<PAGE>   1

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                   For the Fiscal Year-Ended December 31, 1997
                         Commission File Number 33-95928

                          LS POWER FUNDING CORPORATION
             (Exact name of registrant as specified in its charter)


Delaware                                                             81-0502366
                                       ----------------------------------------
(State or other jurisdiction of                                (I.R.S. Employer
 incorporation or organization)                             Identification No.)

    1105 North Market Street, Suite 1108, Wilmington, DE 19801, (302)427-8494
  (Address, including zip code, and telephone number, including area code, of
                   registrant's principal executive offices)


                             LSP-COTTAGE GROVE, L.P.
                       LSP-WHITEWATER LIMITED PARTNERSHIP
             (Exact name of registrant as specified in its charter)

Delaware                                                             81-0493289
Delaware                                                             81-0493287
                                       ----------------------------------------
(State  or  other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                         Identification Numbers)

9405 Arrowpoint Boulevard, Charlotte, North Carolina 28273, (704)525-3800 
9405 Arrowpoint Boulevard, Charlotte, North Carolina 28273, (704)525-3800 
  (Address, including zip code, and telephone number, including area code, of
                   registrant's principal executive offices)

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

Securities registered pursuant to Section 12(g) of the Act:

  7.19% Senior Secured Bonds Due 2010, Series A of LS Power Funding Corporation
  8.08% Senior Secured Bonds Due 2016, Series A of LS Power Funding Corporation
  7.19% First Mortgage Bonds of LSP-Cottage Grove, L.P. 
  8.08% First Mortgage Bonds of LSP-Cottage Grove, L.P. 
  7.19% First Mortgage Bonds of LSP-Whitewater Limited Partnership 
  8.08% First Mortgage Bonds of LSP-Whitewater Limited Partnership

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
                                        ---   ---

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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. X






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<PAGE>   3


                          LS POWER FUNDING CORPORATION
                             LSP-COTTAGE GROVE, L.P.
                       LSP-WHITEWATER LIMITED PARTNERSHIP

                                 FORM 10-K INDEX


<TABLE>
<CAPTION>
                                                                                                               Page
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                                     PART I

       <S>        <C>                                                                                          <C>
       Item 1.    Business                                                                                       4
       Item 2.    Properties                                                                                    19
       Item 3.    Legal Proceedings                                                                             20
       Item 4     Submission of Matters to a Vote of Security Holders                                           20

                                     PART II

       Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters                         20
       Item 6.    Selected Financial Data                                                                       20
       Item 7.    Management's Discussion and Analysis of Financial Condition and Results
                      of Operations                                                                             22
       Item 8.    Financial Statements and Supplementary Data                                                   23
       Item 9.    Changes in and Disagreements with Accountants
                      on Accounting and Financial Disclosure                                                    24

                                    PART III

       Item 10.   Directors and Executive Officers of the Registrant                                            24
       Item 11.   Executive Compensation                                                                        26
       Item 12.   Security Ownership of Certain Beneficial Owners and Management                                26
       Item 13.   Certain Relationships and Related Transactions                                                27

                                     PART IV

       Item 14.   Exhibits, Financial Statement Schedules and Reports on Form 8-K                               28

                  Signatures                                                                                    29

                  Financial Statement Index                                                                    F-1

                  Exhibits Index                                                                               E-1
</TABLE>


<PAGE>   4
PART I/ITEM 1.  BUSINESS

ORGANIZATION

COTTAGE GROVE

       LSP-Cottage Grove, L.P. ("Cottage Grove") is a single purpose Delaware
limited partnership formed on December 14, 1993 to develop, finance, construct
and own a gas-fired cogeneration facility located in Cottage Grove, Minnesota
(the "Cottage Grove Facility"). The general partner of Cottage Grove is
LSP-Cottage Grove, Inc., a Delaware corporation which, until March 20, 1998, was
a wholly-owned subsidiary of Granite Power Partners, L.P., a Delaware limited
partnership ("Granite"). See discussion below under "Change in Control." The
general partner of Granite is LS Power Corporation, a Delaware corporation ("LS
Power"). LSP-Cottage Grove, Inc. is a 1% general partner of Cottage Grove. An
indirect subsidiary of Cogentrix Energy, Inc., a North Carolina corporation
("Cogentrix Energy"), identified in the discussion under "Change in Control"
below, and TPC Cottage Grove, Inc., a Delaware corporation ("TPC Cottage
Grove"), are the sole limited partners of Cottage Grove, owning approximately
72% and 27% limited partnership interests, respectively, although such
percentages remain subject to adjustment under certain circumstances to provide
a particular rate of return on the equity contribution of TPC Cottage Grove as
set forth in Cottage Grove's partnership agreement.

WHITEWATER

       LSP-Whitewater Limited Partnership ("Whitewater", and collectively with
Cottage Grove, the "Partnerships") is a single purpose Delaware limited
partnership formed on December 14, 1993 to develop, finance, construct and own a
gas-fired cogeneration facility located in Whitewater, Wisconsin (the
"Whitewater Facility", and collectively with the Cottage Grove Facility, the
"Facilities" or "Projects"). The general partner of Whitewater is LSP-Whitewater
I, Inc., a Delaware corporation (along with LSP-Cottage Grove, Inc., the
"General Partners", and each individually a "General Partner") which, until
March 20, 1998, was a wholly-owned subsidiary of Granite. See discussion below
under "Change in Control." LSP-Whitewater I, Inc. is a 1% general partner of
Whitewater. An indirect subsidiary of Cogentrix Energy, identified in the
discussion under "Change in Control" below, and TPC Whitewater, Inc., a Delaware
corporation ("TPC Whitewater"), are the sole limited partners of Whitewater,
owning approximately 73% and 26% limited partnership interests, respectively,
although such percentages remain subject to adjustment under certain
circumstances to provide a particular rate of return on the equity contribution
of TPC Whitewater as set forth in Whitewater's partnership agreement.

FUNDING

       LS Power Funding Corporation ("Funding") was organized on June 23, 1995
as a special purpose Delaware corporation to issue debt securities in connection
with financing the construction of the Facilities. Funding's sole business
activities are limited to maintaining its organization and activities necessary
pursuant to the offering of the Senior Secured Bonds (defined below) and its
acquisition of the First Mortgage Bonds (defined below) from the Partnerships.

       The Senior Secured Bonds are the following:

                  7.19% Senior Secured Bonds Due 2010, Series A of LS Power
                  Funding Corporation 
                  8.08% Senior Secured Bonds Due 2016, Series A of LS Power 
                  Funding Corporation

       The First Mortgage Bonds are the following:

                  7.19% First Mortgage Bonds of LSP-Cottage Grove, L.P. Due 2010
                  8.08% First Mortgage Bonds of LSP-Cottage Grove, L.P. Due 2016
                  7.19% First Mortgage Bonds of LSP-Whitewater Limited 
                        Partnership Due 2010
                  8.08% First Mortgage Bonds of LSP-Whitewater Limited 
                        Partnership Due 2016



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<PAGE>   5

       Cottage Grove and Whitewater each own 50% of the outstanding stock of
Funding.

CHANGE IN CONTROL

       On March 6, 1998, LS Power and Granite (collectively, the "Sellers")
entered into a Securities Purchase Agreement (the "Securities Purchase
Agreement") with Cogentrix Mid-America, Inc., a Delaware corporation, and its
wholly-owned subsidiaries Cogentrix Cottage Grove, LLC, a Delaware limited
liability company, and Cogentrix Whitewater, LLC, a Delaware limited liability
company (collectively, the "Purchasers") and Cogentrix Energy which controls
each of the Purchasers, as wholly-owned indirect subsidiaries.

       On March 20, 1998, pursuant to the Securities Purchase Agreement, the
Sellers sold all of the capital stock of FloriCulture, Inc., a Delaware
corporation ("FloriCulture"), LSP-Cottage Grove, Inc., and LSP-Whitewater I,
Inc., and all of the Sellers' limited partnership interests in Cottage Grove and
Whitewater to the Purchasers. As a result, Cogentrix Mid-America, Inc. now owns
all of the capital stock of FloriCulture. Cogentrix Cottage Grove, LLC now owns
all of the capital stock of LSP-Cottage Grove, Inc., the general partner of
Cottage Grove, as well as a 72.22% limited partnership interest in Cottage Grove
for a combined total ownership interest of 73.22% in Cottage Grove. Cogentrix
Whitewater, LLC now owns all of the capital stock of LSP-Whitewater I, Inc., the
general partner of Whitewater, as well as a 73.17% limited partnership interest
in Whitewater for a combined total ownership interest of 74.17% in Whitewater.

       On the same date that the Purchasers acquired their ownership interests
in Cottage Grove and Whitewater, Cogentrix Energy and LS Power entered into an
Assignment and Assumption Agreement, pursuant to which LS Power assigned, and
Cogentrix Energy assumed, all of the rights and obligations of LS Power under
certain management services agreements between LS Power and each of LSP-Cottage
Grove, Inc., Cottage Grove, LSP-Whitewater, Inc. and Whitewater. A description
of these agreements is included in Part III/Item 13 - "Certain Relationships and
Related Transactions" of this annual report on Form 10-K.

THE POWER PLANTS

THE COTTAGE GROVE FACILITY

       The Cottage Grove Facility is a dispatchable, combined-cycle natural
gas-fired (with fuel oil back-up) cogeneration facility designed to generate
approximately 245 megawatts of electrical capacity measured at summer
conditions, and 262 megawatts of electrical capacity measured at winter
conditions, with a maximum of 190,000 pounds per hour of steam. The Cottage
Grove Facility is a "topping-cycle cogeneration facility", which means that when
the power plant is operated in a combined-cycle mode, it uses natural gas or
fuel oil to produce electricity, and the reject heat from power production is
then used to provide steam to its steam purchaser. The Cottage Grove Facility
commenced commercial operation on October 1, 1997 (the "Cottage Grove Commercial
Operations Date"). The Facility consists of a single combustion
turbine-generator unit, a heat recovery steam generator, a steam
turbine-generator unit, auxiliary boilers, and all required buildings and
accessory equipment. The auxiliary boilers are used to provide steam to the
Minnesota Mining and Manufacturing Company's ("3M") Cottage Grove facility,
Cottage Grove's steam purchaser, when the Cottage Grove Facility is off-line.

       All of the electric capacity and energy generated by the Cottage Grove
Facility is sold to Northern States Power Company ("NSP" or, as the context
requires, the "Power Purchaser") under a 30-year power purchase agreement (the
"Cottage Grove Power Purchase Agreement"). The thermal energy generated by the
Cottage Grove Facility is sold in the form of steam to 3M under a 30-year steam
supply agreement. Natural gas for the Cottage Grove Facility is purchased
pursuant to 20-year contracts with Natural Gas Clearinghouse ("NGC") and Aquila
Energy Marketing



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<PAGE>   6


Corporation ("Aquila"), a subsidiary of UtiliCorp United Inc. ("UtiliCorp").
Interstate gas transportation is provided by Northern Natural Gas Company
("Northern Natural"), and local gas transportation is provided by Peoples
Natural Gas Company ("Peoples"), a division of UtiliCorp, each pursuant to a
20-year contract subject to a 10-year renewal option. Additionally, Northern
Natural provides gas storage services pursuant to a 20-year contract subject to
a 10-year renewal option. The Cottage Grove Facility is designed to operate as a
Qualifying Facility ("QF") under the Public Utility Regulatory Policies Act of
1978 ("PURPA") and the regulations promulgated thereunder.

THE WHITEWATER FACILITY

       The Whitewater Facility is a dispatchable, combined-cycle natural
gas-fired (with fuel oil back-up) cogeneration facility designed to generate
approximately 245 megawatts of electrical capacity measured at summer conditions
and 262 megawatts of electrical capacity measured at winter conditions, with a
maximum of 190,000 pounds per hour of steam. The Whitewater Facility is a
"topping-cycle cogeneration facility". The Whitewater Facility commenced
commercial operation on September 18, 1997 (the "Whitewater Commercial
Operations Date"). The Facility consists of a single combustion
turbine-generator unit, a heat recovery steam generator, a steam
turbine-generator unit, auxiliary boilers, and all required buildings and
accessory equipment. The auxiliary boilers are used to provide thermal energy to
Whitewater's thermal energy purchasers when the Whitewater Facility is off-line.

       Whitewater sells up to 236.5 megawatts of electric capacity and
associated energy generated by the Whitewater Facility to Wisconsin Electric
Power Company ("WEPCO" or, as the context requires, the "Power Purchaser")
pursuant to a 25 year power purchase agreement, as amended (the "Whitewater
Power Purchase Agreement" and, collectively with the Cottage Grove Power
Purchase Agreement, the "Power Purchase Agreements"). Whitewater may also sell
to third parties up to 12 megawatts of electric capacity and any energy which is
not dispatched by WEPCO. The thermal energy generated by the Whitewater Facility
is provided in the form of steam to the University of Wisconsin-Whitewater
("UWW") under a steam supply agreement expiring on June 30, 2005 and in the form
of hot water to a greenhouse owned by Whitewater and located adjacent to the
Whitewater Facility (the "Greenhouse"). Natural gas for the Whitewater Facility
is purchased pursuant to 20-year contracts with NGC and Aquila. Interstate gas
transportation is provided by Northern Natural pursuant to a 20-year contract
subject to a 10-year renewal option, and local gas transportation is provided by
Wisconsin Natural Gas Company ("WNG") pursuant to a 25-year contract with two
five-year renewal options. Additionally, Northern Natural provides gas storage
services pursuant to a 20-year contract subject to a 10-year renewal option. The
Whitewater Facility is designed to operate as a QF under PURPA and the
regulations promulgated thereunder.

CONSTRUCTION

THE COTTAGE GROVE FACILITY

       The Cottage Grove Facility was constructed by Westinghouse Electric
Corporation ("Westinghouse Electric" or the "Contractor") pursuant to a turnkey
construction contract (the "Cottage Grove Construction Contract"). Westinghouse
began construction of the Cottage Grove Facility on June 30, 1995. Westinghouse
Electric had agreed to complete the construction and start-up of the Facility to
specified performance levels by May 31, 1997 and is required under the Cottage
Grove Construction Contract to reimburse the Partnership for extension fees paid
under the Cottage Grove Power Purchase Agreement, and certain liquidated damages
in the event of a delay. During 1997, Westinghouse Electric paid $1,333,000 and
$5,073,000 of reimbursable extension fees and delay liquidated damages,
respectively, to Cottage Grove. In order to demonstrate that construction of the
Facility was substantially complete, the Contractor was required to demonstrate,
with the concurrence of Cottage Grove and R.W. Beck, the independent engineer,
that: (i) the Facility was mechanically and electrically sound and free from
known defects or deficiencies that could affect the safety and reliability of
the Facility, (ii) the Facility met



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<PAGE>   7

performance and emission guarantees, (iii) the Facility successfully completed
testing designed to demonstrate the Facility's reliability, and (iv) the
Facility successfully completed testing required by the Cottage Grove Power
Purchase Agreement.

       Effective September 30, 1997, the Partnership and the Contractor, with
the concurrence of R.W. Beck, agreed to a Construction Contract change order.
Under the change order, certain non-material modifications were made to the
Cottage Grove Construction Contract and certain guarantees were deferred until
final completion, which allowed the Contractor to achieve substantial completion
and the Partnership to commence commercial operation. In addition, the
Contractor committed to certain future modifications in the Facility's
construction, extension of certain warranty periods and certain financial
concessions. The construction and start-up of the Cottage Grove Facility was
substantially complete and commercial operation commenced on October 1, 1997.

THE WHITEWATER FACILITY

       The Whitewater Facility was constructed by Westinghouse Electric
pursuant to a turnkey construction contract (the "Whitewater Construction
Contract"). Westinghouse Electric began construction of the Whitewater Facility
on June 30, 1995. Westinghouse Electric had agreed to complete the construction
and start-up of the Facility to specified performance levels by May 31, 1997 and
is required under the Whitewater Construction Contract to reimburse the
Partnership for extension fees paid under the Whitewater Power Purchase
Agreement, and certain liquidated damages in the event of a delay. During 1997,
Westinghouse Electric paid $110,000 and $4,539,000 of reimbursable extension
fees and delay liquidated damages, respectively, to Whitewater. In order to
demonstrate that construction of the Facility was substantially complete, the
Contractor was required to demonstrate, with the concurrence of Whitewater and
R.W. Beck, the independent engineer, that: (i) the Facility was mechanically and
electrically sound and free from known defects or deficiencies that could affect
the safety and reliability of the Facility, (ii) the Facility met performance
and emission guarantees, (iii) the Facility successfully completed testing
designed to demonstrate the Facility's reliability, and (iv) the Facility
successfully completed testing required by the Whitewater Power Purchase
Agreement.

       Effective September 18, 1997, the Partnership and the Contractor, with
the concurrence of R.W. Beck, agreed to a Construction Contract change order.
Under the change order, certain non-material modifications were made to the
Whitewater Construction Contract and certain guarantees were deferred until
final completion, which allowed the Contractor to achieve substantial completion
and the Partnership to commence commercial operation. In addition, the
Contractor committed to certain future modifications in the Facility's
construction, extension of certain warranty periods and certain financial
concessions. The construction and start-up of the Whitewater Facility was
substantially complete and commercial operation commenced on September 18, 1997.

 GREENHOUSE

       Whitewater entered into a construction contract (the "Dominion
Construction Contract") with Dominion Growers/Whitewater L.C. ("Dominion") under
which Dominion was required to design, engineer, procure, interconnect,
construct and start-up the Greenhouse, as well as perform certain other
obligations. The Dominion Construction Contract established a 19-month
construction schedule for the Greenhouse. Dominion began procurement and
construction on July 11, 1995. The Greenhouse was substantially complete on June
2, 1997.

PROJECT MANAGEMENT

       LS Power provided certain management and administration services to the
Partnerships, including supervision of the Contractor and Westinghouse Operating
Services Company, Inc., as operator of the Facilities, pursuant to management
services agreements (collectively, the "MSAs") with the Partnerships and the
General Partners. On March 20, 1998, LS Power assigned, and Cogentrix Energy
assumed, all of the rights and obligations of LS Power under each of these
agreements. See Part I, Item 1 - "Change in Control" and Part III, Item 13 -
"Certain Relationships and



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<PAGE>   8

Related Transactions".

OPERATIONS AND MAINTENANCE

OPERATIONS AND MAINTENANCE AGREEMENTS

       Each of the Cottage Grove and Whitewater Facilities is operated by
Westinghouse Operating Services Company, Inc. ("Westinghouse Services") pursuant
to a seven-year operations and maintenance agreement (an "O&M Agreement" and
collectively, the "O&M Agreements" ). Under each O&M Agreement, Westinghouse
Services was required to provide certain services during the pre-operational
phase of the related Facility as well as services following commercial
operation. As compensation for its services, Westinghouse Services is reimbursed
under each O&M Agreement on a monthly basis for certain approved costs incurred
in connection with operating the related Facility. In addition, Westinghouse
Services (i) received a fixed monthly fee during the pre-operational phase of
such Facility and (ii) will receive an annual management fee of $350,000 during
the operational years of such Facility. The Partnerships contract directly with
certain subcontractors for materials and services which are outside the scope of
Westinghouse Service's obligations under the O&M Agreements, including major
maintenance of the Facilities. Westinghouse Services is also subject to an
annual performance bonus or penalty payment depending on each Facility's
availability relative to certain performance criteria reflecting aspects of
similar criteria contained in such Facility's Power Purchase Agreement.
Furthermore, Westinghouse Services is subject to a penalty payment depending
upon each Facility's ability to produce an uninterrupted supply of thermal
energy.

PARTS AGREEMENTS

       Cottage Grove and Whitewater each has a parts agreement (a "Parts
Agreement" and collectively, the "Parts Agreements") with Westinghouse Electric.
Under each Parts Agreement, Westinghouse Electric provides a spare set of
certain major combustion turbine parts (including combustors, fuel nozzles,
transitions, turbine blades and vanes and various other items), and repairs or
replaces specified parts during certain scheduled and unscheduled outages of the
related Facility. Pursuant to each Parts Agreement, which expires at the earlier
of (i) completion of the first scheduled major inspection of the applicable
Facility and (ii) 15 years after provisional acceptance of the related Facility,
Westinghouse Electric is paid an annual fee of $976,833 (subject to adjustment
each year on specified indices published by the United States Bureau of Labor
Statistics) for 12 years. In addition, Westinghouse Electric provides certain
Westinghouse Electric parts at a discount from the list price for the life of
the related Facility and repairs certain parts at cost plus a certain percentage
markup for the duration of the financing of such Facility.

GREENHOUSE

       Whitewater previously entered into a lease agreement (the "Dominion
Lease") with Dominion. Under the Dominion Lease, Whitewater agreed to lease to
Dominion the Greenhouse and an approximate 38-acre parcel of land upon which the
Greenhouse was constructed. 

       In 1997, Whitewater and Dominion terminated the Dominion Lease and the
related hot water supply agreement with Dominion. To replace these Dominion
arrangements, Whitewater entered into an operational services agreement (the
"Greenhouse Operational Services Agreement") with FloriCulture, an affiliate of
Whitewater, which operates the Greenhouse for the benefit of Whitewater.

       Under the terms of the Greenhouse Operational Services Agreement,
FloriCulture is required to provide all the services necessary to produce,
market, and sell horticultural products and to operate and maintain the
Greenhouse. As compensation for its services, FloriCulture is reimbursed on a
monthly basis for its approved costs in connection with conducting the
Greenhouse business and operating the Greenhouse, and will receive an annual
management fee equal to 12% of Whitewater's net profit from the operation of the
Greenhouse. The term of the Greenhouse Operational Services Agreement will
expire on May 31, 2022.



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<PAGE>   9

SALE OF CAPACITY AND ELECTRICITY

COTTAGE GROVE

       Cottage Grove, as seller, and NSP, as purchaser, have entered into the
Cottage Grove Power Purchase Agreement. Under and subject to the terms of the
Cottage Grove Power Purchase Agreement, NSP is obligated to purchase all
electric capacity made available to it and all associated energy which NSP
chooses to dispatch from the Cottage Grove Facility beginning on the Cottage
Grove Commercial Operations Date and extending for 30 years thereafter.

       Payments by NSP to Cottage Grove under the Cottage Grove Power Purchase
Agreement consist of (i) capacity payments and (ii) energy payments. The
capacity payments made by NSP are based on the Facility's tested capacity and
availability, and have three components: one rate component based on a fixed
schedule and two rate components that escalate in accordance with changes in
published indices. NSP is required to make capacity payments to Cottage Grove on
a monthly basis for electric capacity made available to NSP, regardless of the
level of dispatch. Capacity payments from NSP are subject to adjustment on the
basis of performance-based factors which reflect the Cottage Grove Facility's
semi-annually tested capacity and its rolling 12-month average for availability
and on-peak availability. Capacity payments are also adjusted for transmission
losses or gains relative to a reference plant (the "Capacity Loss Factor").

       Under the Cottage Grove Power Purchase Agreement, NSP has full dispatch
discretion over energy delivered by the Cottage Grove Facility subject to
certain agreed dispatch parameters. This offers NSP the flexibility to call upon
the Cottage Grove Facility to deliver energy when it is the lowest cost unused
variable energy source available to NSP. There is no contractual minimum amount
of energy that NSP must purchase from Cottage Grove.

       Energy payments for energy delivered by the Cottage Grove Facility vary
in accordance with a published monthly spot natural gas index or, in case of
dispatch in excess of 16 hours per day, with the Cottage Grove Facility's actual
fuel costs. The prices that Cottage Grove pays for natural gas pursuant to its
gas supply contracts vary in accordance with the same monthly spot natural gas
index as the related variable energy rate contained in the Cottage Grove Power
Purchase Agreement or, in some circumstances, in accordance with daily spot
prices for natural gas. While the gas pricing and gas transportation escalation
rates under Cottage Grove's gas supply and transportation agreements are
designed to generally track corresponding revenues derived under the Cottage
Grove Power Purchase Agreement, there can be no assurance that such pricing
components will match corresponding revenue streams under all operating and
escalation environments.

       Following the 10th anniversary of the Cottage Grove Commercial Operations
Date, if NSP fails to obtain or is denied authorization by any governmental
authority having jurisdiction over NSP's retail rates and charges, granting it
the right to recover from its customers any payments made to Cottage Grove under
the Cottage Grove Power Purchase Agreement, any such disallowance will be
monitored in a tracking account and the unpaid balance in the tracking account
shall accrue interest at 8.7% per annum. Within 30 days after Cottage Grove's
First Mortgage Bonds have been fully retired, NSP may begin reducing payments to
Cottage Grove to (i) ensure the payments are in-line with Minnesota Public
Utility Commission rates and (ii) begin amortizing the balance in the tracking
account. Should NSP exercise its right to reduce payments, the maximum reduction
is 75% of the capacity payment otherwise due for the period.

WHITEWATER

       Whitewater, as seller, and WEPCO, as Power Purchaser, have entered into
the Whitewater Power Purchase Agreement. Under and subject to the terms of the
Whitewater Power Purchase Agreement, WEPCO is obligated to purchase the electric
capacity made available to it up to 236.5 megawatts and associated energy which
WEPCO chooses to dispatch from the Whitewater Facility beginning on the
Whitewater 

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Commercial Operations Date and extending for 25 years thereafter.

       Payments by WEPCO to Whitewater under the Whitewater Power Purchase
Agreement consist of (i) capacity payments and (ii) energy payments. The
capacity payments made by WEPCO are based on the Whitewater Facility's tested
capacity and availability and have three rate components: a rate component based
on a fixed schedule, a fixed operation and maintenance rate component escalating
in accordance with changes in a published index, and a fixed gas transport rate
component escalating in a similar manner. WEPCO is required to make capacity
payments to Whitewater on a monthly basis for electric generating capacity made
available to WEPCO, regardless of the amount of electric energy actually
dispatched. Capacity payments from WEPCO are subject to adjustment on the basis
of performance-based factors which reflect the Whitewater Facility's
semi-annually tested capacity, and average and peak availability factors for the
preceding contract year.

       Under the Whitewater Power Purchase Agreement, WEPCO has full dispatch
discretion over energy to be delivered by the Whitewater Facility subject to
certain agreed dispatch parameters. This offers WEPCO the flexibility to call
upon the Whitewater Facility to deliver energy when it is the lowest cost unused
variable energy source available to WEPCO. There is no contractual minimum
amount of energy that WEPCO must purchase from Whitewater.

       Energy payments for energy delivered by the Whitewater Facility vary in
accordance with a published monthly spot natural gas index or with the
Whitewater Facility's actual fuel costs. The prices that Whitewater pays for
natural gas pursuant to its gas supply contracts vary in accordance with the
same monthly spot natural gas index as the related variable energy rate
contained in the Whitewater Power Purchase Agreement or, in some circumstances,
in accordance with daily spot prices for natural gas. While the gas pricing and
gas transportation escalation rates under Whitewater's gas supply and
transportation agreements are designed to generally track corresponding revenues
derived under the Whitewater Power Purchase Agreement, there can be no assurance
that such pricing components will match corresponding revenue streams under all
operating and escalation environments.

