##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549




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FORM 10-K

|  |  |                                                                                             
|- |  | --------------------------------------------------------------------------------------------
|þ |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR
    15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
| 
|  |  | For the fiscal year ended December 31,
    2002.                                            
| 
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13
    OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| 
|  |  | For the transition period
    from           to          .                                  

Commission File No. 333-42638

NRG Northeast Generating LLC

(Exact name of Registrant as specified in its
charter)


|                                                                                                        |  |                                         
|------------------------------------------------------------------------------------------------------- |  | ----------------------------------------
|Delaware                                                                                                |  | 41-1937472                              
|(State or other jurisdiction
    of incorporation or organization)                                      |  | (I.R.S. Employer
    Identification No.)
|                                                                                                       
|901 Marquette Avenue, Suite 2300
    Minneapolis, Minnesota(Address of principal executive
    offices) |  | 55402(Zip Code)                         

(612) 373-5300

(Registrants telephone number, including
area code)


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

None


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


None


Indicate by check mark whether the Registrant
(1) has filed all reports to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has
been subject to such filing requirements for the past
90 days.     Yes þ          No o

Indicate by check mark 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 the registrants 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.     þ

Indicate by check mark whether the registrant is
an accelerated filer as defined by Rule 12b-2 of the
Act.     Yes o          No þ

As of the last business day of the most recently
completed second fiscal quarter, no voting or non-voting common
equity was held by non-affiliates.

As of the latest practicable date, Northeast
Generation Holding LLC owned 50% of the outstanding equity
interests of NRG Northeast Generating LLC and NRG Eastern LLC
owned 50% of the outstanding equity interests of NRG Northeast
Generating LLC. Northeast Generation Holding LLC and NRG Eastern
LLC are each wholly-owned subsidiaries of NRG Energy, Inc.

Documents Incorporated by Reference:

None




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TABLE OF CONTENTS



|                                                 |                                                                                                           |  |  |  |  |  |  | 
|------------------------------------------------ | --------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                          
|                                                 | Item 1 -- Business                                                                                       
|                                                 | Item 2 -- Properties                                                                                     
|                                                 | Item 3 -- Legal Proceedings                                                                              
|                                                 | Item 4 -- Submission of Matters to a Vote of Security Holders                                            
|PART II                                         
|                                                 | Item 5 -- Market for the Registrants Common Equity and Related Stockholder Matters                      
|                                                 | Item 6 -- Selected Financial Data                                                                        
|                                                 | Item 7 -- Managements Discussion and Analysis of Financial Condition and Results of Operations          
|                                                 | Item 7A -- Quantitative and Qualitative Disclosures About Market Risk                                    
|                                                 | Item 8 -- Financial Statements and Supplementary Data                                                    
|                                                 | Item 9 -- Changes in and Disagreements with Accountants on Accounting and Financial Disclosures          
|                                                 | Item 10 -- Directors and Executive Officers of the Registrant                                            
|                                                 | Item 11 -- Executive Compensation                                                                        
|                                                 | Item 12 -- Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|                                                 | Item 13 -- Certain Relationships and Related Transactions                                                
|                                                 | Item 14 -- Controls and Procedures                                                                       
|PART IV                                         
|                                                 | Item 15 -- Exhibits, Financial Statement Schedules and Reports on Form 8-K                               
|CERTIFICATION                                   
|Exhibit Index                                   
|Subsidiaries of the NRG Northeast               
|Officer Certification                           
|Financial Statement of Dunkirk Power LLC        
|Financial Statements of Huntley Power LLC       
|Financial Statements of Arthur Kill Power LLC   
|Financial Statements of Middletown Power LLC    
|Financial Stmts of Astoria Gas Turbine Power LLC



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NRG ENERGY, INC. AND SUBSIDIARIES

INDEX

|           |  |                                                                                                    |    |          |    | 
|---------- |  | -------------------------------------------------------------------------------------------------- | -- | -------- | -- | 
|           |  |                                                                                                    |    | Page No.
|           |  |                                                                                                    |    |         
|PART I    
|Item 1     |  | Business                                                                                           |    |          | 3  | 
|Item 2     |  | Properties                                                                                         |    |          | 16 | 
|Item 3     |  | Legal Proceedings                                                                                  |    |          | 16 | 
|Item 4     |  | Submission of Matters to a Vote of Security
    Holders                                            |    |          | 18 | 
|PART II   
|Item 5     |  | Market for Registrants Common Equity and
    Related Stockholder Matters                          |    |          | 18 | 
|Item 6     |  | Selected Financial Data                                                                            |    |          | 19 | 
|Item 7     |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations          |    |          | 19 | 
|Item 7A    |  | Quantitative and Qualitative Disclosure About
    Market Risk                                      |    |          | 36 | 
|Item 8     |  | Financial Statements and Supplementary Data                                                        |    |          | 37 | 
|Item 9     |  | Changes in & Disagreements With Accountants
    on Accounting and Financial Disclosure             |    |          | 37 | 
|PART III  
|Item 10    |  | Directors and Executive Officers of the
    Registrants                                            |    |          | 37 | 
|Item 11    |  | Executive Compensation                                                                             |    |          | 38 | 
|Item 12    |  | Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters |    |          | 38 | 
|Item 13    |  | Certain Relationships and Related Transactions                                                     |    |          | 38 | 
|Item 14    |  | Controls and Procedures                                                                            |    |          | 39 | 
|PART IV   
|Item 15    |  | Exhibits, Financial Statement Schedules, and
    Reports on Form 8-K                               |    |          | 40 | 
|Signatures |  |                                                                                                    | 70 |         

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PART I






|         |         
|-------- | --------
|Item 1  | Business

General

NRG Northeast Generating LLC, (NRG Northeast) is
a Delaware limited liability company, formed in 1999. NRG
Northeast owns electric power generation plants in the
northeastern region of the United States through its family of
subsidiaries and was formed for the purpose of financing,
acquiring, owning, operating and maintaining electric generating
facilities. NRG Northeasts headquarters and principal
executive offices are located at 901 Marquette Avenue,
Suite 2300, Minneapolis, Minnesota 55402. NRG
Northeasts phone number is (612) 373-5300.

NRG Northeasts assets represent a
diversified regional base of generating facilities in
Connecticut, Massachusetts and New York. NRG Northeasts
revenues are derived from base-load, intermediate and peaking
facilities. The facilities are diversified in terms of fuel
usage and include coal, natural gas and fuel oil plants, or
combination thereof.

NRG Northeast is an indirect wholly-owned
subsidiary of NRG Energy, Inc. (NRG Energy). NRG Energy is an
energy company, primarily engaged in the ownership and operation
of power generation facilities and the sale of energy, capacity
and related products in the United States and internationally.
NRG Energy is a wholly owned subsidiary of Xcel Energy Inc.
(Xcel Energy). Xcel Energy directly owns six utility
subsidiaries that serve electric and natural gas customers in
12 states. Xcel Energy also owns or has interest in a
number of non-regulated businesses, the largest of which is NRG
Energy.

Due to a number of reasons, including the overall
down-turn in the energy industry, NRG Energys financial
condition has deteriorated significantly. As a direct
consequence, in 2002 NRG Energy entered into discussions with
its creditors in anticipation of a comprehensive restructuring.
NRG Energy is working toward this goal by selective divestiture
of non-core assets, consolidation of management, reorganization
and redirection of power marketing philosophy and activities and
an overall financial restructuring that will improve liquidity
and reduce debt. In connection with its restructuring efforts,
it is likely that NRG Energy (and certain of its subsidiaries)
will file for Chapter 11 bankruptcy protection. If NRG
Energy seeks protection under Chapter 11 of the Bankruptcy
Code, it is likely that NRG Energy would also seek such
protection for certain wholly-owned subsidiaries, which would
likely include NRG Northeast. For more information about NRG
Energys restructuring process, refer to the Form 10-K
filed by NRG Energy on March 31, 2003.

As a part of the comprehensive restructuring of
NRG Energy, NRG Energys financial and legal restructuring
advisors have been assisting the management of NRG Northeast in
the preparation of a comprehensive financial and operational
restructuring for NRG Northeast. NRG Northeast and its advisors
have been meeting regularly to discuss restructuring issues
relating to NRG Northeast with an ad hoc committee of its
bondholders (the NRG Northeast Bondholder Committee). NRG
Northeast, its management and its financial and legal advisors
have engaged in discussions with the NRG Project Bondholder
Committee regarding the terms and conditions of a restructuring
of the debt of NRG Northeast.

NRG Northeast, NRG Energy and Xcel Energy file
periodic reports and other documents with the Securities and
Exchange Commission. The public may read and copy the materials
filed with the SEC at the SECs Public Reference Room at
450 Fifth Street, NW, Washington, DC 20549. The public may also
obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. In addition, electronic
copies of these periodic filings are available through the
Commissions web site at www.sec.gov.

Liquidity Issues



| |                                                                                                
| | -----------------------------------------------------------------------------------------------
| | Liquidity Issues of NRG Energy and it
    Subsidiaries  Current Status and Chain of
    Events

In December 2001, Moodys Investor Service
(Moodys) placed NRG Energys long-term senior
unsecured debt rating on review for possible downgrade. In
response, Xcel Energy and NRG Energy put into

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effect a plan to preserve NRG Energys
investment grade rating and improve its financial condition.
This plan included financial support to NRG Energy from Xcel
Energy; marketing certain NRG Energy assets for sale; canceling
and deferring capital spending; and reducing corporate expenses.


In response to a possible downgrade, during 2002,
Xcel Energy contributed $500 million to NRG Energy, and NRG
Energy and its subsidiaries sold assets and businesses that
provided NRG Energy in excess of $286 million in cash and
eliminated approximately $432.0 million in debt. NRG Energy
also canceled or deferred construction of approximately 3,900 MW
of new generation projects. On July 26, 2002, Standard
& Poors (S&P) downgraded NRG Energys senior
unsecured bonds to below investment grade, and three days later
Moodys also downgraded NRG Energys senior unsecured
debt rating to below investment grade. Since July 2002, NRG
Energy senior unsecured debt, as well as the secured NRG
Northeast Generating LLC bonds and the secured NRG South Central
Generating LLC bonds and secured LSP Energy (Batesville) bonds
were downgraded multiple times. After NRG Energy failed to make
payments due under certain unsecured bond obligations on
September 16, 2002, both Moodys and S&P lowered
their ratings on NRG Energys and its subsidiaries
unsecured bonds once again. Currently, NRG Energys
unsecured bonds carry a rating of between CCC and D at S&P
and between Ca and C at Moodys, depending on the specific
debt issue.

As a result of the downgrade of NRG Energys
credit rating, declining power prices, increasing fuel prices,
the overall down-turn in the energy industry, and the overall
down-turn in the economy, NRG Energy has experienced severe
financial difficulties. These difficulties have caused NRG
Energy to, among other things, miss scheduled principal and
interest payments due to its corporate lenders and bondholders,
prepay for fuel and other related delivery and transportation
services and provide performance collateral in certain
instances. NRG Energy has also recorded asset impairment charges
of approximately $3.1 billion, related to various operating
projects as well as for projects that were under construction
which NRG Energy has stopped funding.

NRG Energy and its subsidiaries (including NRG
Northeast) have failed to timely make several interest and/or
principal payments on its indebtedness. These missed payments
have resulted in cross-defaults of numerous other non-recourse
and limited recourse debt instruments of NRG Energy and have
caused the acceleration of multiple debt instruments of NRG
Energy, rendering such debt immediately due and payable. For
more specific information regarding NRG Energys liquidity
issues, refer to Liquidity Issues in Item 1 of
Form 10-K filed by NRG Energy on March 31, 2003.

In addition to the payment defaults described
above, prior to the downgrades many corporate guarantees and
commitments of NRG Energy and its subsidiaries required that
they be supported or replaced with letter of credit or cash
collateral within 5 to 30 days of a ratings downgrade below
Baa3 or BBB- by Moodys or Standard & Poors,
respectively. As a result of the downgrades on July 26 and
July 29, NRG Energy received demands to post collateral
aggregating approximately $1.1 billion. NRG Energy is
presently working with various secured project lender groups
with respect to the issue of posting collateral and is working
toward establishing a comprehensive plan of restructuring.

In August 2002, NRG Energy retained financial and
legal restructuring advisors to assist its management in the
preparation of such comprehensive financial and operational
restructuring. NRG Energy and its advisors have been meeting
regularly to discuss restructuring issues with an ad hoc
committee of its bondholders and a steering committee of its
bank lenders (the Ad Hoc Creditors Committees). In November
2002, NRG Energy and Xcel Energy presented a comprehensive plan
of restructuring to the Ad Hoc Creditors Committees. The
restructuring plan has served as a basis for continuing
negotiations between the Ad Hoc Creditors Committees, NRG Energy
and Xcel Energy related to a consensual plan of reorganization
for NRG Energy. If a comprehensive plan of restructuring is
ultimately agreed to, it is highly probable that such a plan
would be implemented through the commencement of a voluntary
Chapter 11 bankruptcy proceeding. If NRG Energy seeks
protection under Chapter 11 of the Bankruptcy Code, it is
likely that NRG Energy would also seek such protection for
certain wholly-owned subsidiaries, which would likely include
NRG Northeast. For more specific information regarding NRG
Energys restructuring efforts, refer to Liquidity
Issues in Item 1 of Form 10-K filed by NRG
Energy on March 31, 2003.

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On November 22, 2002, five former NRG Energy
executives filed an involuntary Chapter 11 petition against
NRG Energy in U.S. Bankruptcy Court for the District of
Minnesota. Under provisions of federal law, NRG Energy has the
full authority to continue to operate its business as if the
involuntary petition had not been filed unless and until a court
hearing on the validity of the involuntary petition is resolved
adversely to NRG Energy. On December 16, 2002, NRG Energy
responded to the involuntary petition, contesting the
petitioners claims and filing a motion to dismiss the
case. On February 19, 2003, NRG Energy announced that it
had reached a settlement with the petitioners. The U.S.
Bankruptcy Court for the District of Minnesota will hear NRG
Energys motion to approve the settlement and dismiss the
involuntary petition. Two of NRG Energys creditors have
objected to the motion to dismiss. There can be no assurance
that the court will dismiss the involuntary petition. The
Bankruptcy Court has discretion in the review and approval of
the settlement agreement. There is a risk that the Bankruptcy
Court may, among other things, reject the settlement agreement
or enter an order for relief under Chapter 11.

On March 26, 2003, Xcel Energy announced
that its board of directors had approved a tentative settlement
agreement with holders of most of NRG Energys long-term
notes and the steering committee representing NRGs bank
lenders. The settlement is subject to certain conditions,
including the approval of at least a majority in dollar amount
of the NRG Energy bank lenders and long-term noteholders and
definitive documentation. There can be no assurance that such
approvals will be obtained. The terms of the settlement call for
Xcel Energy to make payments to NRG Energy over the next
13 months totaling up to $752 million for the benefit
of NRG Energys creditors in consideration for their waiver
of any existing and potential claims against Xcel Energy. Under
the settlement, Xcel Energy will make the following payments:
(i) $350 million at or shortly following the
consummation of a restructuring of NRG Energys debt. It is
expected this payment would be made prior to year-end 2003;
(ii) $50 million on January 1, 2004. At Xcel
Energys option, it may fill this requirement with either
cash or Xcel Energy common stock or any combination thereof; and
(iii) $352 million in April 2004.



| |                                                    
| | ---------------------------------------------------
| | NRG Northeast Indebtedness and Liquidity
    Issues

On February 22, 2000, NRG Northeast issued
$750 million of senior secured bonds to refinance
short-term project borrowings and for certain other purposes.
The bond offering included three tranches: $320 million
with an interest rate of 8.065% due in 2004; $130 million
with an interest rate of 8.842% due in 2015; and
$300 million with an interest rate of 9.292% due in 2024.
Principal and interest payments are made semi-annually on each
June 15 and December 15. The bonds are jointly and
severally guaranteed by each of NRG Northeasts existing
and future subsidiaries. The bonds are secured by a security
interest in NRG Northeasts membership and/or other
ownership interests in the guarantors and its rights under all
intercompany notes between NRG Northeast and the guarantors. At
December 31, 2002, $556.5 million of bonds remain
outstanding and are classified as current. NRG Northeast secured
bonds currently carry a rating of D at S&P and Caa1 at
Moodys.

On June 15, 2002, NRG Energy loaned NRG
Northeast $30 million to fund capital expenditures. The
debt bears interest at the three month London Interbank Offered
Rate plus 0.5%. The debt is subordinate to the other long-term
debt of NRG Northeast and is subject to the terms and conditions
of the senior secured bonds indenture. Accordingly, NRG
Northeast has classified this loan as a short-term affiliated
note payable.

The debt agreements of NRG Northeast generally
restrict its ability to pay dividends, make distributions or
otherwise transfer funds to NRG Energy under certain
circumstances such as failure to maintain a required minimum
debt service ratio. As of December 31, 2002, NRG Northeast
did not meet the required minimum debt service coverage ratios,
and therefore is restricted from making any payments to NRG
Energy.

NRG Northeast is also precluded from making
payments to NRG Energy due to an unfunded debt service reserve
account. Prior to the NRG Energy downgrades (see above), the
debt service reserve account of NRG Northeast was funded with a
letter of guarantee from NRG Energy. Following the downgrade,
this account was required to be funded with cash from NRG Energy
within five to thirty days. The account was not funded with cash
from NRG Energy within the respective cure period, and an event
of default occurred, thereby giving the lenders the right to
accelerate the project financings. As a result of this default,
the long-

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term portion of the debt has been reclassified as
a current liability, as it is potentially callable within the
next twelve months. NRG Northeast has approximately
$40.1 million of unfunded debt service reserve commitments
as of December 31, 2002.


NRG Northeast and its subsidiaries have failed to
timely make the following interest and/or principal payments to
non-affiliates on its indebtedness:

|                             |  |        |       |      |  |          |       |          |  |           |            |          |  |   |      |  |  |   |      |  |  |  |            | 
|---------------------------- |  | ------ | ----- | ---- |  | -------- | ----- | -------- |  | --------- | ---------- | -------- |  | - | ---- |  |  | - | ---- |  |  |  | ---------- | 
|                             |  | Amount |       |      |  |          |       | Interest |  | Principal |            |         
|Debt ($ in millions)         |  | Issued |       | Rate |  | Maturity |       | Due      |  | Due       |            | Date Due
|                             |  |        |       |      |  |          |       |          |  |           |            |         
|Non-Recourse Debt (secured)  |  |        |       |      |  |          |       |          |  |           |            |          |  |   |      |  |  |   |      |  |  |  |            | 
|NRG Northeast Generating LLC |  | $      | 320.0 |      |  |          | 8.065 | %        |  |           | 12/15/2004 |          |  | $ | 5.1  |  |  | $ | 53.5 |  |  |  | 12/15/2002 | 
|NRG Northeast Generating LLC |  | $      | 130.0 |      |  |          | 8.842 | %        |  |           | 6/15/2015  |          |  | $ | 5.7  |  |  |   |     |  |  |  | 12/15/2002 | 
|NRG Northeast Generating LLC |  | $      | 300.0 |      |  |          | 9.292 | %        |  |           | 12/15/2024 |          |  | $ | 13.9 |  |  |   |     |  |  |  | 12/15/2002 | 

On December 27, 2002, NRG Northeast made the
$24.7 million interest payment due on the NRG Northeast
bonds but failed to make the $53.5 million principal
payment. As of March 31, 2003, NRG Northeast had cash and
cash equivalents of approximately $12 million.

As a part of the comprehensive restructuring of
NRG Energy, NRG Energys financial and legal restructuring
advisors have been assisting the management of NRG Northeast in
the preparation of a comprehensive financial and operational
restructuring for NRG Northeast. NRG Northeast and its advisors
have been meeting regularly to discuss restructuring issues
relating to NRG Northeast with an ad hoc committee of its
bondholders (the NRG Northeast Bondholder Committee). NRG
Northeast, its management and its financial and legal advisors
have engaged in discussions with the NRG Project Bondholder
Committee regarding the terms and conditions of a restructuring
of the debt of NRG Northeast.

NRG Northeast Generating Assets

NRG Northeast owns a total of ten fossil
fuel-fired and four remote gas turbine electric power generation
facilities, as described below. The purchase price set forth
below for certain of the facilities is based on an allocation
made when more than one facility was purchased pursuant to the
same purchase and sale agreement.

Arthur Kill
Facility.NRG Northeast acquired the
Arthur Kill facility from the Consolidated Edison Company of New
York, Inc. (ConEd) in June 1999 for a purchase price of
$395.5 million. The Arthur Kill facility, located in Staten
Island, New York, is a natural gas/oil-fired
intermediate/peaking plant consisting of 3 units and having
a capacity of 842 MW (including a black start gas turbine).

Astoria Facility.NRG Northeast acquired the Astoria facility from ConEd in June
1999 for a purchase price of $109.5 million. The Astoria
facility, located in Queens, New York, is a gas/liquid
fuel-fired peaking plant consisting of 20 units and having a
capacity of 614 MW.

Connecticut Jet
Facilities.NRG Northeast acquired
four unmanned aero derivative combustion turbine facilities
(ICU) from Connecticut Light & Power Company (CL&P)
in December 1999 for a purchase price of $22.3 million.
These ICU facilities, located at local switchyards in Branford,
Torrington Terminal, Franklin Drive and Cos Cob, are oil-fired
peaking units consisting of 6 units and having an aggregate
capacity of 127 MW.

Devon Facility.NRG
Northeast acquired the Devon facility from CL&P in December
1999 for a purchase price of $113.3 million. The Devon
facility, located in Milford, Connecticut, is a natural
gas/oil-fired intermediate/peaking load facility consisting of 7
units and having a capacity of 401 MW.

Dunkirk Facility.NRG Northeast acquired the Dunkirk facility from Niagara Mohawk
Power Corporation (NiMo) in June 1999 for a purchase price of
$193.3 million. The Dunkirk facility, located in

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Dunkirk, New York (near Buffalo), is a coal-fired
base-load facility consisting of 4 units and having a
capacity of 600 MW. The Dunkirk facility is among the
lowest variable cost fossil fuel plants that sell into the New
York Independent Operators wholesale markets (NYISO).


Huntley Facility.NRG Northeast acquired the Huntley facility from NiMo in June
1999 for a purchase price of $161.7 million. The Huntley
facility, located five miles northeast of Buffalo, New York, is
a coal-fired base-load facility consisting of 6 units and having
a capacity of 760 MW. The Huntley facility is among the
lowest cost fossil fuel plants that sell into the NYISO markets.

Middletown Facility.NRG Northeast acquired the Middletown facility from CL&P in
December 1999 for a purchase price of $225.8 million. The
Middletown facility, located in Middletown, Connecticut, is a
natural gas/oil-fired intermediate/peaking plant consisting of 5
units and having a capacity of 856 MW, of which one unit of
70 MW is in deactivated-reserve and has not renewed its air
permit.

Montville Facility.NRG Northeast acquired the Montville facility from CL&P in
December 1999 for a purchase price of $82.8 million. The
Montville facility, located in Uncasville, Connecticut, is a
natural gas/oil-fired intermediate/peaking load plant consisting
of 4 units and having a capacity of 498 MW.

Norwalk Facility.NRG Northeast acquired the Norwalk facility from CL&P in
December 1999 for a purchase price of $75.0 million. The
Norwalk facility, located in Norwalk, Connecticut, is an
oil-fired intermediate/peaking load plant consisting of
3 units and having a capacity of 353 MW.

Oswego Facility.NRG
Northeast acquired the Oswego facility from NiMo and Rochester
Gas & Electric Company (RG&E) in October 1999 for a
purchase price of $84.9 million. The Oswego facility,
located in Oswego, New York, is a natural gas/oil-fired peaking
plant consisting of 2 units and having a capacity of
1,700 MW. The Oswego facility has a very low cost capacity
factor and is a source of excess emissions allowances that can
be utilized at NRG Northeasts other facilities. NRG
Northeast operates the Oswego facility as a peaking facility.

Somerset Facility.NRG Northeast acquired the Somerset facility from Montaup
Electric Company (MEC) in April 1999 for a purchase price
of $55.2 million. The Somerset facility, located in
Somerset, Massachusetts, is a coal-fired base-load facility
consisting of 1 unit and having a capacity of 112 MW.
The Somerset facility also owns one deactivated coal-fired unit
of 69 MW and two oil-fired, peaking units with a combined
capacity of 48 MW (of which one is retired). Total
operational capacity at Somerset is 136 MW. The Somerset
facility is strategically positioned to sell power into the New
England Power Pool (ISO-NE). NRG Operating Services, Inc.
operates the Somerset facility as a base-load facility, with
peaking capacity depending on market conditions.

