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SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 2004 Commission File Number 33-82034 INDIANTOWN COGENERATION, L.P.  Delaware
    
    52-1722490(State or other jurisdiction of
    
    (I.R.S. Employer Identification Number)incorporation or organization)
 INDIANTOWN COGENERATION FUNDING CORPORATION  Delaware
    
    52-1889595(State or other jurisdiction of
    
    (I.R.S. Employer Identification Number)incorporation or organization)
 7600 Wisconsin AvenueBethesda, Maryland 20814-6161
(Co-registrants address of principal executive offices) (301)-280-6800
(Co-registrants telephone number, including area code) Indicate by check mark whether the co-registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
co-registrants were required to file such reports), and (2) have been subject
to such filing requirements for the past 90 days. [ X ] Yes    [ ] No Indicate by check mark whether the co-registrants are accelerated filers (as
defined in Rule 12b-2 of the Exchange Act) [ ] Yes    [X] No As of November 10, 2004, there were 100 shares of common stock of Indiantown
Cogeneration Funding Corporation, $1 par value, outstanding.




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Indiantown Cogeneration, L.P.
Indiantown Cogeneration Funding Corporation Page No.PART I FINANCIAL INFORMATIONItem 1 Financial Statements:Condensed Consolidated Balance Sheets as of September 30, 2004 (Unaudited) and December 31, 2003
    
    
    1Consolidated Statements of Operations for the Three Months and Nine Months Ended September 30, 2004 (Unaudited) and September 30, 2003 (Unaudited)
    
    
    3Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2004 (Unaudited) and September 30, 2003 (Unaudited)
    
    
    4Notes to Consolidated Financial Statements (Unaudited)
    
    
    5Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    9Item 3 Quantitative and Qualitative Disclosures About Market Risk
    
    
    20Item 4 Controls and Procedures
    
    
    21PART II OTHER INFORMATIONItem 5 Other Information
    
    
    22Item 6 Exhibits
    
    
    22Signatures
    
    
    23




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PART I
FINANCIAL INFORMATION Indiantown Cogeneration, L.P. and Subsidiary
Condensed Consolidated Balance Sheets
(in thousands) September 30,
    
    December 31,ASSETS
    
    2004
    
    2003(Unaudited)CURRENT ASSETS:Cash and cash equivalents
    
    $
    908
    
    
    $
    1,517Accounts receivable-trade
    
    
    15,934
    
    
    
    16,104Inventories
    
    
    949
    
    
    
    793Prepaids
    
    
    995
    
    
    
    1,088Investments held by trustee, including
restricted funds of $22,235 and
$5,557, respectively
    
    
    33,325
    
    
    
    8,107Total current assets
    
    
    52,111
    
    
    
    27,609INVESTMENTS HELD BY TRUSTEE,
restricted funds
    
    
    12,509
    
    
    
    16,501DEPOSITS
    
    
    255
    
    
    
    243NET PROPERTY, PLANT & EQUIPMENT
    
    
    573,642
    
    
    
    584,828FUEL RESERVE
    
    
    1,021
    
    
    
    1,991DEFERRED FINANCING COSTS, net of
accumulated amortization of $49,972 and
$48,353, respectively
    
    
    12,444
    
    
    
    14,063Total assets
    
    $
    651,982
    
    
    $
    645,235
 The accompanying notes are an integral part of these consolidated financial statements. 1




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Indiantown Cogeneration, L. P. and Subsidiary
Condensed Consolidated Balance Sheets
(in thousands) September 30,
    
    December 31,LIABILITIES AND PARTNERS CAPITAL
    
    2004
    
    2003(Unaudited)CURRENT LIABILITIES:Accounts payable and accrued liabilities
    
    $
    8,174
    
    
    $
    9,407Accounts payable and accrued liabilities to related
parties (Note 4)
    
    
    1,324
    
    
    
    1,809Accrued interest
    
    
    14,463
    
    
    
    2,218Current
portion - First Mortgage Bonds
    
    
    16,521
    
    
    
    16,785Current portion lease payable  railcars
    
    
    435
    
    
    
    412Total current liabilities
    
    
    40,917
    
    
    
    30,631LONG TERM DEBT:First Mortgage Bonds
    
    
    392,628
    
    
    
    400,757Tax Exempt Facility Revenue Bonds
    
    
    125,010
    
    
    
    125,010Lease payable  railcars
    
    
    2,463
    
    
    
    2,792Total long term debt
    
    
    520,101
    
    
    
    528,559ASSET RETIREMENT OBLIGATION
    
    
    98
    
    
    
    92Total liabilities
    
    
    561,116
    
    
    
    559,282PARTNERS CAPITAL:General Partners:Palm Power Corporation
    
    
    9,087
    
    
    
    8,595Indiantown Project Investment Partnership
    
    
    18,128
    
    
    
    17,147Limited Partners:Toyan Enterprises
    
    
    27,305
    
    
    
    25,829Thaleia, LLC
    
    
    36,346
    
    
    
    34,382Total partners capital
    
    
    90,866
    
    
    
    85,953Total liabilities and partners capital
    
    $
    651,982
    
    
    $
    645,235
 The accompanying notes are an integral part of these consolidated financial statements. 2




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Indiantown Cogeneration, L.P. and Subsidiary
Consolidated Statements of Operations
(in thousands) Three Months Ended
    
    Three Months Ended
    
    Nine Months Ended
    
    Nine Months EndedSeptember 30, 2004
    
    September 30, 2003
    
    September 30, 2004
    
    September 30, 2003(Unaudited)
    
    (Unaudited)
    
    (Unaudited)
    
    (Unaudited)Operating Revenues:Electric capacity and capacity
bonus revenue
    
    $
    31,415
    
    
    $
    31,347
    
    
    $
    94,215
    
    
    $
    93,823Electric energy revenue
    
    
    13,703
    
    
    
    16,437
    
    
    
    42,115
    
    
    
    43,462Steam revenue
    
    
    68
    
    
    
    61
    
    
    
    232
    
    
    
    192Total operating revenues
    
    
    45,186
    
    
    
    47,845
    
    
    
    136,562
    
    
    
    137,477Cost of Sales:Fuel and ash
    
    
    15,672
    
    
    
    17,546
    
    
    
    49,182
    
    
    
    52,263Operating and maintenance
    
    
    4,062
    
    
    
    4,345
    
    
    
    14,913
    
    
    
    15,774Depreciation
    
    
    3,800
    
    
    
    3,801
    
    
    
    11,415
    
    
    
    11,395Loss on sale of assets
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    Total cost of sales
    
    
    23,534
    
    
    
    25,692
    
    
    
    75,517
    
    
    
    79,432Gross Profit
    
    
    21,652
    
    
    
    22,153
    
    
    
    61,045
    
    
    
    58,045Other Operating Expenses:General and administrative
    
    
    912
    
    
    
    885
    
    
    
    2,353
    
    
    
    2,955Insurance and taxes
    
    
    1,705
    
    
    
    1,603
    
    
    
    5,086
    
    
    
