<PAGE>
                                
               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

  ANNUAL   REPORT  PURSUANT  TO  SECTION  13  OR  15(d)  OF   THE
  SECURITIES EXCHANGE ACT OF 1934
  For the fiscal year ended

X TRANSITION  REPORT  PURSUANT TO SECTION  13  OR  15(d)  OF  THE
  SECURITIES EXCHANGE ACT OF 1934
  For  the  transition period from June 30, 1996 to December  31,
  1996.

                 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
 of incorporation or  organization)              Identification No.)


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.              Yes  X No

      Indicate  by check mark if disclosure of delinquent  filers
pursuant  to Item 405 of Regulation S-K is not contained  herein,
and will not be contained, to the best of 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  20,  1997, there were outstanding  6,440,514
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  such  shares  held  by  non-affiliates   was
$35,637,000.

      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

<PAGE>

               Documents Incorporated By Reference

       The  information  required  for  the  following  items  is
incorporated by reference to the 1997 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                                      17
     Item 3.  Legal Proceedings                               18
     Item 4.  Submission of Matters to a Vote of Security
              Holders                                         19

Part II
     Item 5.  Market for the Registrant's Common Equity and
              Related Stockholder Matters                     20
     Item 6.  Selected Financial Data                         21
     Item 7.  Management's Discussion and Analysis of
              Financial Condition and Results of Operations   22
     Item 8.  Financial Statements and Supplementary Data     31
     Item 9.  Changes in and Disagreements with Accountants
              on Accounting and Financial Disclosure          31

Part III
     Item 10. Directors and Executive Officers of the
              Registrant                                      32
     Item 11. Executive Compensation                          32
     Item 12. Security Ownership of Certain Beneficial 
              Owners and Management                           32
     Item 13. Certain Relationships and Related Transactions  32

Part IV
     Item 14. Exhibits, Financial Statement Schedules and 
              Reports on Form 8-K                             33
                                
                                1 

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                             PART I
                                
ITEM 1.   BUSINESS.
          
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.

     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 Parlin  Project  (the
          "Parlin Project"), located in Parlin, New Jersey, began
          operations in June 1991; and
          
          (c)   The 22 MW Philadelphia Cogeneration Project  (the
          "Philadelphia   Project"),  located  in   Philadelphia,
          Pennsylvania, began operations in May 1993.
          
      The  Company  also owns a one-third interest in  the  Grays
Ferry  Cogeneration Partnership (the "Grays Ferry  Partnership"),
which  owns  a  150  MW  cogeneration  project (the "Grays  Ferry 
Project"), located in Philadelphia, Pennsylvania. The Grays Ferry
Project is currently under construction with commercial operation
currently  expected to occur in December 1997.  The Company  also
is  currently evaluating a number of prospective projects for the
purpose of determining whether to submit a bid.

      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.

Emergence from Bankruptcy; NRG Energy Investment
          
       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 order to  preserve  its
business  relationships,  maintain its operational  strength  and
assets,  restructure its debt and utilize its  assets  consistent
with the interests of all of its creditors and shareholders.

                                2          

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     In connection with the consummation of the Plan, NRG Energy,
Inc.  ("NRG  Energy") advanced $71,240,000 under loan  agreements
with  the  Company and purchased new Common Stock of the  Company
for  aggregate  consideration of $21,178,000.   NRG  Energy  also
purchased certain subsidiaries of the Company for $7,500,000  and
funded   a   cash   distribution  to  the  O'Brien   stockholders
aggregating $7,500,000.  As a result of consummation of the Plan,
NRG Energy now holds approximately 41.86% of the Common Stock  of
the  Company.  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.

Recent Developments
          
Nasdaq SmallCap Market Listing
          
     On March 4, 1997, The Nasdaq Stock Market, Inc. approved the
listing  of  the  Company's Common Stock on the  Nasdaq  SmallCap
Market.   Trading in NRGG's Common Stock on this market began  on
March  10,  1997.   There can be no assurance, however,  that  an
active  trading market will develop or continue for the Company's
Common  Stock as a result of this listing.  See "Item 5.   Market
for Registrant's Common Equity and Related Stockholder Matters."

Change in Operations and Maintenance Responsibility

     Power Operations, Inc., a new wholly-owned subsidiary of the
Company, assumed operations and maintenance responsibilities  for
the  Newark  facility  and  the Parlin  facility,  in  each  case
replacing the former operator, on November 8, 1996, and  December
31, 1996, respectively.  The Company  believes that  such changes
will have no material financial impact on the operations of these
facilities or on the  Company's financial condition or results of
operations.  On January 1, 1997, Power Operations,  Inc. was sold
by the Company to  NRG  Energy.   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.

Risk Factors
          
History of Losses
          
      The Company incurred income in the amount of $6,423,000 for
the  six month fiscal year ended December 31, 1996.  However, due
in  part to costs associated with its bankruptcy proceeding,  the
Company  incurred  losses  in  the  amounts  of  $17,713,000  and
$40,919,000  for the fiscal years ended June 30, 1996,  and  June
30, 1995, respectively.  These losses have had a material adverse
effect on the Company's liquidity and financial position and  may
continue to adversely affect the Company's liquidity and  results
of operations in future periods by, among other things, 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."

                                3

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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 which may enable it to finance
the  acquisition of ownership interests in certain projects which
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 which 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.  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.    See  "Business  -  Project   Development
Activities."

Energy Price Fluctuations and Fuel Supply
          
      The  Company's  power  purchase  agreements  ("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 PPA with Jersey Central Power and  Light
Company  ("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.  The Company
anticipates  that  this  change  in  the  PPAs  will  reduce  its
historical  volatility  in  gross  margins  by  eliminating   the
Company's  exposure to fluctuations in the price of  natural  gas
which  must be paid by its Newark and Parlin Projects.   However,
because  energy  revenues as well as the cost of energy  revenues
will decline under the amended PPAs, the Company anticipates that
its  operating gross margins, over time, will remain  similar  to
historical results, and there can be no assurance that any of the
foregoing steps will improve or maintain gross profit margins  in
the  future.  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 often are achieved independently
of  one another, and success in achieving one objective does  not
necessarily  result in success in achieving others.   During  the
period  that  the Company was in bankruptcy, project  development

                                4

<PAGE>

efforts  virtually ceased.  Since emerging from bankruptcy  these
efforts  have  resumed, in part as a result of the  Co-Investment
Agreement.  There can be no assurance, however, that the  Company
will   be   able  to  obtain  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 a project  is  not  completed  the
Company may not generate any revenue from the project and may not
otherwise be able to recover its investment in the project,  each
of  which  could have a material adverse effect on  the  Company.
See "Business - Project Development Activities."

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."

Proposed Restructuring of the Electric Utility Industry
          
      The U.S. Congress is considering legislation to repeal  the
Public   Utility  Regulatory  Policies  Act  of  1978   ("PURPA")
entirely,  or  at least to repeal the obligation of utilities  to
purchase from qualifying facilities thereunder ("QFs").  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  the  Public
Utility Holding Company Act  of 1935 ("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 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."

                                5

<PAGE>

      In  addition,  the  Federal  Energy  Regulatory  Commission
("FERC"),  many  state  public utility commissions  ("PUCs")  and
Congress   are  currently  studying  and  beginning   preliminary
implementation  of 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.
While  the  Company does not believe that any such  restructuring
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."

Risks Associated with Foreign Operations
          
      The  Company's foreign operations (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, the Company 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 the  Company 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."

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.   Without limiting the generality of the foregoing,  the
words  "believe," "anticipate," "estimate," "expect" and  similar
expressions,  when  used  in  this Form  10-K,  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 of 1934,  as
amended  (the "Exchange Act"), and are intended to be covered  by
the  safe harbors created thereby.  Investors are cautioned  that
all  forward-looking statements involve risks  and  uncertainties
including,  without limitation, the factors set forth  under  the
caption "Risk

                                6

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Factors"  in this Form 10-K.  Although the Company believes  that
the   assumptions   underlying  the  forward-looking   statements
contained herein are reasonable, any of the assumptions could  be
inaccurate,  and  therefore there can be no  assurance  that  the
forward-looking statements included in this Form 10-K will  prove
to  be  accurate.   In  light  of the  significant  uncertainties
inherent  in the forward-looking statements included herein,  the
inclusion  of  such  information should  not  be  regarded  as  a
representation  by  the  Company or any  other  person  that  the
objectives and plans of the Company will be achieved.

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 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"  within  the  meaning  of   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  applicable  to  electric
utilities.  In accordance with PURPA, the Company's projects with
one exception are exempt, 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."

      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.   In addition, obtaining power contracts with  utilities
has become more competitive with

                                7

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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."

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.  Under
its Co-Investment Agreement with NRG Energy, the Company also may
acquire  ownership interests in certain power projects  initially
developed by NRG Energy or to which NRG Energy has entered into a
binding  acquisition  agreement with a  third  party.   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.

      The  Company sells the electricity produced by its projects
pursuant to long-term contracts either on a "wholesale basis"  to
local  public  utilities  or  on a  "retail  basis"  to  specific
industrial  and  commercial  users.   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.

      The  Company also may develop standby/peak shaving projects
such  as  its  Philadelphia Project, which utilize the  Company's
power generation equipment as a back-up source of electricity for
large  customers.  These projects are intended  to  fill  a  need
between  large  electrical users and the  requirements  of  local
utilities.   The  availability of an  alternative  energy  source
allows  these customers to benefit from significantly  discounted
interruptible   energy   tariffs.    The   standby/peak   shaving
generators typically will be required to provide a limited amount
of electricity during peak periods.

Co-Investment Agreement with NRG Energy

      Pursuant  to  the Plan, NRG Energy and the Company  entered
into  a 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.   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 limited exceptions, any  proposed
or  existing  electric power plant within the United  States  NRG
Energy  initially  develops or in which NRG  Energy  proposes  to
acquire an ownership interest. NRG Energy is obligated under  the
Co-Investment Agreement to offer to the Company, during the three
year period ending on April 30,

                                8

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1999,  projects  with  an  aggregate equity  value  of  at  least
$60,000,000 or a minimum of 150 net MW.

      To  facilitate  the Company's ability to acquire  ownership
interests  which  may  be offered pursuant to  the  Co-Investment
Agreement,  NRG  Energy  has  agreed  to  finance  the  Company's
purchase  of such ownership interests on 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.

Grays Ferry Project

      The  Company has executed a partnership agreement  with  an
affiliate  of  PECO  Energy Company and an  affiliate  of  Trigen
Energy  Corporation  to  jointly develop  and  own  this  150  MW
project.   The partnership has executed a 25-year agreement  with
the  Trigen-Philadelphia Thermal Energy Corporation for the  sale
of  steam and a 20-year agreement for the sale of electric output
with  PECO Energy Company, in addition to numerous other  project
documents.  The project is under construction and is expected  to
be  in  commercial  operation  in December  1997.   However,  the
Company   believes  that  the  project  is  subject   to   normal
construction and completion risks, and no assurance can  be  made
that  commercial  operation will occur  in  December  1997.   Any
failure   of  the  Grays  Ferry  Project  to  achieve  commercial
operation  by December 1997 could have a material adverse  effect
on  the  Company.   See  Note  8  of the  Consolidated  Financial
Statements.

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

                                9

<PAGE>

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

Products and Services

      During  the six month fiscal year ended December 31,  1996,
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
selling  and  renting  of  power  generating,  cogenerating   and
standby/peak shaving equipment and services.  See Note 25 of  the
Consolidated  Financial Statements of the Company  for  financial
information with respect to industry segments.

Energy Segment

     Overview

      Set  forth  below are descriptions of the  Company's  three
projects   in operation as of December 31, 1996.  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  has  obtained  business   interruption
insurance  and  performance guarantees by the  operators  of  its
cogeneration  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  example,  in  the  event  of  an   unscheduled
breakdown,  the  Company 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 that such insurance or guarantees  will
sufficiently mitigate the risk of unforeseen contingencies.

<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 thousands)
<S>                  <C>             <C>           <C>           <C>             <C>        <C>  
Cogeneration                                                                                      
Parlin                   122.0          $97,000     June 1991    Jersey Central   Credit       100%  
                                                                 Power & Light   Suisse(3)
                                                                 Company
Newark                    52.0           52,000   November 1990  Jersey Central   Credit       100%  
                                                                 Power & Light   Suisse(3)
                                                                 Company
Standby/Peak                                                                                      
Shaving
Philadelphia              22.0           12,000      May 1993    Philadelphia       (2)         83%  
                                                                 Municipal
                                                                 Authority
                         _____         ________                              
                         196.0         $161,000

</TABLE>
_____________________
(1) See discussion of each particular project which follows for current
    contract production, which may be less than the stated rated capacity.

                               10

<PAGE>
 
(2) This project is financed by various lenders through equipment credit
    facilities.
(3) See Note 12 of the Consolidated Financial Statements.

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

       The   Company  has  developed  and  currently   owns   two
cogeneration  projects, the Newark and Parlin Projects.   Natural
gas  for  these projects is provided by JCP&L as a  part  of  its
obligations  under  the  terms of its 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.    Power
Operations, Inc., a wholly-owned subsidiary of the Company  which
was sold to NRG Energy on January 1, 1997, assumed the operations
and  maintenance  responsibilities  for  the  Newark  and  Parlin
facilities  under  long-term contracts on November  8,  1996  and
December  31, 1996, respectively.  The Newark and Parlin Projects
previously had been operated and maintained under agreement  with
a   subsidiary  of  Stewart  &  Stevenson,  Inc.  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 Boxboard Company, a  subsidiary  of  the
Newark Group Industries, Inc., and 52 MW of electricity to JCP&L,
each under agreements extending into the year 2015.  See Note  12
of   the  Company's  Consolidated  Financial  Statements  for   a
discussion  of  this project's refinancing.  For  the  six  month
fiscal  year ended December 31, 1996, this project accounted  for
approximately   $9,590,000   in  gross   revenues,   representing
approximately 23% 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

                               11

<PAGE>

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  12 of the Company's Consolidated Financial  Statements
for  a  discussion of this project's refinancing.   For  the  six
month fiscal year ended December 31, 1996, this project accounted
for  approximately  $10,327,000 in gross  revenues,  representing
approximately 26% of the Company's gross revenues.

      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.    The
standby/peak  shaving generators typically will  be  required  to
provide a specified amount of electricity during peak periods.

      Philadelphia 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  27 of 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 is required  to  use  excess
digester gas collected at the Authority's northeast and southwest
Philadelphia  plants  to generate up to an approximate  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.  The Company's Board of  Directors
has  authorized Wexford Management LLC ("Wexford") to  arrange  a
sale  of  the Company's interest in the Philadelphia Project,  if
satisfactory  terms can be obtained, pursuant  to  a  Liquidating
Asset  Management Agreement entered into in connection  with  the
consummation of the Plan.

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").

      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

                               12

<PAGE>

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  foreign
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
six month fiscal year ended December 31, 1996.

<TABLE>
<CAPTION>
                                                                           
                       December 31,      June 30,       June 30,        June 30,
                           1996            1996           1995            1994
                                      (In Thousands)                 
<S>                    <C>             <C>            <C>             <C>         
Revenues:                                                                  
    United States       $   27,937      $   82,917     $    89,332     $   93,090
    United Kingdom          11,979          13,630          12,915         13,499
                        $   39,916      $   96,547     $   102,247     $  106,589
                                                                           
Net Income (Loss):                                                         
    United States       $    6,087      $  (17,591)    $   (40,905)    $  (14,570)
    United Kingdom             336            (122)            (14)        (1,931)
                        $    6,423      $  (17,713)    $   (40,919     $  (16,501)
                                                       
                                                                           
Identifiable Assets:                                                       
    United States       $  164,631      $  169,657     $   179,793     $  230,343
    United Kingdom           8,993           8,505           9,955          7,473
                        $  173,624      $  178,162     $   189,748     $  237,816
</TABLE>

                               13

<PAGE>

Regulation

      In  connection  with the development and operation  of  its
projects, the Company is substantially 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 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  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  to  FERC
under  PURPA, FERC has promulgated regulations which  at  present
generally  exempt  qualifying facilities from the  Federal  Power
Act, 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.  For its major cogeneration projects, the
Company's  practice  has  been  to  obtain  an  order  from  FERC
confirming  the  qualification of its facilities.   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

                               14

<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,  the
Company  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 ("EPA") is still in the process of implementing
the  requirements mandated by the 1990 Amendments.  In  addition,
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 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 EPA conducts a study of hazardous
air  pollutant  emissions from these units to  determine  whether
such  regulation is "appropriate and necessary."  This  study  is
currently  underway, and in 1996 EPA submitted an interim  report
to  Congress.   If,  in  the final report  EPA  finds  that  such
regulations  are necessary, the Company may be required  to  meet
additional  pollution control requirements.  EPA plans  to  issue
hazardous  air pollutant regulations for combustion  sources  not
included  within  the  scope  of 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, EPA and the states are in the process of developing more
stringent  emission  limitations to control  ground-level  ozone.
EPA and a number

                               15

<PAGE>

of  states have established  the Ozone Transport Assessment Group
("OTAG"),  composed  of federal, state and local  air  regulatory
officials from the 37 eastern-most states to review the need  for
additional  NOx emission reduction requirements to address  ozone
transport  and  ozone  nonattainment under  the  current  federal
ambient ozone standard.  The OTAG process could result in new NOx
emission  standards being required by EPA and/or the states.   If
more  stringent  NOx standards are adopted by EPA and/or  certain
states, NRGG could be required to install additional NOx emission
control  technology at some of its facilities.  In addition,  EPA
has  proposed to revise the current National Ambient Air  Quality
Standards for ground-level ozone and particulate matter  to  make
them  more  stringent.  EPA plans to finalize  these  rules  this
summer.   If  EPA decides to make these standards more stringent,
additional  control technology requirements  may  be  imposed  on
existing NRGG plants.