NRG Northeast Operations

NRG Northeast is an owner of electric power
generation in the northeastern region of the United States. NRG
Northeasts regional base of generating facilities is close
to major load centers. NRG Northeasts regional generating
facilities are diverse in terms of operational characteristics,
location in and access to multiple power pools and fuel sources.

NRG Energys energy marketing subsidiary,
NRG Power Marketing Inc. (NRG Power Marketing), provides a full
range of energy management services for NRG Energys
generation facilities in its Eastern and Central regions. These
services are provided under bilateral contracts or agency
agreements pursuant to which NRG Power Marketing manages the
sales and purchases of energy, capacity and ancillary services,
procures the fuel (coal, oil and natural gas) and associated
transportation and manages the emission allowance credits for
these facilities. NRG Power Marketing has continued to provide
these services since NRG Energy lost its investment grade
ratings in July 2002, and because of NRG Energys credit
and liquidity limitations, NRG Power Marketing has scaled back
its activities. Since July 2002, NRG Power Marketing has focused
primarily on procuring fuel for, and marketing the power from,
NRG Energys North American generation facilities in the
spot and short-term markets.

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NRG Operating Services, Inc. (NRG Operating
Services), a direct wholly-owned subsidiary of NRG Energy, has
entered into operation and maintenance agreements with each of
the subsidiaries of NRG Northeast. Each agreement has an initial
term of five years, with options to extend beyond five years.
Under the agreements, the NRG Operating Services company
operator is reimbursed for usual and customary costs related to
providing operations and maintenance services, including plant
labor and other operating costs. The NRG Operating Services
subsidiary performs all administrative, operations and
maintenance work at each facility.

Regulation



| |                                                  
| | -------------------------------------------------
| | Environmental and Safety Laws and
    Regulations

NRG Northeast is subject to a broad range of
federal, state and local environmental and safety laws and
regulations applicable to the development, ownership and
operation of its projects. These laws and regulations impose
requirements relating to discharges of substances to the air,
water and land, the handling, storage and disposal of hazardous
substances and wastes and the cleanup of properties affected by
pollutants. These laws and regulations generally require that
NRG Northeast obtain a number of governmental permits and
approvals before construction or operation of a power plant
commences and, after completion, that its facilities operate in
compliance with those permits and applicable legal requirements.
NRG Northeast could also be held responsible under these laws
for the cleanup of pollutants released at its facilities or at
off-site locations where it has sent wastes.

NRG Northeast strives at all times to comply with
the terms of all environmental and safety laws, regulations,
permits and licenses and NRG Northeast believes that all of its
operating plants are in material compliance with applicable
environmental and safety requirements. NRG Northeast also does
not expect that its liability under environmental laws for the
cleanup of contamination at its plants or off-site waste
disposal facilities will have a material effect on the results
of its operations. NRG Northeast cannot assure you, however,
that in the future it will not incur material environmental
liabilities, that it will obtain all necessary permits for its
operations or that it will operate in full compliance with
environmental and safety laws and regulations at all times. In
addition, regulatory compliance for the construction of new
facilities is a costly and time-consuming process. Intricate and
rapidly changing environmental regulations may require major
capital expenditures for permitting and create a risk of
expensive delays or material impairment of project value if
projects cannot function as planned due to changing regulatory
requirements or local opposition. Environmental laws have become
increasingly stringent over time, particularly with regard to
the regulation of air emissions from NRG Northeasts
plants, which requires regular major capital expenditures for
power plant upgrades and modifications. Therefore, it is NRG
Northeasts policy to integrate the consideration of
potential environmental impacts into every decision it makes,
and by doing so, strive to improve its competitive advantage by
meeting or exceeding environmental and safety requirements
pertaining to the management and operation of its assets. (See
Item 7  Managements Discussion and
Analysis of Financial Condition and Results of
Operations  Environmental Matters).



| |                  
| | -----------------
| | Energy Regulation

Various federal and state laws pertaining to
power generation and sales also affect NRG Northeast. The
Federal Power Act regulates the sale of electricity in the
wholesale market. The Federal Energy Regulatory Commission
(FERC) is an independent agency within The Department of
Energy that regulates the transmission and wholesale sale of
electricity in interstate commerce under the authority of The
Federal Power Act. FERC is also responsible for licensing and
inspecting private, municipal and state-owned hydro electric
projects. FERC determines whether a public utility qualifies for
exempt wholesale generator (EWG) status under The Public
Utility Holding Company Act, which was amended by The Energy
Policy Act of 1992.

Federal Power Act.The Federal Power Act gives FERC exclusive rate-making
jurisdiction over wholesale sales of electricity and
transmission of electricity in interstate commerce. FERC
regulates the owners of facilities used for the wholesale sale
of electricity and its transmission in interstate commerce as

8



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##### Table of Contents



public utilities under the Federal
Power Act. The Federal Power Act also gives FERC jurisdiction to
review certain transactions and numerous other activities of
public utilities (such as the granting of waivers of certain of
the accounting, record-keeping and reporting requirements that
are imposed on public utilities with cost-based rate schedules).


Under the Federal Power Act, an entity that sells
electricity in the wholesale market is a public utility, subject
to FERCs jurisdiction. Public utilities are required to
obtain FERCs acceptance of their rate schedules for
wholesale sales of electricity. Because NRG Northeasts
operating subsidiaries sell energy and capacity in the wholesale
market, they are deemed to be public utilities for purposes of
the Federal Power Act. In most cases, FERC has granted the NRG
Northeast operating companies the authority to sell electricity
at market-based rates (Arthur Kill Power, Astoria Power, Dunkirk
Power, Huntley Power, Somerset Power, Oswego Power, Connecticut
Jet Power, Devon Power, Middletown Power, Montville Power and
Norwalk Power applied for and were granted market-based rate
authority for the wholesale sales of power by FERC in 1999). In
New England, New York, PJM (Pennsylvania, New Jersey, Maryland,
Delaware and parts of the Midwest) the Midwest and California,
FERC has established Independent System Operators (ISOs) which
file market-based rate tariffs, subject to FERC Approval. These
tariffs/market rules dictate how the wholesale markets are to
operate and how entities with market-based rates shall be
compensated within those markets. The ISOs in these regions also
control access to, pricing of and the operation of the
transmission grid within their footprint. Outside of ISO
controlled regions, NRG Northeast is allowed to sell at
market-based rates as determined by willing buyers and sellers.
Access to, pricing for and operation of the transmission grid in
such regions is controlled by the local transmission owning
utility according to their Pro Forma Open Access Transmission
Tariff (OATT) filed with and approved by FERC.

Usually, FERCs orders which grant NRG
Northeast market-based rate authority reserve the right to
revoke or revise the market-based rate authority on a
prospective basis if FERC subsequently determines that NRG
Northeast possesses excessive market power. If NRG Northeast
lost its market-based rate authority, NRG Northeast may be
required to obtain FERCs acceptance of a cost-of-service
rate schedule and may become subject to the accounting,
record-keeping and reporting requirements that are imposed only
on utilities with cost-based rate schedules. It should be noted,
however, that NRG Northeast does have the right at any time to
petition FERC to grant cost of service based rates pursuant to
Section 205 of the Federal Power Act.

Public Utility Holding Company Act
(PUHCA).The Public Utility Holding
Company Act, known as PUHCA, provides that any entity that owns,
controls or has the power to vote 10% or more of the outstanding
voting securities of an electric utility company, or
a holding company for an electric utility company, is subject to
regulation under PUHCA.

Registered holding companies under PUHCA are
required to limit their utility operations to a single,
integrated utility system and divest any other operations that
are not functionally related to the operation of the utility
system. In addition, a company that is a subsidiary of a holding
company registered under PUHCA is subject to financial and
organizational regulation, including approval by the SEC of
certain financings and transactions. Under the Energy Policy Act
of 1992, however, FERC can determine that a company engaged
exclusively in the business of owning or operating an eligible
facility used for the generation of electric energy for sale at
wholesale is an EWG. Accordingly, it is exempt from PUHCA
requirements. In the case of facilities previously operated by
regulated utilities, FERC can make an exempt wholesale generator
determination only after the state utility commission finds that
allowing the facility or facilities to be eligible for exempt
wholesale generator status will benefit consumers, is in the
public interest, and does not violate state law. Each of NRG
Northeasts operating subsidiaries has been designated by
FERC as an EWG or is otherwise exempt from PUHCA because it is a
Qualifying Facility under the Public Utility Regulatory Policy
Act of 1978.

NRG Northeast does not expect to engage in any
activities that will subject it to regulation under PUHCA. If
NRG Northeast were to lose its EWG status, it would become
subject to regulation under PUHCA. It would be difficult for NRG
Northeast to comply with PUHCA absent a substantial
restructuring.

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| |                        
| | -----------------------
| | State Energy Regulation

New York.Pursuant
to the New York Public Service Law (the NYPSL), the New York
State Public Service Commission (NYPSC) regulates all
public utility companies or utility
companies operating in New York. A public utility
company or utility company under the NYPSL
includes, among other things, any entity engaged in the
production, transmission or distribution of electricity to the
public for light, heat or power purposes. The Huntley, Dunkirk,
Oswego, Arthur Kill and Astoria facilities (the New York
facilities), each considered an EWG, do not provide electricity
directly to the public and each sells only at wholesale to power
marketers, energy service companies or the New York Independent
System Operator (NYISO) wholesale markets. Although the
NYPSL is silent with respect to the utility status of electric
corporations selling at wholesale within New York, precedent of
the NYPSC has applied lightened regulation to New
York EWGs, which provides for minimal financial and
organizational regulation. Each of the New York facilities has
been accorded lightened regulatory treatment by the NYPSC. The
New York facilities rates, however, remain subject to the
jurisdiction of the FERC.

Massachusetts.Pursuant to Chapter 164 of the Massachusetts General Laws,
a wholesale generation company includes any company
engaged in the business of producing, manufacturing or
generating electricity for sale in the wholesale market only.
The Somerset facility, as an EWG, does not provide electricity
directly to the public and sells only at wholesale to power
marketers and energy service companies and thus is considered a
wholesale generation company. Such companies are subject to very
limited regulation by the Massachusetts Department of
Telecommunications and Energy (MDTE), and management believes
the Somerset facility will not likely be subject to regulation
as a Massachusetts public utility or electric company. If,
however, the Somerset facility were deemed to be an electric
company by the MDTE, the MDTE could retroactively apply certain
provisions of the statutes to the Somerset facility. The
Somerset facility would also be subject to other laws and
regulations (other than rate regulation) applicable to
Massachusetts electric companies. The Somerset facilitys
rates, however, would remain subject to the jurisdiction of the
FERC.

Connecticut.Pursuant to Title 16, Chapter 283 of the Connecticut
General Statutes, a foreign electric company is a
corporation organized under the laws of a state other than
Connecticut authorized by that state to generate electric
energy. A foreign electric company is allowed to acquire and
operate electric utility facilities, which include generating
stations, in Connecticut. However, any foreign electric company
which owns or operates any utility facility in the state is
deemed to be an electric company and a public
service company for all purposes of Title 16.
Pursuant to Title 16, Chapter 277 of the Connecticut
General Statutes, a public service company includes
electric companies, but does not include EWGs. An electric
company includes every corporation engaged in generating
electricity to be transmitted or distributed within the state,
but does not include an EWG. The Connecticut Department of
Public Utility Control (DPUC) has authority to adopt rules
with respect to rates and charges, services, accounting
practices, safety and the conduct of operations generally of
public service companies, as it deems reasonable and necessary.
The DPUC also must approve the merger or consolidation of any
public service company, and the issuance of common stock, notes,
bonds, evidence of indebtedness, or securities by any public
service company. Since they are EWGs, Middletown Power,
Montville Power, Norwalk Power, Devon Power, and Connecticut Jet
Power are not likely to be regulated as public service companies
or electric companies by the DPUC. If, however, the Connecticut
facilities were deemed to be public service companies or
electric companies by the DPUC, the DPUC could retroactively
apply certain provisions of the statutes to the Connecticut
facilities. The Connecticut facilities would also be subject to
other laws and regulations (other than rate regulation)
applicable to Connecticut public service or electric companies.
The rates for each of the Connecticut facilities, however, would
remain subject to the jurisdiction of the FERC.

Competition

The entire independent power industry in the
United States is in turmoil. Many of NRG Northeasts
competitors have announced plans to scale back their growth,
sell assets, and restructure their finances. The results of the
wholesale restructuring of the independent power industry are
impossible to predict, but they may include consolidation within
the industry, the sale or liquidation of certain competitors,
the re-regulation of certain markets, and the long-term
reduction in new investment into the industry. Under any
scenario,

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however, NRG Northeast anticipates that it will
continue to face competition from numerous companies in the
industry, some of which may have more extensive operating
experience, larger staffs, and greater financial resources than
NRG Northeast presently possesses.


Many companies in the regulated utility industry,
with which the independent power industry is closely linked, are
also restructuring or reviewing their strategies. Several of
these companies are discontinuing going forward with unregulated
investments, seeking to divest of their unregulated subsidiaries
or attempting to have their regulated subsidiaries acquire their
unregulated subsidiaries. This may lead to an increased
competition between the regulated utilities and the unregulated
power producers within certain markets. In such instances, NRG
Northeast may compete with regulated utilities in the
development of market designs and rulemaking.

FERC, however, is attempting to level the
competitive playing field between regulated utilities and
unregulated energy suppliers by providing open,
non-discriminatory access to electricity markets and the
transmission grid. In April 1996, FERC issued Orders 888
and 889 that required all public utilities to file open
access transmission tariffs that give wholesale
generators, as well as other wholesale sellers and buyers of
electricity, access to transmission facilities on a
non-discriminatory basis. This led to the formation of the ISOs
described above. On December 20, 1999, FERC issued Order
2000, encouraging the creation of Regional Transmission
Organizations (RTOs). Finally, on July 31, 2002, FERC
issued its Notice of Proposed Rulemaking regarding Standard
Market Design. All three orders were intended to eliminate
market discrimination by incumbent vertically integrated
utilities and to provide for open access to the transmission
grid.

The full effect of these changes on NRG Northeast
is uncertain at this time, because in many parts of the United
States, it has not been determined how entities will attempt to
comply with FERCs initiatives. At this time, five ISOs
have been approved and are operational; New England (ISO-NE),
New York (NYISO), Pennsylvania, NJ, Maryland, DE and parts of
the midwest (collectively PJM), Central Midwest (MISO), South
Central (SPP) and in California (CA ISO). Two of these
ISOs, PJM and MISO, have been found to also qualify as RTOs.
Three other entities have also requested that FERC approve their
organizations as RTOs; WestConnect (Desert Southwest); RTO West
(Pacific Northwest and Rockies) and Setrans (Southeast).

NRG Northeast is also impacted by rule/tariff
changes that occur in the existing ISOs. On March 1, 2003,
ISO-NE implemented its version of Standard Market Design. This
change dramatically modifies the New England market structure by
incorporating Locational Marginal Pricing (LMP 
pricing by location rather than on a New England wide basis).
Even though NRG Northeast views this change as a significant
improvement to the existing market design, NRG Northeast still
views the market within New England as insufficient to allow for
NRG Northeast to recover its costs and earn a reasonable return
on investment. Consequently, on February 26, 2003, Devon
Power LLC, Middletown Power LLC, Montville Power LLC, Norwalk
Power LLC and NRG Power Marketing (collectively, the NRG Filers)
filed and requested a cost of service rate with FERC for most of
its Connecticut fleet, requesting a February 27th effective
date. The NRG Filers remain committed to working with ISO-NE,
FERC and other stakeholders to continue to improve the New
England market that will hopefully make further reliance on a
cost of service rate unnecessary. While the NRG Filers have the
right to file for such rate treatment, there are no assurances
that FERC will grant such rates in the form or amount that the
NRG Filers petitioned for in their filing. If FERC declines to
grant cost of service based rates in Connecticut, there may be
additional impairments related to the Connecticut assets.
Management is unable to determine the possible magnitude of any
such additional asset impairments.

On March 25, 2003, the Federal Energy
Regulatory Commission (FERC) issued an order (the Order) in
response to the NRG Filers Joint Motion for Emergency
Expedited Issuance of Order by March 17, 2003 in Docket
No. ER03-563-000 (the Emergency Motion). In the Emergency
Motion, the NRG Filers requested that FERC accept the NRG
Filers reliability must-run agreements and assure the NRG
Filers recovery of deferred maintenance costs for their
New England generating facilities prior to the peak summer
season. FERC accepted the NRG Filers filing as to the
recovery of spring 2003 maintenance costs, subject to refund.
FERCs Order authorizes the ISO New England Inc. to begin
collecting these maintenance costs in escrow for the benefit of
the NRG Filers as of February 27, 2003. Several intervenors
protested the Emergency

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Motion. FERC will rule on such protests and other
issues raised in the Emergency Motion in a subsequent order.


On March 21, 2003, the NYISO filed tariff
revisions at FERC seeking permission to implement a demand curve
for ICAP (ICAP Demand Curve) that would allow for ICAP revenues
to exceed current levels if capacity shortages exist. The ICAP
Demand Curve proposed by the NYISO was proposed by the New York
Public Service Commission as an improvement to the ICAP market
designed to attract more capacity to New York. The NYISO states
that the ICAP Demand Curve proposal will enhance system and
resource reliability by valuing capacity in excess of the
minimum requirements and promote greater stability in the
capacity market resulting in a more effective economic signal
for new investment. The NYISO seeks an effective date of
May 21, 2003 for the tariff changes. In PJM, NRG Energy is
closely following market power mitigation modifications that may
significantly impact the revenues achievable in that market by
modifying PJMs price capping mechanisms. The potential
modifications are unknown at this time, and it is unclear
whether such changes would have a positive or a negative effect
on NRG Northeast.

Proposals have been introduced in Congress to
repeal PURPA and PUHCA, and FERC has publicly indicated support
for the PUHCA repeal effort. If the repeal of PURPA or PUHCA
occurs, either separately or as part of legislation designed to
encourage the broader introduction of wholesale and retail
competition, the significant competitive advantages that
independent power producers currently enjoy over certain
regulated utility companies would be eliminated or sharply
curtailed, and the ability of regulated utility companies to
compete more directly with independent power companies would be
increased. To the extent competitive pressures increase and the
pricing and sale of electricity assumes more characteristics of
a commodity business, the economics of domestic independent
power generation projects may come under increasing pressure.
Deregulation may not only continue to fuel the current trend
toward consolidation among domestic utilities, but may also
encourage the dis-aggregation of vertically-integrated utilities
into separate generation, transmission and distribution
businesses.

In addition, the independent system operators who
oversee most of the wholesale power markets have in the past
imposed, and may in the future continue to impose, price caps
and other mechanisms to address some of the volatility in these
markets. For example, the independent system operator for the
New York power pool and the California independent system
operator have imposed price caps. These types of price caps and
other mechanisms in New York, California, the New England Power
Pool and elsewhere may adversely impact the profitability of NRG
Energys generation facilities that sell energy into the
wholesale power markets. Finally, the regulatory and legislative
changes that have recently been enacted in a number of states in
an effort to promote competition are novel and untested in many
respects. These new approaches to the sale of electric power
have very short operating histories, and it is not yet clear how
they will operate in times of market stress or pressure, given
the extreme volatility and lack of meaningful long-term price
history in many of these markets and the imposition of price
caps by independent system operators.

Power Markets



| |                                                 
| | ------------------------------------------------
| | New York Independent System Operator
    (NYISO)

The NYISO control area includes 34,000 MW of
installed capacity and serves almost all of New York
States electric power requirements. The NYISO operates
competitive, non-discriminatory NYISO bid-based markets for
energy, capacity and ancillary services. The NYISO commenced
operations in November 1999. Most of New York States
investor-owned utilities have completed or are in the process of
divesting their fossil generation assets as part of the
restructuring of the states electricity markets. These
divested plants compete to varying degrees with new merchant
plants in the wholesale markets. The market-clearing price for
the NYISOs day-ahead and real-time energy markets are
calculated by determining the market-clearing price for
transactions with zonal adjustments to account for transmission
constraints. All purchasers of energy from the market pay a
transaction charge set by the NYISO to settle system energy
balancing and certain ancillary service costs.

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| |                                     
| | ------------------------------------
| | The New York City In-City
    Market

In connection with the divestiture by ConEd (the
Consolidated Edison Company of New York, Inc.) of certain of its
electric generating resources in the New York City in-city
market, certain market power mitigation measures are applied to
generators located in that area. The intent of these market
power mitigation measures is to alleviate concerns that the
divested generation resources might be able to exercise
localized market power due to the current configuration of New
York City in-city market loads, generation, and transmission
facilities and related local reliability rules and transmission
constraints. The market mitigation measures have been
implemented by the NYISO and tracked through its market
monitoring process.



| |                           
| | --------------------------
| | The New England Power Pool

NEPOOL was originally formed to capture the
benefits of economic dispatch and joint planning between a large
number of utilities. NEPOOL is populated with a large number of
participants attributed to five sectors: Generators, Suppliers,
Transmission Owners, Municipalities and End Users. The region is
a high variable cost power market, with oil/gas units operating
in the margin. In addition, the region has transmission
constraints that limit imports both from neighboring regions and
internal to the control area. NEPOOL continues to experience
significant transmission constraints in Southwest Connecticut,
an area in which NRG Energy owns and operates the Norwalk and
Devon Stations and a number of the Connecticut Jets. NEPOOL, is
considered a highly divested region with most of the major
utilities having divested all of the generating assets. At this
time, only New Hampshire and Vermont and the Municipal Utilities
Companies remain vertically integrated. NEPOOL redesigned its
existing single-settlement market with the implementation of
Standard Market Design on March 1, 2003  a market
design substantially identical to the PJM market design.

Significant Customers

During 2002, one customer, NYISO, accounted for
72.5% of NRG Northeasts gross revenues. During 2001, two
customers accounted for 72.5% of NRG Northeasts total
revenues, NYISO (58.4%) and Niagara Mohawk Power Corporation
(NiMo) (14.1%). During 2000, three customers accounted for 73.1%
of NRG Northeasts total revenues, NYISO (39.9%), CL&P
(22.0%) and NiMo (11.2%). Such amounts include revenues from
customers under contract with Power Marketing, Inc.

Seasonality and Price Volatility

Annual and quarterly operating results can be
significantly affected by weather and price volatility. Since
NRG Northeasts peak demand is in the summer months,
temperature variations in summer months are generally more
significant than variations during winter months. Significant
other events, such as the war in Iraq and the precipitous
decline in natural gas inventories and productive capacity, have
combined to increase fuel and power price volatility.

Sources and Availability of Raw
Materials

NRG Northeasts raw material requirements
primarily include various forms of fossil fuel energy sources,
including oil, natural gas and coal. NRG Northeast obtains its
oil, natural gas and coal from multiple sources and availability
is generally not an issue, although localized shortages can and
do occur. The prices of oil, natural gas and coal are subject to
macro- and micro-economic forces that can change dramatically in
both the short term and the long term. For example, the prices
of natural gas and oil have been particularly high during the
winter of 2002-2003 due to weather volatility and geo-political
uncertainty in the Middle East. Oil, natural gas and coal
represented approximately 65.4% of NRG Northeasts cost of
operations during the year ended December 31, 2002.

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Employees

NRG Northeast has no employees. The operating
employees at the NRG Northeast facilities are employees of the
respective NRG Energy subsidiaries that have contracted to
operate each facility. All of the facilities (other than the
Middletown facility) are staffed by a combination of union and
non-union employees. The Middletown facility is staffed
completely by non-union employees. With respect to union
employees, all such employees are covered by current labor
agreements with the relevant union, which agreements have
varying expiration dates. To date there are no significant
unresolved arbitrations filed by employees at any of the NRG
Northeasts facilities.

Segment Information

NRG Northeasts operations are not divided
into financial or geographical segments.