    5,010Total other operating expenses
    
    
    2,617
    
    
    
    2,488
    
    
    
    7,439
    
    
    
    7,965Operating Income
    
    
    19,035
    
    
    
    19,665
    
    
    
    53,606
    
    
    
    50,080Non-Operating Income (Expense):Interest expense
    
    
    (13,163
    )
    
    
    (13,495
    )
    
    
    (39,802
    )
    
    
    (40,828
    )Interest/other income
    
    
    272
    
    
    
    270
    
    
    
    808
    
    
    
    811Net non-operating expense
    
    
    (12,891
    )
    
    
    (13,225
    )
    
    
    (38,994
    )
    
    
    (40,017
    )Income Before Cumulative Effect of Change
in Accounting Principle
    
    
    6,144
    
    
    
    6,440
    
    
    
    14,612
    
    
    
    10,063Cumulative Effect of Change in Accounting
Principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (49
    )Net Income
    
    $
    6,144
    
    
    $
    6,440
    
    
    $
    14,612
    
    
    $
    10,014
 The accompanying notes are an integral part of these consolidated financial statements. 3




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Indiantown Cogeneration, L.P. and SubsidiaryConsolidated Statements of Cash Flows
(in thousands)  Nine Months
    
    Nine MonthsEnded
    
    EndedSeptember 30,
    
    September 30,2004
    
    2003(Unaudited)
    
    (Unaudited)CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    14,612
    
    
    $
    10,014Adjustments to reconcile net income to net
cash provided by operating activities:Cumulative effect of a change in accounting
principle
    
    
    
    
    
    
    49Depreciation, amortization and accretion
    
    
    13,041
    
    
    
    12,716Loss on disposal of assets
    
    
    7
    
    
    
    Decrease (increase) in accounts receivable
    
    
    170
    
    
    
    (2,348
    )Decrease (increase) in inventories and fuel reserves
    
    
    813
    
    
    
    (1,588
    )Decrease (increase) in deposits and prepaids
    
    
    93
    
    
    
    (392
    )Increase in accounts payable, accrued liabilities
and accrued interest
    
    
    10,526
    
    
    
    14,667Net cash provided by operating activities
    
    
    39,262
    
    
    
    33,118CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of property, plant & equipment
    
    
    (255
    )
    
    
    (36
    )Proceeds from sale of assets
    
    
    9
    
    
    
    Increase in investment held by trustee
    
    
    (21,226
    )
    
    
    (24,770
    )Net cash used in investing activities
    
    
    (21,472
    )
    
    
    (24,806
    )CASH FLOWS FROM FINANCING ACTIVITIES:Payment on capital lease obligation  railcars
    
    
    (306
    )
    
    
    (285
    )Repayment under letter of credit agreement
    
    
    
    
    
    
    (703
    )Payment of First Mortgage Bonds
    
    
    (8,393
    )
    
    
    (7,282
    )Cash distributions
    
    
    (9,700
    )
    
    
    Net cash used in financing activities
    
    
    (18,399
    )
    
    
    (8,270
    )CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    (609
    )
    
    
    42CASH and CASH EQUIVALENTS, beginning of year
    
    
    1,517
    
    
    
    290CASH and CASH EQUIVALENTS, end of period
    
    $
    908
    
    
    $
    332
 The accompanying notes are an integral part of these consolidated financial statements. 4




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Indiantown Cogeneration, L.P. and Subsidiary
Notes to Consolidated Financial Statements
As of September 30, 2004
(Unaudited) 1. ORGANIZATION AND BASIS OF PRESENTATION: Indiantown Cogeneration, L.P. (the Partnership) is a special purpose Delaware
limited partnership formed on October 4, 1991. The Partnership was formed to
develop, construct, own and operate an approximately 330 megawatt (net)
pulverized coal-fired cogeneration facility (the Facility) located on an
approximately 240-acre site in southwestern Martin County, Florida. The
Facility produces electricity for sale to Florida Power & Light Company (FPL)
under a Power Purchase Agreement (PPA) and supplies steam to Louis Dreyfus
Citrus, Inc. (LDC), successor to Caulkins Indiantown Citrus Co., under an
Energy Services Agreement (ESA). In July 1994, the Partnership formed a
wholly owned subsidiary, Indiantown Cogeneration Funding Corporation, solely
for the purpose of issuing debt securities in connection with the financing of
the Facility. The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-Q and do not include all the
information and notes required by accounting principles generally accepted in
the United States for complete statements. Management believes that the
accompanying unaudited consolidated financial statements, which have been
prepared in accordance with interim reporting requirements, reflect all
adjustments that are necessary to present a fair statement of the consolidated
financial position and results of operations for the interim periods for
Indiantown Cogeneration, L.P. and Indiantown Cogeneration Funding Corporation.
All material adjustments are of a normal recurring nature unless otherwise
disclosed in this report on Form 10-Q. Results of operations for interim
periods are not necessarily indicative of results to be expected for a full
year. This quarterly report should be read in conjunction with the Partnerships
consolidated financial statements and notes to consolidated financial
statements included in its December 31, 2003 Annual Report on Form 10-K filed
with the Securities and Exchange Commission (SEC). 2. RELATIONSHIP WITH NATIONAL ENERGY & GAS TRANSMISSION, INC.
(NEGT): The Partnership is managed by Power Services Company (PSC, formerly known as
PG&E National Energy Group Company), pursuant to a Management Services
Agreement (the MSA). The Facility is operated by U.S. Operating Services
Company (OSC, formerly known as PG&E Operating Services Company),pursuant to
an Operation and Maintenance Agreement (the O&M Agreement). PSC and OSC are
general partnerships indirectly wholly owned by NEGT. Prior to October 29,
2004, NEGT was an indirect subsidiary of PG&E Corporation. 5




