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, 1997

  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

                      NRG GENERATING (U.S.) INC.
        (Exact name of registrant as specified in its charter)

              Delaware                               59-2076187
(State   or   other  jurisdiction     (I.R.S. Employer Identification No.)
 of  incorporation  or  organization)


1221 Nicollet Mall, Suite 610, Minneapolis, Minnesota  55403
(612) 373-8834
(Address   of   principal  executive   offices)      (Zip Code)
(Telephone number, including area code)

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

Securities registered pursuant to Section 12(g) of the Act:
     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
Form 10-K or any amendment to this Form 10-K.

      As of March 18, 1998, there were outstanding 6,836,769 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 $51,466,000.

      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

                  Documents Incorporated By Reference

      The  information required for the following items is incorporated
by  reference to the 1998 Definitive Proxy Statement of NRG  Generating
(U.S.) Inc.:

     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

                                                               Page
                                                              Number
Part I
     Item 1.Business                                               2
     Item 2.Properties                                            21
     Item 3.Legal Proceedings                                     21
     Item 4.Submission of Matters to a Vote of Security Holders   23

Part II
     Item 5.Market for the Registrant's Common Equity and Related
            Stockholder Matters                                   24
     Item 6.Selected Financial Data  26
     Item 7.Management's Discussion and Analysis of Financial
            Condition and Results of Operations                   27
     Item 7A.Quantitative and Qualitative Disclosures about
            Market Risk                                           37
     Item 8.Financial Statements and Supplementary Data           37
     Item 9.Changes in and Disagreements with Accountants on
            Accounting and Financial Disclosure                   37

Part III
     Item 10.Directors and Executive Officers of the Registrant   38
     Item 11.Executive Compensation                               38
     Item 12.Security Ownership of Certain Beneficial Owners
             and Management                                       38
     Item 13.Certain Relationships and Related Transactions       38

Part IV
     Item 14.Exhibits, Financial Statement Schedules and Reports
             on Form 8-K                                          39

Consolidated Financial Statements                                F-1

Index to Exhibits                                                 41
                                PART I

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 of 1933, as amended (the "Securities
Act"),  and  Section 21E of the Securities Exchange  Act  of  1934,  as
amended (the "Exchange Act").  Such forward-looking statements 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."

General

     NRG   Generating  (U.S.)  Inc.  (referred  to  herein   with   its
consolidated  subsidiaries  as  "NRGG" or  the  "Company")  is  engaged
primarily   in  the  business  of  developing,  owning  and   operating
cogeneration projects which produce electricity and thermal energy  for
sale under long-term contracts with industrial and commercial users and
public  utilities.   In  addition to its energy business,  the  Company
sells  and  rents  power generation and cogeneration equipment  through
subsidiaries located in the United States and the United Kingdom.   The
Company  currently is pursuing several avenues for the  disposition  of
its equipment sales and rental business.

     In  its  role  as  a developer and owner of energy  projects,  the
Company has developed the following projects in which it currently  has
an ownership interest:

          (a)   The  52  megawatt ("MW") Newark Boxboard  Project  (the
          "Newark  Project"),  located in  Newark,  New  Jersey,  began
          operations in November 1990;

          (b)   The 122 MW E.I. du Pont de Nemours Parlin Project  (the
          "Parlin  Project"),  located in  Parlin,  New  Jersey,  began
          operations in June 1991;

          (c)    The  22  MW  Philadelphia  Cogeneration  Project  (the
          "Philadelphia   PWD  Project"),  located   in   Philadelphia,
          Pennsylvania, began operations in May 1993, and

          (d)   The 150 MW Grays Ferry Cogeneration Project (the "Grays
          Ferry Project"), located in Philadelphia, Pennsylvania, began
          operations  in  January 1998.  The Company owns  a  one-third
          interest  in  the  Grays Ferry Cogeneration Partnership  (the
          "Grays  Ferry  Partnership"),  which  owns  the  Grays  Ferry
          Project.  As of the date of this Report, the Company and  the
          Grays  Ferry Partnership are in litigation with the  electric
          power  purchaser  from the Grays Ferry  Project  over,  among
          other  things,  the  effectiveness of  the  applicable  power
          purchase agreements.  See "Item 3.  Legal Proceedings."

     In December 1997, the Company acquired from NRG Energy, Inc. ("NRG
Energy") a 117 MW steam and electricity cogeneration project located in
Morris, Illinois (the "Morris Project").

                                   2

<PAGE>

The  Morris  Project  is currently under construction  with  commercial
operation  currently  expected to occur during the  fourth  quarter  of
1998.

     Formerly  known as O'Brien Environmental Energy, Inc. ("O'Brien"),
the  Company  changed  its  name  to  NRG  Generating  (U.S.)  Inc.  in
connection with its emergence from bankruptcy on April 30, 1996,  under
a  plan  of reorganization (the "Plan") approved by the U.S. Bankruptcy
Court for the District of New Jersey (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
NRGG  common stock, par value $.01 per share (the "Common Stock").   In
addition,  NRG Energy advanced approximately $71.2 million  under  loan
agreements with the Company and purchased approximately 41.86%  of  the
Common  Stock  for  aggregate  consideration  of  approximately   $21.2
million.  NRG Energy also purchased certain subsidiaries of the Company
for  $7.5  million  and  funded  a cash  distribution  to  the  O'Brien
stockholders aggregating $7.5 million.  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 Agreement (the "Co-
Investment  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.

     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.

Independent Power Market Overview

      The  independent power market (the market for power generated  by
companies other than traditional utilities) has evolved and is expected
by  the  Company to continue to expand as a result of the growing  need
for  new  and  replacement  power capacity by  electric  utilities  and
industrial customers.  Historically, regulated utilities in the  United
States  have  been  the  only  producers  of  electric  power  intended
primarily for sale to third parties.  The increase in oil prices during
the  late  1970s and the increasing cost of constructing and  financing
large  coal-fired  or  nuclear generating  facilities  along  with  the
enactment  of  the  Public  Utility Regulatory  Policies  Act  of  1978
("PURPA")  created  a  favorable regulatory environment  and  favorable
market  conditions for the development of energy projects by  companies
other  than  electric utilities.  The basic policy judgment behind  the
encouragement of the development of cogeneration facilities is that the
United  States' dependence on oil and natural gas resources  should  be
reduced  and  that the very high incremental costs of large centralized
power  production  facilities  should be  avoided.   However,  economic
considerations remain the central issue affecting a decision to install
a cogeneration project.

     PURPA provides significant incentives to developers of "qualifying
facilities" under PURPA.  It designates certain small power  production
(those utilizing renewable fuels and having a capacity of less than  80
MW)  and  certain  cogeneration  facilities  as  qualifying  facilities
eligible  for  various benefits under federal law, including  exemption
from many of the regulatory requirements

                                   3

<PAGE>

applicable  to  electric  utilities.  In  accordance  with  PURPA,  the
Company's   projects  with  one  exception  are  exempt  as  qualifying
facilities,  and its proposed projects are intended to be exempt,  from
rate,  financial and similar regulation as a utility as  long  as  they
meet  the  requirements of a qualifying facility.  These projects  also
benefit  from  regulations that require public  utilities  to  purchase
power generated by qualifying projects at the utilities' "avoided cost"
(determined  in accordance with a formula which varies  from  state  to
state but which is generally calculated based upon what the cost to the
utility  would be to generate the power itself or to purchase  it  from
another  source).  Power purchase contracts generally must be  approved
by  state public utility commissions.  Since the Company benefits  from
PURPA,  the  Company's  business  could  be  adversely  affected  by  a
significant change in PURPA and could otherwise be materially  impacted
by  decisions  of  federal, state and local legislative,  judicial  and
regulatory bodies.  See "Business - Regulation" and "- Risk  Factors  -
Proposed Restructuring of the Electric Utility Industry."

       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
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.    The
Company's primary market is the development and ownership of industrial
inside-the-fence cogeneration projects.  A substantial portion  of  the
electric  output  of these facilities may be sold to public  utilities.
Obtaining  power  contracts with utilities has become more  competitive
with the increased use of competitive bidding procedures and the advent
of  deregulation  in  the  electric  utility  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  on  any  future  projects.    Any   such
developments  could  have a material adverse effect  on  the  Company's
results  of  operations  and  financial  condition.   See  "Business  -
Competition" and "- Risk Factors - Competition."

Products and Services

      During  the  fiscal  year ended December 31,  1997,  the  Company
operated  principally  in  two industry  segments:  (i)  energy  -  the
development  and  ownership of cogeneration projects, the  development,
ownership and operation of standby/peak shaving projects through wholly-
owned  subsidiaries and limited partnerships; and (ii) equipment sales,
rentals  and  service  -  the  sale and  rental  of  power  generating,
cogenerating   and  standby/peak  shaving  equipment   and   associated
services.   See  Note  16  of the Notes to the  Consolidated  Financial
Statements for financial information with respect to industry segments.

Energy Segment

     Overview

      Set  forth  below are descriptions of the Company's  projects  in
operation  as  of  December 31, 1997 and one additional  project  which
commenced commercial operation in January 1998.  Each of these projects
is  currently producing revenues through the sale of energy under long-
term contracts.  In connection with the obtaining of financing for  its
three  cogeneration projects in operation, the Company or the owner  of
the   project   has  obtained  business  interruption   insurance   and
performance  guarantees  by  the  operators  of  the  projects.   These
arrangements  are  negotiated  and secured  prior  to  commencement  of
operations  of a project.  Taken as a whole, these arrangements  reduce
the  risks  associated with any past and future equipment  problems  or
unscheduled plant shutdowns.  For

                                   4

<PAGE>

example, in the event of an unscheduled breakdown, the Company  or  the
owner  of  the project generally is 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.  There can be no  assurance,  however,
that  such insurance or guarantees will sufficiently mitigate the  risk
of  unforeseen  contingencies.  As of the  date  of  this  Report,  the
Company  and  the  Grays Ferry Partnership are in litigation  with  the
electric power purchaser from the Grays Ferry Project over, among other
things,  the effectiveness of the applicable power purchase agreements.
See "Item 3.  Legal Proceedings."

<TABLE>
<CAPTION>

Name and Location    Rated    Approximate    Date of       Power                 Company's
    Of Project   Capacity (1) Capital Cost  Operation    Purchaser       Lender   Interest
                   (in MWs)   (in millions)
<S>                <C>         <C>         <C>           <C>            <C>        <C>
Cogeneration
Parlin              122.0       $112.0      June 1991     Jersey         Credit     100%
                                                          Central Power  Suisse(2)
                                                          Power & Light
                                                          Company
Newark               52.0         56.0      November 1990 Jersey         Credit     100%
                                                          Central        Suisse(2)
                                                          Power & Light
                                                          Company
Grays Ferry         150.0        160.0      January 1998  PECO Energy    Chase(3)   33.3%
                                                          Company
Standby/Peak
Shaving

Philadelphia         22.0         12.0      May 1993      Philadelphia     (4)       83%
                                                          Municipal
                                                          Authority
                     ____        _____
                    346.0       $340.0


(1) See   discussion  of  each particular  project which  follows for
    current contract production,  which may be less than  the  stated
    rated capacity.
(2) See Note 8 of the  Notes to the Consolidated Financial Statements.
(3) This  project  is  financed  under a  construction  loan which may
    be converted to a 15-year term loan. The Grays  Ferry  Partnership
    has  received  a  notice  of  default from the lender  under  this
    construction  loan    which    asserted default,  as  of the  date
    of  this Report, has  not been waived.
(4) This   project  is financed  under  the Company's revolving credit
    facility.  See  Note  8  of Notes to  the   Consolidated Financial
    Statements for a description of this facility.

      Cogeneration

      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  of a cogeneration project are permit  applications,
contracts  for  sales of electricity and thermal energy,  contracts  or
arrangements  for fuel supply, 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 qualifying  projects
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.  Thermal energy from cogeneration  plants
may be sold to commercial enterprises and other

                                   5

<PAGE>

institutions.  Large industrial users of thermal energy include  plants
in  the  chemical  processing,  petroleum  refining,  food  processing,
pharmaceutical and paper industries.

      The  Company has developed and currently has ownership  in  three
cogeneration projects, the Newark, Parlin and the Grays Ferry Projects.
Natural  gas for the Newark and Parlin projects is provided  by  Jersey
Central  Power and Light Company ("JCP&L") as a part of its obligations
under  the  terms  of its power purchase agreements ("PPAs")  with  NRG
Generating   (Newark)  Cogeneration  Inc.  ("NRGG  Newark")   and   NRG
Generating (Parlin) Cogeneration Inc. ("NRGG Parlin"), respectively, as
renegotiated  effective April 30, 1996.  Previously, the  Company  bore
the  risk of fluctuating natural gas prices.  In the case of the  Grays
Ferry Project, gas is currently being provided by purchases on the spot
market  by  the Grays Ferry fuel manager, Exelon Corporation.   Natural
gas  for  the  Grays Ferry Project will be provided  by  Aquila  Energy
Marketing Corporation under a 16-year gas sales agreement.

     Power Operations, Inc., a subsidiary of NRG Energy, is responsible
for  the  operation and maintenance of the Newark and Parlin facilities
under  long-term contracts.  Philadelphia United Power Corporation,  an
affiliate  of one of the partners, has been engaged under  a  long-term
contract  to  manage and perform all operation and maintenance  of  the
Grays  Ferry  Project.   See  "Item  7.   Management's  Discussion  and
Analysis of Financial Condition and Results of Operations."

      Newark Project.  This 52 MW project, which commenced operation in
November  1990, is 100%-owned by NRGG Newark, a wholly-owned subsidiary
of the Company.  The Newark Project is designed to operate continuously
and  to  provide  up to 75,000 lbs./hr. of steam to  a  recycled  paper
boxboard manufacturing plant owned by Newark Group, Inc., and 52 MW  of
electricity  to JCP&L, each under agreements extending  into  the  year
2015.  See Note 8 of the Notes to the Consolidated Financial Statements
for  a  discussion of this project's refinancing.  For the fiscal  year
ended December 31, 1997, this project accounted for approximately $17.3
million  in  gross  revenues, representing  approximately  27%  of  the
Company's gross revenues.

     Parlin Project.  This 122 MW project, which commenced operation in
June  1991, is 100%-owned by NRGG Parlin, a wholly-owned subsidiary  of
the  Company.   The Parlin Project provides up to 120,000  lbs./hr.  of
steam  to a manufacturing plant in Parlin, New Jersey owned by E.I.  du
Pont  de  Nemours  and  Company ("E.I. du Pont"),  under  an  agreement
extending  until 2021.  In addition, the project sells 41  MW  of  base
electric power and up to 73 MW of dispatchable power to JCP&L, under an
agreement with an initial term until 2011.  Finally, the project  sells
up  to  9  MW  of  power  to NRG Parlin, Inc. ("NPI"),  a  wholly-owned
subsidiary of NRG Energy.  NPI resells this power at retail to E.I.  du
Pont  under an agreement extending until 2021.  See Note 8 of the Notes
to  the  Consolidated  Financial Statements for a  discussion  of  this
project's  refinancing.  For the fiscal year ended December  31,  1997,
this  project  accounted  for  approximately  $21.7  million  in  gross
revenues,  representing  approximately  33%  of  the  Company's   gross
revenues.   Parlin  is  also occasionally able to sell  marginal  power
outside its PPA with JCP&L on a short-term basis.

      Grays  Ferry  Project.   This  150 MW  project,  which  commenced
operation   in  January  1998,  is  33.3%-owned  by  NRGG  (Schuylkill)
Cogeneration,  Inc.,  a wholly-owned subsidiary of  the  Company.   The
Company has executed a partnership agreement with an affiliate of  PECO
Energy  Company ("PECO") and an affiliate of Trigen Energy  Corporation
("Trigen")  to  jointly develop and own this project.  The  partnership
has  executed a 25-year agreement with the Trigen-Philadelphia  Thermal
Energy  Corporation, a wholly owned subsidiary of Trigen, for the  sale
of

                                   6

<PAGE>

steam  and  a  20-year agreement for the sale of electric  output  with
PECO.   The project began commercial operation in January 1998 and  did
not record any revenue in the fiscal year ended December 31, 1997.   As
of the date of this Report, the Company and the Grays Ferry Partnership
are  in  litigation  with  PECO Energy over, among  other  things,  the
effectiveness of the applicable power purchase agreements.   See  "Item
3.  Legal  Proceedings" and Note 19 of the Notes  to  the  Consolidated
Financial Statements.

       Standby/Peak Shaving

       Standby/peak  shaving  projects  utilize  the  Company's   power
generation  equipment  as  a back-up source of  electricity  for  large
electrical demand customers.  The availability of an alternative energy
source  allows these customers to benefit from significantly discounted
interruptible  energy tariffs from their primary electricity  provider.
The  standby/peak  shaving generators typically  will  be  required  to
provide a specified amount of electricity during peak periods.

      Philadelphia PWD Project.  This 22 MW project, owned  by  O'Brien
(Philadelphia) Cogeneration, Inc. ("OPC"), commenced operations in  May
1993.  The Company owns an 83% interest in OPC, with the remaining  17%
interest  owned by an unrelated private investor.  See Note 18  to  the
Consolidated  Financial  Statements.   Pursuant  to  a  20-year  energy
service   agreement,   the   Philadelphia  Municipal   Authority   (the
"Authority")  has  the right to be supplied with 20 MW  of  electricity
from  the  project at any time on one hour's notice.  In addition,  the
project uses excess digester gas collected at the Authority's northeast
and southwest Philadelphia plants to generate up to approximately 2  MW
of  electricity which is delivered to the Authority pursuant to  a  10-
year power generation agreement.  In October 1998, the Authority's rate
structure  with its electrical utility is due to be renegotiated.   The
outcome  of  these  negotiations could adversely  affect  the  project.
However,   in  the  December  23,  1997  Pennsylvania  Public   Utility
Commission  order, PECO is to continue to offer the LILR tariff,  which
is  the underlying rate structure between the Authority and PECO, until
the  end  of the restructuring transition period (expected to  be  June
30th,  2007).  The facility was not called on to provide standby  power
in  1997.   For  the fiscal year ended December 31, 1997, this  project
accounted   for   approximately  $4.2  million   in   gross   revenues,
representing approximately 6% of the Company's gross revenues.

Equipment Sales, Rentals and Services Segment

     In  addition to the energy business, the Company sells  and  rents
power  generation  and  cogeneration  equipment  and  provides  related
services.   The  Company  operates its  equipment  sales,  rentals  and
services business principally through two subsidiaries.  In the  United
States,  the  equipment sales, rentals and services  business  operates
under  the  name  of  O'Brien  Energy Services  Company  ("OES").   NRG
Generating  Limited, a wholly-owned United Kingdom subsidiary,  is  the
holding company for a number of subsidiaries that operate in the United
Kingdom under the common name of Puma ("Puma").

