the 1996 transition period and to the refinancing of the
Parlin and Newark Projects. 1996 interest and debt expense includes
post-petition interest on prepetition liabilities of $6,487. 1996 also includes
$1,098 in interest costs associated with loans provided by NRG Energy and $1,433
of deferred financing costs attributable to the nonrecourse debt relating to the
Parlin and Newark Projects which were refinanced during the year (see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources").

         EXTRAORDINARY ITEM

         In the 1996 transition period, the Company negotiated a buyout of a
subsidiary's capital lease obligation. The lender agreed to accept a $1,100
payment in full satisfaction of the lease. The transaction resulted in an
extraordinary gain of $1,643 (net of $124 of state income taxes).

         INCOME TAXES

         For 1997, the 1996 transition period and 1996, the Company recorded an
income tax benefit of $20,454, $268 and $463, respectively. The benefit for 1997
was attributable to the reduction of a deferred tax asset valuation reserve
previously established for net operating losses incurred by the Company from
1992 to 1996. The income tax benefit for the 1996 transition period and for 1996
was attributable to the utilization of state net operating loss carryforwards.

         NET INCOME (LOSS) AND EARNINGS (LOSS) PER SHARE

         Net income for 1997 was $23,352 compared to net income for the 1996
transition period of $6,423 and a net loss for 1996 of $17,713. The basic
earnings per share for 1997 was $3.59 compared to basic earnings per share for
the 1996 transition period of $1.00 and basic losses per share for 1996 of
$4.24.

         The increase in 1997 net income and earnings per share was primarily
due to the income tax benefit recognized upon reduction of the deferred tax
asset valuation reserve, less the impairment provision to write-down and
write-off certain assets. Net income and earnings per share for the 1996
transition period increased from the net loss in 1996 primarily due to the
non-recurring bankruptcy reorganization costs incurred in 1996.

LIQUIDITY AND CAPITAL RESOURCES

         The development, construction and operation of cogeneration projects
and other power generation facilities requires significant capital.
Historically, the Company has employed substantial leverage at both the project
and parent company level to finance its capital requirements. Debt financing at
the project level is typically nonrecourse to the parent. Nonrecourse project
financing agreements usually require initial equity investments at the project
level. The Company has financed such equity investments through cash generated
from operations and other borrowings, including borrowings at the parent level.

         Almost all of the Company's operations are conducted through
subsidiaries and other affiliates. As a result, the Company depends almost
entirely upon their earnings and cash flow to service consolidated indebtedness,
including indebtedness of the parent, CogenAmerica. The 


                                       45
<PAGE>

nonrecourse project financing agreements of certain subsidiaries and other
affiliates generally restrict their ability to pay dividends, make distributions
or otherwise transfer funds to the parent prior to the payment of other
obligations, including operating expenses, debt service and reserves.

         At December 31, 1998, consolidated long-term indebtedness (including 
current maturities) totals $285,096, consisting of nonrecourse project 
borrowings in the aggregate amount of $197,908, project borrowings with 
recourse to the parent of $21,775, $25,000 outstanding under a revolving 
credit facility and borrowings from NRG Energy of $40,413. Of the total 
long-term indebtedness, borrowings with recourse to the parent totaled 
$87,188 at December 31, 1998, consisting of borrowings under the revolving 
credit facility and from NRG Energy, and a guarantee by the parent of $21,775 
of the Parlin and Newark project borrowings. NRG Energy also has provided a 
corporate guarantee of $3,000, of certain pre-existing liabilities of Parlin 
and Newark as of May 23, 1996.

         At December 31, 1998, cash and cash equivalents totaled $3,568 and 
restricted cash totaled $12,135. The restricted cash primarily represents 
escrow funds required by the terms of credit agreements for the Newark, 
Parlin and Morris projects.

         Cash provided by operating activities was $17,571, $16,989 and $1,056
for 1998, 1997 and the 1996 transition period, respectively. In 1996 cash used
by operating activities was $8,050. Cash provided by operations in 1998
increased from 1997 primarily due to higher depreciation and amortization
expense. Cash provided by operating activities in 1997 increased from the 1996
transition period due to only six months of operations included in the 1996
transition period and improved working capital cash management. Cash used by
operating activities in 1996 resulted from the net loss incurred during the
period the Company emerged from bankruptcy.

         Cash used by investing activities was $74,274, $14,484 and $776 in
1998, 1997 and the 1996 transition period, respectively. During 1996 cash
provided by investing activities was $1,604.

         Cash used by investing activities in 1998 primarily represents 
capital expenditures of $73,406 to complete construction of the Morris 
project and upgrade other facilities, and net deposits of $3,578 into 
restricted cash accounts as required by certain credit agreements. These uses 
of cash were offset by proceeds of $2,686 from the sale of OES and other 
assets.

         Cash used by investing activities in 1997 primarily represents 
capital expenditures of $5,858 for the Newark and Parlin Project improvements 
and an equity contribution of $10,000 to the Grays Ferry Partnership. These 
uses of cash were reduced by collection of notes receivable of $1,175 and 
proceeds of $552 from the sale of certain assets.

         Cash used by investing activities for the 1996 transition period 
primarily resulted from expenditures of $1,315 for capital improvements and 
project development activities, less net withdrawals from restricted cash 
accounts.

         Cash provided by investing activities in 1996 primarily reflected 
$7,500 proceeds from the sale of certain subsidiaries in connection with the 
Company's bankruptcy plan, less $1,783 for capital expenditures and project 
development activities and less $5,156 for net deposits into restricted cash 
accounts.

                                       46
<PAGE>


         Cash provided by (used in) financing activities was $56,827, $(2,248),
$(2,115) and $7,385 for 1998, 1997, the 1996 transition period and 1996.

         During 1998, proceeds from long-term debt totaled $67,771, consisting
of construction loan draws of $54,450, and $12,027 of loans from NRG Energy
related to the Morris project. Repayments of long-term debt totaled $10,142.

         1998 Non-cash investing and financing activities include $23,890 for
acquisition of the Pryor Project and $6,230 of capital expenditures for the 
Morris Project included in liabilities.

         The Company evaluates current and forecasted cash flow as a basis for
financing operating requirements and capital expenditures. Management believes
there is sufficient liquidity from cash flow from operations and working capital
to finance recurring capital expenditures and to fund working capital
requirements, including scheduled debt service, for the next twelve months.

         In May 1996, the Company's wholly-owned subsidiaries CogenAmerica 
Newark and CogenAmerica Parlin entered into a credit agreement (the "Newark 
and Parlin Credit Agreement") which established provisions for a $155,000 
fifteen-year loan and a $5,000 five-year debt service reserve line of credit. 
The loan is secured by all of CogenAmerica Newark's and CogenAmerica Parlin's 
assets and a pledge of the capital stock of such subsidiaries. The Company 
has guaranteed repayment of UP TO $21,775 of the amount outstanding under the 
Credit Agreement. The interest rate on the outstanding principal is variable 
based on, at the option of CogenAmerica Newark and CogenAmerica Parlin, LIBOR 
plus a 1.125% margin or a defined base rate plus a 0.375% margin, with 
nominal margin increases in the sixth and eleventh year. For any quarterly 
period where the debt service coverage ratio is in excess of 1.4:1, both 
margins are reduced by 0.125%. Concurrently with the Newark and Parlin Credit 
Agreement, CogenAmerica Newark and CogenAmerica Parlin entered into an 
interest rate swap agreement with respect to 50% of the principal amount 
outstanding under the Credit Agreement. This interest rate swap agreement 
fixes the interest rate on such principal amount ($77,500 at December 31, 
1998) at 6.9% plus the margin. At December 31, 1998, the principal amount 
outstanding under the credit agreement was $134,927.

         The Company used the proceeds of the loan under the Newark and Parlin
Credit Agreement to repay certain preexisting obligations of the Company
including $87,291 of indebtedness to NRG Energy. NRG Energy provided the Company
loans of which $40,413, $4,439, $14,388 and $101,679 was outstanding at December
31, 1998, 1997, 1996 and June 30, 1996, respectively.

         CogenAmerica Schuylkill, a wholly-owned subsidiary of the Company, owns
a one-third partnership interest in the Grays Ferry Project which commenced
operation in January 1998. In March 1996, the Grays Ferry Partnership entered
into a credit agreement with Chase to finance the project. The credit agreement
obligated each of the project's three partners to make a $10,000 capital
contribution prior to the commercial operation of the facility. The Company made
its required capital contribution in 1997. NRG Energy entered into a loan
commitment to provide CogenAmerica Schuylkill the funding, if needed, for the
CogenAmerica Schuylkill capital contribution obligation to the Grays Ferry
Partnership. Prior to December 31, 1997, CogenAmerica Schuylkill had borrowed
$10,000 from NRG Energy under this loan agreement, of which $1,900 remained
outstanding to NRG Energy at December 31, 1998.


                                       47
<PAGE>


         In connection with its acquisition of the Morris Project, 
CogenAmerica Funding, a wholly-owned subsidiary of the Company, assumed all 
of the obligations of NRG Energy to provide future equity contributions to 
the project, which obligations are limited to the lesser of 20% of the total 
project cost or $22,000. NRG Energy has guaranteed to the Morris Project's 
lenders that CogenAmerica Funding will make these future equity 
contributions, and the Company has guaranteed to NRG Energy the obligation of 
CogenAmerica Funding to make these future equity contributions (which 
guarantee is secured by a second priority lien on the Company's interest in 
the Morris Project). In addition, NRG Energy has committed in a Supplemental 
Loan Agreement between the Company, CogenAmerica Funding and NRG Energy to 
loan CogenAmerica Funding and the Company (as co-borrowers) the full amount 
of such equity contributions by CogenAmerica Funding, subject to certain 
conditions precedent, at CogenAmerica Funding's option. Any such loan will be 
secured by a second priority lien on all of the membership interests of the 
project and will be recourse to CogenAmerica Funding and the Company. 
Effective November 30, 1998 the Company and NRG Energy agreed to a First 
Amendment to the Supplemental Loan Agreement that allowed the Company to 
contribute the $22,000 of equity in installments to match the construction 
draw payments. At December 31, 1998, $12,027 had been drawn and contributed 
as equity. Subsequent to year end, additional draws and equity fundings have 
been made and as of March 26, 1999, the entire $22,000 had been drawn and 
contributed as equity. The Supplemental Loan Agreement calls for an interest 
rate of prime plus 1.5%. Effective with the First Amendment the interest rate 
was changed to prime plus 3.5% until the possible event of default related to 
the Grays Ferry Project has been eliminated. This additional interest rate 
resulted in an additional $35 of interest expense for the Morris Project in 
1998. On February 16, 1999 NRG Energy agreed to reduce the interest rate 
under the loan back to prime plus 1.5%. This adjustment was made effective 
January 1, 1999. At December 31, 1998, $12,027 was due NRG Energy under the 
Supplemental Loan Agreement.

         On December 17, 1997, the Company entered into the MeesPierson Credit
Agreement providing for a $30,000 reducing revolving credit facility. The
facility is secured by the assets and cash flows of the PWD Project as well as
the distributable cash flows of the Parlin and Newark Projects, and the Grays
Ferry Partnership. On December 19, 1997 the Company borrowed $25,000 under this
facility. The proceeds were used to repay $16,949 to NRG Energy, to repay $6,551
of obligations of the PWD Project and $1,500 for general corporate purposes. The
MeesPierson Credit Agreement includes cross default provisions that cause
defaults to occur in the event certain defaults or other adverse events occur
under certain other instruments or agreements (including financing and other
project documents) to which the Company or one or more of its subsidiaries or
other entities in which it owns an ownership interest is a party. The actions
taken by the power purchaser of the Grays Ferry Project have resulted in a cross
default under the MeesPierson Credit Agreement. Repayment of the MeesPierson
Credit Agreement has not been accelerated and the lender has waived such default
and the Company has agreed not to draw any additional amounts under the
MeesPierson Credit Agreement. On August 14, 1998 the lender agreed to continue
the waiver on the default until July 1, 1999 by imposing a 2.0% increase in the
interest rate effective October 1, 1998. This additional interest rate increased
interest expense by $126 for the year ended December 31, 1998. On February 12,
1999 the lender agreed to a permanent waiver of the Grays Ferry Project cross
default and eliminated the 2.0% increase in the interest rate effective January
1, 1999. The Company also reduced the size of the facility to $25,000. The
repayment of the $25,000 is due in full on December 17, 2000.

         The Company's principal credit agreements (including the Newark and
Parlin Credit Agreement) include cross-default provisions that generally permit
its lenders to accelerate the 


                                       48
<PAGE>

indebtedness owed thereunder, to decline to make available any additional
amounts for borrowing thereunder, and to exercise certain other remedies in
respect of any collateral securing such indebtedness in the event certain
defaults or other adverse events occur under certain other instruments or
agreements (including financing and other project documents) to which the
Company or one or more of its subsidiaries or other entities in which it owns an
ownership interest is a party. As a result, a default under one such other
instrument or agreement could have a material adverse effect on the Company by
causing one or more cross-defaults to occur under one or more of the Company's
principal credit agreements, potentially having one or more of the effects set
forth above and otherwise adversely affecting the Company's liquidity and
capital position.

         During 1998 the Company incurred approximately $1,001 of third-party
costs related to a capital markets financing transaction expected to be
completed during 1999. These costs have been deferred and are included in the
balance sheet as "Deferred financing costs, net." If the Company elects to
pursue an alternative financing, such as through the commercial bank market, or
if the financing currently contemplated for the capital markets is indefinitely
delayed or discontinued, it will have to expense the financing costs that have
been deferred.

         On October 9, 1998, CogenAmerica Pryor, a wholly-owned subsidiary of
CogenAmerica, acquired from MCPC the entire interest in a 110 MW cogeneration
project, the Pryor project, located in the Mid-America Industrial Park, in
Pryor, Oklahoma. CogenAmerica Pryor acquired the Pryor Project by purchasing
from MCPC all of the issued and outstanding stock of OLAC for a cash purchase
price of approximately $23,900.

         NRG Energy has loaned the Company and CogenAmerica Pryor 
approximately $23,900 to finance the acquisition. The loan is a six-year term 
facility calling for principal and interest payments on a quarterly basis, 
based on project cash flows. The interest rate on the note relating to such 
loan was initially set at prime rate plus 3.5% and such rate reduces by two 
percentage points upon the occurrence of certain events related to 
elimination of default risk under the loan. On February 16, 1999 NRG Energy 
agreed to reduce the interest rate under the loan to prime plus 1.5%. This 
adjustment was made effective January 1, 1999.

SALE OF OES

         On November 5, 1998 the Company sold OES, a wholly-owned subsidiary of
the Company, in a stock transaction to an unrelated third party. The sales price
was $2,000 and the Company recorded a gain on the sale. The Company recorded
revenue from OES of $8,343 for fiscal 1998. This transaction did not have a
material impact on the Company's results of operations or financial position.

YEAR 2000

         The Year 2000 issue refers generally to the data structure problem that
may prevent systems from properly recognizing dates after the year 1999. The
Year 2000 issue affects information technology ("IT") systems, such as computer
programs and various types of electronic equipment that process date information
by using only two digits rather than four digits to define the applicable year,
and thus may recognize a date using "00" as the year 1900 rather than the year
2000. The issue also affects some non-IT systems, such as devices which rely on
a microcontroller to process date information. The Year 2000 issue could result
in system failures or miscalculations, causing disruptions of a company's
operations. Moreover, even if a company's 


                                       49
<PAGE>

systems are Year 2000 compliant, a problem may exist to the extent that the data
that such systems process is not.

         The following discussion contains forward-looking statements reflecting
management's current assessment and estimates with respect to the Company's Year
2000 compliance efforts and the impact of Year 2000 issues on the Company's
business and operations. Various factors, many of which are beyond the control
of the Company, could cause actual plans and results to differ materially from
those contemplated by such assessments, estimates and forward-looking
statements. Some of these factors include, but are not limited to,
representations by the Company's vendors and counterparties, technological
advances, economic considerations and consumer perceptions. The Company's Year
2000 compliance program is an ongoing process involving continual evaluation and
may be subject to change in response to new developments.

         THE COMPANY'S STATE OF READINESS

         The Company has implemented a Year 2000 compliance program designed to
ensure that the Company's computer systems and applications will function
properly beyond 1999. The Company believes that it has allocated adequate
resources for this purpose and expects its Year 2000 conversions to be completed
on a timely basis. In light of its compliance efforts, the Company does not
believe that the Year 2000 issue will materially adversely affect operations or
results of operations, and does not expect implementation to have a material
impact on the Company's financial statements. However, there can be no assurance
that the Company's systems will be Year 2000 compliant prior to December 31,
1999, or that the failure of any such system will not have a material adverse
effect on the Company's business, operating results and financial condition. In
addition, to the extent the Year 2000 problem has a material adverse effect on
the business, operations or financial condition of third parties with whom the
Company has material relationships, such as vendors, suppliers and customers,
the Year 2000 problem could have a material adverse effect on the Company's
business, results of operations and financial condition.

         IT SYSTEMS. The Company has reviewed and continues to review all of its
IT systems as they relate to the Year 2000 issue. The Company's accounting
system has been upgraded to alleviate any potential Year 2000 issues. The
Company outsources its human resource and payroll systems and is in the process
of working with the outside vendor to identify and correct any potential Year
2000 issues. This process is expected to be complete and any changes implemented
by December 31, 1999. The Company's billing systems are either provided by the
customer or are performed internally on microcomputer systems. In these cases,
the collection of data is the most important feature and any impact from a Year
2000 issue is expected to be immaterial.

         NON-IT SYSTEMS. As indicated above, the Company is dependent upon some
of its customers for billing data related to the amount of electricity and steam
sold and delivered during the month. For the most part, the collection of this
data is done mechanically rather than electronically. Only data storage is
managed electronically. The collection of this data also occurs within the
control systems of the Company's various facilities. The Company has requested
that the control system vendors audit their software to identify any potential
Year 2000 issues and provide recommendations for alleviating any potential
problems. This process has been completed for all of the Company's facilities
and the various solutions have been implemented. The Company does not believe
that any further upgrades, if necessary, will be material to its financial
condition or results of operation.


                                       50
<PAGE>


         YEAR 2000 ISSUES RELATING TO THIRD PARTIES. As described above, the
Company, in some cases, is dependent upon certain customers to provide billing
data. However, the Company also captures and processes this data as a
redundancy. The Company's control systems have been upgraded as described above
and the Company does not believe that any loss of data will occur due to a Year
2000 issue. In addition, the Company's third parties are major utilities and
sophisticated industrial concerns who are participants in sophisticated Year
2000 readiness programs. The Company has participated in numerous vendor surveys
to determine the readiness of various Company systems for any potential Year
2000 issues. In addition, the Company has obtained written disclosure from a
number of vendors relating to their Year 2000 preparedness.

         COSTS TO ADDRESS THE COMPANY'S YEAR 2000 ISSUES

         The Company's costs to review and assess the Year 2000 issue have not
been material. The Company believes that its future costs to implement Year 2000
solutions will also be immaterial to the financial statements.

         THE RISKS OF THE COMPANY'S YEAR 2000 ISSUES

         The Company believes that its most likely Year 2000 worst case scenario
would be the loss of billing data to utilities and industrial companies which
purchase the Company's electricity and steam. This billing information, as
explained above, is also captured by the Company's control systems at its
various facilities.

         THE COMPANY'S CONTINGENCY PLANS

         As described above, the contingency plan for the loss of billing data
is to use the data provided by the Company's internal control systems which are
in the process of being upgraded to eliminate any Year 2000 issues.

NEW ACCOUNTING STANDARDS

         In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes standards for reporting and
display of comprehensive income and its components. The Company adopted the
statement in 1998. The adoption had no affect on the Company's results of
operations, cash flows or financial position.

         In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information". SFAS No. 131 establishes standards
for the way that public companies report information about operating segments in
annual financial statements and requires reporting of selected information about
operating segments in interim financial statements issued to the public. It also
establishes standards for disclosures regarding products and services,
geographic area and major customers. As required, the Company adopted the
disclosure requirements for annual financial statements in 1998. The interim
reporting requirements will be adopted beginning with the Company's quarterly
report on Form 10-Q for the quarter ending March 31, 1999.

         In April 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") No. 98-5, "Reporting the Costs of
Start-Up Activities," which is effective for financial statements for fiscal
years beginning after December 15, 1998. For the 


                                       51
<PAGE>

purposes of this SOP, start-up activities are broadly defined as those one-time
activities related to opening a new facility, conducting business in a new
territory, conducting business with a new class of customer or beneficiary,
initiating a new process in an existing facility, or commencing some new
operation. Start-up activities are also defined to include activities related to
organizing a new entity. The Company assessed the impact and adopted SOP 98-5 as
of December 31, 1998, and determined it to be immaterial to the consolidated
financial statements.

         In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 is required to be adopted for
fiscal years beginning after June 15, 1999 (fiscal year 2000 for the Company).
SFAS 133 requires that all derivative instruments be recorded on the balance
sheet at their fair value. Changes in the fair value of derivatives are to be
recorded each period in current earnings or other comprehensive income,
depending on whether a derivative is designated as part of a hedge transaction
and, if it is the type of hedge transaction. Management has not yet determined
the impact that adoption of SFAS No. 133 will have on its earnings or financial
position, but it may increase earnings volatility.


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

         The Company's market risk is primarily impacted by changes in interest
rates and changes in natural gas prices.

         The Company's strategy is to mitigate fuel supply price risk at the
facilities through the use of several methods. At the Newark and Parlin
Projects, the customer is responsible for natural gas supply and delivery. The
customer is the fuel manager at the Morris Project with all costs of supplying
gas treated as pass-through to the customer. The Pryor Project bases sales
prices of energy on the weighted average cost of fuel. The Gray's Ferry Project
has obtained fuel supply contracts to limit risk of fluctuating fuel prices. The
Company does not hold or issue derivative instruments to hedge future fuel price
fluctuations.

         The table below provides information about the Company's financial
instruments that are sensitive to changes in interest rates, including debt
obligations and interest rate swaps. For debt obligations the table presents
principal cash flows and related weighted average interest rates by expected
maturity dates. For interest rate swaps, the table presents notional amounts and
weighted average interest rates by contractual maturity dates. The information
is presented in U.S. dollar equivalents, which is the reporting currency. The
instrument's actual cash flows are denominated in both U.S. dollars ($US) and
British Sterling (L), as indicated in parentheses.


                                       52
<PAGE>

<TABLE>
<CAPTION>

                                                              Expected Maturity Date
                               --------------------------------------------------------------------------------------

   (DOLLARS IN THOUSANDS)        1999       2000       2001      2002       2003     Thereafter   Total      Fair
                                                                                                             Value

                                                                 (US$ Equivalent)
                               --------------------------------------------------------------------------------------
<S>                            <C>        <C>        <C>       <C>        <C>        <C>        <C>        <C>     
        Liabilities
----------------------------
Long-Term Debt:

Variable Rate ($US)            $ 13,901   $ 39,958   $ 22,401  $ 19,861   $ 19,148   $169,415   $284,684   $284,684
  Average Interest Rate            7.94%      8.19%      8.29%     7.98%      8.15%      6.63%      7.24%

Fixed Rate (UK Sterling)       $     25   $     28   $     31  $     34   $     38   $    256   $    412   $    412
Average Interest Rate             10.27%     10.27%     10.27%    10.27%     10.27%     10.27%     10.27%

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

 Interest Rate Derivatives
----------------------------

Variable to Fixed ($US)        $  4,805   $  4,301   $  5,231  $  5,464   $  4,650   $ 43,013   $ 67,464   $  6,060
  Average Pay Rate                 6.90%      6.90%     6.90%      6.90%      6.90%      6.90%      6.90%
  Average Receive Rate             6.13%      6.13%     6.13%      6.13%      6.13%      6.13%      6.13%
</TABLE>


         The average interest on debt outstanding was 7.71% during 1998. For
additional information concerning the Company's debt obligations, please see
Notes 9 and 10 to the Company's Consolidated Financial Statements.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         The following Consolidated Financial Statements of the Company and its
subsidiaries and independent auditors' report thereon are included as pages F-1
through F-24 immediately following the signature page of this Annual Report on
Report on Form 10-K, and is incorporated herein by reference:


<TABLE>

        <S>                                                                                                    <C>
         Report of Independent Accountants .................................................................... F-1

         Financial Statements:
              Consolidated Balance Sheets as of December 31, 1998 and 1997 .................................... F-2

              Consolidated  Statements of  Operations  for the years ended  December 31, 1998,  December 31,
              1997, the six months ended December 31, 1996 and the year
              ended June 30, 1996 ............................................................................. F-3

              Consolidated Statements of Stockholders' Equity (Deficit) for the years ended
              December 31, 1998, December 31, 1997, the six months ended December 31,
              1996 and the year ended June 30, 1996 ........................................................... F-4

              Consolidated Statements of Cash Flows for the years ended December 31,
              1998, December 31, 1997, the six months ended December 31,
              1996 and the year ended June 30, 1996 ........................................................... F-5

              Notes to Consolidated Financial Statements ......................................... F-6 through F-28

</TABLE>


         See item 14(a)(2) for the audited financial statements of the Grays
Ferry Partnership and the Independent Accountants Report thereon.


