##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarter ended June 30, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 0001261679
    
    MSW Energy Holdings LLC
    
    Delaware
    
    14-18731190001261680
    
    MSW Energy Finance Co., Inc.
    
    Delaware
    
    20-0047886Commission File Number
    
    (Exact name of each registrant as
    
    (State or other jurisdiction
    
    (I.R.S. Employerspecified in its charter)
    
    of incorporation or
    
    Identification Number)organization)
 c/o Danielson Holding Corporation
40 Lane Road
Fairfield, New Jersey 07004
Phone No. 973-882-9000
 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 (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
 Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Act):
 MSW Energy Holdings LLC:
    
    yes o no þMSW Energy Finance Co., Inc:
    
    yes o no þ
 Indicate the number of shares outstanding of each of the registrants classes of common stock,
as of the latest practicable date.
 MSW Energy Holdings LLC:
    
    NoneMSW Energy Finance Co., Inc:
    
    100 shares of Common Stock
 MSW
Energy Finance Co., Inc. meets the conditions set forth in General
Instruction H (1)(a) and (b)
of Form 10-Q and is therefore filing this Form 10-Q with the reduced disclosure format.




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TABLE OF CONTENTS
 Part I FINANCIAL INFORMATION
    
    
    3Item 1. Consolidated Financial Statements
    
    
    3Consolidated
Balance Sheets as of June 30, 2005 (Unaudited) and
December 31, 2004
    
    
    3Consolidated
Statements of Operations for the period from June 25 through
June 30, 2005, the period from April 1 through
June 25, 2005 and the Three Months Ended June 30, 2004
(Unaudited)
    
    
    4Consolidated
Statements of Operations for the period from June 25 through
June 30, 2005, the period from January 1 through
June 25, 2005 and the Six Months Ended June 30, 2005
(Unaudited)
    
    
    5Consolidated
Statements of Members Equity for the period from January 1,
2004 to June 24, 2005 (Predecessor) and the period from
June 24 to June 30, 2005 (Successor) (Unaudited)
    
    
    6Consolidated
Statements of Cash Flows for the period from June 25 through
June 30, 2005, the period from January 1 through
June 25, 2005 and the Six Months Ended June 30, 2004
(Unaudited)
    
    
    7Notes
to the Consolidated Financial Statements (Unaudited)
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    21Item 4. Controls and Procedures
    
    
    29PART II OTHER INFORMATION
    
    
    30Item 1. Legal Proceedings
    
    
    30Item 5. Other Information
    
    
    31Item 6. Exhibits
    
    
    32SIGNATURESStatement re Computation of Ratio of Earnings to Fixed Charges15d-14(a) Certification of Anthony J. Orlando for MSW Energy Holdings LLC15d-14(a) Certification of Craig D. Abolt for MSW Energy Holdings LLC15d-14(a) Certification of Anthony J. Orlando for MSW Energy Finance Co., Inc.15d-14(a) Certification of Craig D. Abolt for MSW Energy Finance Co., Inc.Section 1350 Certification for MSW Energy Holdings LLCSection 1350 Certification for MSW Energy Finance Co., Inc.




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##### Table of Contents



Part I FINANCIAL INFORMATION
 
 Item 1. Consolidated Financial Statements
 MSW ENERGY HOLDINGS LLC AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
(In thousands)
 June 30, 2005
    

    
    December 31, 2004(unaudited)AssetsCurrent assetsCash and cash equivalents
    
    $
    39,334
    

    
    $
    86,310Restricted cash and short-term investments
    
    
    62,357
    

    
    
    64,703Accounts receivable, net of allowance for doubtful accounts of
$2,044 and $1,317, respectively
    
    
    69,497
    

    
    
    72,027Prepaid expenses and other current assets
    
    
    16,094
    

    
    
    12,426Total current assets
    
    
    187,282
    

    
    
    235,466Long-term assetsProperty, plant and equipment, net
    
    
    1,900,699
    

    
    
    1,174,896Intangible assets, net
    
    
    268,383
    

    
    
    535,134Goodwill
    
    
    298,089
    

    
    
    2,175Restricted cash and long-term investments
    
    
    83,819
    

    
    
    90,972Other long-term assets
    
    
    13,564
    

    
    
    17,088Total long-term assets
    
    
    2,564,554
    

    
    
    1,820,265Total assets
    
    $
    2,751,836
    

    
    $
    2,055,731Liabilities and Members EquityCurrent liabilitiesAccounts payable trade
    
    $
    6,310
    

    
    $
    5,050Current portion of intermediate debt
    
    
    26,657
    

    
    
    20,000Current portion of project debt
    
    
    55,707
    

    
    
    67,184Accrued interest payable
    
    
    15,821
    

    
    
    16,583Accrued expenses and other current liabilities
    
    
    42,346
    

    
    
    39,929Income taxes payable
    
    
    
    

    
    
    22Total current liabilities
    
    
    146,841
    

    
    
    148,768Long-term liabilitiesIntermediate debt
    
    
    418,349
    

    
    
    420,000Project debt
    
    
    718,606
    

    
    
    738,829Other long-term liabilities
    
    
    162,150
    

    
    
    224,619Deferred
income taxes
    
    
    143,266
    

    
    
    27,044Total long-term liabilities
    
    
    1,442,371
    

    
    
    1,410,492Total liabilities
    
    
    1,589,212
    

    
    
    1,559,260Commitments and contingencies (Note 12)Minority interests
    
    
    769,445
    

    
    
    365,123Members equityTotal members equity
    
    
    393,179
    

    
    