     The Company has determined that OES and Puma are not a part of its
strategic  plan  for the future, and the Company is currently  pursuing
several   avenues  for  the  disposition  of  these  businesses.    The
disposition  of  these businesses is not expected to  have  a  material
impact on the Company's financial position or results of operations.

                                   7

<PAGE>

      O'Brien Energy Services Company

      A  significant portion of the Company's equipment rental business
is  attributable  to  the operations of OES.  The Company  rents  power
generation  and cogeneration equipment to the construction, industrial,
military,  transportation, mining, utility and  entertainment  markets.
In   addition   to  its  rental  business,  OES  sells  (i)   equipment
manufactured  by others to turnkey contractors in connection  with  the
construction of the Company's projects, (ii) equipment purchased by  it
for  projects  unrelated to those being developed by the  Company,  and
(iii)  equipment  purchased  and reconditioned  by  it.   Finally,  OES
provides  related services including the design, assembly,  repair  and
maintenance of permanent or standby power generation equipment.   On  a
national  level, the Company competes with a number of other companies.
In  addition,  there  are numerous local competitors  in  each  of  the
geographic  areas in which the Company operates.  The Company  competes
on  the  basis  of experience, service, price and depth of  its  rental
fleet.

      Puma

      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.
The  Company exports many of its products primarily through established
distributors and dealers in local areas for delivery to markets such as
the Far East, including Hong Kong and mainland China, together with the
Middle East and South America.

      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.

      The  revenues and operations of the Company's operations  in  the
United Kingdom disclosed below are attributable solely to the equipment
sales  and  services segment of the Company's business.   The  revenues
from  such operations accounted for in excess of 50% of that particular
segment's revenue in the fiscal year ended December 31, 1997.
                                      Six Months
                                        Ended
                      December 31,    December 31,  June 30,     June 30,
                          1997            1996        1996         1995
                                          (In Thousands)
Revenues:
    United States     $  51,504       $  27,937    $  82,917    $  89,332
    United Kingdom       13,300          11,979       13,630       12,915
                      $  64,804       $  39,916    $  96,547    $ 102,247

Net Income (Loss):
    United States     $  23,236       $   6,087    $ (17,591)   $ (40,905)
    United Kingdom          116             336         (122)         (14)
                      $  23,352       $   6,423    $ (17,713)   $ (40,919)

Identifiable Assets:
    United States     $ 221,752       $ 164,631    $ 169,657    $ 179,793
    United Kingdom        6,142           8,993        8,505        9,955
                      $ 227,894       $ 173,624    $ 178,162    $ 189,748

                                   8

<PAGE>



Project Development Activities

General

      The  Company,  together  with  its subsidiaries  and  affiliates,
develops,  owns  and  operates  cogeneration  projects  which   produce
electricity and thermal energy for sale under long-term contracts  with
industrial  and  commercial  users  and  public  utilities.   Potential
project  structures  include (but are not limited to)  sole  ownership,
general partnerships, limited partnerships, sale leaseback arrangements
and  other  forms  of joint venture or debt arrangements.   Development
activities  are  pursued  by  the Company's internal  management  team.
Under  a Co-Investment Agreement with NRG Energy, the Company also  may
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  sells  the  electricity produced  by  its  projects
pursuant  to long-term contracts either on a "retail basis" to specific
industrial  and  commercial users or on a "wholesale  basis"  to  local
public  utilities.  Presently, most of the electricity produced by  the
Company's projects in operation is sold on a wholesale basis.  The  mix
of future energy sales may differ based upon future economic conditions
and other circumstances.

Internal Project Development

     The  Company  has assembled a management team with  more  than  80
combined  years  of  experience  in  the  development,  financing   and
operation  of independent power projects.  The Company has formed  this
team to pursue projects in the industrial inside-the-fence cogeneration
market, focusing on natural gas projects in the United States in the 50
MW  to 300 MW size.  Internal project development activities will focus
on   greenfield   development,  acquisitions  of  operating   projects,
enhancement   of  current  projects  and  acquisitions  of   competitor
companies or portfolios.

Co-Investment Agreement with NRG Energy

      Pursuant  to  the Co-Investment Agreement, NRG Energy  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  United  States
which  NRG Energy initially develop 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 $60.0 million or a minimum of 150 net MW.  As of  the
date  of this Report, ownership interests in projects with an aggregate
of  more  than  130  net MW have been offered under  the  Co-Investment
Agreement, including the 117 net MW Morris 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

                                   9

<PAGE>

the  relevant power purchase agreement 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  an  ownership
interest that is consummated as a result of a foreclosure or conveyance
in lieu of foreclosure of liens or security interests, (ii) any sale or
disposition of an ownership interest to a third party that is  or  will
become  a participant in the eligible project, where the obligation  to
sell  the  interest is incidental to the provision of services  or  the
contribution  of  assets to the project and is  created  prior  to  the
execution and delivery of a binding power purchase agreement  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 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.

     In  December  1997,  a  wholly-owned  subsidiary  of  the  Company
purchased the Morris Project from NRG Energy.  The Morris Project, with
an  aggregate  of 117 net MW, had been offered under the  Co-Investment
Agreement.    The  Company  has  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 a 110 MW cogeneration  project
which  the  Company contends NRG Energy agreed to sell to an  unrelated
third  party  without fulfilling its obligations with respect  to  such
project  under  the  Co-Investment  Agreement.   See  "Item  3.   Legal
Proceedings."

     To facilitate the Company's ability to acquire ownership interests
which  may  be  offered  pursuant to its Co-Investment  Agreement,  NRG
Energy  has agreed to finance the Company's purchase of such  ownership
interests  at  commercially competitive terms to the extent  funds  are
unavailable to the Company on comparable terms from other sources.  Any
such  financing  provided by NRG Energy under  the  terms  of  the  Co-
Investment  Agreement is required to be recourse  to  the  Company  and
secured  by a lien on the ownership interest acquired.  Such  financing
also  is  required to be repaid from the net proceeds received  by  the
Company  from  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.

      In  light  of the Company's internal development activities,  the
Company  does  not expect the Co-Investment Agreement to serve  as  the
primary source of future project development activities.

Morris Project

     In  December 1997, NRGG Funding Inc. ("NRGG Funding"),  a  wholly-
owned  subsidiary  of the Company, completed its acquisition  from  NRG
Energy  of all of NRG Energy's interest in a 117 MW project located  in
Morris,  Illinois by acquiring 100% of the interests  in  NRG  (Morris)
Cogen, LLC ("Morris LLC").  Morris LLC has the exclusive right to build
and  operate  a  cogeneration plant to be located in  Morris,  Illinois
within  a  petrochemical  manufacturing facility,  which  is  owned  by
Equistar  Chemicals  LP  ("Equistar"), a joint  venture  of  Millennium
Chemicals Inc. and Lyondell Petrochemical Company.  A 25-year agreement
has been executed for the sale of steam and

                                   10

<PAGE>

electric output from the project.  NRG Energy commenced construction of
the   Morris  Project  in  September  1997  with  commercial  operation
currently expected to occur in the fourth quarter of 1998.

     NRGG Funding agreed to assume all of the obligations of NRG Energy
and  to  provide future equity contributions to Morris  LLC  which  are
limited  to  the  lesser  of 20% of the total  project  cost  or  $22.0
million.   NRG  Energy has guaranteed to the Morris  Project's  lenders
that NRGG Funding will make these future equity contributions, and  the
Company has guaranteed to NRG Energy the obligation of NRGG Funding  to
make  these  future equity contributions.  In addition, Morris  LLC  is
obligated  to  pay NRG Energy $1.0 million as and when permitted  under
the project's principal loan agreement.  Morris LLC has previously paid
$4.0 million to NRG Energy in connection with the financial closing  of
the construction financing of the Morris Project.

     The Company intends to arrange financing (the terms and manner  of
which  have  not been determined by the Company) to fund  the  required
future  equity  contributions to Morris LLC.  NRG Energy  is  obligated
under  a  Supplemental Loan Agreement between the Company, NRGG Funding
and  NRG  Energy to loan NRGG Funding and the Company (as  co-borrower)
the  full amount of such equity contributions by NRGG Funding,  all  at
NRGG Funding's option.  Any such loan will be secured by a lien on  all
of the membership interests of Morris LLC and will be fully recourse to
NRGG Funding and the Company.

     Under  the  terms of its energy services agreement with  Equistar,
Morris  LLC  has granted to Equistar an option to purchase  the  Morris
Project  at  its  fair market value, as defined in  the  agreement,  at
either  the  fifteenth  or  twentieth  anniversary  of  the  commercial
operations  date.   Equistar  also was granted  a  one-time  option  to
purchase  up  to a 10% membership interest in Morris LLC.  In  February
1998  Equistar gave notice of its intention to purchase  a  5%  passive
membership  interest.   Under  the terms  of  the  proposed  agreement,
Equistar  would acquire a 5% passive interest in Morris LLC in exchange
for  the  assumption by Equistar of an obligation to  make  5%  of  the
required   equity  contributions  to  Morris  LLC,   expected   to   be
approximately $1.1 million.

Other 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 and owned by third parties.
As  of  the  date  of  this report, the Company is  not  party  to  any
definitive agreements with respect to any such potential projects,  and
no  assurances can be made with respect to the likelihood  of  entering
into any such agreements with respect to any such potential projects.

      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, all necessary  licenses,
permits and certifications; conducting contract negotiations with local
utilities  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

                                   11

<PAGE>

may  not  be able to recover its investment in such projects,  each  of
which could have a material adverse effect on the Company.

Regulation

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

      The  enactment  in 1978 of PURPA and the adoption of  regulations
thereunder  by  the  Federal  Energy  Regulatory  Commission   ("FERC")
provided  incentives  for  the development of  small  power  production
facilities  (those utilizing renewable fuels and having a  capacity  of
less than 80 MW) and cogeneration facilities (collectively referred  to
as  "qualifying facilities" or "QFs").  Electric utilities are required
to   purchase  power  from  such  facilities  at  rates  based  on  the
incremental  cost  of  electrical energy (so  called  "avoided  cost").
Under  regulations adopted by the FERC and upheld by the United  States
Supreme  Court, such rates are based upon "the incremental cost  to  an
electric  utility of electrical energy or capacity or both  which,  but
for the purchase from the qualifying facility or qualifying facilities,
such  utility  would generate itself or purchase from another  source."
Historically,  and  as it affects the Company's  sales  of  power  from
qualifying  facilities, avoided cost is generally  a  function  of  the
purchasing  utility's otherwise applicable cost  of  fuel  required  to
generate  electricity and its cost of capital required to  construct  a
power plant to supply such capacity.

      With  the  exception  of  the Parlin Project  and  parts  of  the
Philadelphia  PWD  Project,  all  of the  Company's  existing  electric
generating  facilities are qualifying small power production facilities
or  qualifying cogeneration facilities, as these terms are  defined  in
PURPA.  Pursuant to authority granted under PURPA, FERC has promulgated
regulations  which  at  present generally exempt qualifying  facilities
from the Federal Power Act, the Public Utility Holding Company Act   of
1935 ("PUHCA") and state laws on electric utility regulation.

      In  order  to  qualify for the benefits provided  by  PURPA,  the
Company's  QFs  must meet certain size, efficiency, fuel and  ownership
requirements.   However,  the  standards  for  qualification  and   the
regulations  described  above  are  subject  to  amendment.    If   the
regulations were to be amended, the Company cannot predict  the  effect
of  any such amendment on the extent of regulation to which the Company
may thereby become subject.

      In  the  event that one of the Company's cogeneration  facilities
failed to meet the requirements of being a "qualifying facility"  after
relying  on  that  status,  the Company would be  materially  adversely
affected.  See "Business - Risk Factors - Proposed Restructuring of the
Electric Utility Industry."

      The Company  renegotiated the PPA for the Parlin  Project  during
1996.   As  permitted  under the terms of its renegotiated  agreements,
NRGG  Parlin  filed rates with the FERC as a public utility  under  the
Federal  Power Act.  Previously, the Parlin Project had been  certified
as a QF by FERC.  However, the effect of the rate filing by NRGG Parlin
was  to relinquish its claim to QF status.  FERC has approved the rates
filed  by NRGG Parlin effective April 30, 1996, and given certain other
approvals  to  NRGG Parlin in connection with the consummation  of  the
Plan.   Among  other things, NRGG Parlin has received  a  determination
from FERC that it is an exempt wholesale generator ("EWG").  It is thus
exempt from all provisions of the PUHCA, and the

                                   12

<PAGE>

ownership of NRGG Parlin by the Company does not subject the Company to
regulation under PUHCA.

      The Company is also subject to the Powerplant and Industrial Fuel
Use  Act  of 1978 ("FUA"), which generally limits the ability of  power
producers  to  burn  natural gas in new baseload generation  facilities
unless  such  facilities also have the capability to use  coal  or  any
other  alternate fuel as a primary energy source.  All of the Company's
existing projects have either received permanent exemption from the FUA
or otherwise complied with its provisions.

Environmental Regulations

      In  addition  to the regulations described above,  the  Company's
projects   must  comply  with  applicable  federal,  state  and   local
environmental  regulations, including those related to  water  and  air
quality.   These laws and regulations in many cases require  a  lengthy
and  complex process of obtaining licenses, permits and approvals  from
federal, state and local agencies.  The environmental regulations under
which  the  Company's projects operate are subject to  amendment.   The
Company cannot predict what effect compliance with such amendments  may
have on the Company's business or operations.  Compliance could require
modification  of a project and thereby increase its costs,  extend  its
completion date or otherwise adversely affect a project.

      The  environmental regulations likely to have the greatest impact
on  the  Company's business and operations are air quality  regulations
under  the  Clean Air Act.  All of NRGG's operating plants  perform  at
levels  better than current federal performance standards mandated  for
such  plants  under the Clean Air Act.  Based on the current  trend  of
environmental  regulation,  management  believes  that  this  area   of
regulation in the U.S. will become more strict.

      In November 1990, Congress passed the Clean Air Act Amendments of
1990 ("the 1990 Amendments").  The Environmental Protection Agency (the
"EPA")  is  still  in  the  process of  implementing  the  requirements
mandated  by the 1990 Amendments.  In addition, the EPA and the  states
are  in  the process of revising existing requirements under the  Clean
Air Act to make them more stringent.

      The 1990 Amendments require the EPA to establish technology-based
emission  standards  for hazardous air pollutants.   "Electric  utility
steam  generating units" that are greater than 25 MW are excluded  from
regulation  while the EPA conducts a study of hazardous  air  pollutant
emissions  from  these units to determine whether  such  regulation  is
"appropriate  and  necessary." The final report, which  was  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 including mercury 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,
including  internal  combustion  engines,  by  November  2000.    These
regulations  may  also require the Company to meet  additional  control
requirements.

      The  Company's  business and operations may also be  impacted  by
changes  to existing regulations under the Clean Air Act.  For example,
the  EPA and the 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 certain  states  in  the
Eastern  U.S.  to  make substantial reductions in  NOx  emissions.   If
finalized as proposed, this rule could result in new NOx emission

                                   13

<PAGE>

standards being required by the affected states.  If more stringent NOx
standards  are  adopted by certain states, NRGG could  be  required  to
install  additional  NOx emission control technology  at  some  of  its
facilities.   In  addition, the EPA has revised  the  current  National
Ambient  Air  Quality Standards for ground-level ozone and  particulate
matter  to  make  them  more stringent.  These new  standards  will  be
implemented  by  the  states over the next several  years.   Additional
control technology requirements may be imposed on existing NRGG  plants
to  comply  with the new standards.  The Company does not believe  that
the  effect  of any such additional requirements, if implemented,  will
have a material adverse effect on its financial condition or results of
operations.

     All projects in operation and under development are believed to be
operating  in substantial compliance with or designed to meet currently
applicable environmental requirements.  To date, compliance with  these
environmental  regulations  has  not  had  a  material  effect  on  the
Company's   earnings  nor  has  it  required  the  Company  to   expend
significant capital expenditures.

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 57%, 46%, 62% and 65% of its revenues in  the
fiscal  year  ended  December 31, 1997, six months ended  December  31,
1996,  and the fiscal years ended June 30, 1996 and 1995, respectively,
from  JCP&L  as  a  result of the operation of the  Newark  and  Parlin
facilities.   The  revenues from JCP&L, as a percent of  total  Company
revenues, are anticipated to decline in the future as new projects  are
added to the Company's operations.

Employees

      As  of December 31, 1997, the Company had approximately 110 full-
time employees.

                                   14

<PAGE>

Patents

      The  Company  and  its subsidiaries do not  own  any  patents  or
trademarks.

Backlog

     Total  production  backlog  relating to  the  Company's  equipment
sales, rental and services business was approximately $3.9 million  and
approximately $1.2 million at December 31, 1997 and 1996, respectively.

Risk Factors

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.   While  the
Company  is  provided  with  certain  rights  under  the  Co-Investment
Agreement  that may enable it to finance the acquisition  of  ownership
interests in certain projects that may be offered by NRG Energy,  there
can  be no assurance that the terms on which such financing may be made
available will be satisfactory to the Company, and no financing will be
made available under the Co-Investment Agreement for the development or
acquisition of projects that are not offered to the Company pursuant to
the  terms  of  such  agreement.  There can be no  assurance  that  the
Company  will  be  able  to  arrange the  financing  needed  for  these
additional  projects.   Moreover, 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 non-recourse basis.  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 provisions  of  tax
and securities laws that are conducive to raising capital in the manner
desired.  If the Company is unable to secure such financing, or if  the
terms  of  such  financing as may be available under the  Co-Investment
Agreement  are not satisfactory to the Company, its business  could  be
materially  adversely affected.  Management believes  that  sources  of
debt financing are available to finance future projects.  See "Business
- Project Development Activities."

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 in high 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.
Effective April 30, 1996, the Company renegotiated its PPAs with JCP&L,
the  primary electricity purchaser from its Newark and Parlin Projects.
Under the new PPAs, JCP&L is responsible for all natural gas supply and
delivery.   Management  believes that this change  in  these  PPAs  has
reduced  its  historical volatility in gross margins on  revenues  from
such projects by eliminating the Company's exposure to

                                   15

<PAGE>

fluctuations  in  the price of natural gas that must  be  paid  by  its
Newark  and Parlin Projects. See "Item 7.  Management's Discussion  and
Analysis  of Financial Condition and Results of Operations - Costs  and
Expenses."

Project Development Risks

      The  development  of  cogeneration projects often  requires  many
months or years to complete and involves a high degree of risk that any
particular project will not be completed.  Among the principal elements
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, 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  result  in
success  in  achieving others.  For example, the future growth  of  the
Company  is dependent, in part, upon the demand for significant amounts
of  additional  or replacement electrical generating capacity  and  its
ability  to  obtain  contracts to supply  portions  of  this  capacity.
However,  even  if  the  Company is successful in  the  development  or
acquisition  of  an  interest in a project,  the  Company  may  require
substantial  additional  debt or equity financing  for  such  projects,
which additional financing may not be available on acceptable terms, if
at all.