      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.

     In the spring of 1996, the Company discovered numerous minor
and  unintentional  permit infractions of  certain  air  emission
limits for its Newark and Parlin facilities which occurred over a
period  of  time  as  a  result of an  operational  error.   Upon
discovering  such infractions, the Company promptly notified  the
New  Jersey Department of Environmental Protection ("NJDEP")  and
took  measures to correct the operational error and  prevent  its
recurrence.  The cumulative effect of the excess emissions  on  a
"pounds per hour" basis was small.  In June 1996, the Company met
with  representatives of NJDEP to discuss the  permit  violations
and  submitted  a report to NJDEP concerning the violations.   At
this  time,  NJDEP  has not indicated that  it  will  assess  any
penalty and has not required any other action as a result of such
violations.   The  Company  considers  the  matter  resolved  and
believes that no further actions are required.

     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  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.   Even  though  many of its potential  competitors  have
substantially  greater resources than the  Company,  the  Company
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.

                               16

<PAGE>

Principal Customer

     The Company derived 46%, 62%, 65% and 53% of its revenues in
the  six  months  ended December 31, 1996, and the  fiscal  years
ended June 30, 1996, 1995 and 1994, respectively, from JCP&L as a
result of the operation of the Newark and Parlin facilities.

Employees

      As  of December 31, 1996, the Company had approximately 120
full-time employees.

Patents

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

Backlog

      At  December 31, 1996,  the   Company's   total  production
backlog was $1,176,000.

ITEM 2.   PROPERTIES.
          
       The  Company's  corporate  headquarters  are  located   in
Minneapolis, Minnesota.  The Company leases office and  warehouse
space  until April 30, 1997 from Christiana River Holdings, Ltd.,
an  entity  owned  by Frank L. O'Brien III,  the  former  CEO  of
O'Brien.   Rental  expense for the six month  fiscal  year  ended
December 31, 1996 was approximately $98,000.

      In September 1993, Puma purchased its executive offices and
its  principal manufacturing facility located in Ash, Canterbury,
Kent,  United  Kingdom from III Enterprises, Limited,  an  entity
owned  by Frank L. O'Brien III, for approximately $800,000.   See
Note 23 of the Consolidated Financial Statements.

      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 Company leases property on the site of its cogeneration
facilities  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.   The  Company
believes that the leased  premises  are suitable and adequate for
the Company's projects.

                               17

<PAGE>

ITEM 3.   LEGAL PROCEEDINGS.
          
     The Company  or a subsidiary is party to the following legal
     proceedings:

1.   Calpine  Corporation v. NRG Generating (Parlin) Cogeneration
     Inc.,  Superior  Court of Essex County,  New  Jersey,  Civil
     Action File No. ESX-L-6905-96, filed June 19, 1996.  This is
     a  dispute over the purchase of certain accounts receivables
     allegedly owed by the Company.

2.   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.

3.   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  2
     above.

4.   GEC  Alsthom, International, Inc. v. O'Brien Energy Services
     Co.,  Stewart & Stevenson Operations, Inc., and ABC  Company
     (fictitious),  Superior Court of Essex County,  New  Jersey,
     Civil Action File No. L-7389-95, filed June 16, 1995.   This
     action  arises out of the purchase of materials and services
     from  a  vendor to make repairs in connection  with  a  fire
     which  occurred  at  the Company's Newark turbine  generator
     facility  on  December 25, 1992.  The Plaintiff claims  that
     the   Company   has  failed  to  meet  monetary  obligations
     aggregating   approximately  $155,000  under   the   alleged
     agreement, and the Company has filed counter-claims alleging
     that  the  Plaintiff  failed  to  properly  install  certain
     equipment  which  led to failures at the  turbine  generator
     facility.
     
5.   In re: O'Brien Environmental Energy, Case No. 94-26723, U.S.
     Bankruptcy  Court  for  the District of  New  Jersey,  filed
     September 29, 1994.  The Company's exposure with respect  to
     its  bankruptcy case is limited.  The Company believes  that
     such  limited exposure would probably be immaterial  to  its
     operating results.
     
     The  Company  is subject from time to time to various  other
claims  that  arise  in the normal course of  business,  and  the
Company  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.

                               18

<PAGE>

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

     At the Annual Meeting of Stockholders of the Company held on
November  21, 1996 (the "Meeting"), the following directors  were
elected, each of whom will serve until the 1997 annual meeting of
stockholders and until his successor is elected and qualified:

Nominee                   Affirmative   Negative
                             Votes        Votes     Abstentions

David H. Peterson          5,903,104          -         6,853
Leonard A. Bluhm           5,903,104          -         6,853
Lawrence I. Littman        5,903,101          -         6,856
Craig A. Mataczynski       5,903,104          -         6,853
Spyros S. Skouras, Jr.     5,902,378          -         7,579
Charles Thayer             5,903,104          -         6,853
Ronald J. Will             5,902,352          -         7,605

     In   addition, the following proposals were approved at  the
Meeting:

     Approval of the Company's 1996 Stock Option Plan authorizing
the Company to grant options to purchase up to 500,000 shares  of
the  Company's Common Stock to members of the Board of Directors,
officers and key employees of the Company or its subsidiaries.

                 Affirmative   Negative
                    Votes        Votes     Abstentions

                  3,923,233     80,735        14,160

     Ratification of the selection of Price Waterhouse LLP as the
Company's independent public accountants.

                 Affirmative   Negative
                    Votes        Votes     Abstentions
 
                  5,900,782      2,911         6,264

                               19

<PAGE>

                            PART II


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

      From July 1, 1996, through December 31, 1996, 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.  According to the NASDAQ News Service,  the
range of high and low selling prices during such period was $4.75
to  $12.00.  Such prices may have reflected inter-dealer  prices,
without  retail mark-ups, mark downs or commissions, and may  not
necessarily represent actual transactions.

      As  of  March  13, 1997, the Company had approximately  600
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.

      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  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.

                               20

<PAGE>

ITEM 6.   SELECTED FINANCIAL DATA.

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

<TABLE>
<CAPTION>
                                        Six Months                     
(Dollars in thousands,                     Ended                       
(except per share amounts)             December 31,                       Year Ended June 30
                                         1996(3)        1996         1995         1994        1993        1992
<S>                                    <C>           <C>          <C>          <C>         <C>         <C>              
Statements of Operations Data:                                                                          
Revenues:                                                                                               
  Energy                                 $  21,669   $  66,623    $  74,455    $  62,647   $  65,136   $  71,638
  Equipment sales and services              15,607      25,344       19,639       24,304      18,955      21,854
  Rental                                     1,062       1,895        2,362        5,372       3,636       3,191
  Related parties                                -           -            -            -         515         378
  Development fees and other                 1,578       2,685        5,791       14,266       9,450       3,054
    Total                                   39,916      96,547      102,247      106,589      97,692     100,115
Cost of revenues                            21,987      71,753       72,164       84,174      71,750      66,996
Gross profit                                17,929      24,794       30,083       22,415      25,942      33,119
Provision for loss on equipment                  -           -       21,640        6,250           -           -
Selling, general and administrative      
 expenses                                    6,149      12,792       20,320       19,680      21,872      13,133
Income (loss) from operations               11,780      12,002      (11,877)      (3,515)      4,070      19,986
Involuntary conversion gain                      -           -            -        6,066           -           -
Interest and other income                      413         569        2,587          874         993       1,204
Interest and debt expense                   (7,681)    (18,646)     (20,583)     (18,013)    (15,696)    (17,340)
Reorganization costs                             -     (12,101)      (8,366)           -           -           -
   Income (loss) before income taxes    
    and cumulative effect of a change in
    accounting principle                     4,512     (18,176)     (38,239)     (14,588)    (10,633)      3,850
Provision for (benefit from) income      
 taxes                                        (268)       (463)       2,680        1,913       3,078       2,438
   Income (loss) before extraordinary
    item                                     4,780     (17,713)     (40,919)     (16,501)    (13,711)      1,412
Extraordinary item, net of income taxes      1,643           -            -            -           -           -
   Net income (loss)                     $   6,423   $ (17,713)   $ (40,919)   $ (16,501)  $ (13,711)  $   1,412
                                                                                                                 
Net income (loss) per share(1)           $    1.00   $   (4.24)   $  (11.02)   $   (4.45)  $   (3.70)  $    0.43
Weighted average shares outstanding          6,454       4,182        3,712        3,712       3,701       3,280
                                                              
                                                                                                                 
                                            1996        1996         1995         1994        1993        1992
Balance Sheet Data:                                                                                     
Working capital (deficiency)             $   2,491   $  (6,211)   $(184,589)(2)$(125,683)  $ (11,119)  $     816
Property, plant and equipment, net         132,203      134,694     151,130      176,514     194,217     195,677
Total assets                               173,624      178,162     189,748      237,816     262,529     259,054
Nonrecourse long-term debt, net            150,311       66,789       3,405        7,073      28,012      20,003
Convertible senior subordinated 
 debentures                                      -            -           -            -      49,174      49,174
Nonrecourse project financing, net               -            -           -       60,310      97,140     107,898
Stockholders' equity (deficit)             (30,513)     (37,573)    (40,758)         136      15,675      29,405

<FN>                                        
(1) Net  income (loss) per share has been restated for all periods presented to reflect the
    common shares issued under the terms of the Plan.

(2) At June 30, 1995, nonrecourse project financing, net excludes $60,310 of amounts
    with long-term repayment terms. This amount was included in current liabilities
    (thereby included in working capital deficiency) due to default under the debt agreement.

(3) Effective July 1, 1996, the Company changed its year end from June 30 to December 31.

</TABLE>

                               21

<PAGE>

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

     All amounts set forth in this Item 7 are in thousands.
     
     The Company, formerly known as O'Brien Environmental Energy,
Inc.,  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, O'Brien emerged from bankruptcy.   The
Plan approved on January 18, 1996 by the Bankruptcy Court awarded
NRG  Energy the right to acquire a 41.86% equity interest in  the
Company and generally provided for full and immediate payment  of
all  undisputed prepetition liabilities and included a  provision
for post-petition interest.  O'Brien was renamed on the April 30,
1996 closing date to NRG Generating (U.S.) Inc.

     On  April 30, 1996, NRG Energy funded approximately $107,418
in accordance with the Plan and acquired a 41.86% equity interest
in  the Company.  All common shares of O'Brien were canceled  and
replaced  by  a  new issue of common stock of NRGG.   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.   The
Company  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 and operates  two  cogeneration
facilities  (the  Newark and Parlin Projects)  with  an  electric
generating  capacity  of  174  MW and  two  standby/peak  shaving
facilities (together comprising the Philadelphia Project) with  a
capacity  of 22 MW in which the Company has an 83% interest.   On
April 30, 1996, the amended PPAs with JCP&L, the primary customer
of  the  Newark and Parlin Projects, became effective.   Although
energy  revenues as well as the cost of energy revenues decreased
under the amended PPAs, the Company believes that operating gross
profit   margins  will  remain  similar  to  historical  results.
However,  margin fluctuations attributable to periodic swings  in
fuel costs have been eliminated.

      Equipment  sales,  rentals and services  is  the  Company's
demand-side   management  business  through  which  the   Company
provides standby power equipment and services to customers for  a
fee.   The  Company  is  also a one-third partner  in  a  150  MW
cogeneration facility currently under construction.

                               22

<PAGE>

     Both   the   Newark  and  Parlin  Projects  were  previously
certified  as  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, NRGG 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 NRGG Parlin's claim to QF  status.
The  FERC  has approved NRGG Parlin's rates effective  April  30,
1996,  and given certain other approvals to Parlin in conjunction
with  the  bankruptcy reorganization.  In addition, the FERC  has
determined Parlin to be an EWG.  As an EWG, NRGG Parlin is exempt
from  PUHCA, and the ownership of NRGG Parlin by the Company does
not subject the Company to regulation under PUHCA.  Finally, as a
seller  of  power exclusively at wholesale, NRGG  Parlin  is  not
generally  subject  to state regulation and,  in  any  case,  the
Company  believes that NRGG Parlin complies with  all  applicable
requirements of state utility law.

     Power Operations, Inc., a new wholly-owned subsidiary of the
Company, assumed operations and maintenance responsibilities  for
the  Newark  facility  and  the Parlin  facility,  in  each  case
replacing the former operator, on November 8, 1996, and  December
31, 1996, respectively.  The Company  believes that  such changes
will have no material financial impact on the operations of these
facilities or on the  Company's financial condition or results of
operations.  On January 1, 1997, Power Operations,  Inc. was sold
by the Company to  NRG  Energy.   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, a co-sponsor  of  the
Plan,  which,  in  accordance with the Plan, retains  Wexford  as
manager, operator and liquidator of the Liquidating Assets 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  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  Project,  (c)  unused
equipment and (d) American Hydrotherm ("American Hydrotherm") and
two related companies.  The Board of Directors authorized Wexford
to  liquidate   the  Philadelphia  Project,  American  Hydrotherm
and two related companies and the unused  equipment.  In December
1996,  the  Company  sold  American  Hydrotherm  and  two related
companies to the management of American Hydrotherm.  Wexford  has
received  compensation  in  accordance  with  the  terms  of  the
agreement (see Note 23 to the Consolidated Financial Statements).
No decision has  been  made regarding the possible liquidation of
the  engine generator  business.  Management does not expect  the
disposition of  these businesses to have a material effect on the
Company's financial position or results of operation.
     
     The  Company has adopted a change in its fiscal  year  to  a
calendar year effective on December 31, 1996.

                               23

<PAGE>  

Results of Operations for the Six Months Ended December 31,  1996
and the Years Ended June 30, 1996, 1995 and 1994

Revenues
     
     Energy  revenues for the six months ended December 31,  1996
and  the  years ended June 30, 1996, 1995 and 1994 were  $21,669,
$66,623,  $74,455  and  $62,647, respectively.   Energy  revenues
primarily reflect billings associated with the Newark and  Parlin
Projects  and the Philadelphia Project.  The decrease  in  energy
revenues  for the six months ended December 31, 1996 as  compared
to  fiscal  year  1996 was primarily due to only  six  months  of
revenues  reported in the period ended December 31, 1996  and  to
the  amended PPAs affecting both the Newark and Parlin  Projects.
The  decrease in energy revenues in 1996 from 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 the six months  ended
December  31,  1996 and the years ended June 30, 1996,  1995  and
1994  were  $10,327, $34,867, $40,784 and $37,910,  respectively.
NRGG  Parlin revenues decreased for the six months ended December
31,  1996 as compared to fiscal year 1996 primarily due  to  only
six  months of revenues reported in the period ended December 31,
1996  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.
     
     Fiscal 1994 NRGG Parlin revenues were negatively impacted by
a  gas  turbine  being  shut  down for  unscheduled  repairs  for
approximately three months during the year.
     
     Revenues recognized at NRGG Newark for the six months  ended
December  31,  1996 and the years ended June 30, 1996,  1995  and
1994  were  $9,259,  $26,820, $28,908 and $23,082,  respectively.
NRGG  Newark revenues decreased for the six months ended December
31,  1996 as compared to fiscal year 1996 primarily due  to  only
six  months of revenues reported in the period ended December 31,
1996  and to the amended PPA.  The increase in revenues  in  1995
from 1994 was attributable primarily to a full year of operations
in  fiscal  1995 as compared to a partial year of  operations  in
fiscal  1994.   The Newark Project resumed partial operations  in
August  1993 and full operations in October 1993 after completing
reconstruction resulting from damage incurred in a December  1992
fire.