Cautionary Statement Regarding Forward-Looking
Information

The information presented in this annual report
includes forward-looking statements in addition to historical
information. These statements involve known and unknown risks
and relate to future events, or projected business results. In
some cases forward-looking statements may be identified by their
use of such words as may, expects,
plans, anticipates,
contemplates, believes, and similar
terms. Forward-looking statements are only predictions or
expectations and actual results may differ materially from the
expectations expressed in any forward-looking statement. While
NRG Northeast believes that the expectations expressed in such
forward-looking statements are reasonable, NRG Northeast can
give no assurances that these expectations will prove to have
been correct. In addition to any assumptions and other factors
referred to specifically in connection with such forward-looking
statements, factors that could cause actual results to differ
materially from those contemplated in any forward-looking
statements include, among others, the following:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The possibility of a bankruptcy filing in the
    near future, either by NRG Northeast, NRG Energy and/or one or
    more of its other subsidiaries, the entry of an order for relief
    by the Minnesota Bankruptcy Court in respect of a pending
    involuntary Chapter 11 petition in that court with respect
    to NRG Energy, or the filing of an involuntary bankruptcy
    petition in another court by a requisite number of creditors of
    NRG Northeast, NRG Energy or any other subsidiary, as the case
    may be;
|
| |  | NRG Energys ability or the ability of any
    of its subsidiaries to reach agreements with its lenders,
    creditors and other stakeholders regarding a comprehensive
    restructuring of NRG Energy;                                                                                                                                                                                                                                                                                                                           
|
| |  | Cost and other effects of legal and
    administrative proceedings, settlements, investigations and
    claims;                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | NRG Energys ability to sell assets in the
    amounts and on the time table assumed;                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | General economic conditions including inflation
    rates and monetary exchange rate fluctuations; the risk of a
    significant slowdown in growth in the U.S. economy or risk
    of delay in growth recovery in the U.S. as a consequence of
    the September 11, 2001 terrorist attacks and other factors;                                                                                                                                                                                                                    
|
| |  | The effect on the U.S. economy as a consequence
    of an invasion of Iraq and other potential actions relating to
    the U.S. governments efforts to suppress terrorism;                                                                                                                                                                                                                                                                                                                                                        
|
| |  | Trade, monetary, fiscal, taxation, and
    environmental policies of governments, agencies and similar
    organizations in geographic areas where NRG Northeast has a
    financial interest;                                                                                                                                                                                                                                                                                                                                     
|
| |  | Customer business conditions including demand for
    their products or services and supply of labor and materials
    used in creating their products and services;                                                                                                                                                                                                                                                                                                                                                               
|
| |  | Customer financial conditions, including solvency
    and the ability to pay invoices when due.                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | Financial or regulatory accounting principles or
    policies imposed by the Financial Accounting Standards Board,
    the Securities and Exchange Commission, the Federal Energy
    Regulatory Commission and similar entities with regulatory
    oversight;                                                                                                                                                                                                                                                                    

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Factors affecting the availability or cost of
    capital such as changes in: interest rates; market perceptions
    of the power generation industry, NRG Northeast or its
    subsidiary; or credit ratings;                                                                                                                                                                                                                                        
|
| |  | Inability of NRG Northeast to adequately control
    or hedge against commodity price volatility due to constraints
    or limitations on available working capital or market credit.                                                                                                                                                                                                                                                                 
|
| |  | Factors affecting power generation operations
    such as unusual weather conditions; catastrophic weather-related
    damage; unscheduled generation outages, maintenance or repairs;
    unanticipated changes to fossil fuel, or gas supply costs or
    availability due to higher demand, shortages, transportation
    problems or other developments; environmental incidents; or
    electric transmission or gas pipeline system constraints;
|
| |  | Employee workforce factors including loss or
    retirement of key executives, collective bargaining agreements
    with union employees, or work stoppages;                                                                                                                                                                                                                                                                                          
|
| |  | Volatility of energy prices in a deregulated
    market environment:                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | Increased competition in the power generation
    industry;                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  | Cost and other effects of legal and
    administrative proceedings, settlements, investigations and
    claims;                                                                                                                                                                                                                                                                                                                                       
|
| |  | Technological developments that result in
    competitive disadvantages and create the potential for
    impairment of existing assets;                                                                                                                                                                                                                                                                                                               
|
| |  | Limitations on NRG Northeasts ability to
    control projects in which NRG Energy has less than 100% interest;                                                                                                                                                                                                                                                                                                                                       
|
| |  | Limited operating history at recently acquired or
    constructed projects provide only a limited basis for management
    to project the results of future operations;                                                                                                                                                                                                                                                                               
|
| |  | Risks associated with timely completion of
    projects under construction, including obtaining competitive
    commercial agreements, obtaining regulatory and permitting
    approvals, local opposition, construction delays and other
    factors beyond NRG Northeasts control;                                                                                                                                                                 
|
| |  | Factors associated with various investments
    including competition, operating risks, dependence on certain
    suppliers and customers, and environmental and energy
    regulations;                                                                                                                                                                                                                                                              
|
| |  | Changes in government regulation or the
    implementation of new government regulations, or the outcome of
    any litigation which could adversely affect the continued
    deregulation of the electric industry;                                                                                                                                                                                                                                  
|
| |  | Other business or investment considerations that
    may be disclosed from time to time in NRG Northeasts
    Securities and Exchange Commission filings or in other publicly
    disseminated written documents.                                                                                                                                                                                                                                    
|
| |  | Changes in market design or implementation of
    rules that affect NRG Northeasts ability to transmit or
    sell power in any market, including, without limitation, the
    failure of FERC to grant the NRG Filers cost of service based
    rates on certain Connecticut generation facilities in the form
    and amount petitioned for in the Section 205 filing
    pursuant to the Federal Power Act.                                       

NRG Northeast undertakes no obligation to update
or revise any forward-looking statements, whether as a result of
new information, future events or otherwise. The foregoing
review of factors that could cause NRG Northeasts actual
results to differ materially from those contemplated in any
forward-looking statements included in this Form 10-K
should not be construed as exhaustive.

15



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Item 2 
Properties

Listed below are descriptions of NRG
Northeasts interests in facilities and operations as of
December 31, 2002.

Independent Power Production and Cogeneration
Facilities

|                                   |  |                              |  |          |       |            |  |           |     |   |  |             
|---------------------------------- |  | ---------------------------- |  | -------- | ----- | ---------- |  | --------- | --- | - |  | ------------
|                                   |  |                              |  | Net      |       | NRGs      |  |          
|                                   |  |                              |  | Owned    |       | Percentage |  |          
|                                   |  |                              |  | Capacity |       | Ownership  |  |          
|Name and Location of Facility      |  | Purchaser/Power Market       |  | (MW)     |       | Interest   |  | Fuel Type
|                                   |  |                              |  |          |       |            |  |          
|Oswego, New York                   |  | Niagara Mohawk/NYISO         |  |          | 1,700 |            |  |           | 100 | % |  | Oil/Gas     
|Huntley, New York                  |  | Niagara Mohawk/NYISO         |  |          | 760   |            |  |           | 100 | % |  | Coal        
|Dunkirk, New York                  |  | Niagara Mohawk/NYISO         |  |          | 600   |            |  |           | 100 | % |  | Coal        
|Arthur Kill, New York              |  | NYISO                        |  |          | 842   |            |  |           | 100 | % |  | Gas/Oil     
|Astoria Gas Turbines, New York     |  | NYISO                        |  |          | 614   |            |  |           | 100 | % |  | Gas/Oil     
|Somerset, Massachusetts            |  | Eastern Utilities Associates |  |          | 160   |            |  |           | 100 | % |  | Coal/Oil/Jet
|Middletown, Connecticut            |  | ISO-NE                       |  |          | 856   |            |  |           | 100 | % |  | Oil/Gas/Jet 
|Montville, Connecticut             |  | ISO-NE                       |  |          | 498   |            |  |           | 100 | % |  | Oil/Gas     
|Devon, Connecticut                 |  | ISO-NE                       |  |          | 401   |            |  |           | 100 | % |  | Gas/Oil/Jet 
|Norwalk, Connecticut               |  | ISO-NE                       |  |          | 353   |            |  |           | 100 | % |  | Oil         
|Connecticut Jet Power, Connecticut |  | ISO-NE                       |  |          | 127   |            |  |           | 100 | % |  | Jet         




Item 3  Legal
Proceedings

Fortistar Capital Inc. v. NRG Energy,
Inc., Hennepin County District
Court

On July 12, 1999, Fortistar Capital Inc.
sued NRG Energy in Minnesota state court. The complaint sought
injunctive relief and damages of over $50 million resulting
from NRG Energys alleged breach of a letter agreement with
Fortistar relating to the Oswego Steam Station. NRG Energy
asserted counterclaims. After considerable litigation, the
parties entered into a conditional, confidential settlement
agreement, which was subject to necessary board and lender
approvals. NRG Energy was unable to obtain necessary approvals.
Fortistar has moved the court to enforce the settlement, seeking
damages in excess of $35 million plus interest and
attorneys fees. NRG Energy is opposing Fortistars
motion on the grounds that conditions to contract performance
have not been satisfied. No decision has been made on the
pending motion, and NRG Energy cannot predict the outcome of
this dispute.

Connecticut Light & Power Company v.
NRG Power Marketing Inc., Docket
No. 3:01-CV-2373 (A WT), pending in the United States
District Court, District of Connecticut

This matter involves a claim by Connecticut
Light & Power Company for recovery of amounts it claims
is owing for congestion charges under the terms of a Standard
Offer Services contract between the parties, dated
October 29, 1999. CL&P has served and filed its motion
for summary judgment to which NRG Power Marketing filed a
response on March 21, 2003. CL&P has offset
approximately $30 million from amounts owed to NRG Power
Marketing claiming that it has the right to offset those amounts
under the contract. NRG Power Marketing has counterclaimed
seeking to recover those amounts, arguing among other things
that CL&P has no rights under the contract to offset them.
NRG Power Marketing cannot estimate at this time the likelihood
of an unfavorable outcome in this matter, or the overall
exposure for congestion charges for the full term of the
contract. Although the outcome of this litigation may have an
effect on NRG Northeast, NRG Northeast is not a party to this
litigation.

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The State of New York and Erin M. Crotty,
as Commissioner of the New York State Department of
Environmental Conservation v. Niagara Mohawk Power Corporation
et al.,United States District Court
for the Western District of New York, Civil Action
No. 02-CV-002S

In January, 2002, NRG Energy and Niagara Mohawk
Power Corporation (NiMo) were sued by the New York
Department of Environmental Conservation in federal court in New
York. The complaint asserts that projects undertaken at NRG
Energys Huntley and Dunkirk plants by NiMo, the former
owner of the facilities, should have been permitted pursuant to
the Clean Air Act and that the failure to do so violated federal
and state laws. In July, 2002, NRG Energy filed a motion to
dismiss. On March 27, 2003 the court dismissed the
complaint against NRG Energy with prejudice as to the federal
claims and without prejudice as to the state claims. It is
possible the state will appeal this dismissal to the Second
Circuit Court of Appeals or re-file a case against NRG Energy.
If the case ultimately is litigated to a judgment and there is
an unfavorable outcome that could not be addressed through use
of compliant fuels and/or a plantwide applicability limit, NRG
Energy has estimated that the total investment that would be
required to install pollution control devices could be as high
as $300 million over a ten to twelve-year period, and NRG
Energy may be responsible for payment of certain penalties and
fines.

Niagara Mohawk Power Corporation v. NRG
Energy, Inc., Huntley Power, LLC, and Dunkirk Power,
LLC,Supreme Court, State of New York,
County of Onondaga, Case No. 2001-4372

NRG Energy has asserted that NiMo is obligated to
indemnify it for any related compliance costs associated with
resolution of the enforcement action. NiMo has filed suit in
state court in New York seeking a declaratory judgment with
respect to its obligations to indemnify NRG Energy under the
asset sales agreement.

Huntley Power LLC, Dunkirk Power LLC and
Oswego Harbor Power LLC

All three of these facilities have been issued
Notices of Violation with respect to opacity exceedances. NRG
Energy has been engaged in consent order negotiations with the
New York State Department of Environmental Conservation relative
to opacity issues affecting all three facilities periodically
since 1999. One proposed consent order was forwarded by DEC
under cover of a letter dated January 22, 2002, which makes
reference to 7,890 violations at the three facilities and
contains a proposed payable penalty for such violations of
$900,000. On February 5, 2003, DEC sent to us a proposed
Schedule of Compliance and asserted that it is to be used in
conjunction with newly-drafted consent orders. NRG Energy has
not yet received the consent orders although NRG Energy has been
told by DEC that DEC is now seeking a penalty in excess of that
cited in its January 22, 2002 letter. NRG Energy expects to
continue negotiations with DEC regarding the proposed consent
orders, including the Schedule of Compliance and the penalty
amount. NRG Energy cannot predict whether those discussions with
the DEC will result in a settlement and, if they do, what
sanctions will be imposed. In the event that the consent order
negotiations are unsuccessful, NRG Energy does not know what
relief DEC will seek through an enforcement action and what the
result of such action will be.

Niagara Mohawk Power Corporation v. Dunkirk
Power LLC, et al., Supreme Court, Erie
County, Index No. 1-2000-8681

On October 2, 2000, plaintiff Niagara Mohawk
Power Corporation commenced this action against NRG Energy to
recover damages, plus late fees, less payments received, through
the date of judgment, as well as any additional amounts due and
owing for electric service provided to the Dunkirk Plant after
September 18, 2000. Plaintiff Niagara Mohawk claims that
NRG Energy has failed to pay retail tariff amounts for utility
services commencing on or about June 11, 1999 and
continuing to September 18, 2000 and thereafter. Plaintiff
has alleged breach of contract, suit on account, violation of
statutory duty, and unjust enrichment claims. On or about
October 23, 2000, NRG Energy served an answer denying
liability and asserting affirmative defenses.

After proceeding through discovery, and prior to
trial, the parties and the court entered into a stipulation and
order filed August 9, 2002 consolidating this action with
two other actions against NRG Northeasts

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Huntley and Oswego subsidiaries, both of which
cases assert the same claims and legal theories for failure to
pay retail tariffs for utility services.


On October 8, 2002, a Stipulation and Order
was filed in the Erie County Clerks Office staying this
action pending submission of some or all of the disputes in the
action to the FERC. NRG Energy cannot make an evaluation of the
likelihood of an unfavorable outcome. The cumulative potential
loss could exceed $35 million.

NRG Energy Credit Defaults

NRG Energy and various of its subsidiaries are in
default under various of their credit facilities, financial
instruments, construction agreements and other contracts, which
have given rise to liens, claims and contingencies against them
and may in the future give rise to additional liens, claims and
contingencies against them. In addition, NRG Energy and various
of its subsidiaries have entered into various guarantees, equity
contribution agreements, and other financial support agreements
with respect to the obligations of their affiliates, which have
given rise to liens, claims and contingencies against them and
may in the future give rise to additional liens, claims and
contingencies against the party or parties providing the
financial support. NRG Energy cannot at this time predict the
outcome or financial impact of these matters.




Item 4  Submission of
Matters to a Vote of Security Holders

No matters were considered during the year ended
December 31, 2002.




PART II




Item 5  Market for the
Registrants Common Equity and Related Stockholder
Matters



| |                     
| | --------------------
| | Quarterly Stock Data

There is no established public market for the
common equity of NRG Northeast.

Holders

Northeast Generation Holding LLC owns 50% of the
outstanding equity interests of NRG Northeast Generating LLC and
NRG Eastern LLC owns 50% of the outstanding equity interests of
NRG Northeast Generating LLC. Northeast Generation Holding LLC
and NRG Eastern LLC are each wholly-owned subsidiaries of NRG
Energy, Inc.

Distributions on Common Equity

During 2002 NRG Northeast did not distribute
earnings and does not currently intend to distribute any future
earnings as distributions. During 2001 and 2000, NRG Northeast
distributed $52.7 million and $422.1 million to its
members.

18



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Item 6  Selected Financial
Data

The following table presents selected financial
data of NRG Northeast. This historical data should be read in
conjunction with the Consolidated Financial Statements and the
related notes thereto in Item 15 and
Managements Discussion and Analysis of Financial
Condition and Results of Operations in Item 7.

|                                             |  |                         |           |                |  |      |           |                   |  |   |           |  |  |   |           | 
|-------------------------------------------- |  | ----------------------- | --------- | -------------- |  | ---- | --------- | ----------------- |  | - | --------- |  |  | - | --------- | 
|                                             |  |                         |           |                |  |      |           | For the          
|                                             |  |                         |           | period from   
|                                             |  | Year Ended December 31, |           | April 27, 1999
|                                             |  |                         |           | (inception) to
|                                             |  | 2002                    |           | 2001           |  | 2000 |           | December 31, 1999
|                                             |  |                         |           |                |  |      |           |                  
|                                             |  |                        
|                                             |  | (In thousands)         
|Total operating revenues                     |  | $                       | 693,869   |                |  | $    | 1,050,688 |                   |  | $ | 1,121,798 |  |  | $ | 258,574   | 
|Special charges                              |  |                         | 50,524    |                |  |      |          |                   |  |   |          |  |  |   |          | 
|Total operating costs and expenses           |  |                         | 643,459   |                |  |      | 785,420   |                   |  |   | 776,193   |  |  |   | 177,817   | 
|Net income                                   |  |                         | 3,885     |                |  |      | 211,255   |                   |  |   | 283,309   |  |  |   | 54,347    | 
|Total assets                                 |  |                         | 1,693,737 |                |  |      | 1,794,730 |                   |  |   | 1,750,484 |  |  |   | 1,704,638 | 
|Long-term debt, including current Maturities |  |                         | 586,500   |                |  |      | 610,000   |                   |  |   | 700,000   |  |  |   | 682,330   | 




Item 7  Managements
Discussion and Analysis of Financial Condition and Results of
Operations

Overview

Due to the factors discussed below, as well as
other matters discussed herein, NRG Northeasts financial
condition has deteriorated significantly in the recent past. See
Liquidity below. As a result, NRG Northeast does not
contemplate that it will have sufficient funds to make required
principal and interest payments on its corporate debt, which
means that NRG Northeast will remain in default of the various
corporate level debt obligations discussed more fully herein
including the secured NRG Northeast Generating LLC bonds. In the
absence of a consensual plan of reorganization, it is highly
likely that NRG Northeast, in conjunction with NRG Energy, will
be required to commence a voluntary chapter 11 bankruptcy
proceeding to allow it to implement its own plan of
reorganization. The commencement of a voluntary chapter 11
bankruptcy proceeding without a consensual plan of
reorganization will increase the possibility of a prolonged
bankruptcy proceeding.

Industry Dynamics

An unregulated merchant power company in the
United States can be characterized in two ways, as a generator
or as an energy merchant, with some companies having
characteristics of both. In the United States, generators are
either outgrowths of regulated utilities, developers or are
independent aggregators of plants divested by utilities.
Generators have grown through acquisitions or the construction
of new power plants. Energy merchants have emphasized risk
management and trading skills over the ownership of physical
assets. Energy deregulation paved the way for development of
these companies, with utilities in some regions forced to sell
off some of their generating capacity and buy electricity on the
wholesale market or through power procurement agreements.

Both generators and energy merchants prospered in
the late 1990s. Starting in 1999, however, a number of
factors began to arise which had a negative effect on the
business model for merchant power companies. These factors
included:

California When
California restructured its electricity industry in the
mid-1990s, it required utilities to sell generation assets
and buy electricity on the wholesale spot market, without the
stability of long-term contracts. At the time, California had
adequate supplies of power, but the State of California was
experiencing unusually high electricity demand growth while new
capacity additions were not keeping pace. Supply began to lag
behind demand, and previously moderate weather gave way to dryer
conditions, reducing hydroelectric supply. Shortages and
blackouts ensued in 1999 and 2000. Meanwhile, as wholesale
electricity prices moved higher, utilities were not allowed to
pass higher costs on to consumers under Californias
regulatory regime. Unable to bear the financial burden, PG&E
sought Chapter 11 protection and California took over the
role of

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procuring electricity for the utilities.
Politicians have criticized the electricity generators and the
energy merchants, accusing them of improperly manipulating
supply, demand and prices. Merchant power companies in
California are now embroiled in protracted litigation with
California and private parties, which is discouraging new
investment.


Economy The
United States economy, already headed towards a recession by
mid-2001, suffered a heavy blow on September 11, 2001.
This, along with a decrease in economically driven electricity
demand, exacerbated the drop in stock valuations of the energy
merchants. Other regions of the world economy have suffered
problems as well, which has exposed companies with international
assets to losses based on severe currency fluctuations.

Weather On
the whole, the summer of 2001, the winter of 2001/2002 and the
summer of 2002 were mild in the United States. This together
with excessive new construction in many markets has driven down
energy prices significantly.

Enron The
bankruptcy of Enron has devastated the merchant power industry.
The public and political perception created by Enron put a
stigma on the industry, drove investors away and increased
scrutiny of the industry. Enron also played a key role in the
energy trading markets, providing a widely used electronic
trading platform that accounted for an enormous amount of
trading volume. No other company has stepped in to fill this
role, and as a result the electricity markets have become far
less efficient and liquid.

Credit
ratings The credit
rating agencies were sharply criticized for not foreseeing
Enrons problems. As a result, the agencies have been quick
to scrutinize the rest of the industry, and have tightened their
criteria for creditworthiness. The agencies have downgraded
most, if not all, of the industry participants. Many of these
downgrades were severe  ratings at times were dropped
several notches at once, or dropped more than once in a span of
weeks. This has resulted in most of the energy companies,
generators and merchants having non-investment grade credit
ratings at this time.

Oversupply As
wholesale electricity prices and market liquidity increased in
the late 1990s the industry went on a building boom.
Through 2001 capital was readily available for the industry,
encouraging companies to build new generation facilities. The
years 2000 and 2001 saw record megawatt capacity additions in
the United States, and record years were on the horizon for 2002
and 2003. Even with steady economic growth this would have
created an oversupply of generation. Limited economic growth and
recession have exacerbated the oversupply situation.

Results of Operations

For the Year
Ended December 31, 2002 Compared to the Year Ended
December 31, 2001

Net income for the year ended December 31,
2002 was $3.9 million, a decrease of $207.4 million or
98.2% compared to 2001. This change was due to the factors
described below.



| |                   
| | ------------------
| | Operating Revenues

For the year ended December 31, 2002, NRG
Northeast had total revenues of $693.9 million compared to
$1,050.7 million for the year ended December 31, 2001,
a decrease of $356.8 million or 34.0%. The revenues
primarily consist of sales under long-term agreements for both
years. The decrease in revenues is due to a combination of lower
capacity revenues and a 23% decline in megawatt hour generation
compared with 2001. This decline in generation is attributable
to an unseasonably warm winter and cooler spring and a slowing
economy which reduced demand for electricity, together with new
regulation (UCAP structure) which reduced price volatility,
particularly in New York City, where NRG Northeasts plants
sell into the merchant energy market.



| |                
| | ---------------
| | Operating Costs

Cost of operations for the year ended
December 31, 2002 were $494.4 million compared to
$712.1 million for the year ended December 31, 2001.
This represents a decrease of $217.7 million or 30.6%.
Operating costs

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primarily consist of expenses for fuel, plant
operations and maintenance and unrealized gains or losses
associated with changes in the fair value of energy related
derivative instruments not accounted for as hedges in accordance
with SFAS No. 133. The decrease in operating costs is primarily
due to a reduction in fuel cost due to a decline in power
generation, lower expenditures on plant maintenance and
operations and a $48.8 million favorable swing in
unrealized gains/losses associated with changes in the fair
value of energy related derivative instruments not accounted for
as hedges in accordance with SFAS No. 133.


Fuel expense for the year ended December 31,
2002 was $323.1 million compared to $462.6 million for
the year ended December 31, 2001. For the year ended
December 31, 2002 fuel expense represented 46.6% of revenue
and included $108.9 million of coal, $114.1 million of
natural gas, $100.1 million of fuel oil, diesel and other
related fuel costs. For the year ended December 31, 2001
fuel expense represented 44.0% of revenue and included
$107.3 million of coal, $178.4 million of natural gas,
$176.9 million of fuel oil and other related fuel costs.

Plant operations and maintenance expense for the
year ended December 31, 2002, was $196.5 million
compared to $225.9 million for the year ended December 31,
2001. For the year ended December 31, 2002, plant
operations and maintenance expense represented 28.3% of revenue,
and includes labor and benefits under operating service
agreements of $62.1 million, maintenance parts, supplies
and services of $76.4 million, and property taxes and other
expenses of $58.0 million. For the year ended
December 31, 2001, plant operations and maintenance expense
represented 21.5% of revenue, and includes labor and benefits
under operating service agreements of $72.4 million,
maintenance parts, supplies and services of $84.5 million,
and property taxes and other expenses of $69.0 million.