      During  the  period  that the Company was in bankruptcy,  project
development  efforts virtually ceased.  Since emerging from  bankruptcy
these efforts have resumed, both through the re-staffing of an internal
development team and as a result of the Co-Investment Agreement.  There
can  be  no assurance, however, that the Company will be able to obtain
satisfactory   projects   under   the   Co-Investment   Agreement   and
satisfactory  project  agreements,  construction  contracts,  necessary
licenses and permits or satisfactory financing commitments or that  any
of  the  projects discussed in this report or which otherwise might  be
pursued  will ultimately be completed.  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 therewith  and  could  incur
additional  losses associated with any related contingent  liabilities.
Moreover,  most  acquisition agreements and power  purchase  agreements
permit the seller or customer, respectively, to terminate the agreement
or  impose penalties if the acquisition or operation of the project (as
the  case  may  be) is not achieved by a specified date.  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.  See "Business  -  Project
Development Activities."

Dependence on Certain Customers and 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 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.  See "Business - Principal Customer."  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.   As a result, the financial  performance  of  such
facilities is dependent on continued performance by customers of  their
obligations  under such long-term agreements and, in addition,  on  the
credit quality of the project's customers.  See "Item 3. Legal

                                   16

<PAGE>

Proceedings."   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, which in turn could adversely affect the Company's results
of operations.  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.

Risks Involved in Making Minority Investments in Projects

      The  Company  currently conducts its business  primarily  through
subsidiaries.    However,   one  of  the  Company's   current   project
investments consists of a minority interest in a project entity  (i.e.,
the  Company beneficially owns 50% or less of the ownership interests),
and  future investments in projects may also take the form of  minority
interests.   As  a  result,  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.

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.   Each
facility  may  depend  on a single or limited  number  of  entities  to
purchase electricity or thermal energy, to supply water, to supply gas,
to  transport  gas, to dispose of wastes or to wheel electricity.   The
failure  of  any  such purchasing utility, steam  host,  water  or  gas
supplier,  gas transporter, wheeling utility or other relevant  project
participant  to  fulfill  its  contractual  obligations  could  have  a
material adverse impact on the Company.

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  the  advent of deregulation in the electric utility 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 on any future  projects.   Any
such developments could have a material adverse effect on the Company's
results  of  operations  and  financial  condition.   See  "Business  -
Independent Power Market Overview."

                                   17


<PAGE>

Proposed 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  qualifying  facilities thereunder.  There is strong  support  for
grandfathering  existing 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.   Since  the  Company benefits from  PURPA,  the  Company's
business could be adversely affected by a significant change in  PURPA.
See  "Business  - Independent Power Market Overview," and  "Business  -
Regulation."

     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  limitations  of
PUHCA  which generally require that retail electric systems be  capable
of  physical integration.  Also, registered holding companies would  be
free to acquire non-utility businesses, which they may not do now, with
certain limited exceptions.

      With  the  repeal of PURPA or PUHCA, competition for  independent
power  generators  from  vertically integrated utilities  would  likely
increase.   While  the Company does not believe that  any  such  repeal
would  necessarily  have  a material adverse effect  on  its  financial
position or results of operations, the long term effect on the  Company
of any such repeal cannot be predicted.  See "Business - Regulation."

      In addition, the FERC, many state legislatures and public utility
commissions  ("PUCs") and Congress are currently studying and  in  some
cases  implementing  proposals  to  restructure  the  electric  utility
industry  in  the  U.S.  to permit consumers to  choose  their  utility
supplier  in  a  competitive electric energy market.  The  FERC  issued
rules  in  1996  to require utilities to offer wholesale customers  and
suppliers open access on their transmission lines on a comparable basis
to  the  utilities' own use of the lines.  Virtually all investor-owned
utilities  have  already  filed  "open  access  tariffs  for  wholesale
transmission."   The  utilities contend that they should  recover  from
departing  customers their fixed costs that will be "stranded"  by  the
ability  of  their  wholesale customers (and perhaps eventually,  their
retail  customers)  to  choose  new electric  power  suppliers.   These
include the costs utilities are required to pay under many QF contracts
which the utilities view as excessive when compared with current market
prices.   Many  utilities are therefore seeking  ways  to  lower  these
contract  prices or rescind the contracts altogether,  out  of  concern
that  their shareholders will be required to bear all or part  of  such
"stranded"  costs.   Some utilities have engaged in litigation  against
QFs to achieve these ends.  In addition, future U.S. electric rates may
be  deregulated in a restructured U.S. electric utility  industry,  and
increased  competition may result in lower rates and  less  profit  for
U.S.  electricity sellers.  Falling electricity prices and  uncertainty
as  to  the  future  structure  of the  industry  are  inhibiting  U.S.
utilities  from entering into long-term power purchase  contracts.   At
the  state  level the New Jersey Board of Public Utilities ("BPU")  has
issued  a  final  report  and  recommendation  for  introducing  retail
electric   competition  in  New  Jersey  beginning  in  October   1998.
Consistent with the BPU's recommendation General Public Utilities,  the
parent  corporation of JCP&L, has filed a restructuring plan  with  the
BPU  seeking  the recovery of stranded costs including  costs  that  it
characterizes as stemming from purchased power commitments.   JCP&L  is
the  long  term purchaser of power from the Parlin and Newark Projects.
The  BPU  has  recently  released draft proposed  legislation  that  it
believes  is  necessary to implement retail competition  fully  in  New
Jersey.

                                   18

<PAGE>

      In  Pennsylvania  the Pennsylvania General Assembly  enacted  the
Electricity Generation Customer Choice and Competition Act in  December
1996.   The Act provides for phased in retail competition and  stranded
cost recovery implemented by the Pennsylvania Public Utility Commission
("PaPUC")  over several years. PECO Energy Company ("PECO"),  the  long
term purchaser of power from the Grays Ferry Project, recently notified
Grays  Ferry  Cogeneration Partnership that  PECO  believes  the  power
purchase  agreements  that it has with Grays Ferry  are  no  longer  in
effect  based  on  the alleged denial of cost recovery  by  the  PaPUC.
Grays  Ferry  Cogeneration Partnership and other parties including  the
Company's wholly-owned subsidiary through which it owns its interest in
the  Partnership have commenced litigation against PECO and  the  PaPUC
seeking   injunctive  relief  and  damages.   See   "Item   3.    Legal
Proceedings"  and  Note  19 of the Notes to the Consolidated  Financial
Statements.

      While the Company does not believe that ongoing federal and state
restructuring efforts necessarily would 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."

Environmental Law and Regulation

      The  Company and its projects are subject to a number of  complex
and  stringent  environmental  laws  and  regulations,  affecting  many
aspects  of  its  present  and  future  operations.   These  laws   and
regulations  in  many cases require a lengthy and  complex  process  of
obtaining licenses, permits and approvals from federal, state and local
agencies.   The  environmental regulations under  which  the  Company's
projects operate are subject to amendment.  The Company cannot  predict
what  effect compliance with such amendments may have on the  Company's
business  or  operations.  Compliance could require modification  of  a
project  and thereby increase its costs, extend its completion date  or
otherwise  adversely affect a project before or after  its  completion.
See "Business - Environmental Regulations."

Risks Associated with Foreign Operations

      The  Company's foreign operations (currently consisting primarily
of  its equipment sales and rental operations) are subject to the risks
inherent  in doing business in foreign countries, including changes  in
currency  exchange rates, currency restrictions, political changes  and
expropriation.  Although it is impossible to predict the likelihood  of
such  occurrences  or their effect on the Company, management  believes
these  risks  to  be mitigated by the facts that the Company's  foreign
activities  historically  have  not been  concentrated  in  any  single
country  and  have  been conducted largely in Europe, which  management
believes  to be subject to fewer of such risks than other regions.   In
addition, the Company attempts to secure payment for export sales  with
commercial  letters of credit or other secured means.  See "Business  -
Products and Services - Equipment Sales, Rentals and Services Segment."

History of Losses

     The Company reported net income of approximately $23.4 million and
$6.4 million for the fiscal year ended December 31, 1997 and six months
ended  December 31, 1996, respectively.  However, due in part to  costs
associated with its bankruptcy proceeding, the Company incurred  losses
of  approximately $17.7 million and $40.9 million for the fiscal  years
ended June 30, 1996, and June 30, 1995, respectively.  These losses had
a material adverse effect on the Company's

                                   19

<PAGE>

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, rendering it more difficult for  the  Company  to
raise  capital or otherwise to conduct project development  activities.
See  "Item  7.   Management's  Discussion  and  Analysis  of  Financial
Condition and Results of Operations."

Influence by NRG Energy, Inc.

      NRG  Energy  holds approximately 45.21% of the  Company's  Common
Stock.  Four 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 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   Restated   Articles   of   Incorporation   impose   certain
supermajority   requirements   in  certain   circumstances,   and   the
Independent Directors Committee of the Board 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 to  effectively
control the outcome of matters which may be submitted to a vote of  the
shareholders, including the election of directors of the Company.   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.   Moreover, 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  under  certain
circumstances.   See "Business - Project Development Activities  -  Co-
Investment Agreement with NRG Energy."

Risks Associated with Forward-Looking Statements

       This  Form  10-K,  including  the  information  incorporated  by
reference  herein,  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.  From time  to
time,  the  Company and its officers, directors or employees  may  make
other  oral  or  written  statements  (including  statements  in  press
releases   or   other  announcements)  which  contain   forward-looking
statements  and  information.  Without limiting the generality  of  the
foregoing,  the  words  "believe," "anticipate," "estimate,"  "expect,"
"intend,"  "plan," "seek" and similar expressions, when  used  in  this
Form  10-K  and  in  such other statements, are  intended  to  identify
forward-looking   statements.   All  forward-looking   statements   and
information in this Form 10-K are forward-looking statements within the
meaning  of  Section 27A of the Securities Act and Section 21E  of  the
Securities  Exchange  Act and are intended to be covered  by  the  safe
harbors  created  thereby.   Such forward-looking  statements  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 above.  Many of such factors are beyond the  Company's
ability  to  control or predict, and readers 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 or in any statement referencing the
risk  factors and other cautionary statements set forth in this Report,
whether as a result of new information, future events or otherwise.

                                   20


<PAGE>


ITEM 2.   PROPERTIES.

      The  Company's corporate headquarters are located in Minneapolis,
Minnesota.

      The  headquarters for Puma's executive offices and its  principal
manufacturing  facility  are located in Ash, Canterbury,  Kent,  United
Kingdom.

     The headquarters of OES are located on approximately four acres in
Wilmington, Delaware. The premises are owned, subject to a mortgage, in
fee  simple  and include an approximately 55,000 square foot  building.
In  addition,  OES  owns, subject to a mortgage, office  and  warehouse
space  in  Houston,  Texas, on approximately two acres  of  land.   OES
leases  space for similar purposes in each of Bakersfield and  Benicia,
California.   The  office  and warehouse space  in  Texas  and  in  the
California  locations range from approximately 5,000 to  10,000  square
feet.

      The Newark, Parlin, Grays Ferry and Morris project entities lease
property  on  the  site of the Newark, Parlin, Grays Ferry  and  Morris
cogeneration  facilities, respectively, from  the  commercial  user  of
thermal  energy  for a nominal fee.  The term of the  lease  equals  or
exceeds  that of each respective thermal supply agreement.   Management
believes  that  the leased premises are suitable and adequate  for  the
Company's projects.

ITEM 3.   LEGAL PROCEEDINGS.

Litigation

      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 during the class  period  who
     allege  various  violations of the Federal securities  laws.   The
     Plaintiffs  claim  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.   Management  does
     not  expect the outcome 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 object
     to  treatment of the class under the Bankruptcy Plan.  This matter
     has been consolidated with the Stevens class action case described
     in  paragraph  number  1 above.  Management does  not  expect  the
     outcome 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 the debtor in the bankruptcy case, filed an
     application   for  allowance  of  an  administrative   claim   for
     approximately  $4.5 million in break-up fees and expenses  in  the
     bankruptcy case.  The Bankruptcy Court denied the

                                        21

<PAGE>

     application  in full, by order dated November 27,  1996.   Calpine
     filed  an  appeal  from the Bankruptcy Court's order  denying  its
     application.   The  appeal  has now been  fully  briefed  and  the
     parties  are awaiting a decision.  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,  the  United States  District Court  for  the  Eastern
     District  of  Pennsylvania,  Civil  Action  No. 98-CV-1243,  filed
     March 9,  1998.  This  action arose out  of PECO  Energy Company's
     ("PECO") notification to the Grays Ferry  Cogeneration Partnership
     (the  "Partnership")   that  PECO  believes  its  power   purchase
     agreements with the 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 power  purchase  agreements  in  retail  electric  rates.  The
     Plaintiffs include, in addition to the Partnership, the  Company's
     wholly-owned subsidiary through which it owns its interest in  the
     Partnership  and  two  subsidiaries of Trigen  Energy  Corporation
     ("Trigen"), one of which subsidiaries is also a one-third owner of
     the Partnership. Defendant Adwin (Schuylkill) Cogeneration,Inc. is
     a subsidiary  of  PECO and also a partner in the  Partnership. The
     Plaintiffs are seeking to enjoin PECO from terminating  the  power
     purchase agreements and to compel PECO to pay the rates set  forth
     therein.   In addition, the Plaintiffs are seeking actual  damages
     against PECO  in an  amount in  excess of $200  million,  punitive
     damages and attorneys' fees and costs. The Plaintiffs have asserted
     claims   against  PECO and its  subsidiary which include breach of
     contract, breach of implied covenant of good faith and fair dealing,
     breach of  fiduciary duties and  tortious interference with a long-
     term contract  which one of the Trigen Plaintiffs has entered into
     for the sale of   steam to be produced predominantly  by the Grays
     Ferry Project. The lawsuit further  seeks to  compel PECO to  take
     the  necessary  actions  before the  Pennsylvania  Public  Utility
     Commission to seek recovery of its  costs under the power purchase
     agreements and to compel the Pennsylvania Public Utility Commission
     to allow cost recovery of the  power purchase agreements in PECO's
     retail  electric  rates.  On March  19, 1998, the  district  court
     dismissed the lawsuit for lack of subject matter jurisdiction.  On
     March 27, 1998, the Plaintiffs filed a motion  for reconsideration
     and leave to file an amended complaint.  As of the   date of  this
     Report, the Plaintiffs were awaiting the judge's decision   on the
     motion and reviewing their other legal options.

Arbitration

      On  January 30, 1998, the Company gave notice to NRG Energy of  a
dispute  to  be  arbitrated pursuant to the terms of the  Co-Investment
Agreement.   With  certain  exceptions,  the  Co-Investment   Agreement
obligates  NRG  Energy  to  offer  to sell  to  the  Company  "eligible
projects," which are defined in the Co-Investment Agreement as  certain
facilities  which generate electricity for sale through the  combustion
of  natural  gas,  oil  or  any other fossil fuel.   The  Co-Investment
Agreement  provides  that  if NRG Energy offers  to  sell  an  eligible
project  to  the  Company  and the Company  declines  to  purchase  the
project, NRG Energy then has the right to sell the project to  a  third
party  at a price which  equals or exceeds that offered to the Company.
See   "Business   -  Project  Development  Activities  -  Co-Investment
Agreement with NRG Energy."  In the arbitration proceeding, the Company
contends that NRG Energy breached the Co-Investment Agreement by,



                                   22



<PAGE>



among  other  things, agreeing to sell to an affiliate of Oklahoma  Gas
and  Electric  Company,  a  110 MW cogeneration  project  in  Oklahoma,
without fulfilling NRG Energy's commitment to offer the project to  the
Company  at  the  same price.  The Company intends to request  specific
performance of the Co-Investment Agreement.  NRG Energy has advised the
Company that it believes that it had no obligation to offer the project
to  the Company.  Both parties have chosen their respective arbitrators
and  are awaiting the selection of a third arbitrator from the American
Arbitration Association.

      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  these matters (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.

      No matters were submitted to a vote of the Company's stockholders
during the quarter ended December 31, 1997.

                                   23

<PAGE>

                            PART II


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

      The  Company's Common Stock has been quoted and traded under  the
symbol "NRGG" on the Nasdaq SmallCap Market from March 1997 to November
1997  and on the Nasdaq National Market since November 1997.  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  1997  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.

        NRGG Common Stock Price Per Share Information for 1997
                                          Price Per Share ($)
        Period                              Low       High
        First Quarter (1)                 11.250     13.750
        Second Quarter                    11.125     16.000
        Third Quarter                     14.250     21.000
        Fourth Quarter                    18.000     22.375

(1)   The  Company's Common Stock began trading on the Nasdaq  SmallCap
Market  on March 3, 1997.  This information reflects the low  and  high
prices during the period from March 3, 1997 to March 31, 1997.

     As of March 11, 1998, the Company had approximately 500 holders of
record  of  its  Common  Stock, not including beneficial  owners  whose
shares are held by banks, brokers and nominees.

      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, NRGG Newark
and  NRGG 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

                                   24

<PAGE>

available after the payment of various costs and expenses set forth  in
the  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  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, (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 NRGG Funding also are parties to a supplemental
Loan  Agreement  with  NRG Energy which prohibits NRGG  Funding  (which
directly or indirectly 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 another Credit Agreement  which
prohibits the payment of dividends by the Company without prior written
consent  unless  the Company provides more than 30 days  prior  to  the
proposed  date  of payment of such dividend a letter of  credit  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.

      On April 30, 1996, the Bankruptcy Court approved the issuance  of
6,474,814 shares of Common Stock of the Company which have been  issued
since  such date and prior to March 31, 1998 pursuant to the  terms  of
the  Plan  to  NRG Energy and holders of O'Brien Class A  and  Class  B
Common  Stock.   Such  shares  issued to  NRG  Energy  were  issued  in
consideration  of  a cash payment of approximately $21.2  million,  and
such  shares  issued to holders of O'Brien Class A and Class  B  Common
Stock  were issued in exchange for such shares of O'Brien Class  A  and
Class B Common Stock.  The cash payment from NRG Energy was used by the
Company under the Plan to provide for full and immediate payment of all
undisputed pre-petition claims as well as a provision for post-petition
interest.  In connection with the consummation of the Plan, the Company
also  granted  NRG  Energy an option to convert  $3.0  million  of  the
outstanding  principal amount of the loan between NRG Energy  and  NRGG
(Schuylkill)  Cogeneration, Inc. ("NSC") in  the  principal  amount  of
$10.0  million (the "Loan") into shares of Common Stock.   On  November
25,  1997, the Company issued 396,255 shares of its Common Stock to NRG
Energy  upon  conversion of such portion of the Loan.   The  securities
issued to NRG Energy and the holders of the O'Brien Class A and Class B
Common Stock were issued without registration under the Securities  Act
or  under  any  state or local law, in reliance on the  exemptions  set
forth in Section 1145 of the United States Bankruptcy Code.