    131,348Total liabilities and members equity
    
    $
    2,751,836
    

    
    $
    2,055,731
  3




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MSW ENERGY HOLDINGS LLC AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands)
 For the Period
    

    
    For the Periodfrom June 25
    

    
    from April 1
    
    
    For the Threethrough
    

    
    through
    
    
    Months EndedJune 30, 2005
    

    
    June 24, 2005
    
    
    June 30, 2004RevenuesWaste disposal and related services revenues
    
    $
    5,692
    

    
    $
    76,452
    
    
    $
    53,889Electricity and steam sales
    
    
    2,968
    

    
    
    54,007
    
    
    
    26,477Total operating revenues
    
    
    8,660
    

    
    
    130,459
    
    
    
    80,366ExpensesPlant operating expenses
    
    
    2,769
    

    
    
    46,902
    
    
    
    33,555Depreciation and amortization
    
    
    1,935
    

    
    
    42,058
    
    
    
    18,500Net interest
expense on project debt
    
    
    458
    

    
    
    6,645
    
    
    
    5,020General and administrative
    
    
    258
    

    
    
    33,470
    
    
    
    3,922(Gain) loss on asset retirement
    
    
    
    

    
    
    (867
    )
    
    
    836Operating income
    
    
    3,240
    

    
    
    2,251
    
    
    
    18,533Interest income
    
    
    38
    

    
    
    519
    
    
    
    127Interest expense
    
    
    (616
    )

    
    
    (8,529
    )
    
    
    (7,842
    )Equity in net earnings of unconsolidated affiliate -
Ref-Fuel Holdings
    
    
    
    

    
    
    
    
    
    
    2,006Minority interests in net loss (income) of subsidiary
    
    
    (1,514
    )

    
    
    464
    
    
    
    (7,996
    )Income (loss) before income taxes
    
    
    1,148
    

    
    
    (5,295
    )
    
    
    4,828Income tax (provision) benefit
    
    
    (477
    )

    
    
    2,242
    
    
    
    (213
    )Net income (loss)
    
    
    671
    

    
    
    (3,053
    )
    
    
    4,615Other comprehensive loss
    
    
    
    

    
    
    
    
    
    
    (211
    )Comprehensive income (loss)
    
    $
    671
    

    
    $
    (3,053
    )
    
    $
    4,404
  4




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MSW ENERGY HOLDINGS LLC AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands)
 For the Period
    

    
    For the Periodfrom
    

    
    fromJune 25
    

    
    January 1
    
    
    For the Sixthrough
    

    
    through
    
    
    Months EndedJune 30, 2005
    

    
    June 24, 2005
    
    
    June 30, 2004RevenuesWaste disposal and related services revenues
    
    $
    5,692
    

    
    $
    148,990
    
    
    $
    53,889Electricity and steam sales
    
    
    2,968
    

    
    
    79,462
    
    
    
    26,477Total operating revenues
    
    
    8,660
    

    
    
    228,452
    
    
    
    80,366ExpensesPlant operating expenses
    
    
    2,769
    

    
    
    103,616
    
    
    
    33,555Depreciation and amortization
    
    
    1,935
    

    
    
    57,032
    
    
    
    18,500Net interest
expense on project debt
    
    
    458
    

    
    
    13,964
    
    
    
    5,020General and administrative
    
    
    258
    

    
    
    39,745
    
    
    
    4,395Loss on asset retirement
    
    
    
    

    
    
    519
    
    
    
    836Operating income
    
    
    3,240
    

    
    
    13,576
    
    
    
    18,060Interest income
    
    
    38
    

    
    
    1,076
    
    
    
    155Interest expense
    
    
    (616
    )

    
    
    (17,553
    )
    
    
    (12,897
    )Equity in net earnings of unconsolidated
affiliate - Ref-Fuel Holdings
    
    
    
    

    
    
    
    
    
    
    6,545Minority interests in net income of subsidiary
    
    
    (1,514
    )

    
    
    (3,637
    )
    
    
    (7,996
    )Income (loss) before income taxes
    
    
    1,148
    

    
    
    (6,538
    )
    
    
    3,867Income tax (provision) benefit
    
    
    (477
    )

    
    
    2,761
    
    
    
    (213
    )Net income (loss)
    
    
    671
    

    
    
    (3,777
    )
    
    
    3,654Other
comprehensive loss
    
    
    
    

    
    
    
    
    
    
    (211
    )Comprehensive income (loss)
    
    $
    671
    

    
    $
    (3,777
    )
    
    $
    3,443
  5




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MSW ENERGY HOLDINGS LLC AND SUBSIDIARIES
 
 CONSOLIDATED
STATEMENTS OF MEMBERS EQUITY
(Unaudited, in thousands)
 AccumulatedOtherMembers
    
    
    ComprehensiveEquity
    
    
    Income
    
    
    TotalBalance, January 1, 2004
    
    $
    160,111
    
    
    $
    
    
    
    $
    160,111Assumption of tax liability
    
    
    (14,892
    )
    
    
    
    
    
    
    (14,892
    )Current tax benefit contributed to member
    
    
    (3,463
    )
    
    
    
    
    
    
    (3,463
    )Distribution to members
    

    
    (29,355
    )
    
    
    
    
    
    
    (29,355
    )Unrealized gain on investments from the consolidation of Ref-Fuel
Holdings
    
    
    
    
    
    
    211
    
    
    
    211Comprehensive income
    
    
    18,947
    
    
    
    (211
    )
    
    
    18,736Balance, December 31, 2004
    
    
    131,348
    
    
    
    
    
    
    