                                       53
<PAGE>


         All other supplementary financial information has been omitted because
of the absence of the conditions under which it is required.


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

        None.




                                       54
<PAGE>


                                    PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The information appearing under the heading "Proposal One: Election of
Directors" and the subheadings "Executive Officers of CogenAmerica" and "Section
16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement relating
to the annual meeting of shareholders of the Company, scheduled to be held on
May 20, 1999, is incorporated herein by references.


ITEM 11. EXECUTIVE COMPENSATION

         The information appearing under the headings "Report of the
Compensation Committee on Executive Compensation," "Performance Graph,"
"Executive and Director Compensation," and "Related Party Transactions" in the
1999 Proxy Statement is incorporated herein by reference.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information appearing under the heading "Security Ownership of
Certain Beneficial Owners and Management" in the 1999 Proxy Statement is
incorporated herein by reference.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information appearing under the subheading "Compensation Committee
Interlocks and Insider Participation" and the heading "Related Party
Transactions" in the 1999 Proxy Statement is incorporated herein by reference.




                                       55
<PAGE>




                                     PART IV


ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a)      Documents filed as part of this report.

1.       FINANCIAL STATEMENTS

         The following consolidated financial statements of the Company and its
Subsidiaries and report of independent auditors thereon are included as Pages
F-1 through F-24 immediately following the signature page of this Annual Report
on Report on Form 10-K.

Index to Consolidated Financial Statements

         Report of Independent Accountants

         Consolidated Balance Sheets as of December 31, 1998 and December 31,
         1997

         Consolidated Statements of Operations for the years ended December 31,
         1998, December 31, 1997, the six months ended December 31, 1996 and for
         the year ended June 30, 1996

         Consolidated Statements of Stockholders' Equity (Deficit) for the years
         ended December 31, 1998, December 31, 1997, the six months ended
         December 31, 1996 and for the year ended June 30, 1996

         Consolidated Statements of Cash Flows for the years ended December 31,
         1998, December 31, 1997, the six months ended December 31, 1996 and for
         the year ended June 30, 1996

         Notes to Consolidated Financial Statements

2.       FINANCIAL STATEMENT SCHEDULES

         Financial Statements for the years ended December 31, 1998 and 1997 and
Independent Accountants Report for the Grays Ferry Cogeneration Partnership

         All schedules are omitted because of the absence of the conditions
under which they are required or because the required information is included in
the financial statements or notes thereto.

3.       EXHIBITS

         The "Index to Exhibits" following the Consolidated Financial Statements
of the Company and its subsidiaries is incorporated herein by reference.


                                       56
<PAGE>


(b)      REPORTS ON FORM 8-K

         The following reports on Form 8-K were filed during the last quarter of
the calendar year ended December 31, 1998:

         1. Current Report on Form 8-K dated November 12, 1998 reporting 
            information under Item 5.

         2. Current Report on Form 8-K dated October 26, 1998 reporting 
            information under Item 5.

         3. Current Report on Form 8-K dated October 8, 1998 reporting 
            information under Items 2 and 7.





                                       57
<PAGE>




                                    SIGNATURE

         In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                            COGENERATION CORPORATION OF AMERICA


     Date: March 26, 1999   /s/ TIMOTHY P. HUNSTAD
                            ---------------------------------------------------
                            By:      Timothy P. Hunstad
                            Title:   Vice President and Chief Financial Officer

         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated:

<TABLE>
<CAPTION>
              SIGNATURE                                     TITLE                                DATE
              ---------                                     -----                                -----
<S>                                         <C>                                             <C> 
/s/ JULIE A. JORGENSEN                              Interim President and                   March 26, 1999
------------------------------------
By:  Julie A. Jorgensen                     Chief Executive Officer and Director

/s/ TIMOTHY P. HUNSTAD                               Vice President and                     March 26, 1999
------------------------------------
By:  Timothy P. Hunstad                           Chief Financial Officer
                                        (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)

/s/ DAVID H. PETERSON                        Chairman of the Board of Directors             March 26, 1999
------------------------------------
By:  David H. Peterson

/s/ LAWRENCE I. LITTMAN                                   Director                           March 26, 1999
------------------------------------
By:  Lawrence I. Littman

/s/ CRAIG A. MATACZYNSKI                                  Director                          March 26, 1999
------------------------------------
By:  Craig A. Mataczynski

/s/ MICHAEL A. O'SULLIVAN                                 Director                           March 26, 1999
------------------------------------
By: Michael A. O'Sullivan

/s/ SPYROS S. SKOURAS, JR.                                Director                          March 26, 1999
------------------------------------
By:  Spyros S. Skouras, Jr.

/s/ CHARLES J. THAYER                                     Director                           March 26, 1999
------------------------------------
By:  Charles J. Thayer

/s/ RONALD J. WILL                                        Director                          March 26, 1999
------------------------------------
By:  Ronald J. Will
</TABLE>




                                       58
<PAGE>




COGENERATION CORPORATION OF AMERICA
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998


<PAGE>



            REPORT OF INDEPENDENT ACCOUNTANTS


            To the Stockholders and Board of Directors
            of Cogeneration Corporation of America

            In our opinion, the accompanying consolidated balance sheets and the
            related consolidated statements of operations, of stockholders'
            equity (deficit) and of cash flows present fairly, in all material
            respects, the financial position of Cogeneration Corporation of
            America and its subsidiaries at December 31, 1998 and 1997, and the
            results of their operations and their cash flows for the years ended
            December 31, 1998 and 1997, the six months ended December 31, 1996,
            and the year ended June 30, 1996, in conformity with generally
            accepted accounting principles. 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 generally accepted auditing standards which require that we
            plan and perform the audits 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 the opinion expressed above.

            As discussed in Note 1 to the consolidated financial statements, on
            April 30, 1996, the Company, formerly known as O'Brien Environmental
            Energy, Inc., was reorganized and emerged from bankruptcy.



            PricewaterhouseCoopers LLP
            Minneapolis, Minnesota
            March 19, 1998




                                      F-1
<PAGE>



<TABLE>
<CAPTION>

COGENERATION CORPORATION OF AMERICA
CONSOLIDATED BALANCE SHEETS
-------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
                                                                               DECEMBER 31,          DECEMBER 31,
                                                                                  1998                   1997
                                                                             ----------------      ----------------
<S>                                                                          <C>                   <C>             
                                         ASSETS
Current assets:
   Cash and cash equivalents                                                 $          3,568      $          3,444
   Restricted cash and cash equivalents                                                12,135                 8,527
   Accounts receivable, net                                                            14,326                11,099
   Receivables from related parties                                                       130                    87
   Notes receivable                                                                        --                    27
   Inventories                                                                          2,683                 2,134
   Other current assets                                                                   640                 1,022
                                                                             ----------------      ----------------
       Total current assets                                                            33,482                26,340
Property, plant and equipment, net                                                    244,040               127,574
Projects under development                                                                 --                46,376
Investments in equity affiliates                                                       18,179                13,381
Deferred financing costs, net                                                           6,503                 5,643
Deferred tax assets, net                                                                   --                 7,996
Other assets                                                                           16,470                   584
                                                                             ----------------      ----------------
       Total assets                                                          $        318,674      $        227,894
                                                                             ----------------      ----------------
                                                                             ----------------      ----------------

                     LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
   Current portion of loans and payables due NRG Energy                      $          7,020      $          2,864
   Current portion of nonrecourse long-term debt                                        8,060                 7,106
   Current portion of recourse long-term debt                                           1,550                 1,914
   Short-term borrowings                                                                1,887                 1,313
   Accounts payable                                                                     8,800                 5,136
   Prepetition liabilities                                                                803                   775
   Other current liabilities                                                            4,227                 3,083
                                                                             ----------------      ----------------
       Total current liabilities                                                       32,347                22,191

Loans due NRG Energy                                                                   36,123                 4,439
Nonrecourse long-term debt                                                            189,848               143,697
Recourse long-term debt                                                                45,225                46,323
Deferred tax liabilities, net                                                           2,793                    --
Other liabilities                                                                       8,525                15,446
                                                                             ----------------      ----------------
       Total liabilities                                                              314,861               232,096

Stockholders' equity (deficit):
   Common stock, par value $.01, 50,000,000 shares
   authorized; 6,871,069 and 6,836,769 shares issues
   and outstanding, respectively                                                           68                    68
   Additional paid-in capital                                                          65,715                65,715
   Accumulated deficit                                                                (61,590)              (69,592)
   Accumulated other comprehensive income (loss)                                         (380)                 (393)
                                                                             ----------------      ----------------
       Total stockholders' equity (deficit)                                             3,813                (4,202)
                                                                             ----------------      ----------------
       Total liabilities and stockholders' equity (deficit)                  $        318,674      $        227,894
                                                                             ----------------      ----------------
                                                                             ----------------      ----------------
</TABLE>

     THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.




                                      F-2
<PAGE>


<TABLE>
<CAPTION>

COGENERATION CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
                                                                                      Six Months
                                               Year Ended          Year Ended            Ended             Year Ended
                                              December 31,        December 31,        December 31,          June 30,
                                                  1998                1997                1996                1996
                                             --------------      -------------       -------------       -------------
<S>                                          <C>                 <C>                 <C>                 <C>          
Energy revenues                              $       52,216      $      43,210       $      21,669       $      66,623
Equipment sales and services                         19,342             19,415              15,607              25,344
Rental revenues                                       2,438              2,179               1,062               1,895
Development fees and other                               --                 --               1,578               2,685
                                             --------------      -------------       -------------       -------------
                                                     73,996             64,804              39,916              96,547

Cost of energy revenues                              23,462             14,841               7,229              45,663
Cost of equipment sales and services                 16,929             17,037              12,365              22,153
Cost of rental revenues                               1,954              1,817                 834               1,406
Cost of development fees and other                       --                 --               1,559               2,531
                                             --------------      -------------       -------------       -------------
                                                     42,345             33,695              21,987              71,753
                                             --------------      -------------       -------------       -------------

Gross profit                                         31,651             31,109              17,929              24,794
Selling, general and administrative
  expenses                                            9,415              9,479               6,149              12,612
Provision for impaired assets                            --              5,274                  --                 180
                                             --------------      -------------       -------------       -------------

Income (loss) from operations                        22,236             16,356              11,780              12,002

Interest and other income                             1,715              1,205                 251                 508
Reorganization costs                                     --                 --                  --             (12,101)
Interest and debt expense                           (15,855)           (14,768)             (7,681)            (18,646)
Equity in earnings of affiliates                      4,784                105                 162                  61
                                             --------------      -------------       -------------       -------------

Income (loss) before income taxes                    12,880              2,898               4,512             (18,176)
Provision for income taxes (benefit)                  4,878            (20,454)               (268)               (463)
                                             --------------      -------------       -------------       -------------

Income (loss) before extraordinary item               8,002             23,352               4,780             (17,713)
Extraordinary item, net of income taxes                  --                 --               1,643                  --
                                             --------------      -------------       -------------       -------------

Net income (loss)                            $        8,002      $      23,352       $       6,423       $     (17,713)
                                             --------------      -------------       -------------       -------------

Basic earnings (loss) per share:
   Before extraordinary item                 $         1.17      $        3.59       $        0.75       $       (4.24)
   Extraordinary item                                    --                 --                0.25                  --
                                             --------------      -------------       -------------       -------------
                                             $         1.17      $        3.59       $        1.00       $      (4.24)
                                             --------------      -------------       -------------       -------------
                                             --------------      -------------       -------------       -------------
Diluted earnings (loss) per share:
   Before extraordinary item                 $         1.15      $        3.48       $        0.74       $      (4.24)
   Extraordinary item                                     -                  -                0.25                   -
                                             --------------      -------------       -------------       -------------
                                             $         1.15      $        3.48       $        0.99       $      (4.24)
                                             --------------      -------------       -------------       -------------
                                             --------------      -------------       -------------       -------------
Weighted average shares outstanding
  Basic                                               6,837              6,511               6,430               4,182
                                             --------------      -------------       -------------       -------------
                                             --------------      -------------       -------------       -------------
  Diluted                                             6,966              6,725               6,463               4,182
                                             --------------      -------------       -------------       -------------
                                             --------------      -------------       -------------       -------------
</TABLE>


   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.


                                      F-3
<PAGE>

<TABLE>
<CAPTION>

COGENERATION CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
------------------------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)                                                                                     ACCUMULATED
                                                                            ADDITIONAL       ACCUMU-       OTHER COM-      TOTAL
                                                 COMMON         PREFERRED    PAID-IN          LATED        PREHENSIVE  STOCKHOLDERS'
                                                  STOCK           STOCK      CAPITAL         DEFICIT      INCOME (LOSS)   EQUITY
------------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>            <C>             <C>            <C>            <C>        <C>
Balance, June 30, 1995                          $    169       $       --      $41,353        $(81,654)      $ (626)    $(40,758)

Net loss                                              --               --           --         (17,713)          --      (17,713)
Currency translation adjustment                       --               --           --              --         (223)        (223)
                                                                                                                          ------
         Comprehensive Income (Loss)                                                                                     (17,936)
Plan of reorganization:
  Purchase of common stock by NRG Energy              27               --       21,151              --           --       21,178
  Exchange class A and B common stock
    for new common shares, retire
    treasury shares                                 (132)              --           68              --           64           --
  Issue preferred shares to Wexford                   --               49        4,908              --           --        4,957
Redemption of preferred shares                        --              (49)      (4,908)             --           --       (4,957)
Preferred dividends                                   --               --          (57)             --           --          (57)
                                                --------       ----------   ----------      ----------      -------    ---------
Balance, June 30, 1996                                64               --       62,515         (99,367)        (785)     (37,573)

Net income                                            --               --           --           6,423           --        6,423
Currency translation adjustment                       --               --           --              --          433          433
                                                                                                                       ---------
         Comprehensive Income (Loss)                                                                                       6,856
Payment received on treasury stock
    resulting from reorganization                     --               --          105              --           --          105
Issue restricted stock                                --               --           99              --           --           99
                                                --------       ----------   ----------      ----------      -------    ---------
Balance, December 31, 1996                            64               --       62,719         (92,944)        (352)     (30,513)

Net income                                            --               --           --          23,352           --       23,352
Currency translation adjustment                       --               --           --              --          (41)         (41)
                                                                                                                        ---------
         Comprehensive Income (Loss)                                                                                      23,311
NRG Energy conversion of
    stock option                                       4               --        2,996              --           --        3,000
                                                --------       ----------   ----------      ----------      -------    ---------
Balance, December 31, 1997                            68               --       65,715         (69,592)        (393)      (4,202)
Net income                                            --               --           --           8,002           --        8,002
Currency translation adjustment                       --               --           --              --           13           13
                                                                                                                       ---------
         Comprehensive Income (Loss)                                                                                       8,015
                                                --------       ----------   ----------      ----------      -------    ---------
Balance, December 31, 1998                      $     68       $       --      $65,715        $(61,590)       $(380)    $  3,813
                                                --------       ----------   ----------      ----------      -------    ---------
                                                --------       ----------   ----------      ----------      -------    ---------
</TABLE>


                                      F-4
<PAGE>

<TABLE>
<CAPTION>

COGENERATION CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
                                                                                              SIX MONTHS
                                                                YEAR ENDED     YEAR ENDED        ENDED        YEAR ENDED
                                                               DECEMBER 31,   DECEMBER 31,   DECEMBER 31,      JUNE 30,
                                                                   1998           1997           1996            1996
                                                               ---------      ---------       ---------      ---------
<S>                                                            <C>            <C>             <C>            <C>       
Cash flows from operating activities:
   Net income (loss)                                           $   8,002      $  23,352       $   6,423      $ (17,713)
   Adjustments to reconcile net income (loss) to net cash
     provided by (used in) operating activities:
     Extraordinary item, net of income taxes                          --             --          (1,643)            --
     Depreciation and amortization                                 9,791          7,840           4,869          9,441
     Deferred tax (benefit) expense                                3,589        (21,400)           (778)          (904)
     Provision for impaired assets                                    --          5,274              --            180
     Gain on disposition of property and equipment                    --            756              59             --
     Equity in earnings of affiliates                             (4,784)            --              --             --
     (Gain) on disposal of business                                 (807)            --              --             --
     Bankruptcy professional fees accrued                             --             --              --            432
     Other, net                                                       --           (212)            148           (216)
     Changes in operating assets and liabilities:
       Accounts receivable                                        (3,453)           772          (1,011)           730
       Inventories                                                  (931)           621             (13)           615
       Receivables from related parties                              (43)            97             275            223
       Other assets                                                  416            178            (277)            --
       Payables to related parties                                  (135)            --              --             --
       Accounts payable and other current liabilities              5,926           (289)         (6,996)          (838)
                                                               ---------      ---------       ---------      ---------
           Net cash provided by (used in) operating 
             activities                                           17,571         16,989           1,056         (8,050)
                                                               ---------      ---------       ---------      ---------

Cash flows from investing activities:
   Capital expenditures and project development costs            (73,406)        (5,858)         (1,315)        (1,783)
   Proceeds from sale of property and equipment                      686            552             104             --
   Proceeds from sale of subsidiaries and projects                 2,000             --              --          7,500
   Investment in equity affiliates                                    --        (10,000)             --             --
   Collections on notes receivable                                    24          1,175              10            816
   Withdrawals from (deposits into) restricted cash 
      accounts - net                                              (3,578)          (353)            545         (5,156)
   Other, net                                                         --             --            (120)           227
                                                               ---------      ---------       ---------      ---------

       Net cash (used in) provided by investing activities       (74,274)       (14,484)           (776)         1,604
                                                               ---------      ---------       ---------      ---------

Cash flows from financing activities:
   Proceeds from long-term debt                                   55,744         24,582          95,000         60,226
   Proceeds from NRG Energy loans                                 12,027         10,000              --        128,078
   Repayments of NRG Energy loans                                     --        (16,949)        (86,035)       (26,398)
   Repayments of long-term debt                                  (10,142)       (16,857)         (6,098)       (92,816)
   NRG Energy capital contribution                                    --             --              --         21,178
   Net (repayments) proceeds of short-term borrowings                574         (1,072)            595            193
   Payments on prepetition liabilities                                --         (1,762)         (4,660)       (73,483)
   Deferred financing costs                                       (1,376)          (190)         (1,121)        (4,579)
   Payment received on treasury stock resulting from
     reorganization                                                   --             --             105             --
   Issuance of restricted stock                                       --             --              99             --
   Redemption of and dividends on preferred shares                    --             --              --         (5,014)
                                                               ---------      ---------       ---------      ---------
       Net cash (used in) provided by financing activities        56,827         (2,248)         (2,115)         7,385
                                                               ---------      ---------       ---------      ---------

Net increase (decrease) in cash and cash equivalents                 124            257          (1,835)           939
Cash and cash equivalents at beginning of year                     3,444          3,187           5,022          4,083
                                                               ---------      ---------       ---------      ---------
Cash and cash equivalents at end of year                       $   3,568      $   3,444       $   3,187      $   5,022
                                                               ---------      ---------       ---------      ---------
                                                               ---------      ---------       ---------      ---------

Supplemental disclosure of cash flow information: 
  Non-cash investing and financing activities:
     Acquisition of subsidiary financed with long-term
       debt from NRG Energy                                    $  23,890      $      --       $      --      $      --
     Capital expenditures included in other liabilities            6,230         15,446              --             --
     Conversion of NRG Energy debt to common stock                    --          3,000              --             --
   Interest paid                                                  18,160         15,887          12,472         18,926
   Income taxes paid                                               2,024          1,477             495            110
</TABLE>


   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.



                                      F-5
<PAGE>


FOR DEFINITIONS OF CERTAIN CAPITALIZED TERMS USED BUT NOT DEFINED IN THESE NOTES
TO FINANCIAL STATEMENTS, PLEASE SEE THE SELECTED DEFINITIONS THAT IMMEDIATELY
PRECEDE ITEM 1.

1.   Business and Emergence from Bankruptcy

Cogeneration Corporation of America ("CogenAmerica" or the "Company"), formerly
known as NRG Generating (U.S.) Inc., is an independent power producer pursuing
"inside-the-fence" cogeneration projects in the U.S. The Company is engaged
primarily in the business of developing, owning and managing the operation of
cogeneration projects which produce electricity and thermal energy for sale
under long-term contracts with industrial and commercial users and public
utilities. The Company is currently focusing on natural gas-fired cogeneration
projects with long-term contracts for substantially all of the output of such
projects. In addition, the Company sells and rents power generation and
standby/peak shaving equipment and services.

On April 30, 1996, O'Brien Environmental Energy, Inc. ("O'Brien"), the formerly
named parent company, emerged from bankruptcy pursuant to the Plan submitted by
NRG Energy, Inc. ("NRG Energy"), the O'Brien Official Committee of Equity
Security Holders and Wexford Management Corporation ("Wexford") and approved by
the U.S. Bankruptcy Court for the District of New Jersey (the "Court"). The Plan
awarded NRG Energy the rights to acquire a 41.86% equity interest in the Company
and generally provided for full and immediate payment of all undisputed
prepetition liabilities and included a provision for post-petition interest.
O'Brien was renamed on the April 30, 1996 closing date to NRG Generating (U.S.)
Inc.

O'Brien filed a voluntary petition for reorganization under Chapter 11 of the
United States Bankruptcy Code with the Court on September 28, 1994 to pursue
financial restructuring efforts under the protection afforded by the U.S.
bankruptcy laws. The decision to seek Chapter 11 relief was based on the
conclusion that action had to be taken to preserve its business relationships,
restructure its debt and maintain the operational strength and assets of the
Company. The Company continued its normal operations as Debtor-in-Possession
during the bankruptcy period but could not engage in transactions outside the
ordinary course of business without approval of the Court.

On April 30, 1996, NRG Energy funded approximately $107,418 in accordance with
the Plan and O'Brien's existing Class A and Class B common stock was canceled
and became exchangeable for 3,764,457 (58.14%) shares of new common stock. The
NRG Energy funding was comprised of: $71,240 advanced under the terms of three
loan agreements; $21,178 to purchase 2,710,357 (41.86%) of new common stock;
$7,500 for the purchase of ten wholly-owned subsidiaries of O'Brien; and $7,500
deposited with the Company's stock transfer agent representing a cash
distribution of approximately $0.44 per share by NRG Energy to O'Brien's Class A
and Class B common stockholders.

On April 30, 1996 the Company also issued 49,574 shares of series A, 13.5%
cumulative preferred stock to Wexford in satisfaction of $4,957 of prepetition
unsecured claims allowed by the Court. The preferred shares were redeemed by the
Company in May 1996 for $4,957 plus $57 in dividends.

The funds received from NRG Energy were disbursed according to the Plan's terms
which generally provided for full payment (or cure/reinstatement) of all
undisputed prepetition liabilities including the payment of post-petition
interest on most prepetition obligations. Additionally, disbursements were made
to certain creditors of subsidiary companies whose obligations were not included
in prepetition liabilities and for professional fees incurred during the
bankruptcy proceedings. Certain other bankruptcy claims filed with the Court
remain in dispute and are classified on the balance sheet as 


                                      F-6
<PAGE>

"prepetition liabilities." An escrow fund has been established to fully reserve
the remaining disputed claims submitted to the Court. Any remaining escrow funds
resulting from the Court disallowing any disputed claims will be disbursed pro
rata to all reinstated creditor claimholders as additional post-petition
interest.