Unrealized gains associated with changes in fair
value of non-hedge energy related derivative instruments
recorded in operating costs were $25.2 million for 2002
compared to unrealized losses of $23.6 million for 2001.



| |             
| | ------------
| | Depreciation

Depreciation costs were $54.2 million for
the year ended December 31, 2002 compared to
$48.9 million of the year ended December 31, 2001.
Depreciation expense is primarily related to the facilities and
related equipment, which are being depreciated over ten to
thirty years. The increase in expense is primarily due to the
impact of the $34.1 million of capital expenditures made
during 2002.



| |                                   
| | ----------------------------------
| | General and Administrative Expense

General and administrative expenses were
$44.3 million for the year ended December 31, 2002
compared to $24.4 million for the year ended
December 31, 2001. These expenses include costs for legal
and other contract services, payments to NRG Energy for
corporate services, expenses related to office administration,
as well as costs for certain employee benefits. General and
administrative expense represented 6.4% and 2.3% of revenues for
the years ended December 31, 2002 and 2001, respectively.
The 2002 expense includes $22.3 million related to bad
debts. Offsetting the 2001 general and administrative expenses
is $8.1 million related to the reversal of the accounts
receivable reserve during the fourth quarter due to the
collection of previously disputed receivables.



| |                
| | ---------------
| | Special Charges

During the third quarter of 2002, NRG Northeast
experienced credit rating downgrades, defaults under certain
credit agreements, increased collateral requirements and reduced
liquidity. NRG Northeast applied the provisions of SFAS
No. 144 to the asset carrying values of its projects
factoring in the probability of different courses of action
available to NRG Northeast given its financial position and
liquidity constraints significantly affected by NRG
Northeasts downgrade at the end of July 2002. In applying
those provisions, NRG Northeasts management primarily
considered cash flow analyses related to those projects. As a
result, NRG Northeast determined that the Somerset Facility
became impaired during the third quarter of 2002 and should be
written down to fair market value. The asset impairment was
recognized as a special charge in the

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third quarter of 2002 statement of operations in
the amount of $49.3 million. See Item 15 
Notes 3 and 14 to the Consolidated financial statements and
notes of this Form 10-K for additional information.


In addition to the asset impairment charge, NRG
Northeast incurred $1.2 million of expected restructuring costs
consisting of advisor and legal fees. These costs were also
recorded as special charges.

Additional asset impairment and other related
charges may be recorded by NRG Northeast given the changing
business conditions and resolution of the pending restructuring
plan.



| |             
| | ------------
| | Other Income

Other income was $5.3 million for the year
ended December 31, 2002 compared to $4.6 million for
the year ended December 31, 2001. The majority of the
increase relates to a property tax refund and an insurance
settlement.



| |                 
| | ----------------
| | Interest Expense

Interest expense was $51.8 million for the
year ended December 31, 2002 compared to $58.6 million
for the year ended December 31, 2001. The interest expense
relates to amortization of deferred finance costs and interest
on the outstanding balance of the initial $750 million of
senior secured bonds issued on February 22, 2000. The
decrease in interest expense is due primarily to scheduled debt
repayments resulting in a decline in the average outstanding
debt balances during the year ended December 31, 2002
versus the year ended December 31, 2001.



| |                                                                                      
| | -------------------------------------------------------------------------------------
| | For the Year Ended December 31, 2001
    Compared to the Year Ended December 31, 2000

Net income for the year ended December 31,
2001 was $211.3 million, a decrease of $72.0 million
or 25.4% compared to 2000. This change was due to the factors
described below.



| |                   
| | ------------------
| | Operating Revenues

For the year ended December 31, 2001, NRG
Northeast had total revenues of $1.1 billion compared to
$1.1 billion for the year ended December 31, 2000, a
decrease of $71.1 million or 6.3%. The revenue amounts
consisted primarily of revenue from sales under long-term
agreements for both years. The 6.3% decrease in revenue is
primarily attributable to an 8% decline in megawatt hour
production. Most of that decline occurred in the fourth quarter,
as a warmer winter and economic conditions lowered electricity
demand.



| |                             
| | ----------------------------
| | Operating Costs and Expenses

Cost of operations for the year ended
December 31, 2001 were $712.1 million compared to
$700.6 million for the year ended December 31, 2000.
This represents a increase of $11.5 million or 1.6%.

Fuel expense for the year ended December 31,
2001 was $462.6 million compared to $457.5 million for
the year ended December 31, 2000. For the year ended
December 31, 2001 fuel expense represented 44.0% of revenue
and included $107.3 million of coal, $178.4 million of
natural gas, $176.9 million of fuel oil, diesel and other
related fuel costs. For the year ended December 31, 2000
fuel expense represented 40.8% of revenue and included
$115.5 million of coal, $156.1 million of natural gas,
$185.9 million of fuel oil and other related fuel costs.
Fuel expense increased 1.1% in 2001 despite an 8% decrease in
generation. This is due to a sharp increase in the price of
natural gas primarily in the first half of the year as compared
with the same period in 2000. The increase in natural gas was
partially offset by declines in coal expense driven by lower
coal plant generating levels.

Plant operations and maintenance expense for the
year ended December 31, 2001, was $225.9 million
compared to $243.1 million for the year ended December 31,
2000. For the year ended December 31, 2001, plant
operations and maintenance expense represented 21.5% of revenue,
and includes labor and benefits under operating service
agreements of $72.4 million, maintenance parts, supplies
and services of $84.5 million, and property taxes and other
expenses of $69.0 million. For the year ended
December 31, 2000, plant

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operations and maintenance expense represented
21.7% of revenue, and includes labor and benefits under
operating service agreements of $64.8 million, maintenance
parts, supplies and services of $101.8 million, and
property taxes and other expenses of $76.5 million.


Unrealized losses associated with changes in fair
value of non-hedge related derivative instruments recorded in
operating costs were $23.6 million for 2001.



| |             
| | ------------
| | Depreciation

Depreciation costs were $48.9 million for
the year ended December 31, 2001 compared to
$47.8 million of the year ended December 31, 2000.
Depreciation expense is primarily related to the facilities and
related equipment, which are being depreciated over twenty-five
to thirty years.



| |                                   
| | ----------------------------------
| | General and Administrative Expense

General and administrative expenses were
$24.4 million for the year ended December 31, 2001
compared to $27.9 million for the year ended
December 31, 2000. These expenses include costs for legal
and other contract services, payments to NRG Energy for
corporate services, expenses related to office administration,
as well as costs for certain employee benefits. General and
administrative expense represented 2.3% and 2.5% of revenues for
the years ended December 31, 2001 and 2000, respectively.
Offsetting the 2001 general and administrative expenses is
$8.1 million related to the reversal of the accounts
receivable reserve during the fourth quarter due to the
collection of previously disputed receivables.



| |             
| | ------------
| | Other Income

Other income was $4.6 million for the year
ended December 31, 2001 compared to $0 for the year ended
December 31, 2000. The majority of the increase relates to
interest income related to prior year disputed revenues.



| |                 
| | ----------------
| | Interest Expense

Interest expense was $58.6 million for the
year ended December 31, 2001 compared to $62.3 million
for the year ended December 31, 2000. The interest expense
relates to amortization of deferred finance costs and interest
on the outstanding balance of the initial $750 million of
senior secured bonds issued on February 22, 2000. The
decrease in interest expense is due primarily to the write-off,
in February 2000, of the remaining unamortized deferred finance
costs on short-term borrowings coupled with scheduled debt
repayments resulting in a decline in the average outstanding
debt balances during the twelve months ended December 31,
2001 versus the twelve months ended December 31, 2000.

Factors Affecting Future Results of
Operations

NRG Northeast is also impacted by rule/tariff
changes that occur in the existing ISOs. On March 1, 2003,
ISO-NE implemented its version of Standard Market Design. This
change dramatically modifies the New England market structure by
incorporating Locational Marginal Pricing (LMP 
pricing by location rather than on a New England wide basis).
Even though NRG Northeast views this change as a significant
improvement to the existing market design, NRG Northeast still
views the market within New England as insufficient to allow for
NRG Northeast to recover its costs and earn a reasonable return
on investment. Consequently, on February 26, 2003, Devon
Power LLC, Middletown Power LLC, Montville Power LLC, Norwalk
Power LLC and NRG Power Marketing (collectively, the NRG Filers)
filed and requested a cost of service rate with FERC for most of
its Connecticut fleet, requesting a February 27th effective
date. The NRG Filers remain committed to working with ISO-NE,
FERC and other stakeholders to continue to improve the New
England market that will hopefully make further reliance on a
cost of service rate unnecessary. While the NRG Filers have the
right to file for such rate treatment, there are no assurances
that FERC will grant such rates in the form or amount that the
NRG Filers petitioned for in their filing.

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On March 25, 2003, the Federal Energy
Regulatory Commission (FERC) issued an order (the Order) in
response to the NRG Filers Joint Motion for Emergency
Expedited Issuance of Order by March 17, 2003 in Docket
No. ER03-563-000 (the Emergency Motion). In the Emergency
Motion, the NRG Filers requested that FERC accept the NRG
Filers reliability must-run agreements and assure the NRG
Filers recovery of deferred maintenance costs for their
New England generating facilities prior to the peak summer
season. FERC accepted the NRG Filers filing as to the
recovery of spring 2003 maintenance costs, subject to refund.
FERCs Order authorizes the ISO New England Inc. to begin
collecting these maintenance costs in escrow for the benefit of
the NRG Filers as of February 27, 2003. Several intervenors
protested the Emergency Motion. FERC will rule on such protests
and other issues raised in the Emergency Motion in a subsequent
order.

If FERC declines to grant cost of service-based
rates in Connecticut, there may be additional impairments
related to the Connecticut assets. Management is unable to
determine the possible magnitude of any such additional asset
impairments.

Critical Accounting Policies and
Estimates

NRG Northeasts discussion and analysis of
its financial condition and results of operations are based upon
NRG Northeasts consolidated financial statements, which
have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of
these financial statements and related disclosures in compliance
with generally accepted accounting principles
(GAAP) requires the application of appropriate technical
accounting rules and guidance as well as the use of estimates
and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosures of
contingent assets and liabilities. The application of these
policies necessarily involves judgments regarding future events,
including the likelihood of success of particular projects,
legal and regulatory challenges. These judgments, in and of
themselves, could materially impact the financial statements and
disclosures based on varying assumptions, which may be
appropriate to use. In addition, the financial and operating
environment also may have a significant effect, not only on the
operation of the business, but on the results reported through
the application of accounting measures used in preparing the
financial statements and related disclosures, even if the nature
of the accounting policies have not changed.

On an ongoing basis, NRG Northeast evaluates its
estimates utilizing historic experience, consultation with
experts and other methods NRG Northeast considers reasonable in
particular circumstances. In any case, actual results may differ
significantly from NRG Northeasts estimates. Any effects
on NRG Northeasts business, financial position or results
of operations resulting from revisions to these estimates are
recorded in the period in which the facts that give rise to the
revision become known.

NRG Northeasts significant accounting
policies are summarized in Item 15  Note 2
of the Consolidated Financial Statements. The following table
identifies certain of the significant accounting policies listed
in Item 15  Note 2 of the Consolidated
Financial Statements. The table also identifies the judgments
required and uncertainties involved in the application of each.
These policies, along with the underlying assumptions and
judgments made by NRG Northeasts management in their
application, have a significant impact on NRG Northeasts
consolidated financial statements. NRG Northeast identifies its
most critical accounting policies as those that are the most
pervasive and important to the portrayal of NRG Northeasts

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financial position and results of operations, and
that require the most difficult, subjective and/or complex
judgments by management regarding estimates about matters that
are inherently uncertain.


|                                             |  |                                                                                                                                                                                                                                                                                                                                                
|-------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Accounting Policy                            |  | Judgments/Uncertainties Affecting Application                                                                                                                                                                                                                                                                                                  
|                                             |  |                                                                                                                                                                                                                                                                                                                                                
|Capitalization Practices/Purchase Accounting |  |  Determination of beginning and ending
    of capitalization periods
     Allocation of purchase prices to identified assets                                                                                                                                                                                                                 
|Asset Valuation                              |  |  Recoverability of investment through
    future operations
     Regulatory and political environments and
    requirements
     Estimated useful lives of assets
     Environmental obligations and operational
    limitations
     Estimates of future cash flows
     Estimates of fair value
     Judgement about triggering events
|Revenue Recognition                          |  |  Customer/counter-party dispute
    resolution practices
     Market maturity and economic conditions
     Contract interpretation                                                                                                                                                                                                          
|Uncollectible Receivables                    |  |  Economic conditions affecting
    customers, counter parties, suppliers and market prices
     Regulatory environment and impact on customer
    financial condition
     Outcome of litigation and bankruptcy proceedings                                                                                                                 
|Derivative Financial Instruments             |  |  Market conditions in the energy
    industry, especially the effects of price volatility on
    contractual commitments
     Assumptions used in valuation models
     Counter party credit risk
     Regulatory and political environments and
    requirements                                                                          
|Litigation Claims and Assessments            |  |  Impacts of court decisions
     Estimates of ultimate liabilities arising from legal
    claims                                                                                                                                                                                                                                             

Of all of the accounting policies identified in
the above table, NRG Northeast believes that the following
policies and the application thereof to be those having the most
direct impact on NRG Northeasts financial position and
results of operations.



| |                                                     
| | ----------------------------------------------------
| | Capitalization Practices and Purchase
    Accounting

As of December 31, 2002, NRG Northeast has a
carrying value of approximately $1.3 billion of net
property, plant and equipment, representing approximately 78.8%
total assets. These amounts represent the estimated fair values
at the date of acquisition and construction. These estimates may
be adjusted based upon completion of certain procedures
including third party valuations.

For those assets that were or are being
constructed or acquired by NRG Northeast, the carrying value
reflects the application of NRG Northeasts property, plant
and equipment policies which incorporate estimates, assumptions
and judgments by management relative to the capitalized costs
and useful lives of NRG Northeasts generating facilities.
Interest incurred on funds borrowed to finance projects expected
to require more than three months to complete is capitalized.
Capitalization of interest is discontinued when the asset under
construction is ready for its intended use or when construction
is terminated. There was no capitalized interest in 2002.
Development costs and capitalized project costs include third
party professional services, permits, and other costs which are
incurred incidental to a particular project. Such costs are
expensed as incurred until an acquisition agreement or letter of
intent is signed, and the project has been approved by

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NRG Northeasts Management Committee.
Additional costs incurred after this point are capitalized. When
a project begins operation, previously capitalized project costs
are reclassified to equity investments in affiliates or property
plant and equipment and amortized on a straight-line basis over
the lesser of the life of the projects related assets or
revenue contract period.




| |                                    
| | -----------------------------------
| | Impairment of Long Lived
    Assets

NRG Northeast evaluates property, plant and
equipment and intangible assets for impairment whenever
indicators of impairment exist. Recoverability of assets to be
held and used is measured by a comparison of the carrying amount
of the assets to the future net cash flows expected to be
generated by the asset, through considering project specific
assumptions for long-term power pool prices, escalated future
project operating costs and expected plant operations. If such
assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets by
factoring in the probability weighting of different courses of
action available to NRG Northeast. Generally, fair value will be
determined using valuation techniques such as the present value
of expected future cash flows. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less
the cost to sell. As of December 31, 2002, net income from
continuing operations was reduced $49.3 million due to
impairments recorded in 2002. Asset impairment evaluations are,
by nature highly subjective.



| |                                                      
| | -----------------------------------------------------
| | Revenue Recognition and Uncollectible
    Receivables

NRG Northeast is primarily an electric generation
company, operating a portfolio of majority-owned electric
generating plants. Both physical and financial transactions are
entered into to optimize the financial performance of NRG
Northeasts generating facilities. Electric energy is
recognized upon transmission to the customer. Electric energy is
recognized upon transmission to the customer. Capacity and
ancillary revenue is recognized when contractually earned. NRG
Northeast continually assesses the collectibility of its
receivables and in the event it believes a receivable to be
uncollectible an allowance for doubtful accounts is recorded or,
in the event of a contractual dispute, the receivable and
corresponding revenue may be considered unlikely of recovery and
not recorded in the financial statements until management is
satisfied that it will be collected.



| |                                     
| | ------------------------------------
| | Derivative Financial
    Instruments

In January 2001, NRG Northeast adopted SFAS
No. 133, Accounting for Derivative Instruments and Hedging
Activities, as amended by SFAS No. 137 and SFAS
No. 138. SFAS No. 133 requires NRG Northeast to record
all derivatives on the balance sheet at fair value. Changes in
the fair value of non-hedge derivatives are immediately
recognized in earnings. Changes in the fair value of derivatives
accounted for as hedges are either recognized in earnings as an
offset to the changes in the fair value of the related hedged
assets, liabilities and firm commitments or for forecasted
transactions, deferred and recorded as a component of
accumulated other comprehensive income (OCI) until the
hedged transactions occur and are recognized in earnings. NRG
Northeast primarily applies SFAS No. 133 to long-term power
sales contracts, long-term gas purchase contracts and other
energy related commodities financial instruments used to
mitigate variability in earnings due to fluctuations in spot
market prices, hedge fuel requirements at generation facilities
and protect investments in fuel inventories. SFAS No. 133
also applies to interest rate swaps and foreign currency
exchange rate contracts. The application of SFAS No. 133
results in increased volatility in earnings due to the impact
market prices have on the market positions and financial
instruments that NRG Northeast has entered into. In determining
the fair value of these derivative/financial instruments NRG
Northeast uses estimates, various assumptions, judgment of
management and when considered appropriate third party experts
in determining the fair value of these derivatives.

Off Balance-Sheet Items

As of December 31, 2002, NRG Northeast does
not have any significant relationships with structured finance
or special purpose entities that provide liquidity, financing or
incremental market risk or credit risk.

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Liquidity and Capital Resources



| |                                                                                                
| | -----------------------------------------------------------------------------------------------
| | Liquidity Issues of NRG Energy and it
    Subsidiaries  Current Status and Chain of
    Events

In December 2001, Moodys Investor Service
(Moodys) placed NRG Energys long-term senior
unsecured debt rating on review for possible downgrade. In
response, Xcel Energy and NRG Energy put into effect a plan to
preserve NRG Energys investment grade rating and improve
its financial condition. This plan included financial support to
NRG Energy from Xcel Energy; marketing certain NRG Energy assets
for sale; canceling and deferring capital spending; and reducing
corporate expenses.

In response to a possible downgrade, during 2002,
Xcel Energy contributed $500 million to NRG Energy, and NRG
Energy and its subsidiaries sold assets and businesses that
provided NRG Energy in excess of $286 million in cash and
eliminated approximately $432.0 million in debt. NRG Energy
also cancelled or deferred construction of approximately 3,900
MW of new generation projects. On July 26, 2002, Standard
& Poors (S&P) downgraded NRG Energys senior
unsecured bonds to below investment grade, and three days later
Moodys also downgraded NRG Energys senior unsecured
debt rating to below investment grade. Since July 2002, NRG
Energy senior unsecured debt, as well as the secured NRG
Northeast Generating LLC bonds and the secured NRG South Central
Generating LLC bonds and Secured LSP Energy (Batesville) bonds
were downgraded multiple times. After NRG Energy failed to make
payments due under certain unsecured bond obligations on
September 16, 2002, both Moodys and S&P lowered
their ratings on NRG Energys and its subsidiaries
unsecured bonds once again. Currently, NRG Energys
unsecured bonds carry a rating of between CCC and D at S&P
and between Ca and C at Moodys, depending on the specific
debt issue.

As a result of the downgrade of NRG Energys
credit rating, declining power prices, increasing fuel prices,
the overall down-turn in the energy industry, and the overall
down-turn in the economy, NRG Energy has experienced severe
financial difficulties. These difficulties have caused NRG
Energy to, among other things, miss scheduled principal and
interest payments due to its corporate lenders and bondholders,
prepay for fuel and other related delivery and transportation
services and provide performance collateral in certain
instances. NRG Energy has also recorded asset impairment charges
of approximately $3.1 billion, related to various operating
projects as well as for projects that were under construction
which NRG Energy has stopped funding.

NRG Energy and its subsidiaries (including NRG
Northeast) have failed to timely make several interest and/or
principal payments on its indebtedness. These missed payments
have resulted in cross-defaults of numerous other non-recourse
and limited recourse debt instruments of NRG Energy and have
caused the acceleration of multiple debt instruments of NRG
Energy, rendering such debt immediately due and payable. For
more specific information regarding NRG Energys liquidity
issues, refer to Liquidity Issues in Item 1 of
Form 10-K filed by NRG Energy on March 31, 2003.

In addition to the payment defaults described
above, prior to the downgrades many corporate guarantees and
commitments of NRG Energy and its subsidiaries required that
they be supported or replaced with letter of credit or cash
collateral within 5 to 30 days of a ratings downgrade below
Baa3 or BBB- by Moodys or Standard & Poors,
respectively. As a result of the downgrades on July 26 and
July 29, NRG Energy received demands to post collateral
aggregating approximately $1.1 billion. NRG Energy is
presently working with various secured project lender groups
with respect to the issue of posting collateral and is working
toward establishing a comprehensive plan of restructuring.

In August 2002, NRG Energy retained financial and
legal restructuring advisors to assist its management in the
preparation of such comprehensive financial and operational
restructuring. NRG Energy and its advisors have been meeting
regularly to discuss restructuring issues with an ad hoc
committee of its bondholders and a steering committee of its
bank lenders (the Ad Hoc Creditors Committees). In November
2002, NRG Energy and Xcel Energy presented a comprehensive plan
of restructuring to the Ad Hoc Creditors Committees. The
restructuring plan has served as a basis for continuing
negotiations between the Ad Hoc Creditors Committees, NRG Energy
and Xcel Energy related to a consensual plan of reorganization
for NRG Energy. If a comprehensive plan of restructuring is
ultimately agreed to, it is highly probable that such a plan

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would be implemented through the commencement of
a voluntary Chapter 11 bankruptcy proceeding. If NRG Energy
seeks protection under Chapter 11 of the Bankruptcy Code,
it is likely that NRG Energy would also seek such protection for
certain wholly-owned subsidiaries, which would likely include
NRG Northeast. For more specific information regarding NRG
Energys restructuring efforts, refer to Liquidity
Issues in Item 1 of Form 10-K filed by NRG
Energy on March 31, 2003.


On November 22, 2002, five former NRG Energy
executives filed an involuntary Chapter 11 petition against
NRG Energy in U.S. Bankruptcy Court for the District of
Minnesota. Under provisions of federal law, NRG Energy has the
full authority to continue to operate its business as if the
involuntary petition had not been filed unless and until a court
hearing on the validity of the involuntary petition is resolved
adversely to NRG Energy. On December 16, 2002, NRG Energy
responded to the involuntary petition, contesting the
petitioners claims and filing a motion to dismiss the
case. On February 19, 2003, NRG Energy announced that it
had reached a settlement with the petitioners. The U.S.
Bankruptcy Court for the District of Minnesota will hear NRG
Energys motion to approve the settlement and dismiss the
involuntary petition. Two of NRG Energys creditors have
objected to the motion to dismiss. There can be no assurance
that the court will dismiss the involuntary petition. The
Bankruptcy Court has discretion in the review and approval of
the settlement agreement. There is a risk that the Bankruptcy
Court may, among other things, reject the settlement agreement
or enter an order for relief under Chapter 11.

On March 26, 2003, Xcel Energy announced
that its board of directors had approved a tentative settlement
agreement with holders of most of NRG Energys long-term
notes and the steering committee representing NRGs bank
lenders. The settlement is subject to certain conditions,
including the approval of at least a majority in dollar amount
of the NRG Energy bank lenders and long-term noteholders and
definitive documentation. There can be no assurance that such
approvals will be obtained. The terms of the settlement call for
Xcel Energy to make payments to NRG Energy over the next
13 months totaling up to $752 million for the benefit
of NRG Energys creditors in consideration for their waiver
of any existing and potential claims against Xcel Energy. Under
the settlement, Xcel Energy will make the following payments:
(i) $350 million at or shortly following the
consummation of a restructuring of NRG Energys debt. It is
expected this payment would be made prior to year-end 2003;
(ii) $50 million on January 1, 2004. At Xcel
Energys option, it may fill this requirement with either
cash or Xcel Energy common stock or any combination thereof; and
(iii) $352 million in April 2004.



| |                                                    
| | ---------------------------------------------------
| | NRG Northeast Indebtedness and Liquidity
    Issues

On February 22, 2000, NRG Northeast issued
$750 million of senior secured bonds to refinance
short-term project borrowings and for certain other purposes.
The bond offering included three tranches: $320 million
with an interest rate of 8.065% due in 2004; $130 million
with an interest rate of 8.842% due in 2015; and
$300 million with an interest rate of 9.292% due in 2024.
Principal and interest payments are made semi-annually on each
June 15 and December 15. The bonds are jointly and
severally guaranteed by each of NRG Northeasts existing
and future subsidiaries. The bonds are secured by a security
interest in NRG Northeasts membership and/or other
ownership interests in the guarantors and its rights under all
intercompany notes between NRG Northeast and the guarantors. At
December 31, 2002, $556.5 million of bonds remain
outstanding and are classified as current. NRG Northeast secured
bonds currently carry a rating of D at S&P and Caa1 at
Moodys.