    131,348Distribution to members
    
    
    (19,395
    )
    
    
    
    
    
    
    (19,395
    )Current tax benefit contributed to member
    
    
    (11,346
    )
    
    
    
    
    
    
    (11,346
    )Net (loss) for the period from January 1, 2005 through June 24, 2005
    
    
    (3,777
    )
    
    
    
    
    
    
    (3,777
    )Balance, June 24, 2005 (predecessor)
    
    $
    96,830
    
    
    $
    
    
    
    $
    96,830Balance, June 24, 2005 (successor)
    
    $
    393,255
    
    
    $
    
    
    
    $
    393,255Current tax benefit contributed to member
    

    
    (747
    )
    
    
    
    
    
    
    (747
    )Net income for the period from June 25, 2005 through June 30, 2005
    
    
    671
    
    
    
    
    
    
    
    671Balance, June 30, 2005
    
    $
    393,179
    
    
    $
    
    
    
    $
    393,179
  6




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MSW ENERGY HOLDINGS LLC AND SUBSIDIARIES
 
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
 For the PeriodFor the Period from
    

    
    from January 1
    
    
    For the SixJune 25 through
    

    
    through
    
    
    Months EndedJune 30, 2005
    

    
    June 24, 2005
    
    
    June 30, 2004Cash flows from operating activitiesNet income (loss)
    
    $
    671
    

    
    $
    (3,777
    )
    
    $
    3,654Adjustments
to reconcile net income (loss) to net cash provided
by operating activities:Depreciation and amortization
    
    
    1,935
    

    
    
    57,032
    
    
    
    18,500Deferred
income taxes
    
    
    1,224
    

    
    
    8,380
    
    
    
    213Revenue contract levelization
    
    
    31
    

    
    
    692
    
    
    
    3,844Amortization of lease liability
    
    
    
    

    
    
    (1,593
    )
    
    
    Amortization of debt premium and deferred financing costs
    
    
    (199
    )

    
    
    (5,287
    )
    
    
    (1,896
    )Amortization of deferred revenue
    
    
    (2
    )

    
    
    (75
    )
    
    
    Interest on loss contracts
    
    
    38
    

    
    
    1,069
    
    
    
    1,036Loss asset retirements
    
    
    
    

    
    
    519
    
    
    
    836Equity earnings in unconsolidated affiliate -
Ref-Fuel Holdings
    
    
    
    

    
    
    
    
    
    
    (6,545
    )Distributions from Ref-Fuel Holdings
    
    
    
    

    
    
    
    
    
    
    31,374Minority interests
    
    
    1,514
    

    
    
    3,637
    
    
    
    7,996Changes in assets and liabilities:Accounts receivable, net
    
    
    6,741
    

    
    
    (4,211
    )
    
    
    736Prepaid expenses and other current assets
    
    
    869
    

    
    
    (2,732
    )
    
    
    1,003Other long-term assets
    
    
    178
    

    
    
    (2,944
    )
    
    
    1,796Accounts payable and current liabilities
    
    
    292
    

    
    
    (4,198
    )
    
    
    952Accounts payable affiliates
    
    
    
    

    
    
    
    
    
    
    (480
    )Income taxes payable
    
    
    (747
    )

    
    
    (11,421
    )
    
    
    Accrued interest payable
    
    
    (6,388
    )

    
    
    5,626
    
    
    
    (10,366
    )Other long-term liabilities
    
    
    32
    

    
    
    (1,131
    )
    
    
    744Net cash provided by operating activities
    
    
    6,189
    

    
    
    39,586
    
    
    
    53,397Cash flows from investing activitiesAdditions of property, plant and equipment
    
    
    
    

    
    
    (25,228
    )
    
    
    (4,943
    )Proceeds from sale of assets
    
    
    
    

    
    
    2,651
    
    
    
    20Cash from consolidation of unconsolidated
subsidiary (Note 3)
    
    
    
    

    
    
    
    
    
    
    40,238Net cash provided by (used in) investing activities
    
    
    
    

    
    
    (22,577
    )
    
    
    35,315Cash flows from financing activitiesChange in restricted cash and investments, net
    
    
    17,609
    

    
    
    (8,110
    )
    
    
    (13,682
    )Payment of long-term debt
    
    
    (6,000
    )

    
    
    (29,178
    )
    
    
    (5,717
    )Distributions paid to members
    
    
    
    

    
    
    (19,395
    )
    
    
    (18,500
    )Distributions paid to holders of minority interests in
consolidated subsidiary
    
    
    
    

    
    
    (25,100
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    11,609
    

    
    
    (81,783
    )
    
    
    (37,899
    )Net increase (decrease) in cash and cash equivalents
    
    
    17,798
    

    
    
    (64,774
    )
    
    
    50,813Cash and cash equivalents, beginning of period
    
    
    21,536
    

    
    
    86,310
    
    
    
    3,633Cash and cash equivalents, end of period
    
    $
    39,334
    

    
    $
    21,536
    
    
    $
    54,446
  7




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MSW Energy Holdings LLC and Subsidiaries
 
 Notes to Consolidated Financial Statements
 1. Organization
 1 2
      8




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##### Table of Contents



Push-Down Accounting
   2. Summary of Significant Accounting Policies
 Principles of Consolidation
  9




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Reclassifications
  Use of Estimates
  Equity Method Investment
   Income Taxes
   Stock-Based Compensation
 Accounting for Stock-Based
Compensation Accounting for Stock-Based Compensation 
Transition and Disclosure  an Amendment of FAS No. 123 Accounting for Stock Issued to Employees
 Accounting Policies
  Risks and Uncertainties
  10