                               24

<PAGE>

     Equipment  sales and services revenues for  the  six  months
ended  December 31, 1996 and the years ended June 30, 1996,  1995
and   1994   were  $15,607,  $25,344,  $19,639  and   $   24,304,
respectively,  which principally reflect the operations  of  OES,
Puma  and  American Hydrotherm.  Revenues decreased for  the  six
months  ended December 31, 1996 as compared to fiscal  year  1996
primarily  due  to only six months of revenues  reported  in  the
period  ended December 31, 1996, offset in part by the  inclusion
of  nine months of revenues in the period from the operations  of
Puma.   Puma adopted a change in its fiscal year end of March  31
to  a  calendar 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 the six months
ended  December 31, 1996 and the years ended June 30, 1996,  1995
and  1994  were  $1,575, $5,232, $3,575 and $7,789, respectively.
Fiscal  1994  revenue levels were generated from  backlog  orders
transferred   from  O'Brien  Power  Systems,  Inc.,   a   company
controlled  by  a relative of the former CEO of the  Company,  in
order  to  expand  OES's  domestic business  in  the  design  and
assembly  of  generator sets and switchgear.  OES was  unable  to
replenish this transferred backlog until late in the 1995  fiscal
year.
     
     Rental  revenues for the six months ended December 31,  1996
and  the  years ended June 30, 1996, 1995 and 1994  were  $1,062,
$1,895,  $2,362 and $5,372, respectively.  In November 1993,  the
Company  sold  the  Philadelphia Project to an unrelated  private
investor  and subsequently reacquired it in August 1994.   Rental
fluctuations  are  primarily  attributable  to  rental   revenues
recognized during the period the project was owned by the private
investor.   The Company continued to own and lease the  equipment
and  facilities to the private investor during the period between
November 1993 and August 1994.
     
     Development fees and other revenues for the six months ended
December  31,  1996 and the years ended June 30, 1996,  1995  and
1994 were $1,578, $2,685, $5,791 and $14,266, respectively.   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  and  to
higher gas sales to the Artesia Cogeneration partnership in 1995.
The  decrease  in  revenues from 1994 to  1995  was  attributable
primarily  to  the  sale of the Company's contractual  rights  to
develop  certain coalbed methane reserves for $5,121 and  to  the
sale  of  rights  to  develop  a  standby  electric  project  for
approximately $5,000 in 1994.
     
Costs and Expenses
     
     Cost  of  energy revenues for the six months ended  December
31,  1996  and the years ended June 30, 1996, 1995 and 1994  were
$7,229,  $45,663,  $46,694  and $49,961,  respectively.  Cost  of
energy  revenues decreased for the six months ended December  31,
1996  as  compared to fiscal year 1996 primarily due to only  six
months  of costs reported in the period ended December  31,  1996
and  the result of the amended PPAs in which JCP&L began assuming
the cost of fuel for the

                               25

<PAGE>

Newark and Parlin facilities.  Fiscal 1996 and 1994 included more
severe  winters  than  1995  resulting  in  significantly  higher
natural  gas unit rates in these years.  Cost of energy  revenues
also  includes  a temporary period of natural gas curtailment  in
the  winters  of  fiscal 1996 and 1994 requiring the  Newark  and
Parlin  Projects  to  operate using a more expensive  alternative
fuel.
     
     Cost  of  equipment sales and services for  the  six  months
ended  December 31, 1996 and the years ended June 30, 1996,  1995
and   1994   were   $12,365,  $22,153,   $17,622   and   $21,890,
respectively.  Cost of equipment sales and services for  the  six
months ended December 31, 1996  include nine months of costs from
the  operations of Puma.  The fluctuations in cost  of  equipment
sales  and  services  between fiscal years 1996,  1995  and  1994
primarily correlate to the fiscal changes in sales volume in  the
Company's equipment sales, rental and service businesses.
     
     Cost  of  rental revenues services for the six months  ended
December  31,  1996 and the years ended June 30, 1996,  1995  and
1994 were $834, $1,406, $2,357 and $2,730, respectively. Cost  of
rental  revenues decreased for the six months ended December  31,
1996  as  compared to fiscal year 1996 primarily due to only  six
months  of costs reported in the period ended December 31,  1996.
The  decrease  in cost of equipment rentals between fiscal  years
1996,  1995 and 1994 is attributable to the reacquisition of  the
Philadelphia  Project  from an unrelated private  investor.   The
Company  sold the project in November 1993 and reacquired  it  in
August  1994  but  continued to own and lease the  equipment  and
facilities to the private investor during this period.
     
     Cost  of development fees and other for the six months ended
December  31,  1996 and the years ended June 30, 1996,  1995  and
1994  were  $1,559,  $2,531,  $5,491 and  $9,593,   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 $17,929 (44.9% of  sales),
$24,794  (25.7%  of  sales),  $30,083   (29.4%  of  sales)    and
$22,415   (21.0% of sales)  for  the  six months  ended  December
31,  1996  and for the years ended June 30, 1996, 1995 and  1994,
respectively.  The fluctuations are primarily attributable to the
energy   segment  which,  as  discussed  above,   were   due   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 Loss on Equipment Held for Sale and Write  Down  of
Plant and Equipment
     
     The  Company  began  actively seeking  buyers  for  specific
energy  equipment consisting primarily of gas and steam  turbines
not currently being used in an operating project nor critical  to
the  completion  of any projects in development.   The  value  of
these  assets  sold  in  a  secondary  market  is  less  than  if
incorporated  into  an  internally developed  operating  project.
Accordingly,  the  Company recorded a non-cash charge  of  $6,250
against earnings to write down the carrying value of these assets
to an estimated resale value for the year ended June 30, 1994 and
recorded  an  additional writedown in fiscal 1995  of  $5,655  to
reflect  the Company's intent to accelerate the disposal of  this
equipment.

                               26

<PAGE>

     The  Company  engaged  an independent  valuation  expert  to
appraise its property, plant and equipment in connection with the
bankruptcy  proceedings and the Plan.  Accordingly,  the  Company
recorded  a  non-cash charge against earnings in fiscal  1995  of
$15,985  to write down the carrying value of its property,  plant
and equipment to a lower appraised value.
     
Selling, General and Administrative Expenses
     
     Selling,  general and administrative expenses  ("SG&A")  for
the  six months ended December 31, 1996 and the years ended  June
30,  1996,  1995  and  1994  were $6,149,  $12,792,  $20,320  and
$19,680,  respectively.   Fiscal  1996  includes  a  $3,100  cost
incurred  to  terminate  the  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.
     
     Since  filing for bankruptcy in September 1994, the  Company
has  attempted  to  reduce its SG&A expenses.  Fiscal  1995  SG&A
includes project development costs totaling $4,418 based upon the
anticipated  implementation of the Plan and $1,888 in unamortized
goodwill  primarily  associated with the  value  assigned  to  an
acquired  subsidiary's  patented waste heat  recovery  technology
deemed not realizable.
     
     In January 1994, the Company ceased operations at one of its
United  Kingdom  subsidiaries  which  was  in  the  business   of
manufacturing low voltage switchgear.  Fiscal 1994 SG&A  includes
pretax  losses associated with this United Kingdom subsidiary  of
approximately $1,200 which includes $319 of costs associated with
the closure of the business.
     
Involuntary Conversion Gain
     
     In  fiscal  1994,  the  Company  recognized  an  involuntary
conversion gain of $6,066 from the property settlement  with  the
insurance  carrier resulting from the December 25, 1992  fire  at
the Newark facility.  The gain represents the amount by which the
insurance proceeds (replacement cost) exceeded the net book value
of the equipment lost in the fire.
     
Interest and Other Income
     
     Other income for the six months ended December 31, 1996  and
the  years  ended June 30, 1996, 1995 and 1994 were  $413,  $569,
$2,587  and $874, respectively.  Other income for the six  months
ended  December  31,  1996 was positively  impacted  by  interest
income   earned   on  escrow  account  balances  established   in
connection  with the recourse financing on the Newark and  Parlin
facilities.  Fiscal 1995 other income includes $1,180  recognized
in  connection with the original construction of the Philadelphia
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 the years  ended

                               27

<PAGE>

June    30,   1996   and   1995   were   $12,101   and    $8,366,
respectively.  These costs consist primarily of professional  and
administrative fees and expenses as well as a fiscal 1995 expense
of   $3,387  incurred  to  adjust  the  carrying  value  of   the
subordinated debentures to the amount approved by the  Bankruptcy
Court as an allowed claim.
     
Interest and Debt Expense
     
     Interest  and debt expense for the six months ended December
31,  1996  and the years ended June 30, 1996, 1995 and 1994  were
$7,681, $18,646, $20,583 and $18,013, respectively. Interest  and
debt expense decreased for the six months ended December 31, 1996
as  compared to fiscal year 1996 primarily due to only six months
of expenses reported in the period ended December 31, 1996 and to
the  refinancing of the Newark and Parlin 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 Project to August 1994.
     
Extraordinary Item

     In the six month period ended December 31, 1996, 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  the  six  months ended December 31, 1996 and  the  year
ended  June 30, 1996, the Company realized an overall income  tax
benefit  of  $268 and $463, respectively.  For the  fiscal  years
ended  June 30, 1995 and June 30, 1994, the provision for  income
taxes  was $2,680 and $1,913, respectively.  The benefit for  the
six  months ended December 31, 1996 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  the
fiscal  year  ended  June  30,  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 and  1994
tax  provisions, 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  24  to  the  Consolidated
Financial Statements).

                               28

<PAGE>

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 with a new
lender   (the   "Credit   Agreement").   The   Credit   Agreement
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 NRGG Newark and NRGG 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.  Concurrent with
the Credit Agreement, NRGG Newark and NRGG 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 the 50% portion of
the principal amount outstanding at 6.9% plus the margin.

     On  May 23 1996, NRGG Newark borrowed $60,000 in the form of
a  six-month  term loan under the terms of the Credit  Agreement,
pending  the availability of the remaining total loan commitment.
On  July  11,  1996,  the remaining $95,000 loan  commitment  was
borrowed  and combined with the $60,000 into a $155,000,  fifteen
year new term loan.

     The  Company used the proceeds of the new term 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
at  June 30, 1996.  At December 31, 1996, loans of $14,388 remain
outstanding to NRG Energy.

     NRG  Energy has provided additional loan commitments to  the
Company.  A $10,000 loan agreement negotiated between NRG  Energy
and NRGG Schuylkill Cogeneration, Inc. (formerly known as O'Brien
(Schuylkill)   Cogeneration,  Inc.)   ("NSC"),   a   wholly-owned
subsidiary,  provides  funding, if needed,  for  an  NSC  capital
contribution obligation to the Grays Ferry Partnership.  NSC 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 Chase Manhattan Bank N.A. to
finance  the project.  The credit agreement obligates  a  $10,000
capital  contribution from each of the projects'  three  partners
prior  to  the  commercial operation of the  facility,  which  is
anticipated   to  occur by the end of 1997.  In  addition,  there
remains $13,615 in available borrowings under the terms of one of
the  Plan  loan agreements to provide funding for any  bankruptcy
obligation shortfalls.
     
     Except for the historical information contained within  this
Management's  Discussion and Analysis of Financial Condition  and
Results  of  Operations, the accompanying consolidated  financial
statements,  and the Notes to Consolidated Financial  Statements,
the matters reflected or discussed in this report which relate to
the Company's beliefs, expectations, plans, future

                               29

<PAGE>

estimates  and  the  like  are  forward-looking  statements  that
involve  risks  and uncertainties including but not  limited  to:
business conditions and growth in the general economy; regulatory
and  other legal developments affecting the markets in which  the
Company operates and changes in environmental laws; volatility in
gross   margins  caused  by  seasonal  factors  that  cannot   be
controlled  by  the Company; competitive factors, such  as  price
pressures and other factors which may make it more difficult  for
the  Company  to secure future projects and may increase  project
development costs and/or reduce operating margins; the success of
the  Company's business partners, including its energy  customers
and  fuel suppliers; the successful completion of the Grays Ferry
Project  and the various other factors discussed in this  report,
including  without  limitation those  discussed  under  "Item  1.
Business  - Risk Factors."   Such factors may cause the Company's
actual  results to differ materially from those discussed  herein
and in forward-looking statements made herein.

                               30

<PAGE>     

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-31 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, 1996,
           June 30, 1996 and 1995                             F-2
     
       Consolidated  Statements of Operations  for  the  six
       months ended December 31, 1996 and the years ended
       June 30,  1996, 1995 and 1994                          F-3
     
       Consolidated Statements of Stockholders'  Equity  for
       the six months ended December 31, 1996 and the years
       ended June 30, 1996,  1995 and 1994                    F-4
     
       Consolidated  Statements of Cash Flows  for  the  six
       months ended December 31, 1996 and the years ended
       June 30, 1996,  1995 and 1994                          F-5
     
     Notes to Consolidated Financial Statements F-6  through F-30
     
     Report of Independent Accountants for fiscal year 1994  F-31
          
     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.
     
      Previously reported in NRG Generating (U.S.) Inc.'s Current
Report  on Form 8-K dated April 30, 1996, and as amended May  20,
1996.

                               31

<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 1997 Definitive Proxy Statement  which
the Company will file with the Securities and Exchange Commission
no later than 120 days subsequent to December 31, 1996.


ITEM 11.  EXECUTIVE COMPENSATION.

      The  information required for this item is incorporated  by
reference to the Company's 1997 Definitive Proxy Statement  which
the Company will file with the Securities and Exchange Commission
no later than 120 days subsequent to December 31, 1996.


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

      The  information required for this item is incorporated  by
reference to the Company's 1997 Definitive Proxy Statement  which
the Company will file with the Securities and Exchange Commission
no later than 120 days subsequent to December 31, 1996.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

      The  information required for this item is incorporated  by
reference to the Company's 1997 Definitive Proxy Statement  which
the Company will file with the Securities and Exchange Commission
no later than 120 days subsequent to December 31, 1996.

                               32

<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-31 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, 1996 and June
     30, 1996 and 1995

     Consolidated  Statements of Operations for  the  six  months
     ended  December  31, 1996 and for the years ended  June  30,
     1996, 1995 and 1994

     Consolidated Statements of Stockholders' Equity for the  six
     months ended December 31, 1996 and for the years ended  June
     30, 1996, 1995 and 1994

     Consolidated  Statements of Cash Flows for  the  six  months
     ended  December  31, 1996 and for the years ended  June  30,
     1996, 1995 and 1994

Notes to Consolidated Financial Statements

Report of Independent Accountants for fiscal year 1994

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.

                               33

<PAGE>

3.   Exhibits

     The "Index to Exhibits" following the Consolidated Financial
Statements of the Company and its  subsidiaries  is  incorporated
herein by reference.  Certain documents  related  to the projects
and  other  matters, some  of which are  listed in  the Index  to
Exhibits,  will  be filed  by  amendment  as  soon aspracticable.

 (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, 1996:

     1.   Current  Report  on  Form 8-K dated December  13,  1996
          reporting information under Item 5.

                               34

<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,  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/ Leonard A. Bluhm         Chairman of the       March 26, 1997
By:  Leonard A. Bluhm     Board of Directors and
                         Chief Executive Officer

/s/ Timothy P. Hunstad      Vice President and     March 26, 1997
By:  Timothy P. Hunstad   Chief Financial Officer

/s/  Lawrence  I.  Littman      Director           March 26, 1997
By:  Lawrence I. Littman

/s/  Craig  A.  Mataczynski     Director           March 26, 1997
By:  Craig A. Mataczynski

/s/  David  H.  Peterson        Director           March 26, 1997
By:  David H. Peterson

/s/  Spyros  S. Skouras,  Jr.   Director           March 26, 1997
By:  Spyros S. Skouras, Jr.