       The Partnership and WEPCO disagreed on the interpretation of certain
provisions in the Whitewater Power Purchase Agreement with respect to the
methodology to be used to determine Committed Capacity of the Whitewater
Facility, as defined. Effective on February 26, 1998, the Partnership and WEPCO
entered into a settlement letter and the Fifth Amendment to the Power Purchase
Agreement to resolve various differences in interpretation of the Whitewater
Power Purchase Agreement to their mutual satisfaction. Whitewater does not
believe that the settlement will have a material impact on the Partnership's
results of operations or financial position.

       Subject to certain limitations, the capacity payments from WEPCO may be
reduced to the extent that WEPCO's senior debt instruments are downgraded by any
two of Standard & Poor's Corporation, Moody's Investors Services, Inc. and Duff
& Phelps as a result of WEPCO's long term power purchase obligations under the
Whitewater Power Purchase Agreement. So long as Whitewater's First Mortgage
Bonds are outstanding, the reduction may not exceed the level necessary to cause
Whitewater's debt service coverage ratio to be less than 1.4 in any month, with
such ratio calculated on a rolling average of the four fiscal quarters
immediately preceding the proposed adjustment. After Whitewater's First Mortgage
Bonds have been repaid, the reduction may not exceed 50% of the Whitewater's
revenues minus expenses. The amount of the reductions precluded by application
of the above limitations will be monitored in a tracking account and the unpaid
balance in the tracking account shall accrue interest at the base or prime
lending rate set from time to time by The Chase Manhattan Bank, N.A. or its
successor. Accrued tracking account obligations are to be repaid when possible,
subject to the limitations described above, or may be applied to WEPCO's
purchase of the Whitewater Facility at the expiration of the Whitewater Power
Purchase Agreement.

       In the event that at any time WEPCO is denied rate recovery from its
customers of any payment to be made to Whitewater under the Whitewater Power
Purchase Agreement by an applicable regulatory authority, WEPCO's payments to
Whitewater may be correspondingly reduced, subject to certain limitations. While
Whitewater's First Mortgage Bonds are outstanding, the capacity payments may be
reduced by the annual regulatory disallowance provided that the reduction may
not cause Whitewater's debt service coverage ratio to be less than 1.4 in any



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<PAGE>   11

month calculated on a rolling average of the four fiscal quarters preceding the
proposed adjustment. After Whitewater's First Mortgage Bonds are repaid,
reductions may not exceed 50% of Whitewater's revenues minus expenses. The
amount of the reductions precluded by these restrictions is monitored in a
tracking account with repayment subject to the same provisions as for bond
downgrading adjustments discussed above.

QUALIFYING FACILITY STATUS

       The Cottage Grove Facility and the Whitewater Facility are each certified
as a QF under PURPA and the regulations of the Federal Energy Regulatory
Commission ("FERC") promulgated thereunder. While loss of QF status does not
result in a default under either Power Purchase Agreement, it can result in a
reduction in payments under the Cottage Grove Power Purchase Agreement to the
lower of FERC approved rates or the contract rates, or under the Whitewater
Power Purchase Agreement to the lower of FERC approved rates or rates reflecting
a five percent discount from the capacity component of the contract rates. Under
its respective Power Purchase Agreement, each Partnership may regain full
contract rates if it regains QF status that has been lost. In addition, a loss
of QF status will cause the rates and certain organizational and financial
affairs of the affected Partnership to become subject to regulation by the FERC,
possibly result in both Partnerships to become regulated under the Public
Utility Holding Company Act of 1935, as amended ("PUHCA"), and to the extent not
preempted by the Federal Power Act, as amended ("FPA"), to become subject to the
jurisdiction of the applicable state public utility commission.

THERMAL ENERGY SALES

COTTAGE GROVE

       Cottage Grove has a steam supply agreement, as amended, with 3M (the "3M
Thermal Energy Agreement"), which provides for Cottage Grove to supply the steam
requirements of 3M's manufacturing plant in Cottage Grove, Minnesota. The
Cottage Grove Facility is capable of delivering up to 190,000 pounds of steam
per hour through its cogeneration process and, alternatively, up to 160,000
pounds of steam per hour in the aggregate through two auxiliary steam generators
(the "Auxiliary Boilers") which are used when NSP has not dispatched the
Facility or when the cogeneration process is otherwise unavailable. The term of
the 3M Thermal Energy Agreement extends for an initial period of 30 years from
the date upon which the first deliveries of steam were made, which term may be
extended upon terms and conditions mutually satisfactory to Cottage Grove and
3M.

       The 3M Thermal Energy Agreement obligates Cottage Grove to supply all of
3M's steam requirements up to a maximum of 664 million pounds of steam annually
at a rate not to exceed 190,000 pounds per hour when the Cottage Grove
Facility's cogeneration process is operating and 160,000 pounds per hour when
the steam is generated by the Auxiliary Boilers (the "Maximum 3M Purchase
Amount"). For the first ten years after Cottage Grove commences steam delivery
to 3M, 3M must take and use, at a minimum, the amount of steam necessary to
maintain the Cottage Grove Facility's status as a QF (the "Minimum 3M Purchase
Amount"). Thereafter, if 3M takes less than the Minimum 3M Purchase Amount,
Cottage Grove may reduce the Maximum 3M Purchase Amount and sell steam in excess
of such reduction to other steam purchasers. In the event Cottage Grove delivers
steam which does not conform to the specifications in the 3M Thermal Energy
Agreement, Cottage Grove must discontinue such delivery (unless otherwise
requested by 3M) and, at its own expense, take prompt action to correct such
non-conformance. The 3M Thermal Energy Agreement also provides that 3M is
obligated to return the condensate to the Cottage Grove Facility, supply a
quantity of cooling and potable water sufficient to satisfy the requirements of
the Cottage Grove Facility and, to the extent consistent with certain
governmental permits and regulations, accept the Cottage Grove Facility's
wastewater and sanitary wastewater into 3M's existing discharge systems. 3M has
the right to reduce the water supply to the Facility in the event that it cannot
satisfy both its own and Cottage Grove's requirements; however, Cottage Grove
has drilled a back-up well as a reserve in the event of any shortfalls in water
supply from 3M.

       Cottage Grove is obligated to supply steam to 3M on a non-interruptible
basis, except during periods of 



                                       11

<PAGE>   12

force majeure, emergency conditions affecting the Cottage Grove Facility and
periods when 3M is unable to accept steam due to repair or maintenance of its
manufacturing plant. In the event of any failure to supply steam to 3M, other
than as a result of force majeure or the acts or omissions of 3M, Cottage Grove
must reimburse 3M for its incremental costs.

WHITEWATER 

University of Wisconsin-Whitewater

       Whitewater has a steam supply agreement with the Department of
Administration of the State of Wisconsin ("DOA"), which provides for Whitewater
to supply the steam requirements of UWW (the "UWW Thermal Energy Agreement").
The initial term of the UWW Thermal Energy Agreement expires June 30, 2005 (the
"UWW Initial Term"). The DOA has the option to extend the UWW Initial Term for
up to four extension periods of four years each.

       The UWW Thermal Energy Agreement obligates Whitewater to supply all of
UWW's steam requirements up to a maximum of 350 million pounds of steam annually
at a rate not to exceed 100,000 pounds per hour (the "Maximum UWW Purchase
Amount"). DOA may also request, and Whitewater must use reasonable efforts to
supply, steam in excess of the Maximum UWW Purchase Amount. DOA is not obligated
to take any minimum annual or hourly quantity of steam. In the event Whitewater
delivers steam that does not conform to the specifications set forth in the UWW
Thermal Energy Agreement, Whitewater must discontinue such delivery (unless
otherwise requested by DOA) and, at its own cost, take prompt action to correct
such non-conformance.

       Whitewater has agreed to reimburse DOA for costs up to $500,000 incurred
to repair and recondition one of UWW's existing steam boilers for use as a
back-up boiler and to modify the operations of the UWW heating plant where its
boilers are located. As of December 31, 1997, Whitewater has reimbursed DOA
approximately $280,000 for the repair of UWW's steam boiler. Whitewater has also
agreed to pay the annual costs to maintain the back up boiler in a standby mode.

       Whitewater is obligated to supply steam to UWW on a non-interruptible
basis, except during periods of force majeure, emergency conditions affecting
the Whitewater Facility and periods when UWW is unable to accept steam due to
necessary repair or maintenance to the UWW steam piping system. In the event of
any failure to supply UWW, other than as a result of force majeure or the acts
or omissions of UWW, Whitewater must reimburse UWW for its incremental costs.

Greenhouse

       Under the terms of the Greenhouse Operational Services Agreement with
FloriCulture, Whitewater will supply the hot water requirements of the
Greenhouse. See "Operations and Maintenance; Greenhouse".

GAS SUPPLY

       Each of Cottage Grove and Whitewater has entered into gas supply
contracts with substantially identical terms, with the exception of the volume
of gas required to be delivered under the contracts. This difference is
primarily a result of varying contractual requirements in the Power Purchase
Agreements. Specifically, each Partnership has entered into (i) a gas sales
contract with NGC, as amended (the "NGC Gas Supply Contracts"), and (ii) a gas
sales contract with Aquila, as amended (the "Aquila Gas Supply Contracts," and
together with the NGC Gas Supply Contracts, the "Gas Supply Contracts") to
collectively service 100% of the expected gas requirements of its Facility.

       The Aquila Gas Supply Contracts and the NGC Gas Supply Contracts each
provide for the sale of up to 17,060 MMBtu per day of gas to Cottage Grove and
up to 11,855 MMBtu per day of gas to Whitewater. Under the Gas Supply Contracts,
except during periods of force majeure or default by a Partnership, NGC and
Aquila (together, the "Gas Suppliers") are required to supply on a firm basis to
the point of demarcation between the field



                                       12

<PAGE>   13

zone and the market zone of Northern Natural (the "Demarcation Point"), all gas
properly nominated by each Partnership. If a Gas Supplier fails to deliver
properly nominated gas to the Demarcation Point for any reason other than force
majeure or a Partnership's failure to pay for past deliveries, Cottage Grove or
Whitewater, as the case may be, has the right to buy replacement gas (or fuel
oil) from other sources and charge the applicable Gas Supplier for the direct
increased cost (including transportation charges), if any, of using such gas or
fuel oil.

       Under the Gas Supply Contracts, there are three categories of gas, Tier I
Gas, Tier II Gas, and Tier III Gas. Tier I Gas is "baseload" gas, nominated
prior to the commencement of each month at a set volume for such month. Tier II
Gas is "TOK-swing" gas, nominated prior to the commencement of each month at a
set volume with the ability to reduce daily volumes to reflect daily swings in
gas needs at the Facilities. Tier III Gas is "spot-swing" gas, nominated on a
monthly basis (in the case of Aquila) and daily basis (in the case of both NGC
and Aquila) to fulfill daily swings in Facility requirements not met by Tier I
Gas and/or Tier II Gas.

       The price for Tier I Gas is equal to a published price for
first-of-the-month spot natural gas delivered to Northern Natural in Texas,
Oklahoma and Kansas (the "TOK Price"), plus a percentage fee. The price for Tier
II Gas is equal to the TOK Price plus a reservation fee payable on all Tier II
volumes nominated, regardless of whether such volumes are actually purchased by
such Partnership. The price for Tier III Gas is calculated on a daily cost basis
which could vary above or below the first-of-the-month TOK Price. The TOK Price,
or, in some circumstances, actual fuel cost is used as the basis for the price
payable for variable energy under the Power Purchase Agreements.

       Under the Gas Supply Contracts, the Partnerships are subject to an
annual minimum take requirement for Tier I Gas equal to 40% of the annualized
maximum quantity. Under the NGC Gas Supply Contracts, one-half of Tier II Gas
quantities delivered may be applied to reduce the minimum take requirement. The
Partnerships may satisfy the minimum take requirements by delivering gas to the
Facilities, taking gas into storage or by remarketing gas to third parties. In
the event of two consecutive annual minimum take shortfalls, Aquila has the
right to reduce the volumes deliverable under the applicable Aquila Gas Supply
Contract. On a monthly basis, Whitewater and Cottage Grove are required to take
all Tier I Gas nominated for such month, make other arrangements for the
disposition thereof, or pay certain penalties.

       The primary term of each Gas Supply Contract is 20 years beginning with
the Commercial Operations Date of the respective Facility. Following the end of
the primary term, the NGC Gas Supply Contracts may be extended at the applicable
Partnership's option for an additional five-year term. The Aquila Gas Supply
Contracts extend beyond the primary term on a year-to-year basis, unless
affirmatively terminated by one of the parties thereto.

       The Gas Supply Contracts may be terminated prior to expiration in the
event the corresponding Power Purchase Agreement is terminated without
replacement or upon the occurrence of certain events of default. Events of
default include bankruptcy or insolvency proceedings, legal process against the
contract itself, false representations or warranties, unexcused failure to
deliver gas, continued failure to pay for gas after suspension of deliveries by
the applicable Gas Supplier or any other continued material breach.

GAS TRANSPORTATION

COTTAGE GROVE

       Cottage Grove has various gas transportation agreements with Northern
Natural (collectively, the "Cottage Grove Northern Transportation Agreements")
pursuant to an agreement among Cottage Grove, Northern Natural and Peoples (the
"Cottage Grove Letter Agreement"). The Cottage Grove Letter Agreement and the
Cottage Grove Northern Transportation Agreements (the "Cottage Grove Northern
Agreements") have a term of 20 years, subject to a 10-year option to renew by
Cottage Grove, and set forth the terms and conditions under which Northern
Natural agrees to transport on both a firm and interruptible basis the gas
purchased by Cottage Grove pursuant to the Cottage Grove Gas Supply Contracts.
Under the Cottage Grove Northern Agreements, gas is



                                       13


<PAGE>   14

transported from Northern Natural's field zone to the Demarcation Point on an
interruptible basis, and from the Demarcation Point to the interconnection of
the facilities of Northern Natural and Peoples (the "Cottage Grove TBS") on a
firm basis. Subject to certain restrictions (including minimum and maximum
injection and withdrawal rates), the Cottage Grove Northern Agreements also
provide firm storage service at Northern Natural's gas storage facility in the
market zone of an aggregate volume of gas sufficient to supply the Cottage Grove
Facility for approximately 29 days.

       Cottage Grove also has an agreement with Peoples that provides for the
transportation from the Cottage Grove TBS to the Cottage Grove Facility of
29,120 MMBtu per day on a firm basis and excess gas required by the Cottage
Grove Facility on an interruptible basis (the "Peoples Agreement", and together
with the Cottage Grove Northern Agreements, the "Cottage Grove Transportation
Agreements").

       Under the Cottage Grove Letter Agreement, Peoples has agreed to release
to Cottage Grove 34,120 MMBtu/day of firm capacity it currently holds on
Northern Natural's system for gas transportation under the Cottage Grove
Transportation Agreements from the Demarcation Point to the Cottage Grove TBS.
Northern Natural has agreed to construct, maintain and own at its expense the
Cottage Grove TBS and other facilities necessary to effectuate the services
described above. In order to secure its payment obligations under the Cottage
Grove Letter Agreement, if the rating on the Senior Secured Boards falls below
investment grade, Cottage Grove will be required to obtain a guarantee or a
letter of credit from an investment grade entity.

       The Peoples Agreement provided for the construction of an approximately
one mile long pipeline at Peoples' expense from the Cottage Grove TBS to the
Cottage Grove Facility. The agreement designates Peoples as Cottage Grove's
agent with respect to nominations on Northern Natural's system and requires
Peoples to sell gas, if available, to Cottage Grove in case of a failure of any
of Cottage Grove's supplies under the Cottage Grove Gas Supply Contracts. In
addition, the Peoples Agreement provides various balancing services which
augment the balancing rights held by Cottage Grove under the Cottage Grove
Northern Agreements. For up to 20 days of each "heating period" (i.e., an
interval beginning December 1 and extending to the end of the following
February) Peoples has the option to retain the gas destined for the Cottage
Grove Facility for its own use, subject to proper notice and the reimbursement
of Cottage Grove for replacement fuel costs. In consideration for such option,
Cottage Grove receives a monthly payment of $116,480 during the heating period.
In addition, on any day during each heating period on which Cottage Grove
nominates a quantity of gas and transportation from the Gas Suppliers and
Northern Natural less than 29,120 MMBtu, Peoples may require Cottage Grove to
nominate and deliver to Peoples the difference between the quantities actually
nominated and 29,120 MMBtu, subject to compliance with Northern Natural's
tariffs, agreement between Peoples and NSP and payment to Cottage Grove of its
actual cost of gas and gas transportation with respect to such differential
quantities.

WHITEWATER

       Whitewater has various gas transportation agreements with Northern
Natural (collectively, the "Whitewater Northern Agreements"). The Whitewater
Northern Agreements have a term of 20 years, with a 10-year option to renew by
Whitewater, and set forth the terms and conditions under which Northern Natural
agrees to transport, on both a firm and interruptible basis, the gas purchased
by Whitewater pursuant to the Whitewater Gas Supply Contracts. Under the
Whitewater Northern Agreements, gas will be transported from Northern Natural's
field zone to the Demarcation Point on an interruptible basis, and from the
Demarcation Point to the interconnection of the facilities of Northern Natural
and WNG (the "Whitewater TBS") on a firm basis. Subject to certain restrictions
(including the minimum and maximum injection and withdrawal rates), the
Whitewater Northern Agreements also provide for firm storage service at Northern
Natural's gas storage facility in the market zone of an aggregate volume of gas
sufficient to supply the Whitewater Facility for approximately 21 days. Finally,
the Whitewater Northern Agreements provide for interruptible storage service at
Northern Natural's gas storage facility in the market area, subject to its
availability.

       Under the Whitewater Northern Agreements, Northern Natural agrees to
provide 30,400 MMBtu/day of firm capacity for the transportation of gas from the
Demarcation Point to the Whitewater TBS. Northern Natural


                                       14


<PAGE>   15
has also agreed to construct, maintain and own the Whitewater TBS and other
facilities necessary to effectuate the services described above. As a
contribution toward the cost of these facilities, Whitewater has made a payment
to Northern Natural of $2,500,000. In order to secure its payment obligations
under the Whitewater Northern Agreements, if the rating on the Senior Secured
Bonds falls below investment grade, Whitewater will be required to obtain a
guarantee or a letter of credit from an investment grade entity.

       Whitewater also has an agreement with WNG which provides for the
transportation of all gas required by the Whitewater Facility from the
Whitewater TBS to the Whitewater Facility (the "WNG Agreement", and together
with the Whitewater Northern Agreements, the "Whitewater Transportation
Agreements"). The WNG Agreement provided for the construction of an
approximately five mile long pipeline from the Whitewater TBS to the Whitewater
site. Whitewater paid approximately $1,328,000 for the construction of the
pipeline. The WNG Agreement extends for an initial term of 25 years (with two
optional five-year extensions), and provides for the firm transport of the daily
and hourly gas requirements of the Whitewater Facility.

       Whitewater has an agreement, as amended, with Wisconsin Power & Light
Company ("WP&L") which provides WP&L with the ability to purchase a portion of
Whitewater's daily gas supply and interstate transportation capacity in return
for the payment of a monthly fee to Whitewater and reimbursement of Whitewater's
incremental costs (the "WP&L Agreement"). The WP&L Agreement permits WP&L to
purchase from Whitewater up to 15,000 MMBtu/day of gas and up to 10,400
MMBtu/day of interstate transportation capacity, not to exceed in the aggregate
508,000 MMBtu/year of combined gas and transportation capacity. In consideration
therefor, WP&L pays Whitewater a monthly fee of $58,500 and the incremental
costs incurred for replacement gas or fuel oil, including transportation. The
term of the WP&L Agreement commenced in 1997 and continues for three years, with
an option in favor of WP&L to extend the term for an additional three years.

DEPENDENCE ON THIRD PARTIES

       Each Partnership is highly dependent on a single utility for purchases of
electric generating capacity and energy from its respective Facility, a single
operator to perform the operation and maintenance of its respective Facility
and, in the case of the Cottage Grove Facility, a single steam purchaser for
purchases of thermal energy. In addition, each Partnership has contracted with
only two gas companies, Aquila and NGC, to supply the gas requirements of the
Facilities, and has contracted with a single interstate gas transporter,
Northern Natural, to transport gas. Any material breach by any one of these
parties of their respective obligations to either Partnership could affect the
ability of the applicable Partnership to make payments under its First Mortgage
Bonds and consequently Funding's ability to make payments on the Senior Secured
Bonds. In addition, bankruptcy or insolvency of certain other parties or
defaults by such parties relative to their contractual or regulatory obligations
could adversely affect the ability of a Partnership to make payments to Funding
with respect to such Partnership's First Mortgage Bonds and consequently
Funding's ability to make payments on the Senior Secured Bonds. If a project
agreement were to be terminated due to a breach of such project agreement, the
affected Partnership's ability to enter into a substitute agreement having
substantially equivalent terms and conditions, or with an equally creditworthy
third party, is uncertain.

THE INDEPENDENT POWER MARKET

       Utilities in the United States have been the predominant producers of
electric power intended primarily for sale to third parties since the early
1900s; however, the enactment of PURPA removed certain regulatory constraints
relating to the production and sale of electric energy by certain non-utility
power producers and required electric utilities to buy electricity from certain
types of non-utility power producers under certain conditions, thereby
encouraging companies other than electric utilities to enter the electric power
production market. As a result, a market for electric power produced by
independent power producers unaffiliated with utilities such as the Partnerships
has developed in the United States since the enactment of PURPA.

       The Energy Policy Act of 1992 (the "Policy Act") expands certain
exemptions previously available only under PURPA and provides for the ability of
independent power producers to compete in a non-regulated fashion


                                       15


<PAGE>   16

without having to qualify as QFs under PURPA. In addition, over the last several
years, various state utility commissions have opened the electrical generation
and sales market to competition not only from QFs but to non-QF independent
power producers and competitive proposals from other utilities and power
marketers. These developments have generally required that independent power
projects must now be viewed as "least-cost" with such a showing being
demonstrated through a competitive procurement process, such as those which
resulted in the selection of the Cottage Grove Facility and Whitewater Facility.

REGULATION

GENERAL

       The Partnerships are required to comply with numerous Federal, state and
local statutory and regulatory standards and obtain and maintain numerous
permits and approvals relating to energy, the environment and other laws
required for the operation of the Facilities. The permits and regulatory
approvals that have been issued to the Partnerships contain certain conditions.
There can be no assurance that either Facility will continue to operate in
accordance with the conditions established by the permits or approvals or that
the Partnerships or third parties will be able to obtain any outstanding permits
required for the operation of the Facilities. Laws and regulations affecting
Funding, the Partnerships and the Facilities may change during the period in
which the Senior Secured Bonds are scheduled to be outstanding, and such changes
could adversely affect Funding or the Partnerships. For example, changes in laws
or regulations (including but not limited to environmental laws and regulations)
could impose more stringent or comprehensive requirements on the operation or
maintenance of the Facilities, resulting in increased compliance costs or the
reduction of certain benefits currently available to the Partnerships, or could
expose Funding or the Partnerships to liabilities for previous actions taken in
compliance with all laws in effect at the time or for actions taken by or
conditions caused by unrelated third parties.

PURPA

       PURPA and the regulations promulgated thereunder by FERC provide an
electric generating facility with rate and regulatory incentives if the facility
is a QF. Under PURPA, a topping-cycle cogeneration facility is a QF if (i) the
facility sequentially produces both electricity and a useful thermal energy
output during any calendar year (and the first 12 months of operation) which
constitutes at least five percent of its total energy output and which is used
for industrial commercial, heating or cooling purposes, (ii) during any calendar
year (and the first 12 months of operation) the sum of the useful power output
of the facility plus one-half of its useful thermal energy output equals or
exceeds 42.5 percent of the total energy input of natural gas and oil, or, in
the event that the facility's useful thermal energy output is less than 15
percent of the facility's total energy output, such sum equals or exceeds 45
percent of such total energy input and (iii) the facility is not owned by a
person primarily engaged in the generation or sale of electric energy (other
than from QFs, other types of exempt facilities and power marketers) or more
than 50 percent owned by an electric utility, electric utility holding company,
or a wholly or partially owned subsidiary of an electric utility or an electric
utility holding company. PURPA and the regulations promulgated thereunder exempt
QFs from PUHCA, most provisions of the FPA and certain state laws relating to
rates, and the financial and organizational regulation of electric utilities.

       The Partnerships expect the Facilities to continue to meet all of the
criteria required for designation as QFs under PURPA. If either Facility were to
fail to meet such criteria, the related Partnership may become subject to
regulation under PUHCA, the FPA and state utility laws. Furthermore, as a result
of the loss of QF status on one Facility, and the possible creation of a holding
company, the other Facility may lose its QF status due to a violation of PURPA's
ownership restrictions.

PUHCA

       PUHCA provides that any corporation, partnership or other entity, or
organized group of persons which


                                       16


<PAGE>   17

owns, controls or holds with power to vote 10 percent or more of the outstanding
voting securities, or controlling influence over the management, of a "public
utility company" or a company which is a "holding company" of a "public utility
company" is subject to registration with the United States Securities and
Exchange Commission (the "Commission") and regulation under PUHCA, unless
eligible for an exemption or unless a Commission order declaring it not to be a
holding company is issued. PUHCA requires registration for a holding company of
a public utility company, and requires a public utility holding company to limit
its utility operations to a single integrated utility system and to divest any
other operations not functionally related to the operation of the utility
system. In addition, a public utility company which is a subsidiary of a
registered holding company under PUHCA is subject to financial, organizational
and rate regulation, including approval by the Commission of its financing
transactions.

       The Policy Act contains amendments to PUHCA which may allow the
Partnerships to operate their businesses without becoming subject to PUHCA in
the event that either Facility loses its status as a QF. Under the Policy Act, a
company engaged exclusively in the business of owning and/or operating one or
more facilities used for the generation of electric energy exclusively for sale
at wholesale may be exempted from PUHCA. In order to qualify for such an
exemption, a company must apply to the FERC for a determination of eligibility,
pursuant to implementing rules promulgated by the FERC. Both Whitewater and
Cottage Grove were granted exempt wholesale generator status by the FERC on
October 17, 1996. Notwithstanding this exemption, in the event that QF status is
revoked, the applicable Partnership would be subject to regulation under the FPA
and the capacity and energy rates, as described below, would have to be approved
by FERC.


FPA

       Under the FPA, the FERC has exclusive rate-making jurisdiction over
wholesale sales of electricity and transmission in interstate commerce. These
rates may be based on a cost-of-service approach or a market-based approach. If
a Facility were to lose its QF status, the rates set forth in each of the Power
Purchase Agreements would have to be filed with FERC and would be subject to
review and acceptance by the FERC under the FPA. The Whitewater Power Purchase
Agreement provides for a reduction in capacity payment rates in such event to
the lower of a five percent discount from the contract rates, or FERC approved
rates. The Cottage Grove Power Purchase Agreement provides for Cottage Grove to
receive the lower of FERC approved rates or the contract rates.