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Effect of New Accounting Standard
 Share-Based Payment
 3. Business Combinations
  Push-Down Accounting Business Combinations
  Fair value of assets acquiredCurrent assets
    
    $
    180,805Property, plant and equipment
    
    
    1,901,787Intangible assets (excluding goodwill)
    
    
    269,436Other assets
    
    
    111,459Goodwill
    
    
    298,089Total Assets Acquired
    
    
    2,761,576Fair value of liabilities assumedCurrent liabilities
    
    
    147,996Long-term Intermediate debt
    
    
    426,791Long-term Project debt
    
    
    718,805Deferred income taxes
    
    
    142,042Other liabilities
    
    
    164,756Total Liabilities Assumed
    
    
    1,600,390Minority interest account
    
    
    767,931Net assets acquired
    
    $
    393,255
  11




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4. Reclassifications of Prior Periods
  As Previously Reported Three
    
    
    
    
    
    
    As Reported ThreeMonths Ended
    
    
    
    
    
    
    Months EndedJune 30, 2004
    
    
    Reclassifications
    
    
    June 30, 2004RevenuesWaste
disposal and related service revenues
    
    $
    49,120
    
    
    $
    4,769
    
    
    $
    53,889Electricity and steam sales
    
    
    22,319
    
    
    
    4,158
    
    
    
    26,477Other revenues
    
    
    2,013
    
    
    
    (2,013
    )
    
    
    Total operating revenues
    
    
    73,452
    
    
    
    6,914
    
    
    
    80,366ExpensesPlant operating expenses
    
    
    30,709
    
    
    
    2,846
    
    
    
    33,555Depreciation and amortization
    
    
    11,173
    
    
    
    7,327
    
    
    
    18,500Net interest
expense on project debt
    
    
    
    
    
    
    5,020
    
    
    
    5,020General and administrative
    
    
    7,282
    
    
    
    (3,360
    )
    
    
    3,922Loss on asset retirements
    
    
    836
    
    
    
    
    
    
    
    836Operating income
    
    
    23,452
    
    
    
    (4,919
    )
    
    
    18,533Interest income
    
    
    501
    
    
    
    (374
    )
    
    
    127Interest expense
    
    
    (13,237
    )
    
    
    5,395
    
    
    
    (7,842
    )Equity in net earnings of unconsolidated
affiliate - Ref-Fuel Holdings
    
    
    2,006
    
    
    
    
    
    
    
    2,006Minority
interests in net income of subsidiary
    
    
    (7,996
    )
    
    
    
    
    
    
    (7,996
    )Other income, net
    
    
    102
    
    
    
    (102
    )
    
    
    Income before income taxes
    
    $
    4,828
    
    
    $
    
    
    
    $
    4,828
 As Previously Reported Six
    
    
    
    
    
    
    As Reported SixMonths Ended
    
    
    
    
    
    
    Months EndedJune 30, 2004
    
    
    Reclassifications
    
    
    June 30, 2004RevenuesWaste
disposal and related service revenues
    
    $
    49,120
    
    
    $
    4,769
    
    
    $
    53,889Electricity and steam sales
    
    
    22,319
    
    
    
    4,158
    
    
    
    26,477Other revenues
    
    
    2,013
    
    
    
    (2,013
    )
    
    
    Total operating revenues
    
    
    73,452
    
    
    
    6,914
    
    
    
    80,366ExpensesPlant operating expenses
    
    
    30,709
    
    
    
    2,846
    
    
    
    33,555Depreciation and amortization
    
    
    11,173
    
    
    
    7,327
    
    
    
    18,500Net interest
expense on project debt
    
    
    

    
    
    
    5,020
    
    
    
    5,020General and administrative
    
    
    7,755
    
    
    
    (3,360
    )
    
    
    4,395Loss on asset retirements
    
    
    836
    
    
    
    
    
    
    
    836Operating income
    
    
    22,979
    
    
    
    (4,919
    )
    
    
    18,060Interest income
    
    
    529
    
    
    
    (374
    )
    
    
    155Interest expense
    
    
    (18,292
    )
    
    
    5,395
    
    
    
    (12,897
    )Equity in net earnings of unconsolidated
affiliate - Ref-Fuel Holdings
    
    
    6,545
    
    
    
    
    
    
    
    6,545Minority
interests in net income of subsidiary
    
    
    (7,996
    )
    
    
    
    
    
    
    (7,996
    )Other income, net
    
    
    102
    
    
    
    (102
    )
    
    
    Income before income taxes
    
    $
    3,867
    
    
    $
    
    
    
    $
    3,867
 12




---



##### Table of Contents




    
    The amortization of above
and below market contracts were reclassified from waste disposal and
related service revenues and electricity and steam sales into depreciation and amortization
expense.
    
    Other revenues, which primarily consisted of sales of scrap metals, were reclassified
from other revenues into waste and service revenues.
    
    Interest expense on project debt and interest income on funds restricted for the
payment of project debt were reclassified as part of operating income.
    
    Certain costs associated with operating facilities and TransRiver were reclassified from
general and administrative expenses into plant operating expenses.
    
    Reimbursements from certain municipal clients for operating expenses were reclassified
from revenues to reductions of operating expenses.
    
    Reductions of revenues shared with certain municipal customers for energy produced were
reclassified from waste and service revenues to energy revenues.
    