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On July 8, 2003, NEGT and certain subsidiaries voluntarily filed petitions for
relief under the provisions of Chapter 11 of the U.S. Bankruptcy Code
(collectively, the NEGT Bankruptcy) in
the Greenbelt Division of the United States Bankruptcy Court for the District
of Maryland (the Bankruptcy Court). Neither the Partnership nor any of its NEGT affiliated partners, including
Toyan Enterprises (Toyan) and Indiantown Project Investment, L.P. (IPILP),
or PSC and OSC, were parties to the filings by NEGT or other affiliates for
protection under the NEGT Bankruptcy. The NEGT Bankruptcy did not result in an
event of default under the principal project contracts or the principal
financing documents of the Facility. On February 26, 2004, NEGT filed with the Bankruptcy Court its Third Amended
Plan of Reorganization and the related Disclosure Statement. A Modified Third
Amended Plan of Reorganization (POR) was confirmed by order of the Bankruptcy
Court on May 3, 2004. The POR contemplated that NEGT would retain and continue
to operate its power generation and pipeline businesses unless they were sold.
On October 29, 2004, the POR became effective, and NEGT emerged from
bankruptcy. Pursuant to the POR, NEGT completed its separation from PG&E
Corporation and will issue new debt securities and common stock to its
creditors. As previously reported in a Current Report on Form 8-K, NEGT announced on
September 15, 2004, that it had entered into a definitive purchase agreement
with GS Power Holdings II LLC, a wholly owned subsidiary of The Goldman Sachs
Group, Inc. (the GS Power Agreement), to acquire NEGTs equity interests in
12 power plants and a natural gas pipeline, including NEGTs indirect ownership
interests in the Partnership. The GS Power Agreement resulted from a
multi-round bankruptcy court-sanctioned auction bidding process in which GS
Power Holdings II LLC was the winning bidder. As a result, the purchase
agreement between NEGT and Denali Power, LLC previously disclosed in a
Quarterly Report on Form 10-Q for the quarter ended June 30, 2004 will
ultimately be terminated prior to the consummation of the sale under the GS
Power Agreement. On September 23, 2004, the Bankruptcy Court issued an order
approving the GS Power Agreement. NEGT expects the transaction, which is
subject to certain regulatory and third party approvals, to close in the first
quarter of 2005. The Goldman Sachs Group, Inc., through its ownership of
Cogentrix Energy, Inc., already owns indirect beneficial interests in the
Partnership through the general partner interest of Palm Power Corporation and
limited partner interest of Thaleia LLC. NEGTs indirect ownership interest in the general partner interest of
Indiantown Project Investment, L.P. and the limited partner interest of Toyan
Enterprises are included within the sale as contemplated by the GS Power
Agreement (the GS Power Sale). As presently contemplated, the GS Power Sale,
if consummated, is not expected to affect the MSA and the O&M Agreement with
the Partnership. On September 17, 2004, Moodys Investors Service (Moodys) issued a credit
opinion confirming the Partnerships senior secured debt rating at Ba1 with a
stable rating outlook. In this credit opinion, Moodys stated that the rating
considers the September 15, 2004 announcement by NEGT concerning the GS Power
Agreement, which includes NEGTs indirect ownership in the Partnership. 6




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On September 24, 2004 Standard and Poors (S&P) issued a bulletin stating
that it does not expect the recent announcement by NEGT concerning the GS Power
Agreement to affect the rating on the senior secured debt of Indiantown
Cogeneration Funding Corporation, which is currently at BBB- with a credit
watch negative. S&P also stated that it is analyzing the possible effects of
the proposed ownership change on the project. 3. SIGNIFICANT ACCOUNTING POLICIES: Except as disclosed herein, the Partnership is following the same accounting
principles discussed in the Partnerships December 31, 2003 Annual Report on
Form 10-K. Adoption of New Accounting Pronouncements On January 1, 2003, the Partnership adopted SFAS No. 143, Accounting for Asset
Retirement Obligations. SFAS No. 143 provides accounting requirements for
costs associated with legal obligations to retire tangible, long-lived assets.
The statement requires that an asset retirement obligation be recorded at fair
value in the period in which it is incurred, if a reasonable estimate of fair
value can be made. In the same period, the associated asset retirement costs
are capitalized as part of the carrying amount of the related long-lived asset.
In each subsequent period, the liability is accreted to its present value and
the capitalized cost is depreciated over the useful life of the long-lived
asset. Upon implementation of this statement, the Partnership recorded approximately
$44,000 in property, plant and equipment to reflect the fair value of the asset
retirement costs as of the date the obligation was incurred, approximately
$9,000 of accumulated depreciation through December 31, 2002 and an asset
retirement obligation of approximately $84,000. The cumulative effect of the
change in accounting principle as a result of adopting this statement was a
loss of approximately $49,000. The Partnership recognized accretion of $6,000
in the nine month period ended September 30, 2004 and $8,000 in the year ended
December 31, 2003. 4. RELATED PARTY TRANSACTIONS: The Partnership has an MSA with PSC for the day-to-day management and
administration of the Partnerships business relating to the Facility. The
agreement commenced on September 30, 1992, was amended and restated on November
1, 1994, and will continue through October 31, 2028. The cost of services is
included in general and administrative expenses in the accompanying
consolidated statements of operations. The total expense incurred for these
services for each of the nine months ended September 30, 2004 and 2003 was
$583,000. The Partnership has an O&M Agreement with OSC for the operation and maintenance
of the Facility for a period of 30 years (starting September 30, 1992).
Compensation to OSC under the agreement includes an annual base fee of which a
portion is subordinate to debt service and certain other costs. The base fee
is included in operating and maintenance expenses in the accompanying
consolidated statements of operations. The total expense incurred for these
services for the nine months ended September 30, 2004 and 2003 was $1,383,000
and $1,361,000, respectively. 7




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5. LETTERS OF CREDIT: As previously reported, on October 10, 2003, the Partnership closed a
transaction with Calyon New York Branch (Calyon, formerly known as Credit
Lyonnais New York Branch), as agent and arranger, to replace certain letters of
credit. The facilities include a Debt Service Reserve Letter of Credit up to
$29.9 million, which has a term of seven years; Performance Letters of Credit
up to $15.0 million, which have a term of five years; and a Working Capital
Revolving Facility up to $10.0 million, which has a term of three years and is
presently capped at $3.0 million. Under the Performance Letters of Credit, the
ESA Letter of Credit for $10.0 million was issued in favor of LDC. On June 11, 2004, under the Performance Letters of Credit, a Qualifying
Facility (QF) Letter of Credit was issued in favor of FPL for an aggregate
amount of $4.0 million, which is to be increased from time to time up to $5.0
million. Amounts previously deposited into a cash reserve account of $4.0
million held in lieu of a letter of credit were released and deposited in
accordance with the terms set forth in the Amended and Restated Disbursement
Agreement. 6. COMMITMENTS AND CONTINGENCIES: In 2003, a long-term interruption of the delivery of Appalachian coal to St.
Johns River Power Park (SJRPP) meeting the criteria contained in the PPA
occurred. As a result of the interruption, the PPA required that the
Partnership and FPL agree upon a comparable replacement index (the Replacement
Index) to escalate the coal cost component of the Unit Energy Cost (UEC)
paid by FPL to the Partnership. A Letter Agreement, dated as of July 29, 2004,
was entered into by the Partnership and FPL to fulfill the mutual obligation to
develop a Replacement Index. The Replacement Index, which will be used to
calculate the coal cost component of the UEC beginning with the first calendar
quarter of 2004, is based on the weighted-average coal cost component of
Appalachian coal delivered by rail to Florida utilities and municipalities.
The Replacement Index will comprise data meeting the same coal specifications
as the SJRPP coal data used in the original index. The Letter Agreement
provides for reversion to the original index should qualified Appalachian coal
deliveries resume to SJRPP in sufficient quantities as specified in the Letter
Agreement. FPL filed a letter in August, 2004 to the Florida Public Service Commission
(FPSC) to inform the Division of Economic Regulation that, as explicitly
contemplated by the terms of the PPA, the original index has been replaced with
the Replacement Index and falls within the rule that states an application for
approval is not required if the modification was explicitly contemplated by the
terms of the contract. Although the Partnership agrees with the position of
FPL that the Replacement Index does not require formal approval by the FPSC,
the Partnership filed a petition for a declaratory statement from the FPSC,
requesting the FPSC to confirm this position. On October 7, 2004 the FPSC issued an order granting the Partnerships petition
for the declaratory statement. Specifically, the declaratory statement will
confirm that formal approval of the revised fuel index is not required to
assure cost recovery. The order became final after a 30-day appeal period,
which expired on November 8, 2004. The effectiveness of the Letter Agreement
was contingent upon this order. An adjustment of approximately $3.7 million
for the period from January 1, 2004 through September 30, 2004 will be made to
increase electric energy revenue in the fourth quarter of 2004 relating to the
Replacement Index. 8