       The FPA, and the FERC's authority thereunder, also subject public
utilities to various other requirements, including accounting and record-keeping
requirements, FERC approval requirements applicable to activities such as
selling, leasing or otherwise disposing of certain facilities, FERC approval
requirements for mergers, consolidations, acquisitions, the issuance of
securities and assumption of liabilities, and certain restrictions regarding
interlocking directorates. Upon a loss of QF status, the affected Partnership
would become subject to such requirements and although it could make application
for specific waivers, there is no assurance such application would be approved.

STATE REGULATION

       If the Whitewater Facility loses its QF status, it would, absent a
successful request for exemption, become subject to a wide range of Wisconsin
statutes and regulations applicable to Wisconsin public utilities, including the
requirement of the approval by the Wisconsin Public Service Commission (the
"Wisconsin PSC") for the issuance of securities and the need to file periodic
detailed information on financial and organizational matters.

       The rates charged to Whitewater under the WNG Agreement are subject to
approval by the Wisconsin PSC. The criteria for approval by the Wisconsin PSC is
related to its determination that such rates are compensatory. If the rates are
determined by the Wisconsin PSC to be non-compensatory, and the Wisconsin PSC
requires WNG to increase the rates, Whitewater shall be subject to such
increased rates.


                                       17

<PAGE>   18

       Wisconsin law prohibits the granting or transfer of any licenses, permits
and franchises to own or operate equipment to produce light, heat or power to
any foreign corporation. Local counsel does not believe that the Wisconsin law
applies to Whitewater. However, if it is determined that this prohibition does
apply, Whitewater's Certificate of Public Convenience and Necessity ("CPCN")
could be determined to be invalid. If this were to occur, Whitewater's ability
to repay the Whitewater First Mortgage Bonds, and Funding's ability to repay the
Senior Secured Bonds, could be materially delayed or impaired.

GAS SUPPLY AND TRANSPORTATION

       The gas transportation agreements serving each Facility are subject in
various respects to the regulatory authority of governmental entities having
jurisdiction, including but not limited to (i) for Cottage Grove, the Minnesota
Environmental Quality Board ("MEQB"), the Minnesota Department of Natural
Resources, the Minnesota Public Utilities Commission and the FERC and (ii) for
Whitewater, the Wisconsin Department of Natural Resources, the Wisconsin PSC and
the FERC.

       There can be no assurance that changes in regulatory rules or oversight
by such agencies would not adversely affect the economics of Cottage Grove and
Whitewater or their access to gas supplies. Similarly, modifications to tariff
provisions could result in a disallowance of any price discounts existing under
the transportation agreements.



ENVIRONMENTAL MATTERS

       As with any facility similar to the Facilities, the Partnerships are
required to comply with a number of statutes and regulations relating to
protection of the environment and the public and the safety and health of the
personnel operating the Facilities during the construction and operation of the
Facilities. Such statutes and regulations include: (i) regulation of hazardous
materials associated with each Facility, (ii) regulation of noise emissions from
the Facilities, (iii) safety and health standards related to Facility
construction and operation, (iv) regulations requiring certain practices and
procedures applicable to the operation of the Facilities, including permitting
requirements that apply to air emissions, process wastewater and stormwater
discharges and (v) other environmental protection requirements including,
without limitation, emission and discharge standards relating to air and water
pollutants, land use regulations, wild life conservation and fuel storage.

       While the Partnerships believe that the use of natural gas provides
comparative environmental advantages over other fossil fuel-fired power
production technologies, there can be no assurance that environmental or other
laws and regulations adopted in the future will not impose significant
constraints and increased costs on the Facilities' operations. In addition, the
Partnerships may be liable for the investigation and removal of hazardous
materials on the Facilities' sites even if the Partnerships are not the source
of such hazardous materials. Specifically, the Whitewater site boundary is
situated approximately one quarter of a mile away from a landfill under which
groundwater contamination has been discovered. To the extent that such
contamination has reached or reaches the Whitewater Facility site, there is a
possibility that Whitewater would be responsible for the costs of remediating
such contamination from off-site sources that is subsequently identified at the
site. There can be no assurance that such remediation costs payable by
Whitewater, if any, in connection with such contamination will not have a
material adverse effect on the ability of Whitewater to make payments on its
First Mortgage Bonds.

       The Partnerships must also comply with certain environmental conditions
described in the approval orders issued by the appropriate state and Federal
agencies for the Facilities. Failure to comply with any such statutes,
regulations or approvals could have an adverse effect on the Facilities,
including civil or criminal liability, the imposition of cleanup liens, fines,
penalties and expenditures of funds to bring the Facilities into compliance or
the loss of authorization to continue to operate.


                                       18

<PAGE>   19

COMPETITION

       The demand for power in the United States traditionally has been met by
utility construction of large-scale electric generation projects under rate-base
regulation. PURPA removed certain regulatory constraints relating to the
production and sale of electric energy by eligible non-utilities and required
electric utilities to buy electricity from various types of non-utility power
producers under certain conditions, thereby encouraging companies other than
electric utilities to enter the electric power production market. Concurrently,
there has been a decline in the construction of large generating plants by
electric utilities. In addition to independent power producers, subsidiaries of
fuel supply companies, engineering companies, equipment manufacturers and other
industrial companies, as well as subsidiaries of a number of regulated
utilities, have entered the power market. Because the Partnerships have
long-term contracts to sell electric generating capacity and energy from the
Facilities, it is not expected that competitive forces will have a significant
effect on the businesses of the Partnerships. Nevertheless, each of the Power
Purchase Agreements permits the purchasing utility to schedule the respective
Facility for dispatch on an economic basis, which takes into account the
variable cost of electricity to be delivered by the Facility compared to the
variable cost of electricity available to the purchasing utility from other
sources. Accordingly, competitive forces may have some effect on the dispatch
levels of the Facilities.

       The FERC and numerous state utility regulatory commissions have continued
to pursue proceedings to deregulate the generation and sale of electricity. In
several states, including Wisconsin and Minnesota, commissions have initiated
proceedings to examine or develop methods for making the retail sale of
electricity competitive. These proceedings remain at early stages in Wisconsin
and Minnesota, and the potential impact of these proceedings on the Partnerships
is unknown at this time.

EMPLOYEES

       Funding and the Partnerships have no employees and do not anticipate
having any employees in the future. Each Partnership and each General Partner
has a management services agreement which provided for LS Power to perform
management services for each Partnership and each General Partner. On March 20,
1998, LS Power assigned, and Cogentrix Energy assumed, all of the rights and
obligations of LS Power under each of these agreements. See Part I, Item 1 -
"Change in Control" and Part III, Item 13 - "Certain Relationships and Related
Transactions". In addition, each of the Cottage Grove and Whitewater Facilities
is operated by Westinghouse Services pursuant to the O&M Agreements. See Part I,
Item 1 - "Operations and Maintenance".


PART I/ITEM 2.  PROPERTIES

COTTAGE GROVE

       Cottage Grove owns a 13 acre tract of land located in the City of Cottage
Grove, Washington County, Minnesota, on which the Cottage Grove Facility was
constructed.

WHITEWATER

       Whitewater owns a 35 acre tract of land located in the City of
Whitewater, Wisconsin on which the Whitewater Facility and the substation for
the Facility were constructed (the "Whitewater Site"). Whitewater also owns a 93
acre tract of land, adjacent to the Whitewater Site and located in the City of
Whitewater, Wisconsin, on which the Greenhouse was constructed.


PART I/ITEM 3.  LEGAL PROCEEDINGS

       Funding, Whitewater and Cottage Grove experience routine litigation in
the normal course of business. Management is of the opinion that none of this
routine litigation will have a material adverse impact on the 

                                       19


<PAGE>   20

financial position or results of operations of Funding, Whitewater or Cottage
Grove.


PART I/ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

       None.


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

      There is no established public market for Funding's common stock. Funding
has 100 issued and outstanding shares of common stock, $0.01 par value per
share, 50 of which shares are owned by each Partnership. All of the equity
interests in the Partnerships are held by the partners of the Partnerships and,
therefore, there is no established public market for the equity interests in the
Partnerships.


PART II/ITEM 6.  SELECTED FINANCIAL DATA

      The following selected financial data have been taken from the audited
financial statements of Funding, Cottage Grove and Whitewater. The information
set forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" under Part II, Item 7
and the financial statements and related notes included under Part II, Item 8.

      Funding was organized on June 23, 1995, and the Partnerships were formed
on December 14, 1993. Since their formation in 1993 through September 18, 1997
and October 1, 1997 for Whitewater and Cottage Grove, respectively, the
Partnerships were developing and constructing their respective Facilities and
had recognized no operating revenues and expenses. Accordingly, only balance
sheet data is presented for the Partnerships for the years ended December 31,
1996, 1995, 1994 and 1993.









                                       20


<PAGE>   21



STATEMENT OF INCOME DATA (dollars in thousands):

<TABLE>
<CAPTION>
                                                                               For the Period from     
                             For the Year Ended      For the Year Ended     June 23, 1995 (Inception)
                             December 31, 1997       December 31, 1996         to December 31, 1995  
                             -----------------       -----------------      -------------------------
<S>                          <C>                     <C>                    <C>     
Funding:                                                                                   
      Interest income            $25,886                 $25,886                   $12,943 
      Interest expense            25,886                  25,886                    12,943 
                                 -------                 -------                   ------- 
      Net income                 $     0                 $     0                   $     0 
                                 =======                 =======                   ======= 
</TABLE>





<TABLE>
<CAPTION>
                                           
                                                                          For the Period from
                                      For the Year Ended December 31,      December 14, 1993
                                      -------------------------------       (Inception)  to
                                         1997   1996   1995   1994         December 31, 1993
                                         ----   ----   ----   ----        -------------------
<S>                                   <C>       <C>    <C>    <C>         <C>
Cottage Grove:
   Operating revenues                 $10,738   N/A    N/A    N/A         N/A     
   Operating expenses                   5,851   N/A    N/A    N/A         N/A     
   Operating income                     4,887   N/A    N/A    N/A         N/A     
   Gain on sales-type capital lease    87,056   N/A    N/A    N/A         N/A     
   Interest expense, net                2,725   N/A    N/A    N/A         N/A     
   Net income                          89,218   N/A    N/A    N/A         N/A     
                                                                                  
Whitewater:                                                                       
   Operating revenues                 $13,348   N/A    N/A    N/A         N/A     
   Operating expenses                   7,747   N/A    N/A    N/A         N/A     
   Operating income                     5,601   N/A    N/A    N/A         N/A     
   Gain on sales-type capital lease    97,042   N/A    N/A    N/A         N/A     
   Interest expense, net                3,641   N/A    N/A    N/A         N/A     
   Net income                          99,002   N/A    N/A    N/A         N/A     
</TABLE>












                                       21

<PAGE>   22







BALANCE SHEET DATA (dollars in thousands):

<TABLE>
<CAPTION>
                                                                December 31,
                                     ------------------------------------------------------------
                                       1997            1996            1995       1994     1993
                                     --------        --------        --------     ------   ------
<S>                                  <C>             <C>             <C>          <C>      <C>
Funding:
      Current assets                 $      1        $      1        $      1        N/A      N/A
      Total assets                    332,001         332,001         332,001        N/A      N/A
      Current liabilities                   0               0               0        N/A      N/A
      Total long-term debt            332,000         332,000         332,000        N/A      N/A   
      Stockholders' equity                  1               1               1        N/A      N/A

Cottage Grove:
      Current assets                 $ 18,791        $    103        $     68         $1       $1
      Restricted investments           11,475          28,108         111,304          0        0
      Net investment in lease         234,034               0               0          0        0
      Construction in process               0         125,597          42,720          0        0
      Total assets                    270,818         160,583         160,951          1        1
      Current liabilities               8,432           5,582           5,950          0        0
      Total long-term debt            155,000         155,000         155,000          0        0
      Partners' capital               107,386               1               1          1        1

Whitewater:
      Current assets                 $ 17,402        $    102        $     72         $1       $1
      Restricted investments           13,752          34,415         126,688          0        0
      Net investment in lease         262,072               0               0          0        0
      Construction in process               0         149,232          49,531          0        0
      Total assets                    308,115         190,618         183,251          1        1
      Current liabilities              11,556          13,617           6,250          0        0
      Total long-term debt            177,000         177,000         177,000          0        0
      Partners' capital               119,559               1               1          1        1
</TABLE>



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

GENERAL



       The Whitewater Facility commenced commercial operations on September
18, 1997, and the Cottage Grove Facility commenced commercial operations on
October 1, 1997. The Whitewater and Cottage Grove Power Purchase Agreements
described in Part I/Item 1 - "Sale of Capacity and Electricity" meet the
criteria of a "sales-type" capital lease as described in Statement of Financial
Accounting Standards (SFAS) No. 13, "Accounting for Leases". Cottage Grove and
Whitewater each recognized a gain on sales-type capital lease for the difference
between the estimated fair market value and the historical cost of the
Facilities as of the commencement of the respective Power Purchase Agreement
terms (commencement of commercial operations). The Partnerships each recorded a
net investment in lease which reflects the present value of future minimum lease
payments. Future minimum lease payments represent the amount of capacity
payments due from the utilities under the Power Purchase Agreements in excess of
fixed operating costs



                                       22

<PAGE>   23

(i.e. executory costs). The difference between the undiscounted future minimum
lease payments due from the utilities and the net investment in lease represents
unearned income. This unearned income will be recognized as lease revenue over
the term of the Power Purchase Agreements using the effective interest rate
method. The Partnerships will also recognize service revenue related to the
reimbursement of costs incurred in operating the Facilities and providing
electricity and thermal energy. The amount of service revenue recognized by
each Partnership will be directly related to the level of dispatch of the
Facilities by the utility and to a lesser extent the level of thermal energy
required by the steam hosts.

RESULTS OF OPERATIONS - 1997

WHITEWATER

       The Whitewater Power Purchase Agreement term commenced September 18,
1997. Prior to September 18, 1997, Whitewater recognized no revenues or
expenses.

         Revenues for the year ended December 31, 1997 were approximately $13.3
million. Revenues consisted primarily of lease revenue of approximately $6.6
million and service revenue of approximately $5.9 million.

         Operating expenses were approximately $7.7 million for the year ended
December 31, 1997. Operating expenses consisted primarily of cost of services
related to operating the Facility during the period September 18, 1997 through
December 31, 1997 of approximately $6.9 million. Operating expenses also
included approximately $.8 million of expense related to operating the
Greenhouse.

         Whitewater recognized a gain on sales-type capital lease described
above of approximately $97.0 million on September 18, 1997. This gain represents
the difference between the estimated fair market value of the Facility of
approximately $261.7 million and the historical cost of the Facility of
approximately $164.7 million.

         Interest expense of approximately $4.0 million for the year ended
December 31, 1997 consisted primarily of interest expense on the First Mortgage
Bonds. Interest incurred during the construction phase of the Whitewater
Facility as well as amortization of deferred financing costs were capitalized as
part of construction in process.

         Interest income of approximately $.4 million for the year ended
December 31, 1997 consisted primarily of interest earned on investments held by
the trustee under the trust indenture for the First Mortgage Bonds. Interest
income earned during the construction phase of the Whitewater Facility was
netted against construction in process. The trust indenture restricts the
investment of available funds to high quality, short-term financial investments.

COTTAGE GROVE

       The Cottage Grove Power Purchase Agreement term commenced October 1,
1997. Prior to October 1, 1997, Cottage Grove recognized no revenues or
expenses.

         Revenues for the year ended December 31, 1997 were approximately $10.7
million. Revenues consisted primarily of lease revenue of approximately $5.3
million and service revenue of approximately $4.9 million.

         Operating expenses were approximately $5.9 million for the year ended
December 31, 1997. Operating expenses consisted of cost of services related to
operating the Facility during the period October 1, 1997 through December 31,
1997.

         Cottage Grove recognized a gain on sales-type capital lease described
above of approximately $87.1 million on October 1, 1997. This gain represents
the difference between the estimated fair market value of the Facility of
approximately $233.6 million and the historical cost of the Facility of
approximately $146.5 million.

         Interest expense of approximately $3.1 million for the year ended
December 31, 1997 consisted primarily of interest expense on the First Mortgage
Bonds. Interest incurred during the construction phase of the Cottage Grove
Facility as well as amortization of deferred financing costs were capitalized as
part of construction in process.

                                       23


<PAGE>   24
         Interest income of approximately $.4 million for the year ended
December 31, 1997 consisted primarily of interest earned on investments held by
the trustee under the trust indenture for the First Mortgage Bonds. Interest
income earned during the construction phase of the Cottage Grove Facility was
netted against construction in process. The trust indenture restricts the
investment of available funds to high quality, short-term financial investments.


FACILITY CONSTRUCTION

COTTAGE GROVE


       The Partnership has a $107 million turnkey construction contract
(inclusive of executed change orders) with Westinghouse Electric. Westinghouse
Electric had committed to complete the construction and start-up of the Cottage
Grove Facility to specified performance levels by May 31, 1997 and is required
under the contract to reimburse the Partnership for extension fees paid under
the Cottage Grove Power Purchase Agreement, and to pay certain liquidated
damages in the event of a delay. During 1997, Westinghouse Electric was required
to pay $1,333,000 and $5,073,000 of reimbursable extension fees and delay
liquidated damages, respectively, to Cottage Grove. The Partnership has recorded
receivables from Westinghouse Electric of $3,012,000 at December 31, 1997, which
is comprised of reimbursable extension fees of $267,000 and delay liquidated
damages of $2,745,000. Subsequent to December 31, 1997, these receivables have
been satisfied. The construction and start-up of the Cottage Grove Facility were
substantially complete and commercial operation commenced on October 1, 1997.

       Effective September 30, 1997, the Partnership and, the Contractor, with
the concurrence of R.W. Beck, the independent engineer, agreed to a Construction
Contract change order. Under the change order, certain nonmaterial modifications
were made to the Cottage Grove Construction Contract and certain guarantees were
deferred until final completion, which allowed the Contractor to achieve
substantial completion and the Partnership to commence commercial operation. In
addition, the Contractor committed to certain future modifications in the
Facility's construction, extension of certain warranty periods and certain
financial concessions. As of December 31, 1997, the Partnership had retained
construction contract payments (in the form of cash and an irrevocable letter of
credit) totaling approximately $10,886,000.

WHITEWATER

       The Partnership has a $115 million turnkey construction contract
(inclusive of executed change orders) with Westinghouse Electric. Westinghouse
Electric had committed to complete the construction and start-up of the
Whitewater Facility to specified performance levels by May 31, 1997 and is
required under the contract to reimburse the Partnership for extension fees paid
under the Whitewater Power Purchase Agreement, and to pay certain liquidated
damages in the event of a delay. During 1997, Westinghouse Electric was required
to pay $110,000 and $4,539,000 of reimbursable extension fees and delay
liquidated damages, respectively, to Whitewater. The Partnership has recorded a
receivable from Westinghouse Electric of $2,195,000 at December 31, 1997, which
is comprised of reimbursable extension fees of $35,000 and delay liquidated
damages of $2,160,000. Subsequent to December 31, 1997, this receivable was
satisfied. The construction and start-up of the Whitewater Facility were
substantially complete and commercial operations commenced on September 18,
1997.

       Effective September 18, 1997, the Partnership and the Contractor, with
the concurrence of R.W. Beck, the independent engineer, agreed to a Construction
Contract change order. Under the change order, certain nonmaterial modifications
were made to the Whitewater Construction Contract and certain guarantees were
deferred until final completion,


                                       24


<PAGE>   25
which allowed the Contractor to achieve substantial completion and the
Partnership to commence commercial operation. In addition, the Contractor
committed to certain future modifications in the Facility's construction,
extension of certain warranty periods and certain financial concessions. As of
December 31, 1997, the Partnership had retained construction contract payments
(in the form of cash and an irrevocable letter of credit) totaling approximately
$11,174,000.


LIQUIDITY AND CAPITAL RESOURCES

       The $332,000,000 of proceeds received by Funding from the sale of the
Senior Secured Bonds were used by Funding to acquire (i) $155,000,000 of Cottage
Grove First Mortgage Bonds and (ii) $177,000,000 of Whitewater First Mortgage
Bonds. In addition to the proceeds of the First Mortgage Bonds, each Partnership
received equity contributions from each of TPC Cottage Grove and TPC Whitewater
in 1997, in the respective amounts of $18,167,000 for Cottage Grove and
$20,556,000 for Whitewater (the "Equity Contribution Amounts"). The net proceeds
from the sale of each Partnership's First Mortgage Bonds and the Equity
Contribution Amounts together with other sources of funds available to such
Partnership were used to: (i) finance the development, design, engineering,
construction, testing, inspection and start-up of its Facility (ii) pay interest
on each Partnership's First Mortgage Bonds during construction and (iii)
maintain a debt service reserve fund as required by certain financing documents,
currently equal to $6,043,000 and $6,900,000 for Cottage Grove and Whitewater,
respectively.

      As required by the financing documents, both Cottage Grove and Whitewater
have set aside certain funds to pay for project cost overruns, including change
orders to the Construction Contracts and any other reasonable contingencies,
during construction and through final completion of the Facilities (the
"Contingency Fund"). At December 31, 1997, the balances of the Contingency Fund
accounts were $1,426,000 for Cottage Grove and $339,000 for Whitewater.

      In addition to funds received through the acquisition of the First
Mortgage Bonds by Funding and through the Equity Contribution Amount, each
Partnership may receive on its behalf certain letters of credit to be issued
pursuant to a letter of credit facility. Each letter of credit facility provides
for letters of credit in a face amount not to exceed $5,000,000 for Whitewater
and $5,500,000 for Cottage Grove which may be drawn on by the respective
Partnership from time to time. Such letters of credit will satisfy certain
requirements of the Partnerships under various project agreements. Effective
October 31, 1997, a $500,000 letter of credit was issued under the Cottage Grove
letter of credit facility to secure certain obligations of Cottage Grove under
the Cottage Grove Power Purchase Agreement.

      In order to provide for the Partnerships' working capital needs, each
Partnership has also entered into a working capital facility. Each working
capital facility will provide for working capital loans in an aggregate
principal amount not to exceed $3,000,000 for each Partnership. At December 31,
1997, no loans were outstanding under the working capital facilities.

                                       25


<PAGE>   26


                            


      The Partnerships expect that payments from the utilities under the Power
Purchase Agreements will provide the substantial majority of the revenues of
each of the Partnerships. Under and subject to the terms of the Power Purchase
Agreements, each utility is obligated to purchase electric capacity made
available to it and energy which it requests from the related Partnership. For
additional information regarding NSP and WEPCO, reference is made to the
respective Annual Reports filed on Form 10-K, the Quarterly Reports filed on
Form 10-Q, proxy, and any other filings made by NSP and WEPCO with the
Securities and Exchange Commission (the "Commission").

       The Power Purchase Agreements are dispatchable contracts which provide
the utilities the ability to suspend or reduce purchases of electricity from the
Facilities. The Power Purchase Agreements are structured such that the
Partnership will continue to receive capacity payments during any period of
dispatch. Each Partnership is dependent on capacity payments under its Power
Purchase Agreement to meet its fixed obligations, including the payment of debt
service under each Partnership's First Mortgage Bonds (which will be Funding's
sole source of revenues for payment of debt service under the Senior Secured
Bonds). Capacity payments by each of NSP and WEPCO are based on the tested
capacity and availability of the Facilities and are unaffected by levels of
dispatch. Each Facility's capacity is subject to semi-annual verification
through testing. Capacity payments are subject to reduction if a Facility is
operating at reduced or degraded capacity at the time of such test, although
each Facility is permitted a retest subject to certain retest limitations. Also,
capacity payments for each Facility are subject to rebate or reduction if the
respective Facility does not maintain certain minimum levels of availability.
Under the Cottage Grove Power Purchase Agreement capacity payments are further
adjusted by, among other things, the capacity loss factor which is determined in
accordance with procedures jointly agreed to by Cottage Grove and NSP. The
Partnerships expect to achieve the minimum capacity and availability levels;
however, any material shortfall in tested capacity or availability over a
significant period could result in a shortage of funds to the Partnerships.

      Each Partnership presently believes that funds available from cash and
investments on hand, restricted funds, operations and letter of credit and
working capital facilities will be more than sufficient to liquidate each
partnership's obligations as they come due, pay 1998 project debt service and
make required contributions to project reserve accounts.

       As with any power generation facility, operation of the Facilities will
involve certain risks, including the performance of a Facility below expected
levels of output or efficiency, interruptions in fuel supply, pipeline
disruptions, disruptions in the supply of thermal or electrical energy, power
shut-downs due to the breakdown or failure of equipment or processes, violation
of permit requirements (whether through operation, or change in law), operator
error, labor disputes or catastrophic events such as fires, earthquakes,
explosions, floods or other similar occurrences affecting a Facility or its
power purchasers, thermal energy purchasers, fuel suppliers or fuel
transporters. The occurrence of any of these events could significantly reduce
or eliminate revenues generated by a Facility or significantly increase the
expenses of that Facility, thereby impacting the ability of a Partnership to
make payments of the amounts necessary to fund principal of and interest on its
First Mortgage Bonds, and consequently Funding's ability to make payments of
principal of and interest on the Senior Secured Bonds. Not all risks are insured
and the proceeds of such insurance applicable to covered risks may not be
adequate to cover a Facility's lost revenues or increased expenses. In addition,
extended unavailability under the Power Purchase Agreements, which may result
from one or more of such events, may entitle the respective Power Purchaser to
terminate its Power Purchase Agreement.

IMPACT OF ENERGY PRICE CHANGES, INTEREST RATES AND INFLATION

      The Partnerships have attempted to mitigate the risk of increases in fuel
and transportation costs by providing contractually for matching increases in
the energy payments the Partnerships receive from the utilities purchasing
electricity generated by the Facilities. In addition, the Partnerships have
hedged against the risk of fluctuations in interest rates by arranging fixed
rate financing.



                                       26


<PAGE>   27
PART II/ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      See financial statements commencing at F-1.


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

      The registrant has previously reported the information required by this
item in a report on Form 8-K filed on March 31, 1998.

PART III/ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS AND EXECUTIVE OFFICERS OF THE GENERAL PARTNERS

      Each Partnership Agreement provides that all management functions of the
respective Partnership are the responsibility of the General Partner, subject to
certain conditions and limitations. All of the stock of each General Partner is
owned by an indirect wholly-owned subsidiary of Cogentrix Energy. Certain
officers of Cogentrix Energy concurrently serve as officers of the General
Partner.

      The following table sets forth the names and positions of the directors
and executive officers of each General Partner. With the exception of Mr.
Taiano, each of these individuals was elected or appointed to his position on
March 20, 1998 when the change in control event described in Part I, Item 1 -
"ORGANIZATION - Change in Control" occurred. Directors are elected annually and
each elected director holds office until a successor is elected. Officers are
chosen from time to time by vote of the board of directors.