                                   25

<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>
<TABLE>
<CAPTION>
                                       Year       Six Months
                                       Ended         Ended
(Dollars in thousands, except per   December 31,   December 31,       Year Ended June 30
 share amounts)                        1997         1996 (1)     1996       1995       1994        1993

<S>                                  <C>           <C>        <C>        <C>        <C>         <C>
Statement of Operations Data:

Revenues:
 Energy                              $ 43,210      $ 21,669   $ 66,623   $ 74,455   $ 62,647    $ 65,136
 Equipment sales and services          19,415        15,607     25,344     19,639     24,304      18,955
 Rental                                 2,179         1,062      1,895      2,362      5,372       3,636
 Related parties                            -             -          -          -          -         515
 Development fees and other                 -         1,578      2,685      5,791     14,266       9,450
   Total                               64,804        39,916     96,547    102,247    106,589      97,692

Income (loss) before
 extraordinary item                    23,352         4,780    (17,713)   (40,919)   (16,501)    (13,711)


Net income (loss).                     23,352         6,423    (17,713)   (40,919)   (16,501)    (13,711)

Basic earnings (loss) per share(2):
 Before extraordinary item           $   3.59      $   0.75   $  (4.24)  $ (11.02)  $  (4.45)   $  (3.70)
 Extraordinary item                         -          0.25          -          -          -           -
                                     $   3.59      $   1.00   $  (4.24)  $ (11.02)  $  (4.45)   $  (3.70)

Diluted earnings (loss) per share(2)
 Before extraordinary item           $   3.48      $   0.74   $  (4.24)  $ (11.02)  $  (4.45)   $  (3.70)
 Extraordinary item                         -          0.25          -          -          -           -
                                     $   3.48      $   0.99   $  (4.24)  $ (11.02)  $  (4.45)   $  (3.70)


Balance Sheet Data:

Total assets                         $227,894      $173,624   $178,162   $189,748   $237,816    $262,529

Long-term debt, net                   190,020       150,311     66,789      3,405(3)  67,383     125,152

Convertible senior subordinated
 Debentures                                 -             -          -          -          -      49,174

<FN>
 (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.

</TABLE>

                                   26

<PAGE>

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

      Certain  of  the  statements made in this Item  7  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 of 1933, as amended (the "Securities
Act"),  and  Section 21E of the Securities Exchange  Act  of  1934,  as
amended (the "Exchange Act").  Such forward-looking statements 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."

     All amounts set forth in this Item 7 are in thousands.

     The  Company  directly and through its subsidiaries  develops  and
owns cogeneration projects which produce electricity and thermal energy
for  sale to industrial and commercial users and public utilities.   In
addition, the Company, through its subsidiaries, sells and rents  power
generation,   cogeneration  and  standby/peak  shaving  equipment   and
services.

     On  April  30, 1996, the Company emerged from bankruptcy  under  a
plan  approved  by  the  Bankruptcy Court  on  January  18,  1996.   In
connection  with  the  consummation of the Plan,  NRG  Energy  advanced
approximately $107,418 and purchased approximately 41.86% of the Common
Stock.   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.  The
Plan  also provided that all of the shares of O'Brien Class A and Class
B Common Stock were canceled and replaced by a new issue of NRGG Common
Stock.   Net income (loss) per share has been restated for all  periods
presented  to reflect the new common shares issued under the  terms  of
the Plan.

     Additionally, under the terms of the Plan, NRG Energy acquired the
stock  of ten wholly-owned subsidiaries from the Company on the closing
date  which included all of the Company's landfill gas projects  (those
operating and those in development), the general partner holding  a  3%
equity  interest in the Artesia Cogeneration partnership and a  standby
power project.  Management believes that the sale of these subsidiaries
will not have a material adverse effect on its results of operations in
future years.

     The Company currently owns two cogeneration facilities (the Newark
and  Parlin Projects) with an electric generating capacity of  174  MW.
In  addition,  the  Company operates and owns an 83%  interest  in  two
standby/peak  shaving facilities (together comprising the  Philadelphia
PWD  Project) with a capacity of 22 MW.  The Company also  has  a  one-
third  ownership interest in a cogeneration facility (the "Grays  Ferry
Project")  with  an  electric generating  capacity  of  150  MW,  which
commenced  operation in January 1998.  As of the date of  this  Report,
the  Company and the Grays Ferry Partnership are in litigation with the
electric power purchaser from the Grays Ferry Project over, among other
things,  the effectiveness of the applicable power purchase agreements.
See "Item 3. Legal Proceedings".

                                   27

<PAGE>

      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 in high 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.
Effective April 30, 1996, the Company renegotiated its PPAs with JCP&L,
the  primary electricity purchaser from its Newark and Parlin Projects.
Under the new PPAs, JCP&L is responsible for all natural gas supply and
delivery.   Management  believes that this change  in  these  PPAs  has
reduced  its  historical volatility in gross margins on  revenues  from
such projects by eliminating the Company's exposure to fluctuations  in
the  price  of natural gas that must be paid by its Newark  and  Parlin
Projects.

      Both the Newark and Parlin Projects were previously certified  as
qualifying facilities ("QFs") by the FERC under PURPA.  The  effect  of
QF  status  is  generally to exempt a project's  owners  from  relevant
provisions  of  the  Federal Power Act, PUHCA, and  state  utility-type
regulation.   However, as permitted under the terms of its renegotiated
PPAs,  Parlin  has chosen to file rates with FERC as a  public  utility
under  the  Federal  Power  Act.  The effect  of  this  filing  was  to
relinquish the Parlin Project's claim to QF status.  The FERC  approved
Parlin's rates effective April 30, 1996 and has determined Parlin to be
an  EWG.  As an EWG, Parlin is exempt from PUHCA, and the ownership  of
Parlin by the Company does not subject the Company to regulation  under
PUHCA.   Finally, as a seller of power exclusively at wholesale, Parlin
is  not  generally  subject  to  state regulation  and,  in  any  case,
management   believes   that  Parlin  complies  with   all   applicable
requirements of state utility law.

     In  addition to the energy business, the Company sells  and  rents
power  generation  and  cogeneration  equipment  and  provides  related
services.   The  Company  operates its  equipment  sales,  rentals  and
services business principally through two subsidiaries.  In the  United
States,  the  equipment sales, rentals and services  business  operates
under  the  name  of O'Brien Energy Services Company.   NRG  Generating
Limited,  a  wholly-owned  United Kingdom subsidiary,  is  the  holding
company for a number of subsidiaries that operate in the United Kingdom
under the common name of Puma.  The Company has determined that OES and
Puma  are  not  a  part of its strategic plan for the future,  and  the
Company  is  currently pursuing several avenues for the disposition  of
these  businesses.  The disposition of these businesses is not expected
to have a material impact on the Company's financial position.

     Effective  January 1, 1997, Power Operation, Inc., a  wholly-owned
subsidiary of the Company providing operation and maintenance  for  the
Newark and Parlin facilities under long-term contracts, was sold to NRG
Energy.   This transaction did not have a material financial impact  on
the  operations  of  these  facilities or on  the  Company's  financial
condition or results of operations.  The terms of this transaction were
approved by the Independent Directors Committee of the Company's  Board
of Directors as required by the Company's Bylaws.

     The  Company entered into a Liquidating Asset Management Agreement
on  April  30,  1996 with Wexford Management Corp. ("Wexford"),  a  co-
sponsor  of  the  Plan,  which, in accordance with  the  Plan,  retains
Wexford  as manager, operator and liquidator of the Liquidating  Assets
(as  defined in the agreement) of the Company pursuant to the terms and
conditions  of the agreement.  The Board of Directors and  officers  of
the  Company have the right to direct and control which assets will  be
liquidated and the extent of management services required for each

                                   28

<PAGE>

Liquidating Asset.  The Liquidating Assets identified in the  agreement
consist of (a) the Company's engine generator sales, service and rental
business,  (b)  the Philadelphia PWD Project, (c) unused equipment  and
(d)   American  Hydrotherm  ("American  Hydrotherm")  and  two  related
companies.  In December 1996, the Company sold American Hydrotherm  and
the  two  related  companies to the management of American  Hydrotherm.
The  Company's  Board  of Directors has decided not  to  liquidate  the
Philadelphia  PWD  Project.   Wexford  has  received  compensation   in
accordance with the terms of the agreement (see Note 1 of the Notes  to
the Consolidated Financial Statements).

     Effective July 1, 1996, the Company changed its year end from June
30  to  December 31.  As a result, "fiscal 1995" refers to the 12-month
period  ended  June  30, 1995 ; "fiscal 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; and "fiscal 1997" refers to the
12-month period ended December 31, 1997.

Results  of Operations for Fiscal 1997, the 1996 Transition Period  and
Fiscal 1996 and 1995

Revenues

     Energy  revenues for fiscal 1997, the 1996 transition  period  and
fiscal  1996  and  1995  were $43,210, $21,669,  $66,623  and  $74,455,
respectively.   Energy revenues primarily reflect  billings  associated
with  the  Newark and Parlin Projects and the Philadelphia PWD Project.
The increase in energy revenues for fiscal 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 fiscal 1996  was
primarily  due  to  only six months of revenues reported  in  the  1996
transition period and to the amended PPAs affecting both the Newark and
Parlin  Projects.  The decrease in energy revenues in fiscal 1996  from
fiscal  1995  was primarily attributable to a voluntary curtailment  of
operations  at  Parlin and to the negative impact  of  unit  fuel  cost
fluctuations on the energy rate calculation under the Parlin  Project's
previous  PPA.  Additionally, a portion of the decrease is attributable
to  the amended PPAs affecting both the Newark and Parlin Projects  for
the final two months of fiscal 1996.

     Revenues  recognized  by NRGG Parlin for  fiscal  1997,  the  1996
transition  period  and  fiscal 1996 and 1995  were  $21,685,  $10,327,
$34,867 and $40,784, respectively.  NRGG Parlin revenues increased  for
fiscal 1997 as compared to the 1996 transition period primarily due  to
only  six  months  of revenues reported in the 1996 transition  period.
NRGG  Parlin  revenues  decreased for the  1996  transition  period  as
compared  to  fiscal 1996 primarily due to only six months of  revenues
reported  in the 1996 transition period and to the amended  PPA.   NRGG
Parlin  initiated a voluntary curtailment of electric output  beginning
in  the  first quarter and extending into the second quarter of  fiscal
1996,  during off-peak hours, to maintain the correct ratio of  thermal
to   electric   production  after  E.I.  du  Pont,  the   steam   host,
significantly  decreased its steam demand by moving a business  segment
overseas.   Additionally,  NRGG  Parlin's  fiscal  1996  revenues  were
affected  by  a  decrease  in the energy rate under  the  previous  PPA
adjusted quarterly based on, in part, the average cost of fuel over the
preceding  year.  A mild 1995 winter resulted in unusually low  natural
gas  costs  which, after a five quarter lag, lowered  the  energy  rate
received  during fiscal 1996.  NRGG Parlin revenues also  decreased  in
fiscal 1996 by approximately $2,680 from the amended PPA implemented on
April 30, 1996.

                                   29

<PAGE>

     Revenues  recognized at NRGG Newark for fiscal 1997, for the  1996
transition  period  and  fiscal 1996 and  1995  were  $17,319,  $9,259,
$26,820 and $28,908, respectively.  NRGG Newark revenues increased  for
fiscal 1997 as compared to the 1996 transition period primarily due  to
only  six  months  of revenues reported in the 1996 transition  period.
NRGG  Newark  revenues  decreased for the  1996  transition  period  as
compared  to  fiscal 1996 primarily due to only six months of  revenues
reported  in  the 1996 transition period and to the amended  PPA.   The
decrease in revenues in fiscal 1996 from 1995 is primarily attributable
to the implementation of the amended PPA in May 1996.

     Equipment  sales and services revenues for fiscal  1997,  for  the
1996  transition period and fiscal 1996 and 1995 were $19,415, $15,607,
$25,344  and  $19,639,  respectively,  which  principally  reflect  the
operations  of OES, Puma and American Hydrotherm.  American  Hydrotherm
was  sold  in  December 1996.  Revenues increased for  fiscal  1997  as
compared to the 1996 transition period primarily due to only six months
of  revenues reported in the 1996 transition period and to higher sales
volumes.  Revenues decreased for the 1996 transition period as compared
to fiscal 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 a fiscal year ended March  31  to  a
calendar  year fiscal year effective on December 31, 1996.   Management
attributes  the increase in fiscal 1996 to a volume increase  resulting
from  successful marketing efforts as well as to an improvement in  the
U.S. economy.  The Company also believes that its bankruptcy filing  in
September 1994 had some negative impact in fiscal 1995 revenues because
of customer uncertainty.

     OES equipment sales and services revenues for fiscal 1997, for the
1996  transition  period and fiscal 1996 and 1995 were $6,115,  $1,575,
$5,232 and $3,575, respectively.

     Rental  revenues  for fiscal 1997, for the 1996 transition  period
and  fiscal  1996  and  1995 were $2,179, $1,062,  $1,895  and  $2,362,
respectively.   Revenues increased for fiscal 1997 as compared  to  the
1996  transition  period primarily due to only six months  of  revenues
reported  in  the 1996 transition period.  Revenues decreased  for  the
1996 transition period as compared to fiscal 1996 primarily due to only
six months of revenues reported in the 1996 transition period.

     There were no development fees and other revenues for fiscal 1997.
Development fees and other revenues for the 1996 transition period  and
fiscal  1996  and  1995  were $1,578, $2,685 and $5,791,  respectively.
Revenues decreased for the 1996 transition period as compared to fiscal
1996  primarily due to only six months of revenues reported in the 1996
transition  period.   The decrease in revenues in 1996  from  1995  was
attributable primarily to the Company selling its rights to  develop  a
standby  electric  project  for $1,763, the expiration  of  a  purchase
option whereby, the Company retained $775 in forfeited escrow deposits,
offset  in  part  to  higher  gas sales  to  the  Artesia  Cogeneration
partnership in 1995.

Costs and Expenses

     Cost  of  energy revenues for fiscal 1997, for the 1996 transition
period  and  fiscal  1996 and 1995 were $14,841,  $7,229,  $45,663  and
$46,694,  respectively.  Cost of energy revenues increased  for  fiscal
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 fiscal 1996 primarily due to only  six
months of costs reported in the 1996 transition period and the

                                   30

<PAGE>

result  of the amended PPAs in which JCP&L began assuming the  cost  of
fuel for the Newark and Parlin facilities.

     Cost of equipment sales and services for fiscal 1997, for the 1996
transition  period  and  fiscal 1996 and 1995  were  $17,037,  $12,365,
$22,153  and  $17,622,  respectively.   Cost  of  equipment  sales  and
services increased for fiscal 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  to the recording of $190 in the fourth quarter to  reserve
for  the  writedown of inventory.  Cost of equipment sales and services
decreased  for  the 1996 transition period as compared to  fiscal  1996
primarily  due  to  only  six  months of costs  reported  in  the  1996
transition  period.   The fluctuations in cost of equipment  sales  and
services  between  fiscal  1996 and 1995  primarily  correlate  to  the
changes  in  sales volume in the Company's equipment sales, rental  and
service businesses.

     Cost  of  rental revenues for fiscal 1997, for the 1996 transition
period  and fiscal 1996 and 1995 were $1,817, $834, $1,406 and  $2,357,
respectively.   Cost  of  rental revenues  increased  for  fiscal  1997
primarily  due  to  only  six  months of costs  reported  in  the  1996
transition  period.   Cost of rental revenues decreased  for  the  1996
transition period as compared to fiscal 1996 primarily due to only  six
months  of costs reported in the 1996 transition period.  The  decrease
in   cost  of  equipment  rentals  between  fiscal  1996  and  1995  is
attributable to the reacquisition of the Philadelphia PWD Project  from
an unrelated private investor.

     There  were  no development fees and other costs for fiscal  1997.
Cost  of development fees and other for the 1996 transition period  and
fiscal  1996  and  1995  were $1,559, $2,531 and $5,491,  respectively.
These  costs consist principally of costs associated with the  sale  of
various projects either under development or in operation.

     The Company's gross margins were $31,109 (48.0% of sales), $17,929
(44.9%  of  sales),  $24,794 (25.7% of sales), and  $30,083  (29.4%  of
sales)  for fiscal 1997, for the 1996 transition period and for  fiscal
1996   and   1995,  respectively.   The  fluctuations   are   primarily
attributable to increased operating efficiency in the energy segment of
the  Company and to fluctuations in the recovery of fuel costs  through
energy  revenues  under the Newark and Parlin Project  PPAs  in  effect
until April 30, 1996.

Provision for Impaired Assets

     In  the  fourth quarter of 1997, the Company completed a  thorough
review  of  its  business operations and market  opportunities.   As  a
result  of this review, the Company concluded that the estimated future
cash  flows  to  be generated by certain assets were not sufficient  to
recover  their  carrying values. Accordingly, the Company  recorded  an
impairment  provision  of  $5,274  for  such  assets.   The   provision
consisted  of  property,  plant and equipment  write  downs  of  $2,778
primarily related to the generator sales and services business,  $1,553
for  equipment held for sale, $500 to reduce the carrying value of  the
equity  investment  in  PoweRent, $371 to expense  project  development
costs  and $72 for other impairments.  The property plant and equipment
and  PoweRent provisions reduced the asset carrying values to estimated
fair  values determined by management and the board of directors  based
on  prices  of  similar assets and various valuation  techniques.   The
equipment held for sale provision represents the write off of remaining
equipment  which is being scrapped.  The project development write  off
was necessary due to abandonment of certain projects.

                                   31

<PAGE>

     During fiscal 1996 unrecoverable project development costs of $180
were  written  off.   In  fiscal  1995,  based  on  independent  market
appraisals,  the  Company  recorded charges of  $15,985  to  write-down
property,  plant and equipment and $5,655 to write-down equipment  held
for  sale to lower fair values.  In addition, project development costs
of $4,418 determined to be unrecoverable were written off.

Selling, General and Administrative Expenses

     Selling,  general and administrative expenses ("SG&A") for  fiscal
1997,  for  the  1996 transition period and fiscal 1996 and  1995  were
$9,479, $6,149, $12,612 and $15,902, respectively.  SG&A increased  for
fiscal  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 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 fiscal 1996 primarily due to only  six
months  of  costs reported in the 1996 transition period.  Fiscal  1996
includes  a  $3,100  cost incurred to terminate an interest  rate  swap
agreement  in  connection  with  the Parlin  nonrecourse  project  debt
refinancing.   Fiscal 1996 SG&A expenses benefited from  lower  payroll
and  related  tax  costs  as  well  as reduced  insurance  expenses  by
approximately $2,347 as compared to fiscal 1995.