In accordance with the Plan, on April 30, 1996 the Company and Wexford entered
into a Liquidating Asset Management Agreement whereby Wexford agreed to assist
the Company with the possible liquidation of certain specified assets consisting
of (a) the Company's equipment sales, rental and services business operated by
its subsidiaries OES and PUMA, (b) the PWD Project, (c) certain unused
equipment, and (d) American Hydrotherm Corporation ("American Hydrotherm") and
two other related subsidiaries. During 1996 and 1997, the unused equipment,
American Hydrotherm and the two other related subsidiaries were sold or
otherwise disposed. In the fourth quarter of 1997, the board of directors
decided to retain the PWD Project and determined that the equipment sales,
rental and services business is not a part of the Company's strategic plan for
the future and would be disposed. Consistent with the board of directors'
determination to exit this business, OES was sold in November 1998 (see Note 6)
and possible alternatives for the disposition of PUMA continued to be pursued.
In accordance with the agreement and as approved by the Court, the Company paid
Wexford $1,219, and $281 in compensation for services during the year ended
December 31, 1997 and six months ended December 31, 1996.

2.   Summary of Significant Accounting Policies

BASIS OF PRESENTATION

The consolidated financial statements include the accounts of all majority-owned
subsidiaries and all significant intercompany balances and transactions have
been eliminated. Investments in companies, partnerships and projects that are
more than 20% but less than majority-owned are accounted for by the equity
method.

Effective July 1, 1996, the Company changed its year end from June 30 to
December 31. The Company filed a transition Report on Form 10-K for the period
July 1, to December 31, 1996. The periods presented in the Company's
consolidated statements of operations, stockholders' equity (deficit) and of
cash flows are for the twelve months ended December 31, 1998 and 1997, the six
months ended December 31, 1996 and the twelve months ended June 30, 1996. The
twelve months ended June 30, 1996 are sometimes referred to in these Notes to
Consolidated Financial Statements as fiscal 1996.

USE OF ESTIMATES

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

REORGANIZATION COSTS AND PREPETITION LIABILITIES

Expenses incurred after filing bankruptcy related to the Company's
reorganization and restructuring efforts have been presented in the consolidated
statement of operations as reorganization costs. Liabilities which remain
subject to the bankruptcy proceeding are classified on the balance sheet as
prepetition liabilities and include provisions for post-petition interest.


                                      F-7
<PAGE>


REVENUE RECOGNITION

Energy revenues from cogeneration projects are recognized as electricity and
steam are delivered. Revenue from sales and rental of power generation equipment
are recognized upon shipment or over the term of the rental. Development fee
revenue is generally recognized on a cost recovery basis as cash is received
(without future lending provisions).

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with maturities of three
months or less at the time of purchase to be cash equivalents.

INVENTORIES

Inventories, consisting principally of power generation equipment and related
parts held for sale, are valued at the lower of cost (determined primarily by
the specific identification method) or market.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is stated at cost less accumulated depreciation.
When assets are disposed of, the cost and related accumulated depreciation are
removed from the accounts and the resulting gains or losses are included in
results of operations. The cost of property, plant and equipment, net of
estimated salvage value is depreciated using the straight-line method over the
useful lives of the assets which range from five to thirty years. It is
reasonably possible that the estimated useful lives or salvage values could
differ materially in the near term from the amounts assumed in arriving at
current depreciation expense. These estimates are affected by such factors as
the Company's overhaul, repair and maintenance activities, the ability of the
Company to continue selling electricity and steam to customers under existing
long-term contracts, changes in estimated prices of electricity and steam as
well as alternative sources of energy and changes in the regulatory environment.

Cost of maintenance and repairs is charged to expense as incurred. Betterments
and improvements are capitalized. During the years ended December 31, 1998 and
1997, the Company capitalized interest in connection with the construction of
power plants of $4,465 and $744, respectively. No interest was capitalized
during the six months ended December 31, 1996 or the year ended June 30, 1996.

PROJECT DEVELOPMENT COSTS

Project development costs consist of fees, licenses, permits, site testing, bids
and other charges, including employee costs, incurred incidental to specific
projects under development. Project development costs are expensed in any period
in which management determines the costs to be unrecoverable.

DEFERRED FINANCING COSTS

Financing costs are deferred and amortized on a straight-line basis over the
term of the related debt, which is comparable to results using the effective
interest method. Interest expense includes amortization of $516, $407, $199, and
$1,480 for the years ended December 31, 1998 and 1997, the six months ended
December 31, 1996 and the year ended June 30, 1996, respectively. Accumulated
amortization was $1,101 and $585 at December 31, 1998 and 1997, respectively.

OTHER ASSETS

Other assets include $16,470 (net of accumulated amortization of $110) at
December 31, 1998 for 


                                      F-8
<PAGE>


capitalized project development costs related to the Morris Project. The 
capitalized project development costs are amortized by the straight-line 
method over the 25-year life of the project.

NONRECOURSE LONG-TERM DEBT

Nonrecourse long-term debt consists of project financing for which the repayment
obligation is limited to specific project subsidiaries.

INCOME TAXES

The Company accounts for income taxes under Statement of Financial Accounting
Standards ("SFAS") No. 109. SFAS No. 109 is an asset and liability approach that
requires the recognition of deferred tax assets and liabilities for the expected
future tax consequences of temporary differences between the carrying amounts
and tax basis of other assets and liabilities. Valuation allowances are recorded
when it is more likely than not that a tax benefit will not be realized.

INTEREST RATE SWAP AGREEMENT

The Company has entered into an interest rate swap agreement to reduce the
impact of changes in interest rates on certain of its variable rate long-term
debt. The differentials paid or received under the swap agreement are accrued
and recorded as adjustments to interest expense.

FOREIGN CURRENCY TRANSLATION

The accounts of foreign subsidiaries have been translated in accordance with
SFAS No. 52, whereby assets and liabilities are translated at rates of exchange
existing at the balance sheet date and revenues and expenses are translated at
the average rates of exchange for the period.

CONCENTRATION OF CREDIT RISK

The Company primarily sells electricity and steam to industrial and commercial
users and public utilities under long-term agreements. The Company also sells,
rents and services power generation equipment to various entities worldwide. The
Company performs on-going credit evaluations of its customers and generally does
not require collateral. The Company maintains reserves for potential credit
losses and such losses have been within management's expectations.

RECLASSIFICATIONS

Certain reclassifications have been made to conform prior years' data to the
current presentation. These reclassifications had no impact on previously
reported net income or stockholders' equity (deficit).

3.   New Accounting Pronouncements

In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standard ("SFAS") No. 130 "Reporting Comprehensive
Income," which establishes standards for reporting and display of comprehensive
income and its components. The Company adopted the statement in 1998 and
displays comprehensive income on its consolidated statement of stockholders'
equity (deficit). The Company's comprehensive income is comprised of net income
and foreign currency translation adjustments.

In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS No. 131 establishes standards for the
way that public companies report 


                                      F-9
<PAGE>

information about operating segments in annual financial statements and requires
reporting of selected information about operating segments in interim financial
statements issued tot he public. It also establishes standards for disclosures
regarding products and services, geographic areas and major customers. The
Company adopted the disclosure requirements for annual financial statements in
1998. The interim reporting requirements will be adopted beginning with the
Company's quarterly report on Form 10-Q for the quarter ending March 31, 1999.

In April 1998, the American Institute of Certified Public Accountants ("AICPA")
issued Statement of Position ("SOP") No. 98-5, "Reporting the Costs of Start-Up
Activities," which is effective for financial statements for fiscal years
beginning after December 15, 1998. For purposes of this SOP, start-up activities
are broadly defined as those one-time activities related to opening a new
facility, conducting business in a new territory, conducting business with a new
class of customer or beneficiary, initiating a new process in an existing
facility, or commencing some new operation. Start-up activities are also defined
to include activities related to organizing a new entity. The Company assessed
the impact and adopted SOP 98-5 as of December 31, 1998, and determined it to be
immaterial to the consolidated financial statements.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 is required to be adopted for
fiscal years beginning after June 15, 1999 (fiscal year 2000 for the Company).
SFAS No. 133 requires that all derivative instruments be recorded on the balance
sheet at their fair value. Changes in the fair value of derivatives are to be
recorded each period in current earnings or other comprehensive income,
depending on whether a derivative is designated as part of a hedge transaction
and, if it is the type of hedge transaction. Management has not yet determined
the impact that adoption of SFAS No. 133 will have on its earnings or financial
position, but it may increase earnings volatility.

4.   Restricted Cash and Cash Equivalents

Cash and cash equivalents that are not fully available for use in operations are
classified as restricted. Restricted cash and cash equivalents relate primarily
to debt service reserve accounts required by the nonrecourse project debt
agreements for CogenAmerica Newark, CogenAmerica Parlin and CogenAmerica Morris
and to bankruptcy escrow accounts.

Restricted cash and cash equivalents consist of the following:

<TABLE>
<CAPTION>
                                                                              DECEMBER 31,          DECEMBER 31,
                                                                                  1998                  1997
                                                                              -----------           -----------
    <S>                                                                       <C>                   <C>        
     Bankruptcy escrow accounts                                               $       803           $       770
     Debt service reserve accounts                                                 11,332                 7,757
                                                                              -----------           -----------
                                                                              $    12,135           $     8,527
                                                                              -----------           -----------
                                                                              -----------           -----------
</TABLE>


                                      F-10
<PAGE>


5.   Property, Plant and Equipment

Property, plant and equipment consists of the following:


<TABLE>
<CAPTION>

                                                                              DECEMBER 31,          DECEMBER 31,
                                                                                  1998                  1997
                                                                             -------------         -------------
     <S>                                                                     <C>                   <C>          
     Plant and equipment                                                     $     291,098         $     169,839
     Furniture and fixtures                                                            297                   687
     Land, buildings and improvements                                                  464                 1,528
     Other equipment                                                                    --                    37
                                                                             -------------         -------------
                                                                                   291,859               172,091
     Accumulated depreciation and amortization                                     (47,819)              (44,517)
                                                                             -------------         -------------
                                                                             $     244,040         $     127,574
                                                                             -------------         -------------
                                                                             -------------         -------------
</TABLE>


Depreciation expense was $8,581, $7,320, $3,626 and $7,858, for the years ended
December 31, 1998, 1997, the six months ended December 31, 1996, and the year
ended June 30, 1996, respectively.

Plant and equipment relates primarily to the Newark, Parlin, Morris and Pryor
cogeneration projects and the PWD Project standby facility.

The Newark Project consists of a 58 MW cogeneration power plant in Newark, New
Jersey which commenced operations in November 1990 and is supplying electricity
and steam pursuant to 25-year supply contracts. The Project is a qualifying
facility as defined in the Public Utility Regulatory Policies Act of 1978.

The Parlin Project consists of a 122 MW cogeneration power plant in Parlin, New
Jersey which commenced operations in June 1991 and is supplying up to 114 MW of
electricity pursuant to a 20-year electric supply contract and steam pursuant to
a 30-year supply contract. Parlin relinquished its claim to QF status and filed
rates as a public utility under the Federal Power Act. However, Parlin has been
determined to be an exempt wholesale generator (EWG). The Parlin project has
also changed from a full base load operation to a partial base load/partial
dispatchable project.

The Morris Project consists of a 117 MW cogeneration power plant in Morris,
Illinois which commenced operations in November 1998 and is supplying
electricity and steam pursuant to 25 year supply contracts. The Morris Project
is a qualifying facility as defined in the Public Utility Regulatory Policies
Act of 1978.

The Pryor Project was acquired in October 1998 and consists of a 110 MW
cogeneration power plant in Pryor, Oklahoma. The Pryor Project sells 110 MW of
capacity and varying amounts of energy to Oklahoma Gas and Electric Company
under a contract through 2007 and steam to a number of industrial users under
contracts with various termination dates ranging from 1998 and 2007. In
addition, the Pryor Project sells varying amounts of energy to the Public
Service of Oklahoma at its avoided cost. The Pryor Project is a qualifying
facility as defined in the Public Utility Regulatory Policies Act of 1978.

The PWD Project is a 22 MW standby/peak shaving facility in Philadelphia,
Pennsylvania which commenced operations in September 1993 and is supplying
electricity pursuant to 20-year supply contracts. The Company owns an 83%
interest in this project.


                                      F-11
<PAGE>

6.  Acquisitions and Divestitures

PRYOR PROJECT

On October 9, 1998, CogenAmerica Pryor, a wholly-owned subsidiary of
CogenAmerica, acquired from Mid Continent Power Company, L.L.C. ("MCPC") all of
the issued and outstanding stock of Oklahoma Loan Acquisition Corporation
("OLAC"), the owner of the Pryor Project. MCPC is owned 50% by NRG Energy and
50% by parties affiliated with Decker Energy International, Inc. The purchase
price was approximately $23,900, including related acquisition costs, and was
financed with borrowings from NRG Energy (See Note 10). The acquisition was
accounted for by the purchase method. Accordingly, the operating results of OLAC
have been included in the Company's consolidated financial statements since the
date of acquisition.

The following unaudited pro forma consolidated financial information assumes the
acquisition had occurred on January 1 of each year:

<TABLE>
<CAPTION>
                                                               YEAR ENDED                          YEAR ENDED
                                                            DECEMBER 31, 1998                   DECEMBER 31, 1997
                                                            -----------------                   -----------------
                 <S>                                        <C>                                  <C>    
                  Revenues                                      $86,784                          $74,943
                  Net Income                                    $ 7,158                          $19,955
                  Earnings per share:
                    Basic                                       $  1.05                          $  3.06
                    Diluted                                     $  1.03                          $  2.97
</TABLE>


The pro forma consolidated results are not indicative of the actual results that
would have occurred had the acquisition been completed as of the beginning of
each period presented, nor are they necessarily indicative of results that will
be obtained in the future.

MORRIS PROJECT

On December 29, 1997, CogenAmerica Funding, a wholly-owned subsidiary of the
Company, acquired all of the issued and outstanding stock of Morris LLC from NRG
Energy for a purchase price of $5,000. At the date of acquisition, Morris LLC
had no operations, but was developing and constructing the 117 MW cogeneration
facility referred to as the Morris Project. As part of the acquisition, the
Company assumed all of the rights and obligations held by NRG Energy related to
the development, construction and financing of the Morris Project, including
those under the engineering, procurement and construction contract, the
construction and term loan agreement (see Note 10), the power purchase agreement
and various other project agreements and documents. The acquisition was
accounted for by the purchase method. The purchase price was capitalized and
included in "projects under development" on the balance sheet as of December 31,
1997. During 1998 the capitalized cost was reclassified to "other assets" and
are being amortized over the 25-year life of the Morris Project.

OES

In November 1998, the Company sold OES, a wholly-owned subsidiary of the
Company, in a stock transaction to an unrelated third party. The sales price was
$2,000 and the Company recorded a pre-tax gain of approximately $800 on the
sale.


                                      F-12
<PAGE>

7.   Investments in Equity Affiliates

Investments in equity affiliates consist of the following:

<TABLE>
<CAPTION>
                                                                              DECEMBER 31,          DECEMBER 31,
                                                                                  1998                  1997
                                                                               -----------           -----------
    <S>                                                                       <C>                   <C>        
     Grays Ferry (33% owned)                                                  $    17,603           $    12,845
     PoweRent Limited (50% owned)                                                     576                   536
                                                                              -----------           -----------
                                                                              $    18,179           $    13,381
                                                                               -----------           -----------
                                                                               -----------           -----------
</TABLE>

GRAYS FERRY

CogenAmerica Schuylkill, a wholly-owned subsidiary of the Company, has a
one-third partnership interest in the Grays Ferry Partnership. The other
partners are affiliates of PECO Energy Company and Trigen Energy Corporation
("Trigen"). Grays Ferry has constructed a 150 MW cogeneration facility located
in Philadelphia which began commercial operations in January 1998. Grays Ferry
has a 25-year contract to supply all the steam produced by the project to an
affiliate of Trigen through 2022 and two 20-year contracts ("PPAs") to supply
all of the electricity produced by the project to PECO through 2017.

The Company accounts for its investment in the Grays Ferry Partnership by the
equity method. The Company's equity in earnings of the partnership was $4,758 in
1998. Grays Ferry commenced commercial operation in January 1998 and therefore
had no earnings prior to 1998. The Company and the Grays Ferry Partnership are
in litigation with PECO Energy Company over the validity of the PPAs (see Note
8).

Summarized financial information of Grays Ferry for 1998 is presented
below:

<TABLE>
<S>                           <C>            <C>                      <C>
Net revenues                  $78,126        Current Assets           $ 33,393
Cost of sales                 $39,274        Noncurrent assets        $150,771
Operating income              $26,304        Current Liabilities      $133,426
Partnership net income        $15,295        Nonwarrant liabilities   $     --
</TABLE>

POWERENT LIMITED

PoweRent Limited ("PoweRent") is a 50% owned United Kingdom company that sells
and rents power generation equipment. The Company accounts for its investment by
the equity method. In 1997 the Company recorded a charge of $500 to reduce the
carrying value of its investment in PoweRent (see Note 14).

8.   Contingencies

In March 1998 PECO asserted that its PPAs with the Grays Ferry Partnership are
not effective based on an alleged denial of cost recovery by the Pennsylvania
Public Utility Commission. PECO claims that it is not obligated to pay the rates
set forth in the agreements. PECO has further taken the position that, in any
event, its total liability under each of the two PPAs is limited to $25,000
($50,000 in the aggregate) by the terms of such agreements. The Company and the
Grays Ferry Partnership are in litigation with PECO over its obligations under
such agreements. They are seeking actual and punitive damages plus attorneys'
fees and costs. After initially refusing to pay the rates set forth in the PPAs
and making payments for the electricity purchased from the Grays Ferry Project
at substantially lower rates, PECO was ordered by the court in which the
litigation is pending to comply with the PPAs pending the outcome 


                                      F-13
<PAGE>

of the litigation. Following the court order, PECO resumed paying under protest
the full contract rates and, as of December 31, 1998, has paid all amounts due
under the applicable PPAs. Through December 31, 1998, the Grays Ferry
Partnership has recorded revenue of approximately $34,500 from PECO, which PECO
claims it was not obligated to pay. On March 9, 1999 the court issued an order
for partial summary judgment in favor of the Grays Ferry Partnership, ruling
that PECO's attempted termination of the Grays Ferry PPAs was improper. A trial
date of March 29, 1999 has been established to determine damages owed to the
Grays Ferry Partnership and to decide the remaining litigated claims.

Due to PECO's actions, the Grays Ferry Partnership defaulted in the payment of
certain interest due under its principal credit agreement, which default has
since been cured, and the Grays Ferry Partnership continues to be in default
under other provisions of such credit agreement. As a result of such continuing
default, the lenders under the credit agreement have the ability generally to
prevent the Grays Ferry Partnership from distributing or otherwise disbursing
cash held or generated by the Grays Ferry Project. These rights, if exercised by
the lenders, could prevent the Grays Ferry Partnership from meeting its
obligations to suppliers and others and from disbursing or otherwise
distributing cash to its partners during the pendency of the litigation. Any of
these actions by the Grays Ferry Partnership's lenders could materially disrupt
the Grays Ferry Partnership's relations with its suppliers and could have other
potentially material adverse effects on its operations and profitability and,
ultimately, on the Company's earnings and financial position. While the Grays
Ferry Partnership's lenders have allowed the partnership to meet its obligations
to suppliers, the partnership received a notice of default from the lenders on
June 22, 1998, for the failure to timely convert the loan used for construction
purposes to a term loan. This failure occurred due to the event of default
created by the alleged termination of the PPAs by PECO and due to the inability
of the Grays Ferry Partnership to declare either provisional or final acceptance
of the Grays Ferry Project due to the existence of certain unresolved issues
between the Grays Ferry Partnership and Westinghouse Electric Corporation
("Westinghouse") regarding completion and testing of the Grays Ferry Project.
These issues between the partnership and Westinghouse are the subject of an
ongoing arbitration proceeding. Until there is a satisfactory resolution of the
litigation with PECO, the lenders will not allow distributions for the payment
of subordinated fees, payments to the subordinated debt lender or equity
distributions to the partners. In lieu of making these payments, the Grays Ferry
Partnership will be required to apply such amounts to the repayment of the loan.
The Company further expects that at the time the litigation is resolved the loan
will be restructured.

Although the Company does not believe it likely PECO's position ultimately will
be sustained, the Company believes that upon such event the Grays Ferry
Partnership would cease to be economically viable as currently structured and
the Company's earnings and financial position could be materially adversely
effected in various respects. Such effects could include, without limitation, a
material adjustment to the value of the Company's investment in the Grays Ferry
Project, the loss of future income and cash flows form the project and other
material costs which would not be recovered.

In January 1999 the Morris facility experienced two unscheduled outages which 
resulted in service and business interruptions to Equistar. The Company, 
Equistar and NRG Energy, as provider of construction management services and 
operation and maintenance services, are currently investigating the matter 
and are examining their respective rights and obligations with respect to 
each other and with respect to potentially responsible third parties, 
including insurers. The Company's investigation and discussions with Equistar 
are continuing. The Company does not believe that there will be a material 
adverse impact on the financial statements, however, no assurance can be 
given as to the ultimate outcome of this matter.

9.   Short-Term Borrowings

Short-term borrowings consist of amounts owed financial institutions under lines
of credit, primarily in 


                                      F-14
<PAGE>

the United Kingdom. The Company has aggregate lines of credit of approximately
$2,000 of which approximately $1,887, and $1,313 was outstanding at December 31,
1998 and 1997, respectively. The respective weighted average interest rates on
short-term borrowings as of December 31, 1998 and 1997, respectively, were
approximately 9.7% and 10.0%.

10. Long-Term Debt

Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                              DECEMBER 31,          DECEMBER 31,
                                                                                  1998                  1997
                                                                             -------------         -------------
    <S>                                                                      <C>                   <C>   
     Notes payable, due in monthly installments of principal
       plus interest at 10.27% maturing in 2008                              $         413         $         733
     Capital lease obligations                                                          38                     -
     MeesPierson Credit Agreement                                                   25,000                25,000
     Morris Project financing (nonrecourse)                                         84,305                29,855
     Newark / Parlin financing (nonrecourse)                                       113,152               120,710
     Newark / Parlin financing (recourse)                                           21,775                22,742
                                                                             -------------         -------------
                                                                                   244,683               199,040
     Less amounts classified as current                                             (9,610)               (9,020)
                                                                             -------------         -------------
                                                                             $     235,073         $     190,020
                                                                             -------------         -------------
                                                                             -------------         -------------
</TABLE>


Aggregate amounts of long-term debt maturing during each of the next five years
are $9,610, $33,603, $12,283, $13,689 and $12,406 in 1999, 2000, 2001, 2002 and
2003 respectively.

The credit agreements for the MeesPierson, Morris, and Newark / Parlin long-term
debt, include cross-default provisions. As a result, a default under one such
instrument or agreement could have a material adverse effect on the Company's
liquidity and capital position.

MEESPIERSON CREDIT AGREEMENT

On December 17, 1997, the Company and MeesPierson Capital Corp. entered into a
$30,000, three-year reducing, revolving credit facility (however, the Company
has agreed to not increase its borrowings above the $25,000 currently
outstanding). The $30,000 facility reduces by $2,500 on each of the first and
second anniversaries of the agreement and repayment of the outstanding balance
is due on December 17, 2000. Interest is variable based on, at the Company's
option, LIBOR plus a margin ranging from 1.50% to 1.875% or the prime rate plus
a margin ranging from 0.75% to 1.125%. The interest rate margin is dependent
upon the Company's debt service coverage ratio. The interest rate resets based
on the borrowing period selected, generally one to six months, and was 9.1875%
at December 31, 1998. The credit facility includes cross default provisions that
cause defaults to occur in the event certain defaults or other adverse events
occur under certain other instruments or agreements (including financing and
other project documents) to which the Company or one or more of its subsidiaries
or other entities in which it owns an interest is a party. The actions taken by
the power purchaser of the Grays Ferry Project have resulted in a cross default
under the MeesPierson Credit Agreement. Repayment of the MeesPierson Credit
Agreement has not been accelerated and the lender has waived such default and
the Company has agreed not to draw any additional amounts under the MeesPierson
Credit Agreement. On August 14, 1998 the lender agreed to continue the waiver on
the default until July 1, 1999 by imposing a 2.0% increase in the interest rate
effective October 1, 1998. On February 12, 1999 the lender agreed to a permanent
waiver of the Grays Ferry Project cross default and eliminated the 2.0% increase
in the interest rate effective January 1, 1999. The Company also reduced 


                                      F-15
<PAGE>

the size of the facility to $25,000. Commitment fees of 0.375% accrue on the
unused facility. Borrowings are secured by the assets, capital stock and cash
flows of the PWD Project as well as the distributable cash flows of the Newark
and Parlin Projects and the Grays Ferry Partnership, as permitted by primary
lenders of each project.