On June 15, 2002, NRG Energy loaned NRG
Northeast $30 million to fund capital expenditures. The
debt bears interest at the three month London Interbank Offered
Rate plus 0.5%. The debt is subordinate to the other long-term
debt of NRG Northeast and is subject to the terms and conditions
of the senior secured bonds indenture. Accordingly, NRG
Northeast has classified this loan as a short-term affiliated
note payable.

The debt agreements of NRG Northeast generally
restrict its ability to pay dividends, make distributions or
otherwise transfer funds to NRG Energy under certain
circumstances such as failure to maintain a required minimum
debt service ratio. As of December 31, 2002, NRG Northeast
did not meet the required minimum debt service coverage ratios,
and therefore is restricted from making any payments to NRG
Energy.

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NRG Northeast is also precluded from making
payments to NRG Energy due to an unfunded debt service reserve
account. Prior to the NRG Energy downgrades (see above), the
debt service reserve account of NRG Northeast was funded with a
letter of guarantee from NRG Energy. Following the downgrade,
this account was required to be funded with cash from NRG Energy
within five to thirty days. The account was not funded with cash
from NRG Energy within the respective cure period, and an event
of default occurred, thereby giving the lenders the right to
accelerate the project financings. As a result of this default,
the long-term portion of the debt has been reclassified as a
current liability, as it is potentially callable within the next
twelve months. NRG Northeast has approximately
$40.1 million of unfunded debt service reserve commitments
as of December 31, 2002.

NRG Northeast and its subsidiaries have failed to
timely make the following interest and/or principal payments to
non-affiliates on its indebtedness:

|                             |  |        |       |      |  |          |       |          |  |           |            |          |  |   |      |  |  |   |      |  |  |  |            | 
|---------------------------- |  | ------ | ----- | ---- |  | -------- | ----- | -------- |  | --------- | ---------- | -------- |  | - | ---- |  |  | - | ---- |  |  |  | ---------- | 
|                             |  | Amount |       |      |  |          |       | Interest |  | Principal |            |         
|Debt ($ In millions)         |  | Issued |       | Rate |  | Maturity |       | Due      |  | Due       |            | Date Due
|                             |  |        |       |      |  |          |       |          |  |           |            |         
|Non-Recourse Debt (secured)  |  |        |       |      |  |          |       |          |  |           |            |          |  |   |      |  |  |   |      |  |  |  |            | 
|NRG Northeast Generating LLC |  | $      | 320.0 |      |  |          | 8.065 | %        |  |           | 12/15/2004 |          |  | $ | 5.1  |  |  | $ | 53.5 |  |  |  | 12/15/2002 | 
|NRG Northeast Generating LLC |  | $      | 130.0 |      |  |          | 8.842 | %        |  |           | 6/15/2015  |          |  | $ | 5.7  |  |  |   |     |  |  |  | 12/15/2002 | 
|NRG Northeast Generating LLC |  | $      | 300.0 |      |  |          | 9.292 | %        |  |           | 12/15/2024 |          |  | $ | 13.9 |  |  |   |     |  |  |  | 12/15/2002 | 

On December 27, 2002, NRG Northeast made the
$24.7 million interest payment due on the NRG Northeast
bonds but failed to make the $53.5 million principal
payment. As of March 31, 2003, NRG Northeast had cash and
cash equivalents of approximately $12 million.

As a part of the comprehensive restructuring of
NRG Energy, NRG Energys financial and legal restructuring
advisors have been assisting the management of NRG Northeast in
the preparation of a comprehensive financial and operational
restructuring for NRG Northeast. NRG Northeast and its advisors
have been meeting regularly to discuss restructuring issues
relating to NRG Northeast with an ad hoc committee of its
bondholders (the NRG Northeast Bondholder Committee). NRG
Northeast, its management and its financial and legal advisors
have engaged in discussions with the NRG Project Bondholder
Committee regarding the terms and conditions of a restructuring
of the debt of NRG Northeast.

Cash
Flows

|                                          |  |                                 |        |      |  |      |         |  |  |   |         | 
|----------------------------------------- |  | ------------------------------- | ------ | ---- |  | ---- | ------- |  |  | - | ------- | 
|                                          |  |                                
|                                          |  | For the Year Ended December 31,
|                                          |  |                                
|                                          |  | 2002                            |        | 2001 |  | 2000
|                                          |  |                                 |        |      |  |     
|                                          |  |                                
|                                          |  | (In thousands)                 
|Net cash provided by operating activities |  | $                               | 71,610 |      |  | $    | 165,991 |  |  | $ | 430,094 | 

Net cash provided by operations for the year
ended December 31, 2002 decreased in comparison to 2001.
The decrease was primarily driven by the decrease in net income
and the significant increase in Accounts Receivable, offset in
part by the decrease in Inventory. Net cash provided by
operations for the year ended December 31, 2001 decreased
in comparison to 2000. The decrease was primarily driven by a
decrease in net income and adverse changes within working
capital.

|                                      |  |                                 |         |      |  |      |         |   |  |   |         |  
|------------------------------------- |  | ------------------------------- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                      |  |                                
|                                      |  | For the Year Ended December 31,
|                                      |  |                                
|                                      |  | 2002                            |         | 2001 |  | 2000
|                                      |  |                                 |         |      |  |     
|                                      |  |                                
|                                      |  | (In thousands)                 
|Net cash used in investing activities |  | $                               | (34,126 | )    |  | $    | (25,140 | ) |  | $ | (23,832 | )

Net cash used in investing activities for the
year ended December 31, 2002 increased in comparison to
2001. The increase is due to higher capital expenditures in
2002. Net cash used in investing activities for the year ended
December 31, 2001 increased slightly in comparison to 2000.
The increase resulted from a minor increase in capital
expenditures.

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|                                      |  |                                 |         |      |  |      |          |   |  |   |          |  
|------------------------------------- |  | ------------------------------- | ------- | ---- |  | ---- | -------- | - |  | - | -------- | -
|                                      |  |                                
|                                      |  | For the Year Ended December 31,
|                                      |  |                                
|                                      |  | 2002                            |         | 2001 |  | 2000
|                                      |  |                                 |         |      |  |     
|                                      |  |                                
|                                      |  | (In thousands)                 
|Net cash used in financing activities |  | $                               | (23,500 | )    |  | $    | (142,925 | ) |  | $ | (414,369 | )

Net cash used in financing activities for the
year ended December 31, 2002 decreased in comparison to
2001. The decrease is primarily due to the suspension of
principal payments on the debt during the year, as well as the
absence of any equity distributions during the year. Net cash
used in financing activities for the year ended
December 31, 2001 decreased in comparison to 2000. The
decrease was primarily due to a reduction in member
distributions.

The debt agreements of NRG Energys
subsidiaries and project affiliates generally restrict their
ability to pay dividends, make distributions or otherwise
transfer funds to NRG Energy. As of December 31, 2002, NRG
Northeast is restricted from making cash payments to NRG Energy.
On March 31, 2003, NRG Northeast had approximately
$12 million of cash on hand.

Capital Commitments



| |                                     
| | ------------------------------------
| | Prospective Capital
    Requirements

Management currently forecasts that cash flow
from operations for 2003 will be insufficient to cover capital
expenditures, which include minor refurbishments and
environmental compliance. Given this shortfall, NRG Northeast
anticipates funding its ongoing capital requirements through
operating cash flows and existing cash, as well as potential
external financing. Management forecasts capital expenditures to
total approximately $150 million to $200 million in
the period of 2003 through 2007. NRG Northeasts capital
expenditure program is subject to continuing review and
modification. The timing and actual amount of expenditures may
differ significantly based upon plant operating history,
unexpected plant outages, and changes in the regulatory
environment, and the availability of cash and restructuring
efforts.



| |                                                       
| | ------------------------------------------------------
| | Contractual Obligations and Commercial
    Commitments

NRG Northeast has a variety of contractual
obligations and other commercial commitments that represent
prospective cash requirements in addition to its capital
expenditure program. The following is a summarized table of
contractual obligations. See additional discussion in
Item 15 and Notes 6, 7 and 12 to the Consolidated
Financial Statements.

|                                   |  |                                                        |         |            |  |           |         |           |  |               |       |  |  |   |       |  |  |   |        | 
|---------------------------------- |  | ------------------------------------------------------ | ------- | ---------- |  | --------- | ------- | --------- |  | ------------- | ----- |  |  | - | ----- |  |  | - | ------ | 
|                                   |  |                                                       
|                                   |  | Payments Due by Period Subsequent to December 31, 2002
|                                   |  |                                                       
|                                   |  | Total                                                  |         | Short Term |  | 1-3 Years |         | 4-5 Years |  | After 5 Years
|                                   |  |                                                        |         |            |  |           |         |           |  |              
|                                   |  |                                                       
|                                   |  | (In thousands)                                        
|Long term debt                     |  | $                                                      | 556,500 |            |  | $         | 556,500 |           |  | $             |      |  |  | $ |      |  |  | $ |       | 
|Operating Leases                   |  |                                                        | 6,676   |            |  |           | 780     |           |  |               | 1,536 |  |  |   | 1,048 |  |  |   | 3,312  | 
|Note payable  affiliate           |  |                                                        | 30,000  |            |  |           |         |           |  |               |      |  |  |   |      |  |  |   | 30,000 | 
|                                   |  |                                                        |         |            |  |           |         |           |  |               |       |  |  |   |       |  |  |   |        | 
|Total contractual cash obligations |  | $                                                      | 593,176 |            |  | $         | 557,280 |           |  | $             | 1,536 |  |  | $ | 1,048 |  |  | $ | 33,312 | 
|                                   |  |                                                        |         |            |  |           |         |           |  |               |       |  |  |   |       |  |  |   |        | 

|                             |  |                                                                   |         |            |  |           |         |           |  |               |   |  |  |   |   |  |  |   |   | 
|---------------------------- |  | ----------------------------------------------------------------- | ------- | ---------- |  | --------- | ------- | --------- |  | ------------- | - |  |  | - | - |  |  | - | - | 
|                             |  |                                                                  
|                             |  | Amount of Commitment by Expiration Period as of December 31, 2002
|                             |  |                                                                  
|                             |  | Total Amounts                                                     |         |           
|                             |  | Committed                                                         |         | Short Term |  | 1-3 Years |         | 4-5 Years |  | After 5 Years
|                             |  |                                                                   |         |            |  |           |         |           |  |              
|                             |  |                                                                  
|                             |  | (In thousands)                                                   
|Guarantees                   |  | $                                                                 | 140,839 |            |  | $         | 140,839 |           |  | $             |  |  |  | $ |  |  |  | $ |  | 
|                             |  |                                                                   |         |            |  |           |         |           |  |               |   |  |  |   |   |  |  |   |   | 
|Total commercial commitments |  | $                                                                 | 140,839 |            |  | $         | 140,839 |           |  | $             |  |  |  | $ |  |  |  | $ |  | 
|                             |  |                                                                   |         |            |  |           |         |           |  |               |   |  |  |   |   |  |  |   |   | 

NRG Northeast provides performance guarantees to
third parties on behalf of NRG Power Marketing in relation to
certain of its sales and supply agreements.

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Other Contingencies



| |                     
| | --------------------
| | Contract Negotiation

In July 2002, NRG Power Marketing reached a
tentative agreement with Connecticut Light & Power
(CL&P) that would result in increased compensation to NRG
Northeast, a supplier of CL&Ps wholesale supply
requirements. CL&P filed an emergency petition with the
Connecticut Department of Public Utility Control
(DPUC) asking for approval of a shift of wholesale supply
agreement revenues, effective August 1, 2002, through
December 31, 2003, that would reallocate 0.7 cents per
kilowatt-hour in the wholesale price paid to existing suppliers.
On July 26, 2002, the DPUC denied the request of CL&P
for an emergency letter ruling. On August 9, 2002, NRG
Energy announced that it had reached an agreement with ISO-NE to
keep three units at its Devon station in service in return for a
reliability must-run capacity payment. The agreement expires on
September 30, 2003.

On February 26, 2003, Devon Power LLC,
Middletown Power LLC, Montville Power LLC, Norwalk Power LLC and
NRG Power Marketing (collectively, the NRG Filers) filed and
requested a cost of service rate with FERC for most of its
Connecticut fleet, requesting a February 27th effective
date. The NRG Filers remain committed to working with ISO-NE,
FERC and other stakeholders to continue to improve the New
England market that will hopefully make further reliance on a
cost of service rate unnecessary. While the NRG Filers have the
right to file for such rate treatment, there are no assurances
that FERC will grant such rates in the form or amount that the
NRG Filers petitioned for in their filing. On March 25,
2003, the FERC issued an order (the Order) in response to the
NRG Filers Joint Motion for Emergency Expedited Issuance
of Order by March 17, 2003 in Docket No. ER03-563-000
(the Emergency Motion). In the Emergency Motion, the NRG Filers
requested that FERC accept the NRG Filers reliability
must-run agreements and assure the NRG Filers recovery of
deferred maintenance costs for their New England generating
facilities prior to the peak summer season. FERC accepted the
NRG Filers filing as to the recovery of spring 2003
maintenance costs, subject to refund. FERCs Order
authorizes the ISO New England Inc. to begin collecting these
maintenance costs in escrow for the benefit of the NRG Filers as
of February 27, 2003. Several intervenors protested the
Emergency Motion. FERC will rule on such protests and other
issues raised in the Emergency Motion in a subsequent order.

Derivative Instruments

The tables below disclose NRG Northeasts
derivative activities that include non-exchange traded contracts
accounted for at fair value. Specifically, these tables
disaggregate realized and unrealized changes in fair value;
identifies changes in fair value attributable to changes in
valuation techniques; disaggregates estimated fair values at
December 31, 2002 based on whether fair values are
determined by quoted market prices or more subjective means; and
indicates the maturities of contracts at December 31, 2002.



| |                    
| | -------------------
| | Derivative Activity

|                                                                           |  |                        |         |  
|-------------------------------------------------------------------------- |  | ---------------------- | ------- | -
|Gains/(Losses)                                                             |  | Total                 
|                                                                           |  |                       
|                                                                           |  | (Thousands of dollars)
|Fair Value of contracts outstanding at the
    beginning of the period     |  | $                      | 76,513  |  
|Contracts realized or otherwise settled during
    the period              |  |                        | (25,079 | )
|Fair value of new contract when entered into
    during the period         |  |                        |        |  
|Changes in fair values attributable to changes in
    valuation techniques |  |                        |        |  
|Other changes in fair values                                               |  |                        | (39,370 | )
|                                                                           |  |                        |         |  
|Fair value of contracts outstanding at the end of
    the period           |  | $                      | 12,064  |  
|                                                                           |  |                        |         |  

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| |                                         
| | ----------------------------------------
| | Sources of Fair Value
    Gains/(Losses)

|                                                     |  |                                       |         |           |  |             |       |           |  |            |   |  |  |   |   |  |  |   |         |  
|---------------------------------------------------- |  | ------------------------------------- | ------- | --------- |  | ----------- | ----- | --------- |  | ---------- | - |  |  | - | - |  |  | - | ------- | -
|                                                     |  |                                      
|                                                     |  | Fair Value of Contracts at Period End
|                                                     |  |                                      
|                                                     |  | Maturity                              |         |           |  | Maturity in |       |          
|                                                     |  | Less than 1                           |         | Maturity  |  | Maturity    |       | excess of |  | Total Fair
|Maturity schedule                                    |  | Year                                  |         | 1-3 Years |  | 4-5 Years   |       | 5 Years   |  | Value     
|                                                     |  |                                       |         |           |  |             |       |           |  |           
|                                                     |  |                                      
|                                                     |  | (Thousands of dollars)               
|Prices actively quoted                               |  | $                                     | (18,813 | )         |  | $           | 2,042 |           |  | $          |  |  |  | $ |  |  |  | $ | (16,771 | )
|Prices provided by other external sources            |  |                                       |        |           |  |             |      |           |  |            |  |  |  |   |  |  |  |   |        |  
|Prices based on models & other valuation
    methods |  |                                       | 28,835  |           |  |             |      |           |  |            |  |  |  |   |  |  |  |   | 28,835  |  
|                                                     |  |                                       |         |           |  |             |       |           |  |            |   |  |  |   |   |  |  |   |         |  
|                                                     |  | $                                     | 10,022  |           |  | $           | 2,042 |           |  | $          |  |  |  | $ |  |  |  | $ | 12,064  |  
|                                                     |  |                                       |         |           |  |             |       |           |  |            |   |  |  |   |   |  |  |   |         |  

Environmental Matters



| |                                     
| | ------------------------------------
| | Environmental Regulatory
    Matters

The construction and operation of power projects
are subject to stringent environmental and safety protection and
land use laws and regulations in the United States. These laws
and regulations generally require lengthy and complex processes
to obtain licenses, permits and approvals from federal, state
and local agencies. If such laws and regulations become more
stringent and NRG Northeasts facilities are not exempted
from coverage, NRG Northeast could be required to make extensive
modifications to further reduce potential environmental impacts.
Also, NRG Northeast could be held responsible under
environmental and safety laws for the cleanup of pollutant
releases at its facilities or at off-site locations where it has
sent wastes.

NRG Northeast and its subsidiaries strive to
exceed the standards of compliance with applicable environmental
and safety regulations. Nonetheless, NRG Northeast expects that
future liability under or compliance with environmental and
safety requirements could have a material effect on its
operations or competitive position. It is not possible at this
time to determine when or to what extent additional facilities
or modifications of existing or planned facilities will be
required as a result of possible changes to environmental and
safety regulations, regulatory interpretations or enforcement
policies. In general, the effect of future laws or regulations
is expected to require the addition of pollution control
equipment or the imposition of restrictions on NRG
Northeasts operations.

NRG Northeast establishes accruals where
reasonable estimates of probable environmental and safety
liabilities are possible. NRG Northeast adjusts the accruals
when new remediation responsibilities are discovered and
probable costs become estimable, or when current remediation
estimates are adjusted to reflect new information. For more
information on Environmental Matters see
Item 15  Note 12 to the Consolidated
Financial Statements.



| |                                        
| | ---------------------------------------
| | U.S. Federal Regulatory
    Initiatives

Several federal regulatory and legislative
initiatives are being undertaken in the U.S. to further limit
and control pollutant emissions from fossil-fuel-fired
combustion units. Although the exact impact of these initiatives
is not known at this time, all of NRG Northeasts power
plants will be affected in some manner by the expected changes
in federal environmental laws and regulations. In Congress,
legislation has been proposed that would impose annual caps on
U.S. power plant emissions of nitrogen oxides (NOX),
sulfur dioxide (SO2), mercury, and, in some
instances, carbon dioxide (CO2). NRG Northeast is
currently participating in the debates around such legislative
proposals as a member of the Electric Power Supply Association.
Federal legislation relating to NOX, SO2
and mercury is likely in the next two years. The prospects for
passage of the legislation relating to CO2 is more
uncertain. The U.S. Environmental Protection Agency
(USEPA) is scheduled to propose in December 2003 and
finalize in December 2004 rules governing mercury emissions from
power plants. In support of this schedule, USEPA and critical
stakeholders, some of which are aligned with NRG
Northeasts interests, are presently conducting a thorough
review of existing power plant mercury emissions data. Since
these mercury rules have not yet been proposed and legislation
has

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not yet supplanted them, it is not possible for
NRG Northeast to determine the extent to which the rules will
affect its operations.


USEPA has finalized federal rules governing ozone
season NOX emissions across the eastern United
States. These ozone season rules will be implemented in two
phases. The first phase of restrictions will occur in the Ozone
Transport Commission region during the 2003 and subsequent ozone
seasons; all of NRG Northeasts existing, wholly owned
generating units are included in this part of the program. The
second phase of NOX reductions will extend to states
within the Ozone Transport Assessment Group (OTAG) region
and restrict 2004 and subsequent ozone season NOX
emissions in most states east of the Mississippi River. These
rules require one NOX allowance to be held for each
ton of NOX emitted from any fossil fuel-fired
stationary boiler, combustion turbine, or combined cycle system
that (i) at any time on or after January 1, 1995,
served a generator with a nameplate capacity greater than 25 MW
and sold any amount of electricity or (ii) has a maximum
design heat input greater than 250 MMBtu/hr. NRG
Northeasts facilities that are subject to this rule have
been allocated NOX emissions allowances, but NRG
Northeast expects that those allowances may not be sufficient
for the anticipated operation of these facilities. Where
insufficient allowances exist, NRG Northeast must purchase
NOX allowances from sources holding excess
allowances. The need to purchase these additional NOX
allowances could have a material affect on NRG Northeasts
operations.

During the first quarter of 2002, USEPA proposed
new rules governing cooling water intake structures at existing
power facilities. These rules are scheduled to be finalized by
February 16, 2004. The proposed rules specify certain
location, design, construction, and capacity standards for
cooling water intake structures at existing power plants using
the largest amounts of cooling water. These rules will require
implementation of the best technology available for minimizing
adverse environmental impacts unless a facility shows that such
standards would result in very high costs or little
environmental benefit. The proposed rules would require NRG
Northeast facilities that withdraw water in amounts greater than
50 million gallons per day to submit with wastewater permit
applications certain surveys, plans, operational measures, and
restoration measures that combined would act to minimize adverse
environmental impacts. These anticipated cooling water intake
structure rules could have a material effect on NRG
Northeasts operations.

Other Federal initiatives that could affect NRG
Northeast and that would govern regional haze, fine particulate
matter, and ozone are underway, but under extended compliance
implementation timeframes ranging from 2009 and beyond.



| |                                    
| | -----------------------------------
| | Regional Regulatory
    Initiatives

Final rules implementing changes in air
regulations in the states of Massachusetts and Connecticut were
promulgated in 2000. The Connecticut rules required that
existing facilities reduce their emissions of SO2 in
two steps, the first of which took place on January 1,
2002. The second SO2 milestone will occur on
January 1, 2003. The NRG Northeast plants in Connecticut
have operated in compliance with the first phase rules and are
now operating in compliance with the second phase rules.
Connecticuts rules governing emissions of NOX
were also modified in 2000 to restrict the average, non-ozone
season NOX emission rate to 0.15 pound per million
Btu heat input. NRG Northeast plans to comply with the new
NOX rules, in part, through selective firing of
natural gas, use of selective non-catalytic reduction
(SNCR) technology presently installed at its Norwalk Harbor
and Middletown Power Stations, improved combustion controls, use
of emission reduction credits, and purchase of allowances. In
2002, the Connecticut legislature passed a law further
tightening air emission standards by eliminating in-state
emissions credit trading subsequent to January 1, 2005 as a
means of meeting Department of Environmental Protection
(DEP) regulatory standards for SO2 emissions
from older power plants. The termination of SO2
emissions trading in Connecticut by 2005 could have a material
effect on NRG Northeasts operations in that state.

The new Massachusetts rules set forth schedules
under which six existing coal-fired power plants in-state were
required to meet stringent emission limits for NOX,
SO2, mercury, and CO2. The state has
reserved the issue of control of carbon monoxide and particulate
matter emissions for future consideration. On
February 25th, 2003, NRG Northeast received from the
Massachusetts Department of Environmental Protection
(MADEP) a permit to install natural gas reburn technology
to meet the NOX and SO2 limits specified
in the

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new rule at its Somerset Generating Station. NRG
Northeast is projected to incur total capital expenditures of
approximately $5.4 million to implement the reburn
technology at the Somerset Station, of which about
$3.0 million remains to be spent during 2003. MADEP is
evaluating the technological and economic feasibility of
controlling and eliminating emissions of mercury from the
combustion of solid fossil fuel in Massachusetts. Within six
months of completing the feasibility evaluation, MADEP must
propose emission standards for mercury, with a proposed
compliance date of October 1, 2006. NRG Northeast believes
it can comply with any future mercury reductions required by the
rules through achieving early reductions of mercury via early
implementation of the natural gas reburn technology and with its
January 1, 2010 commitment to shutdown Somerset
Stations existing boiler. NRG Northeast is still
considering its options with respect to how it will address
MADEPs CO2 emission standards. Such options
include using early reductions of CO2 achieved
through early implementation of the natural gas reburn
technology or by filing a legal challenge with respect to
MADEPs legal authority to regulate CO2
emissions.