Interest and Other Income

     Interest and other income for fiscal 1997, for the 1996 transition
period  and  fiscal 1996 and 1995 were $1,310, $413, $569  and  $2,587,
respectively.   Interest  and other income increased  for  fiscal  1997
primarily  due  to  only  six months of income  reported  in  the  1996
transition  period,  the settlement of a legal  suit,  the  sale  of  a
development project in Pakistan, offset in part by fees paid to Wexford
under the Liquidating Asset Management Agreement 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  Newark  and Parlin facilities.  Fiscal 1995 other income  includes
$1,180  recognized in connection with the original construction of  the
Philadelphia PWD Project.

Reorganization Costs

     Reorganization  costs  represent all costs incurred  after  filing
bankruptcy   that   relate   to   the  Company's   reorganization   and
restructuring efforts.  Reorganization costs for fiscal 1996  and  1995
were  $12,101 and $8,366, respectively.  These costs consist  primarily
of  professional  and  administrative fees and expenses.   Fiscal  1995
expense  includes $3,387 to write-off deferred financing costs  due  to
Court-approved reductions in the carrying value of certain  prepetition
subordinated debentures.

Interest and Debt Expense

     Interest and debt expense for fiscal 1997, for the 1996 transition
period  and  fiscal  1996 and 1995 were $14,768,  $7,681,  $18,646  and
$20,583, respectively.  Interest and debt expense increased for  fiscal
1997  as  compared to 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 fiscal 1996 primarily due to only six months of expenses reported in
the  1996  transition period and to the refinancing of the  Newark  and
Parlin

                                   32

<PAGE>

Projects.  Fiscal 1996 and 1995 interest and debt expense includes post-
petition  interest  on prepetition liabilities of  $6,487  and  $6,194,
respectively.   Fiscal  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
Newark  and Parlin Projects which were refinanced during the year  (see
"Liquidity  and  Capital Resources").  Fiscal 1995  interest  and  debt
expense  includes  $1,050  paid to the unrelated  private  investor  to
extend  the  Company's reacquisition option period for the Philadelphia
PWD Project to August 1994.

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  fiscal 1997, for the 1996 transition period and fiscal  1996,
the Company realized an overall income tax benefit of $20,454, $268 and
$463,  respectively.  For fiscal 1995, the provision for  income  taxes
was  $2,680.   The benefit for fiscal 1997 and for the 1996  transition
period is derived from the Company's ability to reduce its current  and
deferred tax liabilities by using net operating loss carryforwards  and
existing  deductible  temporary differences to offset  current  taxable
income  and  future  reversals of taxable temporary  differences.   The
benefit for fiscal 1997 was attributable to the reversal of a valuation
reserve  that was applied against deferred tax assets relating  to  net
operating  losses incurred by the Company from fiscal  1992  to  fiscal
1996.   The benefit for fiscal 1996 was attributable to the utilization
of  state net operating loss carryforwards as well as a decrease in the
deferred  tax liability primarily attributable to a change in temporary
differences resulting from the landfill gas equipment sold  to  NRG  on
April  30,  1996.   The  1995 tax provision,  consisting  primarily  of
deferred  taxes  relating to property and equipment, results  from  the
uncertainty of realizing the benefits of the tax loss carryforwards  in
future  years  against  them.   Additionally,  most  professional  fees
incurred during the bankruptcy period included in reorganization  costs
are  treated as capital expenditures and are not deductible for  income
tax  purposes  (see Note 14 of the Notes to the Consolidated  Financial
Statements).

Net Earnings (Loss) and Earnings (Loss) Per Share

     The  net  earnings for fiscal 1997 were $23,352  compared  to  net
earnings  for the 1996 transition period of $6,423 and a net  loss  for
fiscal  1996 and 1995 of $17,713 and $40,919, respectively.  The  basic
earnings per share for fiscal 1997 was $3.59 compared to basic earnings
per  share for the 1996 transition period of $1.00 and basic losses per
share for fiscal 1996 and 1995 of $4.24 and $11.02, respectively.

     The fiscal 1997 net earnings are primarily due to the reversal  of
a  valuation  reserve  that  was applied against  deferred  tax  assets
relating  to  net operating losses incurred by the Company from  fiscal
1992  to fiscal 1996 offset in part by the write-off of certain assets.
The  1996 transition period net earnings are primarily attributable  to
higher  gross  margins due in part to the amended PPAs in  which  JCP&L
began  assuming the cost of fuel for the Newark and Parlin  facilities.
The  fiscal  1996  and  1995  net  losses  are  primarily  due  to  the
reorganization costs incurred after filing for bankruptcy  that  relate
to the Company's reorganization and restructuring

                                   33

<PAGE>

efforts  and to the impact of higher fuel costs prior to the  amendment
of the PPAs at Newark and Parlin in May 1996.

Liquidity and Capital Resources

     On  April 30, 1996, NRG Energy funded $107,418 in accordance  with
the  Plan.  The Company received $99,918 of which $71,240 was  advanced
under  the terms of three loan agreements between the Company  and  NRG
Energy;  $21,178 represented the purchase of new common stock  of  NRGG
and  $7,500 was designated as the proceeds for the sale of ten  wholly-
owned  subsidiaries  sold  to  NRG Energy.   In  addition,  NRG  Energy
transferred  $7,500  directly  to the Company's  stock  transfer  agent
representing  a  cash distribution by NRG Energy to the O'Brien  common
stockholders.

     In  May  1996, the Company's wholly-owned subsidiaries NRGG Newark
and   NRGG  Parlin  entered  into  a  Credit  Agreement  (the   "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
interest rate on the outstanding principal is variable based on, at the
option  of  Newark and 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%.   Concurrent with the Credit Agreement, Newark  and  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
($71,726 at December 31, 1997) at 6.9% plus the margin.

     The  Company  used  the  proceeds of the  loan  to  repay  certain
preexisting   obligations   of  the  Company   including   $87,291   of
indebtedness to NRG Energy.  NRG Energy provided the Company with loans
during  fiscal 1996 of which $101,679 was outstanding to NRG Energy  at
June  30, 1996, $14,388 was outstanding at December 31, 1996 and $2,539
was outstanding at December 31, 1997.

     NSC,  a  wholly-owned subsidiary of the Company, owns a  one-third
partnership  interest  in  the  Grays  Ferry  Project  currently  under
construction.   In March 1996, the partnership entered  into  a  credit
agreement  with The Chase Manhattan Bank N.A. 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, and the facility began commercial operations in January 1998.

     NRG  Energy  entered  into a loan commitment to  provide  NSC  the
funding, if needed, for the NSC capital contribution obligation to  the
Grays  Ferry Partnership.  Prior to December 31, 1997, NSC had borrowed
$10,000  from  NRG Energy under this loan agreement,  of  which  $1,900
remained   outstanding  to  NRG  Energy  at  December  31,  1997,   and
contributed the proceeds to the Grays Ferry Partnership as part of  the
above-referenced capital contribution.  In connection  with  this  loan
commitment for the Grays Ferry Project, the Company granted NRG  Energy
the  right  to  convert $3,000 of borrowings under the commitment  into
396,255  shares of common stock of the Company.  In October  1997,  NRG
Energy exercised such conversion right in full.

      In  connection with its acquisition of the Morris  Project,  NRGG
Funding (a wholly-owned subsidiary of the Company) assumed all  of  the
obligations of NRG Energy to provide future equity

                                   34

<PAGE>

contributions  to  Morris LLC, which obligations  are  limited  to  the
lesser  of 20% of the total project cost or $22.0 million.  NRG  Energy
has  guaranteed to the Morris Project's lenders that NRGG Funding  will
make  these future equity contributions, and the Company has guaranteed
to  NRG  Energy  the  obligation of NRGG Funding to make  these  future
equity  contributions.   The Company intends to arrange  financing  for
either  NRGG Funding or itself (the terms and manner of which have  not
been  determined  by  the Company) to fund the required  future  equity
contributions by NRGG Funding to Morris LLC.  In addition,  NRG  Energy
is  obligated under a Supplemental Loan Agreement between the  Company,
NRGG Funding and NRG Energy to loan NRGG Funding and the Company (as co-
borrower) the full amount of such equity contributions by NRGG Funding,
all  at NRGG Funding's option.  Any such loan will be secured by a lien
on  all  of the membership interests of Morris LLC and will be recourse
to NRGG Funding and the Company.

     On  December 17, 1997, the Company entered into a credit agreement
providing for a $30,000 reducing revolving credit facility with  a  new
lender.   The facility is secured by the assets and cash flows  of  the
Philadelphia PWD Project as well as the distributable cash flows of the
Newark  and  Parlin  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 Philadelphia PWD Project and $1,500 for  general
corporate  purposes.  The remaining $5,000 of the facility will  become
available  once security interests in the Philadelphia PWD Project  are
perfected.   The  facility reduces by $2,500 on the  first  and  second
anniversaries of the agreement and repayment of the outstanding balance
is  due  on the third anniversary of the agreement.  Interest is based,
at  the Company's option, on 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  was  7.84% at December  31,  1997.   The  facility
provides for commitment fees of 0.375% on the unused facility.

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

     The  Grays Ferry Partnership has received a notice of default from
the  agent for the lenders under its principal loan agreement.   As  of
the  date of this Report, management believes that it is not in default
under  any  of  its  principal credit agreements as  a  result  of  the
asserted Grays Ferry default.  However, either (i) the passage of  time
under  the current circumstances, or (ii) certain actions which may  be
taken by the lenders to the Grays Ferry Partnership as a consequence of
the asserted Grays Ferry default, would result in a cross-default under
a  $30,000 reducing revolving credit facility that the Company  entered
into  in December 1997 which is further described above.  Such a cross-
default,  if  it  were to occur, could result in further cross-defaults
under other credit agreements of the Company and its subsidiaries.  The
Company  has discussed the Grays Ferry situation with the lender  under
the  $30,000  reducing revolving credit facility  and  has  obtained  a
temporary waiver

                                   35

<PAGE>

of  any  cross-default   under such  facility  which  otherwise   might
occur.    However, there can be no assurance that the Company  will  be
successful continuing to obtain any such waiver if and when it  may  be
needed  or  in  avoiding such cross-defaults.  As a result,  management
believes  there exists a risk that the dispute between the Grays  Ferry
Partnership and its electric power purchaser which caused the  asserted
Grays  Ferry  default, if not promptly resolved in favor of  the  Grays
Ferry  Partnership, will result in action by the lenders to  the  Grays
Ferry  Partnership which could result in cross-defaults  under  one  or
more  of  the Company's principal credit agreements.  While  the  Grays
Ferry Partnership is actively pursuing a rapid and favorable resolution
of its dispute with the power purchaser, there can be no assurance that
the  Grays Ferry Partnership will be successful in that regard.   As  a
result, there can be no assurance that the Grays Ferry default will not
result in cross-defaults which would have a material adverse effect  on
the Company's liquidity and financial condition.

     The  Company's Board of Directors has decided not to liquidate the
Philadelphia PWD Project, which was identified in the Liquidating Asset
Management  Agreement.  As a result of this decision, Wexford  received
compensation  in  accordance with the terms of  the  Liquidating  Asset
Management Agreement in fiscal 1997.

Inflation

      Due  to  the  relatively low rate of inflation  in  recent  years
management believes that inflation has not had a material impact on its
results of operations or financial condition.

Year 2000

     The Year 2000 issue refers generally to the data structure problem
that  will  prevent systems from properly recognizing dates  after  the
year  1999.   For  example,  computer programs  and  various  types  of
electronic equipment that process date information by reference to  two
digits  rather than four to define the applicable year may recognize  a
date  using "00" as the year 1900 rather than the year 2000.  The  Year
2000 problem could result in system failures or miscalculations causing
disruptions of operations.  The Year 2000 problem may occur in computer
software programs, computer hardware systems and any device that relies
on a computer chip if that chip relies on date information.  Based on a
preliminary study, the Company does not anticipate either a significant
amount  of  incremental expense or a disruption in  service  associated
with  the  Year 2000 and its impact on the Company's systems.  However,
there can be no assurance that the Company's systems nor the systems of
other  companies with whom the Company conducts business 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.

                                   36

<PAGE>


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

     Not applicable.



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  Form  10-K, and  is  incorporated  herein  by
reference:

     Report of Independent Accountants                        F-1

     Financial Statements:
       Consolidated Balance Sheets as of December 31, 1997,
        December 31, 1996 and June 30, 1996                   F-2

       Consolidated Statements of Operations for the
        year ended December 31, 1997, the six months ended
        December 31, 1996 and the years ended
        June 30, 1996 and 1995                                F-3

       Consolidated Statements of Stockholders' Equity
        (Deficit) for the year ended December 31, 1997,
        the six months ended December 31, 1996 and the
        years ended June 30, 1996 and 1995                    F-4

       Consolidated Statements of Cash Flows for the year
        Ended December 31, 1997, the six months ended
        December 31, 1996 and the years ended June 30,
        1996 and 1995                                         F-5

     Notes to Consolidated Financial Statements F-6  through F-24

     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.

                                   37

<PAGE>

                               PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

      The  information  required  for  this  item  is  incorporated  by
reference  to the Company's 1998 Definitive Proxy Statement  which  the
Company will file with the Securities and Exchange Commission no  later
than 120 days subsequent to December 31, 1997.


ITEM 11.  EXECUTIVE COMPENSATION.

      The  information  required  for  this  item  is  incorporated  by
reference  to the Company's 1998 Definitive Proxy Statement  which  the
Company will file with the Securities and Exchange Commission no  later
than 120 days subsequent to December 31, 1997.


ITEM 12.  SECURITY   OWNERSHIP   OF  CERTAIN  BENEFICIAL   OWNERS   AND
          MANAGEMENT.

      The  information  required  for  this  item  is  incorporated  by
reference  to the Company's 1998 Definitive Proxy Statement  which  the
Company will file with the Securities and Exchange Commission no  later
than 120 days subsequent to December 31, 1997.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

      The  information  required  for  this  item  is  incorporated  by
reference  to the Company's 1998 Definitive Proxy Statement  which  the
Company will file with the Securities and Exchange Commission no  later
than 120 days subsequent to December 31, 1997.


                                   38

<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 Form 10-K.

Index to Consolidated Financial Statements
     Report of Independent Accountants
     Consolidated Balance Sheets as of December 31, 1997, December  31,
     1996 and June 30, 1996
     Consolidated Statements of Operations for the year ended  December
     31, 1997, the six months ended December 31, 1996 and for the years
     ended June 30, 1996 and 1995
     Consolidated Statements of Stockholders' Equity (Deficit) for  the
     year  ended  December 31, 1997, the six months ended December  31,
     1996 and for the years ended June 30, 1996 and 1995
     Consolidated Statements of Cash Flows for the year ended  December
     31, 1997, the six months ended December 31, 1996 and for the years
     ended June 30, 1996 and 1995
Notes to Consolidated Financial Statements

2.   Financial Statement Schedules

     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.

 (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, 1997:

     1.   Current  Report on Form 8-K dated December 30, 1997 reporting
          information under Items 2 and 7.

                                   39

<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.

                              NRG GENERATING (U.S.) INC.


                              /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:

     Signature                      Title                 Date

/s/ Robert T. Sherman           President and        March 30, 1998
By:  Robert T. Sherman, Jr. Chief Executive Officer

/s/ Timothy P. Hunstad       Vice President and      March 30, 1998
By:  Timothy P. Hunstad   Chief Financial Officer
                       (Principal Accounting Officer)

/s/ David H. Peterson       Chairman of the Board
                                 of Directors        March 30, 1998
By:  David H. Peterson

/s/ Julie A. Jorgensen             Director          March 30, 1998
By:  Julie A. Jorgensen

/s/ Lawrence I. Littman            Director          March 30, 1998
By:  Lawrence I. Littman

/s/ Craig A. Mataczynski           Director          March 30, 1998
By:  Craig A. Mataczynski

/s/ Spyros S. Skouras, Jr.         Director          March 30, 1998
By:  Spyros S. Skouras, Jr.

/s/ Charles J. Thayer              Director          March 30, 1998
By:  Charles J. Thayer

/s/ Ronald J. Will                 Director          March 30, 1998
By:  Ronald J. Will

                                   40

<PAGE>

NRG Generating (U.S.) Inc.
Consolidated Financial Statements
December 31, 1997

<PAGE>

Report of Independent Accountants


      To the Stockholders and Board of Directors
      of NRG Generating (U.S.) Inc.

      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 NRG Generating (U.S.) Inc. and  its
      subsidiaries at December 31, 1997, December 31, 1996, and
      June  30,  1996, and the results of their operations  and
      their  cash flows for the year ended December  31,  1997,
      the  six  months ended December 31, 1996, and  the  years
      ended  June  30,  1996  and  1995,  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.