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The Partnership has included its coal supplier, Massey Coal Sales Company, Inc.
(Massey), in the process to achieve a similar index, as contemplated in the
First Amendment to the Coal Purchase and Sales Agreement. Negotiations are
continuing. The Partnership cannot predict whether such an agreement will be
reached in the future. 7. RECLASSIFICATIONS: Certain prior year amounts have been reclassified to conform with the current
year presentation. Item 2 Managements Discussion and Analysis of Financial
Condition and Results of Operations This Managements Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the consolidated financial
statements of the Partnership and the notes to the accompanying consolidated
financial statements included herein. Further, this Quarterly Report on Form
10-Q should be read in conjunction with the Partnerships December 31, 2003
Annual Report on Form 10-K. Cautionary Statement Regarding Forward-Looking Statements The information in this Quarterly Report on Form 10-Q includes forward-looking
statements about the future that are necessarily subject to various risks and
uncertainties. Use of words like anticipate, estimate, intend,
project, plan, expect, will, believe, could, and similar
expressions help identify forward-looking statements and constitute
forward-looking statements under the Private Securities Litigation Reform Act
of 1995. These statements are based on current expectations and assumptions,
which the Partnership believes are reasonable and on information currently
available to the Partnership. Actual results could differ materially from
those contemplated by the forward-looking statements. Although the Partnership
believes that the expectations reflected in the forward-looking statements are
reasonable, future results, events, levels of activity, performance or
achievements cannot be guaranteed. Although the Partnership is not able to
predict all the factors that may affect future results, some of the factors
that could cause future results to differ materially from those expressed or
implied by the forward-looking statements include: Operational Risks The Partnerships future results of operations and financial condition may be
affected by the performance of equipment, levels of dispatch, the receipt of
certain capacity and other fixed payments, electricity prices, fuel deliveries
and fuel prices and any mismatch between the actual energy costs and the energy
revenue reimbursement of those costs; unanticipated changes in operating
expenses or capital expenditures or other maintenance activities; variations in
weather and natural disasters; and the potential impacts of threatened or
actual terrorism and war. Currently, coal supply and transportation demands and
constraints in the eastern region of the United States have resulted in a
general decline in fuel inventories at power stations, including the Facility.
CSX Transportation, Inc. (CSX) has communicated to the Partnership that, for
an unspecified period of time, CSX may not meet all expected schedules for fuel
deliveries. The Partnership believes that CSX has provided similar
communication to all eastern region customers. CSX has stated that it will
maintain service such that the Facility will be able to maintain minimum fuel
inventories and that operations at the Facility will not be impacted due to
shortages of fuel. The Partnership normally maintains approximately thirty days
in fuel supply on site. As of November 10, 2004, on-site fuel inventory was
approximately 26 days. Although the Partnership has not had to interrupt
operations due to restricted fuel supplies, the Partnership cannot predict
whether in the future it will suffer any interruptions of operations due to
fuel supply constraints. The Partnership continues to closely monitor this
situation and conducts necessary communications with CSX and Massey Coal Sales
Company, Inc. (Massey) to address the needs of the Facility. 9




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##### 



Actions of Florida Power & Light and Other Counterparties The Partnerships future results of operations and financial condition may be
affected by the extent to which counterparties require additional assurances in
the form of letters of credit or cash collateral and the potential future
failure of the Partnership to maintain qualifying facility status, which
failure could cause a default under PPA. Accounting and Risk Management The Partnerships future results of operations and financial condition may be
affected by the effect of new accounting pronouncements, changes in critical
accounting policies or estimates, the effectiveness of the Partnerships risk
management policies and procedures, the ability of the Partnerships
counterparties to satisfy their financial commitments to the Partnership and
the impact of counterparties nonperformance on the Partnerships liquidity
position and heightened rating agency criteria and the impact of changes in the
Partnerships credit ratings. Legislative and Regulatory Matters The Partnerships business may be affected by legislative or regulatory changes
affecting the electric and natural gas industries in the United States,
including the pace and extent of efforts to restructure the electric and
natural gas industries; heightened regulatory and enforcement agency focus on
the energy business with the potential for changes in industry regulations and
in the treatment of the Partnership by state and federal agencies; and changes
in or application of federal, state, and local laws and regulations to which
the Partnership is subject including changes in corporate governance and
securities laws requirements. Litigation and Environmental Matters The Partnerships future results of operations and financial condition may be
affected by compliance with existing and future environmental and safety laws,
regulations, and policies, the cost of which could be significant, and the outcome of any potential future
litigation and environmental matters. 10




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Business Description The Partnership is primarily engaged in the ownership and operation of a
non-utility electric generating facility. From its inception and until
December 21, 1995, the Partnership was in the development stage and had no
operating revenues or expenses. On December 22, 1995 the Facility commenced
commercial operation. Revenues are derived primarily from capacity and bonus
payments, measured by the Capacity Billing Factor (CBF), and sales of
electricity. The facility is dispatched for electric energy by FPL on an
economic basis. Each agreement year the facility is entitled to four weeks of
outages to perform scheduled maintenance, and each fifth agreement year, a
total of ten weeks of outage time to perform major maintenance. Differences in
the timing and scope of scheduled and major maintenance can have a significant
impact on the revenues and operational costs. Executive Summary During the quarter ended September 30, 2004, the Facility was faced with
adverse weather conditions that affected its operating performance. Two major
hurricanes made landfall in September 2004 approximately thirty miles northeast
of the Facility. The Facility sustained some damage; however, the Partnership
expects that the cost for repairs will not exceed the insurance coverage
deductible of $1.0 million. The Facility also experienced derates, or periods
of reduced output at the Partnerships discretion below the 330 megawatt
committed capacity, during the quarter ended September 30, 2004 primarily due
to the hurricanes. The derates were caused by damage to a gauge on the
transformer and due to wet coal which plugged the coal feeders to the
pulverizers. The derates did not have a material adverse effect on the
financial statements for the quarter ended September 30, 2004. The Partnership
notified FPL to claim these events as Force Majeure, which prevented the
Facility from performing certain obligations under the PPA, including the
obligation to make available to FPL energy and capacity and to provide
specified prior notice of unit shutdowns. FPL has requested additional
information from the Partnership to assist in their review to determine if FPL
agrees that these incidents constitute events of Force Majeure. The
Partnership is working to provide this information to FPL. FPL reduced the
payment for the September 2004 billing period made on October 25, 2004 by $0.2
million for the decrease in the capacity bonus due to the reduction of the CBF
related to the events described above. The PPA provides for a quarterly indexing of the coal component of the energy
price. This indexing involved the computation each quarter of the percent
change in St. Johns River Power Parks (SJRPP) domestic Appalachian coal
purchases, contract and spot, as reported to the Florida Public Service
Commission (FPSC). In 2003, a long-term interruption of the delivery of
coal to SJRPP meeting the criteria contained in the PPA occurred. A Letter
Agreement, dated as of July 29, 2004, was entered into by the Partnership and
FPL to fulfill the mutual obligation to develop a comparable replacement index
(the Replacement Index). The Replacement Index, which will be used to
calculate the coal cost component of the UEC beginning with the first calendar
quarter of 2004, is based on the weighted-average coal cost component of Appalachian coal delivered by rail to Florida utilities and municipalities.
The effectiveness of the Letter Agreement was contingent upon an order of the
FPSC finding that no approval of the Letter Agreement is necessary. This order
became final after a 30-day appeal period, which expired on November 8, 2004.
An adjustment of approximately $3.7 million for the period from January 1, 2004
through September 30, 2004 will be made to increase electric energy revenue in
the fourth quarter of 2004 relating to the Replacement Index. 11