<TABLE>
<CAPTION>
                 Name                                Age                Officer Position
                 ----                                ---                ----------------
          <S>                                        <C>             <C>
          Mark F. Miller (Director)                  43              Managing Director
          James R. Pagano (Director)                 38              Managing Director and Treasurer
          James E. Lewis                             34              Vice President
          Dennis W. Alexander                        51              Vice President and Secretary
          Richard L. Taiano (Director)               32              ---
</TABLE>

      Mark F. Miller is the President, Chief Operating Officer and a Director of
Cogentrix Energy. Prior to joining Cogentrix Energy in May 1997, Mr. Miller was
Vice President for Northrop Grumman in Bethpage, New York. He joined Northrop
Grumman in 1982 and held successive positions in the material, law and contracts
departments before being named Vice President, Contracts and Pricing at
Northrop's B-2 Division in 1991. In 1993, he became Vice President Business
Management at the B-2 Division. In 1994, Northrop acquired the Grumman
Corporation and Mr. Miller was named Vice President Business Management for the
newly formed Electronics and Systems Integration Division, a position he held
until his move to Cogentrix Energy. From 1980 to 1982, he was an associate with
the law firm of Dolack, Hansler.

      James R. Pagano has been Group Senior Vice President - Chief Financial
Officer of Cogentrix Energy since May 1997, prior to which he was Senior Vice
President - Project Finance since February 1995 and Vice President Project
Finance since July 1993, Vice President - Legal and Finance from July 1992 to
July 1993, and from January 1992 to July 1992, Mr. Pagano was Vice President and
Assistant General Counsel of Cogentrix Energy. Prior to joining Cogentrix
Energy, he was Vice President of The Deerpath Group, Inc., a financial advisory
firm. From 1987 to 1990, Mr. Pagano was an Associate with the law firm of
Simpson Thacher & Bartlett.

      James E. Lewis has been Executive Vice President and a Director of
Cogentrix Energy since November 1992 and a Director of Cogentrix Energy since
1988. From 1991 to 1992, he was Senior Vice President of Operations responsible
for the daily operations of Cogentrix Energy's facilities. From 1989 to 1991,
Mr. Lewis was Vice President - Utility Operations. Mr. Lewis joined Cogentrix
Energy in 1986.  Mr. Lewis beneficially owns 45,120, or 16%, of the issued and
outstanding shares of Cogentrix Energy.

      Dennis W. Alexander has been Group Senior Vice President, General Counsel,
Secretary and a Director of Cogentrix Energy since February 1994. Immediately
prior to joining Cogentrix Energy, Mr. Alexander was Vice President/General
Counsel of Wheelabrator Environmental Systems Inc., the waste-to-energy and
cogeneration subsidiary of Wheelabrator Technologies Inc., an independent power
and environmental services and products company, as well as Director,
Environmental, Health and Safety Audit Program for Wheelabrator Technologies
Inc. From 1988 to 1990, Mr. Alexander was Vice President/General Counsel -
Operations of Wheelabrator



                                       27

<PAGE>   28

Environmental Systems Inc. and from 1986 to 1988 was Vice President/General
Counsel of Wheelabrator Energy Systems, a cogeneration project development
subsidiary. From 1984 to 1986, he served as Group General Counsel for The Signal
Company and from 1980 to 1984 as Division General Counsel of Wheelabrator-Frye
Inc., each a diversified public company.

      Richard L. Taiano serves as an independent director of each General
Partner. Prior to his appointment, Mr. Taiano had no relationship to either
General Partner or its affiliates. Mr. Taiano is an Assistant Vice President of
Lord Securities and is responsible for daily cash management and accounting for
the special purpose companies managed by the firm. Prior to joining Lord
Securities in 1992, Mr. Taiano was with Goldman, Sachs & Co. where he started in
1987 and was an associate in the Controllers Department from 1987 to February,
1995, serving in the London, Tokyo, Hong Kong, and New York offices of the firm.

DIRECTORS AND EXECUTIVE OFFICERS OF FUNDING

      The following table sets forth the names and positions of the individuals
who are the directors and executive officers of Funding. Directors are elected
annually and each elected director holds office until a successor is elected.
Officers will be chosen from time to time by vote of the board of directors.

<TABLE>
<CAPTION>
      Name                                          Age              Officer Position
      ----                                          ---              ----------------
      <S>                                           <C>              <C>
      Mark F. Miller (Director)                      43              Managing Director
      James R. Pagano (Director)                     38              Managing Director and Treasurer
      Dennis W. Alexander                            51              Vice President and Secretary
      Peter H. Sorensen (Director)                   38              ---
</TABLE>

      Peter H. Sorensen serves as an independent director of Funding. Prior to
his appointment, Mr. Sorensen had no relationship to Funding or its affiliates.
Mr. Sorensen started with Lord Securities in April, 1986 and currently
supervises the administration of the special purpose financing companies managed
by the firm. As President of Lord Securities, he assists in the structuring of
the related finance programs, oversees all legal and rating agency matters and
works on the development of new business. Mr. Sorensen holds a B.S. in Business
Administration from Barrington College, R.I.

      For biographical information on each of the above listed persons other
than Mr. Sorensen, see "-Directors and Executive Officers of the General
Partners" above.


PART III/ITEM 11.  EXECUTIVE COMPENSATION

      None of the officers or directors of Funding or the General Partners has
received or, it is anticipated, will receive compensation for their services
from Funding or from the General Partners except that Lord Securities is paid a
fee for providing the services of Mr. Taiano and Mr. Sorensen. The directors and
executive officers of Cogentrix Energy are compensated by Cogentrix Energy and
are not entitled to any direct compensation from the Partnerships. However,
Cogentrix Energy is paid a management fee and is reimbursed for certain expenses
by the Partnerships as described under Part III/Item 13 - "Certain Relationships
and Related Transactions".


PART III/ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS & MANAGEMENT

      The following information is given with respect to the partnership
interests in LSP-Cottage Grove, L.P. held by persons who are beneficial owners
of more than 5% of such interests.


                                       28

<PAGE>   29

<TABLE>
<CAPTION>
            Title                      Name and Address                   Nature of                  Percentage
          of Class                    of Beneficial Owner                 Ownership                   Interest
          --------                    -------------------                 ---------                   --------
<S>                                <C>                                 <C>                           <C>
General Partnership Interest       LSP-Cottage Grove, Inc.             General Partner                   1.0%
Limited Partnership Interest       Cogentrix Cottage Grove, LLC        Limited Partner                 72.22
Limited Partnership Interest       TPC Cottage Grove, Inc.             Limited Partner                 26.78
                                                                                                      ------
                                                                                                      100.00%
                                                                                                      ======
</TABLE>




      The following information is given with respect to the partnership
interests in LSP-Whitewater Limited Partnership held by persons who are
beneficial owners of more than 5% of such interests.

<TABLE>
<CAPTION>
            Title                      Name and Address                     Nature of                Percentage
          of Class                    of Beneficial Owner                   Ownership                 Interest
          --------                    -------------------                   ---------                 --------
<S>                                <C>                                 <C>                           <C>
General Partnership Interest       LSP-Whitewater I, Inc.              General Partner                   1.0%
Limited Partnership Interest       Cogentrix Whitewater, LLC           Limited Partner                 73.17
Limited Partnership Interest       TPC Whitewater, Inc.                Limited Partner                 25.83
                                                                                                      ------
                                                                                                      100.00%
                                                                                                      ======
</TABLE>

----------

       Except as specifically provided or required by law, the limited partners
of Cottage Grove and Whitewater may not participate in the management or control
of the respective Partnerships. Thus, although each General Partner has a 1%
interest in its Partnership, it has sole responsibility for the management of
such Partnership. All of the outstanding capital stock of each of the General
Partners is owned by an indirect subsidiary of Cogentrix Energy. See Part I/Item
1 - "ORGANIZATION - Change in Control" and Part III/Item 13 - "Certain
Relationships and Related Transactions".

      The following information is given with respect to the beneficial
ownership of the outstanding capital stock of Funding.

<TABLE>
<CAPTION>
         Title                    Name and Address                       Nature of                Percentage
       of Class                  of Beneficial Owner                     Ownership                 Interest
       --------                  -------------------                     ---------                 --------
<S>                            <C>                                       <C>                      <C>
Common Stock                   LSP-Cottage Grove, L.P.                     50 shares                     50%
Common Stock                   LSP-Whitewater Limited Partnership          50 shares                     50%
                                                                                                     ------
                                                                                                     100.00%
                                                                                                     ======
</TABLE>


PART III/ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      The transactions described below occurred prior to the change in control
event that is described in Part I, Item 1 - "ORGANIZATION - Change in Control."
As part of the change in control event, Cogentrix Energy assumed all of the
rights and obligations of LS Power under the management services agreements that
are described below.

      Each Partnership believes that, taking into consideration all of their
terms and conditions, the transactions with the persons, who at the time the
transactions that are described below occurred, were related parties were at
least as favorable to it as those which could have been obtained from unrelated
parties in arms-length transactions.

      LS Power. LS Power was the developer of the Facilities and until March 20,
1998 (See Part I/Item 1. Business, Organization - Change in Control) provided
certain management services to each Partnership and each General Partner
pursuant to the MSAs. Under the MSAs, LS Power managed the business affairs of
each Partnership during construction and operation of the related Facility and
was responsible for supervising each Partnership's, and monitoring each
counterparty's, compliance with all contracts to which each Partnership is a
party. Under the MSAs, each Partnership paid LS Power as compensation for its
services a monthly management fee of $60,000 during construction, and $50,000
during operation (both in 1995 dollars) which fees were escalated annually
beginning on January 1, 1996 pursuant to a rate of change in a consumer-price
related index. LS Power was also reimbursed for its reasonable and necessary
expenses incurred in performing its services, including the salaries of its
personnel to the extent



                                       29

<PAGE>   30

related to services required under the MSAs. The amounts payable by each
Partnership to LS Power under the MSAs are designated as operating expenses
under the depository agreements and therefore were paid prior to interest and
principal on such Partnership's First Mortgage Bonds. For the years ended
December 31, 1997 and 1996, LS Power received payments pursuant to the MSAs of
approximately $1,302,000 and $1,391,000 and $1,424,000 and $1,392,000 from
Cottage Grove and Whitewater, respectively.

       FloriCulture. FloriCulture is a single purpose corporation formed to
operate the Greenhouse for the benefit of Whitewater and until March 20, 1998
was a wholly-owned subsidiary of LS Power (See Part I/Item 1. Business,
Organization - Change in Control). Whitewater and FloriCulture entered into the
Greenhouse Operational Services Agreement in 1997, whereby FloriCulture is
required to provide all the services necessary to produce, market, and sell
horticultural products and to operate and maintain the Greenhouse. As
compensation for its services, FloriCulture is reimbursed on a monthly basis for
its approved costs in connection with conducting the Greenhouse business and
operating the Greenhouse, and will receive an annual management fee equal to 12%
of Whitewater's net profit from the operation of the Greenhouse. The term of the
Greenhouse Operational Services Agreement will expire on May 31, 2022. For the
year ended December 31, 1997, FloriCulture received payments pursuant to the
Greenhouse Operational Services Agreement of approximately $669,000.

      Granite. Granite, a limited partnership among LS Power, Chase Manhattan
Capital Corporation and a trust (the "Cogen Trust"), provided the development
financing for the Facilities through June 30, 1995. Granite's costs to develop
the Facilities were financed through loans from Tomen Power Corporation, a
California corporation ("Tomen"). These loans were repaid from amounts received
by Granite from Cottage Grove and Whitewater on June 30, 1995. On June 30, 1995,
Granite received payments for development fees and reimbursement of certain
development costs totaling $11,730,000 and $12,020,000 from Cottage Grove and
Whitewater, respectively. Also, Whitewater reimbursed $140,000 to Granite for
purchase of its project site.

      LSP-Cottage Grove, Inc. LSP-Cottage Grove, Inc. is the general partner of
Cottage Grove and until March 20, 1998 was a wholly-owned subsidiary of Granite
(See Part I/Item 1., Business, Organizations - Change in Control). LSP-Cottage
Grove, Inc. has no assets other than its general partnership interest in Cottage
Grove. The officers of LSP-Cottage Grove, Inc. concurrently served as officers
of LS Power but did not receive compensation in the former capacity. LSP-Cottage
Grove, Inc. was a party to an MSA with LS Power.

      LSP-Whitewater I, Inc. LSP-Whitewater I, Inc. is the general partner of
Whitewater and until March 20, 1998 was a wholly-owned subsidiary of Granite
(See Part I/Item 1., Business, Organizations - Change in Control).
LSP-Whitewater I, Inc. has no assets other than its general partnership interest
in Whitewater. The officers of LSP-Whitewater I, Inc. concurrently served as
officers of LS Power but did not receive compensation in the former capacity.
LSP-Whitewater I, Inc. was a party to an MSA with LS Power.

      TPC Cottage Grove & TPC Whitewater. TPC Cottage Grove and TPC Whitewater
are both wholly-owned subsidiaries of Tomen and were formed for the sole purpose
of holding a limited partnership interest in the related Partnership. During
1997, TPC Cottage Grove and TPC Whitewater made capital contributions of
$18,167,000 and $20,556,000 to Cottage Grove and Whitewater, respectively.

RELATIONSHIP OF FUNDING AND THE PARTNERSHIPS

       Each Partnership owns 50% of the capital stock of Funding. Each
Partnership has designated Funding as its agent for certain purposes including
issuing the Senior Secured Bonds. Each Partnership has indemnified Funding
against all claims arising in connection with Funding's performance of its
obligations.




                                       30


<PAGE>   31



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

(a) (1) FINANCIAL STATEMENTS

        See Index to Financial Statements on page F-1.

(a) (2) FINANCIAL STATEMENT SCHEDULES

        All schedules are omitted since the information is not required or 
because such information is included in the financial statements and notes 
thereto.


(a) (3) EXHIBITS

        The exhibits listed on the accompanying Exhibits Index are filed as part
of this report.

(b)     REPORTS ON FORM 8-K

        No reports on Form 8-K have been filed during the last quarter of the
period covered by this report.


<PAGE>   32


SIGNATURES: Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf of the undersigned, thereunto duly authorized.

LS POWER FUNDING CORPORATION


By:/s/ Mark F. Miller
   -------------------------------
   Name:  Mark F. Miller
   Title:  Managing Director
   Date:  April 15, 1998

         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.



/s/ Mark F. Miller                    Managing Director and Director
----------------------------------
Mark F. Miller


/s/ James R. Pagano                   Managing Director, Treasurer
----------------------------------    and Director (Principal Financial Officer)
James R. Pagano                        


/s/ Dennis W. Alexander               Vice President and Secretary
----------------------------------
Dennis W. Alexander


/s/ Thomas F. Schwartz                Assistant Treasurer
----------------------------------    (Principal Accounting Officer)
Thomas F. Schwartz                    





                                       32

<PAGE>   33


SIGNATURES: Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf of the undersigned, thereunto duly authorized.

LSP-COTTAGE GROVE, L.P.

By:    LSP-Cottage Grove, Inc.
Its:   General Partner

By:/s/ Mark F. Miller
   -------------------------------
   Name:  Mark F. Miller
   Title:  Managing Director
   Date:  April 15, 1998

         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.

/s/ Mark F. Miller                    Managing Director and Director
----------------------------------
Mark F. Miller


/s/ James R. Pagano                   Managing Director, Treasurer
----------------------------------    and Director (Principal Financial Officer)
James R. Pagano                       


/s/ Dennis W. Alexander               Vice President and Secretary
----------------------------------
Dennis W. Alexander

/s/ Thomas F. Schwartz                Assistant Treasurer
----------------------------------    (Principal Accounting Officer)
Thomas F. Schwartz                    

<PAGE>   34


SIGNATURES: Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf of the undersigned, thereunto duly authorized.

LSP-Whitewater Limited Partership

By:    LSP-Whitewater I, Inc.
Its:   General Partner

By:/s/ Mark F. Miller
   -------------------------------
   Name:  Mark F. Miller
   Title:  Managing Director
   Date:  April 15, 1998

         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.

/s/ Mark F. Miller                    Managing Director and Director
----------------------------------
Mark F. Miller


/s/ James R. Pagano                   Managing Director, Treasurer
----------------------------------    and Director (Principal Financial Officer)
James R. Pagano                       


/s/ Dennis W. Alexander               Vice President and Secretary
----------------------------------
Dennis W. Alexander

/s/ Thomas F. Schwartz                Assistant Treasurer
----------------------------------    (Principal Accounting Officer)
Thomas F. Schwartz                    

<PAGE>   35

                          LS POWER FUNDING CORPORATION
                             LSP-COTTAGE GROVE, L.P.
                       LSP-WHITEWATER LIMITED PARTNERSHIP

                            FINANCIAL STATEMENT INDEX

<TABLE>
<CAPTION>
                                                                                                           Page
                                                                                                           ----
<S>                                                                                                        <C>
LS POWER FUNDING CORPORATION
      Reports of Independent Public Accountants.............................................................F-2
      Balance Sheets as of December 31, 1997 and 1996.......................................................F-4
      Statements of Income for the Years Ended December 31, 1997 and 1996
         and for the Period from Inception (June 23, 1995) to December 31, 1995.............................F-5
      Statements of Changes in Stockholders' Equity for the Years Ended December 31, 1997 and 1996
         and for the Period from Inception (June 23, 1995) to December 31, 1995.............................F-6
      Statements of Cash Flows for the Years Ended December 31, 1997 and 1996
         and for the Period from Inception (June 23, 1995) to December 31, 1995.............................F-7
      Notes to Financial Statements.........................................................................F-8

LSP-COTTAGE GROVE, L.P.
      Reports of Independent Public Accountants............................................................F-11
      Balance Sheets as of December 31, 1997 and 1996......................................................F-13
      Statements of Income for the Years Ended
         December 31, 1997, 1996 and 1995..................................................................F-14
      Statements of Changes in Partners' Capital for the Years Ended
         December 31, 1997, 1996 and 1995..................................................................F-15
      Statements of Cash Flows for the Years Ended
         December 31, 1997, 1996 and 1995..................................................................F-16
      Notes to Financial Statements........................................................................F-17

LSP-WHITEWATER LIMITED PARTNERSHIP
      Reports of Independent Public Accountants............................................................F-27
      Balance Sheets as of December 31, 1997 and 1996......................................................F-29
      Statements of Income for the Years Ended
         December 31, 1997, 1996 and 1995..................................................................F-30
      Statements of Changes in Partners' Capital for the Years Ended
         December 31, 1997, 1996 and 1995..................................................................F-32
      Statements of Cash Flows for the Years Ended
         December 31, 1997, 1996 and 1995..................................................................F-31
      Notes to Financial Statements........................................................................F-33
</TABLE>


                                      F-1

<PAGE>   36



                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


The Board of Directors and Stockholders
LS Power Funding Corporation:

    We have audited the accompanying balance sheet of LS Power Funding
Corporation as of December 31, 1997 and the related statements of income,
changes in stockholders' equity, and cash flows for the year then ended. 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 financial statements referred to above present fairly,
in all material respects, the financial position of LS Power Funding Corporation
as of December 31, 1997, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.




ARTHUR ANDERSEN LLP
Charlotte, North Carolina,
April 9, 1998.



                                      F-2

<PAGE>   37



                          INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholders
LS Power Funding Corporation:

    We have audited the accompanying balance sheet of LS Power Funding
Corporation as of December 31, 1996 and the related statements of income,
changes in stockholders' equity, and cash flows for the year ended December 31,
1996 and for the period from inception (June 23, 1995) to December 31, 1995.
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 in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

    In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of LS Power Funding Corporation
as of December 31, 1996, and the results of its operations and its cash flows
for the year ended December 31, 1996 and the period from inception (June 23,
1995) to December 31, 1995 in conformity with generally accepted accounting
principles.




KPMG PEAT MARWICK LLP 
Billings, Montana, 
February 13, 1997.


                                      F-3

<PAGE>   38


                          LS POWER FUNDING CORPORATION

                                 BALANCE SHEETS
                           DECEMBER 31, 1997 AND 1996
                             (dollars in thousands)




<TABLE>
<CAPTION>
                                                                  1997          1996
                                                                --------      --------
<S>                                                             <C>           <C>     
                                     ASSETS

CURRENT ASSET - Cash                                            $      1      $      1

INVESTMENT IN FIRST MORTGAGE BONDS                               332,000       332,000
                                                                --------      --------

       Total Assets                                             $332,001      $332,001
                                                                ========      ========


                      LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITY - Senior Secured Bonds Payable                        $332,000      $332,000

STOCKHOLDERS' EQUITY:
   Common stock, $.01 par value, 1,000 shares authorized,
      100 shares issued and outstanding                                0             0
   Additional paid-in capital                                          1             1
                                                                --------      --------

       Total Stockholders' Equity                                      1             1
                                                                --------      --------


       Total Liabilities and Stockholders' Equity               $332,001      $332,001
                                                                ========      ========
</TABLE>


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


                                      F-4

<PAGE>   39


                          LS POWER FUNDING CORPORATION

                              STATEMENTS OF INCOME
              FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 AND
       FOR THE PERIOD FROM INCEPTION (JUNE 23, 1995) TO DECEMBER 31, 1995
                             (dollars in thousands)



<TABLE>
<CAPTION>
                                                  INCEPTION
                                                (JUNE 23, 1995)
                                                TO DECEMBER 31,
                        1997         1996            1995
                      -------      -------      ---------------
<S>                   <C>          <C>          <C>    
Interest Income       $25,886      $25,886          $12,943

Interest Expense       25,886       25,886           12,943
                      -------      -------          -------

Net Income            $     0      $     0          $     0
                      =======      =======          =======
</TABLE>






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



                                      F-5

<PAGE>   40


                          LS POWER FUNDING CORPORATION

                 STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                        
                 FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
     AND FOR THE PERIOD FROM INCEPTION (JUNE 23, 1995) TO DECEMBER 31, 1995
                             (dollars in thousands)
                                        

<TABLE>
<CAPTION>
                                                                                                           TOTAL
                                                           COMMON              ADDITIONAL              STOCKHOLDERS'
                                                           STOCK             PAID-IN CAPITAL              EQUITY
                                                           ------            ---------------           -------------
<S>                                                        <C>               <C>                       <C>
Sale of Common Stock at Inception (June 23, 1995)            $0                    $1                       $1
                                                             --                    --                       --

Balance, December 31, 1997, 1996 and 1995                    $0                    $1                       $1
                                                             ==                    ==                       ==
</TABLE>




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


                                      F-6

<PAGE>   41


                          LS POWER FUNDING CORPORATION

                            STATEMENTS OF CASH FLOWS
               FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 AND
       FOR THE PERIOD FROM INCEPTION (JUNE 23, 1995) TO DECEMBER 31, 1995
                             (dollars in thousands)
                                        




<TABLE>
<CAPTION>
                                                                         INCEPTION
                                                                       (JUNE 23, 1995)
                                                                       TO DECEMBER 31,
                                                        1997    1996        1995
                                                        ----    ----   ---------------
<S>                                                     <C>     <C>    <C>       
Cash flows from Investing Activities:
   Cash paid for investment in First Mortgage Bonds      $0      $0      $(332,000)
                                                         --      --      ---------
Cash used in investing activities                         0       0       (332,000)
                                                         --      --      ---------

Cash flows from Financing Activities:
   Proceeds from Senior Secured Bonds                     0       0        332,000
   Proceeds from sale of common stock                     0       0              1
                                                         --      --      ---------
Cash provided by financing activities                     0       0        332,001
                                                         --      --      ---------

Increase in cash                                          0       0              1

Cash, beginning of period                                 1       1              0
                                                         --      --      ---------
Cash, end of period                                      $1      $1      $       1
                                                         ==      ==      =========
</TABLE>



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



                                      F-7

<PAGE>   42


                          LS POWER FUNDING CORPORATION

                          NOTES TO FINANCIAL STATEMENTS


1. ORGANIZATION

   LS Power Funding Corporation ("Funding") was established on June 23, 1995 as
a special purpose funding corporation to issue debt securities in connection
with financing construction of two gas fired cogeneration facilities, one
located in Cottage Grove, Minnesota and the other located in Whitewater,
Wisconsin. LSP-Cottage Grove, L.P.("Cottage Grove") and LSP-Whitewater Limited
Partnership ("Whitewater") are single purpose Delaware limited partnerships
established to develop, finance, construct and own the facilities at Cottage
Grove and Whitewater, respectively. Cottage Grove and Whitewater each own 50% of
the outstanding stock of Funding. Funding's sole business activities are limited
to maintaining its organization, the offering of the Senior Secured Bonds, and
its acquisition of the First Mortgage Bonds issued by Cottage Grove and
Whitewater.


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

STATEMENTS OF CASH FLOWS

       For purposes of reporting cash flows, cash includes short-term
investments with original maturities of three months or less.

INCOME TAXES

   Funding does not record a tax provision as it has no reportable book or
taxable income and there is no difference between Funding's book bases and tax
bases of its existing assets and liabilities. Due to the nature of Funding's
structure as a single purpose funding corporation, Funding is not expected to
produce book or taxable income in future periods.

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 disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates.

3. INVESTMENT IN FIRST MORTGAGE BONDS

   Investment in First Mortgage Bonds consists of the following at December 31,
1997 and 1996 (dollars in thousands):

<TABLE>
<S>                                           <C>
7.19% Cottage Grove First Mortgage Bonds
  due June 30, 2010                           $ 49,278
8.08% Cottage Grove First Mortgage Bonds
  due December 30, 2016                        105,722
7.19% Whitewater First Mortgage Bonds
  due June 30, 2010                             56,273
8.08% Whitewater First Mortgage Bonds
  due December 30, 2016                        120,727
                                              --------
                                              $332,000
                                              ========
</TABLE>

     The First Mortgage Bonds issued by Cottage Grove and Whitewater are secured
by substantially all of the assets of the respective partnership. The collateral
securing the obligations of one partnership does not secure the obligations of
the other partnership. The fair value of Funding's investment in the First
Mortgage Bonds at December 31, 1997 is $30,375,000 higher than the historical
carrying value of $332,000,000. At December 31, 1996, the fair value of
Funding's investment in First Mortgage Bonds approximated carrying value.


                                      F-8

<PAGE>   43

                          LS POWER FUNDING CORPORATION

                          NOTES TO FINANCIAL STATEMENTS


     The following are summarized balance sheets and statements of income of
Cottage Grove and Whitewater as of and for the year ended December 31, 1997
(dollars in thousands):

<TABLE>
<CAPTION>
                                           Cottage Grove     Whitewater
                                           -------------     ----------
<S>                                        <C>               <C>      
BALANCE SHEETS:
   Current assets                            $  18,791       $  17,402
   Restricted investments                       11,475          13,752
   Net investment in lease                     234,034         262,072
   Greenhouse facility, net                          0           8,281
   Debt issuance and financing costs             6,517           6,607
   Other non-current assets                          1               1
                                             ---------       ---------
Total Assets                                 $ 270,818       $ 308,115
                                             =========       =========

   Current liabilities                       $   8,432       $  11,556
   First Mortgage Bonds payable                155,000         177,000
   Partners' capital                           107,386         119,559
                                             ---------       ---------
Total Liabilities and Partners' Capital      $ 270,818       $ 308,115
                                             =========       =========

STATEMENTS OF INCOME:
   Operating revenues                        $  10,738       $  13,348
   Operating expenses                            5,851           7,747
                                             ---------       ---------
   Operating income                              4,887           5,601

   Gain on sales-type capital lease             87,056          97,042
   Interest expense                             (3,087)         (4,024)
   Interest income                                 362             383
                                             ---------       ---------
Net Income                                   $  89,218       $  99,002
                                             =========       =========
</TABLE>


4.  SENIOR SECURED BONDS PAYABLE

     Senior Secured Bonds Payable consists of the following at December 31, 1997
and 1996 (dollars in thousands):

<TABLE>
<S>                                     <C>
7.19% Senior Secured Bonds due
  June 30, 2010 ("2010 Bonds")          $105,551
8.08% Senior Secured Bonds due
  December 30, 2016 ("2016 Bonds")       226,449
                                        --------
                                        $332,000
                                        ========
</TABLE>

   On June 30, 1995, Funding issued and sold $332,000,000 of Senior Secured
Bonds. All of the First Mortgage Bonds issued by Cottage Grove and Whitewater
were purchased with the entire proceeds from the Senior Secured Bonds. The
repayment terms of the First Mortgage Bonds collectively coincide with those of
the Senior Secured Bonds. Interest is payable semi-annually on June 30 and
December 30 of each year, commencing December 30, 1995. Principal on the bonds
is also payable semi-annually in varying amounts beginning on June 30, 2000 for
the 2010 Bonds, and beginning on December 30, 2010 for the 2016 Bonds.