      Price Waterhouse LLP
      Minneapolis, Minnesota
      March 30, 1998

                                  F-1

<PAGE>

NRG Generating (U.S.) Inc.
Consolidated Balance Sheets

<TABLE>
<CAPTION>

(Dollars in thousands)
                                                         December 31,  December 31,  June 30,
                                                             1997          1996        1996

<S>                                                      <C>           <C>           <C>
Assets
Current assets:
  Cash and cash equivalents                              $   3,444     $   3,187     $   5,022
  Restricted cash and cash equivalents                       8,527         8,174         8,719
  Accounts receivable, net                                  11,099        11,920        11,627
  Receivables from related parties                              87           186           461
  Notes receivable                                              27         1,119         1,029
  Inventories                                                2,134         2,897         2,995
  Other current assets                                       1,022           992         1,721
   Total current assets                                     26,340        28,475        31,574

Property, plant and equipment, net                         127,574       132,203       134,694
Projects under development                                  46,376           346           253
Equipment held for sale                                          -         2,628         2,678
Notes receivable, noncurrent                                     -            83            86
Investments in equity affiliates                            13,381         3,653         3,449
Deferred financing costs, net                                5,643         5,530         4,630
Deferred tax assets, net                                     7,996             -             -
Other assets                                                   584           706           798
   Total assets                                          $ 227,894     $ 173,624     $ 178,162

               Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
  Current portion of loans and payables due NRG Energy   $   2,864     $   1,256     $   5,485
  Current portion of nonrecourse long-term                   8,525         7,595         3,000
  Current portion of recourse long-term debt                   495         3,225         4,115
  Short-term borrowings                                      1,313         2,388         1,793
  Accounts payable                                          20,582         6,131         8,708
  Prepetition liabilities                                      775         2,537         6,895
  Other current liabilities                                  3,083         2,852         7,789
   Total current liabilities                                37,637        25,984        37,785

Loans due NRG Energy                                         4,439        14,388        96,929
Nonrecourse long-term debt                                 165,020       143,972        60,415
Recourse long-term debt                                     25,000         6,339         6,374
Deferred income taxes                                            -        13,404        14,182
Other liabilities                                                -            50            50
   Total liabilities                                       232,096       204,137       215,735

Stockholders' equity (deficit):
  Preferred stock, par value $.01, 20,000,000 shares
   authorized; none issued or outstanding                        -             -             -
  Common stock, par value $.01, 50,000,000 shares
   authorized; 6,871,069, 6,474,814 and 6,474,814
   shares, issued, 6,836,769, 6,440,514 and 6,422,014
   shares outstanding, respectively                             68            64            64
  Additional paid-in capital                                65,715        62,719        62,515
  Accumulated deficit                                      (69,592)      (92,944)      (99,367)
  Other                                                       (393)         (352)         (785)
   Total stockholders' equity (deficit)                     (4,202)      (30,513)      (37,573)
   Total liabilities and stockholders' equity (deficit)  $ 227,894     $ 173,624     $ 178,162

</TABLE>

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

                                   F-2

<PAGE>

NRG Generating (U.S.) Inc.
Consolidated Statements of Operations

<TABLE>
<CAPTION>

(Dollars in thousands)

                                                 Six Months
                                   Year Ended       Ended          Year Ended
                                   December 31,  December 31,  June 30,   June 30,
                                       1997          1996        1996       1995
<S>                                <C>           <C>           <C>        <C>
Energy revenues                    $ 43,210      $ 21,669      $ 66,623   $ 74,455
Equipment sales and services         19,415        15,607        25,344     19,639
Rental revenues                       2,179         1,062         1,895      2,362
Development fees and other                -         1,578         2,685      5,791
                                     64,804        39,916        96,547    102,247

Cost of energy revenues              14,841         7,229        45,663     46,694
Cost of equipment sales and services 17,037        12,365        22,153     17,622
Cost of rental revenues               1,817           834         1,406      2,357
Cost of development fees and other        -         1,559         2,531      5,491
                                     33,695        21,987        71,753     72,164

Gross profit                         31,109        17,929        24,794     30,083

Selling, general and administrative
 expenses                             9,479         6,149        12,612     15,902
Provision for impaired assets         5,274             -           180     26,058

Income (loss) from operations        16,356        11,780        12,002    (11,877)

Interest and other income             1,310           413           569      2,587
Reorganization costs                      -             -       (12,101)    (8,366)
Interest and debt expense           (14,768)       (7,681)      (18,646)   (20,583)

Income (loss) before income taxes     2,898         4,512       (18,176)   (38,239)

Provision for income taxes (benefit)(20,454)         (268)        2,680       (463)

Income (loss) before
 extraordinary item                  23,352         4,780       (17,713)   (40,919)

Extraordinary item, net of
 income taxes                             -         1,643             -          -

Net income (loss)                  $ 23,352      $  6,423      $(17,713)  $(40,919)

Basic earnings (loss) per share:
  Before extraordinary item        $   3.59      $   0.75      $  (4.24)  $ (11.02)
  Extraordinary item                      -          0.25             -          -
                                   $   3.59      $   1.00      $  (4.24)  $ (11.02)

Diluted earnings (loss) per share:
  Before extraordinary item        $   3.48      $   0.74      $  (4.24)  $ (11.02)
  Extraordinary item                      -          0.25             -          -
                                   $   3.48      $   0.99      $  (4.24)  $ (11.02)

Weighted average shares
 outstanding - Basic                  6,511         6,430         4,182      3,712
Weighted average shares
 outstanding - Diluted                6,725         6,463         4,182      3,712

</TABLE>

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

                                   F-3

<PAGE>

NRG Generating (U.S.) Inc.
Consolidated Statements of Stockholders' Equity (Deficit)

<TABLE>
<CAPTION>

(Dollars in thousands)
                            Class A  Class B                   Additional                     Total
                             Common   Common  Common Preferred  Paid-in  Accumulated       Stockholders'
                             Stock    Stock   Stock    Stock    Capital    Deficit   Other    Equity
<S>                          <C>      <C>     <C>     <C>       <C>       <C>       <C>     <C>
Balance, June 30, 1994        $130      $39   $   -   $    -    $41,353   $(40,735) $ (651) $     136
Currency translation
 adjustment                                                                             25         25
Net loss                                                                   (40,919)           (40,919)
Balance, June 30, 1995         130       39       -        -     41,353    (81,654)   (626)   (40,758)
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                       (130)     (39)     37                  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)
Currency translation
 Adjustment                                                                           (223)      (223)
Net loss                                                                   (17,713)           (17,713)
Balance, June 30, 1996           -        -      64        -     62,515    (99,367)   (785)   (37,573)

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

NRG Energy conversion
 of stock option                                  4               2,996                         3,000
Currency translation
 Adjustment                                                                            (41)       (41)
Net income                                                                  23,352             23,352
Balance, December 31, 1997    $  -      $ -   $  68   $    -    $65,715   $(69,592) $ (393) $  (4,202)

</TABLE>
                                       F-4

<PAGE>

NRG Generating (U.S.) Inc.
Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>

(Dollars in thousands)                            Six Months
                                    Year Ended       Ended         Year Ended
                                   December 31,   December 31,   June 30,    June 30,
                                       1997           1996         1996        1995
<S>                                <C>            <C>           <C>         <C>
Cash flows from operating activities:
Net  income (loss)                 $   23,352     $    6,423    $ (17,713)  $ (40,919)
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         7,840          4,869        9,441      14,872
  Deferred tax (benefit) expense      (21,400)          (778)        (904)      2,278
  Provision for impaired assets         5,274              -          180      26,058
  Loss on disposition of property
   and equipment                          756             59            -           -
  Reserve for uncollectible note
   receivable                               -              -            -       3,121
  Bankruptcy professional fees accrued      -              -          432       4,415
  Other, net                             (212)           148         (216)        709
  Changes in operating assets and
   liabilities:
    Accounts receivable                   772         (1,011)         730        (257)
    Inventories                           621            (13)         615        (369)
    Receivables from related parties       97            275          223         (51)
    Other assets                          178           (277)           -           -
    Accounts payable and other current
     liabilities                         (289)        (6,996)        (838)      1,639
      Net cash provided by (used in)
       operating activities            16,989          1,056       (8,050)     11,496

Cash flows from investing activities:
Capital expenditures and project
 development costs                     (5,858)        (1,315)      (1,783)     (1,102)
Proceeds from sale of property
 and equipment                            552            104            -           -
Proceeds from sale of subsidiaries
 and projects                               -              -        7,500       1,762
Investment in equity affiliates       (10,000)             -            -           -
Collections on notes receivable         1,175             10          816         824
Withdrawals from (deposits into)
 restricted cash accounts - net          (353)           545       (5,156)      1,032
Other, net                                  -           (120)         227        (676)
      Net cash (used in) provided by
       investing activities           (14,484)          (776)       1,604       1,840

Cash flows from financing activities:
Proceeds from long-term debt           24,582         95,000       60,226       5,711
Proceeds from NRG Energy loans         10,000              -      128,078           -
Repayments of NRG Energy loans        (16,949)       (86,035)     (26,398)          -
Repayments of long-term debt          (16,857)        (6,098)     (92,816)    (18,061)
NRG Energy capital contribution             -              -       21,178           -
Net (repayments) proceeds of
 short-term borrowings                 (1,072)           595          193        (785)
Payments on prepetition liabilities    (1,762)        (4,660)     (73,483)     (1,799)
Deferred financing costs                 (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         (2,248)        (2,115)       7,385     (14,934)
Net increase (decrease) in cash
 and cash equivalents                     257         (1,835)         939      (1,598)
Cash and cash equivalents at
 beginning of year                      3,187          5,022        4,083       5,681
Cash and cash equivalents at
 end of year                       $    3,444      $   3,187    $   5,022   $   4,083


Supplemental disclosure of cash
 flow information:
Interest paid                      $   15,887      $  12,472    $  18,926   $  11,869
Income taxes paid                       1,477            495          110           -

</TABLE>

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

                                          F-5

<PAGE>

NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements

(Dollars in thousands)

1.   Business - Liquidity, Capital Resources and Emergence from
Bankruptcy

NRG  Generating  (U.S.)  Inc.  and  its  subsidiaries  ("NRGG"  or  the
"Company")   develop  and  own  cogeneration  projects  which   produce
electricity  and thermal energy for sale to industrial  and  commercial
users  and public utilities.  In addition, the Company sells and  rents
power  generation, cogeneration and standby/peak shaving equipment  and
services.

On  April  30,  1996, O'Brien Environmental Energy, Inc.  ("OEE"),  the
formerly  named parent company, emerged from bankruptcy pursuant  to  a
plan  (the  "Plan") submitted by NRG Energy, Inc. ("NRG  Energy"),  the
O'Brien  Official  Committee  of Equity Security  Holders  and  Wexford
Management  LLC  ("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.   The Company was renamed on the April 30, 1996 closing  date
to NRG Generating (U.S.) Inc.

OEE  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 OEE'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 OEE; 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  OEE's
Class A and Class B common stockholders.

Also,  on April 30 the Company 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.   An  escrow fund has been  established  to  fully
reserve for 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.

                                   F-6

<PAGE>

NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements

(Dollars in thousands)

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  engine  generator
business,  (b) the Philadelphia Cogeneration Project (the "Philadelphia
PWD   Project"),  (c)  certain  unused  equipment,  and  (d)   American
Hydrotherm Corporation and two other related subsidiaries.   Under  the
agreement,  the  Company's board of directors and officers  direct  and
control  which  assets will be liquidated and the extent  of  Wexford's
services.   During  1996  and  1997,  the  unused  equipment,  American
Hydrotherm  and  the  two  other  related  subsidiaries  were  sold  or
otherwise  disposed.   During 1997, the board of directors  decided  to
retain  the Philadelphia PWD Project.  The Company has determined  that
its  engine generator business is not a part of its strategic plan  for
the   future  and  is  currently  pursuing  several  avenues  for   the
disposition  of  this business.  Management does not  expect  that  the
disposition  of  this  business will have  a  material  effect  on  the
Company's  financial position or results of operations.  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  accounts
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,  1997, the six months ended December 31, 1996 and the twelve months
ended  June 30, 1996 and 1995.  The twelve months ended June  30,  1996
and  1995  are  sometimes referred to in these  Notes  to  Consolidated
Financial Statements as fiscal 1996 and 1995.

Following  are  condensed results of operations for the  twelve  months
ended   December   31,  1997  and  1996  (unaudited).    Due   to   the
reorganization, results are not comparable.

                                                              Unaudited
                                              Year Ended      Year Ended
                                              December 31,    December 31,

                                                  1997            1996

Revenue                                        $ 64,804       $  85,562
Cost of revenues                                 33,695          59,491
Gross profit                                     31,109          26,071
Operating and other expenses                     28,211          38,686
Income (loss) before income tax benefit           2,898         (12,615)
Income tax benefit                              (20,454)           (757)
Income (loss) before extraordinary item          23,352         (11,858)
Extraordinary item                                    -           1,643
Net income (loss)                              $ 23,352        $(10,215)

                                   F-7

<PAGE>

NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements

(Dollars in thousands)

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.

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, net of estimated salvage, is depreciated
using  the straight-line method over the estimated useful lives of  the
assets  which  range  from  five  to  thirty  years.   Amortization  of
equipment  acquired under capital leases is recognized  on  a  straight
line basis over the shorter of the estimated asset life or lease term.

Cost  of  maintenance  and repairs is charged to expense  as  incurred.
Betterments and improvements are capitalized.

                                   F-8

<PAGE>

NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements

(Dollars in thousands)

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.  Interest  expense  includes
amortization of $407, $199, $1,480 and $570 for the year ended December
31,  1997,  the six months ended December 31, 1996 and the years  ended
June  30,  1996  and 1995, respectively.  Accumulated amortization  was
$585,  $410 and $180 at December 31, 1997, December 31, 1996  and  June
30,  1996,  respectively. Fiscal 1995 reorganization costs reported  in
the  consolidated statement of operations includes $3,387 to  write-off
deferred  financing  costs  due  to Court-approved  reductions  in  the
carrying value of certain prepetition subordinated debentures.

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.

                                   F-9

<PAGE>

NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements

(Dollars in thousands)

Concentration of Credit Risk

The  Company primarily sells electricity and steam to public  utilities
and corporations on the east coast of the United States under long-term
agreements.  Also, the Company services, sells and rents  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' deficit.

3.   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  for  NRG  Generating   (Newark)
Cogeneration, Inc. ("Newark") and NRG Generating (Parlin) Cogeneration,
Inc. ("Parlin") and to bankruptcy escrow accounts.

Restricted cash and cash equivalents consist of the following:

                                  December 31, December 31, June 30,
                                      1997         1996       1996

Bankruptcy escrow accounts          $  770       $2,388      $8,490
Debt service reserve accounts        7,757        5,786           -
Other                                    -            -         229
                                    $8,527       $8,174      $8,719

4.   Property, Plant and Equipment

Property, plant and equipment consists of the following:

                                  December 31, December 31, June 30,
                                      1997         1996       1996

Plant and equipment                $169,839     $171,035   $169,744
  Furniture and fixtures                687          759        898
  Land, buildings and improvements    1,528        1,538      1,972
  Other equipment                        37           44        378
                                   $172,091     $173,376   $172,992
  Accumulated depreciation and
  amortization                      (44,517)     (41,173)   (38,298)
                                   $127,574     $132,203   $134,694

Depreciation  expense was $7,320, $3,626, $7,858, and  $8,892  for  the
year  ended December 31, 1997, the six months ended December 31,  1996,
and the years ended June 30, 1996 and 1995, respectively.

                                   F-10

<PAGE>

NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements

(Dollars in thousands)

Plant  and  equipment  relates  primarily  to  the  Newark  and  Parlin
cogeneration plants and the Philadelphia PWD Project standby facility.

The  Newark  project consists of a 52 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  Parlin  project consists of a 122 MW cogeneration power  plant  in
Parlin, New Jersey which commenced operations on June 26, 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.

Effective  April 30, 1996, the Company renegotiated its power  purchase
agreements  with Jersey Central Power and Light ("JCP&L"), the  primary
electricity  purchaser from its Newark and Parlin projects.  Under  the
new  amendments, JCP&L is responsible for all natural  gas  supply  and
delivery.   As  a result, subsequent to the amendment, energy  revenues
and cost of energy revenues exclude fuel supply and delivery costs.

The  Newark  project is a qualifying facility as defined in the  Public
Utility Regulatory Policies Act of 1978.

Parlin  relinquished its claim to qualifying facility 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  Philadelphia PWD Project is a 22 MW standby/peak shaving  facility
in  Philadelphia, Pennsylvania which commenced operations in  May  1993
and  is  supplying  electricity pursuant to a  20-year  energy  service
agreement.  The Company owns an 83% interest in this project.

5.   Morris Acquisition

In  December 1997, NRGG Funding, Inc. ("NRGG Funding"), a wholly  owned
subsidiary, acquired from NRG Energy the entire ownership interest in a
117  MW steam and electricity cogeneration project ("Morris LLC" or the
"Morris Project") under construction in Morris, Illinois.  The purchase
price was $5 million, of which $4 million was previously paid by Morris
LLC from construction financing proceeds.  Payment of the remaining  $1
million, which is subject to certain contingencies, has been accrued at
December 31, 1997.  Identifiable assets acquired were $46,480 which are
primarily  included  in  the  balance  sheet  caption  "Projects  Under
Development".  Identifiable liabilities assumed were $46,480 consisting
of  nonrecourse long-term debt of $29,855, accounts payables of $15,446
and payables to NRG Energy of $1,179.

The  estimated  total cost of the Morris project is $107,600  which  is
being  financed with project bank debt and future equity contributions.
NRGG Funding is obligated to make future equity contributions to Morris
LLC  in an amount which is the lesser of 20% of the total project  cost
or  $22,000.   The  future equity contributions are guaranteed  by  the
Company  and  NRG Energy.  In addition, NRG Energy has agreed  to  make
loans  available  to NRGG Funding and the Company to  make  the  equity
contributions.

                                   F-11

<PAGE>

NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements

(Dollars in thousands)

The  Morris Project is scheduled to begin commercial operations in  the
fourth quarter of 1998.  Morris LLC has entered into an Energy Services
Agreement (the "ESA") with Equistar Chemicals LP ("Equistar") to supply
720,000 pounds of steam per hour and 78 MW of electricity for 25 years.
The  Company  will arrange for the sale of excess energy  and  non-firm
capacity to third parties.

Under  the  terms of the ESA, Equistar has the option to  purchase  the
project  for the fair market value, as defined, at either the fifteenth
or   twentieth   anniversary   of  the   commercial   operation   date.
Additionally, Equistar was granted a one-time option to purchase up  to
a  10%  membership  interest in the project.   On  February  10,  1998,
Equistar  gave  notice  of  its intention  to  purchase  a  5%  passive
membership  interest. Under terms of the proposed  agreement,  Equistar
would acquire a 5% passive interest in the project in exchange for  the
obligation to assume 5% of the required equity contribution expected to
be  approximately  $1,100.  The Company extended the option  expiration
date to April 30, 1998, to close this transaction.

6.   Investments in Equity Affiliates

Investments in equity affiliates consists of the following:

                                  December 31,  December 31,  June 30,
                                      1997          1996        1996

Grays Ferry  (33% owned)           $12,845        $2,659       $2,778
PoweRent Limited  (50% owned)          536           994          671
                                   $13,381        $3,653       $3,449

Grays Ferry

NRGG   (Schuylkill)   Cogeneration,  Inc.   ("NSC"),   a   wholly-owned
subsidiary,  has  a one-third partnership interest in the  Grays  Ferry
Cogeneration  Partnership  ("Grays Ferry").   The  other  partners  are
affiliates of PECO Energy Company and Trigen Energy Corporation.  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  Trigen-Philadelphia Energy Corporation through January  8,
2023  and  a 20-year contract to supply all of the electricity produced
by  the  project to PECO Energy Company through January  8,  2018.   In
March  1998,  PECO  Energy Company asserted that, as a  consequence  of
certain  regulatory  developments, its power  purchase  agreement  with
Grays Ferry was no longer effective.  See Note 19.  NSC's investment is
comprised  of  $10,000 equity contributed during 1997 pursuant  to  its
commitment  under Grays Ferry's financing arrangements and  development
costs incurred during formation and development of the project.

PoweRent Limited

PoweRent Limited ("PoweRent) is a 50% owned United Kingdom company that
sells  and  rents  power generation equipment.  The  remaining  50%  of
PoweRent  is owned by a private investor.  In 1997 the Company recorded
a  charge  of  $500 to reduce the carrying value of its  investment  in
PoweRent (see Note 12).

                                   F-12

<PAGE>

NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements

(Dollars in thousands)

7.   Short-Term Borrowings

Short-term  borrowings  consist of amounts owed financial  institutions
under  lines  of credit, primarily in the United Kingdom.  At  December
31, 1997, December 31, 1996 and June 30, 1996 the Company had aggregate
lines  of  credit of approximately $2,000, $2,400 and $1,800  of  which
$1,313,  $2,388 and $1,793 was outstanding, respectively.  The weighted
average interest rate on short-term borrowings as of December 31, 1997,
December  31, 1996 and June 30, 1996 was approximately 10.0%, 9.9%  and
9.1%, respectively.