The MeesPierson Credit Agreement specifies that the Company maintain certain
covenants with which the Company is in compliance at December 31, 1998. The
Company may under certain circumstances be limited in its ability to make
restricted payments, as defined, which include dividends and certain purchases
and investments, incur additional indebtedness and engage in certain
transactions.

MORRIS PROJECT FINANCING

On September 15, 1997, Morris LLC (which was at that time an affiliate of NRG
Energy) entered into a $91,000 construction and term loan agreement (the
"Agreement") to provide nonrecourse project financing for a major portion of the
Morris Project. The Company assumed the Agreement in December 1997 upon
acquiring Morris LLC. The Agreement provides $85,600 of 20-month construction
loan commitments and $5,400 in letter of credit commitments (the "LOC
Commitment"). Upon satisfaction of all completion criteria as set forth in the
Agreement, the construction loan is due and payable or, if certain criteria are
satisfied, may be converted to a five year term loan based on a 25-year
amortization with a balloon payment at maturity. At December 31, 1998 and 1997,
$84,305 and $29,855, respectively were outstanding under the construction loan
and no amounts were pledged under the LOC Commitment. Interest on the
construction loan is variable based on, at the Company's option, either the base
rate, as defined in the Agreement, or LIBOR plus 0.75%. The interest rate resets
based on the Company's selection of the borrowing period ranging from one to six
months. The interest rate was 6.0% at December 31, 1998. Borrowings are secured
by CogenAmerica Funding's ownership interest in Morris LLC, its cash flows,
dividends and any other property that CogenAmerica Funding may be entitled to as
owner of Morris LLC.

The Agreement specifies that the Company maintain certain covenants with which
the Company is in compliance at December 31, 1998. The Company may under certain
circumstances be limited in its ability to make restricted payments, as defined,
which include dividends and certain purchases and investments, incur additional
indebtedness and engage in certain transactions. 

NEWARK AND PARLIN FINANCING

On May 17, 1996, CogenAmerica Newark and CogenAmerica Parlin entered into the
Newark and Parlin Credit Agreement with provisions for a $155,000 fifteen-year
nonrecourse term loan and a $5,000 five-year debt service reserve line of
credit. On May 23, 1996, CogenAmerica Newark borrowed $60,000 in the form of a
temporary term loan under the Newark and Parlin Credit Agreement. On July 11,
1996, an additional $95,000 was borrowed and the aggregate borrowings were
converted into a $155,000 fifteen-year nonrecourse term loan (the "Term Loan")
which is a joint and several liability of CogenAmerica Newark and CogenAmerica
Parlin. The Term Loan is amortized by quarterly principal payments ranging from
1.275% to 1.825% through the fourteenth year and 3.075% in the fifteenth year.

The interest rate on the outstanding principal is variable based on, at the
Company's option, LIBOR plus a 1.125% margin or a defined base rate plus a
0.375% margin. For any quarterly period where the debt service coverage ratio is
in excess of 1.4:1, both margins are reduced by 0.125%. The interest rate resets
based on the borrowing period selected, generally one to three months. The
interest rate was 6.3125% at December 31, 1998. Nominal margin increases for
both the LIBOR and the defined base rate will occur in year six and eleven of
the Newark and Parlin Credit Agreement. Upon entering into 


                                      F-16
<PAGE>

the Newark and Parlin Credit Agreement, CogenAmerica Newark and CogenAmerica
Parlin entered into an interest rate swap agreement with the lender which fixes
the interest rate on 50% of the principal amount outstanding under the Term Loan
at 6.9% plus the margin in effect as described above.

No amounts were outstanding on the debt service reserve line of credit at
December 31, 1998 and 1997. The line carries a commitment fee of 1.125% on the
undrawn amount. CogenAmerica Newark and CogenAmerica Parlin are required to
maintain debt service reserve accounts with the lender to provide for future
debt service, capital improvements and major maintenance. At December 31, 1998
and 1997 these balances totaled $11,249 and $7,757, respectively, and earned
interest at 3.25%. These balances are recorded as restricted cash and cash
equivalents in the accompanying financial statements.

The Term Loan is secured by all CogenAmerica Newark and CogenAmerica Parlin
assets and a pledge of CogenAmerica Newark's and CogenAmerica Parlin's capital
stock. CogenAmerica has guaranteed repayment of up to $25,000 of the Term Loan
based on the principal balance of the loan, and also guaranteed payment by
CogenAmerica Newark and CogenAmerica Parlin of all income and franchise taxes
when due. The Company's guarantee is reduced proportionate to the outstanding
principal as payments are made on the debt. The balance of this guarantee was
$21,775 as of December 31, 1998. As an inducement to obtain the $60,000
temporary term loan, effective May 23, 1996, NRG Energy guaranteed payment of
pre-existing liabilities of CogenAmerica Newark and CogenAmerica Parlin up to
$5,000. The maximum guarantee is reduced as certain defined milestones are
reached and eliminated no later than May 23, 2001. At December 31, 1998, the
guarantee amount was $3,000.

The Newark and Parlin Credit Agreement specifies that the Company maintain
certain covenants with which the Company is in compliance at December 31, 1998.
The Company may under certain circumstances be limited in its ability to make
restricted payments, as defined, which include dividends and certain purchases
and investments, incur additional indebtedness and engage in certain
transactions.

11.  Loans and Payables Due NRG Energy

Amounts owed to NRG Energy are comprised as follows:

<TABLE>
<CAPTION>
                                                                              DECEMBER 31,          DECEMBER 31,
                                                                                  1998                  1997
                                                                             ------------           -----------
    <S>                                                                      <C>                    <C>
     Long-term debt:
       Note due April 30, 2001 bearing interest at 9.5%                      $      2,539           $     2,539
       Grays Ferry note due July 1, 2005 bearing
         interest at 9.3125%                                                        1,900                 1,900
       Pryor note due September 30, 2004 bearing
         interest at 11.25%                                                        23,947                    --
       Morris note due December 31, 2004 bearing
         interest at 11.25%                                                        12,027                    --
                                                                             ------------           -----------
                                                                                   40,413                 4,439
       Less current portion                                                        (4,290)                   --
                                                                             ------------           -----------
                                                                             $     36,123           $     4,439
                                                                             ------------           -----------
                                                                             ------------           -----------


                                      F-17
<PAGE>
<CAPTION>
                                                                              DECEMBER 31,          DECEMBER 31,
                                                                                  1998                  1997
                                                                             ------------           -----------
    <S>                                                                      <C>                    <C>
     Current maturities of loans and accounts payable:
       Current Maturities:

           Morris note                                                       $      2,104           $        --
           Pryor note                                                               2,186                    --
       Accounts payable:
           Accrued interest                                                            --                   821
           Management services, operations and other                                2,730                 2,043
                                                                             ------------           -----------
                                                                             $      7,020           $     2,864
                                                                             ------------           -----------
                                                                             ------------           -----------
</TABLE>


Aggregate amounts of long-term debt due NRG Energy maturing during each of the
next five years are $4,290, $6,355, $10,118, $6,171, and $6,742 in 1999, 2000,
2001, 2002 and 2003, respectively. Interest expense related to loans due NRG
Energy was $1,249, $1,327, $648 and $1,098 for the years ended December 31, 1998
and 1997, the six months ended December 31, 1996 and the year ended June 30,
1996, respectively.

MORRIS NOTE

In connection with its acquisition of the Morris Project, CogenAmerica 
Funding, a wholly-owned subsidiary of the Company, assumed all of the 
obligations of NRG Energy to provide future equity contributions to the 
project, which obligations are limited ot the lesser of 20% of the total 
project cost or $22,000. NRG Energy has guaranteed to the Morris Project's 
lenders that CogenAmerica Funding will make these future equity 
contributions, and the Company has guaranteed to NRG Energy the obligation of 
CogenAmerica Funding to make these future equity contributions (which 
guarantee is secured by a second priority lien on the Company's interest in 
the Morris Project). In addition, NRG Energy has committed in a Supplemental 
Loan Agreement between the Company, CogenAmerica Funding and NRG Energy to 
loan CogenAmerica Funding and the Company (as co-borrowers) the full amount 
of such equity contributions by CogenAmerica Funding, subject to certain 
conditions precedent, at CogenAmerica Funding's option. Any such loan will be 
secured by a second priority lien on all of the membership interests of the 
project and will be recourse to CogenAmerica Funding and the Company. 
Effective November 30, 1998 the Company and NRG Energy agreed to a First 
Amendment to Supplemental Loan Agreement that allowed the Company to 
contribute the $22,000 of equity in installments to match the construction 
draw payments. At December 31, 1998, $12,027 had been drawn and contributed 
as equity. Subsequent to year end additional draws and equity fundings have 
been made and as of March 26, 1999, the entire $22,000 had been drawn and 
contributed as equity. The Supplemental Loan Agreement calls for an interest 
rate of prime plus 1.5%. Effective with the First Amendment the interest rate 
was increased to prime plus 3.5% pending elimination of the possible event of 
default under the MeesPierson Credit Agreement related to the Grays Ferry 
Project. On February 23, 1999 the Company reached agreement with NRG Energy 
that the possible event of default under the MeesPierson Credit Agreement had 
been eliminated. As a result, NRG Energy reduced the interest rate by 2% 
effective as of January 1, 1999.

PRYOR NOTE

On September 30, 1998, NRG Energy loaned the Company and CogenAmerica Pryor 
$23,947 to finance the acquisition of the Pryor Project. The loan is a 
six-year term facility calling for principal and interest payments on a 
quarterly basis, based on project cash flows. The interest rate on the note 
was set at prime plus 3.5%, reducing by 2% upon elimination of the possible 
event of default under the MeesPierson Credit Agreement related to the Grays 
Ferry Project. On February 23, 1999 the Company reached agreement with NRG 
Energy that the possible event of default under the 

                                      F-18
<PAGE>

MeesPierson Credit Agreement had been eliminated. As a result, NRG Energy
reduced the interest rate by 2% effective as of January 1, 1999.

12.  Stockholders' Equity

NRG ENERGY STOCK OPTION

During 1997 NRG Energy made loans aggregating $10,000 to CogenAmerica Schuylkill
to provide funding for CogenAmerica Schuylkill's equity contribution obligation
to Grays Ferry. Pursuant to a stock option right approved by the bankruptcy
court and included in the loan commitment agreement, in October 1997 NRG Energy
converted $3,000 of the borrowings into 396,255 shares of the Company's common
stock. Following exercise of the option, NRG Energy's ownership interest in the
Company increased to 45.21%.

EARNINGS PER SHARE

Basic earnings per share ("EPS") includes no dilution and is computed by
dividing net income (loss) by the weighted average shares of common stock
outstanding. Diluted EPS is computed by dividing net income (loss) by the
weighted average shares of common stock and dilutive common stock equivalents
outstanding. The Company's dilutive common stock equivalents result from stock
options and are computed using the treasury stock method. The following table
reconciles the numerators and denominators of the basic and diluted EPS
computations for the years ended December 31, 1998 and 1997, and the six months
ended December 31, 1996. The dilutive stock options became outstanding
subsequent to June 30, 1996. Accordingly, there was no difference in basic and
diluted EPS for the year ended June 30, 1996.

<TABLE>
<CAPTION>
                                     YEAR ENDED                         YEAR ENDED                        SIX MONTHS ENDED
                                 DECEMBER 31, 1998                  DECEMBER 31, 1997                     DECEMBER 31, 1996
                         ----------------------------------   ---------------------------------   ---------------------------------
                            INCOME        SHARES       EPS     INCOME        SHARES        EPS      INCOME        SHARES      EPS
                          (NUMERATOR)  (DENOMINATOR)         (NUMERATOR)  (DENOMINATOR)           (NUMERATOR)  (DENOMINATOR)
<S>                         <C>           <C>         <C>      <C>            <C>        <C>       <C>           <C>         <C>   
  Income before
    extraordinary item:
      Basic EPS             $8,002        6,837       $1.17    $ 23,352       6,511      $ 3.59    $ 4,780         6,430     $ 0.75
      Effect of dilutive
        stock options           --          129                      33         214                     --            33
                            ------       ------                --------     -------                -------       -------
      Diluted EPS           $8,002        6,966       $1.15    $ 23,385       6,725      $ 3.48    $ 4,780         6,463     $ 0.74
                            ------       ------                --------     -------                -------       -------
                            ------       ------                --------     -------                -------       -------
</TABLE>

Options to purchase 147,000 shares of common stock at prices ranging from $11.58
- $18.38 were outstanding at December 31, 1998 but were not included in the 1998
computation of diluted EPS because the options' exercise price was greater than
the average market price of the common shares.

STOCK OPTIONS

The Company has reserved 1,000,000 shares of common stock for issuance under its
1996, 1997 and 1998 stock option plans. The plans provide for nonqualified and
incentive stock options to be granted to directors, officers, key employees and
others who make a significant contribution to the Company as determined by the
Board at an exercise price not less than the fair market value of the common
stock at the date of grant. An option will generally expire ten years after the
date it is granted and will ordinarily become exercisable as to one third of the
shares subject to the option on each of the first three anniversaries of the
grant. Following a "change of control" all options granted under the stock
option plans may become immediately exercisable.



                                      F-19
<PAGE>


Option transactions under these plans are summarized as follows:

<TABLE>
<CAPTION>
                                                                                                      WEIGHTED AVERAGE
                                                                            NUMBER OF SHARES            OPTION PRICE
                                                                            ----------------          ----------------
    <S>                                                                      <C>                          <C>
     Outstanding at June 30, 1996                                                      --
       Granted                                                                    399,000                 $    5.46
                                                                            -------------                 ---------
     Outstanding at December 31, 1996                                             399,000                      5.46
       Granted                                                                    305,000                     13.19
       Canceled                                                                   (75,000)                     5.44
                                                                            -------------                 ---------
     Outstanding at December 31, 1997                                             629,000                      9.21
       Granted                                                                     62,000                     17.18
       Canceled                                                                  (173,000)                    11.50
                                                                            -------------                 ---------
     Outstanding at December 31, 1998                                             518,000                 $    9.40
                                                                            -------------                 ---------
                                                                            -------------                 ---------
</TABLE>

The following table summarizes the stock options outstanding and exercisable at
December 31, 1998:

<TABLE>
<CAPTION>
                                           OUTSTANDING                                          EXERCISABLE
                    ---------------------------------------------------------       -----------------------------------
                                     WEIGHTED-AVERAGE
      EXERCISE       NUMBER OF       CONTRACTUAL LIFE        WEIGHTED-AVERAGE        NUMBER OF         WEIGHTED-AVERAGE
     PRICE RANGE      OPTIONS           REMAINING             EXERCISE PRICE          OPTIONS           EXERCISE PRICE

   <S>                <C>               <C>                    <C>                     <C>                <C>

     $5.44-$6.58        321,000         7.8 years               $     5.46              216,000           $    5.47
    $11.58-$16.47       152,000         8.7 years                    15.07               68,333               13.97
       $18.38            45,000         9.2 YEARS                    18.38                   --                   --
                    -----------         ---------               ----------          -----------           ----------
                        518,000         8.2 years               $     9.40              284,333           $    7.51
                    -----------         ---------               ----------          -----------           ----------
                    -----------         ---------               ----------          -----------           ----------
</TABLE>


The Company applies Accounting Principles Board Opinion No. 25 and related
interpretations in accounting for its stock option plans. Had the Company's
compensation costs been determined based on the fair value of the awards at the
option grant dates consistent with the accounting provisions of SFAS 123
"Accounting for Stock Based Compensation," the Company's net income and EPS for
the years ended December 31, 1998 and 1997, and the six months ended 
December 31, 1996 would have been adjusted to the pro-forma amounts indicated 
below:

<TABLE>
<CAPTION>
                                                YEAR ENDED                 YEAR ENDED             SIX MONTHS ENDED
                                             DECEMBER 31, 1998          DECEMBER 31, 1997         DECEMBER 31, 1996
                                             -----------------          -----------------         -----------------
     <S>                                        <C>                       <C>                       <C>        
     Net Income
       As reported                              $     8,002               $    23,352               $     6,423
       Pro-forma                                      7,365                    22,695                     6,362

       EPS (Diluted)
       As reported                              $      1.15               $      3.48               $      0.99
       Pro-forma                                       1.06                      3.38                      0.98
</TABLE>


The estimated weighted average fair value of stock options granted during the
years ended December 31, 1998 and 1997 and the six months ended December 31,
1996 were $6.44, $6.24 and $2.30 per option, respectively. The fair values were
estimated on the grant dates utilizing the Black-Scholes option-pricing model
and the following assumptions:


                                      F-20
<PAGE>

<TABLE>
<CAPTION>
                                                YEAR ENDED                 YEAR ENDED             SIX MONTHS ENDED
                                             DECEMBER 31, 1998          DECEMBER 31, 1997         DECEMBER 31, 1996
                                             -----------------          -----------------         -----------------
    <S>                                         <C>                        <C>                       <C>
     Risk free interest rates                   5.5 - 5.6%                 6.2 - 6.6%                5.8 - 6.1%
     Expected life                                6 years                    6 years                   6 years
     Expected volatility                           25.0%                      36.7%                     30.0%
     Expected dividends                             --                         --                        --
</TABLE>


13.  Extraordinary Item

During the six months ended December 31, 1996, the Company negotiated a buyout
of a subsidiary's capital lease obligation resulting in an extraordinary gain of
$1,643 (net of $124 of state income taxes).

14.  Provision for Impaired Assets

During the 1997 fourth quarter, the Company recorded provisions for impaired
assets in the aggregate amount of $5,274 for various asset disposals, write-offs
and write-downs. The impairment charge reduced identifiable assets of the energy
segment and the equipment sales, rental and service segment by approximately
$697 and $2,161, respectively, and corporate assets by $2,416. The components of
the charge were as follows:

<TABLE>
<CAPTION>

                                                          EQUIPMENT
                                                        SALES, RENTAL
                                                          & SERVICE     ENERGY     CORPORATE    TOTAL
                                                        -------------   ------     ---------    ------
<S>                                                     <C>             <C>        <C>          <C>
Assets disposed
       Equipment held for sale                          $       62      $   --     $ 1,491      $1,553
       Property, plant and equipment
          Write-offs                                           551         326         146       1,023
          Equipment sold or scrapped                            --          --         779         779
       Project development costs                                --         371          --         371
       Other                                                    72          --          --          72
                                                        -------------   ------     ---------    ------
                                                               685         697       2,416       3,797
                                                        -------------   ------     ---------    ------
Assets held and used
       Investment in PoweRent                                  500          --          --         500
       Property, plant and equipment                           976          --          --         976
                                                        -------------   ------     ---------    ------
                                                             1,476          --          --       1,476
                                                        -------------   ------     ---------    ------
                                                        $    2,161      $  697     $ 2,416      $5,274
                                                        -------------   ------     ---------    ------
                                                        -------------   ------     ---------    ------
</TABLE>

To improve liquidity, in fiscal 1994 the Company initiated efforts to liquidate
specific power generation equipment that was not in use in an operating project,
rented to a customer or critical to the completion of projects in development.
These assets, consisting mainly of gas and steam turbines, were written down in
fiscal 1994 and 1995 to liquidation values determined by independent appraisal,
reclassified on the balance sheet as "equipment held for sale" and no longer
depreciated. The $3,228 carrying value of the equipment at June 30, 1995 was
reduced to $2,628 and $1,598 at December 31, 1996 and September 30, 1997,
respectively, through periodic sales. In the 1997 fourth quarter, the remaining
equipment included in the balance sheet caption "equipment held for sale" was
scrapped due to lack of interest by potential buyers, resulting in an impairment
charge of $1,553.


                                      F-21
<PAGE>

Impairment charges for property, plant and equipment disposals totaled $1,801,
comprised of losses of $779 from disposal of other power generating equipment,
and write-offs of $1,023 for equipment that was determined to be non-useable or
could not be located during asset counts and inspections performed at OES and
the PWD Project.

The asset impairment charge also included $371 to write-off capitalized project
development costs related to certain development projects that were terminated.

During the 1997 fourth quarter, the Company completed a thorough review of its
business operations and market opportunities to determine whether operations of
the PWD Project and the equipment sales, rental and service businesses should be
continued. The board of directors determined that the PWD Project should be
retained and that the equipment sales, rental and service segment should be
exited.

The equipment sales, rental and service segment has not been reported as a
discontinued operation because of uncertainties about the expected timing and
manner of disposal. However, management performed an impairment review of the
segment's long-lived assets as required by SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of".
Based on an analysis of estimated future cash flows, the carrying value of OES'
generator equipment was determined to be impaired. Consequently, a provision of
$976 was recorded to write-down the assets to their estimated fair value as
determined by management based on sales values of similar equipment.

Management also evaluated the carrying value of its 50% investment in PoweRent.
Due to PoweRent's low earnings capacity, combined with the expectation of
exiting this business in the near term, the investment was determined to be
permanently impaired. The carrying value of the investment was written down by
$500 based on discussions with potential buyers and management's estimate of the
investment value.

During the year ended June 30, 1996 unrecoverable project development costs of
$180 were written off.

15.  Disclosures about Fair Value of Financial Instruments

At December 31, 1998 and 1997, the carrying amounts and fair values of the
Company's financial instruments are as follows:

<TABLE>
<CAPTION>

                                                            DECEMBER 31, 1998                  DECEMBER 31, 1997
                                                     -------------------------------    -------------------------------
                                                        CARRYING            FAIR           CARRYING           FAIR
                                                         AMOUNT             VALUE           AMOUNT            VALUE
   <S>                                               <C>               <C>              <C>               <C>
     Assets:
       Cash and cash equivalents                     $       3,568     $       3,568    $       3,444     $       3,444
       Restricted cash and cash equivalents                 12,135            12,135            8,527             8,527
       Notes receivable                                         --                --               27                27

     Liabilities:
       Short-term borrowings                                 1,887             1,887            1,313             1,313
       Long-term debt                                      244,683           244,683          199,040           199,040
       Loans and payables due NRG Energy                    43,143            43,143            7,303             7,303
       Interest rate swap                                       --             6,060               --             2,691
</TABLE>


The carrying amounts of cash and cash equivalents, restricted cash and cash
equivalents and notes receivable approximates the fair value of those
instruments due to their short maturity. The fair value of short-term and
long-term debt and amounts due NRG Energy are estimated based on interest rates


                                      F-22
<PAGE>

available to the Company for issuance of debt with similar terms and remaining
maturities. The fair value of the interest rate swap is the estimated amount
that the Company would pay to terminate the interest rate swap agreement at the
reporting date.

Fair value estimates are made at a specific point in time based on relevant
market information about the financial instruments. The estimated fair values of
financial instruments presented are not necessarily indicative of the amounts
the Company might realize in actual market transactions.