                                      F-9

<PAGE>   44

                          LS POWER FUNDING CORPORATION

                          NOTES TO FINANCIAL STATEMENTS


   Collective future maturities of the Senior Secured Bonds as of December 31,
1997 are as follows (dollars in thousands):

<TABLE>
          <S>                                    <C>
             1998                                $      0
             1999                                       0
             2000                                   2,323
             2001                                   3,314
             2002                                   4,559
          Thereafter                              321,804
                                                 --------
                                                 $332,000
                                                 ========
</TABLE>


   The Senior Secured Bonds are secured primarily by a pledge of Funding's
investment in the First Mortgage Bonds. Since Funding is a special purpose
corporation formed to issue the Senior Secured Bonds, Funding's ability to make
payments of principal and interest on the Senior Secured Bonds is entirely
dependent on Cottage Grove's and Whitewater's performance of its obligations
under its First Mortgage Bonds. The obligations of Cottage Grove and Whitewater
under their First Mortgage Bonds are obligations solely of the respective
partnerships.



                                      F-10

<PAGE>   45

                          LS POWER FUNDING CORPORATION

                          NOTES TO FINANCIAL STATEMENTS


   The trust indenture for the Senior Secured Bonds contains certain covenants
including, among others, limitations or restrictions relating to the use of the
proceeds of the Senior Secured Bonds, actions with respect to the First Mortgage
Bonds, and additional debt other than the Senior Secured Bonds. The trust
indenture also describes events of default of the Senior Secured Bonds which
include, among others, events involving bankruptcy of Funding and the failure of
Cottage Grove and Whitewater to own 100 percent of the capital stock of Funding.

   The fair value of Funding's Senior Secured Bonds at December 31, 1997, is
$30,375,000 higher than the historical carrying value of $332,000,000. At
December 31, 1996, the fair value of Funding's Senior Secured Bonds approximated
carrying value.


                                      F-11

<PAGE>   46





                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

The Partners
LSP-Cottage Grove, L.P.:


    We have audited the accompanying balance sheet of LSP-Cottage Grove, L.P. (a
Delaware limited partnership) as of December 31, 1997 and the related statements
of income, changes in partners' capital, and cash flows for the year then ended.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our 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 financial statements referred to above presents fairly,
in all material respects, the financial position of LSP-Cottage Grove, L.P. as
of December 31, 1997, and the results of its operations and its cash flows for
the year then ended, in conformity with generally accepted accounting
principles.




ARTHUR ANDERSEN LLP
Charlotte, North Carolina,
April 9, 1998.


                                      F-12

<PAGE>   47


                          INDEPENDENT AUDITORS' REPORT


The Partners
LSP-Cottage Grove, L.P.:


    We have audited the accompanying balance sheet of LSP-Cottage Grove, L.P. 
as of December 31, 1996, and the related statements of income, changes in
partners' capital and cash flows for each of the years in the two-year period
ended December 31, 1996. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

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

    In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of LSP-Cottage Grove, L.P. as
of December 31, 1996, and the results of its operations and its cash flows for
each of the years in the two-year period ended December 31, 1996, in conformity
with generally accepted accounting principles.




KPMG PEAT MARWICK LLP 
Billings, Montana, 
February 13, 1997.



                                      F-13


<PAGE>   48


                             LSP-COTTAGE GROVE, L.P.


                                 BALANCE SHEETS
                           DECEMBER 31, 1997 AND 1996
                             (dollars in thousands)



<TABLE>
<CAPTION>
                                                             1997          1996
                                                           --------      --------
<S>                                                        <C>           <C>     
                         ASSETS

Current assets:
     Cash and cash equivalents                             $  8,816      $    103
     Accounts receivable - trade                              4,598             0
     Accounts receivable - other                              3,012             0
     Fuel inventories                                         1,869             0
     Spare parts inventories                                    443             0
     Other current assets                                        53             0
                                                           --------      --------
Total current assets                                         18,791           103
                                                           --------      --------

Restricted investments                                       11,475        28,108

Net investment in lease (Notes 2 and 6)                     234,034             0

Construction in process                                           0       125,597

Debt issuance and financing costs, net of accumulated
  amortization of $605 in 1997 and $348 in 1996               6,517         6,774

Investment in unconsolidated affiliate                            1             1
                                                           --------      --------

Total assets                                               $270,818      $160,583
                                                           ========      ========

              LIABILITIES AND PARTNERS' CAPITAL

Current liabilities:
     Accounts payable                                      $  8,360      $  5,582
     Accrued expenses                                            72             0
                                                           --------      --------
Total current liabilities                                     8,432         5,582

First Mortgage Bonds payable                                155,000       155,000
                                                           --------      --------
Total liabilities                                           163,432       160,582

Commitments and contingencies (Note 11)

Partners' capital                                           107,386             1
                                                           --------      --------

Total liabilities and partners' capital                    $270,818      $160,583
                                                           ========      ========
</TABLE>


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


                                      F-14

<PAGE>   49


                             LSP-COTTAGE GROVE, L.P.


                              STATEMENTS OF INCOME
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                             (dollars in thousands)



<TABLE>
<CAPTION>
                                             1997        1996    1995
                                           --------      ----    ----
<S>                                        <C>           <C>     <C>
Operating revenues:
     Lease revenue                         $  5,265       $0      $0
     Service revenue                          4,879        0       0
     Other                                      594        0       0
                                           --------       --      --

                                             10,738        0       0
                                           --------       --      --

Operating expenses:
     Cost of services                         5,851        0       0
                                           --------       --      --

Operating income                              4,887        0       0

Non-operating income (expense):
     Gain on sales-type capital lease        87,056        0       0
     Interest expense                        (3,087)       0       0
     Interest income                            362        0       0
                                           --------       --      --


Net income                                 $ 89,218       $0      $0
                                           ========       ==      ==
</TABLE>



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


                                      F-15

<PAGE>   50



                             LSP-COTTAGE GROVE, L.P.


                   STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                             (dollars in thousands)


<TABLE>
<CAPTION>

                                                  LIMITED PARTNERS            GENERAL
                                                  ----------------            PARTNER
                                           TPC COTTAGE     GRANITE POWER    LSP-COTTAGE
                                           GROVE, INC.     PARTNERS, L.P.   GROVE, INC.       TOTAL
                                           -----------     --------------   -----------      --------
<S>                                        <C>             <C>              <C>              <C>     
Capital contributions at inception           $     0          $     1          $  0          $      1
                                             -------          -------          ----          --------

Balance, December 31, 1995 and 1996                0                1             0                 1

Capital contributions                         18,167                0             0            18,167

Net income                                    23,893           64,433           892            89,218
                                             -------          -------          ----          --------

Balance, December 31, 1997                   $42,060          $64,434          $892          $107,386
                                             =======          =======          ====          ========
</TABLE>



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


                                      F-16

<PAGE>   51


                             LSP-COTTAGE GROVE, L.P.


                            STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                              1997           1996            1995
                                                           ---------       --------       ---------
<S>                                                        <C>             <C>            <C>      
Cash Flows from Operating Activities:
  Net income                                               $  89,218       $      0       $       0
  Adjustments to reconcile net income to net
    cash used in operating activities
  Gain on sales-type capital lease                           (87,056)             0               0
  Amortization of unearned lease income                       (5,265)             0               0
  Amortization of debt issuance and financing costs               66              0               0
  Minimum lease payments received                              4,866              0               0
  Increase  in accounts receivable - trade                    (4,598)             0               0
  Increase in fuel inventories                                (1,648)             0               0
  Increase in spare parts inventories                           (134)             0               0
  Increase in other current assets                               (53)             0               0
  Increase in accounts payable                                 2,032              0               0
  Increase in accrued expenses                                    72              0               0
                                                           ---------       --------       ---------

Cash used in operating activities                             (2,500)             0               0
                                                           ---------       --------       ---------

Cash Flows from Investing Activities:
  Acquisition of land and improvements                             0              0             (97)
  Payments on construction in process                        (24,771)       (87,157)        (40,289)
  Investments held by Trustee                                (18,167)             0        (155,000)
  Investments drawn                                           35,984         87,358          47,410
  Investment in Funding                                            0              0              (1)
                                                           ---------       --------       ---------
Cash provided by (used in) investing activities               (6,954)           201        (147,977)
                                                           ---------       --------       ---------

Cash Flows from Financing Activities:
  Debt issuance and financing costs                                0           (153)         (6,969)
  Proceeds from First Mortgage Bonds                               0              0         155,000
  Capital contributions                                       18,167              0               0
                                                           ---------       --------       ---------
Cash provided by (used in) financing activities               18,167           (153)        148,031
                                                           ---------       --------       ---------

Increase in cash and cash equivalents                          8,713             48              54
Cash and cash equivalents, beginning of period                   103             55               1
                                                           ---------       --------       ---------
Cash and cash equivalents, end of period                   $   8,816       $    103       $      55
                                                           =========       ========       =========

RECONCILIATION OF CHANGES IN
CONSTRUCTION IN PROCESS
Decrease (increase) in total construction in process       $ 125,499       $(82,877)      $ (42,622)
Construction in process sold in lease transaction           (146,481)             0               0
Amortization of debt issuance and financing costs                191            239             109
Interest income on investments held by Trustee                (1,184)        (4,163)         (3,713)
Increase in accounts receivable-other                         (3,012)             0               0
Decrease (increase) in other current assets                        0             13             (13)
Increase in fuel inventories                                    (221)             0               0
Increase in spare parts inventories                             (309)             0               0
Increase (decrease) in accounts payable                          746           (369)          5,950
                                                           ---------       --------       ---------
Payments on construction in process                        $ (24,771)      $(87,157)      $ (40,289)
                                                           =========       ========       =========

Supplemental disclosure of cash flow information:
Cash paid for interest during the year                     $  12,085       $ 12,085       $   6,043
                                                           =========       ========       =========
</TABLE>

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


                                      F-17

<PAGE>   52


                             LSP-COTTAGE GROVE, L.P.


                          NOTES TO FINANCIAL STATEMENTS


1. ORGANIZATION AND NATURE OF BUSINESS

   LSP-Cottage Grove, L.P. (the "Partnership") is a Delaware limited partnership
that was formed on December 14, 1993 to develop, finance, construct and own a
gas fired cogeneration facility with a design capacity of approximately 245
megawatts located in Cottage Grove, Minnesota (the "Facility"). Construction and
start-up of the Facility was substantially completed and commercial operation
commenced October 1, 1997 (the "Commercial Operations Date"). As of December 31,
1997, the 1% general partner of the Partnership was LSP-Cottage Grove, Inc., a
wholly owned subsidiary of Granite Power Partners, L.P., a Delaware limited
partnership ("Granite"). Granite and TPC Cottage Grove, Inc., a Delaware
corporation ("TPC"), were the sole limited partners of the Partnership, owning
approximately 72% and 27% limited partnership interests, respectively. The
general partner of Granite is LS Power Corporation ("LS Power"), a Delaware
corporation. See Note 15 for discussion of a change in ownership which occurred
on March 20, 1998.

   The Partnership holds a 50% equity ownership interest in LS Power Funding
Corporation ("Funding"), which was established on June 23, 1995 as a special
purpose funding corporation to issue debt securities (the "Senior Secured
Bonds") in connection with financing construction of the Facility and a similar
gas fired cogeneration facility located in Whitewater, Wisconsin (the
"Whitewater Facility"). On June 30, 1995, a portion of the proceeds from the
offering and sale of the Senior Secured Bonds issued by Funding was used to
purchase $155 million of First Mortgage Bonds issued simultaneously by the
Partnership.

   All of the electric capacity and energy generated by the Facility is
sold to Northern States Power Company ("NSP" or, as the context requires, the
"Utility") under a 30-year power purchase agreement (the "Power Purchase
Agreement"). The thermal energy generated by the Facility is sold in the form of
steam to Minnesota Mining and Manufacturing Company ("3M" or, as the context
requires, the "Steam Purchaser") under a 30-year thermal energy sales agreement
(the "Steam Supply Agreement").


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS

   For purposes of reporting cash flows, cash equivalents include unrestricted
short-term investments with original maturities of three months or less.

RESTRICTED INVESTMENTS

   Restricted Investments represent overnight repurchase obligations secured by
U.S. Treasury notes. These investments are carried at cost, which approximated
market at December 31, 1997 and 1996. Amounts held by the trustee under the
trust indenture for the First Mortgage Bonds (the "Trustee") in accounts
designated for debt service, major maintenance and construction, which might
otherwise be considered cash equivalents, are treated as restricted investments.

COMMENCEMENT OF POWER PURCHASE AGREEMENT

   The Power Purchase Agreement described in Note 11 has characteristics
similar to a lease in that the agreement confers to the purchasing utility the
right to use specific property, plant and equipment. At the Commercial
Operations Date, the Partnership accounted for the Power Purchase Agreement as a
"sales-type" capital lease in accordance with Statement of Financial Accounting
Standards (SFAS) No. 13, "Accounting for Leases" (see Note 6).

CONSTRUCTION IN PROCESS

   Prior to commercial operation, all costs incurred to develop and construct
the Facility, including net costs associated with performance testing prior to
the Commercial Operation Date, as well as interest costs (including amortization
of debt issuance and financing costs), net of interest income on excess
proceeds, were capitalized and classified as construction in process.


                                      F-18


<PAGE>   53

                             LSP-COTTAGE GROVE, L.P.


                          NOTES TO FINANCIAL STATEMENTS


In recording the Partnership's gain on sales-type capital lease, all
construction in process costs were included in the historical cost basis of the
Facility. All interest costs subsequent to the Commercial Operations Date have
been charged to expense. As of December 31, 1996, capitalized interest including
amortization of debt issuance and financing costs was $10,600,000, ($10,251,000,
before amortization).

DEBT ISSUANCE AND FINANCING COSTS

   Debt issuance and other financing costs are deferred and amortized over the
term of the related debt. Amortization of deferred financing costs was
capitalized as part of construction in process prior to commercial operations
and is included in interest expense subsequent to commercial operations in the
accompanying financial statements.

CURRENT LIABILITIES

   As of December 31, 1997 and 1996, $6,328,000 and $5,582,000 of current
liabilities were considered project costs and were eligible for payment from
funds held by the Trustee included in restricted investments in the accompanying
balance sheets.

LEASE REVENUE

   Lease revenue represents the amortization of unearned income on lease
using the effective interest rate method as well as contingent rentals that
result from changes in payment escalators occurring subsequent to the Commercial
Operations Date. These contingent rentals are not expected to materially change
the lease revenue recognized over the life of the Power Purchase Agreement.

SERVICE REVENUE

   Service revenue represents reimbursement to the Partnership of costs incurred
to operate the Facility and to provide variable electric energy to the Utility
and thermal energy to the Steam Purchaser.

OTHER REVENUES

   Other revenues consist primarily of commodity sales of excess natural gas 
fuel inventory, including amounts remarketed directly to third parties.

COST OF SERVICES

   Cost of services represent expenses related to operating the Facility and
providing variable electric energy to the Utility as well as thermal energy to
the Steam Purchaser.

INCOME TAXES

   Under current tax laws, income or loss of partnerships is included in the
income tax returns of the partners. Accordingly, the Partnership makes no
provision for federal and state income taxes. The tax returns of the Partnership
are subject to examination by federal and state taxing authorities. If such
examinations occur and result in changes with respect to the Partnership
qualification, or in changes in distributable partnership income or loss, the
tax liability of the partners would be changed accordingly.



                                      F-19


<PAGE>   54


                             LSP-COTTAGE GROVE, L.P.


                          NOTES TO FINANCIAL STATEMENTS

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 disclosure 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 those estimates.

NEW ACCOUNTING PRONOUNCEMENTS

   In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income." This pronouncement establishes standards for the
reporting and display of comprehensive income and its components in financial
statements. Comprehensive income is defined as the total of net income and all
other non-owner changes in equity. This statement will be adopted by the
Partnership effective January 1, 1998. The Partnership believes this
pronouncement will not have a material effect on its financial statements.

   In June 1997, the FASB also issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." This pronouncement establishes
standards for reporting information about operating segments in annual and
interim financial statements. SFAS No. 131 will be adopted by the Partnership
effective January 1, 1998. The Partnership believes this pronouncement will not
have a material effect on its financial statements.


3. ACCOUNTS RECEIVABLE - OTHER

      Accounts Receivable-Other represents amounts due from Westinghouse
Electric Corporation ("Westinghouse Electric"), the Partnership's construction
contractor, for delay liquidated damages and extension fees due as a result of
Westinghouse Electric's failure to complete the construction and start-up of the
Facility by May 31, 1997. Such liquidated damages and extension fees were
capitalized as a reduction of construction in process.


4. FUEL INVENTORIES

      Fuel inventories consist of the following (dollars in thousands):

<TABLE>
<CAPTION>
                December 31,  December 31,
                    1997         1996
                ------------  ------------
<S>             <C>           <C>
Natural Gas        $1,490         $0
Fuel Oil              379          0
                   ------         --

                   $1,869         $0
                   ======         ==
</TABLE>

      Natural Gas is stated at weighted average cost and fuel oil is stated at
cost based on the first-in first-out method.



                                      F-20

<PAGE>   55

                             LSP-COTTAGE GROVE, L.P.


                          NOTES TO FINANCIAL STATEMENTS

5. RESTRICTED INVESTMENTS

  Restricted investments consist of the following (dollars in thousands):

<TABLE>
<CAPTION>
                                      December 31,     December 31,
                                          1997             1996
                                      ------------     ------------
<S>                                   <C>              <C>    
Overnight repurchase obligations        $ 19,908         $28,108
Less:  Unrestricted accounts              (8,433)              0
                                        --------         -------
Restricted accounts                     $ 11,475         $28,108
                                        ========         =======
</TABLE>

      Overnight repurchase obligations are secured by U.S. Treasury notes. The
majority of revenue received by the Partnership is required to be deposited into
accounts administered by the Trustee. The Trustee invests funds held in these
accounts at the direction of the Partnership. These accounts are established for
the purpose of depositing all receipts and monitoring all disbursements of the
Partnership. In addition, special accounts are established to provide for debt
service reserves and payments and major maintenance reserves. The use of funds
held by the Trustee prior to the Commercial Operations Date was restricted to
payment of project costs, including payment of interest on the First Mortgage
Bonds. Debt service reserves, major maintenance reserves and construction fund
account balances are reflected as restricted investments, whereas all other
account balances are classified as cash and cash equivalents in the accompanying
balance sheets.


                                      F-21

<PAGE>   56

                             LSP-COTTAGE GROVE, L.P.


                          NOTES TO FINANCIAL STATEMENTS


6.  SALES-TYPE CAPITAL LEASE

   Upon the Commercial Operations Date of the Facility, the Partnership 
recognized a gain on sales-type capital lease of $87.1 million reflecting the
difference between the estimated fair market value ($233.6 million) and the
historical cost ($146.5 million) of the Facility. The interest rate implicit in
the lease is 9.01%. The estimated residual value of the Facility at the end of
the lease term is $0. The components of the net investment in lease at December
31, 1997, are as follows (dollars in thousands):

<TABLE>
<S>                              <C>      
Gross Investment in Lease        $ 567,415
Unearned Income on Lease          (333,381)
                                 ---------
Net Investment in Lease          $ 234,034
                                 =========
</TABLE>

   Gross investment in lease represents total capacity payments receivable over
the life of the Power Purchase Agreement, net of executory costs, which are 
considered minimum lease payments in accordance with SFAS No. 13.

   Estimated minimum lease payments over the remaining term of the Power
Purchase Agreement as of December 31, 1997, are as follows (dollars in
thousands):

<TABLE>
                  <S>                    <C>     
                  1998                   $ 19,609
                  1999                     20,175
                  2000                     21,140
                  2001                     21,058
                  2002                     22,109
                  Thereafter              463,324
                                         --------
                  Total                  $567,415
                                         ========
</TABLE>

7. INVESTMENT IN UNCONSOLIDATED AFFILIATE

   Investment in unconsolidated affiliate represents the Partnership's 50%
ownership interest in Funding. The Partnership's investment in Funding is
accounted for using the equity method. The following is summarized financial
information for Funding (dollars in thousands):

STATEMENT OF INCOME DATA:

<TABLE>
<CAPTION>
                          For the Year Ended    For the Year Ended  Inception (June 23, 1995)
                             December 31,          December 31,          to December 31,
                                 1997                  1996                   1995
                          ------------------    ------------------  -------------------------
<S>                       <C>                   <C>                 <C>    
Interest income                $25,886               $25,886                 $12,943
Interest expense                25,886                25,886                  12,943
                               -------               -------                 -------
Net income                     $     0               $     0                 $     0
                               =======               =======                 =======
</TABLE>


                                      F-22


<PAGE>   57

                             LSP-COTTAGE GROVE, L.P.


                          NOTES TO FINANCIAL STATEMENTS



BALANCE SHEET DATA:

<TABLE>
<CAPTION>
                                                            December 31,
                                                           1997 and 1996
                                                           -------------
<S>                                                        <C>     
Current assets                                               $      1
Investment in First Mortgage Bonds                            332,000
                                                             --------
    Total assets                                             $332,001
                                                             ========

Senior Secured Bonds payable                                 $332,000
Stockholders' equity                                                1
                                                             --------
    Total liabilities and stockholders' equity               $332,001
                                                             ========
</TABLE>

8. FIRST MORTGAGE BONDS PAYABLE

   First Mortgage Bonds payable consists of the following at December 31, 1997
and 1996 (dollars in thousands):

<TABLE>
     <S>                                             <C>     
     7.19% First Mortgage Bonds
       due June 30, 2010 ("2010 Bonds")              $ 49,278
     8.08% First Mortgage Bonds
       due December 30, 2016 ("2016 Bonds")           105,722
                                                     --------
                                                     $155,000
                                                     ========
</TABLE>

   On June 30, 1995, the Partnership issued and sold $155,000,000 of First
Mortgage Bonds to Funding. The bonds are secured by substantially all assets of
the Partnership. Interest is payable semi-annually on June 30 and December 30 of
each year, commencing December 30, 1995. Principal on the First Mortgage Bonds 
is also payable semi-annually in varying amounts beginning on June 30, 2000 for
the 2010 Bonds, and beginning on December 30, 2010 for the 2016 Bonds.
Collective future maturities of the First Mortgage Bonds as of December 31,
1997, are as follows (dollars in thousands):

<TABLE>
       <S>                                   <C>     
       1998                                  $      0
       1999                                         0
       2000                                     1,084
       2001                                     1,547
       2002                                     2,129
       Thereafter                             150,240
                                             --------
                                             $155,000
                                             ========
</TABLE>

   The trust indenture and other financing documents for the First Mortgage
Bonds include a number of covenants with which the Partnership must comply.
These covenants include, among others, compliance with certain reporting
requirements and limitations of activities relating to the bond proceeds,
additional debt, new and existing agreements, partnership distributions and
other activities. The trust indenture also describes events of default of the
First Mortgage Bonds which include, among others, certain events involving
bankruptcy of the Partnership and failure to maintain and comply with agreements
made by the Partnership.



                                      F-23

<PAGE>   58

                             LSP-COTTAGE GROVE, L.P.


                          NOTES TO FINANCIAL STATEMENTS


9. CREDIT AGREEMENT

   The Partnership has a Credit Agreement which provides for working capital
loans of up to $3,000,000 and letter of credit commitments of up to $5,500,000.
The interest rate for loans made under the Credit Agreement is based upon
various short-term indices at the Partnership's option and is determined
separately for each draw. These commitments expire on June 30, 2000. The Credit
Agreement includes commitment fees, payable quarterly in arrears, ranging from
 .25% to .375% on the daily average unused amount of the commitment until the
Credit Agreement is terminated. For all periods through December 31, 1997, no
working capital loans had been issued under the Credit Agreement. In October
1997, a $500,000 letter of credit, in favor of NSP pursuant to the Power
Purchase Agreement, was issued under the Credit Agreement.


10. FAIR VALUE OF FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISKS

   The majority of the Company's accounts receivables are from a major
regulated utility (NSP) and the associated credit risk is considered limited.
The carrying amounts of the Partnership's cash and cash equivalents, accounts
receivables, restricted investments held by Trustee, accounts payable and
accrued expenses approximate fair value. The fair value of the Partnership's
First Mortgage Bonds at December 31, 1997, is $14,181,000 higher than the
historical carrying value of $155,000,000. At December 31, 1996, the fair value
of the Partnership's First Mortgage Bonds approximated carrying value.


11. COMMITMENTS AND CONTINGENCIES

CONSTRUCTION

   The Partnership has a $107 million turnkey construction contract (inclusive
of executed change orders) with Westinghouse Electric. Westinghouse Electric had
committed to complete the construction and start-up of the Facility to specified
performance levels by May 31, 1997 and is required under the contract to
reimburse the Partnership for extension fees paid under the Power Purchase
Agreement with NSP, and to pay certain liquidated damages in the event of a
delay. During 1997, Westinghouse Electric was required to pay $1,333,000 and
$5,073,000 of reimbursable extension fees and delay liquidated damages,
respectively. The Partnership has recorded receivables from Westinghouse
Electric of $3,012,000 at December 31, 1997, which is comprised of reimbursable
extension fees of $267,000 and delay liquidated damages of $2,745,000 (see Note
3).


POWER PURCHASE AGREEMENT

   Under and subject to the terms of the Power Purchase Agreement, the Utility
is obligated to purchase all of the electric capacity made available to it and
all associated energy which the Utility chooses to dispatch from the Facility
beginning on the Commercial Operations Date. Payments by the Utility to the
Partnership under the Power Purchase Agreement consist of capacity payments and
energy payments which fluctuate based upon published indices and/or a fixed
schedule.


                                      F-24
<PAGE>   59
 
                             LSP-COTTAGE GROVE, L.P.


                         NOTES TO FINANCIAL STATEMENTS



THERMAL ENERGY SALES

       The Steam Supply Agreement obligates the Partnership to supply all of
the Steam Purchaser's steam requirements up to a maximum of 664 million pounds
of steam annually at a rate not to exceed 190,000 pounds per hour when the
Facility's cogeneration process is operating and 160,000 pounds per hour when
the steam is generated by the Facility's auxiliary boilers.