/s/  Charles  J.  Thayer        Director           March 26, 1997
By:  Charles J. Thayer

/s/  Ronald  J.  Will           Director           March 26, 1997
By:  Ronald J. Will

                               35


<PAGE>

NRG Generating (U.S.) Inc.
Consolidated Financial Statements
December 31, 1996


     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 and of cash flows present  fairly,  in  all
material  respects,  the  financial position  of  NRG  Generating
(U.S.)  Inc.  (formerly  known as O'Brien  Environmental  Energy,
Inc.),  and its subsidiaries at December 31, 1996, and  June  30,
1996 and 1995, and the results of their operations and their cash
flows  for the six months ended December 31, 1996 and the  twelve
months  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.  The consolidated financial  statements
of  NRG  Generating  (U.S.) Inc., for  the  twelve  months  ended
June 30, 1994 were audited by other independent accountants whose
report dated October 7, 1994 expressed an unqualified opinion  on
those statements and included an explanatory paragraph expressing
substantial  doubt about the Company's ability to continue  as  a
going concern.  That report also disclosed the voluntary petition
filed  by the Company for reorganization under Chapter 11 of  the
Federal Bankruptcy Code in the United States Bankruptcy Court  on
September 28, 1994.

As  discussed in Note 1 to the consolidated financial statements,
on  April  30,  1996,  O'Brien  Environmental  Energy,  Inc.  was
reorganized pursuant to a plan of reorganization submitted by NRG
Energy,  Inc., the O'Brien Official Committee of Equity  Security
Holders  and  Wexford  Management  Corp.,  and  approved  by  the
Bankruptcy  Court for the District of New Jersey on  January  18,
1996.   As  part of the reorganization, NRG Energy, Inc. acquired
an  approximate  42% equity interest in the reorganized  company,
renamed NRG Generating (U.S.) Inc.



Price Waterhouse LLP
Minneapolis, Minnesota
March 13, 1997

                              F-1

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

<TABLE>
<CAPTION>

(Dollars in thousands)                   December 31,  June 30, June 30,
                                             1996        1996     1995
                             Assets
<S>                                        <C>       <C>       <C>
Current assets:
 Cash and cash equivalents                 $  3,187  $  5,022  $  4,083
 Restricted cash and cash equivalents         8,174     8,719     3,563
 Accounts receivable, net                    11,920    11,627    12,357
 Receivables from related parties               186       461       684
 Notes receivable, current                    1,119     1,029       853
 Inventories                                  2,897     2,995     3,610
 Other current assets                           992     1,721     2,176
      Total current assets                   28,475    31,574    27,326
      
Property, plant and equipment, net          132,203   134,694   151,130
Equipment held for sale                       2,628     2,678     3,228
Project development costs                       346       253     1,080
Notes receivable, noncurrent                     83        86     1,078
Investments in equity affiliates              3,653     3,449     3,483
Deferred financing costs, net                 5,530     4,630     1,530
Other assets                                    706       798       893
      Total assets                         $173,624  $178,162  $189,748

         Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
 Accounts payable                          $  6,131  $  8,708  $  9,546
 Current portion of loans and payables due
 NRG Energy, Inc.                             1,256     4,750         -
 Current portion of nonrecourse long-
 term debt                                   10,820     7,115     8,751
 Nonrecourse project financing                   -          -    85,320
 Accrued interest payable                     1,104     5,895     7,655
 Prepetition liabilities                      1,433     1,735    87,743
 Short-term borrowings                        2,388     1,793     1,600
 Other current liabilities                    2,852     7,789    11,300
      Total current liabilities              25,984    37,785   211,915
Loans due NRG Energy, Inc., net of current
 portion                                     14,388    96,929         -
Nonrecourse long-term debt, net of current
 portion                                    150,311    66,789     3,405
Deferred income taxes                        13,404    14,182    15,086
Other liabilities                                50        50       100
      Total liabilities                     204,137   215,735   230,506

Stockholders' equity:
 Preferred stock, par value $.01, 20,000,000
  shares authorized; none issued or outstanding   -         -         -
 New common stock, par value $.01, 50,000,000
  shares authorized, 6,474,814 shares issued,
  6,440,514 and 6,422,014 shares outstanding,
  respectively                                   64        64         -
 Class A common stock, par value $.01, one vote
  per share, 40,000,000 shares authorized,
  13,055,597 issued, 12,965,397 outstanding
  in 1995                                         -         -       130
 Class B common stock, par value $.01, ten votes
  per share, 10,000,000 shares authorized,
  4,070,770 issued, 3,905,770 outstanding
  in 1995                                         -         -        39
 Additional paid-in capital                  62,719    62,515    41,353
 Accumulated deficit                        (92,944)  (99,367)  (81,654)
 Other                                         (352)     (785)     (626)
      Total stockholders' equity (deficit)  (30,513)  (37,573)  (40,758)
      Total liabilities and stockholders'
       equity (deficit)                    $173,624  $178,162  $189,748

</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, except per share amounts)

                                 Six Months
                                   Ended         Twelve Months Ended
                                December 31,  June 30, June 30, June 30,
                                    1996        1996     1995     1994
<S>                              <C>         <C>      <C>      <C>
Energy revenues                   $21,669    $66,623  $74,455  $62,647
Equipment sales and services       15,607     25,344   19,639   24,304
Rental revenues                     1,062      1,895    2,362    5,372
Development fees and other          1,578      2,685    5,791   14,266
                                   39,916     96,547  102,247  106,589
Cost of energy revenues             7,229     45,663   46,694   49,961
Cost of equipment sales and
 services                          12,365     22,153   17,622   21,890
Cost of rental revenues               834      1,406    2,357    2,730
Cost of development fees and other  1,559      2,531    5,491    9,593
                                   21,987     71,753   72,164   84,174
   Gross profit                    17,929     24,794   30,083   22,415
Provision for loss on equipment         -          -   21,640    6,250
Selling, general and administrative
 expenses                           6,149     12,792   20,320   19,680
   Income (loss) from operations   11,780     12,002  (11,877)  (3,515)
Involuntary conversion gain             -          -        -    6,066
Interest and other income             413        569    2,587      874
Reorganization costs                    -    (12,101)  (8,366)       -
Interest and debt expense          (7,681)   (18,646) (20,583) (18,013)
   Income (loss) before income
    taxes                           4,512    (18,176) (38,239) (14,588)
Provision for income taxes (benefit) (268)      (463)   2,680    1,913
   Income (loss) before
    extraordinary item              4,780    (17,713)  40,919) (16,501)
Extraordinary item, net of income
 taxes                              1,643          -        -        -
Net income (loss)                 $ 6,423   $(17,713)$(40,919)$(16,501)
Net income (loss) per common share:
  Income (loss) before extraordinary
   item                           $  0.75   $  (4.24)$ (11.02)$  (4.45)
  Extraordinary item                 0.25          -        -        -
  Net income (loss) per common
   share                          $  1.00   $  (4.24)$ (11.02)$  (4.45)

Weighted average shares
 outstanding                        6,454      4,182    3,712    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

<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, 1993                   $ 130     $ 39  $       $         $40,053    $(23,932)  $ (615)  $ 15,675
Currency translation adjustment                                                                     (36)       (36)
Excess of purchase price over
predecessor cost of facilities acquired                                                   (302)               (302)
Stock warrants issued                                                        1,300                           1,300
Net loss                                                                               (16,501)            (16,501)
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)

NRG plan of reorganization:
Purchase of common stock by NRG                             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)

</TABLE>

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

                              F-4


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

(Dollars in thousands)            Six Months
                                    Ended        Twelve Months Ended
                                 December 31, June 30,  June 30, June 30,
                                     1996       1996      1995     1994
Cash flows from operating activities:
Net income (loss)                   $ 6,423  $(17,713) $(40,919) $(16,501)
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       4,670     7,961     9,003   10,550
  Amortization of goodwill                -         -     1,987       98
  Amortization of debt discount and
   deferred financing costs             199     1,480     3,882    1,752
  Deferred tax expense (benefit)       (778)     (904)    2,278    1,913
  Project development costs expensed      -       180     4,418      539
  Provision for loss on equipment
   held for sale                          -         -     5,655    6,250
  Provision for equipment appraisal
   writedown                              -         -    15,985        -
Involuntary conversion gain               -         -         -   (6,066)
  Reserve for uncollectible note
   receivable                             -         -     3,121        -
  Bankruptcy professional fees accrued    -       432     4,415        -
  Other, net                            (70)     (216)      709    1,527
  Changes in operating assets and
   liabilities:
    Accounts receivable              (1,011)      730      (257)     294
    Inventories                         (13)      615      (369)     805
    Receivables from related parties    275       223       (51)     542
    Accounts payable and other current
     liabilities                     (6,677)     (838)   (4,994)  (2,892)
    Accrued interest payable         (4,677)   (1,760)    6,633        -
      Net cash (used in) provided by
       operating activities          (3,302)   (9,810)   11,496   (1,189)
Cash flows from investing activities:
Capital expenditures                 (1,222)     (299)     (744)  (2,496)
Proceeds from sale of property and
 equipment                              104         -         -        -
Proceeds from sale of subsidiaries        -     7,500         -        -
Capital expenditures and costs to
 repair Newark Plant                      -         -         -  (21,041)
Insurance proceeds for Newark Plant       -         -         -   27,000
Project development costs               (93)   (1,484)     (358)    (529)
Proceeds from the sale of projects,
 net of notes receivable                  -         -     1,762    2,000
Collections on notes receivable          10       816       824    1,784
Divestitures of businesses, net of
 cash given                            (120)        -         -        -
Withdrawals from (deposits into)
 restricted cash accounts - net         545    (5,156)    1,032      470
Other, net                                -       227      (676)     622
      Net cash (used in) provided by
       investing activities            (776)    1,604     1,840    7,810
Cash flows from financing activities:
Proceeds from NRG loans                   -   128,078         -        -
Proceeds from long-term debt         95,000    60,226     5,711   15,622
Repayments of NRG loans             (86,035)  (26,398)        -        -
Repayments of long-term debt         (6,098)  (92,816)  (18,061) (21,660)
NRG capital contribution                  -    21,178         -        -
Net proceeds (repayments) of short-
 term borrowings                        595       193      (785)     187
Payments on prepetition liabilities    (302)  (71,723)   (1,799)       -
Deferred financing costs             (1,121)   (4,579)        -        -
Payment received on treasury stock
 resulting from reorganization          105         -         -        -
Issuance of restricted stock             99         -         -        -
Redemption of preferred shares            -    (4,957)        -        -
Preferred dividends paid                  -       (57)        -        -
Other, net                                -         -         -     (302)
      Net cash provided by (used in)
       financing activities           2,243     9,145   (14,934)  (6,153)
Net (decrease) increase in cash and
 cash equivalents                    (1,835)      939    (1,598)     468
Cash and cash equivalents at
 beginning of year                    5,022     4,083     5,681    5,213
Cash and cash equivalents at end
 of year                            $ 3,187  $  5,022  $  4,083 $  5,681

Supplemental disclosure of cash flow information:
Interest paid during the year       $12,472  $ 18,926  $ 11,869 $ 13,027



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. ("NRGG" or the  "Company")  and  its
subsidiaries 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,
through  its  subsidiaries,  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.  The
Plan,  approved on January 18, 1996 by the U.S. Bankruptcy  Court
for  the District of New Jersey (the "Court"), 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.

Under  the Chapter 11 bankruptcy proceedings, all parent  company
liabilities and claims which existed as of the September 28, 1994
filing  date were stayed. The Company segregated and reclassified
these  liabilities and claims on its balance sheet as prepetition
liabilities. Subsequently, the Company received approval from the
Court   to  make  payments  on  certain  prepetition  obligations
including  employee  wages  and  expense  reports  and  was  also
directed  to  make  periodic  adequate  protection  payments   on
specific secured debt obligations during the bankruptcy period.

Management  concluded that the maximum return  to  creditors  and
shareholders could only be accomplished through the  sale  of  an
equity  interest in the Company or of substantially  all  of  its
assets  to a third party.  After extensive solicitation  efforts,
two  separate third party plans of reorganization were  submitted
to  the  Court.  On November 17, 1995, the Company distributed  a
Master  Disclosure  Statement urging that  creditors  and  equity
security holders vote to accept its plan of reorganization.

On  January  18, 1996, the Court confirmed the Plan submitted  by
NRG  Energy,  the  O'Brien Official Committee of Equity  Security
Holders and Wexford Management LLC ("Wexford").  According to the
Plan, NRG would acquire approximately 42% equity interest in  the
reorganized company.

On   April  30,  1996,  NRG  funded  approximately  $107,418   in
accordance with the Plan and acquired a 41.86% equity interest in
the Company.  NRGG received $99,918 of which $71,240 was advanced
under the terms of the three loans agreements between the Company
and  NRG  Energy; $21,178 represented the purchase of new  common
stock of NRGG and $7,500 was designated as 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 OEE common stockholders.  The funds were disbursed
according to the Plan's

                              F-6

<PAGE>

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

(Dollars in thousands)

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
funds  resulting  from the Court disallowing any disputed  claims
will be disbursed pro rata to all allowed non-reinstated creditor
claimholders as additional post-petition interest.

The Company entered into a Liquidating Asset Management Agreement
on  April  30, 1996 with Wexford, which, in accordance  with  the
Plan, retains Wexford as the manager, operator and liquidator  of
the  Liquidating Assets of the Company pursuant to the terms  and
conditions  of  the  agreement.  The Board of Directors  and  the
Officers  have the right to direct and control which assets  will
be  liquidated and the extent of management services required for
each 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   Water
Department  project,  (c)  unused  equipment,  and  (d)  American
Hydrotherm Corporation and two related companies.  The  Board  of
Directors  has  authorized Wexford to liquidate the  Philadelphia
Water Department project and American Hydrotherm Corporation  and
its  two related companies.  American Hydrotherm Corporation  and
its  two related companies were sold to subsidiary management  in
December  1996.  The Board of Directors has authorized management
to   liquidate  the  unused  equipment.   Wexford  has   received
compensation per the agreement for the sale of unused  equipment.
No  decision has been made regarding the possible liquidation  of
the  engine  generator business.  Management does not expect  the
disposals  of these businesses to have a material effect  on  the
Company's financial position or results of operations.

2.  Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of all
majority-owned  subsidiaries  of the  Company.   All  significant
intercompany  investments, accounts and  transactions  have  been
eliminated.   The  investments in and the  operating  results  of
companies  in which the Company has an ownership of 50%  or  less
are  included  in the financial statements on the  basis  of  the
equity method of accounting.

Effective  July 1, 1996, the Company changed its  year  end  from
June 30 to December 31.  The following are summarized comparative
results for the six months ended December 31, 1996 and 1995.  Due
to the reorganization the comparisons are not meaningful.

                              F-7

<PAGE>

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

(Dollars in thousands)

                                                          Unaudited         
                                         Six Months       Six Months
                                           Ended            Ended
                                        December 31,     December 31,
                                            1996             1995
                                                                      
Revenue                                    $39,916          $50,901
Gross profit                                17,929           16,652
Income tax  provision (benefit)               (268)              25
Income (loss) before extraordinary item      4,780           (1,075)
Extraordinary item                           1,643                -
Net income (loss)                            6,423           (1,075)
Net income (loss) per common share:                                   
  Net income (loss) before extraordinary
   item                                       0.75            (0.29)
  Extraordinary item                          0.25                -
  Net income (loss) per common share          1.00            (0.29)

The  years  ended  June  30, 1996, 1995 and  1994  are  sometimes
referred  to in these Notes to Consolidated Financial  Statements
as fiscal 1996, 1995 and 1994.

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

Expenses  incurred  after  filing  bankruptcy  related   to   the
Company's  reorganization  and restructuring  efforts  have  been
presented   separately  in  the  statement   of   operations   as
reorganization costs.

Revenue Recognition

Energy  revenues  from cogeneration projects  are  recognized  as
billed  over  the term of the contract.  Profits and losses  from
sales  and rental of power generation equipment, including  sales
to  projects  in  which  the Company retains  less  than  a  100%
interest are recognized as the equipment is sold or over the term
of  the rental.  Development fee revenue is recognized on a  cost
recovery  basis  as  cash  is received  (without  future  lending
provisions)  or as equity interest in the partnership  increases,
whereby revenues are recognized subsequent to the recovery of all
project development costs.

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.

                              F-8

<PAGE>

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

(Dollars in thousands)


Property, Plant and Equipment

Property, plant and equipment is stated at the lower of  cost  or
appraised  fair market value and depreciated using the  straight-
line  method over the estimated useful lives of the assets  which
range  from  five  to  thirty years.  Amortization  on  equipment
acquired  under capital leases is recognized on a  straight  line
basis over the shorter of the estimated asset life or lease term.
Depreciation  on  equipment  held  for  future  projects  is  not
provided  until the equipment is placed in service.   For  income
tax  purposes, the Company uses a combination of accelerated  and
straight-line depreciation methods.

Cost  of  maintenance  and  repairs  is  charged  to  expense  as
incurred.   Betterments and improvements are  capitalized.   Upon
retirement  or other disposition of items of plant and equipment,
cost  of  items and related accumulated depreciation are  removed
from the accounts and any gain or loss is included in the results
of operations.