8.   Long-Term Debt

Long-term debt consists of the following:


                                      December 31,  December 31,  June 30,
                                          1997          1996        1996

Notes payable, due in monthly
 installments of principal
 plus interest at rates ranging
 from 8.3% to 13.48% maturing
 on various dates through 1999         $    733      $  8,610     $ 8,995
Capital lease obligations                     -         1,474       4,909
Revolving credit facility                25,000             -           -
Morris Project financing (nonrecourse)   29,855             -           -
Newark and Parlin financing
 (nonrecourse)                          143,452       151,047      60,000
                                        199,040       161,131      73,904
Less amounts classified as current       (9,020)      (10,820)     (7,115)
                                       $190,020      $150,311     $66,789

Aggregate  amounts of long-term debt maturing during each of  the  next
five  years are $9,020, $9,848, $33,602, $11,322 and $11,945  in  1998,
1999, 2000, 2001 and 2002, respectively.

The Company's principal credit agreements; a revolving credit facility,
Morris  Project  financing  and  Newark and  Parlin financing,  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.  The  Company  was not in
default  under any of  its principal  credit agreements at December 31,
1997.  See note 19.

Revolving Credit Facility

On  December  17, 1997, the Company entered into a $30,000,  three-year
reducing,  revolving credit facility agreement.  At December 31,  1997,
$25,000 of the credit facility was utilized; the remaining $5,000  will
become  available  once  security interests  in  the  Philadelphia  PWD
Project are perfected.  The proceeds were used to repay $16,949 to  NRG
Energy,  $6,551  of  obligations of the Philadelphia  PWD  Project  and
$1,500  for general corporate purposes.  The facility reduces by $2,500
on the first and second anniversaries of the agreement and repayment of
the  outstanding  balance is due on December  17,  2000.   Interest  is
based,  at  the Company's option, on 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%,  based  on  the  Company's debt service  coverage  ratio.   The
interest  rate resets based on the borrowing period selected, generally
one  to  six months, and was 7.84% at December 31, 1997.  The  facility
provides  for  commitment  fees  of  0.375%  on  the  unused  facility.
Borrowings are secured by the assets, capital stock and cash  flows  of
the Philadelphia PWD Project as well as the distributable cash flows of
Newark,  Parlin and Grays Ferry as permitted by these projects' primary
lenders.

                                   F-13

<PAGE>

NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements

(Dollars in thousands)

The  revolving  credit facility agreement specifies  that  the  Company
maintain  certain covenants with which the Company is in compliance  at
December  31,  1997.   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 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
Agreement  provides $85,600 of 20-month construction  loan  commitments
and  $5,400  in  letter of credit commitments (the  "LOC  Commitment").
Upon  completion  of  the project, 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, 1997, $29,855  was  outstanding
under  the Construction Loan and no amounts were pledged under the  LOC
Commitment.  Interest  on  the  Construction  Loan  is  based,  at  the
Company's option, either on 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 6.6875% at December 31, 1997.  Borrowings are secured
by  NRGG  Funding's  ownership interest  in  Morris  LLC,  cash  flows,
dividends  and any other property that NRGG Funding may be entitled  to
as an owner in Morris LLC.

The  Agreement  specifies that the Company maintain  certain  covenants
with  which  the  Company is in compliance at December  31,  1997.  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, Newark and Parlin entered into a Credit Agreement (the
"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, Newark borrowed $60,000 in the form  of  a
temporary  term loan under the 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 Newark  and  Parlin.
The Term Loan will be amortized as specified by the Credit Agreement.

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 6.8125%
at  December 31, 1997.  Nominal margin increases for both the LIBOR and
the  defined base rate will occur in year six and eleven of the  Credit
Agreement.  Upon entering into the Credit Agreement, Newark and  Parlin
entered  into an interest rate swap agreement 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.

                                   F-14

<PAGE>

NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements

(Dollars in thousands)

No  amounts were outstanding on the debt service reserve line of credit
at  December 31, 1997 and 1996.  The line carries a commitment  fee  of
1.125%  on  the  undrawn  amount.  Newark and 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, 1997, these balances totaled $7,757 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 Newark and Parlin assets and a  pledge
of  Newark's and Parlin's capital stock.  NRGG has guaranteed repayment
of up to $25,000 of the Term Loan and also guaranteed payment by Newark
and  Parlin  of  all  income  and franchise  taxes  when  due.   As  an
inducement to obtain the $60,000 temporary term loan, effective May 23,
1996,  NRG  Energy  guaranteed payment of pre-existing  liabilities  of
Newark  and  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, 1997, the guarantee amount was $3,000.

The  Credit  Agreement  specifies that  the  Company  maintain  certain
covenants with which the Company is in compliance at December 31, 1997.
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.

9.   Loans and Accounts Payables Due NRG Energy

Amounts owed to NRG Energy are comprised as follows:

                                   December 31,  December 31,  June 30,
                                       1997          1996        1996
Long-term debt:
Note due April 30, 2001 bearing
  interest at 9.5%                  $ 2,539       $14,388     $101,679
Grays Ferry note due July 1, 2005
  bearing interest at 10.75%          1,900             -            -
                                      4,439        14,388      101,679
Less current portion                      -             -       (4,750)
                                    $ 4,439       $14,388     $ 96,929

Current maturities and accounts payable:
   Current maturities               $     -       $     -     $  4,750
   Morris LLC acquisition             1,000             -            -
   Accrued interest                     821           648          735
   Management services, operations
   and other                          1,043           608            -
                                    $ 2,864       $ 1,256     $  5,485

                                   F-15

<PAGE>

NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements

(Dollars in thousands)

10.  Stockholders' Equity

NRG Energy stock option

During 1997 NRG Energy made loans aggregating $10,000 to NSC to provide
funding  for  NSC's  equity  contribution obligation  to  Grays  Ferry.
Pursuant to a stock option right approved by the 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

The  Company  has  adopted SFAS No. 128, "Earnings  Per  Share",  which
became  effective  for financial statements issued for  periods  ending
after  December 15, 1997.  SFAS No. 128 requires presentation of  basic
and  diluted earnings per share ("EPS") and restatement of EPS data for
all  prior  periods. Basic 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 year
ended  December  31, 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 years ended June 30, 1996 and 1995.


                       Year ended              Six months ended
                   December 31, 1997           December 31, 1996
                 Income      Shares            Income     Shares
               (Numerator)(Denominator) EPS (Numerator)(Denominator) EPS

Income before
 extraordinary item:
  Basic EPS       $23,352     6,511    $3.59   $4,780      6,430    $0.75
  Effect of
  dilutive
  stock options        33       214                 -         33
   Diluted EPS    $23,385     6,725    $3.48   $4,780      6,463    $0.74

Stock options

The  Company  has reserved 750,000 shares of common stock for  issuance
under  its  1996  and 1997 stock option plans.  The plans  provide  for
nonqualified  and incentive stock options to be granted  to  directors,
officers, and key employees 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-16

<PAGE>

NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements

(Dollars in thousands)

Option transactions under these plans are summarized as follows:

                                             Weighted Average
                           Number of Shares    Option Price

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

The  following  table  summarizes the  stock  options  outstanding  and
exercisable at December 31, 1997:

<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    324,000       8.8 years          $ 5.47        108,000        $ 5.47
$11.58-$16.47  305,000       9.5 years          $13.19              -             -
               629,000       9.1 years          $ 9.21        108,000        $ 5.47

</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  year  ended
December  31,  1997 and six months ended December 31, 1996  would  have
been adjusted to the pro-forma amounts indicated below:


                           Year Ended        Six Months Ended
                         December 31, 1997   December 31, 1996
          Net Income
          As reported          $23,352            $6,423
          Pro-forma            $22,695            $6,362

          EPS (Diluted)
          As reported          $  3.48            $ 0.99
          Pro-forma            $  3.38            $ 0.98

     The estimated weighted average fair value of stock options granted
during  the  year  ended December 31, 1997 and  the  six  months  ended
December  31,  1996 was $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-17

<PAGE>

NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements

(Dollars in thousands)



                              Year Ended       Six Months Ended
                           December 31, 1997   December 31, 1996
Risk free interest rates       6.2 - 6.6%          5.8 - 6.1%
Expected life                   6 years             6 years
Expected volatility              36.7%               30.0%
Expected dividends                 -                   -

Restrictions on retained earnings

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.

11.  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).

12.  Provision for Impaired Assets

In  the fourth quarter of 1997, the Company completed a thorough review
of  its  business operations and market opportunities.  As a result  of
this review, the Company concluded that the estimated future cash flows
to  be generated by certain assets were not sufficient to recover their
carrying  values.  Accordingly,  the  Company  recorded  an  impairment
provision  of  $5,274  for  such assets.  The  provision  consisted  of
property,  plant and equipment write downs of $2,778 primarily  related
to the generator sales and services business, $1,553 for equipment held
for sale, $500 to reduce the carrying value of the equity investment in
PoweRent,  $371 to expense project development costs and $72 for  other
impairments.  The property plant and equipment and PoweRent  provisions
reduced  the asset carrying values to estimated fair values  determined
by  management  and the board of directors based on prices  of  similar
assets  and various valuation techniques.  The equipment held for  sale
provision  represents  the write off of remaining  equipment  which  is
being scrapped.  The project development write off was necessary due to
abandonment of certain projects.

During fiscal 1996 unrecoverable project development costs of $180 were
written  off.  In fiscal 1995, based on independent market  appraisals,
the  Company recorded charges of $15,985 to write-down property,  plant
and equipment and $5,655 to write-down equipment held for sale to lower
fair   values.  In  addition,  project  development  costs  of   $4,418
determined to be unrecoverable were written off.

13.  Disclosures about Fair Value of Financial Instruments

At  December  31, 1997 and December 31, 1996, the carrying amounts  and
fair values of the Company's financial instruments are as follows:

                                   F-18

<PAGE>

NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements

(Dollars in thousands)


                               December 31, 1997 December 31, 1996
                                Carrying   Fair  Carrying     Fair
                                 Amount    Value  Amount      Value
Assets:
  Cash and cash equivalents   $  3,444 $  3,444  $  3,187  $  3,187
  Restricted cash and cash
   equivalents                   8,527    8,527     8,174     8,174
  Notes receivable                  27       27     1,202     1,202

Liabilities:
  Short-term borrowings          1,313    1,313     2,388     2,388
  Long-term debt               199,040  199,040   161,131   161,131
  Loans and payables due
   NRG Energy                    7,303    7,303    15,644    15,644
  Interest rate swap                 -    2,691         -     1,439

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 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.

14.  Income Taxes

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

                                          Six Months
                              Year Ended     Ended         Year Ended
                             December 31, December 31, June 30,   June 30,
                                  1997        1996       1996       1995

United States                  $ 2,758     $ 4,195    $(18,054)  $(38,225)
Foreign                            140         317        (122)      (14)
                               $ 2,898     $ 4,512    $(18,176)  $(38,239)

The income tax provision (benefit) consists of:


 Current income taxes:
   Federal                    $      -     $   803    $      -   $      -
   State                           946         570         792        402
                                   946       1,373         792        402
 Deferred income taxes:
   Federal                     (20,400)     (2,292)       (493)       912
   State                        (1,000)        651        (762)     1,366
                               (21,400)     (1,641)     (1,255)     2,278
 Income tax provision (benefit)
    excluding extraordinary
     item                     $(20,454)    $  (268)   $   (463)  $  2,680

                                   F-19

<PAGE>

NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements

(Dollars in thousands)

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:

                                   December 31,  December 31,  June 30,
                                       1997          1996        1996
Deferred income tax liabilities:
 Property, plant & equipment        $(18,925)     $(18,445)   $(18,109)
   Total deferred tax liabilities    (18,925)      (18,445)    (18,109)

Deferred income tax assets:
 Net operating loss carryforwards     27,525        26,502      28,219
 Alternative minimum tax credits         159           183          84
 Investment tax credits                1,427         1,622       1,622
 Miscellaneous                         5,040         5,571       5,521
 Valuation allowance                  (7,230)      (28,837)    (31,519)
  Total deferred tax assets           26,921         5,041       3,927
    Net deferred tax assets
    (liabilities)                   $  7,996      $(13,404)   $(14,182)

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       Ended          Year Ended
                                  December 31,  December 31,  June 30,  June 30,
                                      1997          1996        1996      1995
<S>                                <C>           <C>         <C>       <C>
Income tax (benefit) on the amount
 of Federal statutory rate         $     985     $   1,534   $ (6,180) $(13,001)
State income taxes (benefit)             (36)          806        252      (286)
Current benefit of state operating
 loss carryforwards                     (353)         (655)      (232)        -
Operating losses with
 no current tax benefit                1,182             -      3,204     2,272
Other increase (decrease)
 in valuation allowance              (22,232)       (1,630)      (544)    6,233
Excess liabilities                         -             -          -     4,000
Reorganization costs                       -             -      2,636     1,712
Other                                      -          (323)       401     1,750
  Total income tax provision
  (benefit)                        $ (20,454)    $    (268)  $   (463) $  2,680

</TABLE>

                                   F-20

<PAGE>

NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements

(Dollars in thousands)

At  December  31,  1997,  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:

                            Net Operating Loss    Investment Tax
 December 31,                 Carryforwards    Credit Carryforwards

     1998                        $      -             $  255
     1999                               -                240
     2000                               -                409
     2001                             353                 82
     2002                           3,725                174
     2003                           1,720                 52
     2004                           4,968                215
     2005                          13,089                  -
     2006                           4,545                  -
     2007                          15,089                  -
     2008                          10,682                  -
     2009                           6,358                  -
     2010                           9,031                  -
     2011                               -                  -
     2012                           1,695                  -
       Total                      $71,255             $1,427

The  Company  has  $48,719  of  state  and  local  net  operating  loss
carryforwards  available  to  offset future  state  and  local  taxable
income.   These  carryforwards will expire starting in  1998  and  will
continue  to  expire through 2012.  The Company also  has  foreign  net
operating  loss  carryforwards  of  approximately  $1,500.    The   net
operating  loss carryforwards for alternative minimum tax purposes  are
approximately $35,363 at December 31, 1997.

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,  1997  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

                                   F-21

<PAGE>

NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements

(Dollars in thousands)

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.   As
of  December  31,  1997,  the Company has not  undergone  a  subsequent
ownership  change  in  the  two year period  following  the  bankruptcy
protected change.

15.  Transactions with Related Parties

NRG   Energy   provides  management,  administrative,   operation   and
maintenance  services  and  certain  other  services  to  the  Company.
Interest expense related to loans from NRG Energy was $1,327, $648  and
$1,098,  for  the  year ended December 31, 1997, the six  months  ended
December   31,  1996  and  for  fiscal  1996.   Selling,  general   and
administrative  expenses include $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, 1997, the six months
ended December 31, 1996 and for 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 $350
in 1997.

The  Parlin  project  sells up to 9 MW of power  to  NRG  Parlin,  Inc.
("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 $1,300 in 1997.

NRG  Energy  is the project manager of the Morris Project  acquired  in
December 1997 by the Company from NRG Energy.

16.   Segment Information and Major Customers

The  Company operates principally in two industry segments.  The energy
segment  consists of the development and ownership of cogeneration  and
standby/peak  shaving  projects.   The  equipment  sales,  rental   and
services  segment  consists  of  the  selling  and  renting  of   power
generation,   cogeneration  and  standby/peak  shaving  equipment   and
services.   Information with respect to these business segments  is  as
follows:
                                             Six Months
                               Year Ended      Ended          Year Ended
                              December 31,  December 31,  June 30,  June 30,
                                  1997          1996        1996      1995
Revenues:
  Energy                       $ 43,210      $ 23,247    $ 69,308  $ 80,246
  Equipment sales, rental
    and services                 21,594        16,669      27,239    22,001
                               $ 64,804      $ 39,916    $ 96,547  $102,247

Identifiable assets:
  Energy                       $195,027      $141,890    $142,390  $164,243
  Equipment sales, rental
    and services                  8,332        16,170      21,342    22,866
  Corporate assets               24,535        15,564      14,430     2,639
                               $227,894      $173,624    $178,162  $189,748

                                   F-22

<PAGE>

NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements

(Dollars in thousands)

                                            Six Months
                               Year Ended      Ended          Year Ended
                              December 31,  December 31,  June 30,  June 30,
                                  1997          1996        1996      1995
Operating income (loss):
  Energy                       $ 24,984      $ 12,136    $ 16,785  $ 19,642
  Equipment sales, rental
   and services                  (2,020)        1,018        (754)  (20,265)
  General corporate expenses     (6,608)       (1,374)     (4,029)  (11,254)
                               $ 16,356      $ 11,780    $ 12,002  $(11,877)
Depreciation expense:
  Energy                       $  6,788      $  3,272    $  7,025  $  7,152
  Equipment sales, rental
   and services                     498           333         756     1,494
  Not allocable                      34            21          77       246
                               $  7,320      $  3,626    $  7,858  $  8,892
Capital expenditures:
  Energy                       $  5,115      $  1,189    $    273  $    457
  Equipment sales, rental
   and services                     432            31           7       161
  Not allocable                     168             2          19       126
                               $  5,715      $  1,222    $    299  $    744

Revenue  by  segment  consists  of  sales  to  unaffiliated  customers;
intersegment  sales  are  not significant.  For  the  purpose  of  this
presentation, development and other fees are considered revenues of the
energy segment.  Selling, general and administrative expenses have been
allocated  to the individual segments on the basis of segment  revenues
and geographical location.

Identifiable assets are those assets that are used in the operations of
each  business  segment. Corporate assets are those  not  used  in  the
operations  of  a  specific  segment and  consist  primarily  of  cash,
deferred financing costs and deferred taxes.

Information  with  respect  to  the  Company's  geographical  areas  of
business is as follows:

                                            Six Months
                              Year Ended       Ended          Year Ended
                              December 31,  December 31,  June 30,  June 30,
                                  1997          1996        1996      1995
Revenues:
  United States                $ 51,504      $ 27,937    $ 82,917  $ 89,332
  United Kingdom                 13,300        11,979      13,630    12,915
                               $ 64,804      $ 39,916    $ 96,547  $102,247
     Net income (loss):
  United States                $ 23,236      $  6,087    $(17,591) $(40,905)
  United Kingdom                    116           336        (122)      (14)
                               $ 23,352      $  6,423    $(17,713) $(40,919)
Identifiable assets:
  United States                $221,752      $164,631    $169,657  $179,793
  United Kingdom                  6,142         8,993       8,505     9,955
                               $227,894      $173,624    $178,162  $189,748

                                   F-23

<PAGE>

NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements

(Dollars in thousands)

Revenues from one energy customer accounted for 57%, 46%, 62%  and  65%
for the year ended December 31, 1997, the six months ended December 31,
1996, and  the years ended June 30, 1996 and 1995, respectively.

17.  Operating Leases

Total  rental  expense under various operating leases was approximately
$178,  $504, $804 and $1,300 for the year ended December 31, 1997,  the
six  months ended December 31, 1996, and the years ended June 30,  1996
and 1995, respectively.