    Other minor miscellaneous reclassifications were also made.
 5. Equity Investment in Ref-Fuel Holdings
  For the FourMonths EndedApril 30, 2004Revenues
    
    $
    156,623Operating income
    
    
    18,000Net earnings
    
    
    12,753Companys equity in net earnings
    
    
    6,545
 13




---



##### Table of Contents



Pro Forma Information
  Pro Forma
    
    
    Pro FormaFor the Six
    
    
    For the SixMonths Ended
    
    
    Months EndedJune 30, 2005
    
    
    June 30, 2004RevenuesWaste disposal and related services revenues
    
    $
    154,682
    
    
    $
    157,118Electricity and steam sales
    
    
    82,429
    
    
    
    79,870Total operating revenues
    
    
    237,111
    
    
    
    236,988ExpensesPlant operating expenses
    
    
    106,386
    
    
    
    113,054Depreciation and amortization
    
    
    69,406
    
    
    
    69,450Net interest
expense on project debt
    
    
    16,656
    
    
    
    18,753General and administrative
    
    
    11,826
    
    
    
    12,012Loss on asset retirements
    
    
    519
    
    
    
    1,177Operating income
    
    
    32,318
    
    
    
    22,542Interest income
    
    
    1,114
    
    
    
    447Interest expense
    
    
    (18,422
    )
    
    
    (18,690
    )Minority interests in net income of subsidiary
    
    
    (12,934
    )
    
    
    (7,288
    )Net income (loss) before taxes
    
    $
    2,076
    
    
    $
    (2,989
    )
 6. Property, Plant and Equipment
  June 30,
    

    
    December 31,Useful Life
    
    2005
    

    
    2004Plant and equipment
    
    2-50 years
    
    $
    1,868,682
    

    
    $
    1,206,558Land
    
    
    
    
    3,813
    

    
    
    3,813Leasehold improvements
    
    Up to 17 years
    
    
    5,575
    

    
    
    5,575Landfill
    
    13 years
    
    
    17,831
    

    
    
    17,768Construction in progress
    
    
    
    
    5,886
    

    
    
    6,244Total property, plant and equipment
    
    
    
    
    1,901,787
    

    
    
    1,239,958Accumulated depreciation
    
    
    
    
    (1,088
    )

    
    
    (65,062
    )Property, plant and equipment, net
    
    
    
    $
    1,900,699
    

    
    $
    1,174,896
 14




---



##### Table of Contents



7. Intangible Assets and Goodwill
  December 31,Useful Life
    
    June 30, 2005
    

    
    2004Electricity and steam contracts
    
    3-11 years
    
    $
    190,160
    

    
    $
    525,125Waste contracts
    
    8 years
    
    
    2,085
    

    
    
    23,600Financing costs
    
    7 years
    
    
    
    

    
    
    8,382Lease asset
    
    24 years
    
    
    71,845
    

    
    
    Renewable energy credits
    
    5 years
    
    
    2,317
    

    
    
    Emissions credits
    
    Indefinite
    
    
    
    

    
    
    43,377Other intangibles
    
    Indefinite
    
    
    3,029
    

    
    
    3,579269,436
    

    
    
    604,063Accumulated amortization
    
    
    
    
    (1,053
    )

    
    
    (68,929
    )Intangible assets, net
    
    
    
    $
    268,383
    

    
    $
    535,134
  Lease
    
    
    
    
    
    
    RenewableEnergy
    
    
    Asset
    
    
    Waste
    
    
    EnergyContracts
    
    
    Contracts
    
    
    Contracts
    
    
    Credits
    
    
    TotalsEstimated2005 (after June 30, 2005)
    
    $
    13,157
    
    
    $
    1,497
    
    
    $
    123
    
    
    $
    211
    
    
    $
    14,9882006
    
    
    26,312
    
    
    
    2,994
    
    
    
    245
    
    
    
    421
    
    
    
    29,9722007
    
    
    26,312
    
    
    
    2,994
    
    
    
    245
    
    
    
    421
    
    
    
    29,9722008
    
    
    26,312
    
    
    
    2,994
    
    
    
    245
    
    
    
    421
    
    
    
    29,9722009
    
    
    22,756
    
    
    
    2,994
    
    
    
    245
    
    
    
    421
    
    
    
    26,416Thereafter
    
    
    74,568
    
    
    
    58,090
    
    
    
    969
    
    
    
    412
    
    
    
    134,039Total
    
    $
    189,417
    
    
    $
    71,563
    
    
    $
    2,072
    
    
    $
    2,307
    
    
    $
    265,359
 Goodwill
 Goodwill
and Other Intangibles
 15




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##### Table of Contents



8. Accrued Expenses and Other Current Liabilities
  June 30,
    

    
    December 31,2005
    

    
    2004Accrued expenses
    
    $
    23,133
    

    
    $
    19,966Incentive plan accruals
    
    
    1,199
    

    
    
    3,569Compensation liabilities
    
    
    9,693
    

    
    
    8,254Short-term portion of deferred revenue
    
    
    410
    

    
    
    Short-term Duke liability
    
    
    2,500
    

    
    
    2,500Other
    
    
    5,411
    

    
    
    5,640$
    42,346
    

    
    $
    39,929
 9. Financing Arrangements
  FinalInterest Rate
    
    Maturity
    
    June 30, 2005
    

    
    December 31, 2004Company
and Intermediate debtSenior Notes
    
    8.5%
    
    2010
    
    $
    200,000
    

    
    $
    200,000ARC Senior Notes
    
    6.26%
    
    2015
    
    
    234,000
    

    
    
    240,000Project debtNiagara Series 2001
    
    5.45  5.625%
    
    2015
    
    
    165,010
    

    
    
    165,010Seconn Corporate Credit Bonds 
1992 Series A
    
    6.45%
    
    2022
    
    
    30,000
    

    
    