Equipment Held for Sale

Equipment  held  for sale consists of power generation  equipment
not currently being used in an operating project and is valued at
the lower of cost or estimated net realizable value.

Project Development Costs

Project  development costs consist of fees, licenses and permits,
site  testing,  bids  and  other charges,  including  salary  and
interest  charges incurred by the Company in developing projects.
For   wholly-owned  projects,  project  development   costs   are
transferred to property, plant and equipment upon commencement of
construction  and  depreciated  over  the  contract   term   when
operations begin.  For projects structured as partnerships, these
project  development  costs may be recovered through  development
cost reimbursements from the partnership or third parties or  may
be  transferred to an investment in the partnership.  It  is  the
Company's  policy to expense these costs 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 financing.

Nonrecourse Long-term Debt

Recourse long-term debt consists of collateralized long-term debt
for  which  repayment  is  a general obligation  of  the  Company
exclusive  of  any  debt  subject to the bankruptcy  proceedings.
Nonrecourse  project  financing consists of  long-term  debt  for
which  repayment  obligations  are limited  to  specific  project
subsidiaries.

Income Taxes
   
The  provision  for  income taxes has been calculated  using  the
asset  and  liability approach of accounting  for  income  taxes.
Under this approach, deferred taxes represent the future tax

                              F-9

<PAGE>

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

(Dollars in thousands)

consequences  expected  to occur when  the  reported  amounts  of
assets and liabilities are recovered or paid.  The provision  for
income  taxes  represents income taxes payable or  paid  for  the
current  year and the change in deferred taxes during  the  year.
Deferred  taxes  result  from differences  between  the  tax  and
financial bases of the Company's assets and liabilities  and  are
adjusted  for  any changes in the tax rates and laws.   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 entered into interest rate swap agreements to reduce
the  impact  of  changes  in interest rates  on  certain  of  its
variable  rate  nonrecourse  debt.   The  differentials  paid  or
received  under such agreements are accrued and are  recorded  as
increments or decrements to interest and debt expense.

Net Income (Loss) Per Share

Net  income (loss) per share is calculated by dividing net income
(loss)  by the weighted average number of shares of common  stock
and  common  stock  equivalents outstanding during  each  period.
Common  stock equivalents result from dilutive stock options  and
restricted stocks computed using the treasury stock method.   All
periods  have  been restated to reflect the common shares  issued
under the terms of the Plan (see Note 14).


Foreign Currency Accounting

The  financial  statements  of  foreign  subsidiaries  have  been
translated  in accordance with Statement of Financial  Accounting
Standards  No. 52, whereby assets and liabilities are  translated
at  year-end  rates of exchange and statements of operations  are
translated  at  the  average  rates of  exchange  for  the  year.
Currency  translation adjustments are accumulated  in  the  other
component   of   stockholders'  equity  until   the   entity   is
substantially  sold or liquidated. Transaction gains  and  losses
associated  with foreign activities are included  in  net  income
(loss).

Cash and Cash Equivalents

For  purposes of the consolidated statements of cash  flows,  the
Company  considers all highly liquid investments with  maturities
of  three  months  or  less at the time of purchase  to  be  cash
equivalents.

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.

The  Company  invests its excess cash in deposits with  financial
institutions.  These  securities typically mature  within  ninety
days  and,  therefore, bear minimal risk.  The  Company  has  not
experienced any losses on these deposits.

                              F-10

<PAGE>

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

(Dollars in thousands)

Reclassification

Certain  reclassifications have been made to conform prior  years
data to the current presentation.

3.  Restricted Cash and Cash Equivalents

The Company has classified certain cash and cash equivalents that
are  not fully available for use in its operations as restricted.
At December 31, 1996, restricted cash and cash equivalents relate
primarily  to  debt  service reserve  accounts  required  by  the
nonrecourse project debt for O'Brien (Newark) Cogeneration,  Inc.
("Newark")  and  O'Brien (Parlin) Cogeneration,  Inc.  ("Parlin")
which  were refinanced in 1996 (see Note 12).  At June 30,  1996,
restricted  cash  and cash equivalents relate primarily  to  debt
service reserve accounts required by the nonrecourse project debt
refinancing  for  Newark  and  Parlin  and  to  escrow   accounts
established on April 30, 1996, pursuant to the Plan, relating  to
various  administrative,  priority  and  unsecured  claims  which
remain  in  dispute  or are subject to final  resolution  by  the
Court.  Restricted cash and cash equivalents  at  June  30,  1995
relate primarily to debt service reserve accounts required by the
nonrecourse project debt for Newark and Parlin.

Additionally,  restricted cash and cash equivalents  at  December
31, 1996 and June 30, 1996 and 1995 include compensating balances
maintained   by  the  Company  at  a  financial  institution   in
connection  with a line of credit extended to its United  Kingdom
subsidiaries (see Note 10).

Restricted cash and cash equivalents consist of the following:

                                     December 31,  June 30,  June 30,
                                        1996         1996      1995

  NRGG bankruptcy escrow accounts       $2,388     $8,490    $    -
  O'Brien (Newark) Cogeneration, Inc.    2,050          -     3,129
  O'Brien (Parlin) Cogeneration, Inc.    3,736          -       101
  United Kingdom subsidiaries                -        229       241
  Other                                      -          -        92
    Total                               $8,174     $8,719    $3,563

4.  Property, Plant and Equipment

Property, plant and equipment consists of the following:

                                      December 31,  June 30,  June 30,
                                         1996         1996      1995

  Equipment related to energy revenues  $155,802   $154,578  $171,520
  Rental equipment                        15,233     15,166    15,330
  Furniture and fixtures                     759        898     1,694
  Land, buildings and improvements         1,538      1,972     2,424
  Other equipment                             44        378       469
    Total                               $173,376   $172,992  $191,437
  Accumulated depreciation and 
   amortization                           41,173     38,298    40,307
    Total                               $132,203   $134,694  $151,130

                              F-11

<PAGE>

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

(Dollars in thousands)

Depreciation expense was $3,626, $7,858, $8,892 and $9,717 in the
six  months  ended December 31, 1996, and fiscal 1996,  1995  and
1994, respectively.

The Company recorded a charge of $15,985 in fiscal 1995 to reduce
the  carrying amount of property, plant and equipment to a  lower
appraised fair market value.

Equipment  related to energy revenues includes the  property  and
equipment  of  the  Newark  and Parlin cogeneration  plants,  the
Philadelphia Water Department standby project and, until sold  on
April 30, 1996, the biogas projects (see Note 23).

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.

5.  Equipment Held for Sale

As  part of the Company's efforts to improve both short-term  and
long-term  liquidity, it is seeking buyers  for  specific  energy
equipment  not currently being used in an operating  project  nor
critical to the completion of any projects in development.  These
assets,  consisting mainly of gas and steam turbines,  are  being
held for sale in order to raise cash.

The value of these assets sold in a secondary market is less than
if  they were incorporated into an internally developed operating
project.   Accordingly, the Company recorded a noncash charge  of
$6,250  in  fiscal  1994 to adjust the carrying  value  of  these
assets  to estimated resale value, based upon appraisals made  by
the  Company.  In fiscal 1995, the Company recorded an additional
charge  of $5,655 based upon an independent appraisal to  further
reduce  the  carrying  value to reflect the Company's  intent  to
accelerate the disposal of this equipment.

6.  Notes Receivable

Notes receivable consist of the following:
                                      December 31,  June 30,  June 30,
                                         1996         1996      1995
  Notes receivable, non-interest
  bearing, final installment of
  $800 due in June 1997 (a)             $  754      $  754    $1,465
  Other (b)                                448         361       466
   Total                                 1,202       1,115     1,931
  Less current portion                   1,119       1,029       853
    Total noncurrent                    $   83      $   86    $1,078

                              F-12

<PAGE>

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

(Dollars in thousands)
  
  (a)     Note  receivable associated with the termination  of  a
     power  purchase contract.  The note is collateralized by  an
     irrevocable  letter of credit. At December  31,  1996,  face
     value and discount were $800 and $46, respectively, assuming
     an interest rate of 5.95%.

  (b)     Notes  receivable associated primarily  with  a  direct
     finance lease relating to power generation equipment.

7.  Project Development Costs

During  fiscal  1996, 1995 and 1994, the Company determined  that
certain  project  development  costs  should  be  expensed.   The
resulting  charges, net of any recoveries, of  $180,  $4,418  and
$539,   respectively,  are  included  in  selling,  general   and
administrative   expenses   in  the   accompanying   consolidated
statements of operations.  The fiscal 1995 charge included  costs
of  a  project  determined  to be unrecoverable  based  upon  the
anticipated implementation of the Plan.

8.  Investments in Equity Affiliates

Investment in equity affiliates consist of the following:

                                    December 31,  June 30,  June 30,
                                        1996        1996      1995

  Grays Ferry  (33% owned)             $2,659     $2,778    $2,504
  Artesia  (3% owned)                       -          -       337
  PoweRent Limited  (50% owned)           994        671       642
    Total                              $3,653     $3,449    $3,483

Grays Ferry

In October 1991, NRGG (Schuylkill) Cogeneration, Inc. ("NSC"),  a
wholly-owned  subsidiary, executed a partnership  agreement  with
Adwin  Equipment Company ("Adwin"), a wholly-owned subsidiary  of
PECO Energy, for the purpose of developing, constructing, owning,
maintaining  and  operating a 150 MW natural gas  and  oil  fired
cogeneration  facility  to  produce  steam  and  electricity   in
Philadelphia. The project, currently under construction, consists
of  the  installation  and operation of an auxiliary  boiler  and
steam turbine and the installation and operation of a gas turbine
and heat recovery steam generator along with related equipment.

In  March  1996, Trigen (Schuylkill) Cogeneration,  an  unrelated
party,  was  admitted to the partnership.   NSC  and  Adwin  each
received  a  $1,000  admittance fee.  Net operating  profits  and
losses will be allocated to the partners based upon the terms and
provisions as stated in the partnership agreement.  Also in March
1996,  the partnership entered into a credit agreement with Chase
Manhattan Bank N.A. to finance the construction and equipment for
the  facility.  Pursuant  to  the  credit  agreement,  the  three
partners  will each contribute $10,000 of additional  capital  to
the partnership to be funded after all construction loan proceeds
have  been utilized or at such time as is required by the lender.
Additionally, the stock of NSC was pledged as collateral for  the
loan.

In  March  1996, NRG Energy and NSC entered into a  $10,000  loan
agreement  to  provide a source of funding for  the  NSC  capital
contribution obligation to the partnership.  No amounts have  yet
been  contributed to the partnership or borrowed under this  loan
agreement.

                              F-13

<PAGE>

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

(Dollars in thousands)

PoweRent Limited

PoweRent Limited, an entity in which a subsidiary of the  Company
owns  a 50% interest, is a United Kingdom company that sells  and
rents  power generation equipment.  The remaining 50% of PoweRent
is   owned  by  an  officer  of  a  wholly-owned  United  Kingdom
subsidiary.

The  Company's investment in equity affiliates has been accounted
for using the equity method.

9.  Deferred Financing Costs

Deferred  financing  costs  relate  primarily  to  the  cost   of
refinancing the nonrecourse debt and consist of the following:

                                  December 31,  June 30,  June 30,
                                      1996        1996      1995

  Deferred financing costs          $5,940      $4,810    $2,767
  Accumulated amortization             410         180     1,237
    Total                           $5,530      $4,630    $1,530

Amortization  expense,  included in interest  and  debt  expense,
amounted  to  $199  for the six month period ended  December  31,
1996.   In  addition, deferred financing costs of $31, associated
with a capital lease obligation, were written off as a result  of
a  negotiated  buyout of the capital lease obligation  (see  Note
16).

Amortization expense, included in interest and debt  expense,  in
fiscal  year  ending June 30, 1996 was $1,480  which  includes  a
charge of $1,043 to expense unamortized deferred financing  costs
attributable to the nonrecourse project debt which was refinanced
in 1996 (see Note 12).

Amortization  expense amounted to $570 and  $452  in  the  fiscal
years  ended  June  30,  1995 and 1994,  respectively,  which  is
included in interest and debt expense.  Additionally, the Company
charged  $3,387  of  deferred  financing costs to  reorganization
costs  in  fiscal  1995  to adjust the  carrying  amount  of  the
parent's  prepetition  subordinated  debentures  to  the   amount
approved by the Court as an allowed claim.

10.  Short-Term Borrowings

As  of  December 31, 1996, and June 30, 1996 and 1995, short-term
borrowings  consist primarily of foreign lines of credit  payable
to  financial  institutions bearing interest  at  foreign  (U.K.)
short-term rates.

11.  Prepetition Liabilities

All   liabilities   which  remain  subject  to   the   bankruptcy
proceedings  have  been  classified  on  the  balance  sheet   as
prepetition liabilities.  Prepetition liabilities are  stated  at
amounts expected to be approved

                              F-14

<PAGE>

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

(Dollars in thousands)

 by the Court as allowed claims and consist of the following:

                                        December 31,  June 30,  June 30,
                                            1996        1996      1995

  Subordinated debentures                 $    -      $    -   $49,174
  Nonrecourse debt (see Note 12)               -           -    30,368
  Prepetition accrued interest                 -          11     5,634
  Accounts payable and accrued expenses    1,433       1,724     2,567
    Total                                 $1,433      $1,735   $87,743

Generally, all undisputed prepetition liabilities approved by the
Court  as  allowed claims were fully funded (or cured/reinstated)
and  paid  with  post-petition  interest  on  the  closing  date.
However, certain proofs of claims filed with the Court remain  in
dispute.   An  escrow fund was established to fully  reserve  for
these  disputed claims.  Any remaining funds resulting  from  the
Court  disallowing any of these disputed claims will be disbursed
pro  rata to all allowed non-reinstated creditor claimholders  as
additional post-petition interest.

Additionally,  prepetition liabilities  of  approximately  $4,957
consisting primarily of subordinated debentures owned by  Wexford
were  satisfied  by  the  issuance of  preferred  shares  in  the
reorganized company.  These shares were subsequently redeemed  in
May  1996.   The  subordinated debentures carried interest  rates
ranging  from  7% to 11% up to the date of filing for  bankruptcy
on September 28, 1994.

12.  Nonrecourse Long-Term Debt

On  May 17, 1996, the Company's wholly-owned subsidiaries, Newark
and   Parlin  entered  into  a  Credit  Agreement  (the   "Credit
Agreement")  with a new lender.  The Credit Agreement 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  Newark  and
Parlin's  option, LIBOR plus a 1.125% margin or  a  defined  base
rate plus a 0.375% margin.  Nominal margin increases for both the
LIBOR and the defined base rate will occur in year six and eleven
of  the  Credit Agreement.  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 50% of the principal amount outstanding at 6.9%
plus the margin.  On May 23, 1996, Newark borrowed $60,000 in the
form  of a temporary six-month term loan under the terms  of  the
Credit  Agreement.   The proceeds were used  primarily  to  repay
certain  preexisting obligations of the Company.  Also  effective
May  23,  1996,  NRG  Energy guaranteed payment  of  pre-existing
liabilities  of  Newark  and Parlin up to $5,000.  The  guarantee
amount  of  $5,000 will be reduced as certain defined  milestones
are reached and eliminated no later than May 23, 2001.

On  July 11, 1996, an additional $95,000 was borrowed pursuant to
the  Credit Agreement, combined with Newark's $60,000 six  month-
term  loan  and converted into a $155,000 fifteen-year term  loan
(the  "Term  Loan")  which is a joint and  several  liability  of
Newark  and Parlin.  The Term Loan will be amortized as specified
under the terms of the Credit Agreement.  Proceeds of the $95,000
borrowing  were used to repay $53,388 advanced by NRG  Energy  on
June  28,  1996  in  connection with the refinancing  of  certain
nonrecourse   debt   of   Parlin  and  $33,903   of   outstanding
indebtedness to NRG Energy.  The remaining balance was  used  for
various obligations of the Company as well as funding

                              F-15

<PAGE>

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

(Dollars in thousands)

certain   restricted  cash  reserve  accounts  required   to   be
maintained  by  Newark and Parlin under the terms of  the  Credit
Agreement.  Also, effective July 11, 1996, the Company guaranteed
repayment  of up to $25,000 of the Term Loan and payment  of  all
income and franchise taxes of Newark and Parlin as they come due.
Collateral for the Term Loan includes a perfected first  security
interest on all assets of Newark and Parlin and a pledge  of  all
capital stock of Newark and Parlin.