GAS SUPPLY

       The Partnership has 20-year gas supply contracts with two fuel suppliers
to provide 100% of the Facility's natural gas requirements. The gas supply
contracts each provide for the sale of up to 17,060 MMBtu per day of gas to the
Partnership. The price paid by the Partnership under the gas supply contracts
fluctuates based upon published indices.

       Under the gas supply contracts, the Partnership is subject to annual 
minimum take requirements which may be satisfied by delivering gas to the 
Facility, taking gas into storage or remarketing gas to third parties.

GAS TRANSPORTATION

       The Partnership has various gas transportation agreements with fuel
transportation companies which provide for delivery of gas to the Facility. The
price paid by the Partnership under the gas transportation contracts fluctuate
based on published indices.

OPERATIONS AND MAINTENANCE

       The Facility is operated and maintained under an operations and
maintenance agreement with Westinghouse Operating Services Company, Inc.
("Westinghouse Services"). Under the terms of the operations and maintenance
agreement, the Partnership is required to pay Westinghouse Services an annual
management fee of $350,000 as well as reimbursement of payroll, fringe benefits,
insurance and certain subcontractor costs and a bonus based on a targeted plant
performance. If targeted plant performance is not attained, Westinghouse
Services is required to pay a performance penalty to the Partnership. The
management fee is adjusted annually based on certain published indices. The term
of the operations and maintenance agreement extends for an initial period of
seven years (through October, 2004). The Partnership has the option to extend
the term of the agreement for two additional seven-year terms, provided that the
Partnership and Westinghouse Services mutually agree in writing as to the terms
of such extension.

PARTS AGREEMENT

       The Partnership has a spare parts agreement (the "Parts Agreement") with
Westinghouse Electric. Under the terms of the Parts Agreement, Westinghouse
Electric provides (i) certain combustion turbine parts and refurbishment
services, (ii) other spare parts at discounted prices and (iii) other repair
services at direct cost plus a percent mark-up to the Partnership. The
compensation payable to Westinghouse Electric is an annual fee of $977,000
(escalated annually based on published indices) payable for 12 years.

LITIGATION

       The Partnership experiences routine litigation in the normal course of 
business. Management is of the opinion that none of this routine litigation will
have a material adverse effect on the financial position or results of
operations of the Partnership.

12.    DEPENDENCE ON THIRD PARTIES

   The Partnership is highly dependent on a single utility for purchases of
electric generating capacity and energy from its Facility, a single operator to
perform the operation and maintenance of its Facility, and a single steam
purchaser for purchases of thermal energy. In addition, the Partnership has
contracted with two gas companies to supply the gas requirements of the
Facility, 


                                      F-25
<PAGE>   60

                            LSP-COTTAGE GROVE, L.P.
 

                         NOTES TO FINANCIAL STATEMENTS


and has contracted with a single interstate gas transporter to transport gas.
Any material breach by any one of these parties of their respective obligations
to the Partnership could affect the ability of the Partnership to make payments
under its First Mortgage Bonds. In addition, bankruptcy or insolvency of certain
other parties or defaults by such parties relative to their contractual or
regulatory obligations could adversely affect the ability of the Partnership to
make payments under its First Mortgage Bonds. If an agreement were to be
terminated due to a breach of such agreement, the Partnership's ability to enter
into a substitute agreement having substantially equivalent terms and
conditions, or with an equally creditworthy third party, is uncertain.

13.    RELATED PARTY TRANSACTIONS

   The initial costs incurred to develop the Facility, consisting principally of
site development costs, engineering fees, legal fees, permitting costs, interest
and LS Power employee costs, were incurred by Granite. At June 30, 1995, the
Partnership paid development fees and reimbursed certain costs totaling
approximately $11,730,000 to Granite. These payments were capitalized and
included in construction in process.

   LS Power provided certain management services to the Partnership pursuant to
management services agreements. Under these agreements, LS Power managed the
business affairs of the Partnership during construction and operation of the
Cottage Grove Project. As compensation for its services, LS Power received a
monthly management fee of $60,000 during construction, and $50,000 during
operation (both in 1995 dollars). These fees were escalated annually beginning
on January 1, 1996 pursuant to the rate of change in a consumer-price related
index. LS Power was also reimbursed for its reasonable and necessary expenses
incurred in performing its services, including salaries of its personnel to the
extent related to services provided under the agreements. Under these 
agreements,  the Partnership incurred expenses of approximately $1,406,000,
$1,391,000 and $515,000 during the years ended December 31, 1997, 1996 and
1995, respectively. At December 31, 1997 and 1996, the Partnership recorded
accounts payable to LS Power of approximately $231,000 and $57,000,
respectively. See Note 15 for discussion of assignment of the management
services agreements which occurred on March 20, 1998.

14.    PARTNERS' CAPITAL

   In 1997, TPC contributed $18,167,000 of equity for financing the
construction of the Facility. TPC received a limited partner interest in the
Partnership of approximately 27% and equity commitment fees of $350,000.

   Profits, losses and distributions will be allocated based on the respective
partnership interests. Distributions will be made in accordance with the trust
indenture and other financing documents. Such distributions are subject to the
prior satisfaction of a number of conditions including, among others,
maintenance of required funding levels in various Trustee accounts and
compliance with minimum levels of current and projected debt service coverage.




                                      F-26
<PAGE>   61
 

                            LSP-COTTAGE GROVE, L.P.


                         NOTES TO FINANCIAL STATEMENTS


15.    SUBSEQUENT EVENT - CHANGE IN CONTROL

   On March 6, 1998, LS Power and Granite (collectively, the "Sellers")
entered into a Securities Purchase Agreement (the "Securities Purchase
Agreement") with Cogentrix Mid America, Inc. (CMA) and Cogentrix Cottage Grove,
LLC (collectively, the "Purchasers") and Cogentrix Energy, Inc. ("Cogentrix
Energy") which controls each of the Purchasers as wholly - owned indirect
subsidiaries.

   On March 20, 1998, pursuant to the Securities Purchase Agreement, the
Sellers sold all of the Sellers' capital stock of LSP Cottage Grove, Inc., and
all of the Sellers' limited partnership interest in the Partnership to the
Purchasers. As a result, Cogentrix Cottage Grove, LLC, a wholly-owned subsidiary
of CMA, acquired all of the capital stock of LSP-Cottage Grove, Inc., the 1%
general partner of the Partnership, as well as a 72.22% limited partnership
interest in the Partnership for a combined total ownership interest of 73.22%
in the Partnership. 

   On the same date that the wholly-owned indirect subsidiaries of Cogentrix
Energy identified above acquired their ownership interests in the Partnership,
Cogentrix Energy and LS Power entered into an Assignment and Assumption
Agreement, by the terms of which LS Power assigned, and Cogentrix Energy
assumed, all of the rights and obligations of LS Power under certain management
services agreements between LS Power and each of LSP-Cottage Grove, Inc. and the
Partnership.



                                      F-27
<PAGE>   62
 

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

The Partners
LSP-Whitewater Limited Partnership:

   We have audited the accompanying balance sheet of LSP-Whitewater Limited
Partnership (a Delaware limited partnership) as of December 31, 1997 and the
related statements of income, changes in partners' capital, and cash flows for
the year then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our 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 financial statements referred to above present fairly, in
all material respects, the financial position of LSP-Whitewater Limited
Partnership as of December 31, 1997 and the results of its operations and its
cash flows for the year then ended, in conformity with generally accepted
accounting principles.




ARTHUR ANDERSEN LLP
Charlotte, North Carolina,
April 9, 1998.



                                      F-28
<PAGE>   63



                          INDEPENDENT AUDITORS' REPORT

The Partners
LSP-Whitewater Limited Partnership:

     We have audited the accompanying balance sheet of LSP-Whitewater Limited
Partnership as of December 31, 1996 and the related statements of income, 
changes in partners' capital and cash flows for each of the years in the
two-year period ended December 31, 1996. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of LSP-Whitewater Limited
Partnership as of December 31, 1996 and the results of its operations and its
cash flows for each of the years in the two-year period ended December 31, 1996,
in conformity with generally accepted accounting principles.



KPMG PEAT MARWICK LLP 
Billings, Montana, 
February 13, 1997.



                                      F-29
<PAGE>   64
 

                       LSP-WHITEWATER LIMITED PARTNERSHIP


                                 BALANCE SHEETS
                           DECEMBER 31, 1997 AND 1996
                             (dollars in thousands)

<TABLE>
<CAPTION>
                              ASSETS                            1997           1996
                                                                ----           ----
<S>                                                          <C>           <C>     
Current assets:
     Cash and cash equivalents                               $  7,749      $    101
     Accounts receivable - trade                                4,983             0
     Accounts receivable - other                                2,195             0
     Fuel inventories                                           1,361             0
     Spare parts inventories                                      432             0
     Other current assets                                         682             1
                                                             --------      --------
Total current assets                                           17,402           102
                                                             ========      ========

Restricted investments                                         13,752        34,415

Net investment in lease (Notes 2 and 6)                       262,072             0

Construction in process                                             0       149,232

Greenhouse facility, net                                        8,281             0

Debt issuance and finance costs, net of accumulated
  amortization of $616 in 1997 and $355 in 1996                 6,607         6,868

Investment in unconsolidated affiliate                              1             1
                                                             --------      --------

Total assets                                                 $308,115      $190,618
                                                             ========      ========

                LIABILITIES AND PARTNERS' CAPITAL

Current liabilities:
     Accounts payable                                        $ 11,492      $ 13,617
     Accrued expenses                                              64             0
                                                             --------      --------
Total current liabilities                                      11,556        13,617

First Mortgage Bonds payable                                  177,000       177,000
                                                             --------      --------
Total liabilities                                             188,556       190,617

Commitments and contingencies (Note 12)

Partners' capital                                             119,559             1
                                                             --------      --------

Total liabilities and partners' capital                      $308,115      $190,618
                                                             ========      ========
</TABLE>




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



                                      F-30
<PAGE>   65

                       LSP-WHITEWATER LIMITED PARTNERSHIP


                              STATEMENTS OF INCOME
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                    1997       1996      1995
                                                    ----       ----      ----
<S>                                              <C>           <C>       <C>
Operating revenues:
     Lease revenue                               $  6,579       $0        $0
     Service revenue                                5,944        0         0
     Other                                            825        0         0
                                                 --------       --        --

                                                   13,348        0         0
                                                 --------       --        --

Operating expenses:
     Cost of services                               6,948        0         0
     Greenhouse operating expenses                    799        0         0
                                                 --------       --        --
                                                    7,747        0         0
                                                 --------       --        --

Operating income                                    5,601        0         0

Non-operating income (expense):
     Gain on sales-type capital lease              97,042        0         0
     Interest expense                              (4,024)       0         0
     Interest income                                  383        0         0
                                                 --------       --        --

Net income                                       $ 99,002       $0        $0
                                                 ========       ==        ==
</TABLE>


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



                                      F-31
<PAGE>   66
 

                       LSP-WHITEWATER LIMITED PARTNERSHIP


                   STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                             (dollars in thousands)

<TABLE>
<CAPTION>


                                                                            GENERAL
                                                                            PARTNER
                                            LIMITED PARTNERS                -------
                                            ----------------                 LSP-
                                          TPC           GRANITE POWER     WHITEWATER I,
                                     WHITEWATER, INC.   PARTNERS, L.P.        INC.          TOTAL
                                     ----------------   --------------        ----          -----
<S>                                  <C>                <C>               <C>             <C>

Capital contributions at inception       $     0           $     1            $  0        $      1
                                         -------           -------            ----        --------
Balance, December 31, 1995 and 1996            0                 1               0               1

Capital contributions                     20,556                 0               0          20,556

Net income                                25,572            72,440             990          99,002
                                         -------           -------            ----        --------

Balance, December 31, 1997               $46,128           $72,441            $990        $119,559
                                         =======           =======            ====        ========
</TABLE>



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



                                      F-32
<PAGE>   67
 

                       LSP-WHITEWATER LIMITED PARTNERSHIP


                            STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                                   1997            1996            1995
                                                                   ----            ----            ----
<S>                                                            <C>             <C>            <C>      
Cash Flows from Operating Activities:
  Net income                                                   $  99,002       $      0       $       0
  Adjustments to reconcile net income to net
    cash used in operating activities
    Gain on sales-type capital lease                             (97,042)             0               0
    Amortization of unearned lease income                         (6,579)             0               0
    Amortization of debt issuance and finance costs                   76              0               0
    Minimum lease payments received                                6,247              0               0
    Depreciation                                                     112              0               0
    Increase in accounts payable - trade                          (4,983)             0               0
    Increase in fuel inventories                                    (984)             0               0
    Increase in spare parts inventories                             (136)             0               0
    Increase in other current assets                                (682)             0               0
    Increase in accounts payable                                   2,865              0               0
    Increase in accrued expenses                                      64              0               0
                                                               ---------       --------       ---------
Net cash used in operating activities                             (2,040)             0               0
                                                               ---------       --------       ---------


Cash Flows from Investing Activities:
    Sales (acquisition) of land and improvements                     939           (146)         (3,394)
    Payments on construction in process                          (33,847)       (96,746)        (43,983)
    Investments held by Trustee                                  (20,556)             0        (177,000)
    Investments drawn                                             42,596         97,075          54,518
    Investment in Funding                                              0              0              (1)
                                                               ---------       --------       ---------
Net cash provided by (used in) investing activities              (10,868)           183        (169,860)
                                                               ---------       --------       ---------

Cash Flows from Financing Activities:
    Debt issuance and financing costs                                  0           (153)         (7,070)
    Proceeds from First Mortgage Bonds                                 0              0         177,000
    Capital contributions                                         20,556              0               0
                                                               ---------       --------       ---------
Net cash provided by (used in) financing activities               20,556           (153)        169,930
                                                               ---------       --------       ---------

Net increase in cash and cash equivalents                          7,648             30              70
Cash and cash equivalents, beginning of year                         101             71               1
                                                               ---------       --------       ---------
Cash and cash equivalents, end of year                         $   7,749       $    101       $      71
                                                               =========       ========       =========

RECONCILIATION OF CHANGES IN
CONSTRUCTION IN PROCESS
    Decrease (increase) in total construction in process       $ 145,694       $(99,555)      $ (46,139)
    Construction in process sold in lease transaction           (170,493)             0               0
    Amortization of debt issuance and financing costs                185            244             111
    Increase in accounts receivable-other                         (2,195)             0               0
    Interest income on investments held by Trustee                (1,375)        (4,802)         (4,206)
    Increase in fuel inventories                                    (378)             0               0
    Increase in spare parts inventories                             (296)             0               0
    Decrease in other current assets                                   1              0               1
    Increase (decrease) in accounts payable                       (4,990)         7,367           6,250
                                                               ---------       --------       ---------
    Payments on construction in process                        $ (33,847)      $(96,746)      $ (43,983)
                                                               =========       ========       =========

Supplemental disclosure of cash flow information:
    Cash paid for interest during the year                     $  13,801       $ 13,801       $   6,900
                                                               =========       ========       =========
</TABLE>



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



                                      F-33
<PAGE>   68

                       LSP-WHITEWATER LIMITED PARTNERSHIP


                          NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND NATURE OF BUSINESS

   LSP-Whitewater Limited Partnership (the "Partnership") is a Delaware
limited partnership that was formed on December 14, 1993 to develop, finance,
construct and own a gas-fired cogeneration facility with a design capacity of
approximately 245 megawatts located in Whitewater, Wisconsin (the "Facility ").
Construction and start-up of the Facility was substantially completed and
commercial operation commenced September 18, 1997 (the "Commercial Operations
Date"). As of December 31, 1997, the 1% general partner of the Partnership was
LSP-Whitewater I, Inc., a wholly owned subsidiary of Granite Power Partners,
L.P., a Delaware limited partnership ("Granite"). Granite and TPC Whitewater,
Inc., a Delaware corporation ("TPC"), were the sole limited partners of the
Partnership, owning approximately 73% and 26% limited partnership interests,
respectively. The general partner of Granite is LS Power Corporation ("LS
Power"), a Delaware corporation. See Note 16 for discussion of a change in
ownership which occurred on March 20, 1998.

   The Partnership holds a 50% equity ownership interest in LS Power Funding
Corporation ("Funding"), which was established on June 23, 1995 as a special
purpose Delaware corporation to issue debt securities (the "Senior Secured
Bonds") in connection with financing construction of the Facility and a similar
gas-fired cogeneration facility located in Cottage Grove, Minnesota (the
"Cottage Grove Facility"). On June 30, 1995, a portion of the proceeds from the
offering and sale of the Senior Secured Bonds issued by Funding was used to
purchase $177 million of First Mortgage Bonds issued simultaneously by the
Partnership.

   The Partnership sells up to 236.5 megawatts of electric capacity and
associated energy generated by the Facility to Wisconsin Electric Power Company
("WEPCO" or, as the context requires, the "Utility") pursuant to a 25-year power
purchase agreement (the "Power Purchase Agreement"). The Partnership may also
sell to third parties up to 12 megawatts of electric capacity and any energy
which is not dispatched by WEPCO. The thermal energy generated by the Facility
is provided in the form of steam to the University of Wisconsin - Whitewater
under a steam supply agreement expiring on June 30, 2005 and in the form of hot
water to a greenhouse (the "Greenhouse") owned by the Partnership (collectively,
the "Steam Purchasers").

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS

   For purposes of reporting cash flows, cash equivalents include unrestricted
short-term investments with original maturities of three months or less.

RESTRICTED INVESTMENTS

   Restricted investments represent overnight repurchase obligations secured by
U.S. Treasury notes. These investments are carried at cost, which approximated
market at December 31, 1997 and 1996. Amounts held by the trustee under the
trust indenture for the First Mortgage Bonds (the "Trustee") in accounts
designated for debt service, major maintenance and construction, which might
otherwise be considered cash equivalents, are treated as restricted investments.

COMMENCEMENT OF POWER PURCHASE AGREEMENT

   The Power Purchase Agreement described in Note 12 has characteristics
similar to a lease in that the agreement confers to the purchasing utility the
right to use specific property, plant and equipment. At the Commercial
Operations Date, the Partnership accounted for the Power Purchase Agreement as a
sales type capital lease in accordance with Statement of Financial Accounting
Standards (SFAS) No. 13, "Accounting for Leases" (see Note 6).

CONSTRUCTION IN PROCESS

   Prior to commercial operation, all costs incurred to develop and construct
the Facility, including net costs associated with performance testing prior to
the Commercial Operation Date, as well as interest costs (including amortization
of debt issuance and financing costs), net of interest income on excess
proceeds, were capitalized and classified as construction in process.


                                      F-34
<PAGE>   69
 

                       LSP-WHITEWATER LIMITED PARTNERSHIP


                          NOTES TO FINANCIAL STATEMENTS

      In recording the Partnership's gain on sales-type capital lease, all
construction in process costs related to the Facility were included in the
historical cost basis of the Facility. All interest costs subsequent to the
Commercial Operations Date have been charged to expense. As of December 31,
1996, capitalized interest including amortization of debt issuance and financing
costs was $12,048,000 ($11,694,000, before amortization).

GREENHOUSE FACILITY

      Depreciation on the Greenhouse Facility and related equipment is computed 
using the straight-line method over 25 years and 10 years, respectively (see 
Note 7).



                                      F-35
<PAGE>   70
 
                       LSP-WHITEWATER LIMITED PARTNERSHIP


                          NOTES TO FINANCIAL STATEMENTS


DEBT ISSUANCE AND FINANCING COSTS

   Debt issuance and financing costs are deferred and amortized over the term 
of the related debt. Amortization of deferred financing costs was capitalized as
part of construction in process prior to commercial operations and is included
in interest expense subsequent to commercial operations in the accompanying
financial statements.

CURRENT LIABILITIES

   As of December 31, 1997 and 1996, $8,632,000 and $13,617,000 of current
liabilities were considered project costs and were eligible for payment from
funds held by the Trustee included in restricted investments in the accompanying
balance sheets.

LEASE REVENUE

   Lease revenue represents the amortization of unearned income on lease
using the effective interest rate method as well as contingent rentals that
result from changes in payment escalators occurring subsequent to the Commercial
Operations Date. These contingent rentals are not expected to materially change
the lease revenue recognized over the life of the Power Purchase Agreement.

SERVICE REVENUE

   Service revenue represents reimbursement to the Partnership of costs incurred
to operate the Facility and to provide variable electric energy to the Utility
and thermal energy to the Steam Purchasers.

OTHER REVENUES  

   Other revenues consist primarily of commodity sales of excess natural gas
fuel inventory, including amounts remarketed directly to third parties, as well
as sales of horticultural products produced by the Partnership's Greenhouse
Facility.

COST OF SERVICES

   Cost of services represent expenses related to operating the Facility and
providing variable electric energy to the Utility as well as thermal energy to
the Steam Purchasers.

GREENHOUSE OPERATING EXPENSES

   Greenhouse operating expenses include all operating costs specifically
related to greenhouse activities including depreciation on the Greenhouse
Facility.

INCOME TAXES

   Under current tax laws, income or loss of partnerships is included in the
income tax returns of the partners. Accordingly, the Partnership makes no
provision for federal and state income taxes. The tax returns of the Partnership
are subject to examination by federal and state taxing authorities. If such
examinations occur and result in changes with respect to the Partnership
qualification, or in changes in distributable partnership income or loss, the
tax liability of the partners would be changed accordingly.

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 disclosure 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 those estimates.



                                      F-36
<PAGE>   71
  

                       LSP-WHITEWATER LIMITED PARTNERSHIP


                          NOTES TO FINANCIAL STATEMENTS


NEW ACCOUNTING PRONOUNCEMENTS

   In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income." This pronouncement establishes standards for the
reporting and display of comprehensive income and its components in financial
statements. Comprehensive income is defined as the total of net income and all
other non-owner changes in equity. This statement will be adopted by the
Partnership effective January 1, 1998. The Partnership believes this
pronouncement will not have a material effect on its financial statements.

   In June 1997, the FASB also issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." This pronouncement establishes
standards for reporting information about operating segments in annual and
interim financial statements. SFAS No. 131 will be adopted by the Partnership
effective January 1, 1998. The Partnership believes this pronouncement will not
have a material effect on its financial statements.

3. ACCOUNTS RECEIVABLE - OTHER

   Accounts Receivable-Other represents amounts due from Westinghouse Electric
Corporation ("Westinghouse Electric"), the Partnership's construction
contractor, for delay liquidated damages and extension fees due as a result of
Westinghouse Electric's failure to complete the construction and start-up of the
Facility by May 31, 1997. Such liquidated damages and extension fees were 
capitalized as a reduction of construction in process.


4. FUEL INVENTORIES

      Fuel inventories consist of the following (dollars in thousands):

<TABLE>
<CAPTION>
                                               December 31,            December 31,
                                                   1997                    1996
                                                   ----                    ----
                    <S>                       <C>                      <C>          
                    Natural Gas                  $  983                   $    0
                    Fuel Oil                        378                        0
                                                 ------                   ------

                                                 $1,361                   $    0
                                                 ======                   ======
</TABLE>

      Natural gas inventory is stated at weighted average cost and fuel oil
inventory is stated at cost based on the first-in first-out method.



                                      F-37
<PAGE>   72


                       LSP-WHITEWATER LIMITED PARTNERSHIP


                          NOTES TO FINANCIAL STATEMENTS


5. RESTRICTED INVESTMENTS

     Restricted investments consist of the following (dollars in thousands):

<TABLE>
<CAPTION>
                                                  December 31     December 31
                                                     1997             1996
                                                     ----             ----
                <S>                               <C>             <C>                    
                Overnight repurchase obligations    $21,070         $34,415
                Less:  Unrestricted accounts         (7,318)              0
                                                    -------         -------
                Restricted accounts                 $13,752         $34,415
                                                    =======         =======
</TABLE>

   Overnight repurchase obligations are secured by U.S. Treasury notes. The
majority of revenue received by the Partnership is required to be deposited into
accounts administered by the Trustee. The Trustee invests funds held in these
accounts at the direction of the Partnership. These accounts are established for
the purpose of depositing all receipts and monitoring all disbursements of the
Partnership. In addition, special accounts are established to provide for debt
service reserves and payments and major maintenance reserves. The use of funds
held by the Trustee prior to the Commercial Operations Date was restricted to
payment of project costs, including payment of interest on the First Mortgage
Bonds. Debt service reserves, major maintenance reserves and construction fund
account balances are reflected as restricted investments, whereas all other
account balances are classified as cash and cash equivalents in the accompanying
balance sheets.
 
6. SALES-TYPE CAPITAL LEASE

   Upon the Commercial Operations Date of the Facility, the Partnership
recognized a gain on sale-type capital lease of $97.0 million reflecting the
difference between the estimated fair market value ($261.7 million) and the
historical cost ($164.7 million) of the Facility. The interest rate implicit in
the lease is 9.79%. The estimated residual value of the Facility at the end of
the lease term is $0. The components of the net investment in lease at December
31, 1997, are as follows (dollars in thousands):
  
<TABLE>
                          <S>                                     <C>
                          Gross Investment in Lease               $ 615,489
                          Unearned Income on Lease                 (353,417)
                                                                  ---------
                          Net Investment in Lease                 $ 262,072
                                                                  =========
</TABLE>

   Gross investment in lease represents total capacity payments receivable over
the life of the Power Purchase Agreement, net of executory costs, which are
considered minimum lease payments in accordance with SFAS No. 13.

   Estimated minimum lease payments over the remaining term of the Power
Purchase Agreement as of December 31, 1997, are as follows (dollars in
thousands):
    
<TABLE>
                                           <S>                      <C>
                                           1998                     $ 22,392
                                           1999                       22,944
                                           2000                       24,036
                                           2001                       24,132
                                           2002                       25,140
                                           Thereafter                496,845
                                                                    --------
                                                   Total            $615,489
                                                                    ========
</TABLE>      

                                      F-38
<PAGE>   73
 

                       LSP-WHITEWATER LIMITED PARTNERSHIP


                          NOTES TO FINANCIAL STATEMENTS


7. GREENHOUSE FACILITY

   Greenhouse Facility consists of (dollars in thousands):

<TABLE>
<CAPTION>
                                                   December 31,
                                                      1997
                                                   ------------
                       <S>                         <C>  
                       Building                          $7,488
                       Equipment                            905
                                                         ------
                                                          8,393
                       Less: Accumulated Depreciation      (112)
                                                         ------
                                                         $8,281
                                                         ======
</TABLE>

   Building and equipment comprise the cost of the Greenhouse under a
turnkey construction contract inclusive of change orders and interest
capitalized during the construction period.