18.  Minority Interest

O'Brien  (Philadelphia)  Cogeneration  ("OPC"),  a  subsidiary  of  the
Company,  is  17%  owned  by  an unrelated private  investor.   OPC  is
required to make quarterly distributions to the minority owner  of  17%
of  its net earnings.  These distributions totaled $244, $125 and  $227
for the year ended December 31, 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 OPC.  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,  1997  was  approximately
$2,315.  There are no events of default.

19.  Subsequent Event

On  March  9,  1998, the Company announced that it had received  notice
from  PECO Energy ("PECO"), the purchaser of electric power from  Grays
Ferry  Cogeneration  Partnership, that PECO  believed  that  its  power
purchase  agreements with the partnership relating to the  Grays  Ferry
project  were  no  longer in effect and that PECO refused  to  pay  the
electricity rates set forth in the agreements.  The Company  has  filed
a lawsuit against PECO and the Pennsylvania  Public Utility  Commission
seeking to prevent PECO from terminating its power purchase  agreements
with the Grays Ferry Cogeneration  Partnership, to compel  PECO  to pay
the electricity rates  set forth in the  agreements, and to compel  the
Pennsylvania Public Commission to allow the costs of the power purchase
agreements to  be recovered  in retail electric rates.  The Company  is
uncertain as to what the outcome of this matter will  be or what effect
it will have on the business or financial condition  of the Company.

The Grays Ferry  Cogeneration  Partnership has  received  a  notice  of
default  from  the agent  for  the  lenders under  its  principal  loan
agreement.  As of the date of this Report, management believes that  it
is not in default under any of its  principal  credit agreements  as  a
result  of  the asserted  Grays Ferry default.  However, either (i) the
passage  of  time  under  the  current circumstances,  or (ii)  certain
actions which may be taken by the lenders to the Grays Ferry Partnership
as a consequence of the asserted Grays Ferry default, would result in a
cross-default under a $30,000 reducing  revolving credit facility  that
the Company entered into in December 1997.  Such a cross-default, if it
were  to  occur, could  result  in further  cross-defaults under  other
credit agreements of the Company and its subsidiaries.  The Company has
obtained  a   temporary  waiver   of   any   cross-default  under   the
$30,000 reducing revolving credit facility.  However,  there can be  no
assurance that the Company will be successful continuing to obtain  any
such  waiver  if and when it may be needed or in  avoiding  such cross-
defaults. As a  result, there can be no assurance that the Grays  Ferry
default will not result in  cross-defaults which would have a  material
adverse effect on the Company's liquidity and financial condition.

                                   F-24

<PAGE>

                           Index to Exhibits

Exhibit
No.       Description
2.1       Composite  Fourth Amended and Restated Plan of Reorganization
          for  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  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  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 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  and  incorporated  herein  by   this
          reference.

3.1       Amended  and  Restated  Certificate of Incorporation  of  the
          Company  filed  as  Exhibit 3.1 to Amendment  No.  1  to  the
          Company's  Annual  Report on Form 10-K for  the  fiscal  year
          ended   June  30,  1996  and  incorporated  herein  by   this
          reference.

3.2       Preferred  Stock Certificate of Designation  of  the  Company
          filed as Exhibit 3.3 to the Company's Current Report on  Form
          8-K  dated  April 30, 1996 and incorporated  herein  by  this
          reference.

3.3       Restated Bylaws of the Company.

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 Form 10-K for the fiscal
          year  ended  June 30, 1996 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  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 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  and  incorporated  herein  by   this
          reference.

                                   41

<PAGE>

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  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  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  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 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 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  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  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 Report on Form 10-
          K  for  the  fiscal year ended June 30, 1996 and incorporated
          herein by this reference.

10.8.1    Credit  Agreement dated May 17, 1996 between  NRG  Generating
          (Newark)  Cogeneration Inc. ("NRGG Newark"),  NRG  Generating
          (Parlin)  Cogeneration Inc. ("NRGG Parlin"),  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 and incorporated  herein  by  this
          reference.

10.8.2    Amendment No. 1 to the Credit Agreement dated June  28,  1996
          between NRG Generating (Newark) Inc., NRG Generating (Newark)
          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 and incorporated
          herein by this reference.

10.8.3    Stock  Pledge  Agreement  dated June  28,  1996  between  the
          Company as Pledgor and

                                   42

<PAGE>

          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  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 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  and  incorporated  herein  by   this
          reference.

10.8.6    Tax Indemnification Agreement dated June 28, 1996 between the
          Company, NRGG Newark, NRGG Parlin 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
          and incorporated herein by this reference.

10.8.7    Assignment and Security Agreement dated June 28, 1996 between
          NRGG  Parlin  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  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
          NRGG  Newark  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  and  incorporated
          herein by this reference.

10.8.9    Leasehold  Mortgage,  Assignment  of  Leases  and  Rents  and
          Security  Agreement dated June 28, 1996 between  NRGG  Parlin
          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 and incorporated  herein  by  this
          reference.

10.8.10   Interest  Rate  Swap Agreement dated August 2,  1996  between
          NRGG  Newark, NRGG Parlin 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  and
          incorporated herein by this reference.

10.9.1    Loan   Agreement   dated  March  8,  1996   between   O'Brien
          (Schuylkill)  Cogeneration 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  and  incorporated
          herein by this reference.

10.9.2    Option   Agreement   dated  May  1,  1996   between   O'Brien
          (Schuylkill)  Cogeneration  Inc.  and  NRG  Energy  filed  as
          Exhibit  10.9.2  to Amendment No. 2 to the  Company's  Annual
          Report  on Form 10-K for the fiscal year ended June 30,  1996
          and incorporated herein by this reference.

10.10.1   Gas  Supply Agreement dated June 30, 1992 between the Company
          and The

                                   43

<PAGE>

          Philadelphia Municipal Authority (the "PMA") regarding the NE
          Plant  (Philadelphia Project) and filed as an exhibit to  the
          Company's  Annual  Report on Form 10-K for  the  fiscal  year
          ended   June  30,  1992  and  incorporated  herein  by   this
          reference.

10.10.2   Gas  Supply Agreement dated June 30, 1992 between the Company
          and the PMA regarding the SW Plant (Philadelphia Project) and
          filed as an exhibit to the Company's Annual Report on Form 10-
          K  for  the  fiscal year ended June 30, 1992 and incorporated
          herein by this reference.

10.10.3   Energy  Service  Agreement dated June 30,  1992  between  the
          Company  and  the  PMA  regarding the NE Plant  (Philadelphia
          Project)  and  filed  as an exhibit to the  Company's  Annual
          Report  on Form 10-K for the fiscal year ended June 30,  1992
          and incorporated herein by this reference.

10.10.4   Energy  Service  Agreement dated June 30,  1992  between  the
          Company  and  the  PMA  regarding the SW Plant  (Philadelphia
          Project)  and  filed  as an exhibit to the  Company's  Annual
          Report  on Form 10-K for the fiscal year ended June 30,  1992
          and incorporated herein by this reference.

10.10.5   Stock Purchase Agreement dated November 12, 1993 between  the
          Company,  OPC Acquisition, Inc. and BioGas Acquisition,  Inc.
          and  filed  as an exhibit to the Company's Annual  Report  on
          Form  10-K  for  the  fiscal year ended  June  30,  1993  and
          incorporated herein by this reference.

10.10.6   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  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  an
          exhibit 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
          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 and incorporated
          herein by this reference.

10.11.4   Letter   Agreement  dated  April  30,  1996  between  O'Brien
          (Newark)  Cogeneration,  O'Brien  (Parlin)  Cogeneration  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  and  incorporated  herein  by   this
          reference.

10.11.5   Third  Amendment to Power Purchase Agreement dated April  30,
          1996 between O'Brien (Newark) Cogeneration 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
          and incorporated herein by this reference.

10.12     Transmission  Service  and  Interconnection  Agreement  dated
          November 17, 1987

                                   44

<PAGE>

          between  O'Brien  Energy  Systems, Inc.  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 ended June 30, 1996 and incorporated  herein  by
          this reference.

10.13.1   Steam  Purchase  Agreement  dated  October  3,  1986  between
          O'Brien  Cogeneration IV, 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
          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 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 and incorporated  herein  by  this
          reference.

10.14.1   Operating and Maintenance Agreement dated May 1, 1996 between
          NRGG Newark and Stewart & Stevenson Operations, Inc. filed as
          Exhibit  10.16.1  to Amendment No. 2 to the Company's  Annual
          Report  on Form 10-K for the fiscal year ended June 30,  1996
          and incorporated herein by this reference.

10.14.2   Letter  Agreement dated May 10, 1996 between the Company  and
          Stewart & Stevenson Operations, Inc. filed as Exhibit 10.16.2
          to Amendment No. 2 to the Company's Annual Report on Form 10-
          K  for  the  fiscal year ended June 30, 1996 and incorporated
          herein by this reference.

10.14.3   Letter  Agreement dated May 20, 1996 between  NRG  Generating
          (Newark)  Cogeneration  and Stewart &  Stevenson  Operations,
          Inc.  filed  as Exhibit 10.16.3 to Amendment  No.  2  to  the
          Company's  Annual  Report on Form 10-K for  the  fiscal  year
          ended   June  30,  1996  and  incorporated  herein  by   this
          reference.

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

10.15.2   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
          and incorporated herein by this reference.

10.15.3   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  and  incorporated
          herein by this reference.

10.15.4   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  and
          incorporated herein by this reference.

                                   45

<PAGE>

10.16.1   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  and  incorporated  herein  by   this
          reference.

10.16.2   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  and
          incorporated herein by this reference.

10.16.3   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  and  incorporated  herein  by   this
          reference.

10.16.4   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
          and incorporated herein by this reference.

10.16.5   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  and
          incorporated herein by this reference.

10.16.6   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  and
          incorporated herein by this reference.

10.17.1   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  and  incorporated
          herein by this reference.

10.17.2   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
          and incorporated herein by this reference.

10.17.3   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 and incorporated  herein  by
          this reference.

10.18.1   Operating  & Maintenance Agreement dated May 1, 1996  between
          NRG   Generating  (Parlin)  Cogeneration,  Inc.  and  Stewart
          Stevenson  Operations,  Inc.  filed  as  Exhibit  10.22.1  to
          Amendment  No. 2 to the Company's Annual Report on Form  10-K
          for  the  fiscal  year ended June 30, 1996  and  incorporated
          herein by this reference.

10.18.2   Agreement dated May 1, 1996 between the Company, NRGG Newark,
          NRGG Parlin and Stewart & Stevenson Operations, Inc. filed as
          Exhibit  10.22.2  to Amendment No. 2 to the Company's  Annual
          Report  on Form 10-K for the fiscal year ended June 30,  1996
          and incorporated herein by this reference.

10.18.3   Letter  Agreement dated May 20, 1996 between  NRG  Generating
          (Parlin)

                                   46

<PAGE>

          Cogeneration,  Inc. and Stewart & Stevenson Operations,  Inc.
          filed  as Exhibit 10.22.3 to Amendment No. 2 to the Company's
          Annual Report on Form 10-K for the fiscal year ended June 30,
          1996 and incorporated herein by this reference.

10.19     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.
          ("O'Brien  Schuylkill")  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  and  incorporated
          herein by this reference.

10.20.1   Acquisition  Agreement  dated March  1,  1996  between  Adwin
          Schuylkill, O'Brien Schuylkill 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
          and incorporated herein by this reference.

10.20.2   Side  Agreement dated March 1, 1996 between Adwin Schuylkill,
          O'Brien  Schuylkill 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  and
          incorporated herein by this reference.

10.21.1   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  and  incorporated
          herein by this reference.

10.21.2   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  and  incorporated
          herein by this reference.

10.21.3   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  and  incorporated  herein  by   this
          reference.

10.21.4   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  and
          incorporated herein by this reference.

10.21.5   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  and
          incorporated herein by this reference.

10.22.1   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  and  incorporated  herein  by   this
          reference.

                                   47

<PAGE>

10.22.2   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  and  incorporated
          herein by this reference.

10.23.1   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  and  incorporated  herein  by   this
          reference.

10.23.2   Consent  to  Assignment  of Agreement  dated  March  1,  1996
          between  PUPCO, Grays Ferry Cogeneration Partnership and  The
          Chase  Manhattan  Bank,  N.A. 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  and  incorporated
          herein by this reference.

10.24     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  and  incorporated
          herein by this reference.

10.25.1   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.

10.25.2   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.

10.25.3   Guarantee  of  Operator's Obligations by  the  Company  dated
          November   8,  1996  relative  to  NRG  Generating   (Newark)
          Cogeneration Inc.

10.25.4   Indemnification  Agreement dated March 21, 1997  between  NRG
          Generating   (Newark)  Cogeneration  Inc.,   NRG   Generating
          (Parlin)  Cogeneration  Inc., NRG Energy  and  Credit  Suisse
          First Boston.

10.25.5   Stock  Purchase Agreement dated January 1, 1997  between  NRG
          Energy and the Company.

10.25.6   Guarantee of Operator's Obligations by NRG Energy dated March
          21,  1997  between NRG Generating (Newark) Cogeneration  Inc.
          and NRG Generating (Parlin) Cogeneration Inc.

10.25.7   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.

10.26.1   Credit   Agreement  dated  December  17,  1997  between   NRG
          Generating  (U.S.) Inc., MeesPierson Capital  Corp.  and  the
          Lenders (as defined therein).

10.26.2   Promissory  Note dated December 17, 1997 from the Company  to
          MeesPierson  Capital  Corp.  in  the  principal   amount   of
          $30,000,000.

10.26.3   Pledge  Agreement  dated  December  17,  1997,  between   NRG
          Generating (U.S.) Inc. and MeesPierson Capital Corp.

10.26.4   Guarantee  dated  as of December 17, 1997,  made  by  O'Brien
          (Philadelphia)

                                   48

<PAGE>

          Cogeneration Inc. in favor of MeesPierson Capital Corp.

10.26.5   General  Security  Agreement dated as of December  17,  1997,
          between   O'Brien   (Philadelphia)  Cogeneration   Inc.   and
          MeesPierson Capital Corp.

10.26.6   General Security Agreement dated as of December 17, 1997,  by
          NRG  Generating  (U.S.) Inc. in favor of MeesPierson  Capital
          Corp.

10.26.7   General Security Agreement dated as of December 17, 1997,  by
          O'Brien  Energy  Services  Company in  favor  of  MeesPierson
          Capital Corp.

10.26.8   Subordination Agreement dated as of December 10, 1997,  among
          MeesPierson Capital Corp., the Senior Lenders, NRG Generating
          (U.S.) Inc. and NRG Energy, Inc.

10.26.9   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.

10.27.1   Membership  Interest Purchase Agreement  dated  December  10,
          1997  between NRG Energy, NRGG Funding Inc. ("NRGG  Funding")
          and the Company filed as Exhibit 2.1 to the Company's Current
          Report  on  Form 8-K dated December 30, 1997 and incorporated
          herein by this reference.

10.27.2   Equity  Commitment Agreement dated September 15, 1997 between
          NRG Energy and The Chase Manhattan Bank ("Chase").

10.27.3   Assignment and Assumption Agreement dated December  10,  1997
          between NRG Energy and NRGG Funding.

10.27.4   Equity Commitment Guaranty, dated as of December 10, 1997  by
          NRG  Energy  in  favor of Chase and NRG (Morris)  Cogen,  LLC
          ("Cogen, LLC").

10.27.5   Amendment  and Consent, dated as of December 10,  1997  among
          Cogen,  LLC  and the banks (the "Banks") party to the  Credit
          Agreement, dated as of September 15, 1997, among Cogen,  LLC,
          the Banks and Chase.

10.27.6   Construction Services Agreement dated August 29, 1997 between
          Cogen, LLC and NRG Energy.

10.27.7   First  Amendment  to  Construction Services  Agreement  dated
          December 10, 1997 between Cogen, LLC and NRG Energy.

10.27.8   Construction and Term Loan Agreement dated September 15, 1997
          between Cogen, LLC, Chase and the Banks.

10.27.9   Consent  and Amendment, dated as of December 10, 1997,  among
          Cogen, LLC, the Banks and Chase.

10.27.10  Pledge and Security Agreement, dated as of December 10,  1997
          by NRGG Funding and Morris in favor of Chase.

10.27.11  Supplemental  Loan Agreement, dated as of December  10,  1997
          between NRG Energy, the Company and NRGG Funding.

10.27.12  Subordination  Agreement,  dated  as  of  December  10,  1997
          between Chase and NRG Energy.

10.27.13  Subordinated  Pledge  and Security  Agreement,  dated  as  of
          December 10, 1997 by NRGG Funding and Morris to NRG Energy.

                                   49

<PAGE>

10.27.14  Operation and Maintenance Agreement dated September 19,  1997
          between Cogen, LLC and NRG Morris Operations Inc.

10.27.15  First  Amendment to Operation and Maintenance Agreement dated
          December   10,  1997  between  Cogen,  LLC  and  NRG   Morris
          Operations Inc.

10.27.19  Assignment, Assumption and Consent, dated as of December  30,
          1997 among NRG Energy, NRGG Funding, the Company and Equistar
          Chemicals,   LP   a  successor  in  interest  to   Millennium
          Petrochemicals, Inc.

10.27.20  Limited  Guaranty dated September 19, 1997 by NRG Energy  for
          the benefit of Cogen, LLC.

10.27.21  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 Cogen, LLC dated September 19,
          1997.

10.28     Newark Lease 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  and  incorporated  herein  by   this
          reference.

10.29     Parlin Lease 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  and  incorporated  herein  by   this
          reference.

10.30.1   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  and
          incorporated herein by this reference.

10.30.2   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
          and incorporated herein by this reference.

10.30.3   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  and  incorporated  herein  by   this
          reference.

10.30.4   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 and incorporated  herein  by  this
          reference.

10.31.1   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   and
          incorporated herein by this reference.

10.31.2   Form of 1997 Plan Incentive Stock Option Agreement.

10.31.3   Form   of  1997  Plan  Employee  Nonqualified  Stock   Option
          Agreement.

10.31.4   Form  of  1997  Plan Nonemployee Director Nonqualified  Stock
          Option Agreement.

10.32     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 and incorporated herein  by
          this reference.

                                   50

<PAGE>

10.33     Employment  Agreement  dated  August  28,  1997  between  the
          Company and Richard Stone.

10.34     Employment Agreement dated April 30, 1996 between the Company
          and  Leonard A. Bluhm filed as Exhibit 10.32 to Amendment No.
          1  to the Company's Annual Report on Form 10-K for the fiscal
          year  ended  June 30, 1996 and incorporated  herein  by  this
          reference.

10.35     Confidentiality Agreement dated October 3, 1997  between  the
          Company and NRG Energy.

21        List of Subsidiaries of the Registrant.

23.1      Consent of Price Waterhouse LLP.

27        Financial Data Schedule.

                                   51