16.  Income Taxes

Income (loss) before income taxes and extraordinary item consists of the
following:

<TABLE>
<CAPTION>
                                                                                      SIX MONTHS
                                               YEAR ENDED         YEAR ENDED             ENDED              YEAR ENDED
                                              DECEMBER 31,       DECEMBER 31,         DECEMBER 31,           JUNE 30,
                                                  1998               1997                1996                  1996
                                             --------------      -------------       -------------       -------------
<S>                                          <C>                 <C>                 <C>                 <C>           
     United States                           $       12,834      $       2,758       $       4,195       $     (18,054)
     Foreign                                             46                140                 317                (122)
                                             --------------      -------------       -------------       -------------
                                             $       12,880      $       2,898       $       4,512       $     (18,176)
                                             --------------      -------------       -------------       -------------
                                             --------------      -------------       -------------       -------------

The income tax provision (benefit) 
  consists of:

     Current income taxes:
       Federal                               $          287      $          --       $         803       $          --
       State                                          1,002                946                 570                 792
                                             --------------      -------------       -------------       -------------
                                                      1,289                946               1,373                 792
                                             --------------      -------------       -------------       -------------

     Deferred income taxes:
       Federal                                        3,721            (20,400)             (2,292)               (493)
       State                                           (132)            (1,000)                651                (762)
                                             --------------      -------------       -------------       -------------
                                                      3,589            (21,400)             (1,641)             (1,255)
                                             --------------      -------------       -------------       -------------
       Income tax provision (benefit)
         excluding extraordinary item        $        4,878      $     (20,454)      $        (268)      $        (463)
                                             --------------      -------------       -------------       -------------
                                             --------------      -------------       -------------       -------------
</TABLE>


Deferred income taxes arise from temporary differences between the tax bases of
assets and liabilities and their reported amounts in the financial statements.
Deferred tax assets and liabilities are comprised of the following:

<TABLE>
<CAPTION>

                                                               DECEMBER 31,         DECEMBER 31,          DECEMBER 31,
                                                                   1998                 1997                  1996
                                                              -------------         -------------         -------------
<S>                                                           <C>                   <C>                   <C>
Deferred income tax liabilities:
       Property, plant & equipment                            $     (23,609)        $     (18,925)        $     (18,445)
                                                              -------------         -------------         -------------
           Total deferred tax liabilities                           (23,609)              (18,925)              (18,445)
                                                              -------------         -------------         -------------

Deferred income tax assets:
       Net operating loss carryforwards                              22,756                27,525                26,502
       Alternative minimum tax credits                                  446                   159                   183
       Investment tax credits                                         1,172                 1,427                 1,622
       Miscellaneous                                                  4,377                 5,040                 5,571
</TABLE>


                                      F-23
<PAGE>

<TABLE>

     <S>                                                      <C>                   <C>                  <C>     
       Valuation allowance                                           (7,935)               (7,230)              (28,837)
                                                              -------------         -------------         -------------
           Total deferred tax assets                                 20,816                26,921                 5,041
                                                              -------------         -------------         -------------
           Net deferred tax assets (liabilities)              $      (2,793)        $       7,996         $     (13,404)
                                                              -------------         -------------         -------------
                                                              -------------         -------------         -------------
</TABLE>


The difference between tax expense (benefit) calculated at the U.S. federal
statutory tax rate and the recorded tax expense (benefit) on pre-tax income
before extraordinary item is reconciled below:

<TABLE>
<CAPTION>
                                                                                       SIX MONTHS
                                                YEAR ENDED          YEAR ENDED            ENDED             YEAR ENDED
                                               DECEMBER 31,        DECEMBER 31,        DECEMBER 31,          JUNE 30,
                                                  1998                1997                1996                1996
                                             --------------      -------------       -------------       -------------
<S>                                          <C>                 <C>                 <C>                 <C>
     Income tax expense (benefit)
       at the federal statutory rate         $        4,508      $         985       $       1,534       $      (6,180)
     State income taxes (benefit)                       628                (36)                806                 252
     Current benefit of state
       operating loss carryforwards                    (176)              (353)               (655)               (232)
     State operating losses with no
       current tax benefit                              114              1,182                  --               3,204
     Other increase (decrease) in
       valuation allowance                              192            (22,232)             (1,630)               (544)
     Reorganization costs                                --                 --                  --               2,636
     Other                                             (388)                --                (323)                401
                                             --------------      -------------       -------------       -------------
     Total income tax provision
       (benefit)                             $        4,878      $     (20,454)      $        (268)      $        (463)
                                             --------------      -------------       -------------       -------------
                                             --------------      -------------       -------------       -------------
</TABLE>


At December 31, 1998, the Company has federal net operating loss carryforwards
available to offset future regular taxable income and investment tax credit
carryforwards available to offset future federal income taxes payable.
These carryforwards expire as follows:

<TABLE>
<CAPTION>
                                                                  FEDERAL
                                                            NET OPERATING LOSS             INVESTMENT TAX
       DECEMBER 31,                                            CARRYFORWARDS            CREDIT CARRYFORWARDS
       -----------                                          ------------------          ---------------------
         <S>                                                    <C>                           <C>
          1999                                                  $        --                   $      240
          2000                                                           --                          409
          2001                                                           --                           82
          2002                                                           --                          174
          2003                                                           --                           52
          2004                                                           --                          215
          2005                                                        9,213                           --
          2006                                                        4,545                           --
          2007                                                       15,089                           --
          2008                                                       10,682                           --
          2009                                                        6,358                           --
          2010                                                        9,031                           --
                                                                -----------                   ----------
              Total                                             $    54,918                   $    1,172
                                                                -----------                   ----------
                                                                -----------                   ----------
</TABLE>


The Company has $52,875 of state and local net operating loss carryforwards
available to offset future years' state and local taxable income. These
carryforwards will expire starting in 1999 and will continue to expire through
2012. The Company also has foreign net operating loss carryforwards of



                                      F-24
<PAGE>

approximately $2,051. The net operating loss carryforward for alternative
minimum tax purposes is approximately $23,621 at December 31, 1998.

A valuation allowance was recorded in prior years to reserve primarily for
deferred tax assets that were not expected to be recovered through future
reversal of existing temporary differences. In management's judgment,
realization of the reserved tax benefits did not meet the "more likely than not"
recognition criteria of SFAS No. 109 due to the Company's history of operating
losses and projections of future taxable income. At December 31, 1997, the
valuation allowance was reduced to $7,230 based on management's evaluation of
the weight of available evidence about the likelihood of realizing the deferred
tax assets. Positive factors contributing to the decision to reduce the
valuation allowance included the sustained period of profitability since
emergence from bankruptcy and improved outlooks for future earnings. The
remaining valuation allowance at December 31, 1998 reserves a portion of the
state operating loss carryforwards and certain other temporary differences and
all of the investment tax credit, capital loss, and foreign operating loss
carryforwards.

Under the Plan, NRG Energy acquired a 41.86% equity interest in the Company.
This acquisition, along with other shifts in shareholders' stock holdings,
amounted to a more than 50% change in ownership in the Company over a three year
period. Under the general net operating loss and tax credit carryover rules,
utilization of these losses and tax credits would be limited. However, the
Internal Revenue Code provides an exception to the general rules for loss
corporations that undergo an ownership change by reason of certain bankruptcy
proceedings. The Company believes it qualifies for the bankruptcy exception and
its net operating loss and tax credit carryforwards are not subject to the
change of ownership limitations. The bankruptcy exception rules also provide
that if a subsequent ownership change should occur within the two years
following the bankruptcy-protected change, the benefits of the bankruptcy
exception will be lost and the Company's net operating loss and tax credit
carryforwards will be effectively eliminated. During the year ended of December
31, 1998, the Company did not undergo a subsequent ownership change in the two
year period following the bankruptcy protected change.

17.  Transactions with Related Parties

NRG Energy provides management, administrative, operation and maintenance
services and certain other services to the Company. Selling, general and
administrative expenses include $217, $562, $479 and $129 for reimbursement of
services provided by NRG Energy under the terms of a management services
agreement for the year ended December 31, 1998 and 1997, the six months ended
December 31, 1996 and the year ended June 30, 1996. Effective January 1, 1997,
Power Operation, Inc., a wholly-owned subsidiary of the Company providing
operations and maintenance for the Newark and Parlin facilities under long-term
contracts, was sold to NRG Energy. The amount expensed by the Company for these
services was $427 and $350 in 1998 and 1997, respectively.

Beginning in 1997, the Parlin Project sells up to 9 MW of power to NPI, a
wholly-owned subsidiary of NRG Energy. NPI resells this power at retail to a
customer of the Company under an agreement extending until 2021. Total sales to
NPI were $1,313 and $1,300 in 1998 and 1997, respectively.

On December 10, 1997 CogenAmerica purchased 100% of the equity interest in the
Morris Project from NRG Energy. NRG Energy is the construction manager for the
project and received $1,200 in fees and expense reimbursements for these
services in 1998. NRG Energy, though a wholly-owned subsidiary is also the
operator of the project under a long-term agreement. NRG Energy was paid $1,100
for these services during the construction start up and two months of operation
in 1998. (See Note 6.)

On October 9, 1998 a wholly-owned subsidiary of the Company purchased 100% of
the equity interest of the Pryor Project from NRG Energy. In conjunction with
the acquisition, NRG Energy financed the 


                                      F-25
<PAGE>

purchase with a loan of $23,900. (See Note 6.)

18.  Segment Information and Major Customers

The Company is engaged principally in developing, owning and managing
cogeneration projects and the sale, rental and service of cogeneration related
equipment. The Company has classified its operations into the following
segments: energy and equipment sales, rental and service. The energy segment
consists of cogeneration and standby/peak shaving projects. The equipment sales,
rental and service segment consists of PUMA, the Company's wholly owned
subsidiary based in the United Kingdom and OES until its sale in November 1998.
Summarized information about the Company's operations in each industry segment
are as follows:

<TABLE>
<CAPTION>
                                                                          YEAR ENDED DECEMBER 31, 1998

                                                                             EQUIPMENT
                                                                          SALES, RENTAL &
                                                             ENERGY           SERVICE            OTHER            TOTAL
                                                        ----------------- ----------------- ---------------- -------------
<S>                                                     <C>               <C>               <C>              <C>
Revenues                                                $       52,216    $      21,780     $          --    $      73,996
Depreciation & amortization                                      8,424              267                --            8,691
Other cost of revenues                                          15,038           18,616                --           33,654
                                                        --------------    -------------     -------------    -------------
Gross profit                                                    28,754            2,897                --           31,651
Selling, general & administrative expenses                       4,852            2,206             2,357            9,415
                                                        --------------    -------------     -------------    -------------
Income (loss) from operations                                   23,902              691            (2,357)          22,236
Interest & other income                                            497               30             1,189            1,715
Reorganization cost                                                 --               --                --               --
Interest & debt expense                                        (14,071)            (352)           (1,433)         (15,855)
Equity in earnings of affiliates                                 4,758               26                --            4,784
                                                        --------------    -------------     -------------    -------------
Income (loss) before taxes                              $       15,086    $         395     $      (2,601)   $      12,880
                                                        --------------    -------------     -------------    -------------
                                                        --------------    -------------     -------------    -------------
Identifiable assets                                     $      304,834    $       7,885     $       5,955    $     318,674
Capital expenditures                                            86,949              389                26           87,364
</TABLE>


<TABLE>
<CAPTION>
                                                                            YEAR ENDED DECEMBER 31, 1997

                                                                             EQUIPMENT
                                                                          SALES, RENTAL &
                                                             ENERGY           SERVICE            OTHER            TOTAL
                                                        ----------------- ----------------- ---------------- --------------
<S>                                                     <C>               <C>               <C>              <C>          
Revenues                                                $       43,210    $      21,594     $          --    $      64,804
Depreciation & amortization                                      6,788              498                --            7,286
Other cost of revenues                                           8,053           18,356                --           26,409
                                                        --------------    -------------     -------------    -------------
Gross profit                                                    28,369            2,740                --           31,109
Selling, general & administrative expenses                       3,579            3,318             2,582            9,479
Provision for impaired assets                                      697            2,161             2,416            5,274
                                                        --------------    -------------     -------------    -------------
Income (loss) from operations                                   24,093           (2,739)           (4,998)          16,356
Interest & other income                                            436              125               749            1,310
Interest & debt expense                                        (13,112)            (280)           (1,376)         (14,768)
                                                        --------------    -------------     -------------    -------------
Income (loss) before taxes                              $       11,417    $      (2,894)    $      (5,625)   $       2,898
                                                        --------------    -------------     -------------    -------------
                                                        --------------    -------------     -------------    -------------
Identifiable assets                                     $      206,337    $       8,332     $      13,225    $     227,894
Capital expenditures                                             5,115              432               168            5,715
</TABLE>


                                      F-26
<PAGE>

<TABLE>
<CAPTION>

                                                                         SIX MONTHS ENDED DECEMBER 31, 1996

                                                                             EQUIPMENT
                                                                          SALES, RENTAL &
                                                             ENERGY           SERVICE            OTHER            TOTAL
                                                        ----------------- ----------------- ---------------- --------------
<S>                                                     <C>               <C>               <C>              <C>          
Revenues                                                $       23,247    $      16,669     $          --    $      39,916
Depreciation & amortization                                      3,272              333                --            3,605
Other cost of revenues                                           5,516           12,866                --           18,382
                                                        --------------    -------------     -------------    -------------
Gross profit                                                    14,459            3,470                --           17,929
Selling, general & administrative expenses                       2,323            2,452             1,374            6,149
                                                        --------------    -------------     -------------    -------------
Income (loss) from operations                                   12,136            1,018            (1,374)          11,780
Interest & other income                                            197              359              (143)             413
Interest & debt expense                                         (6,014)            (461)           (1,206)          (7,681)
                                                        --------------    -------------     -------------    -------------
Income (loss) before taxes                              $        6,319    $         916     $      (2,723)   $       4,512
                                                        --------------    -------------     -------------    -------------
                                                        --------------    -------------     -------------    -------------
Identifiable assets                                     $      141,583    $      15,790     $      16,251    $     173,624
Capital expenditures                                             1,189               31                 2            1,222

</TABLE>

<TABLE>
<CAPTION>
                                                                              YEAR ENDED JUNE 30, 1996

                                                                             EQUIPMENT
                                                                          SALES, RENTAL &
                                                             ENERGY           SERVICE            OTHER            TOTAL
                                                        ----------------- ----------------- ---------------- ---------------
<S>                                                     <C>               <C>               <C>              <C>          
Revenues                                                $       69,308    $      27,239     $          --    $      96,547
Depreciation & amortization                                      7,025              756                --            7,781
Other cost of revenues                                          41,169           22,803                --           63,972
                                                        --------------    -------------     -------------    -------------
Gross profit                                                    21,114            3,680                --           24,794
Selling, general & administrative expenses                       4,149            4,434             4,029           12,612
Provision for impaired assets                                      180               --                --              180
                                                        --------------    -------------     -------------    -------------
Income (loss) from operations                                   16,785             (754)           (4,029)          12,002
Interest & other income                                            236              333                --              569
Reorganization cost                                                 --               --           (12,101)         (12,101)
Interest & debt expense                                         (9,392)          (1,119)           (8,135)         (18,646)
                                                        --------------    -------------     -------------    -------------
Income (loss) before taxes                              $        7,629    $      (1,540)    $     (24,265)   $     (18,176)
                                                        --------------    -------------     -------------    -------------
                                                        --------------    -------------     -------------    -------------
Identifiable assets                                     $      133,774    $      17,293     $      27,095    $     178,162
Capital expenditures                                               273                7                19              299
</TABLE>


Information with respect to the Company's foreign and domestic operations is:

<TABLE>
<CAPTION>
                                                                                      SIX MONTHS
                                                YEAR ENDED          YEAR ENDED           ENDED             YEAR ENDED
                                               DECEMBER 31,        DECEMBER 31,       DECEMBER 31,          JUNE 30,
                                                  1998                1997                1996                1996
                                             --------------      -------------       -------------       -------------
<S>                                          <C>                 <C>                 <C>                 <C>          
     Revenues:
       United States                         $       60,279      $      51,504       $      27,937       $      82,917
       United Kingdom                                13,717             13,300              11,979              13,630
                                             --------------      -------------       -------------       -------------
                                             $       73,996      $      64,804       $      39,916       $      96,547
                                             --------------      -------------       -------------       -------------
                                             --------------      -------------       -------------       -------------
</TABLE>


                                      F-27
<PAGE>


<TABLE>
   <S>                                       <C>                 <C>                 <C>                 <C>          
     Identifiable assets:
       United States                         $      310,789      $     221,752       $     164,631       $     169,657
       United Kingdom                                 7,885              6,142               8,993               8,505
                                             --------------      -------------       -------------       -------------
                                             $      318,674      $     227,894       $     173,624       $     178,162
                                             --------------      -------------       -------------       -------------
                                             --------------      -------------       -------------       -------------
</TABLE>


Revenues from one energy customer accounted for 50%, 57%, 46% and 62% for the
years ended December 31, 1998 and 1997, the six months ended December 31, 1996,
and the year ended June 30, 1996, respectively.

19.  Minority Interest

OPCI, a subsidiary of the Company, is 17% owned by an unrelated private
investor. OPCI is required to make quarterly distributions to the minority owner
of 17% of its net earnings. These distributions totaled $247, $244, $125 and
$227 for the years ended December 31, 1998 and 1997, the six months ended
December 31, 1996, and fiscal 1996, respectively, and are recorded as interest
expense in the consolidated statement of operations. The 17% minority interest
is redeemable by the Company at its option for a price equal to 17% of the
present value of the projected income stream of OPCI. The Company is obligated
upon certain events of default to redeem the minority interest at 60% of the
Company's redemption price. The Company's redemption price at December 31, 1998
was approximately $2,400. There are currently no events of default.





                                      F-28

<PAGE>



--------------------------------------------------------------------------------
    GRAYS FERRY COGENERATION PARTNERSHIP
    FINANCIAL STATEMENTS FOR THE YEARS ENDED
    DECEMBER 31, 1998 AND 1997 AND
    INDEPENDENT AUDITORS' REPORT


<PAGE>












INDEPENDENT AUDITORS' REPORT


To the Partners of Grays Ferry Cogeneration Partnership:

We have audited the accompanying balance sheets of Grays Ferry Cogeneration
Partnership (the "Partnership"), as of December 31, 1998 and 1997, and the
related statements of changes in partners' capital, and cash flows for the years
then ended, and the related statement of income for the period from January 9,
1998 (date of commercial operation) to December 31, 1998. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Partnership as of December 31, 1998 and
1997, and its cash flows for the years then ended, and the results of its
operations for the period from January 9, 1998 (date of commercial operation) to
December 31, 1998 in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note 2 to the
financial statements, PECO Energy has taken action to terminate its power
purchase agreements with the Partnership. As a consequence, the Project Lender
has determined that the Partnership is in default. These actions raise
substantial doubt about the Partnership's ability to continue as a going
concern. Management's plans concerning these matters are also discussed in Note
2. The financial statements do not include any adjustment that might result from
the outcome of these uncertainties, other than the classification of the Project
debt as current.



Deloitte & Touche LLP
Philadelphia, Pennsylvania
January 26, 1999 (except Note 9, as to
   which the date is March 10, 1999)



<PAGE>

<TABLE>
<CAPTION>

GRAYS FERRY COGENERATION PARTNERSHIP

BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
-----------------------------------------------------------------------------------------------------

ASSETS                                                                     1998              1997
<S>                                                                   <C>              <C>

CURRENT ASSETS:
  Cash and cash equivalents                                           $  18,628,423    $   6,441,729
  Accounts receivable - related parties                                  10,678,770        2,630,093
  Accounts receivable - other                                             1,805,350
  Inventory                                                               2,163,444        1,020,469
  Prepaid expenses                                                          116,976
                                                                      -------------    --------------
           Total current assets                                          33,392,963       10,092,291

PROPERTY, PLANT AND EQUIPMENT:
  Construction work-in-progress                                                          144,328,197
  Plant in service                                                      151,297,117
                                                                      -------------    --------------
           Total property, plant and equipment                          151,297,117      144,328,197

  Accumulated depreciation                                               (7,402,171)
                                                                      -------------    --------------

  Property, plant and equipment - net                                   143,894,946      144,328,197

OTHER ASSETS (Net of accumulated amortization of $426,949 in 1998)        6,875,906        6,544,595
                                                                      -------------    --------------
TOTAL ASSETS                                                          $ 184,163,815    $ 160,965,083
                                                                      -------------    --------------
                                                                      -------------    --------------

LIABILITIES AND PARTNERS' CAPITAL

CURRENT LIABILITIES:
  Construction loan (Notes 2 and 6)                                   $  94,324,049    $ 113,000,000
  Subordinated debt (Note 6)                                             15,000,000
  Accounts payable and accrued liabilities - related parties              3,503,417          558,759
  Accounts payable and accrued liabilities - other                       15,017,152        6,381,865
  Retainage payable                                                       5,581,729        5,581,729
                                                                      -------------    --------------
           Total liabilities                                            133,426,347      125,522,353


PARTNERS' CAPITAL                                                        50,737,468       35,442,730
                                                                      -------------    --------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL                               $ 184,163,815    $ 160,965,083
                                                                      -------------    --------------
                                                                      -------------    --------------


</TABLE>

See notes to financial statements.


                                      -2-
<PAGE>


<TABLE>

GRAYS FERRY COGENERATION PARTNERSHIP

STATEMENT OF INCOME
PERIOD FROM JANUARY 9, 1998 (DATE OF COMMERCIAL OPERATION)
TO DECEMBER 31, 1998
-----------------------------------------------------------------------------------------------------

<S>                                                                                      <C>
    REVENUES FROM RELATED PARTIES:
  Electric energy sales                                                                  $50,776,226
  Steam sales                                                                             14,741,775
  Capacity fees:
    Electric                                                                               9,531,900
    Steam                                                                                  3,075,988
                                                                                         -----------

           Total revenues                                                                 78,125,889
                                                                                         -----------

OPERATING EXPENSES:
  Fuel and consumables:
    Related party                                                                          2,531,844

    Other                                                                                 32,394,334
  Operation and maintenance:
    Related parties                                                                        1,527,916
    Other                                                                                  2,819,680
  General and administrative:
    Related parties                                                                        2,772,641
    Other                                                                                  2,373,432
  Depreciation                                                                             7,402,171
                                                                                         -----------

           Total operating expenses                                                       51,822,018
                                                                                         -----------

INCOME FROM OPERATIONS                                                                    26,303,871
                                                                                         -----------

OTHER INCOME (EXPENSE):
  Interest income                                                                            665,765
  Interest expense                                                                       (11,674,898)
                                                                                         -----------
           Total other expense                                                           (11,009,133)
                                                                                         -----------

NET INCOME                                                                               $15,294,738
                                                                                         -----------
                                                                                         -----------

</TABLE>

See notes to financial statements.


                                      -3-

<PAGE>


GRAYS FERRY COGENERATION PARTNERSHIP

<TABLE>
<CAPTION>

STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
YEARS ENDED DECEMBER 31, 1998 AND 1997
---------------------------------------------------------------------------------------------------------------


                                              Adwin          CogenAmerica          Trigen              Total
                                          (Schuylkill)        Schuylkill        (Schuylkill)         Partners'
                                       Cogeneration, Inc.        Inc.        Cogeneration, Inc.       Capital
<S>                                    <C>                   <C>             <C>                   <C>

BALANCE, JANUARY 1, 1996                  $ 2,784,214        $ 2,658,516                           $ 5,442,730
                                                                                               
  Capital contributions                   $10,000,000         10,000,000         10,000,000         30,000,000
                                          -----------        -----------        -----------        -----------

BALANCE, DECEMBER 31, 1997                 12,784,214         12,658,516         10,000,000         35,442,730

  Net income for period                     5,098,246          5,098,246          5,098,246         15,294,738
                                          -----------        -----------        -----------        -----------

BALANCE, DECEMBER 31, 1998                $17,882,460        $17,756,762        $15,098,246        $50,737,468
                                          -----------        -----------        -----------        -----------
                                          -----------        -----------        -----------        -----------

</TABLE>


See notes to financial statements.


                                      -4-

<PAGE>

<TABLE>
<CAPTION>

GRAYS FERRY COGENERATION PARTNERSHIP

STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998 AND 1997
---------------------------------------------------------------------------------------------------------------------
                                                                                                1998             1997
<S>                                                                                         <C>              <C>    

OPERATING ACTIVITIES:
  Net income                                                                                $15,294,738
  Adjustments to reconcile net income to net cash provided by operating
    activities:
      Depreciation                                                                            7,402,171
      Amortization of other asset                                                               426,949
      Changes in assets and liabilities which provided (used) cash:
        Accounts receivable - related parties                                                (8,048,677)
        Accounts receivable - other                                                          (1,805,350)
        Prepaid assets                                                                         (116,976)
        Inventories                                                                          (1,142,975)
        Accounts payable and accrued expenses - related parties                               3,503,417
        Accounts payable and accrued expenses - other                                        15,017,152
        Other assets                                                                           (758,260)
                                                                                            ------------

           Net cash provided by operating activities                                         29,772,189
                                                                                            ------------

INVESTING ACTIVITIES:
  Construction expenditures                                                                 $(6,968,920)     $(74,253,351)
  Decrease in other construction related expenses                                                             (2,439,849)
  Decrease in construction related accruals - related parties                                  (558,759)
  Decrease in construction related accruals - other                                          (6,381,865)      (4,812,728)
                                                                                            -------------   -------------

           Net cash used in investing activities                                            (13,909,544)     (81,505,928)
                                                                                            -------------   -------------


FINANCING ACTIVITIES:
  Proceeds from borrowings under construction loan agreement and subordinated debt           15,000,000       57,900,000
  Repayment of construction loan agreement                                                  (18,675,951)
  Partners' capital contributions                                                                             30,000,000
                                                                                            -------------   -------------

           Net cash (used in) provided by financing activities                               (3,675,951)      87,900,000
                                                                                            -------------   -------------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                                    12,186,694        6,394,072

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                                6,441,729           47,657
                                                                                            -------------   -------------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                                    $18,628,423     $  6,441,729
                                                                                            -------------   -------------
                                                                                            -------------   -------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
  Cash paid during the year for interest, net of amounts capitalized in 1997                $ 7,770,075     $     --
                                                                                            -------------   -------------
                                                                                            -------------   -------------

</TABLE>

See notes to financial statements.