8. INVESTMENT IN UNCONSOLIDATED AFFILIATE

   Investment in unconsolidated affiliate represents the Partnership's 50%
ownership interest in Funding. The Partnership's investment in Funding is
accounted for using the equity method. The following is summarized financial
information for Funding (dollars in thousands):

STATEMENT OF INCOME DATA:    

<TABLE>
<CAPTION>
                         For the Year        For the Year         Inception
                             Ended               Ended         (June 23, 1995)
                         December 31,        December 31,      to December 31,
                             1997                1996                   1995
                         ------------        ------------      --------------
      <S>                <C>                 <C>               <C>                  
      Interest income       $ 25,886             $ 25,886            $ 12,943
      Interest expense        25,886               25,886              12,943
                            --------             --------            --------
      Net income            $      0             $      0            $      0
                            ========             ========            ========
</TABLE>

BALANCE SHEET DATA:

<TABLE>
<CAPTION>
                                                                December 31,
                                                                1997 and 1996
                                                                -------------
   <S>                                                          <C>
   Current assets                                                   $       1
   Investment in First Mortgage Bonds                                 332,000
                                                                    ---------
       Total assets                                                 $ 332,001
                                                                    =========
   Senior Secured Bonds payable                                     $ 332,000
   Stockholders' equity                                                     1
                                                                    ---------
       Total liabilities and stockholders' equity                   $ 332,001
                                                                    =========
</TABLE>

9.     FIRST MORTGAGE BONDS PAYABLE

First Mortgage Bonds payable consists of the following at December 31, 1997 and
1996 (dollars in thousands):

<TABLE>
       <S>                                                            <C>
       7.19% First Mortgage Bonds
         due June 30, 2010 ("2010 Bonds")                             $ 56,273
       8.08% First Mortgage Bonds
         due December 30, 2016 ("2016 Bonds")                          120,727
                                                                      --------
                                                                      $177,000
                                                                      ========
</TABLE>





                                      F-39
<PAGE>   74
  

                       LSP-WHITEWATER LIMITED PARTNERSHIP


                          NOTES TO FINANCIAL STATEMENTS


On June 30, 1995, the Partnership issued and sold $177,000,000 of First Mortgage
Bonds to Funding. The bonds are secured by substantially all assets of the
Partnership. Interest is payable semi-annually on June 30 and December 30 of
each year, commencing December 30, 1995. Principal on the First Mortgage Bonds
is also payable semi-annually in varying amounts beginning on June 30, 2000 for
the 2010 Bonds, and beginning on December 30, 2010 for the 2016 Bonds.
Collective future maturities of the First Mortgage Bonds as of December 31,
1997, are as follows (dollars in thousands):

<TABLE>
       <S>                                     <C>
       1998                                    $           0
       1999                                                0
       2000                                            1,239
       2001                                            1,767
       2002                                            2,430
       Thereafter                                    171,564
                                                    --------
                                                    $177,000
                                                    ========
</TABLE>

    The trust indenture and other financing documents for the First Mortgage
Bonds include a number of covenants with which the Partnership must comply.
These covenants include, among others, compliance with certain reporting
requirements and limitations of activities relating to the bond proceeds,
additional debt, new and existing agreements, partnership distributions and
other activities. The trust indenture also describes events of default of the
First Mortgage Bonds which include, among others, certain events involving
bankruptcy of the Partnership and failure to maintain and comply with agreements
made by the Partnership.

10. CREDIT AGREEMENT

   The Partnership has entered into a Credit Agreement which provides for
working capital loans of up to $3,000,000 and letter of credit commitments of up
to $5,000,000. The interest rate for loans made under the Credit Agreement is
based upon various short-term indices at the Partnership's option and is
determined separately for each draw. These commitments expire on June 30, 2000.
The Credit Agreement includes commitment fees, payable quarterly in arrears,
ranging from .25% to .375% on the daily average unused amount of the commitment
until the Credit Agreement is terminated. There were no letters of credit
outstanding under the Credit Agreement at December 31, 1997 and 1996. For all
periods through December 31, 1997, no working capital loans had been made to the
Partnership under the Credit Agreement.

11. FAIR VALUE OF FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISKS

   The majority of the Company's accounts receivables are from a major
regulated utility (WEPCO) and the associated credit risk is considered limited.
The carrying amounts of the Partnership's cash and cash equivalents, accounts
receivables, restricted investments, accounts payable and accrued expenses
approximate fair value. The fair value of the Partnership's First Mortgage Bonds
at December 31, 1997, is $16,194,000 higher than the historical carrying value
of $177,000,000. At December 31, 1996, the fair value of the Partnership's First
Mortgage Bonds approximated carrying value.



                                      F-40
<PAGE>   75
 

                       LSP-WHITEWATER LIMITED PARTNERSHIP


                          NOTES TO FINANCIAL STATEMENTS



12. COMMITMENTS AND CONTINGENCIES

CONSTRUCTION

   The Partnership has a $115 million turnkey construction contract (inclusive
of executed change orders) with Westinghouse Electric. Westinghouse Electric had
committed to complete the construction and start-up of the Facility to specified
performance levels by May 31, 1997 and is required under the contract to
reimburse the Partnership for extension fees paid under its Power Purchase
Agreement with WEPCO, and to pay certain liquidated damages in the event of a
delay. During 1997, Westinghouse Electric was required to pay $110,000 and
$4,539,000 of reimbursable extension fees and delay liquidated damages,
respectively. The Partnership has recorded receivables from Westinghouse
Electric of $2,195,000 at December 31, 1997, which is comprised of reimbursable
extension fees of $35,000 and delay liquidated damages of $2,160,000 (see Note
3).

POWER PURCHASE AGREEMENT

    Under and subject to the terms of the Power Purchase Agreement, the Utility
is obligated to purchase the electric capacity made available to it up to 236.5
megawatts and associated energy which the Utility chooses to dispatch from the
Facility beginning on the Commercial Operations Date. Payments by the Utility to
the Partnership under the Power Purchase Agreement consist of capacity payments
and energy payments which fluctuate based upon published indices and/or a fixed
schedule.

    In accordance with the Power Purchase Agreement, the Partnership was
responsible for reimbursing the Utility for the actual increased costs of
capacity and energy acquired to replace the capacity and energy, which were to
be provided by the Facility. The Partnership's obligation to reimburse the
Utility for these "Replacement Power" costs began on June 23, 1997 and continued
through September 17, 1997. The Partnership had an obligation for Replacement
Power costs if the Utility's actual costs of capacity and energy exceeded the
amounts, which would have been paid to the Partnership under the Power Purchase
Agreement. For the period from June 23, 1997 through September 17, 1997, the
Partnership was required to pay the Utility approximately $3,300,000 for
Replacement Power costs. The Partnership has recorded remaining accounts payable
to the Utility of $2,060,000 at December 31, 1997 for Replacement Power in the
accompanying balance sheet.



                                      F-41
<PAGE>   76
 

                       LSP-WHITEWATER LIMITED PARTNERSHIP


                          NOTES TO FINANCIAL STATEMENTS



THERMAL ENERGY SALES

     The Partnership has a thermal energy sales agreement with the Department of
Administration of the State of Wisconsin ("DOA") which provides for the
Partnership to supply the steam requirements of UWW (the "Thermal Energy
Agreement"). The initial term of the agreement runs through June 30, 2005. The
DOA has the option to extend the agreement for up to four extension periods of
four years each. The Thermal Energy Agreement obligates the Partnership to
supply all of UWW's steam requirements up to a maximum of 350 million pounds of
steam annually at a rate not to exceed 100,000 pounds per hour.

GAS SUPPLY

     The Partnership has 20-year gas supply agreements with two fuel suppliers
to provide 100% of the Facility's natural gas requirements. The gas supply
contracts provide for the sale of up to 11,855 MMBtu per day of gas to the
Partnership. The price paid by the Partnership to the fuel suppliers under the
gas supply contracts fluctuate based on published indices.

     Under the gas supply contracts, the Partnership is subject to annual
minimum take requirements which may be satisfied by delivering gas to the
Facility, taking gas into storage or remarketing gas to third parties.

GAS TRANSPORTATION

     The Partnership has entered into various gas transportation agreements
with fuel transportation companies which provide for delivery of gas to the
Facility. The price paid by the Partnership under the gas transportation
contracts fluctuate based upon published indices.

OPERATIONS AND MAINTENANCE

   The Facility is operated and maintained under an operations and
maintenance agreement with Westinghouse Operating Services Company, Inc.
("Westinghouse Services"). Under the terms of the operations and maintenance
agreement, the Partnership is required to pay Westinghouse Services an annual
management fee of $350,000, reimbursement of payroll, fringe benefits,
insurance, and certain subcontractor costs and a bonus based on target plant
performance. If targeted plant performance is not attained, Westinghouse
Services is required to pay a performance penalty to the Partnership. The
management fee is adjusted annually based on certain published indices. The term
of the operations and maintenance agreement extends for an initial period of
seven years (through September, 2004). The Partnership has the option to extend
the term of the agreement for two additional seven-year terms, provided that the
Partnership and Westinghouse Services mutually agree in writing as to the terms
of such extension.

PARTS AGREEMENT

     The Partnership has a spare parts agreement (the "Parts Agreement") with
Westinghouse Electric. Under the terms of the Parts Agreement, Westinghouse
Electric provides (i) certain combustion turbine parts and refurbishment
services, (ii) other spare parts at discounted prices and (iii) other repair
services at direct cost plus a percent mark-up to the Partnership. The
compensation payable to Westinghouse Electric is an annual fee of $977,000
(escalated annually based upon published indices) payable for 12 years.




                                      F-42
<PAGE>   77

                       LSP-WHITEWATER LIMITED PARTNERSHIP


                          NOTES TO FINANCIAL STATEMENTS

GREENHOUSE

   Construction of the Greenhouse was substantially complete on June 2, 1997.
The Partnership has an operational services agreement with Floriculture, Inc.
("Floriculture"), an affiliate of the Partnership, which operates the
Greenhouse for the benefit of the Partnership. Under the terms of the
operational services agreement, Floriculture is required to provide all the
services to produce, market, and sell horticulture products and maintain the
Greenhouse. As compensation for its services Floriculture is reimbursed on a
monthly basis for its approved costs in connection with conducting the
Greenhouse business and operating the Greenhouse, and will receive an annual
management fee equal to 12% of the Partnership's net profit from the operation
of the Greenhouse. The term of the operational services agreement will expire
on May 31, 2002. For the year ended December 31, 1997, Floriculture received
payments pursuant to the operations services agreement of approximately
$669,000. The Partnership has recorded accounts payable to Floriculture of
approximately $197,000 at December 31, 1997.

LITIGATION

   The Partnership experiences routine litigation in the normal course of
business. Management is of the opinion that none of this routine litigation
will have a material adverse effect on the financial position or results of
operations of the Partnership.

13.  DEPENDENCE ON THIRD PARTIES

   The Partnership is highly dependent on a single utility for purchases of
electric generating capacity and energy from its Facility, and a single
operator to perform the operation and maintenance of its Facility. In addition,
the Partnership has contracted with two gas companies to supply the gas
requirements of the Facility, and has contracted with a single interstate gas
transporter to transport gas. Any material breach by any one of these parties
of their respective obligations to the Partnership could affect the ability of
the Partnership to make payments under its First Mortgage Bonds. In addition,
bankruptcy or insolvency of certain other parties or defaults by such parties
relative to their contractual or regulatory obligations could adversely affect
the ability of the Partnership to make payments under its First Mortgage Bonds.
If an agreement were to be terminated due to a breach of such agreement, the
Partnership's ability to enter into a substitute agreement having substantially
equivalent terms and conditions, or with an equally creditworthy third party,
is uncertain.

14.  RELATED PARTY TRANSACTIONS

   The initial costs incurred to develop the Facility, consisting principally
of site acquisition and development costs, engineering fees, legal fees,
permitting costs, interest and LS Power employee and office costs, were
incurred by Granite. At June 30, 1995, the Partnership paid development fees
and reimbursed certain costs totaling approximately $12,160,000 to Granite.
These payments were capitalized and included in construction in process.

   LS Power provided certain management services to the Partnership pursuant to
management services agreements. Under these agreements, LS Power managed the
business affairs of the Partnership during construction and operation of the
Whitewater Project. As compensation for its services, LS Power received a
monthly management fee of $60,000 during construction, and $50,000 during
operation (both in 1995 dollars). These fees were escalated annually beginning
on January 1, 1996 pursuant to the rate of change in a consumer-price related
index. LS Power was also reimbursed for its reasonable and necessary expenses
incurred in performing its services, including salaries of its personnel to the
extent related to services provided under the agreements. Under these
agreements, the Partnership incurred expenses of approximately $1,534,000,
$1,392,000 and $544,000 during the years ended December 31, 1997, 1996 and
1995, respectively. At December 31, 1997 and 1996, the Partnership recorded
accounts payable to LS Power of 



                                      F-43
<PAGE>   78


                       LSP-WHITEWATER LIMITED PARTNERSHIP


                          NOTES TO FINANCIAL STATEMENTS

approximately $235,000 and $53,000, respectively. See Note 16 for discussion of
assignment of the management services agreements which occurred on March 20,
1998.

15.    PARTNERS' CAPITAL

   In 1997, TPC, contributed $20,556,000 of equity for financing the
construction of the Facility. TPC received a limited partner interest in the
Partnership of approximately 26% and equity commitment fees of $350,000.

   Profits, losses and distributions will be allocated based on the respective
partnership interests. Distributions will be made in accordance with the trust
indenture and other financing documents. Such distributions are subject to the
prior satisfaction of a number of conditions including, among others,
maintenance of required funding levels in various Trustee accounts and
compliance with minimum levels of current and projected debt service coverage.

16.    SUBSEQUENT EVENT - CHANGE IN CONTROL

   On March 6, 1998, LS Power and Granite (collectively, the "Sellers")
entered into a Securities Purchase Agreement (the "Securities Purchase
Agreement") with Cogentrix Mid American, Inc. (CMA) and Cogentrix Cottage Grove,
LLC (collectively, the "Purchasers") and Cogentrix Energy, Inc. ("Cogentrix
Energy") which controls each of the Purchasers as wholly-owned indirect
subsidiaries.

   On March 20, 1998, pursuant to the Securities Purchase Agreement, the
Sellers sold all of the Sellers' capital stock of Floriculture, Inc.
("Floriculture") and  LSP-Whitewater I, Inc., as well as all of the Sellers'
limited partnership interest in the Partnership to the Purchasers. As a result,
CMA acquired all of the capital stock of Floriculture, and Cogentrix Whitewater,
LLC, a wholly-owned subsidiary of CMA, acquired all of the capital stock of
LSP-Whitewater I, Inc., the 1% general partner of the Partnership, as well as a
73.17% limited partnership interest in the Partnership for a combined total
ownership interest of 74.17% in the Partnership. 

   On the same date that the indirect subsidiaries of Cogentrix Energy
identified above acquired their ownership interests in the Partnership,
Cogentrix Energy and LS Power entered into an Assignment and Assumption
Agreement, by the terms of which LS Power assigned, and Cogentrix Energy
assumed, all of the rights and obligations of LS Power under certain management
service agreements between LS Power and LSP-Whitewater, Inc. and the
Partnership.



                                      F-44

<PAGE>   79

                          LS POWER FUNDING CORPORATION
                             LSP-COTTAGE GROVE, L.P.
                       LSP-WHITEWATER LIMITED PARTNERSHIP

                                 EXHIBITS INDEX


<TABLE>
<CAPTION>
Exhibit No.                     Description
-----------                     -----------

<S>      <C>                                                                  
*3.1.    -----Certificate of Incorporation of LS Power Funding Corporation.

*3.2.    -----Bylaws of LS Power Funding Corporation.

*3.3.    -----Certificate of Limited Partnership of LSP-Cottage Grove, L.P.

*3.4.    -----Amended and Restated Partnership Agreement dated as of June
                  30, 1995 among LSP-Cottage Grove, Inc., Granite Power
                  Partners, L.P. and TPC Cottage Grove, Inc.

***3.4.1 -----Amendment #1 to the Cottage Grove Partnership Agreement

3.4.2    -----Consent, Waiver and Amendment No. 2 dated March 20, 1998 to the
                  Amended and Restated Limited Partnership Agreement of 
                  LSP-Cottage Grove, L.P.

*3.5.    -----Certificate of Limited Partnership of LSP-Whitewater Limited
                  Partnership.

*3.6.    -----Amended and Restated Partnership Agreement dated as of June
                  30, 1995 among LSP-Whitewater I, Inc., Granite Power Partners,
                  L.P. and TPC Whitewater, Inc.

3.6.1.   -----Consent, Waiver and Amendment No. 1 dated March 20, 1998 to the 
                  Amended and Restated Limited Partnership Agreement of 
                  LSP-Whitewater Limited Partnership

*4.1.    -----Trust Indenture dated as of May 1, 1995 by and among LS Power
                  Funding Corporation and IBJ Schroder Bank & Trust Company, as
                  Trustee, with respect to the Senior Secured Bonds (as
                  supplemented by the First Supplemental Indenture dated as of
                  May 1, 1995 by and among LS Power Funding Corporation and IBJ
                  Schroder Bank & Trust Company, as Trustee).

*4.2.    -----Trust Indenture dated as of May 1, 1995 by and among
                  LSP-Cottage Grove, L.P. and IBJ Schroder Bank & Trust Company,
                  as Trustee, with respect to the Cottage Grove First Mortgage
                  Bonds (as supplemented by the First Supplemental Indenture
                  dated as of May 1, 1995 by and among LSP-Cottage Grove, L.P.
                  and IBJ Schroder Bank & Trust Company, as Trustee).

*4.3.    -----Trust Indenture dated as of May 1, 1995 by and among 
                  LSP-Whitewater Limited Partnership and IBJ Schroder Bank &
                  Trust Company, as Trustee, with respect to the Whitewater
                  First Mortgage Bonds (as supplemented by the First
                  Supplemental Indenture dated as of May 1, 1995 by and among
                  LSP-Whitewater Limited Partnership and IBJ Schroder Bank &
                  Trust Company, as Trustee).

*4.4.    -----Registration Rights Agreement dated as of June 30, 1995 by and 
                  among Chase Securities, Inc., Morgan Stanley & Co.
                  Incorporated, LS Power Funding Corporation, LSP-Cottage Grove,
                  L.P. and LSP-Whitewater Limited Partnership.

*4.5.    -----Form of Senior Secured Bond (included in Exhibit 4.1).

*4.6.    -----Form of Cottage Grove First Mortgage Bond (included in Exhibit 
                  4.2).

*4.7.    -----Form of Whitewater First Mortgage Bond (included in Exhibit 4.3).

</TABLE>




                                      E-1
<PAGE>   80

<TABLE>
<CAPTION>
Exhibit No.                     Description
-----------                     -----------
<S>       <C>                                                                  
LS POWER FUNDING CORPORATION AGREEMENTS

*10.20.   -----Agency Agreement dated May 1, 1995 between LS Power Funding 
                  Corporation and LSP-Cottage Grove, L.P.

*10.21.   -----Agency Agreement dated May 1, 1995 between LS Power Funding 
                  Corporation and LSP-Whitewater Limited Partnership.

*10.22.   -----Security Agreement (related to Cottage Grove) dated as of May 1,
                  1995 between LS Power Funding Corporation and IBJ Schroder
                  Bank & Trust Company, as Trustee.

*10.23.   -----Security Agreement (related to Whitewater) dated as of May 1, 
                  1995 between LS Power Funding Corporation and IBJ Schroder
                  Bank & Trust Company, as Trustee.

LSP-COTTAGE GROVE, L.P. AGREEMENTS

*10.24.   -----Equity Contribution Agreement dated June 30, 1995 among 
                  LSP-Cottage Grove, L.P., TPC Cottage Grove, Inc. and The Chase
                  Manhattan Bank (National Association), as depositary agent.

*10.25.   -----Collateral Agency and Intercreditor Agreement dated as of
                  May 1, 1995 among LSP-Cottage Grove, L.P., the L/C Facility
                  Agent (as defined therein), the Working Capital Agent (as
                  defined therein), each Permitted Counterparty under any
                  Interest Rate Protection Agreement (as defined therein), each
                  Additional Permitted Debt Agent (as defined therein), IBJ
                  Schroder Bank & Trust Company, as trustee, the Other
                  Representatives (as defined therein) and The Chase Manhattan
                  Bank (National Association), as depositary agent, and as
                  collateral agent.

*10.26.   -----Deposit and Disbursement Agreement dated as of May 1, 1995 among
                  LSP-Cottage Grove, L.P. and The Chase Manhattan Bank (National
                  Association), as collateral agent, and as depositary agent.

*10.27.   -----Credit Agreement dated as of May 1, 1995 among LSP-Cottage Grove,
                  L.P., the lenders party thereto and The Chase Manhattan Bank
                  (National Association), as agent.

*10.27.1  -----Instrument of Assignment, Resignation, Appointment, Acceptance 
                  and Designation dated as of December 31, 1995 among The Chase
                  Manhattan Bank (National Association), Dresdner Bank AG, New
                  York and Grand Cayman Branches, and LSP-Cottage Grove, L.P.

*10.27.2  -----Amendment No. 1 to Credit Agreement dated as of December 31, 1995
                  among LSP-Cottage Grove, L.P. and Dresdner Bank AG, New York
                  Branch, as agent.

*10.28.   -----Assignment and Security Agreement dated as of May 1, 1995 between
                  LSP-Cottage Grove, L.P. and The Chase Manhattan Bank (National
                  Association), as collateral agent.

*10.29.   -----Pledge Agreement dated as of May 1, 1995 between LSP-Cottage 
                  Grove, L.P. and IBJ Schroder Bank & Trust Company, as trustee.

*10.30.   -----Mortgage, Assignment of Rents, Security Agreement and Fixture 
                  Filing dated as of May 1, 1995 between LSP-Cottage Grove, L.P.
                  and The Chase Manhattan Bank (National Association), as
                  collateral agent, for the benefit of IBJ Schroder Bank & Trust
                  Company, as trustee.
</TABLE>



                                      E-2
<PAGE>   81


<TABLE>
<CAPTION>
Exhibit No.                     Description
-----------                     -----------
<S>       <C>                                                                  
*10.31.   -----Mortgage, Assignment of Rents, Security Agreement and Fixture 
                  Filing dated as of May 1, 1995 between LSP-Cottage Grove, L.P.
                  and The Chase Manhattan Bank (National Association), as
                  collateral agent, for the benefit of The Chase Manhattan Bank
                  (National Association), as agent under the Credit Agreement.

*10.32.   -----Subordinated Mortgage, Assignment of Rents, Security Assignment 
                  and Fixture Filing dated as of May 1, 1995 by LSP-Cottage
                  Grove, L.P., as mortgagor, and Northern States Power Company,
                  as mortgagee.

*10.33.   -----Subordinated Assignment and Security Agreement dated as of May 1,
                  1995 between LSP-Cottage Grove, L.P. and Northern States Power
                  Company.

*10.34.   -----Power Purchase Agreement dated as of May 9, 1994 between Northern
                  States Power Company and LSP-Cottage Grove, L.P.

*10.35.   -----Letter Agreement dated December 16, 1994 between Northern States 
                  Power Company and LSP-Cottage Grove, L.P.

*10.36.   -----Letter Agreement dated June 1, 1995 between Northern States Power
                  Company and LSP-Cottage Grove, L.P.

*10.37.   -----Letter Agreement dated June 8, 1995 between Northern States Power
                  Company and LSP-Cottage Grove, L.P.

*10.38.   -----Letter Agreement dated June 12, 1995 between Northern States 
                  Power Company and LSP-Cottage Grove, L.P.

*10.39.   -----Assignment dated as of November 23, 1994 between Granite Power 
                  Partners, L.P. and LSP-Cottage Grove, L.P.

**10.40.  -----Second Amended and Restated Turnkey Construction Agreement dated
                  as of April 11, 1995 between Westinghouse Electric Corporation
                  and LSP-Cottage Grove, L.P.

**10.41.  -----Amended and Restated Operation and Maintenance Agreement dated as
                  of April 11, 1995 between Westinghouse Operating Services
                  Company, Inc.  and LSP-Cottage Grove, L.P.

**10.42.  -----Parts Agreement dated as of April 11, 1995 between Westinghouse
                  Electric Corporation and LSP-Cottage Grove, L.P.

*10.43.   -----Management Services Agreement dated as of May 1, 1995 between LS
                  Power Corporation and LSP-Cottage Grove, L.P.

*10.44.   -----Second Amended and Restated Steam Supply Agreement dated as of 
                  June 19, 1995 between the Minnesota Mining and Manufacturing
                  Company and LSP-Cottage Grove, L.P.

*10.45.   -----Purchase and Sale Agreement dated September 30, 1994 between the
                  Minnesota Mining and Manufacturing Company and LSP-Cottage
                  Grove, L.P.

*10.46.   -----Letter Agreement (land and easement) dated September 30, 1994 
                  between the Minnesota Mining and Manufacturing Company and 
                  LSP-Cottage Grove, L.P.
</TABLE>



                                      E-3
<PAGE>   82



<TABLE>
<CAPTION>
Exhibit No.                     Description
-----------                     -----------
<S>       <C>                                                                  
*10.47.   -----Letter Agreement (side letter to steam agreement) dated September
                  30, 1994 between the Minnesota Mining and Manufacturing 
                  Company and LSP-Cottage Grove, L.P.

*10.48.   -----Gas Sales Contract dated as of December 22, 1994 between Natural
                  Gas Clearinghouse and LSP-Cottage Grove, L.P.

*10.49.   -----First Amendment to Gas Sales Contract dated as of April 18, 1995 
                  between Natural Gas Clearinghouse and LSP-Cottage Grove, L.P.

*10.50.   -----Gas Sales Contract dated as of February 16, 1995 among Aquila 
                  Energy Marketing Corporation, UtiliCorp United, Inc. and 
                  LSP-Cottage Grove, L.P.

*10.51.   -----First Amendment to Gas Sales Contract dated as of April 26, 1995
                  among Aquila Energy Marketing Corporation, UtiliCorp United,
                  Inc. and LSP-Cottage Grove, L.P.

*10.52.   -----Amended and Restated Gas Supply Transportation Agreement dated as
                  of May 8, 1995 between Peoples Natural Gas Company and 
                  LSP-Cottage Grove, L.P.

*10.53.   -----Amended and Restated Cottage Grove Letter Agreement dated as of 
                  April 10, 1995 between Northern Natural Gas Company, Peoples
                  Natural Gas Company and LSP-Cottage Grove, L.P.

*10.54.   -----Firm Throughput Service Agreement (Northern Contract #24042) 
                  dated April 25, 1995 between Northern Natural Gas Company and 
                  LSP-Cottage Grove, L.P.

*10.55.   -----Interruptible Throughput Service Agreement (Northern Contract 
                  # 24198) dated April 25, 1995 between Northern Natural Gas 
                  Company and LSP-Cottage Grove, L.P.

*10.56.   -----Interruptible Throughput Service Agreement (Northern Contract 
                  #24199) dated April 25, 1995 between Northern Natural Gas      
                  Company and LSP-Cottage Grove, L.P.

*10.57.   -----Firm Deferred Delivery Service Agreement (Northern Contract 
                  #23281) dated as of April 25, 1995 between Northern Natural 
                  Gas Company and LSP-Cottage Grove, L.P.

*10.58.   -----Interruptible Deferred Delivery Service Agreement (Northern 
                  Contract #24203) dated as of April 25, 1995 between Northern
                  Natural Gas Company and LSP-Cottage Grove, L.P.

*10.59.   -----Letter Agreement dated as of April 21, 1995 between Northern 
                  Natural Gas Company and LSP-Cottage Grove, L.P.