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The Partnership has included its coal supplier, Massey, in the process to
achieve a similar index, as contemplated in the First Amendment to the Coal
Purchase and Sales Agreement. Negotiations are continuing. The Partnership
cannot predict whether such an agreement will be reached in the future. The electric energy payments received in the quarter ended September 30, 2004
were not sufficient to cover the Partnerships variable costs of electric
energy production, since the energy price paid by FPL for the coal cost
component of the energy payment was less than the price of base coal in the
amended coal purchase agreement. Within ninety days after the end of each
agreement year, the Partnership provides FPL with a report showing the previous
agreement years actual energy costs. The Partnership and FPL share the
difference between the actual energy costs of the Partnership and the energy
payments made by FPL as calculated in accordance with the terms of the PPA. In
the event that the actual energy costs of the Partnership and the energy
payments made by FPL differ by more than 4%, the operating representatives will
annually adjust the UEC to better reflect the Partnerships actual energy costs
to minimize the difference for the subsequent agreement year. For the 2002 agreement year, the Partnership provided to FPL in the first
quarter of 2003 a report, which showed that the actual energy costs of the
Partnership exceeded the energy payments made by FPL by more than 4%. However,
in 2003 FPL and the Partnership were engaged in negotiating a Replacement
Index, and consequently did not adjust the UEC for the 2003 agreement year.
FPL and the Partnership reached agreement on a Replacement Index on July 29,
2004, providing for an adjustment of the UEC effective January 1, 2004. The
Partnership notified FPL in August of 2004 that the UEC for agreement year 2003
should be adjusted pursuant to the audit results for the 2002 agreement year.
Both parties are currently engaged in discussions to address this issue. In accordance with the terms of the PPA, the Partnership has scheduled the
Facility for four weeks of maintenance outages during 2004, which is for the
same duration experienced during 2003. Since the scope and duration of the
scheduled maintenance outages for 2004 is comparable to those experienced
during 2003, the Partnership expects maintenance expenses to be approximately
the same in 2004 as compared to 2003. The Partnership has obtained all material environmental permits and approvals
required as of September 30, 2004, in order to continue the operation of the
Facility. Certain of these permits and approvals are subject to periodic
renewal. Certain additional permits and approvals will be required in the
future for the continued operation of the Facility. The Partnership is not
aware of any technical circumstances that would prevent the issuance of such
permits and approvals or the renewal of currently existing permits. 12




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Relationship with National Energy & Gas Transmission, Inc. ( NEGT) The Partnership is managed by Power Services Company (PSC, formerly known as
PG&E National Energy Group Company), pursuant to a Management Services
Agreement (the MSA). The Facility is operated by U.S. Operating Services
Company (OSC, formerly known as PG&E Operating Services Company),pursuant to
an Operation and Maintenance Agreement (the O&M Agreement). PSC and OSC are
general partnerships indirectly wholly owned by NEGT. Prior to October 29,
2004, NEGT was an indirect subsidiary of PG&E Corporation. On July 8, 2003, NEGT and certain subsidiaries voluntarily filed petitions for
relief under the provisions of Chapter 11 of the U.S. Bankruptcy Code
(collectively, the NEGT Bankruptcy) in the Greenbelt Division of the United
States Bankruptcy Court for the District of Maryland (the Bankruptcy Court). Neither the Partnership nor any of its NEGT affiliated partners, Toyan and
IPILP, or PSC and OSC, were parties to the NEGT Bankruptcy. The NEGT
Bankruptcy did not result in an event of default under the principal project
contracts or the principal financing documents of the Facility. On February 26, 2004, NEGT filed with the Bankruptcy Court its Third Amended
Plan of Reorganization and the related Disclosure Statement. A Modified Third
Amended Plan of Reorganization (POR) was confirmed by order of the Bankruptcy
Court on May 3, 2004. On October 29, 2004, the POR became effective, and NEGT
emerged from bankruptcy. Pursuant to the POR, NEGT completed its separation
from PG&E Corporation and will issue new debt securities and common stock to
its creditors. As previously reported in a Current Report on Form 8-K, NEGT announced on
September 15, 2004, that it had entered into a definitive purchase agreement
with GS Power Holdings II LLC, a wholly owned subsidiary of The Goldman Sachs
Group, Inc. (the GS Power Agreement), to acquire NEGTs equity interests in
12 power plants and a natural gas pipeline, including NEGTs indirect ownership
interests in the Partnership. The GS Power Agreement resulted from a
multi-round bankruptcy court-sanctioned auction bidding process in which GS
Power Holdings II LLC was ultimately the winning bidder. As a result, the
purchase agreement between NEGT and Denali Power, LLC previously disclosed in a
Quarterly Report on Form 10-Q for the quarter ended June 30, 2004 will
ultimately be terminated prior to the consummation of the sale under the GS
Power Agreement. On September 23, 2004, the Bankruptcy Court issued an order
approving the GS Power Agreement. NEGT expects the transaction, which is
subject to certain regulatory and third party approvals, to close in the first
quarter of 2005. The Goldman Sachs Group, Inc., through its ownership of
Cogentrix Energy, Inc., already owns indirect beneficial interests in the
Partnership through the general partner interest of Palm Power Corporation and
limited partner interest of Thaleia LLC. 13