                                      -5-

<PAGE>


GRAYS FERRY COGENERATION PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
--------------------------------------------------------------------------------


1.    ORGANIZATION OF PARTNERSHIP

      Grays Ferry Cogeneration Partnership, (the "Partnership") was organized on
      October 29, 1991 as a Pennsylvania general partnership for the sole
      purpose of developing, owning, constructing and operating a 150 megawatt
      gas and oil fired qualifying cogeneration facility (the "Project") at the
      Schuylkill Station of the Trigen-Philadelphia Energy Corporation ("TPEC")
      in Philadelphia, Pennsylvania. For the period from October 29, 1991 (date
      of inception) through January 8, 1998, the Partnership was considered a
      development stage entity as its sole activity was construction of the
      Facility. Pursuant to 20-year electricity and 25-year steam purchase
      agreements between the Partnership and its two customers, sales of
      electricity and steam began in January 9, 1998, the date of Commercial
      Operation.

      The Partnership's date of Commercial Operation of January 9, 1998 was
      chosen because it was the date its customers started paying it for
      electricity and steam sold to them under its 20-year electricity purchase
      agreements and its 25-year steam purchase agreements. The Partnership
      believes the date should have been December 30, 1997 and is litigating
      this issue as part of the litigation described in Note 2.

      The Partnership's original general partners are Adwin Equipment Company, a
      wholly owned subsidiary of Eastern Pennsylvania Development Company, which
      is a wholly owned subsidiary of PECO Energy Company ("PECO") and O'Brien
      (Schuylkill) Cogeneration, Inc., ("O'Brien"), a wholly owned subsidiary of
      O'Brien Environmental Energy, Inc. Subsequent to the original Partnership
      formation, Adwin (Schuylkill) Cogeneration, Inc. ("Adwin"), a wholly owned
      subsidiary of Adwin Equipment Company, was assigned all rights,
      responsibilities, and obligations of the Partnership previously held by
      Adwin Equipment Company.

      Trigen (Schuylkill) Cogeneration, Inc. ("Trigen"), a wholly owned
      subsidiary of Trigen Energy Corporation and an affiliate of TPEC,
      Philadelphia Thermal Development Corporation, ("PTDC"), and Philadelphia
      United Power Corporation, ("PUPCO"), joined the Partnership as an equal
      partner as of March 1, 1996.

      In a reorganization plan, approximately 40% of the capital stock of
      O'Brien Environmental Energy, Inc. was acquired by NRG Energy, Inc.,
      and the Company was renamed NRG Generating (U.S.) Inc. As a result of
      this reorganization, O'Brien became known as NRGG (Schuylkill)
      Cogeneration, Inc. ("NRGG"). During 1998, NRGG was renamed
      CogenAmerica Schuylkill, Inc. ("Cogen").

      The three general partners are equal partners, with net operating profits
      and losses and distributions to be allocated equally to the partners,
      subject to the terms and provisions as stated in the Amended and Restated
      Partnership Agreement.

2.    CONTINUATION OF BUSINESS

      The accompanying financial statements have been prepared assuming that the
      Partnership will continue as a going concern. As discussed below, PECO has
      taken action to terminate its power purchase agreements with the
      Partnership. As a consequence, the Project Lender has determined that the



                                       -6-

<PAGE>

      Partnership is in default. These actions raise substantial doubt about the
      Partnership's ability to continue as a going concern. The financial
      statements do not include any adjustment that might result from the
      outcome of these uncertainties, other than the classification of the
      Project debt as current.

      ENGINEERING, PROCUREMENT AND CONSTRUCTION CONTRACT - Although the
      Partnership began Commercial Operation on January 9, 1998, the Partnership
      has not yet accepted care, custody or control of the Project from
      Westinghouse Electric Corporation (the "Contractor") due to the
      Partnership's concerns over design and construction issues. This issue is
      in arbitration.

      PECO - In March 1998, the Partnership received notice from PECO that PECO
      believes its power purchase agreements with the Partnership are no longer
      effective. PECO has refused to pay the rates set forth in the agreements
      based on its allegations that the Pennsylvania Public Utilities Commission
      (the "PPUC") has denied cost recovery of the power purchase agreements in
      retail electric rates.

      On March 9, 1998, the Partnership, along with Trigen, NRGG and TPEC
      (collectively "Plaintiffs") filed suit against PECO, Adwin and the PPUC
      (collectively "Defendants") in United States District Court for the
      District of Pennsylvania. The suit sought to enjoin PECO from terminating
      the power purchase agreements and to compel PECO to pay the rates set
      forth in the agreements. In addition, the Plaintiffs sought actual
      damages, punitive damages, attorneys' fees and costs. On March 19, 1998,
      the federal district court dismissed the lawsuit for lack of subject
      matter jurisdiction.

      On April 9, 1998, the Plaintiffs filed suit against the Defendants in the
      Court of Common Pleas (the "Court") for Philadelphia County in the State
      of Pennsylvania. Preliminary injunctive relief against PECO in the form of
      specific performance of the electric sale agreements, including payments
      according to the contract terms, was granted by the Court on May 6, 1998.
      A $50,000 bond required by the Court was posted by the Plaintiffs on May
      7, 1998. On May 8, 1998, PECO sought a stay of the May 6 Order which was
      denied on May 20, 1998. Also on May 20, 1998, the Court issued a separate
      order adjudging PECO to be in civil contempt of the May 6 Order. A
      coercive sanction of $50,000 per day, or portion thereof, for nonpayment
      of all sums owing by PECO in accordance to the contract terms was included
      in the May 20, 1998 Order. An emergency application of stay by PECO of the
      May 6 Order was denied on May 22, 1998. As a result, PECO complied with
      the May 6 Order on May 22, 1998.

      CONSTRUCTION LOAN DEFAULT - On March 17, 1998 the Partnership received a
      notice of default from the Project Lender stating that PECO's
      determination that the power purchase agreements are no longer in effect
      constitutes a Material Adverse Effect as defined under the credit
      agreement. In addition, the Subordinate Credit Commitment (the
      "Subordinate Debt") contains cross-default provisions; accordingly upon
      notice of default from the Project Lender, the Partnership was in default
      on its Subordinate Debt. As of the date of this report, the default has
      not been waived; accordingly, the Partnership's long-term debt has been
      reclassified as current in the Partnership's balance sheet (see Note 6).
      The Project Lender has also restricted the Partnership's ability to make
      distributions to related parties for certain transactions, along with
      distributions to the Partners of Partnership earnings. In addition, the
      interest rate charged under the credit agreement increased to prime plus
      2.00%, and the interest on the Subordinate Debt increased to prime plus
      3.5% (9.75% and 11.25%, respectively, at December 31, 1998), the penalty
      interest rates.

      Management intends to vigorously pursue enforcement of the power purchase
      agreements, which if successful, should result in a cure of the
      construction loan and Subordinate Debt default.



                                       -7-

<PAGE>

3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     (a)  CAPITALIZED PROJECT COSTS - Construction of the Project was originally
          scheduled to be completed on or about December 8, 1997 (see Notes 1
          and 5), at an estimated cost of $158,000,000. $128,000,000 was
          provided from the proceeds of the credit agreements (see Note 6), and
          $30,000,000 was provided from partners' capital contributions (see
          Note 7). The remainder has been financed through accounts and
          retainage payable. Capitalized Project costs include costs incurred in
          the development and construction of the gas and oil fired 150-megawatt
          cogeneration facility. The majority of these costs represent
          expenditures made under the Engineering, Procurement, and Construction
          contract between the Partnership and the Contractor. Other costs
          represent expenditures for legal, consulting, engineering and
          financing activities relating to the Project. All costs related to the
          design and construction of the Project up to the date of Commercial
          Operation on January 9, 1998, have been capitalized as construction
          work-in-progress when incurred and now are classified as plant in
          service, except deferred financing fees which are included in other
          assets.

          Substantially all of the property, plant and equipment is being
          depreciated over 20 years, the life of the Project's electric and
          contingent capacity sales agreements (see Note 4).

     (b)  REVENUE RECOGNITION - The Partnership's primary source of revenues is
          from the sale of steam to TPEC and the sale of electricity generated
          by the Project to PECO. Pursuant to the Steam Sales Agreement, TPEC is
          obligated to purchase all of its steam requirements from the Project
          as defined in the agreement. Under the provisions of the Power
          Purchase Agreements, PECO has agreed to purchase, or accept delivery
          of, the net electric output from the Project, up to the lesser of 150
          megawatts or the amount of electric output for which the Federal
          Energy Regulatory Commission ("FERC") has certified the Project.

     (c)  SEGMENT REPORTING - The Partnership currently operates the Project,
          which produces two forms of salable energy from one generation
          process. Revenues from each of the two forms are disclosed on the
          statement of income.

     (d)  INVENTORY - Inventory, which is recorded on the first-in, first-out
          basis, consists of the following at December 31:

<TABLE>
<CAPTION>

                                               1998              1997
          <S>                              <C>               <C>

          Fuel                             $ 1,532,987       $ 1,020,469
          Spare Parts                          630,457
                                           -----------       -----------
                                           $ 2,163,444       $ 1,020,469
                                           -----------       -----------
                                           -----------       -----------


</TABLE>


     (e)  FAIR VALUE OF FINANCIAL INSTRUMENTS - The amounts reported in the
          balance sheets for accounts receivable, accounts payable and debt
          approximate fair value.

     (f)  ACCOUNTING FOR INCOME TAXES - The Partnership is not a taxpaying
          entity for income tax purposes. Taxable income or loss from the
          Partnership is reportable by the Partners on their respective income
          tax returns. Accordingly, there is no recognition of income taxes in
          the financial statements.

     (g)  INTEREST RATE HEDGING - The Partnership entered into interest rate
          swap agreements in order to hedge against future increases in interest
          rates. For swap contracts that effectively hedge interest 



                                       -8-

<PAGE>

            rate exposures, the net cash amounts paid or received on the
            contract are accrued and recognized as an adjustment to interest
            expense over the period of the contract.

      (h)   USE OF ESTIMATES - The preparation of the Partnership's financial
            statements in conformity with generally accepted accounting
            principles necessarily requires management to make estimates and
            assumptions that affect the reported amounts of assets and
            liabilities and disclosure of contingent assets and liabilities at
            the balance sheet dates and the amounts of expenses during the
            reporting periods. Actual results could differ from those estimates.

      (i)   RECLASSIFICATIONS - Certain amounts in the 1997 financial statements
            have been reclassified to conform to current year presentation.

      (j)   CASH AND CASH EQUIVALENTS - The Partnership classifies all
            investments with terms to maturity of less than three months upon
            purchase as cash and cash equivalents. Cash and cash equivalents at
            December 31, 1998 consist primarily of a money market investment
            account, which is carried at market, which approximates cost.

      (k)   DEFERRED FINANCING COSTS - Deferred financing costs of $6,544,596
            are amortized over the life of the credit agreements and are
            included in other assets.

      (l)   REAL ESTATE TAXES - The Partnership has accrued real estate taxes as
            required in the Facility Lease (see Note 4). The Partnership has
            made its best estimate of its anticipated real estate taxes, but has
            not yet been billed by its local taxing authority. However,
            management does not believe that actual taxes due will be materially
            different than the amounts currently accrued.

4.    RELATED PARTY AGREEMENTS AND TRANSACTIONS

      FACILITY LEASE - The Project is located at 2600 Christian Street,
      Philadelphia, Pennsylvania, on the site of TPEC's Schuylkill Station and
      PECO's Schuylkill Station, which is owned by PECO. The Partnership has
      leased a portion of the land which TPEC has leased from PECO. The lease
      agreement with TPEC commenced on the date construction began, March 8,
      1996, and will terminate 25 years from the date of Commercial Operation.
      The Partnership is obligated to pay TPEC $1 per year as rent. The
      Partnership is required to pay any increase in taxes, assessments and fees
      assessed against the site or the Facility during the lease term.

      DOCK FACILITY SERVICE AGREEMENT - The Partnership has an agreement with
      PTDC and TPEC, an affiliate of PTDC, for fuel oil transportation and
      storage services. The Partnership pays operating fees based on the number
      of barrels received at, or delivered to, the dock as well as a storage fee
      for barrels stored for use by the Project. These fees are adjusted
      annually based on the Consumer Price Index ("CPI"). During 1998 and 1997,
      the Partnership incurred costs associated with these services of $199,640
      and $100,923, respectively, of which $12,862 and $100,923 is included in
      accounts payable at December 31, 1998 and 1997, respectively. The entrance
      to the Schuylkill Station of TPEC, which is also the entrance to the
      Project, was upgraded in 1997. The Partnership had previously agreed to
      reimburse TPEC for its share of the cost which amounted to $250,000.

      OPERATIONS AND MAINTENANCE AGREEMENT - PUPCO, a Delaware corporation, an
      affiliate of TPEC, manages and performs all operation and maintenance of
      the Project subsequent to the Commercial Operation date in accordance with
      a 25-year agreement. Prior to Commercial Operation, PUPCO was reimbursed
      for certain costs incurred during mobilization and received a monthly fee
      of $25,000 limited to $150,000 in total monthly fees. After Commercial
      Operation begins, the Partnership is required to pay PUPCO an annual
      operating fee of $600,000 as detailed in the agreement. A portion of the


                                       -9-

<PAGE>

      operating fee, $400,000, is adjusted annually based on changes in the CPI.
      As an additional fee, PUPCO will receive 30% of all payments received by
      the Partnership pursuant to the Contingent Capacity Purchase Addendum
      (Phase 1). The Partnership was billed by PUPCO annual operating fees of
      $600,000 and a capacity fee of $757,416, and reimbursable expenses of
      $1,647,658 for 1998, of which $1,497,003 was included in accounts payable
      at December 31, 1998. Included in those billings were $29,192 and $32,851
      of fees and reimbursable expenses, respectively, which were capitalized as
      construction cost.

      STEAM SALE AGREEMENT - The Partnership has a 25-year agreement with TPEC
      in which the Partnership sells all of the steam produced by the plant to
      TPEC. The price for low- and high-pressure steam is determined based on a
      function of weighted average fuel price, CPI and the City of Philadelphia
      Tariff Water and Sewer Rates. The agreement requires TPEC to pay for a
      minimum of 3.3 Mlbs on an annual basis upon Commercial Operation. During
      1998 and 1997, $18,113,962 and $851,182, respectively, was billed by the
      Partnership to TPEC for steam produced and capacity charges. Of the
      amounts billed in 1998 and 1997, $296,199 and $851,182, respectively, were
      capitalized as a reduction of construction costs as such sales occurred as
      a result of plant testing. Accounts receivable as of December 31, 1998 and
      1997 include $3,985,346 and $851,182, respectively, due from TPEC for
      these billings.

      ELECTRIC AND CONTINGENT CAPACITY SALES AGREEMENTS - The Partnership has
      two 20-year electric sale agreements with PECO, commencing at the
      Commercial Operation date, whereby the Partnership supplies PECO with
      electric output at costs defined by the agreements. The terms of
      agreements require PECO to purchase or accept delivery of the net electric
      output from the power plant of the lesser of 150 megawatts or the amount
      of electric output for which the FERC has certified the power plant. The
      two parties also entered into a 20-year Contingent Capacity Purchase
      Addendum which requires PECO to purchase electric capacity from the
      Partnership. The addendum term commenced on the date of Commercial
      Operation. During 1998 and 1997, $61,932,981 and $1,778,911, respectively,
      was billed by the Partnership to PECO for electricity produced and
      capacity charges. Of the amounts billed in 1998 and 1997, $1,624,855 and
      $1,778,911, respectively, were applied as a reduction of construction
      costs as such sales occurred as a result of plant testing. Accounts
      receivable as of December 31, 1998 and 1997 include $6,693,424 and
      $1,778,911, respectively, due from PECO for these billings. As a result of
      the Project, PECO was required to construct an interconnection between its
      facility and the Partnership's facility. The costs associated with the
      interconnection, $2,355,426, were reimbursed to PECO by the Partnership
      during 1997. Other amounts paid to PECO during 1997 for reimbursement of
      expenses were $6,000 for the Partnership's portion of a joint thermal
      modeling study.

      STEAM VENTURE AGREEMENT - On September 17, 1993, TPEC, PUPCO and the
      Partnership entered into an Amended and Restated Steam Venture Agreement
      for the purpose of the Partnership designing, constructing, starting-up,
      and testing and owning a cogeneration facility, with the assistance of the
      other two participants. The agreement required the Partnership to pay
      PUPCO quarterly fees of $150,000 up to Commercial Operation. Amounts
      billed in 1997 were capitalized as construction costs; however, $252,635
      was in accounts payable at December 31, 1997. After Commercial Operation
      commenced, PUPCO receives annual fees of $1,200,000 payable in monthly
      installments. Two-thirds of the annual fee is subject to an escalation of
      3% per annum. During 1998 the Partnership was billed $1,200,000 by PUPCO
      under this agreement, of which $25,806 was capitalized as construction
      cost. Accounts payable at December 31, 1998, include $1,200,000 related to
      these billings. In addition, during 1997, the Partnership incurred PUPCO
      mobilization fees of $150,000.

      FUEL MANAGEMENT AGREEMENT - During 1998, the Partnership had an agreement
      with Exelon Corporation, a subsidiary of PECO, for fuel management
      services. Under the terms of the agreement, the Partnership was to pay
      Exelon a fee based on the amount of natural gas and liquid fuels delivered
      to 


                                       -10-

<PAGE>


      the Project. During 1998, the Partnership incurred costs associated with
      these services of $176,480, of which $4,474 was capitalized as 
      construction costs and $176,480 was included in accounts payable at 
      December 31, 1998.

      CONSTRUCTION MANAGEMENT - NRGG received fees and reimbursed expenses for
      management services provided to the Project and for acting as the
      Partnership's representative to administer all third-party contracts
      during the construction phase. The arrangement commenced on March 8, 1996
      and ceased upon Commercial Operation. During 1998, NRGG billed the
      Partnership fees and reimbursed expenses of $56,250 and $214,795,
      respectively, all of which was capitalized as construction cost. Accounts
      payable at December 31, 1997 included $205,201 of such fees and expenses.

      MANAGEMENT SERVICES AND OTHER - In accordance with the Partnership
      agreement, the Partnership is required to pay it's Managing Partner
      $150,000 per year for providing management services to the Partnership.
      NRGG acted as Managing Partner through November 15, 1998 and billed the
      Partnership fees and reimbursable expenses of $131,250 and $36,719,
      respectively of which $118,750 was included in accounts payable at
      December 31, 1998. Of these fees, $3,387 was capitalized as construction
      cost. Effective November 15, 1998, Trigen became the Managing Partner and
      billed the Partnership fees of $18,750 for the year ended December 31,
      1998, all of which was included in accounts payable as of December 31,
      1998. In addition, the Partnership purchases demineralized water from
      Trigen. For the year ended December 31, 1998, the Partnership purchased
      $2,206,869 of demineralized water from Trigen of which $46,671 was
      capitalized as a construction cost prior to commercial operation and
      $498,322 was included in accounts payable as of December 31, 1998.

5.    OTHER SIGNIFICANT CONTRACTS

      GAS SUPPLY AGREEMENT - The Partnership has a Gas Sales Agreement with
      Aquila Energy Marketing Corporation ("Aquila"), a Delaware corporation,
      providing for the purchase of natural gas to meet the power plant's
      requirements. The purchase of gas as stated in the agreement is divided
      into two tiers based on quantity purchased. The price of the first tier,
      for daily purchases up to 32,000 million British Thermal units (MMBtu) is
      based on the gas spot market plus a premium. The second tier, for daily
      purchases above the initial 32,000 MMBtu, is also based on the gas spot
      market plus a premium. The premium on second tier gas purchases is subject
      to annual negotiations effective for years beginning January 1, 1999 and
      after. In addition, beginning in 2001 the price of both tiers is indexed
      based on the electricity rate received by the Project. The agreement also
      has a pricing provision for winter quantity gas delivered to certain
      redelivery points as defined in the agreement. The initial term of the Gas
      Sales Agreement is 192 months from the initial delivery and may be
      extended for one-year renewal periods unless terminated by either party.
      During 1998, the Partnership purchased $14,691,090 of gas under this
      agreement.

      GAS TRANSPORTATION ARRANGEMENTS - The Partnership and the Philadelphia
      Authority for Industrial Development ("PAID") entered into a Service
      Agreement dated January 28, 1996, whereby PAID agreed to deliver
      non-interruptible local gas service to the Project for up to 50,000
      Dekatherms ("Dth") per day from the date of Commercial Operation via an
      established agreement with Philadelphia Gas Works ("PGW"). The agreement
      between the Partnership and PAID is for a period of 25 years and may be
      extended at the mutual agreement of the two parties. The Partnership is
      committed to purchase transportation services for a minimum annual
      quantity based in part, on steam sales to Trigen. In addition, TPEC
      permanently released capacity of 15,000 Dth to the Partnership beginning
      November 1, 1997. TPEC retained first refusal privileges on this released
      capacity in the event that the Partnership does not require the additional
      capacity. During 1998, the Partnership purchased $3,187,640 of
      transportation services under these agreements.



                                       -11-

<PAGE>

      ENGINEERING, PROCUREMENT AND CONSTRUCTION CONTRACT - The Partnership has a
      $116,300,000 engineering, procurement and construction contract (the
      "EPC") with the Contractor. The contract guaranteed that the Project would
      be provisionally completed by December 8, 1997, the projected date of
      Commercial Operation. Provisions of the contract included rebates to the
      Partnership of $70,000 a day should the Contractor fail to complete the
      Project on schedule as well as bonus payments to the Contractor should the
      Project be completed prior to schedule. The contract was not completed on
      time. As such, a rebate in the amount of $1,722,000 has been recorded in
      accounts receivable at December 31, 1998. The Partnership believes this
      accrual is based on a conservative estimate. Currently, the Partnership
      and the Contractor are in arbitration over the completion of the EPC
      contract (see Note 2). Provisional acceptance of the Project has not yet
      occurred.

      COMBUSTION TURBINE PARTS SUPPLY AND REPAIR AND SCHEDULED OUTAGE SERVICES
      AGREEMENT - The Partnership entered into a combustion turbine parts supply
      and repair and scheduled outage services agreement with Westinghouse
      Electric Corporation as of August 29, 1997. The agreement requires the
      Partnership to purchase from the Contractor parts and miscellaneous
      hardware for the gas turbine comprising a portion of the Project, repair
      of parts for the gas turbine comprising a portion of the Project, and
      scheduled outage services and technical field assistance for unscheduled
      outages as defined in the agreement.

6.    CREDIT AGREEMENTS

      On March 1, 1996 the Partnership entered into a $125,000,000 Credit
      Agreement (the "Agreement") to provide construction and term loan
      financing for the purpose of financing a major portion of the Project
      facility. The Agreement provides the Partnership with $113,000,000 of
      construction loan commitments (the "Construction Loan") which are
      convertible to term loan commitments (the "Term Loan") after completion of
      certain criteria as stated in the Agreement, $7,000,000 in letter of
      credit commitments (the "LOC Commitment"), and $5,000,000 in working
      capital loan commitments (the "WC Loan"). Upon completion of the Project,
      the Construction Loan is due and payable or may be converted to a 15-year
      Term Loan, payable in quarterly installments through the year 2013. The
      Term Loan is available only to repay the Construction Loan. Substantially
      all of the Partnership's assets have been pledged as collateral under the
      Agreement.

      The Partnership had $94,324,049 outstanding under the Construction Loan at
      December 31, 1998. The Partnership has pledged $5,000,000 under its LOC
      Commitment for outstanding letters of credit as of December 31, 1998.