    30,000Seconn Corporate Credit Bonds 
ARC-I Series A and ARC-11 Series
A
    
    5.50%
    
    2015
    
    
    13,500
    

    
    
    13,500Hempstead Corporate Credit Bonds
    
    5.00%
    
    2010
    
    
    42,670
    

    
    
    42,670Hempstead project debt
    
    4.625%-5.00%
    
    2009
    
    
    114,543
    

    
    
    114,543Essex project debt
    
    5.32%-7.48%
    
    2020
    
    
    96,496
    

    
    
    96,496Seconn project debt
    
    5.125%-5.50%
    
    2015
    
    
    50,602
    

    
    
    50,602Semass Series 2001A
    
    5.50%-5.625%
    
    2016
    
    
    134,345
    

    
    
    134,345Semass Series 2001B
    
    5.25%-5.50%
    
    2010
    
    
    75,250
    

    
    
    104,385Other obligations
    
    
    
    
    
    
    230
    

    
    
    273Subtotal of Project debt
    
    
    
    
    
    
    722,646
    

    
    
    751,824Total debt at par value
    
    
    
    
    
    
    1,156,646
    

    
    
    1,191,824Unamortized debt premium, net
    
    
    
    
    
    
    62,673
    

    
    
    54,189Current portion
    
    
    
    
    
    
    (82,364
    )

    
    
    (87,184
    )Total long-term debt obligations
    
    
    
    
    
    $
    1,136,955
    

    
    $
    1,158,829
 16




---



##### Table of Contents



10. Other Long-Term Liabilities
  AmortizationPeriod
    
    June 30,
    

    
    December 31,(years)
    
    2005
    

    
    2004Waste contracts acquired
    
    9-17
    
    $
    120,830
    

    
    $
    120,276Operating lease acquired
    
    14
    
    
    
    

    
    
    38,453Duke liability
    
    16
    
    
    24,649
    

    
    
    22,623Energy contract levelization
    
    12
    
    
    31
    

    
    
    24,123Landfill liabilities
    
    13
    
    
    11,450
    

    
    
    10,699Deferred revenue
    
    8-20
    
    
    34
    

    
    
    5,112Other long-term accruals
    
    
    
    
    5,156
    

    
    
    3,333$
    162,150
    

    
    $
    224,619
 17




---



##### Table of Contents



11. Income Taxes
  For the Period from
    

    
    For the Period fromJune 25,
    

    
    January 1,
    
    
    For the Sixthrough
    

    
    through
    
    
    Months EndedJune 30, 2005
    

    
    June 24, 2005
    
    
    June 30, 2004Current provision
    
    $
    (747
    )

    
    $
    (11,141
    )
    
    $
    Deferred provision
    
    
    1,224
    

    
    
    8,380
    
    
    
    213Total consolidated income tax provision (benefit)
    
    $
    477
    

    
    $
    (2,761
    )
    
    $
    213
  12. Commitments and Contingencies
  Environmental
    18




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##### Table of Contents



13. Stock Option Plan
  19




---



##### Table of Contents



14. Subsequent Events
   20




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Cautionary Note Regarding Forward-Looking Statements
   Additional Information
   21




---



##### Table of Contents



Push-Down
Accounting
 Executive
Summary
    22




---



##### Table of Contents



Operating Results


For theFor the Period
    

    
    For the
    
    
    For the
    
    
    For the
    

    
    Periodfrom
    

    
    Period from
    
    
    Three
    
    
    Period from
    

    
    from
    
    
    For theJune 25,
    

    
    April 1,
    
    
    Months
    
    
    June 25,
    

    
    January 1,
    
    
    Six Monthsthrough
    

    
    through
    
    
    Ended
    
    
    through
    

    
    through
    
    
    EndedJune 30,
    

    
    June 24,
    
    
    June 30,
    
    
    June 30,
    

    
    June 24,
    
    
    June 30,2005
    

    
    2005
    
    
    2004
    
    
    2005
    

    
    2005
    
    
    2004Statement of Operations Data:Net revenues
    
    $
    8,660
    

    
    $
    130,459
    
    
    $
    80,366
    
    
    $
    8,660
    

    
    $
    228,452
    
    
    $
    80,366Equity in net earnings of Ref-Fuel
Holdings
    
    
    
    

    
    
    
    
    
    
    2,006
    
    
    
    
    

    
    
    
    
    
    
    6,545Net interest
expense on project debt
    
    
    (458
    )

    
    
    (6,645
    )
    
    
    (5,020
    )
    
    
    (458
    )

    
    
    (13,964
    )
    
    
    (5,020
    )Plant operating expenses
    
    
    (2,769
    )

    
    
    (46,902
    )
    
    
    (33,555
    )
    
    
    (2,769
    )

    
    
    (103,616
    )
    
    
    (33,555
    )Depreciation and amortization expense
    
    
    (1,935
    )

    
    
    (42,058
    )
    
    
    (18,500
    )
    
    
    (1,935
    )

    
    
    (57,032
    )
    
    
    (18,500
    )Administrative and general expense
    
    
    (258
    )

    
    
    (33,470
    )
    
    
    (3,922
    )
    
    
    (258
    )

    
    
    (39,745
    )
    
    
    (4,395
    )Interest income
    
    
    38
    

    
    
    519
    
    
    
    127
    
    
    
    38
    

    
    
    1,076
    
    
    
    155Interest expense
    
    
    (616
    )

    
    
    (8,529
    )
    
    
    (7,842
    )
    
    
    (616
    )