New York proposed rules reducing allowable
SO2 and NOX emissions from large,
fossil-fuel-fired combustion units in New York State on
February 20, 2002 (6NYCRR Part 237: Acid Deposition
Reduction NOX Budget Trading Program and Part 238:
Acid Deposition Reduction SO2 Budget Trading
Program). As proposed, these rules would affect every NRG
Northeast generator in-state. NRG Northeast provided testimony
on the proposed rules in public hearings conducted in Buffalo
and Albany on April 4, 2002, and May 20, 2002,
respectively. In addition, NRG Northeast filed written comments
on the proposed rules on May 28, 2002. NRG Northeasts
comments focused on (i) material changes in electric
markets that had occurred since the conduct of studies upon
which the Department of Environmental Conservation
(DEC) had based their proposal, (ii) the need to increase
the quantity of upwind allowances for use in offsetting in-state
emissions, and (iii) the disproportionately minimal
reduction in in-state acid deposition that could be expected
from the significant emissions reductions proposed. NRG
Northeast has received a pre-publication version of the rules
that will be considered by the New York State DECs
Environmental Board at the Boards March 26, 2003
meeting. Indications are that the rules will provide for
increased use of upwind SO2 and NOX
reductions and will continue to allow for the use of early
emission reductions. NRG Northeasts strategy for complying
with the new rules will be to generate early reductions of
SO2 and NOX associated with fuel switching
and use such reductions to extend the timeframe for implementing
technological controls, which could include the addition of flue
gas desulfurization (FGD) and selective catalytic reduction
(SCR) equipment. NRG Northeast anticipates that it could
incur capital expenditures up to $300 million in the 2008
through 2012 timeframe to implement upgrades and modifications
to its plants in New York to meet new state and federal
regulatory requirements.



| |                         
| | ------------------------
| | Site Remediation Matters

Under various federal, state and local
environmental laws and regulations, a current or previous owner
or operator of any facility, including an electric generating
facility, may be required to investigate and remediate releases
or threatened releases of hazardous or toxic substances or
petroleum products located at the facility, and may be held
liable to a governmental entity or to third parties for property
damage, personal injury and investigation and remediation costs
incurred by the party in connection with any releases or
threatened releases. These laws, including the Comprehensive
Environmental Response, Compensation and Liability Act of 1980,
as amended by the Superfund Amendments and Reauthorization Act
of 1986, impose liability without regard to whether the owner
knew of or caused the presence of the hazardous substances, and
courts have interpreted liability under such laws to be strict
(without fault) and joint and several. The cost of
investigation, remediation or removal of any hazardous or toxic
substances or petroleum products could be substantial. Although
NRG Northeast has been involved in on-site contamination
matters, to date, NRG Northeast has not been named as a
potentially responsible party with respect to any off-site waste
disposal matter.

Coal ash is produced as a by-product of coal
combustion at the Dunkirk, Huntley, and Somerset Generating
Stations. NRG Northeast attempts to direct its coal ash to
beneficial uses. Even so, significant amounts of ash are
landfilled at on-site and off-site locations. At Dunkirk and
Huntley, ash is disposed at landfills owned and operated by NRG
Northeast. No material liabilities outside the costs associated
with

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closure, post-closure care and monitoring are
expected at these facilities. NRG Northeast maintains financial
assurance to cover costs associated with closure, post-closure
care and monitoring activities. In the past, NRG Northeast has
provided financial assurance via financial test and corporate
guarantee. NRG Northeast must re-establish financial assurance
via an instrument requiring complete collateralization of
closure and post-closure-related costs, currently estimated at
approximately $5.8 million. NRG Northeast is required to
provide an alternative instrument to provide such financial
assurance on or before April 30, 2003.


NRG Northeast must also maintain financial
assurance for closing interim status RCRA facilities at the
Devon, Middletown, Montville and Norwalk Generating Stations.
Previously, NRG Northeast has provided financial assurance via
financial test. NRG Northeast must re-establish financial
assurance via an instrument requiring complete collateralization
of closure and post-closure-related costs. NRG Northeast is
required to provide an alternative instrument to provide such
financial assurance on or before April 30, 2003.

Historical clean-up liabilities were inherited as
a part of acquiring the Somerset, Devon, Middletown, Montville,
Norwalk Harbor, Arthur Kill and Astoria Generating Stations. NRG
Northeast has recently satisfied cleanup obligations associated
with the Ledge Road property (inherited as part of the Somerset
acquisition). Site contamination liabilities arising under the
Connecticut Transfer Act at the Devon, Middletown, Montville and
Norwalk Stations have been identified and are currently being
refined as part of on-going site investigations. NRG Northeast
does not expect to incur material costs associated with
completing the investigations at these Stations or future work
to cover and monitor landfill areas pursuant to the Connecticut
requirements. Remedial obligations at the Arthur Kill Generating
Station have been established in discussions between NRG
Northeast and the New York State DEC and are estimated at
$1.0 million. Remedial investigations are on-going at the
Astoria Generating Station. At this time, NRG Northeasts
long-term cleanup liability at this site is estimated at
$1.5 million. However, the magnitude of cleanup costs for
the Astoria Station cannot be estimated with certainty until the
results of the remedial investigation are available.

Recent Accounting Developments

In June 2001, FASB issued SFAS No. 143,
Accounting for Asset Retirement Obligations.
This statement addresses financial accounting and reporting for
obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs.
SFAS No. 143 requires an entity to recognize the fair value
of a liability for an asset retirement obligation in the period
in which it is incurred. The liability is initially capitalized
as part of the cost of the related tangible long-lived asset and
thus depreciated over the assets useful life. Accretion of
the liabilities due to the passage of time will be an operating
expense. Retirement obligations associated with long-lived
assets included within the scope of SFAS No. 143 are those
for which a legal obligation exists under enacted laws, statutes
and written or oral contracts, including obligations arising
under the doctrine of promissory estoppel. NRG Northeast is in
the process of evaluating the impact of adopting SFAS
No. 143 on its financial condition.

In April 2002, the FASB issued SFAS No. 145,
Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical
Corrections,that supersedes previous guidance for the
reporting of gains and losses from extinguishment of debt and
accounting for leases, among other things. SFAS No. 145
requires that only gains and losses from the extinguishment of
debt that meet the requirements for classification as
Extraordinary Items, as prescribed in Accounting
Practices Board Opinion No. 30, should be disclosed as such
in the financial statements. Previous guidance required all
gains and losses from the extinguishment of debt to be
classified as Extraordinary Items. This portion of
SFAS No. 145 is effective for fiscal years beginning after
May 15, 2002, with restatement of prior periods required.
NRG Northeast has no extraordinary gains or losses resulting
from extinguishment of debt during the three years ended
December 31, 2002 that will require restatement upon
adoption of this part of SFAS No. 145.

In addition, SFAS No. 145 amends SFAS
No. 13, Accounting for Leases,as it
relates to accounting by a lessee for certain lease
modifications. Under SFAS No. 13, if a capital lease is
modified in such a way that the change gives rise to a new
agreement classified as an operating lease, the assets and
obligation are removed, a gain or loss is recognized and the new
lease is accounted for as an operating lease. Under SFAS

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No. 145, capital leases that are modified so
the resulting lease agreement is classified as an operating
lease are to be accounted for under the sale-leaseback
provisions of SFAS No. 98, Accounting for Leases.These provisions of SFAS No. 145 were effective for
transactions occurring after May 15, 2002. Adoption of SFAS
No. 145 is not expected to have a material impact on NRG
Northeast.


In June 2002, the FASB issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities, (SFAS No. 146), SFAS No. 146
addresses financial accounting and reporting for costs
associated with exit or disposal activities and nullifies EITF
Issue No. 94-3, Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a
Restructuring).SFAS No. 146 applies to costs
associated with an exit activity that does not involve an entity
newly acquired in a business combination or with a disposal
activity covered by SFAS No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets.The
provisions of SFAS No. 146 are effective for exit or
disposal activities that are initiated after December 31,
2002.

In November 2002, The FASB issued FASB
Interpretation No. 45, Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others.The initial
recognition and initial measurement provisions of this
interpretation are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002,
irrespective of the guarantors fiscal year-end. The
disclosure requirements are effective for financial statements
of interim or annual periods ending after December 15,
2002. The interpretation addresses the disclosures to be made by
a guarantor in its interim and annual financial statements about
its obligations under guarantees. The interpretation also
clarifies the requirements related to the recognition of a
liability by a guarantor at the inception of the guarantee for
the obligations the guarantor has undertaken in issuing the
guarantee.

In January 2003, the FASB issued FASB
Interpretation No. 46, Consolidation of Variable
Interest Entities(FIN No. 46). FIN No. 46
requires an enterprises consolidated financial statements
to include subsidiaries in which the enterprise has a
controlling interest. Historically, that requirement has been
applied to subsidiaries in which an enterprise has a majority
voting interest, but in many circumstances the enterprises
consolidated financial statements do not include the
consolidation of variable interest entities with which it has
similar relationships but no majority voting interest. Under FIN
No. 46 the voting interest approach is not effective in
identifying controlling financial interest. The new rule
requires that for entities to be consolidated that those assets
be initially recorded at their carrying amounts at the date the
requirements of the new rule first apply. If determining
carrying amounts as required is impractical, then the assets are
to be measured at fair value the first date the new rule
applies. Any difference between the net amount of any previously
recognized interest in the newly consolidated entity should be
recognized as the cumulative effect of an accounting change. FIN
No. 46 becomes effective in the third quarter of 2003. FIN
No. 46 is not expected to have a significant impact on NRG
Northeast.






|          |                                                               
|--------- | --------------------------------------------------------------
|Item 7A  | Quantitative and Qualitative Disclosures
    About Market Risk

Interest Rate Risk

NRG Northeast may use interest rate hedging
contracts to mitigate the risks associated with movements in
interest rates and, when deemed appropriate, may enter into swap
agreements effectively converting floating rate obligations into
fixed rate obligations. NRG Northeast primarily has fixed rate
debt outstanding as of December 31, 2002. As a result, NRG
Northeast is not significantly exposed to losses due to
fluctuations in interest rates.

Commodity Price Risk

NRG Northeast is exposed to commodity price
variability in electricity, emission allowances and natural gas,
oil and coal used to meet fuel requirements. To manage earnings
volatility associated with these commodity price risks, NRG
Northeast, through its affiliate NRG Power Marketing, may enter
into financial instruments, which may take the form of fixed
price, floating price or indexed sales or purchases, and
options, such as puts, calls, basis transactions and swaps.

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Through NRG Power Marketing, NRG Northeast
utilizes an undiversified Value-at-Risk
(VAR) model to determine the maximum potential three-day
loss in the fair value of the commodity price related financial
instruments for the forward twelve months. The VAR for NRG
Northeast assumes a 95% confidence interval and reflects NRG
Northeasts merchant strategy, the generation assets, load
obligations and the bilateral physical and financial
transactions of NRG Northeast. The volatility estimate is based
on the implied volatility for at the money daily call options
for forward markets where NRG Northeast has exposure. This model
encompasses the ISO-NE and NYISO generating regions.

The estimated maximum potential three-day loss in
fair value of the commodity price related financial instruments,
calculated using the VAR model, is approximately
$81.5 million and $45.4 million as of December 31,
2002 and 2001, respectively. The average, high and low amounts
for the year ended December 31, 2002 were
$51.5 million, $84.1 million and $26.1 million,
respectively.

Credit Risk

NRG Northeast is exposed to credit risk in its
risk management activities. Credit risk relates to the risk of
loss resulting from the nonperformance by a counterparty of its
contractual obligations. Through NRG Energys Treasury
department, NRG Northeast maintains credit policies intended to
minimize overall credit risk and actively monitors these
policies to reflect changes in scope of operations. NRG
Northeast conducts standard credit reviews for all of its
counterparties. NRG Northeast does not believe its exposure to
credit risk is significant.






|         |                                                
|-------- | -----------------------------------------------
|Item 8  | Financial Statements and Supplementary
    Data

The consolidated financial statements and
schedule are listed in Part IV, Item 15 of this
Form 10-K.






|         |                                                                                              
|-------- | ---------------------------------------------------------------------------------------------
|Item 9  | Changes in and Disagreements with
    Accountants on Accounting and Financial
    Disclosures

None.






|          |                                                       
|--------- | ------------------------------------------------------
|Item 10  | Directors and Executive Officers of the
    Registrant

|                     |  |     |    |       |  |                                                                        
|-------------------- |  | --- | -- | ----- |  | -----------------------------------------------------------------------
|Name                 |  | Age |    | Title
|                     |  |     |    |      
|Richard C. Kelly     |  |     | 57 |       |  | President and Management Committee Member                              
|Scott J. Davido      |  |     | 41 |       |  | Vice President, Assistant Secretary and
    Management Committee Member
|George P. Schaefer   |  |     | 52 |       |  | Treasurer and Management Committee Member                              
|Andrew T. Panaccione |  |     | 42 |       |  | Management Committee Member                                            
|William T. Pieper    |  |     | 37 |       |  | Controller                                                             

Richard C. Kellyhas
been President and Management Committee Member of NRG Northeast
since October 2002. Mr. Kelly has also been a Director of
NRG Energy since August 2000. During 2002, Mr. Kelly became
the President and Chief Operating Officer of NRG Energy.
Mr. Kelly has been President  Enterprises of
Xcel Energy since August 2000, and was formerly Executive Vice
President of financial and support services and Chief Financial
Officer for New Century Energy from 1997 to August 2000. Before
that, Mr. Kelly was Senior Vice President of Finance,
Treasurer and Chief Financial Officer for Public Service Company
of Colorado, which he joined in 1968.

Scott J. Davidohas
been Vice President, Assistant Secretary and Management
Committee Member of NRG Northeast since October 2002.
Mr. Davido has also been Senior Vice President, General
Counsel at NRG Energy since October 2002. He served as Executive
Vice President, Chief Financial Officer, Treasurer and Secretary
of The Elder-Beerman Stores Corp. from 1999 to May 2002 and
Senior Vice President, General Counsel from 1997 to 1999.
Mr. Davido was a Partner, Business Practice Group with
Jones, Day, Reavis &

37



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##### Table of Contents



Pogue in Pittsburgh, Pennsylvania from January
1997 to December 1997 and an Associate, Business Practice Group
from September 1987 to December 1996.


George P. Schaeferhas been Treasurer and a Management
Committee Member of NRG Northeast since December 2002.
Mr. Schaefer has also been Treasurer of NRG Energy since
December 2002. Prior to December 2002, Mr. Schaefer served
as Senior Vice President, Finance and Treasurer for PSEG Global,
Inc. for one year, Vice President of Enron North America from
2000 to 2001 and Vice President and Treasurer of Reliant Energy
International from 1995 to 2000. Mr. Schaefer was the Vice
President, Business Development for Entergy Power Group from
1993 through 1995 and held the Senior Vice President, Structured
Finance Group position with General Electric Capital Corporation
from 1982 through 1993.

Andrew T. Panaccionehas been a Management Committee Member
of NRG Northeast since March 2003. Since 1993
Mr. Panaccione has been employed as President of Entity
Services Group, LLC, a company that provides independent
director, Delaware Resident Trustee, Passive Investment Company
and Offshore services to its clients. NRG Northeast pays Entity
Services (SPV), LLC, a wholly-owned subsidiary of Entity
Services Group, LLC, an annual fee of $1200 for
Mr. Panacciones services.

William T. Pieperhas been Vice President and Controller
of NRG Energy since June 2001. In this capacity, Mr. Pieper
has principal responsibility for all accounting matters at NRG
Energy and its subsidiaries, including NRG Northeast. He has
also held the positions of Controller, Assistant Controller and
Manager of International Accounting since joining NRG Energy in
March 1995. Prior to joining NRG Energy, Mr. Pieper
practiced as a Certified Public Accountant for six years with
the firm of KPMG.






|          |                       
|--------- | ----------------------
|Item 11  | Executive Compensation

All of NRG Northeasts executive officers
are employees of NRG Energy, NRG Northeasts parent
company, or Xcel Energy, NRG Energys parent company, and
do not receive additional compensation for their service to NRG
Northeast. See Form 10-K filed by NRG Energy on
March 31, 2003 for information regarding executive
compensation at NRG Energy, and Form 10-K filed by Xcel
Energy on March 31, 2003 for information regarding
executive compensation at Xcel Energy.






|          |                                                                                                       
|--------- | ------------------------------------------------------------------------------------------------------
|Item 12  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder
    Matters

Northeast Generation Holding LLC owns 50% of the
outstanding equity interests of NRG Northeast Generating LLC and
NRG Eastern LLC owns 50% of the outstanding equity interests of
NRG Northeast Generating LLC. Northeast Generation Holding LLC
and NRG Eastern LLC are each wholly-owned subsidiaries of NRG
Energy.




Item 13  Certain
Relationships and Related Transactions

On June 15, 2002, NRG Energy loaned NRG
Northeast $30 million to fund capital expenditures. The
debt bears interest at the three month London Interbank Offered
Rate plus 0.5%. The debt is subordinate to the other long-term
debt of NRG Northeast and is subject to the terms and conditions
of the senior secured bonds indenture. Accordingly, NRG
Northeast has classified this loan as a short-term affiliated
note payable.

NRG Energys energy marketing subsidiary,
NRG Power Marketing Inc. (NRG Power Marketing), provides a full
range of energy management services for NRG Energys
generation facilities in its Eastern and Central regions. These
services are provided under bilateral contracts or agency
agreements pursuant to which NRG Power Marketing manages the
sales and purchases of energy, capacity and ancillary services,
procures the fuel (coal, oil and natural gas) and associated
transportation and manages the emission allowance credits for
these facilities. NRG Power Marketing has continued to provide
these services since NRG Energy lost its investment grade
ratings in July 2002, and because of NRG Energys credit
and liquidity limitations, NRG Power Marketing has scaled back
its activities. Since July 2002, NRG Power Marketing has focused
primarily on procuring fuel for, and marketing the power from,
NRG Energys North American generation facilities in the
spot and short-term markets.

38



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##### Table of Contents



NRG Northeast has no employees and has entered
into operation and maintenance agreements with subsidiaries of
NRG Operating Services, Inc., a wholly-owned subsidiary of NRG.
The agreements are effective for five years, with options to
extend beyond five years. Under the agreements, the NRG
Operating Services company operator operates and maintains its
respective facility, including (i) coordinating fuel
delivery, unloading and inventory, (ii) managing facility
spare parts, (iii) meeting external performance standards
for transmission of electricity, (iv) providing operating
and maintenance consulting and (v) cooperating with and
assisting NRG Northeast in performing NRG Northeasts
obligations under agreements related to its facilities.

Under the agreements, the operator charges an
annual fee, and in addition, will be reimbursed for usual and
customary costs related to providing the services including
plant labor and other operating costs. A demobilization payment
will be made if the subsidiary elects not to renew the
agreement. There are also incentive fees and penalties based on
performance under the approved operating budget, the heat rate
and safety.

During 2002 and 2001, NRG Northeast incurred
annual operating and maintenance costs billed from NRG Operating
Services totaling $4.4 million. In addition, during 2002
and 2001 NRG Northeast incurred $117.9 million and $172.4
million, respectively, for usual and customary costs related to
providing the services including plant labor and other operating
costs.

NRG Northeasts subsidiaries have entered
into agreements with NRG Energy for corporate support and
services. The agreements are perpetual in term, unless
terminated in writing by a subsidiary. Under the agreements, NRG
will provide services, as requested, in areas such as human
resources, accounting, finance, treasury, tax, office
administration, information technology, engineering,
construction management, environmental, legal and safety. Under
the agreements, NRG Energy is paid for personnel time as well as
out-of-pocket costs.

During 2002 and 2001, NRG Northeast paid NRG
Energy approximately $4.2 million and $5.1 million,
respectively, for corporate support and services.




Item 14  Controls and
Procedures

The President and Treasurer (the Certifying
Officers) have evaluated NRG Northeasts disclosure
controls and procedures as defined in the rules of the SEC
within 90 days of the filing date of this report and have
determined that, except to the extent indicated otherwise in
this paragraph, disclosure controls and procedures were
effective in ensuring that material information required to be
disclosed by NRG Northeast in the reports filed under the
Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the
SECs rules and forms. During the fourth quarter of 2002,
the Certifying Officers determined that there were certain
deficiencies in the internal controls relating to financial
reporting at NRG Northeast caused by NRG Northeasts
pending financial restructuring and business realignment. During
the second half of 2002, there were material changes and
vacancies in senior NRG Northeast management positions and a
diversion of NRG Northeasts financial and management
resources to restructuring efforts. These circumstances
detracted from NRG Northeasts ability through its internal
controls to timely monitor and accurately assess the impact of
certain transactions, as would be expected in an effective
financial reporting control environment. NRG Northeast has
dedicated and will continue to dedicate in 2003 resources to
make corrections to those control deficiencies. Notwithstanding
the foregoing and as indicated in the certification accompanying
the signature page to this report, the Certifying Officers have
certified that, to the best of their knowledge, the financial
statements, and other financial information included in this
report on Form 10-K, fairly present in all material respects the
financial conditions, results of operations and cash flows of
NRG Northeast as of, and for the periods presented in this
report.

NRGs Northeasts Certifying Officers
are primarily responsible for the accuracy of the financial
information that is represented in this report. To meet their
responsibility for financial reporting, they have established
internal controls and procedures which, subject to the
disclosure in the foregoing paragraph, they believe are adequate
to provide reasonable assurance that NRG Northeasts assets
are protected from loss.

39



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##### Table of Contents



There were no significant changes in internal
controls or in other factors that could significantly affect
these controls subsequent to the date of the Certifying Officers
evaluation.





PART IV






|          |                                                                    
|--------- | -------------------------------------------------------------------
|Item 15  | Exhibits, Financial Statement Schedules and
    Reports on Form 8-K

(a)(1) Consolidated Financial
Statements

The following consolidated financial statements
of Northeast Generating and related notes thereto, together with
the report thereon of PricewaterhouseCoopers LLP, appearing on
pages 41 through 69 are included herein:

|                                                                                                  |  |  |  | 
|------------------------------------------------------------------------------------------------- |  |  |  | 
|Consolidated Balance Sheets 
    December 31, 2002 and 2001                                      |  |  |  | 
|Consolidated Statements of Operations 
    Years ended December 31, 2002, 2001 and 2000          |  |  |  | 
|Consolidated Statements of Cash Flows 
    Years ended December 31, 2002, 2001 and 2000          |  |  |  | 
|Consolidated Statements of Members
    Equity  Years ended December 31, 2002, 2001 and
    2000 |  |  |  | 
|Notes to Consolidated Financial
    Statements  December 31, 2002.                               |  |  |  | 

(a)(2) Supplemental Consolidated
Financial Statement Schedule

The following Consolidated Financial Statement
Schedule of NRG Northeast is filed as part of Item 15(d) of
this report and should be read in conjunction with the
Consolidated Financial Statements.

Report of Independent Accountants on Financial
Statement Schedule

Schedule II  Valuation and
Qualifying Accounts

Exhibit 99.2 contains the financial
statements of Dunkirk Power LLC

Exhibit 99.3 contains the financial
statements of Huntley Power LLC

Exhibit 99.4 contains the financial
statements of Arthur Kill Power LLC

Exhibit 99.5 contains the financial
statements of Middletown Power LLC

Exhibit 99.6 contains the financial
statements of Astoria Gas Turbine Power LLC

All other financial statement schedules have been
omitted because either they are not required or the information
required to be set forth therein is included in the Consolidated
Financial Statements or in the Notes thereto.

(a)(3) Exhibits: See
Exhibit Index submitted as a separate section of this
report.

(b)  Reports on Form 8-K.
NRG Northeast filed reports on Form 8-K on the following
dates over the last fiscal year: August 1, 2002,
October 24, 2002, November 27, 2002, December 23,
2002 and December 31, 2002.

(c) Exhibits Required by Item 601 of
Regulation S-K.

Reference is made to Item 15(a)(3) above.

(d) Consolidated Financial Statement
Schedule.

Reference is made to Item 15(a)(2) above.