Upon  the  parent  company filing a petition for bankruptcy,  all
debt  subject  to  compromise  was  reclassified  to  prepetition
liabilities  (see  Note 11).  On April 30,  1996,  certain  notes
payable  were cured and reinstated.  Subsequently, an  amount  of
$8,898  was reclassified back to long-term nonrecourse debt  from
prepetition liabilities.  Nonrecourse long-term debt at June  30,
1995 consisted of only post-petition financing and all subsidiary
long-term  nonrecourse debt which was not part of the  bankruptcy
proceedings.    Nonrecourse  long-term  debt  consists   of   the
following:

                                        December 31,  June 30,  June 30,
                                            1996        1996      1995
Notes payable, due in monthly 
 installments of principal plus interest
 at rates ranging from 8.3% to 13.48%
 maturing on various dates through 
 March 2002                               $  8,610   $ 8,995     $4,739
Capital lease obligations, due in monthly
 installments at rates up to 13.48%,
 maturing at various dates through
 December 2000, collateralized by certain
 energy and rental equipment having a net
 book value of $4,840 at December 31, 1996   1,474     4,909      7,417
Credit Agreement financing                 151,047    60,000          -
 Total                                     161,131    73,904     12,156
Less amounts classified as current (a)      10,820     7,115      8,751
 Total noncurrent recourse debt           $150,311   $66,789     $3,405
   
 a)As  a  result  of   defaults  under  certain  of   a subsidiary
   company's   loan agreements,  the  Company  reclassified $4,374
   out  of a  long-term  classification  at  June 30, 1995  for  a
   total of $8,751 of its nonrecourse debt as a current liability.
   Of   this  amount,  approximately  $2,383 was triggered by non-
   payment and  the remainder, $1,991, was reclassified because of
   the Chapter 11 bankruptcy filing on September 28, 1994.

Scheduled  maturities of nonrecourse long-term debt  and  capital
lease  obligations for the next five years and thereafter are  as
follows:

 Year Ending December 31,  Long-Term Debt    Capital Leases

       1997                  $  9,687            $1,133
       1998                    10,813               466
       1999                    11,069                 -
       2000                     9,805                 -
       2001                    11,735                 -
     Thereafter               106,548                 -
     Interest component on
       capital leases               -              (125)
          Total              $159,657            $1,474

                              F-16

<PAGE>

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

(Dollars in thousands)

The  Company incurred interest charges, exclusive of interest  on
nonrecourse project financing and the loans due to NRG Energy, of
$7,042,  $8,351, $9,925 and $9,802 in the six month period  ended
December  31, 1996, and fiscal years ended 1996, 1995  and  1994,
respectively.  Of  these amounts $403 was capitalized  in  fiscal
1994.   No amounts were capitalized in the six month period ended
December 31, 1996 or fiscal 1996 or 1995.

Nonrecourse  project  financing, which was refinanced  in  fiscal
1996, consisted of the following at June 30, 1995:

  Newark project (a)                      $25,010
  Parlin project (b)                       60,310
    Total                                  85,320
  Less current portion                     85,320
    Total noncurrent                      $     -

Nonrecourse   project  financing  agreements  contained   various
restrictive  covenants consisting of the maintenance of  positive
working capital, limitation on the payment of dividends or  other
distributions  to  the  Company and a restriction  on  additional
borrowings  by  the  project subsidiaries.   At  June  30,  1995,
nonrecourse  project financing was classified as current  because
the  Newark  and Parlin projects were in default of the  covenant
requiring the maintenance of positive working capital.
     
   (a)   The  Newark  project  financing  was  an  obligation  of
   Newark,  a  wholly-owned subsidiary of the  Company.   Project
   financing  was converted from a nonrecourse construction  loan
   to  a  nonrecourse 12-year term loan in October 1990.  On June
   6,  1995,  Newark  executed  a  Settlement  and  Restructuring
   Agreement    which   allowed   monthly   predetermined    cash
   distributions   to  the  parent  company,    accelerated   the
   maturity   date  to  January  1997,  provided  for  escalating
   interest  rate margin increases throughout the remaining  term
   of  the  loan and obligated that Newark's monthly excess  cash
   be  applied as additional principal payments on the term loan.
   Previously,  the  term loan provided for a  variable  interest
   rate  tied  to either LIBOR or the prime rate.  During  fiscal
   1996,  1995 and 1994, $1,753, $2,065 and $1,693, respectively,
   of  interest  costs were incurred pursuant to the  term  loan.
   On  May  23,  1996,  the Company used the  $60,000  under  the
   Credit  Agreement, among other things, to refinance the Newark
   nonrecourse project finance debt.

   (b)   The  Parlin  financing was an obligation  of  Parlin,  a
   wholly-owned  subsidiary  of the Company.   Project  financing
   was  converted  from  a  nonrecourse construction  loan  to  a
   nonrecourse  12-year term loan in December 1990.  Through  the
   use  of an interest rate swap agreement, a portion of the term
   loan  had  a  fixed  interest rate of  approximately  11%  per
   annum.   The balance of the loan had a variable interest  rate
   tied  to  LIBOR.  During fiscal 1996, 1995 and  1994,  $5,730,
   $6,470  and  $6,633,  respectively,  of  interest  costs  were
   incurred  pursuant  to  the term loan.  These  interest  costs
   include  $1,642, $2,050 and $3,253 for fiscal 1996,  1995  and
   1994,  respectively,  of costs associated  with  the  interest
   rate  swap  agreement.   On  June 28,  1996,  the  outstanding
   Parlin  nonrecourse project financing debt was refinanced  and
   a  $3,100 breakage fee was paid to terminate the interest rate
   swap  agreement.   On  July 11, 1996,  the  Company  used  the
   $95,000  under  the Credit Agreement, among other  things,  to
   repay NRG Energy for the funds advanced on June 28, 1996  (see
   Note 13).

                              F-17

<PAGE>

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

(Dollars in thousands)

13.  Loans due NRG Energy, Inc.

In  accordance with the Plan, the Company and NRG Energy  entered
into  various  loan agreements.  At December 31, 1996,  the  loan
balance  due  to  NRG Energy is $14,388 with a maturity  date  of
April  30, 2001.  Interest expense in the six month period  ended
December 31, 1996 includes $648 attributable to the loans due NRG
Energy.


14.  Stockholders' Equity

Preferred stock

The   Company's  Certificate  of  Incorporation  authorizes   the
issuance of an aggregate of 20,000,000 shares of Preferred Stock,
par  value  $.01 per share in series.  The Board of Directors  is
authorized  to  fix  the  voting  rights,  designations,  powers,
preferences, qualifications, limitations or restrictions  of  any
such  series  and  to fix the number of shares constituting  such
series.

On  April  30,  1996,  the  Board  of  Directors  authorized  the
designation  of  50,000  shares as a Series  A  13.5%  cumulative
preferred  stock,  par  value $.01.  The  Company  issued  49,574
shares  to  Wexford  in  satisfaction of  $4,957  of  prepetition
unsecured claims allowed by the Court.  The preferred shares were
reacquired by the Company in May 1996 for $4,957 and paid $57  in
dividends.

Common stock

On  April  30, 1996, the outstanding Class A and Class  B  common
shares of the Company were canceled and became exchangeable for a
new  single issue of common stock ("Common Stock").  The  Company
authorized 50,000,000 shares, par value $.01.  The Company issued
6,474,814   common  shares  of  which  2,710,357  (41.86%)   were
purchased  by  NRG  Energy  and the  remaining  3,764,457  shares
(58.14%)  became  issuable to the existing  shareholders  of  the
Company.   Holders of the Company's Class A and  Class  B  shares
also   became   entitled   to   receive   an   aggregate   $7,500
(approximately $.44 cents per Class A and Class B  common  share)
from NRG Energy upon submission of the Class A and Class B common
shares to the transfer agent for exchange.

Except  for voting and conversion privileges, shares of  Class  A
and Class B common stock were identical.

O'Brien   Energy   Services  Company  ("OES"),   a   wholly-owned
subsidiary,  owned  75,000 shares of Class  A  common  stock  and
165,000  shares  of  Class B common stock  at  the  date  of  its
acquisition by the Company.  On April 30, 1996, these shares were
converted  into  52,800 shares of Common Stock.   On  October  8,
1996,  the  Company reacquired 18,500 shares of the Common  Stock
held by OES and issued such shares for aggregate proceeds of  $99
to  certain  members  of  Company management  and  the  board  of
directors.   At  December 31, 1996, there remains  34,300  shares
held  by OES.  Outstanding shares at December 31, 1996, June  30,
1996 and June 30, 1995 exclude the stock owned by OES.

                              F-18

<PAGE>

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

(Dollars in thousands)
  
Stock  options

Under  the  1996 Stock Option Plan adopted in October  1996  (the
"Stock Option Plan"), the Compensation Committee of the Company's
Board  of  Directors may award either nonqualified stock  options
("NQSOs")  or  incentive  stock  options  ("ISOs")  to  officers,
directors and key employees of the Company who occupy responsible
managerial, professional or advisory positions and who  have  the
capability of making a substantial contribution to the success of
the  Company.  Nonemployee directors may only receive NQSOs under
the  Stock Option Plan.  The Company has reserved 500,000  shares
of  Common Stock for issuance pursuant to awards under the  Stock
Option Plan.  During the six months ended December 31, 1996,  the
Company granted 399,000 stock options at an exercise price  range
of  $5.4375  to  $6.575 per share.  No stock  options  have  been
exercised as of December 31, 1996.

The  exercise price for the stock options granted under the Stock
Option Plan may not be less than the fair market value of a share
of  the underlying Common Stock on the date the option is granted
and  must  be  paid  in  cash unless the  Compensation  Committee
permits payment in shares of the Company's stock.  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  three   succeeding
anniversaries  of  the  grant.  The  Compensation  Committee  may
modify the exercisability of an option at its discretion.  If  an
award  under the Stock Option Plan expires or terminates  without
being  exercised  in  full or is forfeited,  the  shares  subject
thereto are generally available for new awards.

The  Company has elected to recognize compensation cost  for  its
stock-based  compensation  plan  in  accordance  with  Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued  to
Employees".  Generally, no compensation expense is recognized for
stock  options with exercise prices equal to the market value  of
the underlying stock at the date of grant.  Pro forma amounts  of
net  income and net income per share reflecting compensation cost
determined  based  on  the  fair  value  at  the  date  of  grant
consistent  with the method of Statement of Financial  Accounting
Standards No. 123 "Accounting for Stock-Based Compensation," have
not been presented because the amounts are not material.

Following  a  "change of control" all options granted  under  the
Stock Option Plan will become immediately exercisable.

Other

The   other  component  of  stockholders'  equity  includes   the
cumulative  foreign  currency translation adjustment  of  ($352),
($785),  and ($562) at December 31, 1996, June 30, 1996 and  June
30,  1995, respectively, and treasury stock of ($64) at June  30,
1995.   Treasury stock at June 30, 1995 is recorded at  cost  and
consisted  of  15,200 shares of Class A common stock  which  were
retired on April 30, 1996.

                              F-19

<PAGE>

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

(Dollars in thousands)

15.  Common Stock Option Right Granted to NRG Energy

In  connection with NRG Energy's assistance with the Grays  Ferry
project  (see Note 8), the Company granted NRG Energy the  right,
approved  by  the Court in March 1996, to convert  a  portion  of
borrowings  under the $10,000 loan agreement to Common  Stock  of
the  Company.   The  option right provides that  NRG  Energy  can
convert $3,000 of borrowings under the loan agreement for  Common
Stock  which would equal 396,301 common shares issued as of April
30,   1996.   No  amounts  have  been  borrowed  under  the  loan
agreement.

16.  Extraordinary Item

During  the six month period ended December 31, 1996, 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).

17.  Business Interruption Insurance Claims

Energy  revenues  for  fiscal 1995 and 1994  include  $1,035  and
$1,706  received under net business interruption insurance claims
associated with the Newark and Parlin cogeneration plants.

18.  Amortization of Cost in Excess of Net Assets Acquired

Amortization of cost in excess of net assets acquired amounted to
$1,987  and $98 in fiscal 1995 and 1994, respectively.   Included
in  fiscal 1995 amortization is $1,888 which related primarily to
the  unamortized value assigned to an acquired subsidiary's  heat
recovery technology which management deemed not realizable.

19.  Amendment to Newark and Parlin Power Purchase Agreement

Effective April 30, 1996, the Company renegotiated its  PPA  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.  The Company  anticipates
that   this  change  in  the  PPAs  will  reduce  its  historical
volatility in gross margins by eliminating the Company's risk  to
fluctuations in the price of natural gas which must  be  paid  by
its Newark and Parlin Projects.  However, because energy revenues
as well as the cost of energy revenues declined under the amended
PPAs,  the Company anticipates that its operating gross  margins,
over time, will remain similar to historical results.

Additionally,   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.

                              F-20

<PAGE>

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

(Dollars in thousands)

20.  Development Fees and Other

In September 1994, the Company sold its rights to develop a 14 MW
standby electric facility project for $1,762.

In  June  1994,  the  Company  sold  its  rights  to  develop   a
standby/peak  shaving project for a $5,000  cash  payment.   This
sale was recorded in development fees and other income. The costs
associated with the development rights were insignificant.

In  August 1993, the Company entered into an arrangement with  an
unrelated  third  party joint venture to sell  substantially  all
proved  and  unproved coalbed methane gas properties for  $6,500.
The Company received $2,000 in cash and a production payment note
receivable  of  $4,500.   In  addition,  the  Company  agreed  to
contribute  up  to  $800  to  complete non-producing  wells  into
commercial wells.  The Company discounted the production  payment
note in fiscal 1994 to an estimated net realizable value.  Fiscal
1994  development  fees  and other includes  $5,121  of  revenues
recognized in connection with this sale.  In May 1994, the  joint
venture   filed   a  complaint  with  the  American   Arbitration
Association.    The  Company  subsequently  counterclaimed.    On
March  31,  1995,  a settlement agreement was executed  with  the
joint  venture  to  resolve all disputes  in  which  the  Company
accepted  responsibility for $1,166 in cost reimbursement  toward
completion on non-producing wells with interest at prime plus 5%.
The  joint venture accepted an assignment of any and all payments
due  the  Company on the note receivable in satisfaction  of  the
obligation  until the sums withheld satisfy the  obligation  plus
all  accrued  interest. Until the obligation  is  satisfied,  the
Company  has no rights to the net revenues, as defined,  nor  can
the  note  receivable  be sold, pledged or assigned.   The  joint
venture is not entitled to look to the Company for the payment of
any  cost  obligations.  Only after recoupment of the  chargeback
obligation,  will payment on the note receivable be paid  from  a
percentage of net revenues, as defined, from the coalbed  methane
properties until the earlier of (1) the note is paid in  full  or
(2) 10 years.  At June 30, 1995, the Company reduced the carrying
value  of the note by the cost obligation and fully reserved  the
balance.

21.  Involuntary Conversion Gain

On  December  25,  1992, a fire disabled the Newark  cogeneration
plant.   The  damage  to the plant caused by the  fire  has  been
repaired.   The  plant returned to partial operations  in  August
1993  and  resumed full operation in October 1993.   The  Company
received  $36,000  from  its insurance carrier  which  covered  a
substantial majority of the Company's cost of repair and loss  of
net  profits  due  to business interruption.   Additionally,  the
Company  recognized an involuntary conversion gain of  $6,066  in
fiscal 1994.

22.  Disclosures about Fair Value of Financial Instruments
   
At  December 31, 1996 and June 30, 1996, the carrying amounts and
fair  values  of  the  Company's  financial  instruments  are  as
follows:

                              F-21

<PAGE>

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

(Dollars in thousands)
                                        December 31, 1996   June 30, 1996
                                         Carrying  Fair    Carrying  Fair
                                          Amount   Value    Amount   Value
Assets:
  Cash and cash equivalents             $  3,187 $  3,187 $  5,022 $  5,022
  Restricted cash and cash equivalents     8,174    8,174    8,719    8,719
  Notes receivable                         1,202    1,202    1,115    1,115

Liabilities:
  Short-term borrowings                    2,388    2,388    1,793    1,793
  Nonrecourse long-term debt             161,131  161,131   73,904   73,904
  Prepetition liabilities                  1,433    1,433    1,735    1,735
  Loans and payables due NRG Energy, Inc. 15,644   15,644  101,679  101,679
  Interest rate swap                           -    1,439        -        -

The carrying amounts of cash and 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
based on interest rates available to the Company for issuance  of
similar  debt with similar remaining maturities.  The fair  value
of  prepetition liabilities is stated at the value of the  amount
expected  to  be approved by the Court as allowed claims.   Under
the  terms  of  the Plan primarily all allowed claims  and  post-
petition  interest will be paid in full.  The fair value  of  the
interest  rate swap generally reflects 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.