    
    
    (17,553
    )
    
    
    (12,897
    )Minority interest in net income of
subsidiary
    
    
    (1,514
    )

    
    
    464
    
    
    
    (7,996
    )
    
    
    (1,514
    )

    
    
    (3,637
    )
    
    
    (7,996
    )Gain (loss) on asset retirement
    
    
    
    

    
    
    867
    
    
    
    (836
    )
    
    
    
    

    
    
    (519
    )
    
    
    (836
    )Income tax (provision) benefit
    
    
    (477
    )

    
    
    2,242
    
    
    
    (213
    )
    
    
    (477
    )

    
    
    2,761
    
    
    
    (213
    )Net income (loss)
    
    $
    671
    

    
    $
    (3,053
    )
    
    $
    4,615
    
    
    $
    671
    

    
    $
    (3,777
    )
    
    $
    3,654Cash Flow Data:Cash provided by operating activities
    
    $
    6,189
    

    
    
    
    
    
    
    
    
    
    
    
    

    
    $
    39,586
    
    
    $
    53,397Cash
provided by (used in) investing activities
    
    
    
    

    
    
    
    
    
    
    
    
    
    
    
    

    
    
    (22,577
    )
    
    
    35,315Cash
provided by (used in) financing activities
    
    
    11,609
    

    
    
    
    
    
    
    
    
    
    
    
    

    
    
    (81,783
    )
    
    
    (37,899
    )Balance Sheet Data:
    
    June 30, 2005
    

    

December 31,
2004Total assets
    
    $
    2,751,836
    

    
    $
    2,055,731Total debt
    
    
    1,219,319
    

    
    
    1,246,013Minority interest in consolidated
subsidiaries
    
    
    769,445
    

    
    
    365,123Total members equity
    
    
    393,179
    

    
    
    131,348
  23




---



##### Table of Contents



Supplemental Pro Forma Information
  Pro Forma
    
    
    Pro FormaFor the Six
    
    
    For the SixMonths Ended
    
    
    Months EndedJune 30, 2005
    
    
    June 30, 2004RevenuesWaste
disposal and related services revenues
    
    $
    154,682
    
    
    $
    157,118Electricity and steam sales
    
    
    82,429
    
    
    
    79,870Total operating revenues
    
    
    237,111
    
    
    
    236,988ExpensesPlant operating expenses
    
    
    106,386
    
    
    
    113,054Net interest
expense on project debt
    
    
    16,656
    
    
    
    18,753Depreciation and amortization
    
    
    69,406
    
    
    
    69,450General and administrative
    
    
    11,826
    
    
    
    12,012Loss on asset retirements
    
    
    519
    
    
    
    1,177Operating income
    
    
    32,318
    
    
    
    22,542Interest income
    
    
    1,114
    
    
    
    447Interest expense
    
    
    (18,422
    )
    
    
    (18,690
    )Minority
interests in net income of subsidiary
    
    
    (12,934
    )
    
    
    (7,288
    )Net income
(loss) before income taxes
    
    $
    2,076
    
    
    $
    (2,989
    )
 Comparison of the Unaudited Pro Forma Six Months Ended June 30, 2005 and 2004, respectively
 Total Operating Revenues.
  24




---



##### Table of Contents



Plant Operating Expenses.
 Depreciation and Amortization
 Net
interest on project debt
 General and Administrative
 Debt Covenant
   25




---



##### Table of Contents



Last TwelveMonths EndedJune 30,2005Proportionate other dataProportionate Adjusted EBITDA (1)
    
    $
    137,597Proportionate interest expense (2)
    
    
    41,101Ratio of proportionate Adjusted EBITDA to proportionate
interest expense (3)
    
    
    3.4
    x
 
 (1)
    
    Proportionate Adjusted
EBITDA is defined under the indenture as 49.8% of the Adjusted EBITDA of Ref-Fuel
Holdings. Adjusted EBITDA (as calculated below) is not a measurement of financial performance
under GAAP and should not be considered as an alternative
to cash flow from operating activities or as a measure of liquidity or an alternative to net
income as indicators of operating performance or any other measures of performance derived
in accordance with GAAP. Proportionate Adjusted EBITDA for the last twelve months ended June 30, 2005 is calculated by
subtracting the results for the six months ended June 30, 2004 from the twelve months ended
December 31, 2004, and then adding the six months ended June 30,
2005, as follows (unaudited, dollars in thousands): CombinedYear
    
    
    Six Months
    
    
    Six Months
    
    
    Twelve MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedDecember 31,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2004
    
    
    2004
    
    
    2005
    
    
    2005Ref-Fuel
Holdings:Net Income
    
    $
    92,030
    
    
    $
    28,835
    
    
    $
    10,298
    
    
    $
    73,493Income taxes
    
    
    741
    
    
    
    216
    
    
    
    (39
    )
    
    
    486Net interest
expense on intermediate debt
    
    
   15,351
    
    
    
    7,915
    
    
    
    6,883
    
    
    
    14,319Operating
income
    
    
    108,122
    
    
    
    36,966
    
    
    
    17,142
    
    
    
    88,298One time
charges for Acquisition
    
    
    
    
    
    
    
    
    
    
    30,192
    
    
    
    30,192Interest on
Project Debt
    
    
    28,379
    
    
    
    13,672
    
    
    
    14,422
    
    
    
    29,129Depreciation
and amortization
    
    
    120,530
    
    
    
    61,010
    
    
    
    58,966
    
    
    
    118,486Loss on
retirements
    
    
    2,107
    
    
    
    1,178
    
    
    
    519
    
    
    