40



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##### Table of Contents



REPORT OF INDEPENDENT ACCOUNTANTS

To the Management Committee of

NRG Northeast Generating LLC:


In our opinion, the accompanying consolidated
balance sheets and the related consolidated statements of
operations, of members equity and of cash flows present
fairly, in all material respects, the financial position of NRG
Northeast Generating LLC and its subsidiaries at
December 31, 2002 and 2001, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 2002 in conformity with
accounting principles generally accepted in the United States of
America. These financial statements are the responsibility of
the Companys management; our responsibility is to express
an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of
America, which 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, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.

The accompanying consolidated financial
statements have been prepared assuming the Company will continue
as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company and its ultimate
parent, NRG Energy, Inc., are experiencing credit and liquidity
constraints and the Companys senior secured bonds are in
default. As a direct consequence, during 2002 the Company
entered into discussion with its creditors to develop a
comprehensive restructuring plan. In connection with its
restructuring efforts, it is likely that the Company will file
for Chapter 11 bankruptcy protection. These conditions
raise substantial doubt about the Companys ability to
continue as a going concern. Managements plans in regard
to these matters are also described in Note 1. The
consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

As discussed in Note 2 to the consolidated
financial statements, the Company adopted Statement of Financial
Accounting Standards No. 142, Goodwill and Other
Intangible Assets, for the year ended December 31,
2002. As discussed in Notes 2 and 3 to the consolidated
financial statements, the Company adopted Statement of Financial
Accounting Standards No. 144, Accounting for
Impairment or Disposal of Long-Lived Assets, on
January 1, 2002. As discussed in Note 8 to the
consolidated financial statements, the Company adopted Statement
of Financial Accounting Standards No. 133, Accounting
for Derivative Instruments and Hedging Activities on
January 1, 2001.

PRICEWATERHOUSECOOPERS LLP

Minneapolis, Minnesota


March 28, 2003


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NRG NORTHEAST GENERATING LLC

CONSOLIDATED BALANCE SHEETS

|                                                                                          |                                                                                   |                                       |           |         |           |   |           |         |           | 
|----------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------- | --------- | ------- | --------- | - | --------- | ------- | --------- | 
|                                                                                          |                                                                                   |                                      
|                                                                                          |                                                                                   | December 31,                         
|                                                                                          |                                                                                   |                                      
|                                                                                          |                                                                                   | 2002                                  |           | 2001   
|                                                                                          |                                                                                   |                                       |           |        
|                                                                                          |                                                                                   |                                      
|                                                                                          |                                                                                   | (In thousands)                       
|ASSETS                                                                                   
|Current Assets:                                                                           |                                                                                   |                                       |           |         |           |   |           |        
|                                                                                          | Cash and cash equivalents                                                         |                                       | $         | 14,354  |           |   | $         | 370     |          
|                                                                                          | Accounts receivable, net of allowance for
    doubtful accounts of $50,712 and $0 |                                       |           | 118,153 |           |   |           | 56,025  |          
|                                                                                          | Inventory                                                                         |                                       |           | 123,963 |           |   |           | 172,215 |          
|                                                                                          | Derivative instruments valuation  at
    fair value                              |                                       |           | 23,039  |           |   |           |        |          
|                                                                                          | Prepaid expenses                                                                  |                                       |           | 38,309  |           |   |           | 20,116  |          
|                                                                                          |                                                                                   |                                       |           |         |           |   |           |        
|Total current assets                                                                      |                                                                                   |                                       | 317,818   |         |           |   | 248,726   |        
|Property, plant & equipment, net of
    accumulated depreciation of $157,534 and $113,688 |                                                                                   |                                       | 1,333,928 |         |           |   | 1,403,318 |        
|Deferred finance costs, net of accumulated
    amortization of $1,161 and $750            |                                                                                   |                                       | 8,995     |         |           |   | 9,406     |        
|Derivative instruments valuation  at
    fair value                                      |                                                                                   |                                       | 9,601     |         |           |   | 109,017   |        
|Other assets, net of accumulated amortization of
    $2,605 and $1,737                    |                                                                                   |                                       | 23,395    |         |           |   | 24,263    |        
|                                                                                          |                                                                                   |                                       |           |         |           |   |           |        
|Total assets                                                                              |                                                                                   | $                                     | 1,693,737 |         |           | $ | 1,794,730 |        
|                                                                                          |                                                                                   |                                       |           |         |           |   |           |        
|LIABILITIES AND MEMBERS EQUITY                                                          
|Liabilities:                                                                              |                                                                                   |                                       |           |         |           |   |           |        
|                                                                                          | Current portion of long-term debt                                                 |                                       | $         | 556,500 |           |   | $         | 107,000 |          
|                                                                                          | Note payable  affiliate                                                          |                                       |           | 30,000  |           |   |           |        |          
|                                                                                          | Accounts payable                                                                  |                                       |           | 14,607  |           |   |           | 2,550   |          
|                                                                                          | Accounts payable-affiliates                                                       |                                       |           | 11,476  |           |   |           |        |          
|                                                                                          | Accrued fuel and purchased power expense                                          |                                       |           | 37,168  |           |   |           | 27,049  |          
|                                                                                          | Accrued interest                                                                  |                                       |           | 4,198   |           |   |           | 2,160   |          
|                                                                                          | Other accrued liabilities                                                         |                                       |           | 11,713  |           |   |           | 41,228  |          
|                                                                                          | Derivative instruments valuation  at
    fair value                              |                                       |           | 13,017  |           |   |           | 32,504  |          
|                                                                                          |                                                                                   |                                       |           |         |           |   |           |        
|Total current liabilities                                                                 |                                                                                   |                                       | 678,679   |         |           |   | 212,491   |        
|Long-term debt                                                                            |                                                                                   |                                       |          |         |           |   | 503,000   |        
|Derivative instruments valuation  at
    fair value                                      |                                                                                   |                                       | 7,559     |         |           |   |          |        
|Other long-term liabilities                                                               |                                                                                   |                                       | 27,936    |         |           |   | 24,655    |        
|                                                                                          |                                                                                   |                                       |           |         |           |   |           |        
|Total liabilities                                                                         |                                                                                   |                                       | 714,174   |         |           |   | 740,146   |        
|Commitments and contingencies                                                             |                                                                                   |                                       |           |         |           |   |           |        
|Members equity                                                                           |                                                                                   |                                       | 979,563   |         |           |   | 1,054,584 |        
|                                                                                          |                                                                                   |                                       |           |         |           |   |           |        
|                                                                                          |                                                                                   | Total liabilities and members equity |           | $       | 1,693,737 |   |           | $       | 1,794,730 | 
|                                                                                          |                                                                                   |                                       |           |         |           |   |           |        

See accompanying notes to consolidated financial
statements.

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##### Table of Contents



NRG NORTHEAST GENERATING LLC

CONSOLIDATED STATEMENTS OF
OPERATIONS

|                             |                                     |                         |        |         |   |      |         |           |   |   |         |           |  
|---------------------------- | ----------------------------------- | ----------------------- | ------ | ------- | - | ---- | ------- | --------- | - | - | ------- | --------- | -
|                             |                                     |                        
|                             |                                     | Year Ended December 31,
|                             |                                     |                        
|                             |                                     | 2002                    |        | 2001    |   | 2000
|                             |                                     |                         |        |         |   |     
|                             |                                     |                        
|                             |                                     | (In thousands)         
|Operating Revenues           |                                     |                         |        |         |   |      |         |           |   |   |         |          
|                             | Revenues                            |                         | $      | 693,869 |   |      | $       | 1,050,688 |   |   | $       | 1,121,798 |  
|Operating Costs and Expenses |                                     |                         |        |         |   |      |         |           |   |   |         |          
|                             | Operating costs                     |                         |        | 494,446 |   |      |         | 712,148   |   |   |         | 700,577   |  
|                             | Depreciation                        |                         |        | 54,227  |   |      |         | 48,900    |   |   |         | 47,762    |  
|                             | General and administrative expenses |                         |        | 44,262  |   |      |         | 24,372    |   |   |         | 27,854    |  
|                             | Special charges                     |                         |        | 50,524  |   |      |         |          |   |   |         |          |  
|                             |                                     |                         |        |         |   |      |         |           |   |   |         |          
|Operating Income             |                                     |                         | 50,410 |         |   |      | 265,268 |           |   |   | 345,605 |          
|Other Income (Expense)       |                                     |                         |        |         |   |      |         |           |   |   |         |          
|                             | Other income, net                   |                         |        | 5,273   |   |      |         | 4,624     |   |   |         |          |  
|                             | Interest expense                    |                         |        | (51,798 | ) |      |         | (58,637   | ) |   |         | (62,296   | )
|                             |                                     |                         |        |         |   |      |         |           |   |   |         |          
|Net Income                   |                                     | $                       | 3,885  |         |   | $    | 211,255 |           |   | $ | 283,309 |          
|                             |                                     |                         |        |         |   |      |         |           |   |   |         |          

See accompanying notes to consolidated financial
statements.

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##### Table of Contents



NRG NORTHEAST GENERATING LLC

CONSOLIDATED STATEMENTS OF CASH
FLOWS

|                                                         |                                                                                       |                                                |         |         |          |      |          |         |          |   |          |          |         |  
|-------------------------------------------------------- | ------------------------------------------------------------------------------------- | ---------------------------------------------- | ------- | ------- | -------- | ---- | -------- | ------- | -------- | - | -------- | -------- | ------- | -
|                                                         |                                                                                       |                                               
|                                                         |                                                                                       | Year Ended December 31,                       
|                                                         |                                                                                       |                                               
|                                                         |                                                                                       | 2002                                           |         | 2001    |          | 2000
|                                                         |                                                                                       |                                                |         |         |          |     
|                                                         |                                                                                       |                                               
|                                                         |                                                                                       | (In thousands)                                
|Cash Flows from Operating
    Activities:                |                                                                                       |                                                |         |         |          |      |          |         |          |   |          |         
|                                                         | Net income                                                                            |                                                | $       | 3,885   |          |      | $        | 211,255 |          |   | $        | 283,309  |        
|                                                         | Adjustments to reconcile net income to net cash
    provided by operating activities: |                                                |         |         |          |      |          |         |          |   |          |          |        
|                                                         |                                                                                       | Depreciation                                   |         |         | 54,227   |      |          |         | 48,900   |   |          |          | 47,762  |  
|                                                         |                                                                                       | Amortization of deferred financing costs       |         |         | 411      |      |          |         | 409      |   |          |          | 3,509   |  
|                                                         |                                                                                       | Asset impairment                               |         |         | 49,289   |      |          |         |         |   |          |          |        |  
|                                                         |                                                                                       | Unrealized (gains)/ losses on energy contracts |         |         | (14,457  | )    |          |         | 31,227   |   |          |          |        |  
|                                                         |                                                                                       | Allowance for doubtful accounts                |         |         | 50,712   |      |          |         | (8,165   | ) |          |          | 8,165   |  
|                                                         |                                                                                       | Changes in assets and liabilities:             |         |         |          |      |          |         |          |   |          |          |         |  
|                                                         |                                                                                       | Accounts receivable                            |         |         | (112,840 | )    |          |         | 109,800  |   |          |          | (65,397 | )
|                                                         |                                                                                       | Inventories                                    |         |         | 48,252   |      |          |         | (64,356  | ) |          |          | 403     |  
|                                                         |                                                                                       | Prepaid expenses                               |         |         | (18,193  | )    |          |         | 581      |   |          |          | 989     |  
|                                                         |                                                                                       | Accounts payable                               |         |         | 12,057   |      |          |         | (1,364   | ) |          |          | 1,038   |  
|                                                         |                                                                                       | Accounts payable  affiliates                  |         |         | 11,476   |      |          |         | (146,894 | ) |          |          | 104,137 |  
|                                                         |                                                                                       | Accrued interest                               |         |         | 2,038    |      |          |         | (391     | ) |          |          | 1,426   |  
|                                                         |                                                                                       | Accrued fuel and purchased power expense       |         |         | 10,119   |      |          |         | (11,337  | ) |          |          | 12,379  |  
|                                                         |                                                                                       | Other accrued liabilities                      |         |         | (29,515  | )    |          |         | (8,379   | ) |          |          | 36,687  |  
|                                                         |                                                                                       | Other assets and liabilities                   |         |         | 4,149    |      |          |         | 4,705    |   |          |          | (3,545  | )
|                                                         |                                                                                       |                                                |         |         |          |      |          |         |          |   |          |         
|Net Cash Provided by Operating
    Activities            |                                                                                       |                                                | 71,610  |         |          |      | 165,991  |         |          |   | 430,862  |         
|                                                         |                                                                                       |                                                |         |         |          |      |          |         |          |   |          |         
|Cash Flows from Investing
    Activities:                |                                                                                       |                                                |         |         |          |      |          |         |          |   |          |         
|                                                         | Capital expenditures                                                                  |                                                |         | (34,126 | )        |      |          | (25,140 | )        |   |          | (24,600  | )      
|                                                         |                                                                                       |                                                |         |         |          |      |          |         |          |   |          |         
|Net Cash Used in Investing
    Activities                |                                                                                       |                                                | (34,126 | )       |          |      | (25,140  | )       |          |   | (24,600  | )       
|                                                         |                                                                                       |                                                |         |         |          |      |          |         |          |   |          |         
|Cash Flows from Financing
    Activities:                |                                                                                       |                                                |         |         |          |      |          |         |          |   |          |         
|                                                         | Proceeds from debt issuance  affiliate                                               |                                                |         | 30,000  |          |      |          |        |          |   |          |         |        
|                                                         | Proceeds from debt issuance                                                           |                                                |         |         |          |      |          |        |          |   |          | 750,000  |        
|                                                         | Distributions to members                                                              |                                                |         |        |          |      |          | (52,727 | )        |   |          | (422,142 | )      
|                                                         | Principal payments on long-term debt                                                  |                                                |         | (53,500 | )        |      |          | (90,000 | )        |   |          | (732,330 | )      
|                                                         | Deferred financing costs                                                              |                                                |         |        |          |      |          | (198    | )        |   |          | (9,897   | )      
|                                                         |                                                                                       |                                                |         |         |          |      |          |         |          |   |          |         
|Net Cash Used in Financing
    Activities                |                                                                                       |                                                | (23,500 | )       |          |      | (142,925 | )       |          |   | (414,369 | )       
|                                                         |                                                                                       |                                                |         |         |          |      |          |         |          |   |          |         
|Net Increase/(Decrease) in Cash and Cash
    Equivalents |                                                                                       |                                                | 13,984  |         |          |      | (2,074   | )       |          |   | (8,107   | )       
|Cash and Cash Equivalents at Beginning of
    Period     |                                                                                       |                                                | 370     |         |          |      | 2,444    |         |          |   | 10,551   |         
|                                                         |                                                                                       |                                                |         |         |          |      |          |         |          |   |          |         
|Cash and Cash Equivalents at End of
    Period           |                                                                                       | $                                              | 14,354  |         |          | $    | 370      |         |          | $ | 2,444    |         
|                                                         |                                                                                       |                                                |         |         |          |      |          |         |          |   |          |         
|Supplemental Disclosures of Cash Flow
    Information:   |                                                                                       |                                                |         |         |          |      |          |         |          |   |          |         
|                                                         | Interest paid (net of amount capitalized)                                             |                                                | $       | 49,760  |          |      | $        | 58,541  |          |   | $        | 57,361   |        

See accompanying notes to consolidated financial
statements.

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NRG NORTHEAST GENERATING LLC

CONSOLIDATED STATEMENTS OF MEMBERS
EQUITY

|                                                                 |  |                |         |             |  |               |          |          |  |   |         |   |  |   |           |  
|---------------------------------------------------------------- |  | -------------- | ------- | ----------- |  | ------------- | -------- | -------- |  | - | ------- | - |  | - | --------- | -
|                                                                 |  |                |         |             |  | Accumulated   |          |         
|                                                                 |  | Members       |         |             |  | Other         |          | Total   
|                                                                 |  | Contributions/ |         | Accumulated |  | Comprehensive |          | Members
|                                                                 |  | Distributions  |         | Net Income  |  | Income        |          | Equity  
|                                                                 |  |                |         |             |  |               |          |         
|                                                                 |  |               
|                                                                 |  | (In thousands)
|Balances at December 31, 1999                                    |  | $              | 872,801 |             |  | $             | 54,347   |          |  | $ |        |   |  | $ | 927,148   |  
|                                                                 |  |                |         |             |  |               |          |          |  |   |         |   |  |   |           |  
|Net income                                                       |  |                |         |             |  |               | 283,309  |          |  |   |        |   |  |   | 283,309   |  
|Distributions to members, net                                    |  |                | (84,486 | )           |  |               | (337,656 | )        |  |   |        |   |  |   | (422,142  | )
|                                                                 |  |                |         |             |  |               |          |          |  |   |         |   |  |   |           |  
|Balances at December 31, 2000                                    |  | $              | 788,315 |             |  | $             |         |          |  |   |        |   |  | $ | 788,315   |  
|                                                                 |  |                |         |             |  |               |          |          |  |   |         |   |  |   |           |  
|Cumulative effect upon adoption of SFAS
    No 133               |  |                |        |             |  |               |         |          |  |   | 14,100  |   |  |   | 14,100    |  
|Impact of SFAS No. 133 for the year ending
    December 31, 2001 |  |                |        |             |  |               |         |          |  |   | 93,641  |   |  |   | 93,641    |  
|Net income                                                       |  |                |        |             |  |               | 211,255  |          |  |   |        |   |  |   | 211,255   |  
|                                                                 |  |                |         |             |  |               |          |          |  |   |         |   |  |   |           |  
|Comprehensive income                                             |  |                |        |             |  |               |          |          |  |   |         |   |  |   | 318,996   |  
|Distributions to members, net                                    |  |                |        |             |  |               | (52,727  | )        |  |   |        |   |  |   | (52,727   | )
|                                                                 |  |                |         |             |  |               |          |          |  |   |         |   |  |   |           |  
|Balances at December 31, 2001                                    |  | $              | 788,315 |             |  | $             | 158,528  |          |  | $ | 107,741 |   |  | $ | 1,054,584 |  
|                                                                 |  |                |         |             |  |               |          |          |  |   |         |   |  |   |           |  
|Impact of SFAS No. 133 for the year ending
    December 31, 2002 |  |                |        |             |  |               |         |          |  |   | (78,906 | ) |  |   | (78,906   | )
|Net income                                                       |  |                |        |             |  |               | 3,885    |          |  |   |        |   |  |   | 3,885     |  
|                                                                 |  |                |         |             |  |               |          |          |  |   |         |   |  |   |           |  
|Comprehensive loss                                               |  |                |        |             |  |               |          |          |  |   |         |   |  |   | (75,021   | )
|                                                                 |  |                |         |             |  |               |          |          |  |   |         |   |  |   |           |  
|Balances at December 31, 2002                                    |  | $              | 788,315 |             |  | $             | 162,413  |          |  | $ | 28,835  |   |  | $ | 979,563   |  
|                                                                 |  |                |         |             |  |               |          |          |  |   |         |   |  |   |           |  

See accompanying notes to consolidated financial
statements.

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##### Table of Contents



NRG NORTHEAST GENERATING LLC AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

Note 1  Organization

NRG Northeast Generating LLC (the
Company or NRG Northeast), a wholly-owned
indirect subsidiary of NRG Energy, Inc. (NRG), owns
electric power generation plants in the northeastern region of
the United States. The Company was formed for the purpose of
financing, acquiring, owning, operating and maintaining, through
its subsidiaries and affiliates the facilities owned by Arthur
Kill Power LLC, Astoria Gas Turbine Power LLC, Connecticut Jet
Power LLC, Devon Power LLC, Dunkirk Power LLC, Huntley Power
LLC, Middletown Power LLC, Montville Power LLC, Norwalk Power
LLC, Oswego Harbor Power LLC and Somerset Power LLC.

As of December 31, 1999, the Company held a
99% interest in Arthur Kill Power LLC, Astoria Gas Turbine Power
LLC, Dunkirk Power LLC, Huntley Power LLC, Oswego Harbor Power
LLC and Somerset Power LLC. Northeast Generating Holding LLC and
NRG Eastern LLC each held a minority interest of 0.5% in Arthur
Kill Power LLC (Arthur Kill Power), Astoria Gas
Turbine Power LLC (Astoria Gas Turbine Power),
Dunkirk Power LLC, Huntley Power LLC (Huntley
Power), Oswego Harbor Power LLC (Oswego Power)
and Somerset Power LLC (Somerset Power).

NRG Connecticut Generating LLC, a wholly-owned
subsidiary of NRG, owned 100% of Connecticut Jet Power LLC,
Devon Power LLC, Middletown Power LLC, Montville Power LLC and
Norwalk Power LLC.

Effective January 1, 2000, the minority
ownership interests held by Northeast Generating Holding LLC and
NRG Eastern LLC as well as the ownership interest held by NRG
Connecticut Generating LLC were transferred to the Company.

Recent
Developments

In December 2001, Moodys Investor Service
(Moodys) placed NRG Energys long-term senior
unsecured debt rating on review for possible downgrade. In
response, Xcel Energy and NRG Energy put into effect a plan to
preserve NRG Energys investment grade rating and improve
its financial condition. This plan included financial support to
NRG Energy from Xcel Energy; marketing certain NRG Energy assets
for sale; canceling and deferring capital spending; and reducing
corporate expenses.

In response to a possible downgrade, during 2002,
Xcel Energy contributed $500 million to NRG Energy, and NRG
Energy and its subsidiaries sold assets and businesses that
provided NRG Energy in excess of $286 million in cash and
eliminated approximately $432.0 million in debt. NRG Energy
also cancelled or deferred construction of approximately 3,900
MW of new generation projects. On July 26, 2002, Standard
& Poors (S&P) downgraded NRG Energys senior
unsecured bonds to below investment grade, and three days later
Moodys also downgraded NRG Energys senior unsecured
debt rating to below investment grade. Since July 2002, NRG
Energy senior unsecured debt, as well as the secured NRG
Northeast Generating LLC bonds and the secured NRG South Central
Generating LLC bonds and Secured LSP Energy (Batesville) bonds
were downgraded multiple times. After NRG Energy failed to make
payments due under certain unsecured bond obligations on
September 16, 2002, both Moodys and S&P lowered
their ratings on NRG Energys and its subsidiaries
unsecured bonds once again. Currently, NRG Energys
unsecured bonds carry a rating of between CCC and D at S&P
and between Ca and C at Moodys, depending on the specific
debt issue.

As a result of the downgrade of NRG Energys
credit rating, declining power prices, increasing fuel prices,
the overall down-turn in the energy industry, and the overall
down-turn in the economy, NRG Energy has experienced severe
financial difficulties. These difficulties have caused NRG
Energy to, among other things, miss scheduled principal and
interest payments due to its corporate lenders and bondholders,
prepay for fuel and other related delivery and transportation
services and provide performance collateral in certain
instances. NRG Energy has also recorded asset impairment charges
of approximately $3.1 billion, related to

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NRG NORTHEAST GENERATING LLC AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

various operating projects as well as for
projects that were under construction which NRG Energy has
stopped funding.

NRG Energy and its subsidiaries (including NRG
Northeast) have failed to timely make several interest and/or
principal payments on its indebtedness. These missed payments
have resulted in cross-defaults of numerous other non-recourse
and limited recourse debt instruments of NRG Energy and have
caused the acceleration of multiple debt instruments of NRG
Energy, rendering such debt immediately due and payable. For
more specific information regarding NRG Energys liquidity
issues, refer to Liquidity Issues in Item 1 of
Form 10-K filed by NRG Energy on March 31, 2003.

In addition to the payment defaults described
above, prior to the downgrades many corporate guarantees and
commitments of NRG Energy and its subsidiaries required that
they be supported or replaced with letter of credit or cash
collateral within 5 to 30 days of a ratings downgrade below
Baa3 or BBB- by Moodys or Standard & Poors,
respectively. As a result of the downgrades on July 26 and
July 29, NRG Energy received demands to post collateral
aggregating approximately $1.1 billion. NRG Energy is
presently working with various secured project lender groups
with respect to the issue of posting collateral and is working
toward establishing a comprehensive plan of restructuring.