      Interest on balances outstanding under the Construction Loan and the WC
      Loan prior to conversion of Construction Loan to Term Loan, is based on
      either the base rate, as defined in the Agreement, or LIBOR plus 1.1% as
      elected by the Partnership at the time of borrowing, and was 6.66% at
      December 31, 1998. Interest on balances outstanding under the Term Loan
      and the WC Loan, subsequent to conversion of Construction Loan to Term
      Loan, is based on the rates as noted during the Construction Loan period
      and is subject to an increase in the percentage as defined in the
      Agreement. Interest on letters of credit outstanding under the LOC
      Commitment is currently 1.1%, and is subject to periodic increases during
      the term of the Agreement. The LOC Commitment also is subject to a fee of
      0.125%, due quarterly.

      The Agreement provides for commitment fees of 0.375% on the unused
      Construction Loan, WC Loan and LOC Commitment.

      To protect the Project Lender from the uncertainty of interest rate
      changes during the term of the loan, the Partnership entered into an
      agreement (the "Swap Agreement") with Chase Manhattan Bank



                                      -12-

<PAGE>

      (the "Counterparty"), a participating bank in the Loan Agreement on
      March 1, 1996. Under the Swap Agreement, the Partnership agreed to
      swap interest payments with the Counterparty. Effective December 8,
      1997, the Partnership is obligated to make fixed interest payments at
      a rate of 7.18% from effective date of December 8, 1997 through
      termination date of December 8, 2012 on a balance of $56,500,000 at
      December 8, 1997 and decreasing in accordance with the Swap Agreement.
      The Counterparty is obligated to make variable interest payments based
      on a three-month LIBOR, which was 5.2% at December 31, 1998, on the
      same balance.

      The Partnership also has a Subordinate Credit Commitment with the
      Project's Contractor. The Contractor agreed to lend the Partnership
      $15,000,000 to provide additional funding for the construction of the
      Project. The funds are available after the Construction Loan commitments
      described above have been exhausted and the Partners have made their
      equity contribution of $30,000,000 to be used for the continuation of the
      Project's construction. The term of the Subordinate Debt is nine years and
      interest on the Subordinate Debt will be calculated using the prime rate
      for the first four years and prime rate plus 1.5% for the remaining years.
      During 1998, the Partnership borrowed the full $15,000,000 available under
      the Subordinate Debt.

      During 1998, the Partnership received a notice of default from the Project
      Lender. Such default resulted in a cross-default on the Partnership's
      Subordinate Debt. See Note 2.

7.    CAPITAL CONTRIBUTIONS

      During 1997, the Construction Loan (see Note 6) was fully utilized. Each
      of the Partners made an equity contribution of $10,000,000. The last
      contributions were made December 29, 1997.

8.    NEW ACCOUNTING PRONOUNCEMENTS

      In April 1998, the American Institute of Certified Public Accountants
      issued Statement of Position 98-5 (SOP 98-5), REPORTING ON THE COSTS OF
      START-UP ACTIVITIES. This statement, which requires that costs related to
      start-up activities generally be expensed as incurred, is effective for
      fiscal years beginning after December 25, 1998. At this time, the
      Partnership has not determined the impact the adoption of this standard
      will have on the Partnership's financial statements.

      In July 1998, the Financial Accounting Standards Board issued Statement of
      Financial Accounting Standard No. 133, ("SFAS No. 133") ACCOUNTING FOR
      DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. This statement, which
      establishes accounting and reporting standards for derivative instruments,
      including certain derivative instruments imbedded in other contracts, and
      for hedging activities, is effective for fiscal years beginning after June
      15, 1999. At this time, the Partnership has not determined the impact the
      adoption of this standard will have on the Partnership's financial
      statements.



                                      -13-

<PAGE>

9.    SUBSEQUENT EVENTS

      On February 28, 1999, the 20 year agreement with Exelon for fuel
      management services was terminated by mutual consent among the parties.

      On March 10, 1999, the Court of Common Pleas granted the Partnership's
      motion for partial summary judgement effectively deciding the issue of
      liability on the contract claim against PECO and in favor of the
      Partnership in the matter discussed in Note 2. The trial will now be
      limited to the amount of damages PECO must pay the Partnership and the
      counts of fraud, conversion, breach of the implied covenant of good faith
      and fair dealing and breach of fiduciary duties.
      The trial is scheduled to begin March 29, 1999.


                                     ******




                                      -14-

<PAGE>



                       CONSENT OF INDEPENDENT ACCOUNTANTS


We hereby consent to the incorporation by reference in the Registration
Statement on Form, S-8 (No. 333-38603) of Cogeneration Corporation of America of
our report, dated January 26, 1999 (except for Note 9, as to which the date is
March 10, 1999), on the financial statements for the years ended December 31,
1998 and 1997 of Grays Ferry Cogeneration Partnership appearing in this 
Form 10-K.


/s/ Deloitte & Touche LLP
--------------------------
Deloitte & Touche LLP
Philadelphia, Pennsylvania
March 25, 1999

<PAGE>



                                INDEX TO EXHIBITS



PERIODIC REPORTS, PROXY STATEMENTS AND OTHER INFORMATION FILED BY COGENAMERICA
WITH THE SEC PURSUANT TO THE INFORMATIONAL REQUIREMENTS OF THE EXCHANGE ACT MAY
BE INSPECTED AND COPIED AT THE SEC'S PUBLIC REFERENCE ROOM, 450 FIFTH STREET,
N.W., WASHINGTON, D.C. 20549, AND THE PUBLIC MAY OBTAIN INFORMATION ON THE
OPERATION OF THE PUBLIC REFERENCE ROOM BY CALLING THE SEC AT 1-800-SEC-0330. THE
SEC ALSO MAINTAINS AN INTERNET SITE (HTTP://WWW.SEC.GOV) THAT MAKES AVAILABLE
REPORTS, PROXY STATEMENTS AND OTHER INFORMATION REGARDING COGENAMERICA. THE
COMPANY'S SEC FILE NUMBER REFERENCE IS COMMISSION FILE NO. 1-9208.


<TABLE>
<CAPTION>
EXHIBIT NO.       DESCRIPTION
----------        ------------
<S>               <C>
2.1               Composite Fourth Amended and Restated Plan of Reorganization
                  for O'Brien Environmental Energy, Inc. (currently Cogeneration
                  Corporation of America) (the "Company") dated January 31, 1996
                  and proposed by the Company, the Official Committee of Equity
                  Security Holders, Wexford Management Corp. ("Wexford") and NRG
                  Energy, Inc. ("NRG Energy") filed as Exhibit 2.1 to Amendment
                  No. 1 to the Company's Annual Report on Form 10-K for the
                  fiscal year ended June 30, 1996 (Commission File No. 1-9208)
                  and incorporated herein by this reference.

2.2               Order confirming Composite Fourth Amended and Restated Plan of
                  Reorganization for the Company proposed by the Company, the
                  Official Committee of Equity Security Holders, Wexford and NRG
                  Energy dated February 13, 1996 and entered on February 22,
                  1996 and filed as Exhibit 2.1 to the Company's Current Report
                  on Form 8-K dated February 13, 1996 (Commission File No.
                  1-9208) and incorporated herein by this reference.

2.3               Amended and Restated Stock Purchase and Reorganization
                  Agreement dated January 31, 1996 between the Company and NRG
                  Energy filed as Exhibit 10.1 to the Company's Current Report
                  on Form 8-K dated February 13, 1996 (Commission File No.
                  1-9208) and incorporated herein by this reference.

2.4               Letter Agreement dated April 26, 1996 between the Company and
                  NRG Energy amending the Stock Purchase and Reorganization
                  Agreement filed as Exhibit 2.4 to Amendment No. 1 to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  June 30, 1996 (Commission File No. 1-9208) and incorporated
                  herein by this reference.

2.5               Stock Purchase Agreement dated September 10, 1998 between the
                  Company and MCPC LLC filed as Exhibit 2.1 to the Company's
                  Current Report on 8-K dated October 9, 1998 (Commission File
                  No. 1-9208) and incorporated herein by this reference.

3.1               Amended and Restated Certificate of Incorporation of the
                  Company filed as Exhibit 3.1 to Company's Quarterly Report on
                  Form 10-Q for the quarter ended June 30, 1998 (Commission File
                  No. 1-9208) and incorporated herein by this reference.

3.2               Restated Bylaws of the Company filed as Exhibit 3.3 to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  December 31, 1997 (Commission File No. 1-9208) and
                  incorporated herein by reference.

10.1              Co-Investment Agreement dated April 30, 1996 between the
                  Company and NRG Energy filed as Exhibit 10.1 to Amendment No.
                  1 to the Company's Annual Report on 
</TABLE>


                                       60
<PAGE>


<TABLE>
<S>               <C>
                  Form 10-K for the fiscal year ended June 30, 1996 (Commission 
                  File No. 1-9208) and incorporated herein by this reference.

10.2.1            Chapter 11 Financing Agreement dated August 30, 1995 between
                  the Company and NRG Energy filed as Exhibit 10.2.1 to
                  Amendment No. 1 to the Company's Annual Report on Form 10-K
                  for the fiscal year ended June 30, 1996 (Commission File No.
                  1-9208) and incorporated herein by this reference.

10.2.2            Letter Agreement dated February 20, 1996 between the Company
                  and NRG Energy amending the Chapter 11 Financing Agreement
                  filed as Exhibit 10.2.2 to Amendment No. 1 to the Company's
                  Annual Report on Form 10-K for the fiscal year ended June 30,
                  1996 (Commission File No. 1-9208) and incorporated herein by
                  this reference.

10.2.3            Letter Agreement dated April 30, 1996 between the Company and
                  NRG Energy further amending the Chapter 11 Financing Agreement
                  filed as Exhibit 10.2.3 to Amendment No. 1 to the Company's
                  Annual Report on Form 10-K for the fiscal year ended June 30,
                  1996 (Commission File No. 1-9208) and incorporated herein by
                  this reference.

10.3              Liquidating Asset Management Agreement dated April 30, 1996
                  between the Company and Wexford filed as Exhibit 10.3 to
                  Amendment No. 1 to the Company's Annual Report on Form 10-K
                  for the fiscal year ended June 30, 1996 (Commission File No.
                  1-9208) and incorporated herein by this reference.

10.4              Management Services Agreement dated as of January 31, 1996
                  between the Company and NRG Energy filed as Exhibit 10.4 to
                  Amendment No. 1 to the Company's Annual Report on Form 10-K
                  for the fiscal year ended June 30, 1996 (Commission File No.
                  1-9208) and incorporated herein by this reference.

10.5.1            Loan Agreement dated April 30, 1996 between the Company and
                  NRG Energy filed as Exhibit 10.5.1 to Amendment No. 1 to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  June 30, 1996 (Commission File No. 1-9208) and incorporated
                  herein by this reference.

10.5.2            Note dated April 30, 1996 from the Company to NRG Energy in
                  the principal amount of $45,000,000 filed as Exhibit 10.5.2 to
                  Amendment No. 1 to the Company's Annual Report on Form 10-K
                  for the fiscal year ended June 30, 1996 (Commission File No.
                  1-9208) and incorporated herein by this reference.

10.6.1            Supplemental Loan Agreement dated April 30, 1996 between NRG
                  Energy and the Company filed as Exhibit 10.6.1 to Amendment
                  No. 1 to the Company's Annual Report on Form 10-K for the
                  fiscal year ended June 30, 1996 (Commission File No. 1-9208)
                  and incorporated herein by this reference.

10.6.2            Note dated April 30, 1996 from the Company to NRG Energy in
                  the principal amount of $15,855,545.25 filed as Exhibit 10.6.2
                  to Amendment No. 1 to the Company's Annual Report on Form 10-K
                  for the fiscal year ended June 30, 1996 (Commission File No.
                  1-9208) and incorporated herein by this reference.

10.7.1            NRG Newark Cogen Loan Agreement dated April 30, 1996 between
                  NRG Energy and the Company filed as Exhibit 10.7.1 to
                  Amendment No. 2 to the Company's Annual Report on Form 10-K
                  for the fiscal year ended June 30, 1996 (Commission File No.
                  1-9208) and incorporated herein by this reference.

10.7.2            Note dated April 30, 1996 from the Company to NRG Energy in
                  the principal amount of $24,000,000 filed as Exhibit 10.7.2 to
                  Amendment No. 1 to the Company's Annual 
</TABLE>



                                       61
<PAGE>

<TABLE>
<S>               <C>
                  Report on Form 10-K for the fiscal year ended June 30, 1996
                  (Commission File No. 1-9208) and incorporated herein by this
                  reference.

10.8.1            Credit Agreement dated May 17, 1996 between NRG Generating
                  (Newark) Cogeneration Inc. (currently CogenAmerica Newark
                  Inc.), NRG Generating (Parlin) Cogeneration Inc. (currently
                  CogenAmerica Parlin Inc.), Credit Suisse, Greenwich Funding
                  Corporation and any Purchasing Lender, as Lenders thereunder
                  filed as Exhibit 10.8.1 to Amendment No. 1 to the Company's
                  Annual Report on Form 10-K for the fiscal year ended June 30,
                  1996 (Commission File No. 1-9208) and incorporated herein by
                  this reference.

10.8.2            Amendment No. 1 to the Credit Agreement dated June 28, 1996
                  between NRG Generating (Newark) Cogeneration Inc., NRG
                  Generating (Parlin) Cogeneration Inc. and Credit Suisse,
                  Greenwich Funding Corporation and any Purchase Lender (as
                  defined therein) filed as Exhibit 10.8.2 to Amendment No. 1 to
                  the Company's Annual Report on Form 10-K for the fiscal year
                  ended June 30, 1996 (Commission File No. 1-9208) and
                  incorporated herein by this reference.

10.8.3            Stock Pledge Agreement dated June 28, 1996 between the Company
                  as Pledgor and Credit Suisse filed as Exhibit 10.8.3 to
                  Amendment No. 1 to the Company's Annual Report on Form 10-K
                  for the fiscal year ended June 30, 1996 (Commission File No.
                  1-9208) and incorporated herein by this reference.

10.8.4            Guaranty dated as of May 17, 1996 by NRG Energy, as Guarantor,
                  to Credit Suisse, as Agent for the benefit of Credit Suisse,
                  Greenwich Funding Corporation and any Purchasing Lender, as
                  Lenders under the Credit Agreement (as defined therein) filed
                  as Exhibit 10.8.4 to Amendment No. 1 to the Company's Annual
                  Report on Form 10-K for the fiscal year ended June 30, 1996
                  (Commission File No. 1-9208) and incorporated herein by this
                  reference.

10.8.5            Guaranty dated as of June 28, 1996 by the Company as Guarantor
                  to Credit Suisse as Agent for the benefit of Credit Suisse,
                  Greenwich Funding Corporation and any Purchasing Lender, as
                  Lenders under the Credit Agreement (as defined therein) filed
                  as Exhibit 10.8.5 to Amendment No. 1 to the Company's Annual
                  Report on Form 10-K for the fiscal year ended June 30, 1996
                  (Commission File No. 1-9208) and incorporated herein by this
                  reference.

10.8.6            Tax Indemnification Agreement dated June 28, 1996 between the
                  Company, NRG Generating (Newark) Cogeneration Inc., NRG
                  Generating (Parlin) Cogeneration Inc. and Credit Suisse filed
                  as Exhibit 10.8.6 to Amendment No. 1 to the Company's Annual
                  Report on Form 10-K for the fiscal year ended June 30, 1996
                  (Commission File No. 1-9208) and incorporated herein by this
                  reference.

10.8.7            Assignment and Security Agreement dated June 28, 1996 between
                  NRG Generating (Parlin) Cogeneration Inc. and Credit Suisse
                  filed as Exhibit 10.8.7 to Amendment No. 1 to the Company's
                  Annual Report on Form 10-K for the fiscal year ended June 30,
                  1996 (Commission File No. 1-9208) and incorporated herein by
                  this reference.

10.8.8            Amended and Restated Leasehold Mortgage, Assignment of Leases
                  and Rents and Security Agreement dated June 28, 1996 between
                  NRG Generating (Newark) Cogeneration Inc. and Credit Suisse
                  filed as Exhibit 10.8.8 to Amendment No. 2 to the Company's
                  Annual Report on Form 10-K for the fiscal year ended June 30,
                  1996 (Commission File No. 1-9208) and incorporated herein by
                  this reference.
</TABLE>


                                       62
<PAGE>

<TABLE>
<S>               <C>
10.8.9            Leasehold Mortgage, Assignment of Leases and Rents and
                  Security Agreement dated June 28, 1996 between NRG Generating
                  (Parlin) Cogeneration Inc. and Credit Suisse filed as Exhibit
                  10.8.9 to Amendment No. 2 to the Company's Annual Report on
                  Form 10-K for the fiscal year ended June 30, 1996 (Commission
                  File No. 1-9208) and incorporated herein by this reference.

10.8.10           Interest Rate Swap Agreement dated August 2, 1996 between NRG
                  Generating (Newark) Cogeneration Inc., NRG Generation (Parlin)
                  Cogeneration, Inc. and Credit Suisse filed as Exhibit 10.8.10
                  to Amendment No. 1 to the Company's Annual Report on Form 10-K
                  for the fiscal year ended June 30, 1996 (Commission File No.
                  1-9208) and incorporated herein by this reference.

10.9              Loan Agreement dated March 8, 1996 between O'Brien
                  (Schuylkill) Cogeneration Inc. (currently CogenAmerica
                  Schuylkill Inc.) and NRG Energy in connection with the Grays
                  Ferry Partnership filed as Exhibit 10.9.1 to Amendment No. 2
                  to the Company's Annual Report on Form 10-K for the fiscal
                  year ended June 30, 1996 (Commission File No. 1-9208) and
                  incorporated herein by this reference.

10.10             Loan Agreement between the Company and PECO Energy Company
                  ("PECO") filed as Exhibit 10.10.6 to Amendment No. 2 to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  June 30, 1996 (Commission File No. 1-9208) and incorporated
                  herein by this reference.

10.11.1           Long Term Power Purchase Contract for Cogeneration and Small
                  Power Production dated March 10, 1986 between the Company and
                  Jersey Central Power and Light ("JCP&L") and filed as Exhibit
                  10.3.11 to the Company's Registration Statement (File No.
                  33-11789) and incorporated herein by this reference.

10.11.2           Letter Agreement dated June 2, 1986 between the Company and
                  JCP&L amending the Long Term Power Purchase Contract filed as
                  Exhibit 10.11.2 to Amendment No. 1 to the Company's Annual
                  Report on Form 10-K for the fiscal year ended June 30, 1996
                  (Commission File No. 1-9208) and incorporated herein by this
                  reference.

10.11.3           Second Amendment to Power Purchase Agreement dated March 1,
                  1988 between the Company and JCP&L filed as Exhibit 10.11.3 to
                  Amendment No. 1 to the Company's Annual Report on Form 10-K
                  for the fiscal year ended June 30, 1996 (Commission File No.
                  1-9208) and incorporated herein by this reference.

10.11.4           Letter Agreement dated April 30, 1996 between O'Brien (Newark)
                  Cogeneration, Inc. (currently CogenAmerica Newark Inc.),
                  O'Brien (Parlin) Cogeneration, Inc. (currently CogenAmerica
                  Parlin Inc.) and JCP&L filed as Exhibit 10.11.4 to Amendment
                  No. 1 to the Company's Annual Report on Form 10-K for the
                  fiscal year ended June 30, 1996 (Commission File No. 1-9208)
                  and incorporated herein by this reference.

10.11.5           Third Amendment to Power Purchase Agreement dated April 30,
                  1996 between O'Brien (Newark) Cogeneration, Inc. and JCP&L
                  filed as Exhibit 10.11.5 to Amendment No. 1 to the Company's
                  Annual Report on Form 10-K for the fiscal year ended June 30,
                  1996 (Commission File No. 1-9208) and incorporated herein by
                  this reference.

10.12             Transmission Service and Interconnection Agreement dated
                  November 17, 1987 between O'Brien Energy Systems, Inc.
                  (currently Cogeneration Corporation of America) and Public
                  Service Electric and Gas Company filed as Exhibit 10.14 to
                  Amendment No. 2 to the Company's Annual Report on Form 10-K
                  for the fiscal year 
</TABLE>


                                       63
<PAGE>


<TABLE>
<S>               <C>
                  ended June 30, 1996 (Commission File No. 1-9208) and
                  incorporated herein by this reference.

10.13.1           Steam Purchase Agreement dated October 3, 1986 between
                  O'Brien Cogeneration IV, Inc. (currently CogenAmerica Newark
                  Inc.) and Newark Boxboard Co. filed as Exhibit 10.15.1 to
                  Amendment No. 2 to the Company's Annual Report on Form 10-K
                  for the fiscal year ended June 30, 1996 (Commission File No.
                  1-9208) and incorporated herein by this reference.

10.13.2           Amendment to Steam Purchase Agreement dated March 15, 1988
                  between O'Brien Cogeneration IV, Inc. and Newark Boxboard Co.
                  filed as Exhibit 10.15.2 to Amendment No. 1 to the Company's
                  Annual Report on Form 10-K for the fiscal year ended June 30,
                  1996 (Commission File No. 1-9208) and incorporated herein by
                  this reference.

10.13.3           Amendment to Steam Purchase Agreement dated July 18, 1988
                  between O'Brien (Newark) Cogeneration, Inc. and Newark Group
                  Industries, Inc. filed as Exhibit 10.15.3 to Amendment No. 1
                  to the Company's Annual Report on Form 10-K for the fiscal
                  year ended June 30, 1996 (Commission File No. 1-9208) and
                  incorporated herein by this reference.

10.14.1           Agreement for Purchase and Sale of Electric Power dated
                  October 20, 1986 between the Company and JCP&L and filed
                  Exhibit 10.3.12 to the Company's Registration Statement (File
                  No. 33-11789) and incorporated herein by this reference.

10.14.2           First Amendment to Agreement for Purchase and Sale Electric
                  Power dated June 11, 1991 between the Company and JCP&L filed
                  as Exhibit 10.17.2 to Amendment No. 2 to the Company's Annual
                  Report on Form 10-K for the fiscal year ended June 30, 1996
                  (Commission File No. 1-9208) and incorporated herein by this
                  reference.

10.14.3           Amended and Restated Agreement for Purchase and Sale of
                  Electric Power dated April 30, 1996 between O'Brien (Parlin)
                  Cogeneration, Inc. and JCP&L filed as Exhibit 10.17.3 to
                  Amendment No. 1 to the Company's Annual Report on Form 10-K
                  for the fiscal year ended June 30, 1996 (Commission File No.
                  1-9208) and incorporated herein by this reference.

10.14.4           Letter Agreement dated April 30, 1996 between O'Brien (Parlin)
                  Cogeneration, Inc. and JCP&L filed as Exhibit 10.17.4 to
                  Amendment No. 1 to the Company's Annual Report on Form 10-K
                  for the fiscal year ended June 30, 1996 (Commission File No.
                  1-9208) and incorporated herein by this reference.

10.15.1           Steam Purchase Contract dated December 8, 1986 between the
                  Company and E.I. du Pont de Nemours ("E.I. du Pont") and
                  Company filed as Exhibit 10.20.1 to Amendment No. 1 to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  June 30, 1996 (Commission File No. 1-9208) and incorporated
                  herein by this reference.

10.15.2           Amendment No. 1 to Steam Purchase Contract dated January 12,
                  1988 between the Company and E.I. du Pont filed as Exhibit
                  10.20.2 to Amendment No. 1 to the Company's Annual Report on
                  Form 10-K for the fiscal year ended June 30, 1996 (Commission
                  File No. 1-9208) and incorporated herein by this reference.

10.15.3           Letter Agreement dated July 25, 1988 between the Company and
                  E.I. du Pont filed as Exhibit 10.20.3 to Amendment No. 1 to
                  the Company's Annual Report on Form 10-K for the fiscal year
                  ended June 30, 1996 (Commission File No. 1-9208) and
                  incorporated herein by this reference.
</TABLE>


                                       64
<PAGE>

<TABLE>
<S>               <C>
10.15.4           Amendment No. 3 to Steam Purchase Agreement dated December 12,
                  1988 between the Company and E.I. du Pont filed as Exhibit
                  10.20.4 to Amendment No. 1 to the Company's Annual Report on
                  Form 10-K for the fiscal year ended June 30, 1996 (Commission
                  File No. 1-9208) and incorporated herein by this reference.

10.15.5           Amendment No. 4 to Steam Purchase Contract dated July 14, 1989
                  between the Company and E.I. du Pont filed as Exhibit 10.20.5
                  to Amendment No. 1 to the Company's Annual Report on Form 10-K
                  for the fiscal year ended June 30, 1996 (Commission File No.
                  1-9208) and incorporated herein by this reference.