*10.60.   -----Limited Warranty Deed granted by Minnesota Mining and 
                  Manufacturing Company to LSP-Cottage Grove, L.P. dated June 1,
                  1995.

*10.61.   -----Consent and Agreement dated as of May 1, 1995 among Northern 
                  States Power Company, LSP-Cottage Grove, L.P. and The Chase
                  Manhattan Bank (National Association), as collateral agent.

*10.62.   -----Consent and Agreement dated as of May 1, 1995 among Westinghouse
                  Electric Corporation, LSP-Cottage Grove, L.P. and The Chase
                  Manhattan Bank (National Association), as collateral agent.
</TABLE>



                                      E-4
<PAGE>   83



<TABLE>
<CAPTION>
Exhibit No.                     Description
-----------                     -----------
<S>       <C>                                                                  
*10.63.   -----Consent and Agreement dated as of May 1, 1995 among Westinghouse
                  Operating Services Company, Inc., LSP-Cottage Grove, L.P. and
                  The Chase Manhattan Bank (National Association), as collateral
                  agent.

*10.64.   -----Consent and Agreement dated as of May 1, 1995 among Minnesota 
                  Mining and Manufacturing Company, LSP-Cottage Grove, L.P. and
                  The Chase Manhattan Bank (National Association), as collateral
                  agent.

*10.65.   -----Consent and Agreement dated as of May 1, 1995 among Natural Gas
                  Clearinghouse, LSP-Cottage Grove, L.P. and The Chase Manhattan
                  Bank (National Association), as collateral agent.

*10.66.   -----Consent and Agreement dated as of May 1, 1995 among Aquila Energy
                  Marketing Corporation, UtiliCorp United, Inc., LSP-Cottage
                  Grove, L.P. and The Chase Manhattan Bank (National
                  Association), as collateral agent.

*10.67.   -----Consent and Agreement dated as of May 1, 1995 among Northern 
                  Natural Gas Company, Peoples Natural Gas Company, LSP-Cottage
                  Grove, L.P. and The Chase Manhattan Bank (National
                  Association), as collateral agent.

*10.68.   -----Consent and Agreement dated as of May 1, 1995 among Northern 
                  Natural Gas Company, LSP-Cottage Grove, L.P. and The Chase
                  Manhattan Bank (National Association), as collateral agent.

*10.69.   -----Consent and Agreement dated as of May 1, 1995 among Peoples 
                  Natural Gas Company, LSP-Cottage Grove, L.P. and The Chase
                  Manhattan Bank (National Association), as collateral agent.

*10.70.   -----Subordinated Creditor Consent and Agreement dated as of May 1, 
                  1995 among LSP-Cottage Grove, L.P., Northern States Power
                  Company and Westinghouse Electric Corporation.

*10.71.   -----Subordinated Creditor Consent and Agreement dated as of May 1, 
                  1995 among LSP-Cottage Grove, L.P., Northern States Power
                  Company and Westinghouse Operating Services Company, Inc.

*10.72.   -----Subordinated Creditor Consent and Agreement dated as of May 1, 
                  1995 among LSP-Cottage Grove, L.P., Northern States Power
                  Company and Aquila Energy Marketing Corporation.

*10.73.   -----Subordinated Creditor Consent and Agreement dated as of May 1, 
                  1995 among LSP-Cottage Grove, L.P., Northern States Power
                  Company and Natural Gas Clearinghouse.

*10.74.   -----Subordinated Creditor Consent and Agreement dated as of May 1, 
                  1995 among LSP-Cottage Grove, L.P., Northern States Power
                  Company and Northern Natural Gas Company.

*10.75.   -----Subordinated Creditor Consent and Agreement dated as of May 1, 
                  1995 among LSP-Cottage Grove, L.P., Northern States Power
                  Company, Northern Natural Gas Company and Peoples Natural Gas
                  Company.

*10.76.   -----Subordinated Creditor Consent and Agreement dated as of May 1, 
                  1995 among LSP-Cottage Grove, L.P., Northern States Power
                  Company and Peoples Natural Gas Company.
</TABLE>


                                      E-5
<PAGE>   84



<TABLE>
<CAPTION>
Exhibit No.                     Description
-----------                     -----------
<S>       <C>                                                                  
*10.77.   -----Subordinated Creditor Consent and Agreement dated as of May 1, 
                  1995 among LSP-Cottage Grove, L.P., Northern States Power
                  Company and Minnesota Mining and Manufacturing Company.

*10.78.   -----Grants of Easement by Minnesota Mining and Manufacturing Company
                  to LSP-Cottage Grove, L.P., each dated May 30, 1994, for the
                  following: (i) Easterly Utilities, (ii) Westerly Utilities,
                  (iii) New Well, and (iv) Well Lines.

*10.79.   -----Temporary Construction Easement granted by Minnesota Mining and
                  Manufacturing Company to LSP-Cottage Grove, L.P.

*10.80.   -----Easements from Soo Line Railroad Company to LSP-Cottage Grove, 
                  L.P., for Easterly and Westerly Railroad Crossroads, each
                  dated June 27, 1995.

*10.81.   -----Assignments of Rights and Privileges dated June 12, 1995 by and 
                  between Minnesota Mining and Manufacturing Company and
                  LSP-Cottage Grove, L.P.

LSP-WHITEWATER LIMITED PARTNERSHIP AGREEMENTS

*10.82.   -----Equity Contribution Agreement dated as of May 1, 1995 among 
                  LSP-Whitewater Limited Partnership, TPC Whitewater, Inc. and
                  The Chase Manhattan Bank (National Association), as depositary
                  agent.

*10.83.   -----Collateral Agency and Intercreditor Agreement dated as of
                 May 1, 1995 among LSP-Whitewater Limited Partnership, the L/C
                 Facility Agent (as defined therein), the Working Capital Agent
                 (as defined therein), each Permitted Counterparty under any
                 Interest Rate Protection Agreement (as defined therein), each
                 Additional Permitted Debt Agent (as defined therein), IBJ
                 Schroder Bank & Trust Company, as trustee, the Other
                 Representatives (as defined therein) and The Chase Manhattan
                 Bank (National Association), as depositary agent, and as
                 collateral agent.

*10.84.   -----Deposit and Disbursement Agreement dated as of May 1, 1995
                 among LSP-Whitewater Limited Partnership and The Chase
                 Manhattan Bank (National Association), as collateral agent, and
                 as depositary agent.

*10.85.   -----Credit Agreement dated as of May 1, 1995 among LSP-Whitewater 
                  Limited Partnership, the lenders party thereto and The Chase
                  Manhattan Bank (National Association), as agent.

*10.85.1  -----Instrument of Assignment, Resignation, Appointment, Acceptance 
                  and Designation dated as of December 31, 1995 among The Chase
                  Manhattan Bank (National Association), Dresdner Bank AG, New
                  York and Grand Cayman Branches, and LSP-Whitewater Limited
                  Partnership

*10.85.2  -----Amendment No. 1 to Credit Agreement dated as of December 31, 1995
                  among LSP-Whitewater Limited Partnership and Dresdner Bank AG,
                  New York Branch, as agent.

*10.86.   -----Assignment and Security Agreement dated as of May 1, 1995
                 between LSP-Whitewater Limited Partnership and The Chase
                 Manhattan Bank (National Association), as collateral agent.

*10.87.   -----Pledge Agreement dated as of May 1, 1995 between LSP-Whitewater 
                  Limited Partnership and IBJ Schroder Bank & Trust Company, as
                  trustee.
</TABLE>




                                      E-6
<PAGE>   85

<TABLE>
<CAPTION>
Exhibit No.                     Description
-----------                     -----------
<S>       <C>                                                                  
*10.88.   -----Mortgage, Assignment of Rents, Security Agreement and Fixture 
                  Filing dated as of May 1, 1995 between LSP-Whitewater Limited
                  Partnership and The Chase Manhattan Bank (National
                  Association), as collateral agent, for the benefit of IBJ
                  Schroder Bank & Trust Company, as trustee.

*10.89.   -----Mortgage, Assignment of Rents, Security Agreement and Fixture 
                  Filing dated as of May 1, 1995 between LSP-Whitewater Limited
                  Partnership and The Chase Manhattan Bank (National
                  Association), as collateral agent, for the benefit of the
                  Chase Manhattan Bank (National Association), as agent under
                  the Credit Agreement.

*10.90.   -----Subordinated Mortgage, Assignment of Rents, Security Assignment 
                  and Fixture Filing dated as of May 1, 1995 by LSP-Whitewater
                  Limited Partnership, as mortgagor, and Wisconsin Electric
                  Power Company, as mortgagee.

*10.91.   -----Subordinated Assignment and Security Agreement dated as of May 1,
                  1995 between LSP-Whitewater Limited Partnership and Wisconsin
                  Electric Power Company.

*10.92.   -----Development Agreement dated as of November 23, 1994 between City 
                  of Whitewater and LSP-Whitewater Limited Partnership.

*10.93.   -----Power Purchase Agreement dated as of December 21, 1993 between 
                  Wisconsin Electric Power Company and LSP-Whitewater Limited
                  Partnership.

*10.94.   -----Amendment to Power Purchase Agreement dated as of February 10, 
                  1994 between Wisconsin Electric Power Company and
                  LSP-Whitewater Limited Partnership.

*10.95.   -----Second Amendment to Power Purchase Agreement dated as of October 
                  5, 1994 between Wisconsin Electric Power Company and
                  LSP-Whitewater Limited Partnership.

*10.96.   -----Third Amendment to Power Purchase Agreement dated as of May 5, 
                  1995 between Wisconsin Electric Power Company and
                  LSP-Whitewater Limited Partnership.

****10.96.1----Fourth Amendment to Power Purchase Agreement dated March 18, 1997
                  between Wisconsin Electric Power Company and LSP-Whitewater
                  Limited Partnership.

10.96.2    ----Fifth Amendment to Power Purchase Agreement dated February 26, 
                  1998 between Wisconsin Electric Power Company and
                  LSP-Whitewater Limited Partnership.

*10.97.   -----Interconnection Agreement dated as of May 12, 1995 between 
                  Wisconsin Electric Power Company and LSP-Whitewater Limited
                  Partnership.

10.98.    -----Intentionally Omitted.

*10.99.   -----Assignment dated as of November 23, 1994 between Granite Power 
                  Partners, L.P. and LSP-Whitewater Limited Partnership.

**10.100  -----Second Amended and Restated Turnkey Construction Agreement
                 dated as of April 11, 1995 between Westinghouse Electric
                 Corporation and LSP-Whitewater Limited Partnership.

**10.101.-----Amended and Restated Operation and Maintenance Agreement dated as 
                  of April 11, 1995 between Westinghouse Operating Services
                  Company, Inc. and LSP-Whitewater Limited Partnership.

**10.102.-----Parts Agreement dated as of April 10, 1995 between Westinghouse
                  Electric Corporation and LSP-Whitewater Limited Partnership.

*10.103.  -----Management Services Agreement dated as of May 1, 1995 between LS 
                  Power Corporation and LSP-Whitewater Limited Partnership.
</TABLE>


                                      E-7
<PAGE>   86

<TABLE>
<CAPTION>
Exhibit No.                     Description
-----------                     -----------
<S>       <C>                                                                  
*10.104.  -----Steam Supply Agreement dated as of July 25, 1994 between the 
                  Department of Administration of the State of Wisconsin and
                  LSP-Whitewater Limited Partnership.

*10.105.  -----Greenhouse Hot Water Supply Agreement dated as of May 1, 1995 
                  between Dominion Growers/Whitewater, L.C. and LSP-Whitewater
                  Limited Partnership.

*10.106.  -----Construction Contract dated as of May 1, 1995 between Dominion 
                  Growers/Whitewater, L.C. and LSP-Whitewater Limited
                  Partnership.

*****10.106.1--Addendum to Construction Contract dated as of June 6, 1997 
                  between Dominion Growers/Whitewater, L.C. and LSP-Whitewater
                  Limited Partnership.

*10.107.  -----Deed of Lease dated as of May 1, 1995 between Dominion 
                  Growers/Whitewater, L.C. and LSP-Whitewater Limited
                  Partnership.

*****10.107.1--Settlement Agreement dated as of May 27, 1997 between Dominion 
                  Growers/Whitewater, L.C. and LSP- Whitewater Limited
                  Partnership.

*****10.107.2--Greenhouse Operational Services Agreement dated as of May 27, 
                  1997 between FloriCulture, Inc. and LSP-Whitewater Limited
                  Partnership.

*10.108.  -----Letter Agreement dated May 12, 1995 between Dominion Growers, 
                  Inc.  and LSP-Whitewater Limited Partnership.

*10.109.  -----Gas Sales Contract dated as of December 22, 1994 between Natural
                  Gas Clearinghouse and LSP-Whitewater Limited Partnership.

*10.110.  -----First Amendment to Gas Sales Contract dated as of April 18, 1995 
                  between Natural Gas Clearinghouse and LSP-Whitewater Limited
                  Partnership.

*10.111.  -----Gas Sales Contract dated as of February 16, 1995 among Aquila 
                  Energy Marketing Corporation, UtiliCorp United, Inc. and
                  LSP-Whitewater Limited Partnership.

*10.112.  -----First Amendment to Gas Sales Contract dated as of April 26, 1995 
                  among Aquila Energy Marketing Corporation, UtiliCorp United,
                  Inc. and LSP-Whitewater Limited Partnership.

*10.113.  -----Letter Agreement dated April 21, 1995 between Northern Natural 
                  Gas Company and LSP-Whitewater Limited Partnership.

*10.114.  -----Amended and Restated Letter Agreement dated as of April 10, 1995 
                  between Northern Natural Gas Company and LSP-Whitewater
                  Limited Partnership.

*10.115.  -----Gas Transportation Agreement dated March 9, 1995 between 
                  Wisconsin Natural Gas Company and LSP-Whitewater Limited
                  Partnership.

*10.116.  -----Capacity Release and Gas Sales Agreement dated as of April 27, 
                  1995 between Wisconsin Power and Light Company and
                  LSP-Whitewater Limited Partnership.

*10.117.  -----First Amendment to Capacity Release and Gas Sales Agreement dated
                  as of June 2, 1995 between Wisconsin Power and Light Company
                  and LSP-Whitewater Limited Partnership.

*10.118.  -----Firm Throughput Service Agreement (Northern Contract #23479) 
                  dated April 25, 1995 between Northern Natural Gas Company and
                  LSP-Whitewater Limited Partnership.

*10.119.  -----Interruptible Throughput Service Agreement (Northern Contract 
                  #24200) dated April 25, 1995 between Northern Natural Gas
                  Company and LSP-Whitewater Limited Partnership.
</TABLE>



                                      E-8
<PAGE>   87



<TABLE>
<CAPTION>
Exhibit No.                     Description
-----------                     -----------
<S>       <C>                                                                  
*10.120.  -----Interruptible Throughput Service Agreement (Northern Contract
                  #24201) dated April 25, 1995 between Northern Natural Gas
                  Company and LSP-Whitewater Limited Partnership.

*10.121.  -----Firm Deferred Delivery Service Agreement (Northern Contract 
                  #23282) dated as of April 25, 1995 between Northern Natural
                  Gas Company and LSP-Whitewater Limited Partnership.

*10.122.  -----Interruptible Deferred Delivery Service Agreement (Northern 
                  Contract #24202) dated as of April 25, 1995 between Northern
                  Natural Gas Company and LSP-Whitewater Limited Partnership.

*10.123.  -----Consent and Agreement dated as of May 1, 1995 between City
                 of Whitewater, LSP-Whitewater Limited Partnership and The Chase
                 Manhattan Bank (National Association), as collateral agent.

*10.124.  -----Consent and Agreement dated as of May 1, 1995 among Wisconsin 
                  Electric Power Company, LSP-Whitewater Limited Partnership and
                  The Chase Manhattan Bank (National Association), as collateral
                  agent.

*10.125.  -----Consent and Agreement dated as of May 1, 1995 among Westinghouse 
                  Electric Corporation, LSP-Whitewater Limited Partnership and
                  The Chase Manhattan Bank (National Association), as collateral
                  agent.

*10.126.  -----Consent and Agreement dated as of May 1, 1995 among Westinghouse
                  Operating Services Company, Inc., LSP-Whitewater Limited
                  Partnership and The Chase Manhattan Bank (National
                  Association), as collateral agent.

*10.127.  -----Consent and Agreement dated as of May 1, 1995 among State
                 of Wisconsin, acting through the Department of Administration,
                 LSP-Whitewater Limited Partnership and The Chase Manhattan Bank
                 (National Association), as collateral agent.

*10.128.  -----Consent and Agreement dated as of May 1, 1995 between
                 Dominion Growers/Whitewater, L.C., LSP-Whitewater Limited
                 Partnership and The Chase Manhattan Bank (National
                 Association), as collateral agent.

*10.129.  -----Consent and Agreement dated as of May 1, 1995 among Natural Gas 
                  Clearinghouse, LSP-Whitewater Limited Partnership and The
                  Chase Manhattan Bank (National Association), as collateral
                  agent.

*10.130.  -----Consent and Agreement dated as of May 1, 1995 among Aquila
                 Energy Marketing Corporation, UtiliCorp United, Inc.,
                 LSP-Whitewater Limited Partnership and The Chase Manhattan Bank
                 (National Association), as collateral agent.

*10.131.  -----Consent and Agreement dated as of May 1, 1995 among Wisconsin 
                  Natural Gas Company, LSP-Whitewater Limited Partnership and
                  The Chase Manhattan Bank (National Association), as collateral
                  agent.

*10.132.  -----Consent and Agreement dated as of May 1, 1995 among Northern 
                  Natural Gas Company, LSP-Whitewater Limited Partnership and
                  The Chase Manhattan Bank (National Association), as collateral
                  agent.

*10.133.  -----Subordinated Creditor Consent and Agreement dated as of May 1, 
                  1995 among LSP-Whitewater Limited Partnership, Wisconsin
                  Electric Power Company and Westinghouse Electric Corporation.
</TABLE>



                                      E-9
<PAGE>   88


<TABLE>
<CAPTION>
Exhibit No.                     Description
-----------                     -----------
<S>       <C>                                                                  
*10.134.  -----Subordinated Creditor Consent and Agreement dated as of May 1, 
                  1995 among LSP-Whitewater Limited Partnership, Wisconsin
                  Electric Power Company and Westinghouse Operating Services
                  Company, Inc.

*10.135.  -----Subordinated Creditor Consent and Agreement dated as of May 1, 
                  1995 among LSP-Whitewater Limited Partnership, Wisconsin
                  Electric Power Company and Aquila Energy Marketing
                  Corporation.

*10.136.  -----Subordinated Creditor Consent and Agreement dated as of May 1, 
                  1995 among LSP-Whitewater Limited Partnership, Wisconsin
                  Electric Power Company and Natural Gas Clearinghouse.

*10.137.  -----Subordinated Creditor Consent and Agreement dated as of May 1, 
                  1995 among LSP-Whitewater Limited Partnership, Wisconsin
                  Electric Power Company and Northern Natural Gas Company.

*10.138.  -----Easement dated May 11, 1995 granted by the University of 
                  Wisconsin-Whitewater to LSP-Whitewater Limited Partnership.

*10.139.  -----Easement dated March 22, 1995 granted by the City of Whitewater 
                  to LSP-Whitewater Limited Partnership.

*10.140.  -----Easement dated March 22, 1995 granted by the City of Whitewater 
                  to LSP-Whitewater Limited Partnership.

*10.141.  -----Easement dated March 22, 1995 granted by the City of Whitewater 
                  to LSP-Whitewater Limited Partnership.

*10.142.  -----Easement dated March 22, 1995 granted by the City of Whitewater 
                  to LSP-Whitewater Limited Partnership.

*10.143.  -----Easement dated June 2, 1995 granted by Joe C. Pattermann and 
                  June M. Pattermann to LSP-Whitewater Limited Partnership.

*10.144.  -----Easement dated September 10, 1994 granted by Joe C. Pattermann 
                  and June M. Pattermann to LSP-Whitewater Limited Partnership.

*10.145.  -----Easement dated May 25, 1995 granted by John P. Hill and Rosalee 
                  K. Hill to LSP-Whitewater Limited Partnership.

*10.146.  -----Easement dated June 1, 1994 granted by Mark D. Hoffmann to 
                  LSP-Whitewater Limited Partnership.

*10.147.  -----Easement dated May 31, 1995 granted by Daniel L. Schwertfeger and
                  Jeanne M. Schwertfeger to LSP-Whitewater Limited Partnership.

*10.148.  -----Easement dated June 2, 1995 granted by Jerry C. Kollwelter and 
                  Donna L. Kollwelter to LSP-Whitewater Limited Partnership.

*10.149.  -----Easement dated June 1, 1995 granted by Lowell C. Hagen and Thu T.
                  Hagen to LSP-Whitewater Limited Partnership.

*10.150.  -----Easement dated June 1, 1995 granted by Dean A. Cox and Maybell 
                  Cox to LSP-Whitewater Limited Partnership.
</TABLE>



                                      E-10
<PAGE>   89


<TABLE>
<CAPTION>
Exhibit No.                     Description
-----------                     -----------
<S>       <C>                                                                  
*10.151.  -----Easement dated June 5, 1995 granted by John's Disposal Service, 
                  Inc. to LSP-Whitewater Limited Partnership.

*10.152.  -----Easement dated June 12, 1995 granted by Greg Lurvey and Mark 
                  Lurvey to LSP-Whitewater Limited Partnership.

*10.153.  -----Easement dated October 24, 1994 granted by Perry Moyer and 
                  Dorothy Moyer to LSP-Whitewater Limited Partnership.

*10.154.  -----Easement dated October 24, 1994 granted by Perry Moyer and 
                  Dorothy Moyer to LSP-Whitewater Limited Partnership.

*10.155.  -----Easement dated May 30, 1995 granted by Perry Moyer and Dorothy 
                  Moyer to LSP-Whitewater Limited Partnership.

*10.156.  -----Easement dated May 30, 1995 granted by Perry Moyer and Dorothy 
                  Moyer to LSP-Whitewater Limited Partnership.

*10.157.  -----Easement dated June 5, 1995 granted by Robert J. Wagner to 
                  LSP-Whitewater Limited Partnership.

*10.158.  -----Easement dated June 5, 1995 granted by Robert J. Wagner to 
                  LSP-Whitewater Limited Partnership.

GRANITE POWER PARTNERS, L.P. AGREEMENTS

*10.159.  -----Pledge Agreement dated as of May 1, 1995 between Granite Power 
                  Partners, L.P. and The Chase Manhattan Bank (National
                  Association), as collateral agent.

*10.160.  -----Pledge Agreement dated as of May 1, 1995 between Granite Power 
                  Partners, L.P. and The Chase Manhattan Bank (National
                  Association), as collateral agent.

*10.161.  -----Assignment dated as of November 23, 1994 between Granite Power 
                  Partners, L.P. and LSP-Cottage Grove, L.P.

*10.162.  -----Assignment dated as of November 23, 1994 between Granite Power 
                  Partners L.P. and LSP-Whitewater Limited Partnership.

*10.163.  -----Acknowledgment and Consent dated June 30, 1995 among Wisconsin
                  Electric Power Company, LSP-Whitewater I, Inc., Granite Power
                  Partners, L.P. and TPC Whitewater, Inc.

*10.164.  -----Amendment to Participation Agreement dated as of June 29, 1995 
                  between Tomen Power Corporation and Granite Power Partners, 
                  L.P.

LSP-COTTAGE GROVE, INC. AGREEMENTS

*10.165.  -----Security Agreement dated as of May 1, 1995 between LSP-Cottage 
                  Grove, Inc. and The Chase Manhattan Bank (National
                  Association), as collateral agent.

*10.166.  -----Management Services Agreement dated as of May 1, 1995 between LS
                  Power Corporation and LSP-Cottage Grove, Inc.
</TABLE>



                                      E-11
<PAGE>   90


<TABLE>
<CAPTION>
Exhibit No.                     Description
-----------                     -----------
<S>       <C>                                                                  
LSP-WHITEWATER I, INC.  AGREEMENTS

*10.167.  -----Security Agreement dated as of May 1, 1995 between LSP-Whitewater
                  I, Inc. and The Chase Manhattan Bank (National Association),
                  as collateral agent.

*10.168.  -----Management Services Agreement dated as of May 1, 1995 between LS
                  Power Corporation and LSP-Whitewater I, Inc.

*10.169.  -----Acknowledgment and Consent dated June 30, 1995 among Wisconsin 
                  Electric Power Company, LSP-Whitewater I, Inc., Granite Power
                  Partners, L.P. and TPC Whitewater, Inc.

LS POWER CORPORATION AGREEMENTS

*10.170.  -----Amended and Restated Limited Partnership Agreement of Granite 
                  Power Partners, L.P. dated January 16, 1992 among LS Power
                  Corporation, Chase Manhattan Capital Corporation and Joseph
                  Cogen.

*10.171.  -----First Amendment to Amended and Restated Limited Partnership 
                  Agreement of Granite Power Partners, L.P. dated December 30,
                  1993 among LS Power Corporation, Chase Manhattan Capital
                  Corporation and Joseph Cogen.

CHANGE IN CONTROL EVENT AGREEMENTS

 10.172   -----Assignment and Assumption Agreement dated as of March 20, 1998
                  between Cogentrix Energy, Inc. and LS Power Corporation.

 10.173   -----Pledge Agreement dated March 20, 1998 between Cogentrix Cottage
                  Grove LLC and The Chase Manhattan Bank as Collateral Agent.
 
 10.174   -----Pledge Agreement dated March 20, 1998 between Cogentrix
                  Whitewater LLC and The Chase Manhattan Bank as Collateral 
                  Agent.

 27.1     -----Financial Data Schedule - LS Power Funding Corporation.

 27.2     -----Financial Data Schedule - LSP-Cottage Grove, L.P.

 27.3     -----Financial Data Schedule - LSP-Whitewater Limited Partnership.

---------------------
*        Incorporated herein by reference from the Registration Statement on
         Form S-4, File No. 33-95928 filed with the Securities and Exchange
         Commission by LS Power Funding Corporation, LSP-Cottage Grove, L.P. and
         LSP-Whitewater Limited Partnership on August 16, 1995, as amended, or
         from the Annual Report on Form 10-K for the fiscal year ended December
         31, 1995, filed with the Securities and Exchange Commission by LS Power
         Funding Corporation, LSP-Cottage Grove, L.P. and LSP-Whitewater Limited
         Partnership.

**       In addition to the note for "*" above, confidential treatment has been
         granted for certain portions of the noted document.

***      Incorporated herein by reference form the Quarterly Report on Form 10-Q
         for the quarterly period ended June 30, 1996, File No. 33-95928 filed
         with the Securities and Exchange Commission by the Registrants.

****     Incorporated herein by reference from the Quarterly Report on Form 10-Q
         for the quarterly period ended March 31, 1997, file No. 33-95928 filed
         with the Securities and Exchange Commission by the Registrants.

*****    Incorporated herein by reference from the Quarterly Report on Form 10-Q
         for the quarterly period ended June 30, 1997, File No. 33-95928 filed
         with the Securities and Exchange Commission by the Registrants.
</TABLE>




















                                      E-12