23.  Transactions with Related Parties

NRG Energy provided the Company with a total of $128,078 in loans
during  fiscal 1996 in addition to funding a capital contribution
of $21,178.  The December 31, 1996 loan balance is $14,388 with a
maturity  date of April 30, 2001.  Interest expense for  the  six
months  ended December 31, 1996, and for fiscal year  ended  June
30,  1996 is $648 and $1,098, respectively.  Selling, general and
administrative  expenses include $608 and $129 for  reimbursement
of  services  provided by NRG Energy to the Company for  the  six
months ended December 31, 1996 and for the fiscal year ended June
30, 1996 under the terms of a management services agreement.
 
On  November  8, 1996, Power Operations, Inc., a new wholly-owned
subsidiary of the Company, assumed the operations and maintenance
of   the   Newark  facility,  replacing  Stewart  and   Stevenson
Operations,  Inc.   On December 31, 1996, Power Operations,  Inc.
assumed  the  operations and maintenance of the Parlin  facility,
replacing  Stewart and Stevenson Operations, Inc.  On January  1,
1997,  Power  Operations, Inc. was sold by  the  Company  to  NRG
Energy.   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
believes that such changes will have no material financial impact
on  the  operations  of  these facilities  or  on  the  Company's
financial condition or results of operations.

                              F-22

<PAGE>

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

(Dollars in thousands)

Under  the  terms  of  the Plan, on April 30,  1996,  NRG  Energy
purchased  the  stock  of 10 wholly-owned subsidiaries  from  the
Company  for  $7,500.   The  companies  sold  (collectively  "the
Subsidiaries") were O'Brien Biogas I (SKB), O'Brien  Biogas  Inc.
VI,  O'Brien Biogas (Mazzaro) Inc., O'Brien Biogas (Corona) Inc.,
O'Brien Biogas Inc. IV, O'Brien Biogas (Hackensack) Inc., O'Brien
Biogas Inc. III (Atochem), O'Brien Biogas VII, O'Brien Cogen Inc.
II (Artesia) and O'Brien Standby Power Energy, Inc.

Wexford was issued 49,574 shares of NRGG 13.5% cumulative  Series
A  preferred stock on April 30, 1996 in satisfaction of $4,957 in
prepetition liabilities approved by the Court as allowed  claims.
In  May  1996,  the Company reacquired the preferred  shares  for
$4,957 and paid $57 in dividends.  Additionally, the Company paid
Wexford a $200 administrative fee approved by the Court.  Wexford
has   an  agreement  with  the  Company  to  sell  the  Company's
Liquidating  Assets (see Note 1).  In the six month period  ended
December  31,  1996,  the  Company paid Wexford  $281  under  the
Liquidating Asset Management Agreement.

The Company leased office space until May 10, 1996 from Pennsport
Partnership, a Pennsylvania partnership in which the former Chief
Executive  Officer and former Principal Stockholder  ("FCEO")  of
the  Company  has  a 50% ownership interest. Rental  expense  for
fiscal 1996, 1995 and 1994 was $152, $242 and $289, respectively.
The  Company also leases office space until April 30,  1997  from
Christiana  River Holdings, Ltd., an entity owned  by  the  FCEO.
Rental  expense  was $55 for the six month period ended  December
31, 1996 and $150 for each fiscal year ended 1996, 1995 and 1994.

In the six months ended December 31, 1996, the Company recognized
$43  of  revenue  by  selling equipment and related  services  to
PoweRent.   In  fiscal  1996, the Company  recognized  $1,039  of
revenue  by  selling equipment and related services to  PoweRent.
The cost of the equipment and related service was $940.

The  Company  was charged commissions by O'Brien  Power  Systems,
Inc.  of  $647 in fiscal 1994 in connection with equipment  sales
and services provided to third parties.

In  September  1993, NRG Generating Limited ("Puma"),  a  wholly-
owned  subsidiary  located in the United Kingdom,  purchased  its
executive offices and its principal facility located in Kent from
III  Enterprises  Limited, an entity owned by  the  FCEO  of  the
Company,  for approximately $800.  The Company estimated  a  fair
value  of  these  facilities at approximately  $1,100.   However,
predecessor  cost  of  $498  was used to  capitalize  the  assets
purchased  and  the  excess  of  the  purchase  price  over   III
Enterprises Limited's historical net book value was reflected  as
an increase in the accumulated deficit.  Prior to September 1993,
Puma leased the facility from III Enterprises Limited with rental
expense amounting to $66 in fiscal 1994.

At  June 30, 1995, the Company had notes receivable totaling $238
from  a  former officer of the Company.  The notes were unsecured
with  interest at 8.25% per annum.  At June 30, 1995, the Company
established  a  reserve  for the notes and  accrued  interest  to
reflect  a  court  approved  stipulation  agreement  between  the
Official  Committee of Unsecured Creditors (the "Committee")  and
the  former  officer whereby, in consideration of the notes,  the
former  officer agreed to withdraw his claim against the  Company
and  assist  the Committee with its prosecution of objections  to
certain identified disputed claims in the bankruptcy proceedings.

                              F-23

<PAGE>

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

(Dollars in thousands)

24.  Income Taxes

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

                              Six Months
                                 Ended          Twelve Months Ended
                              December 31,  June 30,  June 30,  June 30,
                                 1996         1996     1995      1994

United States                    $ 4,195   $(18,054) $(38,225) $(12,657)
Foreign                              317       (122)      (14)   (1,931)
  Total                          $ 4,512   $(18,176) $(38,239) $(14,588)

The income tax provision (benefit) consists of:

 Current income taxes:
   Federal                       $   803   $      -  $      -  $      -
   State                             570        792       402         -
     Subtotal                      1,373        792       402         -

 Deferred income taxes:
 Federal                          (2,292)      (493)      912         -
 State                               651       (762)    1,366         -
  Subtotal                        (1,641)    (1,255)    2,278     1,913
   Income tax provision (benefit)
    excluding extraordinary item $  (268)  $   (463) $  2,680  $  1,913

Deferred  income  taxes arise from temporary differences  between
the  tax  bases  of  assets and liabilities  and  their  reported
amounts  in the financial statements.  The components of the  net
deferred tax liabilities are as follows:
                                  December 31, June 30,  June 30,
                                      1996       1996      1995
Deferred income tax liabilities:
 Property, plant & equipment        $(18,445) $(18,109) $(20,022)
   Total deferred tax liabilities    (18,445)  (18,109)  (20,022)

Deferred income tax assets:
 Net operating loss carryforwards     26,502    28,219    25,241
 Alternative minimum tax credits         183        84        84
 Investment tax credits                1,622     1,622     1,622
 Miscellaneous                         5,571     5,521     6,848
 Valuation allowance                 (28,837)  (31,519)  (28,859)
  Total deferred tax assets            5,041     3,927     4,936
    Net deferred income tax
     liabilities                    $(13,404) $(14,182) $(15,086)

                              F-24

<PAGE>

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

(Dollars in thousands)

The  decrease in the valuation allowance from June  30,  1996  to
December  31,  1996  is due primarily to the utilization  of  net
operating  loss  carryforwards and existing deductible  temporary
differences  against current year taxable income and  the  future
reversals of existing taxable temporary differences.

The  difference between tax expense (benefit) calculated  at  the
U.S.  federal  statutory tax rate and the  recorded  tax  expense
(benefit) on income from continuing operations (exclusive of  the
December 31, 1996 extraordinary item) is reconciled below:
                                Six Months
                                   Ended         Twelve Months Ended
                                December 31, June 30,  June 30, June 30,
                                    1996       1996      1995     1994
Income tax (benefit) on the amount
 of Federal statutory rate         $ 1,534   $(6,180) $(13,001) $(4,959)
State income taxes (benefit)           806       252      (286)     387
Current benefit of state operating
 loss carryforwards                   (655)     (232)        -        -
Operating income tax losses with
 no current tax benefit (federal
 & state)                                -     3,204     2,272    5,759
Other increase (decrease) in 
 valuation allowance                (1,630)     (544)    6,233        -
Excess liabilities                       -         -     4,000        -
Reorganization costs                     -     2,636     1,712        -
Other                                 (323)      401     1,750      726
  Total income tax provision
 (benefit)                         $  (268)  $  (463) $  2,680  $ 1,913

At  December 31, 1996, the Company has federal net operating loss
carryforwards  available to offset future regular taxable  income
and  investment  tax  credit carryforwards  available  to  offset
future  regular  or  alternative  minimum  federal  income  taxes
payable. These carryforwards expire as follows:

                            Net Operating Loss      Investment Tax
 December 31,                 Carryforwards      Credit Carryforwards

     1997                         $     -                $    -
     1998                               -                    57
     1999                               -                   138
     2000                               -                   255
     2001                               -                   240
     2002                           3,553                   409
     2003                           1,725                    82
     2004                           5,010                   174
     2005                          13,327                    52
     2006                           4,607                   215
     2007                          15,741                     -
     2008                          10,715                     -
     2009                           6,414                     -
     2010                           8,117                     -
       Total                      $69,209                $1,622

                              F-25

<PAGE>

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

(Dollars in thousands)

The  Company  has $44,289 of state and local net  operating  loss
carryforwards available to offset future state and local  taxable
income.   These carryforwards will expire starting  in  1997  and
will  continue  to  expire through 2010.  The  Company  also  has
unused net operating loss carryforwards for United Kingdom income
tax  purposes  of approximately $1,480.  For United  Kingdom  tax
purposes these losses can be carried forward and can be  used  to
offset future taxable income.  Based upon the weight of available
negative  evidence, it is more likely than not that the  deferred
tax  assets  will not all be realized.  Accordingly, the  Company
has established a partial valuation allowance against the federal
and  state loss and tax credit carryforwards and a full valuation
allowance against the United Kingdom loss carryforwards.  The net
operating loss carryforwards for alternative minimum tax purposes
are approximately $33,677 at December 31, 1996.

Under  the  Plan, approved on January 18, 1996 by the Court,  NRG
Energy  acquired a 41.86% equity interest in the  Company.   This
acquisition,  along  with  other shifts  in  shareholders'  stock
holdings, amounted to more than a 50% change in ownership in  the
Company  over  a  three  year  period.   Under  the  general  net
operating loss and tax credit carryover rules, the utilization of
the  losses  and  tax  credits would be  limited.   However,  the
Internal Revenue Code provides an exception to the general  rules
for  loss corporations that undergo an ownership change by reason
of  certain  bankruptcy  proceedings.  The  Company  believes  it
qualifies for the bankruptcy exception and its net operating loss
and  tax  credit carryforwards are not subject to the  change  of
ownership  limitations.   The  bankruptcy  exception  rules  also
provide that if a subsequent ownership change should occur within
the  two  years  following the bankruptcy protected  change,  the
benefits  of  the  bankruptcy exception  will  be  lost  and  the
Company's net operating loss and tax credit carryforwards will be
effectively eliminated.

25.  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 segments of the business is as follows:

                              Six Months
                                 Ended         Twelve Months Ended
                              December 31, June 30,  June 30,  June 30,
                                  1996       1996      1995      1994
Revenues:
  Energy                        $ 23,247  $ 69,308  $ 80,246  $ 76,913
  Equipment sales, rental and
   services                       16,669    27,239    22,001    29,676
    Total                       $ 39,916  $ 96,547  $102,247  $106,589

Identifiable assets:
  Energy                        $141,890  $142,390  $164,243  $180,329
  Equipment, sales, rental and
   services                       16,170    21,342    22,866    47,329
  Corporate assets                15,564    14,430     2,639    10,158
    Total                       $173,624  $178,162  $189,748  $237,816

                              F-26

<PAGE>

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

(Dollars in thousands)

                              Six Months
                                 Ended         Twelve Months Ended
                              December 31, June 30,  June 30,  June 30,
                                  1996       1996      1995      1994
Operating income (loss):
  Energy                        $ 12,136  $ 16,785  $ 19,642  $ 10,280
  Equipment sales, rental and
   services                        1,018      (754)  (20,265)   (4,874)
  General corporate expenses      (1,374)   (4,029)  (11,254)   (8,921)
    Total                       $ 11,780  $ 12,002  $(11,877) $ (3,515)

Depreciation and amortization expense:

  Energy                        $  3,686  $  7,123  $  7,259  $  7,345
  Equipment sales, rental and
   services                          481       756     1,494     2,171
  Not allocable                      503        82       250     1,486
    Total                       $  4,670  $  7,961  $  9,003  $ 11,002

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

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

                              Six Months
                                 Ended         Twelve Months Ended
                              December 31, June 30,  June 30,  June 30,
                                  1996       1996      1995      1994
Revenues:
  United States                $ 27,937   $ 82,917  $ 89,332  $ 93,090
  United Kingdom                 11,979     13,630    12,915    13,499
    Total                      $ 39,916   $ 96,547  $102,247  $106,589

Net income (loss):
  United States                $  6,087   $(17,591) $(40,905) $(14,570)
  United Kingdom                    336       (122)      (14)   (1,931)
    Total                      $  6,423   $(17,713) $(40,919) $(16,501)

Identifiable assets:
  United States                $164,631   $169,657  $179,793  $230,343
  United Kingdom                  8,993      8,505     9,955     7,473
    Total                      $173,624   $178,162  $189,748  $237,816

Revenues from one energy customer accounted for 46%, 62%, 65% and
53%  for  the six month period ended December 31, 1996,  and  for
fiscal years 1996, 1995 and 1994, respectively.

                              F-27

<PAGE>

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

(Dollars in thousands)

26.  Operating Leases

The   Company   leases  equipment  and  primarily  conducts   its
operations  in  leased facilities which expire on  various  dates
through  the  year 2000.  Under the terms of most  of  the  lease
agreements,  the  Company is required to  pay  taxes,  insurance,
maintenance  and  other operating costs of the  facilities.   The
total   minimum   annual  lease  payments  under   non-cancelable
operating lease agreements are as follows:

      Year Ending December 31,
             1997                  $ 181
             1998                    114
             1999                     26
             2000                      1
      Total                        $ 322

Total   rental  expense  under  various  operating   leases   was
approximately  $504, $804, $1,300, and $1,308 in  the  six  month
period  ended December 31, 1996, and the fiscal years 1996,  1995
and 1994, respectively.

27.  Minority Interest

On  November 12, 1993, the Company sold the capital stock of  OPC
and   Philadelphia  BioGas  Supply,  Inc.  ("PBG"),  wholly-owned
subsidiaries, and issued 5.5 million warrants for Class A  common
stock to entities controlled by an unrelated private investor for
$5,000  in cash.  The warrants were exercisable at prices ranging
from  $4.00  to  $6.00 per share and assigned a value  of  $1,300
which  was reflected in additional paid-in capital.  The  primary
assets  of  OPC  and  PBG  consist of a  20-year  energy  service
agreement   and  a  digester  gas  supply  agreement   with   the
Philadelphia Municipal Authority.

On August 5, 1994, the Company exercised its option to repurchase
83%  of OPC and PBG for $5,000.  The Company continued to own and
rent to OPC and PBG the facilities and all related generation and
associated equipment to the project during the period the project
was  owned  by  the  unrelated private investor  and  accordingly
recognized  rental revenues of approximately $254 and  $2,187  in
fiscal  1995  and 1994, respectively.  Additionally, fiscal  1995
interest expense includes $1,050 paid to the private investor  to
extend the Company's reacquisition option period to August 1994.

The  repurchase  agreement obligates OPC to distribute  quarterly
17%  of its net earnings.  These distributions totaled $125, $227
and  $209  in the six month period ended December 31,  1996,  and
fiscal  1996 and 1995, respectively, and are recorded as interest
expense  in  the consolidated statement of operations.   The  17%
minority interest retained by the private investor is represented
by 100 shares of OPC series A preferred stock, $.01 par value and
redeemable by the Company at its option for a price equal to  17%
of  the  present  value  of the projected income  stream  of  the
project  as  set forth in the repurchase agreement.  The  private
investor  can also obligate the Company, upon certain  events  of
default,   to  repurchase all, but not  less  than  all,  of  the
outstanding  preferred stock at 60% of the  Company's  redemption
price.   The Company's redemption price at December 31, 1996  was
approximately $2,257. There are no events of default.