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##### 



NEGTs indirect ownership interest in the general partner interest of
Indiantown Project Investment, L.P. and the limited partner interest of Toyan
Enterprises are included within the sale as contemplated by the GS Power Agreement (the GS Power Sale). As
presently contemplated, the GS Power Sale, if consummated, is not expected to
affect the MSA and the O&M Agreement with the Partnership. On September 17, 2004, Moodys Investors Service (Moodys) issued a credit
opinion confirming the Partnerships senior secured debt rating at Ba1 with a
stable rating outlook. In this credit opinion, Moodys stated that the rating
considers the September 15, 2004 announcement by NEGT concerning the GS Power
Agreement, which includes NEGTs indirect ownership in the Partnership. On September 24, 2004 Standard and Poors (S&P) issued a bulletin stating
that it does not expect the recent announcement by NEGT concerning the GS Power
Agreement to affect the rating on the senior secured debt of Indiantown
Cogeneration Funding Corporation, which is currently at BBB- with a credit
watch negative. S&P also stated that it is analyzing the possible effects of
the proposed ownership change on the project. Results of Operations The following table sets forth operating revenue and related data for the three
months and nine months ended September 30, 2004 and 2003 (dollars and volumes
in millions). For the three months ended September 30,2004
    
    2003Factor
    
    
    
    
    
    FactorAverage Capacity Billing Factor
    
    
    98.51
    %
    
    
    
    
    
    
    98.14
    %Average Dispatch Rate
    
    
    76.60
    %
    
    
    
    
    
    
    95.45
    %
 Operating Revenues:
    
    Volume
    
    Dollars
    
    Volume
    
    DollarsCapacity and bonus
    
    
    
    
    
    $
    31.4
    
    
    
    
    
    
    $
    31.3Electric (Kwh)
    
    
    564.2
    
    
    
    13.7
    
    
    
    695.5
    
    
    
    16.4Steam (lbs)
    
    
    1.1
    
    
    
    0.1
    
    
    
    7.5
    
    
    
    0.1Total operating revenues
    
    
    
    
    
    $
    45.2
    
    
    
    
    
    
    $
    47.8
 For the nine months ended September 30,2004
    
    2003Factor
    
    
    
    
    
    FactorAverage Capacity Billing Factor
    
    
    99.68
    %
    
    
    
    
    
    
    97.11
    %Average Dispatch Rate
    
    
    84.00
    %
    
    
    
    
    
    
    90.35
    %
 Operating Revenues:
    
    Volume
    
    Dollars
    
    Volume
    
    DollarsCapacity and bonus
    
    
    
    
    
    $
    94.2
    
    
    
    
    
    
    $
    93.8Electric (Kwh)
    
    
    1,729.7
    
    
    
    42.1
    
    
    
    1,853.3
    
    
    
    43.5Steam (lbs)
    
    
    529.7
    
    
    
    0.2
    
    
    
    463.6
    
    
    
    0.2Total operating revenues
    
    
    
    
    
    $
    136.5
    
    
    
    
    
    
    $
    137.5
 14




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The Average Capacity Billing Factor (CBF) measures the overall availability
of the Facility, but gives a heavier weighting to on-peak availability. The Average Dispatch Rate is the amount of electric energy produced in a given
period expressed as a percentage of the total contract capability amount of
potential electric energy production in that time period. Three Months Ended September 30, 2004 Compared to the Three Months Ended
September 30, 2003 Overall Results Net income for the three months ended September 30, 2004 was approximately $6.1
million compared to the net income of approximately $6.4 million for the
corresponding period in the prior year. Operating Revenues For the three months ended September 30, 2004, the Partnership had total
operating revenues of approximately $45.2 million as compared to $47.8 million
for the corresponding period in the prior year. The $2.6 million decrease in
operating revenue is primarily due to decreased energy payments resulting from
the decrease in megawatt generation due to a superheater tube leak in July
2004, an economizer tube leak in August 2004 and the events related to the
hurricanes in September 2004. Cost of Sales Costs of sales for the three months ended September 30, 2004 were approximately
$23.5 million as compared to $25.7 million for the corresponding period in the
prior year. The overall cost of fuel and ash decreased $1.9 million primarily
from the decrease in fuel costs of $2.1 million resulting from a decrease in
megawatt generation described above. This cost reduction is offset by an
increase in lime costs of $0.2 million due to an increase in usage resulting
from an increase in the sulfur content of coal and reduced lime quality. Operating and maintenance costs have decreased by $0.3 million. In the three
months ended September 30, 2003 the Partnership incurred costs to purchase
evaporator compressor rotor assemblies. Other Operating Expenses Other operating expenses increased by $0.1 million primarily due to an increase
in insurance premiums. 15




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##### 



Non-Operating Income (Expense) Net interest expense for the three months ended September 30, 2004 and 2003 was
approximately $13.2 million and $13.5 million, respectively. December 2003 and
June 2004 principal payments on Series A-9 of the first mortgage bonds
decreased interest expense by $0.3 million. Nine Months Ended September 30, 2004 Compared to the Nine Months Ended
September 30, 2003 Overall Results Net income for the nine months ended September 30, 2004 was approximately $14.6
million compared to net income of approximately $10.0 million for the
corresponding period in the prior year. Operating Revenues For the nine months ended September 30, 2004, the Partnership had total
operating revenues of approximately $136.5 million as compared to $137.5
million for the corresponding period in the prior year. The $1.0 million
decrease in operating revenues is due to a decrease in megawatt generation
resulting in a decrease in energy revenues of $3.0 million. This is offset by
an increase in energy revenues of $1.6 million resulting from the escalations
in the quarterly unit energy costs in 2004 and due to an increase in capacity
payments of $0.4 million resulting from the escalation of the fixed operation
and maintenance component of the capacity payment from FPL in 2004. Cost of Sales Costs of sales for the nine months ended September 30, 2004 were approximately
$75.5 million as compared to $79.4 million for the corresponding period in the
prior year. The overall cost of fuel and ash decreased $3.1 million resulting
primarily from the decrease in coal costs of $2.7 million as a result in a
decrease in megawatt generation. In the nine months ended September 30, 2003
the Partnership paid Lodestar Energy, Inc. (LEI) $0.8 million to terminate
the coal purchase agreement and paid an additional $1.1 million to CSX related
to pre-petition and gap debt owed to CSX from LEI that the Partnership paid in
conjunction with the replacement of the Transportation Agreement. Offsetting
these decreases are lime costs that increased by a total of $1.0 million due to
a temporary interruption of deliveries in March 2004 from the supplier,
Chemical Lime, caused by the shut-down of their processing facility for a
two-week maintenance outage. This resulted in a higher transportation price
paid by the Partnership for replacement lime. Also, an increase in lime usage
resulted from an increase in the sulfur content of coal and reduced lime
quality. Ash disposal costs increased by $0.5 million due to an alternate
method of pugging, which is a process of adding water to the ash to make it
transportable by truck. Operating and maintenance costs have decreased by $0.9 million. In the nine
months ended September 30, 2003 the Partnership incurred additional costs for
tube leak repairs in the main boiler, repairs to one auxiliary boiler and the purchase of evaporator
compressor rotor assemblies. 16