    1,448EBITDA
    
    
    259,138
    
    
    
    112,826
    
    
    
    121,241
    
    
    
    267,553Fair value
adjustment amortization and revenue levelization adjustments
    
    
    19,148
    
    
    
    9,476
    
    
    
    (925
    )
    
    
    8,747Adjusted EBITDA
    
    $
    278,286
    
    
    $
    122,302
    
    
    $
    120,316
    
    
    $
    276,300MSW Energy Holdings
ownership
percentage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49.8
    %MSW Energy Holdings
Proportionate
Adjusted EBITDA
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    137,597
 26




---



##### Table of Contents



(2)
    
    Proportionate interest
expense is defined under the indenture as 49.8% of the interest expense for Ref-Fuel
Holdings plus 100% of interest expense.  Twelve MonthsEndedJune 30, 2005Ref-Fuel Holdings interest expense
    
    $
    47,893MSW Energy Holdings ownership percentage
    
    
    49.8
    %Ref-Fuel Holdings proportionate interest expense
    
    
    23,851MSW Energy Holdings incremental interest expense
    
    
    17,250MSW Energy Holdings proportionate interest expense
    
    $
    41,101
 
 (3)
    
    Proportionate Adjusted
EBITDA to proportionate interest expense is defined under the
indenture as the quotient of
proportionate Adjusted EBITDA divided by proportionate interest expense. Critical Accounting Policies
  Principles
of Consolidation.
 Use of Estimates in Preparing Financial Statements.
 Equity
Method Investment.
 27




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##### Table of Contents



Effect of New Accounting Standard
 Share-Based Payment
 Contractual Obligations and Commercial Commitments
  MoreLess than 1
    
    
    
    
    
    
    
    
    
    
    than 5Contractual Obligations
    
    Total
    
    
    Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    YearsLong-Term Debt Obligations
    
    $
    1,156,646
    
    
    $
    56,252
    
    
    $
    268,007
    
    
    $
    232,678
    
    
    $
    599,709Unconditional Purchase Obligations
    
    
    1,307
    
    
    
    1,307
    
    
    
    
    
    
    
    
    
    
    
    Operating Lease Obligations
    
    
    144,430
    
    
    
    14,609
    
    
    
    27,588
    
    
    
    31,463
    
    
    
    70,770Other Long-Term Obligations
    
    
    70,993

    
    
    
    7,077
    
    
    
    13,466
    
    
    
    7,500
    
    
    
    42,950Total
    
    $
    1,373,376
    
    
    $
    79,245
    
    
    $
    309,061
    
    
    $
    271,641
    
    
    $
    713,429
 Impact of the Acquisition on the Company
  
    
    incur additional indebtedness;
    
    create liens;
    
    purchase or redeem capital stock;
    
    make investments;
 28




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##### Table of Contents




    
    sell assets or consolidate or merge with or into other companies;
    
    engage in transactions with affiliates; and
    
    engage in new lines of business.
   
 
 Item 4. Controls and Procedures
 MSW Energy Holdings and Subsidiaries
     29




---



##### Table of Contents



PART II OTHER INFORMATION
 
 Item 1. Legal Proceedings
   30




---



##### Table of Contents



Item 5. Other Information.
  31




---



##### Table of Contents



Item 6. Exhibits
 (a) Exhibits
 12
    
    Statement re Computation of Ratio of Earnings to Fixed Charges31(a)
    
    15d-14(a) Certification of Anthony J. Orlando for MSW Energy Holdings LLC.31(b)
    
    15d-14(a) Certification of Craig D. Abolt for MSW Energy Holdings LLC.31(c)
    
    15d-14(a) Certification of Anthony J. Orlando for MSW Energy Finance Co., Inc.31(d)
    
    15d-14(a) Certification of Craig D. Abolt for MSW Energy Finance Co., Inc.32(a)
    
    Section 1350 Certification of Anthony J. Orlando and Craig D. Abolt for MSW
Energy Holdings LLC.32(b)
    
    Section 1350 Certification of Anthony J. Orlando and Craig D. Abolt for MSW
Energy Finance Co., Inc.
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##### Table of Contents



SIGNATURES
  MSW ENERGY HOLDINGS LLCBy
    
    /s/ Craig D. AboltCraig D. AboltSenior Vice President and Chief Financial OfficerBy:
    
    /s/ Thomas E. BucksThomas E. BucksVice President and Chief Accounting Officer
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##### Table of Contents



SIGNATURES
  MSW ENERGY FINANCE CO., INC.By
    
    /s/ Craig D. AboltCraig D. AboltSenior Vice President and Chief Financial OfficerBy:
    
    /s/ Thomas E. BucksThomas E. BucksVice President and Chief Accounting Officer
  34




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##### Table of Contents



EXHIBIT INDEX
 12
    
    Statement re Computation of Ratio of Earnings to Fixed Charges31(a)
    
    15d-14(a) Certification of Anthony J. Orlando for MSW Energy Holdings LLC.31(b)
    
    15d-14(a) Certification of Craig D. Abolt for MSW Energy Holdings LLC.31(c)
    
    15d-14(a) Certification of Anthony J. Orlando for MSW Energy Finance Co., Inc.31(d)
    
    15d-14(a) Certification of Craig D. Abolt for MSW Energy Finance Co., Inc.32(a)
    
    Section 1350 Certification of Anthony J. Orlando and Craig D. Abolt for MSW
Energy Holdings LLC.32(b)
    
    Section 1350 Certification of Anthony J. Orlando and Craig D. Abolt for MSW
Energy Finance Co., Inc.