10.15.6           Amendment No. 5 to Steam Purchase Contract dated February 16,
                  1993 between the Company and E.I. du Pont filed as Exhibit
                  10.20.6 to Amendment No. 1 to the Company's Annual Report on
                  Form 10-K for the fiscal year ended June 30, 1996 (Commission
                  File No. 1-9208) and incorporated herein by this reference.

10.16.1           Electricity Purchase Contract dated January 18, 1988 between
                  the Company and E.I. du Pont filed as Exhibit 10.21.1 to
                  Amendment No. 1 to the Company's Annual Report on Form 10-K
                  for the fiscal year ended June 30, 1996 (Commission File No.
                  1-9208) and incorporated herein by this reference.

10.16.2           Electricity Purchase Contract dated April 30, 1996 between
                  O'Brien (Parlin) Cogeneration, Inc. and NRG Parlin Inc. filed
                  as Exhibit 10.21.2 to Amendment No. 1 to the Company's Annual
                  Report on Form 10-K for the fiscal year ended June 30, 1996
                  (Commission File No. 1-9208) and incorporated herein by this
                  reference.

10.16.3           Assignment of Electricity Purchase Contract dated April 30,
                  1996 between O'Brien (Parlin) Cogeneration, Inc., NRG Parlin,
                  Inc. and E.I. du Pont filed as Exhibit 10.21.3 to Amendment
                  No. 1 to the Company's Annual Report on Form 10-K for the
                  fiscal year ended June 30, 1996 (Commission File No. 1-9208)
                  and incorporated herein by this reference.

10.17             Amended and Restated Partnership Agreement of Grays Ferry
                  Cogeneration Partnership ("Grays Ferry") dated March 1, 1996,
                  between Adwin (Schuylkill) Cogeneration, Inc. ("Adwin
                  Schuylkill"), O'Brien (Schuylkill) Cogeneration, Inc. and
                  Trigen-Schuylkill Cogeneration, Inc. ("Trigen-Schuylkill")
                  filed as Exhibit 10.23 to Amendment No. 1 to the Company's
                  Annual Report on Form 10-K for the fiscal year ended June 30,
                  1996 (Commission File No. 1-9208) and incorporated herein by
                  this reference.

10.18.1           Acquisition Agreement dated March 1, 1996 between Adwin
                  Schuylkill, O'Brien (Schuylkill) Cogeneration, Inc. and
                  Trigen-Schuylkill filed as Exhibit 10.24.1 to Amendment No. 1
                  to the Company's Annual Report on Form 10-K for the fiscal
                  year ended June 30, 1996 (Commission File No. 1-9208) and
                  incorporated herein by this reference.

10.18.2           Side Agreement dated March 1, 1996 between Adwin Schuylkill,
                  O'Brien (Schuylkill) Cogeneration, Inc. and Trigen-Schuylkill
                  filed as Exhibit 10.24.2 to Amendment No. 1 to the Company's
                  Annual Report on Form 10-K for the fiscal year ended June 30,
                  1996 (Commission File No. 1-9208) and incorporated herein by
                  this reference.

10.19.1           Contingent Capacity Purchase Addendum to the Agreement for
                  Purchase of Electric Output (Phase I) dated September 17, 1993
                  between PECO and Grays Ferry filed as Exhibit 10.25.1 to
                  Amendment No. 1 to the Company's Annual Report on Form 10-K
                  for the fiscal year ended June 30, 1996 (Commission File No.
                  1-9208) and incorporated herein by this reference.
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10.19.2           Contingent Capacity Purchase Addendum to the Agreement for
                  Purchase of Electric Output (Phase II) dated September 17,
                  1993 between PECO and Grays Ferry filed as Exhibit 10.25.2 to
                  Amendment No. 1 to the Company's Annual Report on Form 10-K
                  for the fiscal year ended June 30, 1996 (Commission File No.
                  1-9208) and incorporated herein by this reference.

10.19.3           Amendment Agreement dated January 31, 1994 between PECO and
                  Grays Ferry filed as Exhibit 10.25.3 to Amendment No. 2 to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  June 30, 1996 (Commission File No. 1-9208) and incorporated
                  herein by this reference.

10.19.4           Agreement for Purchase of Electric Output (Phase I) dated July
                  28, 1992 between PECO and Grays Ferry filed as Exhibit 10.25.4
                  to Amendment No. 2 to the Company's Annual Report on Form 10-K
                  for the fiscal year ended June 30, 1996 (Commission File No.
                  1-9208) and incorporated herein by this reference.

10.19.5           Agreement for Purchase of Electric Output (Phase II) dated
                  July 28, 1992 between PECO and Grays Ferry filed as Exhibit
                  10.25.5 to Amendment No. 2 to the Company's Annual Report on
                  Form 10-K for the fiscal year ended June 30, 1996 (Commission
                  File No. 1-9208) and incorporated herein by this reference.

10.20.1           Amended and Restated Steam Purchase Agreement dated September
                  17, 1993 among Philadelphia Thermal Energy Corporation
                  ("PTEC"), Adwin Equipment Company ("Adwin"), the Company and
                  Grays Ferry filed as Exhibit 10.26.1 to Amendment No. 1 to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  June 30, 1996 (Commission File No. 1-9208) and incorporated
                  herein by this reference.

10.20.2           Amended and Restated Steam Venture Agreement dated September
                  17, 1993 among PTEC, Philadelphia United Power Corporation
                  ("PUPCO"), Adwin and the Company filed as Exhibit 10.26.2 to
                  Amendment No. 1 to the Company's Annual Report on Form 10-K
                  for the fiscal year ended June 30, 1996 (Commission File No.
                  1-9208) and incorporated herein by this reference.

10.21.1           Amended and Restated Project Services and Development
                  Agreement dated September 17, 1993 by and between PUPCO and
                  Grays Ferry filed as Exhibit 10.27.1 to Amendment No. 2 to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  June 30, 1996 (Commission File No. 1-9208) and incorporated
                  herein by this reference.

10.21.2           Consent to Assignment of Agreement dated March 1, 1996 between
                  PUPCO, Grays Ferry and The Chase Manhattan Bank, N.A.
                  ("Chase") filed as Exhibit 10.27.2 to Amendment No. 1 to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  June 30, 1996 (Commission File No. 1-9208) and incorporated
                  herein by this reference.

10.22             Amended and Restated Site lease, dated September 17, 1993
                  between PTEC and Grays Ferry filed as Exhibit 10.28 to
                  Amendment No. 1 to the Company's Annual Report on Form 10-K
                  for the fiscal year ended June 30, 1996 (Commission File No.
                  1-9208) and incorporated herein by this reference.

10.23.1           NRG Generating (Newark) Cogeneration Inc./Power Operations,
                  Inc. Operating and Maintenance Agreement dated November 8,
                  1996 between NRG Generating (Newark) Cogeneration Inc. and
                  Power Operations, Inc. filed as Exhibit 10.25.1 to the
                  Company's 
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                  Annual Report on Form 10-K for the fiscal year ended 
                  December 31, 1997 (Commission File No. 1-9208) and 
                  incorporated herein by this reference.

10.23.2           NRG Generating (Parlin) Cogeneration Inc./Power Operations,
                  Inc. Operating and Maintenance Agreement dated December 31,
                  1996 between NRG Generating (Parlin) Cogeneration Inc. and
                  Power Operations, Inc. filed as Exhibit 10.25.2 to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  December 31, 1997 (Commission File No. 1-9208) and
                  incorporated herein by this reference.

10.23.3           Guarantee of Operator's Obligations by the Company dated
                  November 8, 1996 relative to NRG Generating (Newark)
                  Cogeneration Inc. filed as Exhibit 10.25.3 to the Company's
                  Annual Report on Form 10-K for the fiscal year ended December
                  31, 1997 (Commission File No. 1-9208) and incorporated herein
                  by this reference.

10.23.4           Indemnification Agreement dated March 21, 1997 between NRG
                  Generating (Newark) Cogeneration Inc., NRG Generating (Parlin)
                  Cogeneration Inc., NRG Energy and Credit Suisse First Boston
                  filed as Exhibit 10.25.4 to the Company's Annual Report on
                  Form 10-K for the fiscal year ended December 31, 1997
                  (Commission File No. 1-9208) and incorporated herein by this
                  reference.

10.23.5           Stock Purchase Agreement dated January 1, 1997 between NRG
                  Energy and the Company filed as Exhibit 10.25.5 to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  December 31, 1997 (Commission File No. 1-9208) and
                  incorporated herein by this reference.

10.23.6           Guarantee of Operator's Obligations by NRG Energy dated March
                  21, 1997 between NRG Generating (Newark) Cogeneration Inc. and
                  NRG Generating (Parlin) Cogeneration Inc. filed as Exhibit
                  10.25.6 to the Company's Annual Report on Form 10-K for the
                  fiscal year ended December 31, 1997 (Commission File No.
                  1-9208) and incorporated herein by this reference.

10.23.7           Consent to Assignment of Operating Guaranty Agreement dated
                  March 21, 1997 between NRG Generating (Newark) Cogeneration
                  Inc., NRG Generating (Parlin) Cogeneration Inc., NRG Energy
                  and Credit Suisse First Boston filed as Exhibit 10.25.7 to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  December 31, 1997 (Commission File No. 1-9208) and
                  incorporated herein by this reference.

10.24.1           Credit Agreement dated December 17, 1997 between the Company,
                  MeesPierson Capital Corp. and the Lenders (as defined therein)
                  filed as Exhibit 10.26.1 to the Company's Annual Report on
                  Form 10-K for the fiscal year ended December 31, 1997
                  (Commission File No. 1-9208) and incorporated herein by this
                  reference.

10.24.2           Promissory Note dated December 17, 1997 from the Company to
                  MeesPierson Capital Corp. in the principal amount of
                  $30,000,000 filed as Exhibit 10.26.2 to the Company's Annual
                  Report on Form 10-K for the fiscal year ended December 31,
                  1997 (Commission File No. 1-9208) and incorporated herein by
                  this reference.

10.24.3           Pledge Agreement dated December 17, 1997, between the Company
                  and MeesPierson Capital Corp. filed as Exhibit 10.26.3 to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  December 31, 1997 (Commission File No. 1-9208) and
                  incorporated herein by this reference.

10.24.4           Guarantee dated as of December 17, 1997, made by O'Brien
                  (Philadelphia) Cogeneration Inc. in favor of MeesPierson
                  Capital Corp. filed as Exhibit 10.26.4 to the 
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                  Company's Annual Report on Form 10-K for the fiscal year ended
                  December 31, 1997 (Commission File No. 1-9208) and
                  incorporated herein by this reference.

10.24.5           General Security Agreement dated as of December 17, 1997,
                  between O'Brien (Philadelphia) Cogeneration Inc. and
                  MeesPierson Capital Corp. filed as Exhibit 10.26.5 to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  December 31, 1997 (Commission File No. 1-9208) and 
                  incorporated herein by this reference.

10.24.6           General Security Agreement dated as of December 17, 1997, by
                  the Company in favor of MeesPierson Capital Corp. filed as
                  Exhibit 10.26.6 to the Company's Annual Report on Form 10-K
                  for the fiscal year ended December 31, 1997 (Commission File
                  No. 1-9208) and incorporated herein by this reference.

10.24.7           General Security Agreement dated as of December 17, 1997, by
                  O'Brien Energy Services Company in favor of MeesPierson
                  Capital Corp. filed as Exhibit 10.26.7 to the Company's Annual
                  Report on Form 10-K for the fiscal year ended December 31,
                  1997 (Commission File No. 1-9208) and incorporated herein by
                  this reference.

10.24.8           Subordination Agreement dated as of December 10, 1997, among
                  MeesPierson Capital Corp., the Senior Lenders, the Company and
                  NRG Energy filed as Exhibit 10.26.8 to the Company's Annual
                  Report on Form 10-K for the fiscal year ended December 31,
                  1997 (Commission File No. 1-9208) and incorporated herein by
                  this reference.

10.24.9           Subordination Agreement dated as of December 17, 1997 among
                  MeesPierson Capital Corp., the Senior Lenders, O'Brien
                  (Philadelphia) Cogeneration Inc. and O'Brien Energy Services
                  Company filed as Exhibit 10.26.9 to the Company's Annual
                  Report on Form 10-K for the fiscal year ended December 31,
                  1997 (Commission File No. 1-9208) and incorporated herein by
                  this reference.

10.24.10          First Amendment to Credit Agreement dated as of February 12,
                  1999 between the Company and MeesPierson Capital Corp.

10.25.1           Membership Interest Purchase Agreement dated December 10, 1997
                  between NRG Energy, NRGG Funding Inc. (currently CogenAmerica
                  Funding Inc.) and the Company filed as Exhibit 2.1 to the
                  Company's Current Report on Form 8-K dated December 30, 1997
                  (Commission File No. 1-9208) and incorporated herein by this
                  reference.

10.25.2           Equity Commitment Agreement dated September 15, 1997 between
                  NRG Energy and Chase filed as Exhibit 10.27.2 to the Company's
                  Annual Report on Form 10-K for the fiscal year ended December
                  31, 1997 (Commission File No. 1-9208) and incorporated herein
                  by this reference.

10.25.3           Assignment and Assumption Agreement dated December 10, 1997
                  between NRG Energy and NRGG Funding Inc. filed as Exhibit
                  10.27.3 to the Company's Annual Report on Form 10-K for the
                  fiscal year ended December 31, 1997 (Commission File No.
                  1-9208) and incorporated herein by this reference.

10.25.4           Equity Commitment Guaranty, dated as of December 10, 1997 by
                  NRG Energy in favor of Chase and NRG (Morris) Cogen, LLC
                  (currently CogenAmerica Morris LLC) filed as Exhibit 10.27.4
                  to the Company's Annual Report on Form 10-K for the fiscal
                  year ended December 31, 1997 (Commission File No. 1-9208) and
                  incorporated herein by this reference.
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10.25.5           Amendment and Consent, dated as of December 10, 1997 among NRG
                  (Morris) Cogen, LLC and the banks (the "Banks") party to the
                  Credit Agreement, dated as of September 15, 1997, among NRG
                  (Morris) Cogen, LLC, the Banks and Chase filed as Exhibit
                  10.27.5 to the Company's Annual Report on Form 10-K for the
                  fiscal year ended December 31, 1997 (Commission File No.
                  1-9208) and incorporated herein by this reference.

10.25.6           Construction Services Agreement dated August 29, 1997 between
                  NRG (Morris) Cogen, LLC and NRG Energy filed as Exhibit
                  10.27.6 to the Company's Annual Report on Form 10-K for the
                  fiscal year ended December 31, 1997 (Commission File No.
                  1-9208) and incorporated herein by this reference.

10.25.7           First Amendment to Construction Services Agreement dated
                  December 10, 1997 between NRG (Morris) Cogen, LLC and NRG
                  Energy filed as Exhibit 10.27.7 to the Company's Annual Report
                  on Form 10-K for the fiscal year ended December 31, 1997
                  (Commission File No. 1-9208) and incorporated herein by this
                  reference.

10.25.8           Construction and Term Loan Agreement dated September 15, 1997
                  between NRG (Morris) Cogen, LLC, Chase and the Banks filed as
                  Exhibit 10.27.8 to the Company's Annual Report on Form 10-K
                  for the fiscal year ended December 31, 1997 (Commission File
                  No. 1-9208) and incorporated herein by this reference.

10.25.9           Consent and Amendment, dated as of December 10, 1997, among
                  NRG (Morris) Cogen, LLC, the Banks and Chase filed as Exhibit
                  10.27.9 to the Company's Annual Report on Form 10-K for the
                  fiscal year ended December 31, 1997 (Commission File No.
                  1-9208) and incorporated herein by this reference.

10.25.10          Pledge and Security Agreement, dated as of December 10, 1997
                  by NRGG Funding Inc. and NRG Morris, Inc. (currently
                  CogenAmerica Morris Inc.) in favor of Chase filed as Exhibit
                  10.27.10 to the Company's Annual Report on Form 10-K for the
                  fiscal year ended December 31, 1997 (Commission File No.
                  1-9208) and incorporated herein by this reference.

10.25.11          Supplemental Loan Agreement, dated as of December 10, 1997
                  between NRG Energy, the Company and NRGG Funding Inc. filed as
                  Exhibit 10.27.11 to the Company's Annual Report on Form 10-K
                  for the fiscal year ended December 31, 1997 (Commission File
                  No. 1-9208) and incorporated herein by this reference.

10.25.12          Subordination Agreement, dated as of December 10, 1997 between
                  Chase and NRG Energy filed as Exhibit 10.27.12 to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  December 31, 1997 (Commission File No. 1-9208) and
                  incorporated herein by this reference.

10.25.13          Subordinated Pledge and Security Agreement, dated as of
                  December 10, 1997 by NRGG Funding Inc. and NRG Morris, Inc. to
                  NRG Energy filed as Exhibit 10.27.13 to the Company's Annual
                  Report on Form 10-K for the fiscal year ended December 31,
                  1997 (Commission File No. 1-9208) and incorporated herein by
                  this reference.

10.25.14          Operation and Maintenance Agreement dated September 19, 1997
                  between NRG (Morris) Cogen, LLC and NRG Morris Operations Inc.
                  filed as Exhibit 10.27.14 to the Company's Annual Report on
                  Form 10-K for the fiscal year ended December 31, 1997
                  (Commission File No. 1-9208) and incorporated herein by this
                  reference.

10.25.15          First Amendment to Operation and Maintenance Agreement dated
                  December 10, 1997 between NRG (Morris) Cogen, LLC and NRG
                  Morris Operations Inc filed as Exhibit 
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                  10.27.15 to the Company's Annual Report on Form 10-K for the
                  fiscal year ended December 31, 1997 (Commission File No.
                  1-9208) and incorporated herein by this reference.

10.25.16          Assignment, Assumption and Consent, dated as of December 30,
                  1997 among NRG Energy, NRGG Funding Inc., the Company and
                  Equistar Chemicals, LP a successor in interest to Millennium
                  Petrochemicals, Inc. filed as Exhibit 10.27.16 to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  December 31, 1997 (Commission File No. 1-9208) and
                  incorporated herein by this reference.

10.25.17          Limited Guaranty dated September 19, 1997 by NRG Energy for
                  the benefit of NRG (Morris) Cogen, LLC filed as Exhibit
                  10.27.17 to the Company's Annual Report on Form 10-K for the
                  fiscal year ended December 31, 1997 (Commission File No.
                  1-9208) and incorporated herein by this reference.

10.25.18          First Amendment to Limited Guaranty, dated as of the 10th day
                  of December, 1997 that amends the Limited Guaranty made by NRG
                  Energy for the benefit of NRG (Morris) Cogen, LLC dated
                  September 19, 1997 filed as Exhibit 10.27.18 to the Company's
                  Annual Report on Form 10-K for the fiscal year ended December
                  31, 1997 (Commission File No. 1-9208) and incorporated herein
                  by this reference.

10.25.19          First Amendment to Loan Agreement dated as of November 30,
                  1998 between the Company, CogenAmerica Funding Inc., and NRG
                  Energy.

10.26             Lease dated July 18, 1988 between Newark Group Industries,
                  Inc. and O'Brien (Newark) Cogeneration, Inc. filed as Exhibit
                  10.29 to Amendment No. 2 to the Company's Annual Report on
                  Form 10-K for the fiscal year ended June 30, 1996 (Commission
                  File No. 1-9208) and incorporated herein by this reference.

10.27             Ground Lease dated January 2, 1987 between E.I. Du Pont and
                  Company and O'Brien Energy Systems, Inc. filed as Exhibit
                  10.30 to Amendment No. 2 to the Company's Annual Report on
                  Form 10-K for the fiscal year ended June 30, 1996 (Commission
                  File No. 1-9208) and incorporated herein by this reference.

10.28.1*          NRG Generating (U.S.) Inc. 1996 Stock Option Plan ("1996
                  Plan") dated September 20, 1996 and filed as Appendix A to the
                  Company's Proxy Statement dated October 28, 1996 (Commission
                  File No. 1-9208) and incorporated herein by this reference.

10.28.2*          Form of 1996 Plan Incentive Stock Option Agreement filed as
                  Exhibit 10.31.2 to Amendment No. 1 to the Company's Annual
                  Report on Form 10-K for the fiscal year ended June 30, 1996
                  (Commission File No. 1-9208) and incorporated herein by this
                  reference.

10.28.3*          Form of 1996 Plan Employee Nonqualified Stock Option Agreement
                  filed as Exhibit 10.31.3 to Amendment No. 1 to the Company's
                  Annual Report on Form 10-K for the fiscal year ended June 30,
                  1996 (Commission File No. 1-9208) and incorporated herein by
                  this reference.

10.28.4*          Form of 1996 Plan Nonemployee Director Nonqualified Stock
                  Option Agreement filed as Exhibit 10.31.4 to Amendment No. 1
                  to the Company's Annual Report on Form 10-K for the fiscal
                  year ended June 30, 1996 (Commission File No. 1-9208) and
                  incorporated herein by this reference.
</TABLE>
---------------
*  Management contract or compensatory plan or arrangement required to be filed
   as an exhibit to Item 14(c) of Form 10-K.


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10.29.1*          NRG Generating (U.S.) Inc. 1997 Stock Option Plan ("1997
                  Plan") dated May 1, 1997 and filed as an Appendix to the
                  Company's Proxy Statement dated April 24, 1997 (Commission
                  File No. 1-9208) and incorporated herein by this reference.

10.29.2*          Form of 1997 Plan Incentive Stock Option Agreement filed as
                  Exhibit 10.31.2 to the Company's Report on Form 10-K for the
                  year ended December 31, 1997 (Commission File No. 1-9208) and
                  incorporated herein by this reference.

10.29.3*          Form of 1997 Plan Employee Nonqualified Stock Option Agreement
                  filed as Exhibit 10.31.3 to the Company's Report on Form 10-K
                  for the year ended December 31, 1997 (Commission File No.
                  1-9208) and incorporated herein by this reference.

10.29.4*          Form of 1997 Plan Nonemployee Director Nonqualified Stock
                  Option Agreement filed as Exhibit 10.31.4 to the Company's
                  Report on Form 10-K for the year ended December 31, 1997
                  (Commission File No. 1-9208) and incorporated herein by this
                  reference.

10.30*            Employment Agreement dated March 28, 1997 between the Company
                  and Robert T. Sherman, Jr., and filed as Exhibit 10.2 to the
                  Company's Quarterly Report on Form 10-Q for the fiscal quarter
                  ended September 30, 1997 (Commission File No. 1-9208) and
                  incorporated herein by this reference.

10.31*            Employment Agreement dated August 28, 1997 between the
                  Company and Richard Stone filed as Exhibit 10.33 in the
                  Compay's Report on Form 10-K for the year ended December 31,
                  1997 (Commission File No. 1-9208) and incorporated herein by
                  this reference.

10.32             Confidentiality Agreement dated October 3, 1997 between the
                  Company and NRG Energy filed as Exhibit 10.35 in the Company's
                  Report on Form 10-K for the year ended December 31, 1997
                  (Commission File No. 1-9208) and incorporated herein by this
                  reference.

10.33*            Settlement Agreement and Mutual Release dated December 1,
                  1998 between the Company, Robert T. Sherman, and NRG Energy.

10.34             Loan Agreement dated as of October 9, 1998 between NRG Energy,
                  the Company, CogenAmerica Pryor Inc. and Oklahoma Loan
                  Acquisition Corporation.

10.35.1*          NRG Generating (U.S.) Inc. 1998 Stock Option Plan ("1998
                  Plan") dated May 20, 1998 and filed as an Appendix to the
                  Company's Proxy Statement dated April 27, 1998 (Commission
                  File No. 1-9208) and incorporated herein by this reference.

10.35.2*          Form of 1998 Plan Incentive Stock Option Agreement.

10.35.3*          Form of 1998 Plan Employee Nonqualified Stock Option Agreement.

10.35.4*          Form of 1998 Plan Nonemployee Director Nonqualified Stock
                  Option Agreement.

10.35.5*          Form of 1998 Plan Nonemployee Nonqualified Stock Option
                  Agreement.

21                List of Subsidiaries of the Registrant.

23.1              Consent of PricewaterhouseCoopers LLP.

27                Financial Data Schedule.
</TABLE>



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