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##### 



Other Operating Expenses Other operating expenses decreased by $0.5 million primarily due to the absence
of legal and consulting costs incurred in the nine months ended September 30,
2003 associated with the termination of the Coal Purchase Agreement with
Lodestar Energy, Inc. and the execution of the replacement Coal Purchase and
Sales Agreement with Massey and transportation agreement with CSX. Non-Operating Income (Expense) Net interest expense for the nine months ended September 30, 2004 and 2003 was
approximately $39.0 million and $40.0 million, respectively. December 2003 and
June 2004 principal payments of Series A-9 of the first mortgage bonds
decreased interest expense by approximately $1.0 million. For the nine months
ended September 30, 2003 interest expense on letter of credit loans and
subordinated debt amounted to $0.5 million. This was offset by an increase in
letter of credit fees for the nine months ended September 30, 2004 of $0.5
million. Liquidity and Capital Resources Net cash provided by operating activities for the nine months ended September
30, 2004 was approximately $39.3 million as compared to $33.1 million for the
corresponding period in 2003. Net cash provided by operating activities
represents net income, adjusted by non-cash expenses and income, which
primarily consist of depreciation, amortization and accretion, plus the net
effect of changes within the Partnerships operating assets and liability
accounts. Net income for the nine months ended September 30, 2004 increased by
$4.6 million from the corresponding period in 2003. Depreciation, amortization
and accretion increased in 2004 by $0.3 million from 2003 due to the deferred
financing costs for the replacement letters of credit. Inventories and fuel
reserves decreased in 2004 by $2.4 million from 2003 due to the timing of coal
shipments. Accounts receivable decreased in 2004 by $2.5 million from 2003
primarily due to an adjustment to the energy revenue in the fourth quarter of
2002 which was not remitted by FPL until the first quarter of 2003. Deposits
and prepaids decreased in 2004 by $0.4 million from 2003 and accounts payable,
accrued liabilities and accrued interest decreased in 2004 by $4.1 million from
2003 primarily due to the subordinated fees accrued for PSC and OSC in 2003. Net cash used in investing activities for the nine months ended September 30,
2004 was approximately $21.5 million as compared to $24.8 million for the
corresponding period in 2003. Net cash used in financing activities for the nine months ended September 30,
2004 was $18.4 million as compared to $8.3 million for the corresponding period
in 2003. The increase is due to a partner distribution of $9.7 million in June
2004 and an increase in the payment of overall debt of $0.4 million. 17




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##### 



The Partnership believes that it will have adequate cash flows from operations
in 2004 to timely fund future working capital requirements and to cover debt
repayment obligations. For 2004, the Partnership has identified possible capital improvements of
approximately $0.9 million that will enhance the reliability of the facility
and, if approved by the Board of Control, are funded through cash generated
from operations that would otherwise be distributed to the partners. These
include an oil storage building, a locomotive remote control system, evaporator
structural improvements, water system upgrades and distributed controls system
modifications. The Partnership has decided to defer a project to install upper
aquifer wells originally budgeted in 2004 for $1.2 million while it continues
to address alternate means for backup water supplies. Credit Ratings On September 17, 2004, Moodys issued a credit opinion confirming the
Partnerships senior secured debt rating at Ba1 with a stable rating outlook.
In this credit opinion, Moodys stated that the rating considers the September
15, 2004 announcement by NEGT concerning the GS Power Agreement, which includes
NEGTs indirect ownership in the Partnership. On September 24, 2004 S&P issued a bulletin stating that it does not expect the
recent announcement by NEGT concerning the GS Power Agreement to affect the
rating on the senior secured debt of Indiantown Cogeneration Funding
Corporation, which is currently at BBB- with a credit watch negative. S&P also
stated that it is analyzing the possible effects of the proposed ownership change
on the project. Bonds The Partnerships total borrowings from inception through September 30, 2004
were $769 million. An equity loan of $139 million was repaid on December 26,
1995. As of September 30, 2004, the borrowings included $125 million from the
1994 Tax Exempt Bonds and all of the available First Mortgage Bonds. The weighted average interest rates paid by the Partnership on its debt for the
nine months ended September 30, 2004 and 2003 were 9.198% and 9.203%,
respectively. Credit Agreements As previously reported, on October 10, 2003, the Partnership closed a
transaction with Calyon New York Branch (Calyon, formerly known as Credit
Lyonnais New York Branch), as agent and arranger, to replace certain letters of
credit. The facilities include a Debt Service Reserve Letter of Credit up to
$29.9 million, which has a term of seven years; Performance Letters of Credit
up to $15.0 million, which have a term of five years; and a Working Capital
Revolving Facility up to $10.0 million, which has a term of three years and is
presently capped at $3.0 million. Under the Performance Letters of Credit, the
ESA Letter of Credit for $10.0 million was issued in favor of LDC. 18




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##### 



On June 11, 2004, under the Performance Letters of Credit, a Qualifying
Facility (QF) Letter of Credit was issued in favor of FPL for an aggregate
amount of $4.0 million, which is to be increased from time to time up to $5.0
million. Amounts previously deposited into a cash reserve account of $4.0
million held in lieu of a letter of credit were released and deposited in
accordance with the terms set forth in the Amended and Restated Disbursement
Agreement. Under the provisions of the financing documents above, since the Partnership
had not successfully executed a Replacement Index with FPL and a similar price
index with Massey by January 31, 2004, cash normally available to be
distributed to the Partners was restricted. The Partnership and Calyon entered
into a Temporary Waiver and Agreement (the Agreement) dated as of June 14,
2004. Under the Agreement, Calyon, with the consent of the required banks
under the letters of credit, agreed to waive the banks rights and remedies
under the Amended and Restated Disbursement Agreement and the letter of credit
agreements, including the right to deliver notice that would require the
Partnership to begin cash collateralizing the letters of credit, during the
period from June 14, 2004 and ending on December 1, 2004. Significant Contractual Payment Obligations Since December 31, 2003 the Partnership has not committed to any new
significant contractual payment obligations of the types described under the
caption Liquidity and Capital Resources contained in Item 7, Managements
Discussion and Analysis of Financial Condition and Results of Operations of
the Partnerships December 31, 2003 Annual Report on Form 10-K. Critical Accounting Policies There have been no changes to the Partnerships critical accounting policies
since December 31, 2003. See Item 7, Managements Discussion and Analysis of
Financial Condition and Results of Operations, of the Partnerships December
31, 2003 Annual Report on Form 10-K for further discussion. Accounting Principles Issued But Not Yet Adopted In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities(FIN 46). FIN 46, as subsequently revised in
December 2003 (FIN 46R), is an interpretation of Accounting Research Bulletin
No. 51, Consolidated Financial Statements(ARB 51), and supersedes Emerging
Issues Task Force (EITF) Issues No. 90-15 and 96-21, which prescribe accounting
for lease arrangements with nonsubstantive lessors. This Interpretation
clarifies the application of ARB 51 to certain entities, defined as variable
interest entities (VIEs), in which equity investors do not have a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support. FIN 46R requires that a VIE is to be consolidated by a company if
that company is subject to a majority of the risk of loss from the VIEs
activities or is entitled to receive a majority of the VIEs residual returns,
or both. 19