                              F-28

<PAGE>

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

(Dollars in thousands)

The Company's Class A common stock warrants issued to the private
investor were terminated on the April 30, 1996 closing date under
the terms of the Plan.

28.  Litigation

Hawker Siddeley

The Company was involved in litigation with Hawker Siddeley Power
Engineering,  Inc.  ("Hawker"), the turnkey  contractor  for  the
Parlin  (the  "Parlin Action") and former Salinas  projects  (the
"Salinas  Action").   In  the aggregate,  Hawker's  lawsuits,  as
amended,  sought compensatory damages of $15,000 and $3,000  from
the  Parlin  and former Salinas projects, respectively.   In  May
1994,  Parlin,  O'Brien Cogeneration Inc.  II,  and  the  Company
entered  into a settlement agreement with Hawker Siddeley,  Power
Engineering, Inc. (the "Hawker Settlement Agreement").  Under the
Hawker  Settlement Agreement all parties dismissed  their  claims
related  to  the  Parlin Action and the Company issued  a  $1,500
promissory note to Hawker in satisfaction of the Salinas  Action.
The  promissory note became subject to the bankruptcy proceedings
on  September  28,  1994  and was subsequently  paid  with  post-
petition interest on April 30, 1996.

Newark Fire Deaths

During September 1993 to November 1993, three actions were  filed
against Newark by survivors of three employees of the independent
operator  of the Newark Cogeneration facility who were killed  as
the  result of a fire which occurred at the facility in  December
1992.  All three actions were settled and covered in full by  the
Company's insurance carrier.

Other Proceedings

On  July  27,  1994, an alleged stockholder of the Company  filed
suit  seeking  money damages in an amount allegedly sustained  by
the  stockholder.   On September 15, 1994, two alleged  debenture
holders  filed suit seeking money damages in an amount  allegedly
sustained  by  debenture  holders who purchased  debentures  from
September  28, 1992 through April 12, 1994.  The complaints  name
as  defendants  O'Brien and certain of its  former  officers  and
former  directors.  The complaints allege that  O'Brien  and  the
other defendants violated the Securities Exchange Act of 1934 and
disseminated  or  were responsible for  the  disseminating  of  a
series   of  false  and  misleading  statements  concerning   the
Company's  business, results of operations and future  prospects.
The  Court,  by its confirmation order dated February  13,  1996,
limited  the  rights of these claimants against  the  reorganized
Company  to the extent of any recoveries available to the Company
under the insurance policies providing any insurance coverage  in
respect to such claims.

The  reorganized  Company is continuing its  dispute  of  certain
prepetition  claims  as  well as certain administrative  priority
claims  filed with the Court.  Although the Company  cannot  give
definitive  assurance regarding the ultimate  resolution  of  the
various  claims described above, the Company does  not  presently
believe  the  matters described above or the  resolution  thereof
will  have  a material adverse impact on the Company's  financial
statements.

                              F-29

<PAGE>

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

(Dollars in thousands)

29.  Subsequent Events

Sale of Power Operations, Inc.

On  November  8, 1996, Power Operations, Inc., a new wholly-owned
subsidiary of the Company, assumed the operations and maintenance
of   the   Newark  facility,  replacing  the former operator.  On
December 31, 1996, Power Operations,  Inc. assumed the operations
and  maintenance  of the Parlin  facility, replacing  the  former
operator.  On January  1, 1997,  Power  Operations, Inc. was sold
by  the  Company  to  NRG Energy.  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  believes  that  such changes  will have no material
financial impact on  the  operations  of  these facilities  or on
the Company's financial condition or results of operations.

Pakistan Development Project

In February 1997, NRGG (Asia), Inc., a wholly-owned subsidiary of
the  Company,  sold  its  rights  to  a  development  project  in
Pakistan.   The Company believes that there will be  no  material
financial impact as a result of this sale.

                              F-30

<PAGE>

                 Independent Accountants Report

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

We  have  audited  the  accompanying  consolidated  statement  of
operations,  of  stockholders' equity and of cash  flows  of  NRG
Generating  (U.S.)  Inc. and subsidiaries  ("Company")  (formerly
known  as O'Brien Environmental Energy, Inc.) for the year  ended
June 30, 1994.  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 audit.

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

In our opinion, the consolidated financial statements referred to
above  present fairly, in all material respects, the consolidated
stockholders'   equity  of  NRG  Generating   (U.S.)   Inc.   and
subsidiaries as of June 30, 1994 and the consolidated results  of
their operations, changes in their stockholders' equity and their
cash  flows  for  the year ended June 30,1994 in conformity  with
generally accepted accounting principles.

As discussed in Note 28 to the consolidated financial statements,
the  Company  is a defendant in several lawsuits.   The  ultimate
outcome  of  the  litigations  cannot  presently  be  determined.
Accordingly,  no provisions for any liabilities that  may  result
has been made in the accompanying consolidated statements for the
year ended June 30, 1994.

The   accompanying  consolidated  statement  of  operations,   of
stockholders' equity, and of cash flows for the year  ended  June
30,  1994  have  been prepared assuming  that  the  Company  will
continue  as  a  going concern.  As discussed in Note  1  to  the
consolidated  financial statements, the Company  has  experienced
significant   operating   problems  and   setbacks   which   have
contributed  to  its  losses  and liquidity  problems.   Further,
O'Brien Environmental Energy, Inc. filed a voluntary petition for
reorganization under Chapter 11 of the Federal Bankruptcy Code in
the  United States Bankruptcy Court on September 28, 1994.  These
events   and   circumstances,  including  the  Company's   highly
leveraged  capital structure, raise substantial doubt  about  its
ability  to continue as a going concern.  Management's  plans  in
regard  to  these  matters  are  described  in  Note  1  to   the
consolidated financial statements.  The consolidated statement of
operations,  of stockholders' equity, and of cash flows  for  the
year  ended  June  30, 1994 do not include any  adjustments  that
might result from the outcome of this uncertainty.

COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
October 7, 1994

                              F-31

<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").

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.

2.5*      Agreement dated April 30, 1996 relating to Purchase  of
          the  Stock  of  Ten  Wholly Owned Subsidiaries  of  the
          Company by NRG Energy.

3.1*      Amended  and  Restated Certificate of Incorporation  of
          the Company.

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

10.1*     Co-Investment  Agreement dated April 30,  1996  between
          the Company and NRG Energy.

10.2.1*   Chapter  11 Financing Agreement dated August  30,  1995
          between the Company and NRG Energy.

10.2.2*   Letter  Agreement dated February 20, 1996  between  the
          Company   and  NRG  Energy  amending  the  Chapter   11
          Financing Agreement.

10.2.3*   Letter  Agreement  dated April  30,  1996  between  the
          Company and NRG Energy further amending the Chapter  11
          Financing Agreement.

10.3*     Liquidating Asset Management Agreement dated April  30,
          1996 between the Company and Wexford.

10.4*     Management  Services Agreement dated as of January  31,
          1996 between the Company and NRG Energy.

10.5.1*   Loan Agreement dated April 30, 1996 between the Company
          and NRG Energy.

10.5.2*   Note  dated  April  30, 1996 from the  Company  to  NRG
          Energy in the principal amount

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<PAGE>

          of $45,000,000.

10.6.1*   Supplemental  Loan  Agreement  dated  April  30,   1996
          between NRG Energy and the Company.

10.6.2*   Note  dated  April  30, 1996 from the  Company  to  NRG
          Energy in the principal amount of $15,855,545.25.

10.7.1*   NRG  Newark Cogen Loan Agreement dated April  30,  1996
          between NRG Energy and the Company.

10.7.2*   Note  dated  April  30, 1996 from the  Company  to  NRG
          Energy in the principal amount of $24,000,000.

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 under the Credit
          Agreement.

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).

10.8.3*   Stock Pledge Agreement dated June 28, 1996 between  the
          Company as Pledgor and Credit Suisse.

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.

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.

10.8.6*   Tax  Indemnification  Agreement  dated  June  28,  1996
          between  the  Company,  NRGG Newark,  NRGG  Parlin  and
          Credit Suisse.

10.8.7*   Assignment and Security Agreement dated June  28,  1996
          between NRGG Parlin and Credit Suisse

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

10.8.9*   Leasehold Mortgage, Assignment of Leases and Rents  and
          Security  Agreement dated June 28,  1996  between  NRGG
          Parlin and Credit Suisse.

10.8.10*  Interest  Rate  Swap  Agreement dated  August  2,  1996
          between NRGG Newark, NRGG Parlin and Credit Suisse.

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.

10.9.2*   Option  Agreement  dated May 1,  1996  between  O'Brien
          (Schuylkill) Cogeneration Inc. and NRG Energy.

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

                               37

<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.

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.

10.11.3*  Second  Amendment  to  Power Purchase  Agreement  dated
          March 1, 1988 between the Company and JCP&L.

10.11.4*  Letter  Agreement dated April 30, 1996 between  O'Brien
          (Newark)  Cogeneration, O'Brien  (Parlin)  Cogeneration
          and JCP&L.

10.11.5*  Third Amendment to Power Purchase Agreement dated April
          30,  1996  between  O'Brien (Newark)  Cogeneration  and
          JCP&L.

10.12*    Gas  Service  Agreement  dated  May  13,  1993  between
          O'Brien  (Newark) Cogeneration, Inc. and Public Service
          Electric and Gas Company.

10.13.1*  Interim  Gas  Service Agreement dated  March  27,  1996
          between  JCP&L  and  Public Service  Electric  and  Gas
          Company.

10.13.2*  New  Jersey  Board  of  Public  Utilities  approval  of
          Interim Gas Service Agreement.

10.14*    Transmission  Service  and  Interconnection   Agreement
          dated November 17, 1987 between O'Brien Energy Systems,
          Inc. and Public Service Electric and Gas Company.

10.15.1*  Steam  Purchase Agreement dated October 3, 1986 between
          O'Brien Cogeneration IV,

                               38

<PAGE>

          Inc. and Newark Boxboard Co.

10.15.2*  Amendment  to Steam Purchase Agreement dated March  15,
          1988  between O'Brien Cogeneration IV, Inc. and  Newark
          Boxboard Co.

10.15.3*  Amendment  to Steam Purchase Agreement dated  July  18,
          1988  between O'Brien (Newark) Cogeneration,  Inc.  and
          Newark Group Industries, Inc.

10.16.1*  Operating and Maintenance Agreement dated May  1,  1996
          between NRGG Newark and Stewart & Stevenson Operations,
          Inc.

10.16.2*  Letter Agreement dated May 10, 1996 between the Company
          and Stewart & Stevenson Operations, Inc.

10.16.3*  Letter  Agreement  dated  May  20,  1996  between   NRG
          Generating   (Newark)  Cogeneration   and   Stewart   &
          Stevenson Operations, Inc.

10.17.1   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.

10.17.2*  First  Amendment  to Agreement for  Purchase  and  Sale
          Electric Power dated June 11, 1991 between the  Company
          and JCP&L.

10.17.3*  Amended and Restated Agreement for Purchase and Sale of
          Electric  Power  dated April 30, 1996  between  O'Brien
          (Parlin) Cogeneration, Inc. and JCP&L.

10.17.4*  Letter  Agreement dated April 30, 1996 between  O'Brien
          (Parlin) Cogeneration, Inc. and JCP&L.

10.18*    Gas  Service  Agreement  dated  May  13,  1993  between
          O'Brien  (Parlin) Cogeneration, Inc. and Public Service
          Electric and Gas Company.

10.19.1*  Interim  Gas  Service Agreement dated  March  27,  1996
          between  JCP&L  and  Public Service  Electric  and  Gas
          Company.

10.19.2*  New  Jersey  Board  of  Public  Utilities  approval  of
          Interim Gas Service Agreement.

10.20.1*  Steam  Purchase Contract dated December 8, 1986 between
          the Company and E.I. du Pont de Nemours("E.I. du Pont")
          and Company.

10.20.2*  Amendment  No.  1  to  Steam  Purchase  Contract  dated
          January 12, 1988 between the Company and E.I. du Pont.

10.20.3*  Letter  Agreement  dated  July  25,  1988  between  the
          Company and E.I. du Pont.

10.20.4*  Amendment  No.  3  to  Steam Purchase  Agreement  dated
          December 12, 1988 between the Company and E.I. du Pont.

10.20.5*  Amendment  No. 4 to Steam Purchase Contract dated  July
          14, 1989 between the Company and E.I. du Pont.

10.20.6*  Amendment  No.  5  to  Steam  Purchase  Contract  dated
          February 16, 1993 between the Company and E.I. du Pont.

10.21.1*  Electricity  Purchase Contract dated January  18,  1988
          between the Company and E.I. du Pont.

                               39

<PAGE>

10.21.2*  Electricity  Purchase  Contract dated  April  30,  1996
          between  O'Brien  (Parlin) Cogeneration  Inc.  and  NRG
          Parlin Inc.

10.21.3*  Assignment of Electricity Purchase Contract dated April
          30,  1996 between O'Brien (Parlin) Cogeneration,  Inc.,
          NRG Parlin, Inc. and E.I. du Pont.

10.22.1*  Operating  &  Maintenance Agreement dated May  1,  1996
          between NRG Generating (Parlin) Cogeneration, Inc.  and
          Stewart Stevenson Operations, Inc.

10.22.2*  Agreement  dated May 1, 1996 between the Company,  NRGG
          Newark, NRGG Parlin and Stewart & Stevenson Operations,
          Inc.

10.22.3*  Letter  Agreement  dated  May  20,  1996  between   NRG
          Generating  (Parlin) Cogeneration, Inc. and  Stewart  &
          Stevenson Operations, Inc.

10.23*    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").

10.24.1*  Acquisition Agreement dated March 1, 1996 between Adwin
          Schuylkill, O'Brien Schuylkill and Trigen-Schuylkill.

10.24.2*  Side  Agreement  dated  March  1,  1996  between  Adwin
          Schuylkill, O'Brien Schuylkill and Trigen-Schuylkill.

10.25.1*  Contingent Capacity Purchase Addendum to the  Agreement
          for   Purchase  of  Electric  Output  (Phase  I)  dated
          September 17, 1993 between PECO and Grays Ferry.

10.25.2*  Contingent Capacity Purchase Addendum to the  Agreement
          for  Purchase  of  Electric  Output  (Phase  II)  dated
          September 17, 1993 between PECO and Grays Ferry.

10.25.3*  Amendment Agreement dated January 31, 1994 between PECO
          and Grays Ferry.

10.25.4*  Agreement  for  Purchase of Electric Output  (Phase  I)
          dated   July  28,  1992  between  PECO  Energy  Company
          ("PECO") and Grays Ferry.

10.25.5*  Agreement  for Purchase of Electric Output  (Phase  II)
          dated July 28, 1992 between PECO and Grays Ferry.

10.26.1*  Amended  and  Restated Steam Purchase  Agreement  dated
          September  17,  1993 among Philadelphia Thermal  Energy
          Corporation    ("PTEC"),   Adwin   Equipment    Company
          ("Adwin"),    O'Brien   Environmental   Energy,    Inc.
          ("O'Brien") and Grays Ferry.

10.26.2*  Amended  and  Restated  Steam Venture  Agreement  dated
          September  17,  1993  among PTEC,  Philadelphia  United
          Power Corporation ("PUPCO"), Adwin and O'Brien.

10.27.1*  Amended  and  Restated Project Services and Development
          Agreement dated September 17, 1993 by and between PUPCO
          and Grays Ferry

10.27.2*  Consent to Assignment of Agreement dated March 1,  1996
          between PUPCO, Grays Ferry Cogeneration Partnership and
          The Chase Manhattan Bank, N.A.

10.28*    Amended  and  Restated Site lease, dated September  17,
          1993 between PTEC and Grays Ferry.

10.29*    Newark Lease.

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<PAGE>

10.30*    Parlin Lease.

10.31.1*  NRG Generating (U.S.) Inc. 1996 Stock Option Plan dated
          September  20,  1996 and filed as  Appendix  A  to  the
          Company's  Proxy Statement dated October 28,  1996  and
          incorporated herein by reference.

10.31.2*  Form of an Incentive Stock Option Agreement.

10.31.3*  Form of a Nonqualified Stock Option Agreement.

10.31.4*  Form  of  a  Nonemployee  Director  Nonqualified  Stock
          Option Agreement.

10.32*    Employment  Agreement dated April 30, 1996 between  the
          Company and Leonard A. Bluhm.

21        List of Subsidiaries of the Registrant.

23.1      Consent of Price Waterhouse LLP.

23.2      Consent of Coopers & Lybrand LLP.

27        Financial Data Schedule.
____________
          
* To be filed by amendment.

                               41