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##### 



The consolidation requirements of FIN No. 46 apply immediately to VIEs created
after January 31, 2003. There were no new VIEs created by the Partnership
between February 1, 2003 and September 30, 2004. The Partnership is a
non-public entity as defined by the interpretation. As a non-public entity,
the consolidation requirements related to entities or arrangements existing
before February 1, 2003 are effective January 1, 2005. The Partnership has not
identified any arrangements with other potential VIEs. The Partnership will
continue to evaluate its arrangements for potential FIN 46R application
effective January 1, 2005. The Partnership does not expect that implementation
of this interpretation will have a significant impact on its consolidated
financial statements. Legal Matters From time to time the Partnership may, in the ordinary course of its business,
become a party in various legal proceedings or may become subject to potential
claims. Management does not believe that the resolution of these matters will
have a material adverse effect on the Partnerships consolidated financial
position or results of operations. See Part I, Item 3 of the Partnerships
December 31, 2003 Annual Report on Form 10-K for further discussion of
significant pending litigation. Regulations and Environmental Matters The Partnership has obtained all material environmental permits and approvals
required, as of September 30, 2004, in order to continue commercial operation
of the Facility. Certain of these permits and approvals are subject to periodic
renewal. The Partnership is not aware of any technical circumstances that
would prevent the issuance of such permits and approvals or the renewal of
currently issued permits. On February 23, 2004 the Partnership timely submitted to the Florida Department
of Environmental Protection (FDEP) a renewal application for the Facilitys
Title V operating permit (the Title V Permit), which was due to expire on
October 11, 2004. On July 16, 2004 the FDEP issued a draft report of the Title
V Permit to the Partnership for comments. On July 30, 2004 the Partnership
sent a petition to the FDEP asking for an extension on the public notification
requirement in order to give time to discuss with the FDEP the contents of the
compliance assurance program in the Title V Permit. On September 30, 2004 the
FDEP re-issued a draft of the Title V Permit incorporating all of the changes
the Partnership requested. A notice was published by the Partnership on
October 4, 2004 for a 30-day period for public comment. Once this period
expires, the Environmental Protection Agency will have a 45-day review period.
The Partnership expects that the final Title V Permit will be issued in the
fourth quarter of 2004. The existing permit remains in full effect until the
final permit is issued. Item 3 Quantitative and Qualitative Disclosures About Market Risk For quantitative and qualitative disclosures about market risk, see Item 7A,
Quantitative and Qualitative Disclosures About Market Risk, of the
Partnerships December 31, 2003 Annual Report on Form 10-K. The Partnerships
exposures to market risk have not changed materially since December 31, 2003. 20




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##### 



Item 4 Controls and Procedures Evaluation of Disclosure Controls and Procedures An evaluation of the disclosure controls and procedures of the Partnership and
Indiantown Cogeneration Funding Corporation (ICL Funding) as of September 30,
2004 has been conducted under the supervision and with the participation of the
principal executive officer and principal financial officer of both the
Partnership and ICL Funding. Based on that evaluation, such officers have
concluded that, as of such date, the disclosure controls and procedures of the
Partnership and ICL Funding are effective, in that they provide reasonable
assurance that such officers are alerted on a timely basis to material
information that is required to be included in the Partnerships and ICL
Fundings periodic filings under the Securities Exchange Act of 1934, as
amended. During the quarter ended September 30, 2004, no changes occurred in
the Partnerships or ICL Fundings internal control over financial reporting
that have materially affected, or are reasonably likely to materially affect,
the Partnerships or ICL Fundings internal control over financial reporting. 21




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##### 



PART II OTHER INFORMATION Item 5  Other Information None Item 6  Exhibits Exhibit No.
    
    Exhibit Description31.1
    
    Certification of Principal Executive Officer of Indiantown
Cogeneration, L.P., pursuant to Section 302 of the Sarbanes  Oxley
Act of 2002 dated November 10, 200431.2
    
    Certification of Principal Financial Officer of Indiantown
Cogeneration, L.P., pursuant to Section 302 of the Sarbanes  Oxley
Act of 2002 dated November 10, 200431.3
    
    Certification of Principal Executive Officer of Indiantown
Cogeneration Funding Corporation, pursuant to Section 302 of the
Sarbanes  Oxley Act of 2002 dated November 10, 200431.4
    
    Certification of Principal Financial Officer of Indiantown
Cogeneration Funding Corporation, pursuant to Section 302 of the
Sarbanes  Oxley Act of 2002 dated November 10, 200432.1
    
    Certification of Principal Executive Officer of Indiantown
Cogeneration, L.P., pursuant to Section 906 of the Sarbanes  Oxley
Act of 2002 dated November 10, 200432.2
    
    Certification of Principal Financial Officer of Indiantown
Cogeneration, L.P., pursuant to Section 906 of the Sarbanes  Oxley
Act of 2002 dated November 10, 200432.3
    
    Certification of Principal Executive Officer of Indiantown
Cogeneration Funding Corporation, pursuant to Section 906 of the
Sarbanes  Oxley Act of 2002 dated November 10, 200432.4
    
    Certification of Principal Financial Officer of Indiantown
Cogeneration Funding Corporation, pursuant to Section 906 of the
Sarbanes  Oxley Act of 2002 dated November 10, 2004
 22




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##### 



SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the
co-registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized. Indiantown Cogeneration, L.P.(Co-registrant)Date:November 10, 2004
    
    /s/ J. TRACY MEY

J. Tracy MeyController and Principal Accounting OfficerIndiantown Cogeneration Funding Corporation(Co-registrant)Date: November 10, 2004
    
    /s/ J. TRACY MEY

J. Tracy MeyController and Chief Accounting Officer
 23




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EXHIBIT INDEX Exhibit No.
    
    Exhibit Description31.1
    
    Certification of Principal Executive Officer of Indiantown
Cogeneration, L.P., pursuant to Section 302 of the Sarbanes  Oxley
Act of 2002 dated November 10, 200431.2
    
    Certification of Principal Financial Officer of Indiantown
Cogeneration, L.P., pursuant to Section 302 of the Sarbanes  Oxley
Act of 2002 dated November 10, 200431.3
    
    Certification of Principal Executive Officer of Indiantown
Cogeneration Funding Corporation, pursuant to Section 302 of the
Sarbanes  Oxley Act of 2002 dated November 10, 200431.4
    
    Certification of Principal Financial Officer of Indiantown
Cogeneration Funding Corporation, pursuant to Section 302 of the
Sarbanes  Oxley Act of 2002 dated November 10, 200432.1
    
    Certification of Principal Executive Officer of Indiantown
Cogeneration, L.P., pursuant to Section 906 of the Sarbanes  Oxley
Act of 2002 dated November 10, 200432.2
    
    Certification of Principal Financial Officer of Indiantown
Cogeneration, L.P., pursuant to Section 906 of the Sarbanes  Oxley
Act of 2002 dated November 10, 200432.3
    
    Certification of Principal Executive Officer of Indiantown
Cogeneration Funding Corporation, pursuant to Section 906 of the
Sarbanes  Oxley Act of 2002 dated November 10, 200432.4
    
    Certification of Principal Financial Officer of Indiantown
Cogeneration Funding Corporation, pursuant to Section 906 of the
Sarbanes  Oxley Act of 2002 dated November 10, 2004