In August 2002, NRG Energy retained financial and
legal restructuring advisors to assist its management in the
preparation of such comprehensive financial and operational
restructuring. NRG Energy and its advisors have been meeting
regularly to discuss restructuring issues with an ad hoc
committee of its bondholders and a steering committee of its
bank lenders (the Ad Hoc Creditors Committees). In November
2002, NRG Energy and Xcel Energy presented a comprehensive plan
of restructuring to the Ad Hoc Creditors Committees. The
restructuring plan has served as a basis for continuing
negotiations between the Ad Hoc Creditors Committees, NRG Energy
and Xcel Energy related to a consensual plan of reorganization
for NRG Energy. If a comprehensive plan of restructuring is
ultimately agreed to, it is highly probable that such a plan
would be implemented through the commencement of a voluntary
Chapter 11 bankruptcy proceeding. For more specific
information regarding NRG Energys restructuring efforts,
refer to Liquidity Issues in Item 1 of
Form 10-K filed by NRG Energy on March 31, 2003.

On November 22, 2002, five former NRG Energy
executives filed an involuntary Chapter 11 petition against
NRG Energy in U.S. Bankruptcy Court for the District of
Minnesota. Under provisions of federal law, NRG Energy has the
full authority to continue to operate its business as if the
involuntary petition had not been filed unless and until a court
hearing on the validity of the involuntary petition is resolved
adversely to NRG Energy. On December 16, 2002, NRG Energy
responded to the involuntary petition, contesting the
petitioners claims and filing a motion to dismiss the
case. On February 19, 2003, NRG Energy announced that it
had reached a settlement with the petitioners. The U.S.
Bankruptcy Court for the District of Minnesota will hear NRG
Energys motion to approve the settlement and dismiss the
involuntary petition. Two of NRG Energys creditors have
objected to the motion to dismiss. There can be no assurance
that the court will dismiss the involuntary petition. The
Bankruptcy Court has discretion in the review and approval of
the settlement agreement. There is a risk that the Bankruptcy
Court may, among other things, reject the settlement agreement
or enter an order for relief under Chapter 11.

On March 26, 2003, Xcel Energy announced
that its board of directors had approved a tentative settlement
agreement with holders of most of NRG Energys long-term
notes and the steering committee representing NRGs bank
lenders. The settlement is subject to certain conditions,
including the approval of at least a majority in dollar amount
of the NRG Energy bank lenders and long-term noteholders and
definitive documentation. There can be no assurance that such
approvals will be obtained. The terms of the settlement call for
Xcel Energy to make payments to NRG Energy over the next
13 months totaling up to $752 million for the benefit
of NRG Energys creditors in consideration for their waiver
of any existing and potential claims against Xcel Energy. Under
the settlement, Xcel Energy will make the following payments:
(i) $350 million at or shortly following the consummation
of a restructuring of NRG Energys debt. It is expected
this payment

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NRG NORTHEAST GENERATING LLC AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

would be made prior to year-end 2003; (ii)
$50 million on January 1, 2004. At Xcel Energys
option, it may fill this requirement with either cash or Xcel
Energy common stock or any combination thereof; and (iii)
$352 million in April 2004.



| |                                                    
| | ---------------------------------------------------
| | NRG Northeast Indebtedness and Liquidity
    Issues

On February 22, 2000, NRG Northeast issued
$750 million of senior secured bonds to refinance
short-term project borrowings and for certain other purposes.
The bond offering included three tranches: $320 million
with an interest rate of 8.065% due in 2004; $130 million
with an interest rate of 8.842% due in 2015; and
$300 million with an interest rate of 9.292% due in 2024.
Principal and interest payments are made semi-annually on each
June 15 and December 15. The bonds are jointly and
severally guaranteed by each of NRG Northeasts existing
and future subsidiaries. The bonds are secured by a security
interest in NRG Northeasts membership and/or other
ownership interests in the guarantors and its rights under all
intercompany notes between NRG Northeast and the guarantors. At
December 31, 2002, $556.5 million of bonds remain
outstanding and are classified as current. NRG Northeast secured
bonds currently carry a rating of D at S&P and Caa1 at
Moodys.

On June 15, 2002, NRG Energy loaned NRG
Northeast $30 million to fund capital expenditures. The
debt bears interest at the three month London Interbank Offered
Rate plus 0.5%. The debt is subordinate to the other long-term
debt of NRG Northeast and is subject to the terms and conditions
of the senior secured bonds indenture. Accordingly, NRG
Northeast has classified this loan as a short-term affiliated
note payable.

The debt agreements of NRG Northeast generally
restrict its ability to pay dividends, make distributions or
otherwise transfer funds to NRG Energy under certain
circumstances such as failure to maintain a required minimum
debt service ratio. As of December 31, 2002, NRG Northeast
did not meet the required minimum debt service coverage ratios,
and therefore is restricted from making any payments to NRG
Energy.

NRG Northeast is also precluded from making
payments to NRG Energy due to an unfunded debt service reserve
account. Prior to the NRG Energy downgrades (see above), the
debt service reserve account of NRG Northeast was funded with a
letter of guarantee from NRG Energy. Following the downgrade,
this account was required to be funded with cash from NRG Energy
within five to thirty days. The account was not funded with cash
from NRG Energy within the respective cure period, and an event
of default occurred, thereby giving the lenders the right to
accelerate the project financings. As a result of this default,
the long-term portion of the debt has been reclassified to a
current liability, as it is potentially callable within the next
twelve months. NRG Northeast has approximately
$40.1 million of unfunded debt service reserve commitments.

On December 15, 2002, NRG Northeast failed
to make $24.7 million interest and $53.5 million
principal payments. NRG Northeast had a 15-day grace period to
make payment. On December 27, 2002, NRG Northeast made the
$24.7 million interest payment due on the NRG Northeast
bonds but failed to make the $53.5 million principal payment

NRG Northeast expects to have cash available for
operations through 2003. This forecast does not assume further
investment by Xcel Energy in NRG Energy, further contributions
to NRG Northeast from NRG Energy, or modification of NRG
Northeasts current debt obligations. In the event that NRG
Energy and NRG Northeast are unable to work through the issues
as described above and are unable to obtain adequate financing
on terms acceptable to NRG Energy and NRG Northeast to continue
their operations, NRG Energy and NRG Northeast may have to file
bankruptcy. NRG Energy and NRG Northeasts inability to
obtain timely waivers and avoid defaults on their credit
obligations could lead to additional involuntary bankruptcy
proceedings. In any case, there is substantial doubt as to NRG
Northeasts ability to continue as a going concern.

As a part of the comprehensive restructuring of
NRG Energy, NRG Energys financial and legal restructuring
advisors have been assisting the management of NRG Northeast in
the preparation of a comprehensive financial and operational
restructuring for NRG Northeast. NRG Northeast and its advisors

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NRG NORTHEAST GENERATING LLC AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

have been meeting regularly to discuss
restructuring issues relating to NRG Northeast with an ad hoc
committee of its bondholders (the NRG Northeast Bondholder
Committee). NRG Northeast, its management and its financial and
legal advisors have engaged in discussions with the NRG Project
Bondholder Committee regarding the terms and conditions of a
restructuring of the debt of NRG Northeast.

The accompanying consolidated financial
statements have been prepared assuming NRG Northeast will
continue as a going concern. The consolidated financial
statements do not include any adjustments that might result from
the outcome of this uncertainty.

Note 2  Summary of Significant
Accounting Policies



| |                                                          
| | ---------------------------------------------------------
| | Principles of Consolidation and Basis of
    Presentation

The consolidated financial statements include the
accounts of NRG Northeast and its subsidiaries (referred to
collectively herein as the Company). All significant
intercompany transactions and balances have been eliminated in
consolidation. Accounting policies for all of the Companys
operations are in accordance with accounting principles
generally accepted in the United States of America.



| |                     
| | --------------------
| | Nature of operations

The principal business of NRG Northeast is the
ownership and operation, through its subsidiaries and
affiliates, of power generation facilities and the sale of
energy, capacity and related products in the northeastern region
of the United States.



| |                                             
| | --------------------------------------------
| | Use of Estimates in Financial
    Statements

The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States of America requires management to make estimates
and assumptions that affect reported amounts of assets and
liabilities at the date of the financial statements and reported
amounts of revenue and expenses during the reporting period.
Actual results may differ from those estimates.

In recording transactions and balances resulting
from business operations, NRG Northeast uses estimates based on
the best information available. Estimates are used for such
items as plant depreciable lives, uncollectible accounts, and
the valuation of long-term energy commodities contracts, among
others. In addition, estimates are used to test long-lived
assets for impairment and to determine fair value of impaired
assets. As better information becomes available (or actual
amounts are determinable), the recorded estimates are revised.
Consequently, operating results can be affected by revisions to
prior accounting estimates.



| |                          
| | -------------------------
| | Cash and Cash Equivalents

Cash and cash equivalents include highly liquid
investments (primarily commercial paper) with an original
maturity of three months or less at the time of purchase.



| |          
| | ---------
| | Inventory

Inventory is valued at the lower of weighted
average cost or market and consists principally of fuel oil,
spare parts, coal and kerosene.



| |                              
| | -----------------------------
| | Property, Plant and Equipment

Property, plant and equipment are stated at cost.
Significant additions or improvements extending asset lives are
capitalized, while repairs and maintenance that do not improve
or extend the life of the respective asset are charged to
expense as incurred. Depreciation is computed on a straight-line
basis over the following estimated useful lives:

|                                    |  |  |                 | 
|----------------------------------- |  |  | --------------- | 
|Facilities, machinery and equipment |  |  | 25 to 30  years | 
|Office furnishings and equipment    |  |  | 3 to 10 years   | 

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NRG NORTHEAST GENERATING LLC AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The assets and related accumulated depreciation
amounts are adjusted for asset retirements and disposals with
the resulting gain or loss included in operations. NRG Northeast
expenses all repair and maintenance as incurred, including
planned major maintenance.



| |                  
| | -----------------
| | Asset Impairments

Long-lived assets that are held and used are
reviewed for impairment whenever events or changes in
circumstances indicate carrying values may not be recoverable.
Such reviews were performed in accordance with SFAS
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, (SFAS No. 144) in 2002 and SFAS
No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of (SFAS
No. 121) in prior years. An impairment loss is recognized
if the total future estimated undiscounted cash flows expected
from an asset is less than its carrying value. An impairment
charge is measured by the difference between an assets
carrying amount and fair value. Fair values are determined by a
variety of valuation methods, including appraisals, sales prices
of similar assets and present value techniques.



| |                         
| | ------------------------
| | Deferred Financing Costs

Deferred financing costs consist of legal and
other costs incurred by NRG Northeast to obtain long-term
financing. These costs are capitalized and amortized as interest
expense on a basis which approximates the effective interest
method over the terms of the related debt.



| |             
| | ------------
| | Other Assets

Other assets represent contractual rights held by
NRG Energy. Other assets are amortized over their economic
useful life and reviewed for impairment on a periodic basis.
Other assets are comprised of prepaid transmission costs
pursuant to a long-term contract. These amounts are being
amortized over the life of the contract, which is 30 years.
At December 31, 2002 and 2001, accumulated amortization of
other assets was $2.6 million and $1.7 million,
respectively.

Effective January 1, 2002, NRG Energy
implemented SFAS No. 142, Goodwill and Other Intangible
Assets (SFAS No. 142). Pursuant to SFAS No. 142,
goodwill is not amortized but is subject to periodic impairment
testing. At December 31, 2002 and 2001, NRG Northeast had
no goodwill recorded in the financial statements.



| |                    
| | -------------------
| | Revenue Recognition

Revenues from the sale of electricity are
recorded based upon the output delivered and capacity provided
at rates specified under contract terms or prevailing market
rates. Revenues and related costs under cost reimbursable
contract provisions are recorded as costs are incurred.



| |                           
| | --------------------------
| | Power Marketing Activities

NRG Northeasts subsidiaries have entered
into agency agreements with a marketing affiliate for the sale
of energy, capacity and ancillary services produced by these
subsidiaries, and for the procurement and management of fuel
(coal, oil derivatives and natural gas) and emission credit
allowances, which enable the affiliate to engage in forward
sales and hedging transactions to manage the subsidiaries
electricity and fuel price exposure. Net gains or losses on
hedges by the marketing affiliate, which are physically settled,
are recognized in the same manner as the hedged item. NRG
Northeast receives the net transaction price on all contracts
that are physically settled by its marketing affiliate.

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NRG NORTHEAST GENERATING LLC AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |             
| | ------------
| | Income Taxes

The Company has been organized as a limited
liability company. Therefore, federal and state income taxes are
assessed at the member level. Accordingly, no provision has been
made for federal or state income taxes in the accompanying
financial statements.

As of December 31, 2002 and 2001, the
accompanying financial statements report a balance of
$1.3 billion and $1.4 billion, respectively, for net
property, plant and equipment. The tax basis of this property is
estimated to be $1.1 billion and $1.2 billion as of
December 31, 2002 and 2001, respectively. The primary
difference is due to accelerated tax depreciation.



| |                              
| | -----------------------------
| | Concentrations of Credit Risk

Financial instruments which potentially subject
NRG Northeast to concentrations of credit risk consist primarily
of cash, accounts receivable and derivative instruments. Cash
accounts are generally held in federally insured banks. Accounts
receivable and derivative instruments are concentrated within
entities engaged in the energy industry. These industry
concentrations may impact NRG Northeasts overall exposure
to credit risk, either positively or negatively, in that the
customers may be similarly affected by changes in economic,
industry or other conditions. Receivables are generally not
collateralized; however, NRG Northeast believes the credit risk
posed by industry concentration is mitigated by the
diversification and creditworthiness of its customer base.



| |                                        
| | ---------------------------------------
| | Fair Value of Financial
    Instruments

The carrying amount of cash and cash equivalents,
receivables, accounts payables, and accrued liabilities
approximate fair value because of the short maturity of these
instruments.



| |                              
| | -----------------------------
| | New Accounting Pronouncements

In June 2001, the FASB issued SFAS No. 143,
Accounting for Asset Retirement Obligations(SFAS No. 143). This statement addresses financial
accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated
asset retirement costs. SFAS No. 143 requires an entity to
recognize the fair value of a liability for an asset retirement
obligation in the period in which it is incurred. The liability
is initially capitalized as part of the cost of the related
tangible long-lived asset and thus depreciated over the
assets useful life. Accretion of the liabilities due to
the passage of time will be an operating expense. Retirement
obligations associated with long-lived assets included within
the scope of SFAS No. 143 are those for which a legal
obligation exists under enacted laws, statutes written or oral
contracts, including obligations arising under the doctrine of
promissory estoppel. NRG Northeast is required to adopt SFAS
No. 143 on January 1, 2003. NRG Northeast is in the
process of evaluating the impact of adopting SFAS No. 143
on its financial condition.

In April 2002, the FASB issued SFAS No. 145,
Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical
Corrections,(SFAS No. 145) that supercedes
previous guidance for the reporting of gains and losses from
extinguishment of debt and accounting for leases, among other
things. SFAS No. 145 requires that only gains and losses
from the extinguishment of debt that meet the requirements for
classification as Extraordinary Items, as prescribed
in Accounting Principles Board Opinion No. 30, should be
disclosed as such in the financial statements. Previous guidance
required all gains and losses from the extinguishment of debt to
be classified as Extraordinary Items. This portion
of SFAS No. 145 is effective for fiscal years beginning
after May 15, 2002, with restatement of prior periods
required. NRG Northeast has no extraordinary gains or losses
resulting from extinguishment of debt during the three years
ended December 31, 2002 that will require restatement upon
adoption of this part of SFAS No. 145.

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NRG NORTHEAST GENERATING LLC AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

In addition, SFAS No. 145 amends SFAS
No. 13, Accounting for Leases,(SFAS
No. 13) as it relates to accounting by a lessee for certain
lease modifications. Under SFAS No. 13, if a capital lease
is modified in such a way that the change gives rise to a new
agreement classified as an operating lease, the assets and
obligation are removed, a gain or loss is recognized and the new
lease is accounted for as an operating lease. Under SFAS
No. 145, capital leases that are modified so the resulting
lease agreement is classified as an operating lease are to be
accounted for under the sale-leaseback provisions of SFAS
No. 98, Accounting for Leases.These
provisions of SFAS No. 145 were effective for transactions
occurring after May 15, 2002. Adoption of SFAS No. 145
is not expected to have a material impact on NRG Northeast.

In June 2002, the FASB issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities,(SFAS No. 146), SFAS No. 146
addresses financial accounting and reporting for costs
associated with exit or disposal activities and nullifies
Emerging Issues Task Force (EITF) Issue No. 94-3,
Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring).SFAS No. 146
applies to costs associated with an exit activity that does not
involve an entity newly acquired in a business combination or
with a disposal activity covered by SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets.The provisions of SFAS No. 146 are
effective for exit or disposal activities that are initiated
after December 31, 2002.

In November 2002, the FASB issued FASB
Interpretation No. 45, Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. The initial
recognition and initial measurement provisions of this
interpretation are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002,
irrespective of the guarantors fiscal year-end. The
disclosure requirements are effective for financial statements
of interim or annual periods ending after December 15,
2002. The interpretation addresses the disclosures to be made by
a guarantor in its interim and annual financial statements about
its obligations under guarantees. The interpretation also
clarifies the requirements related to the recognition of a
liability by a guarantor at the inception of the guarantee for
the obligations the guarantor has undertaken in issuing the
guarantee. See Note 12.

In January 2003, the FASB issued FASB
Interpretation No. 46, Consolidation of Variable
Interest Entities(FIN No. 46). FIN No. 46
requires an enterprises consolidated financial statements
to include subsidiaries in which the enterprise has a
controlling interest. Historically, that requirement has been
applied to subsidiaries in which an enterprise has a majority
voting interest, but in many circumstances the enterprises
consolidated financial statements do not include the
consolidation of variable interest entities with which it has
similar relationships but no majority voting interest. Under FIN
No. 46 the voting interest approach is not effective in
identifying controlling financial interest. Assets of entities
consolidated upon adoption of the new standard will be initially
recorded at their carrying amounts at the date the requirements
of the new rule first apply. If determining carrying amounts as
required is impractical, then the assets are to be measured at
fair value the first date the new rule applies. Any difference
between the net amount of any previously recognized interest in
the newly consolidated entity should be recognized as the
cumulative effect of an accounting change. FIN No. 46
becomes effective in the third quarter of 2003. Fin No. 46
is not expected to have a significant impact on NRG Northeast.



| |                  
| | -----------------
| | Reclassifications

Certain prior-year amounts have been reclassified
for comparative purposes. These reclassifications had no effect
on net income or total members equity as previously
reported.

Note 3  Special
Charges

The credit rating downgrades, defaults under
certain credit agreements, increased collateral requirements and
reduced liquidity experienced by NRG Northeast during the third
quarter of 2002 were triggering events which,
pursuant to SFAS No. 144, required the Company to review
the recoverability of its long-lived

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NRG NORTHEAST GENERATING LLC AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

assets. As a result, NRG Northeast determined
that Somerset Power became impaired during the third quarter of
2002 and should be written down to fair market value.
Accordingly, NRG Northeast recorded asset impairment charges of
$49.3 million related to Somerset Power. The impairment
charges were recognized as special charges in the third quarter
of 2002 statement of operations, as restated during the fourth
quarter of 2002 (Note 14).

To determine whether an asset was impaired, NRG
Northeast compared asset carrying values to total future
estimated undiscounted cash flows. Separate analyses were
completed for assets or groups of assets at the lowest level for
which identifiable cash flows were largely independent of the
cash flows of other assets and liabilities. The estimates of
future cash flow included only future cash flows, net of
associated cash outflows, directly associated with and expected
to arise as a result of NRG Northeasts assumed use and
eventual disposition of the asset. Cash flow estimates
associated with assets in service were based on the assets
existing service potential, whereas assets under construction or
in development were based on expected service potential when
complete. The cash flow estimates included probability
weightings to consider possible alternative courses of action
and outcomes, given NRG Northeasts financial position and
liquidity constraints.

Additional asset impairments may be recorded by
NRG Northeast in periods subsequent to December 31, 2002,
given the changing business conditions and the resolution of the
pending NRG Energy restructuring plan and the FERC filing for
cost of service rates for NRG Northeasts Connecticut
assets (see Note 13). Management is unable to determine the
possible magnitude of any additional asset impairments, but they
could be material.

In addition to asset impairment charges, NRG
Northeast incurred $1.2 million of restructuring costs
consisting of financial advisor and legal fees. These costs were
also recognized as special charges in the statement of
operations.

Note 4  Inventory

Inventory, which is stated at the lower of
weighted average cost or market, at December 31, consists
of:

|            |       |                |        |         |  |   |        |         | 
|----------- | ----- | -------------- | ------ | ------- |  | - | ------ | ------- | 
|            |       | 2002           |        | 2001   
|            |       |                |        |        
|            |       |               
|            |       | (In thousands)
|Fuel oil    |       | $              | 47,052 |         |  | $ | 83,857 |        
|Spare parts |       |                | 59,524 |         |  |   | 57,901 |        
|Coal        |       |                | 14,378 |         |  |   | 29,179 |        
|Kerosene    |       |                | 2,852  |         |  |   | 1,268  |        
|Other       |       |                | 157    |         |  |   | 10     |        
|            |       |                |        |         |  |   |        |        
|            | Total |                | $      | 123,963 |  |   | $      | 172,215 | 
|            |       |                |        |         |  |   |        |        

Note 5  Property, Plant and
Equipment

The major classes of property, plant and
equipment at December 31, were as follows:

|                                    |  |                |           |      |  |   |           |  
|----------------------------------- |  | -------------- | --------- | ---- |  | - | --------- | -
|                                    |  | 2002           |           | 2001
|                                    |  |                |           |     
|                                    |  |               
|                                    |  | (In thousands)
|Facilities, machinery and equipment |  | $              | 1,415,726 |      |  | $ | 1,441,428 |  
|Land                                |  |                | 46,925    |      |  |   | 51,920    |  
|Construction in progress            |  |                | 27,615    |      |  |   | 22,206    |  
|Office furnishings and equipment    |  |                | 1,196     |      |  |   | 1,452     |  
|Accumulated depreciation            |  |                | (157,534  | )    |  |   | (113,688  | )
|                                    |  |                |           |      |  |   |           |  
|Property, plant and equipment, net  |  | $              | 1,333,928 |      |  | $ | 1,403,318 |  
|                                    |  |                |           |      |  |   |           |  

53



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NRG NORTHEAST GENERATING LLC AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Note 6  Short-Term
Borrowings

On February 21, 2001, the Company renewed,
for 90-days, its $50 million floating rate working capital
revolving facility. The proceeds of this facility were used to
finance the Companys working capital needs. In May 2001,
the Company allowed its $50 million floating rate working
capital revolving facility to expire.

Note 7  Long-Term Debt and
Note Payable  Affiliate

On February 22, 2000, NRG Northeast issued
$750 million of project level senior secured bonds, to
refinance short-term project borrowings and for certain other
purposes. The bond offering included three tranches:
$320 million with an interest rate of 8.065% due in 2004,
$130 million with an interest rate of 8.842% due in 2015
and $300 million with an interest rate of 9.292% due in
2024. Interest and principal payments are due semi-annually. The
bonds are jointly and severally guaranteed by each of NRG
Northeasts subsidiaries. The bonds are secured by a
security interest in NRG Northeasts membership or other
ownership interests in the guarantors and its rights under all
inter-company notes between NRG Northeast and the guarantors. In
December 2000, NRG Northeast exchanged all of its outstanding
bonds for bonds registered under the Securities Act of 1933. As
of December 31, 2002 and 2001, there remains
$556.5 million and $610 million of outstanding bonds,
respectively. On December 15, 2002, NRG Northeast failed to
make $24.7 million interest and $53.5 million
principal payments. NRG Northeast Generating had a 15-day grace
period to make payment. On December 27, 2002, NRG Northeast
made the $24.7 million interest payment due on the NRG
Northeast bonds but failed to make the $53.5 million
principal payment. As a result, the payment default associated
with its failure to make principal payments when they come due
is currently in effect. NRG Northeast also failed to make a debt
service reserve account cash deposit within 30 days of NRG
Energys credit rating downgrade in July 2002. In addition,
NRG Northeast is also in default of its debt covenants because
of the lapse of the 60 day grace period regarding the
necessary dismissal of an involuntary bankruptcy proceeding. As
a result of these events of default, the entire
$556.5 million owed on the secured bonds is classified as a
current liability at December 31, 2002.

On June 15, 2002, NRG Energy loaned NRG
Northeast $30 million to fund capital expenditures. The
debt bears interest at the 3 month London Interbank Offered
Rate plus 0.5%. The debt is subordinate to the other long-term
debt of NRG Northeast and is subject to the terms and conditions
of the senior secured bonds indenture. Accordingly, NRG
Northeast has classified this loan as a short-term affiliated
note payable.

Note 8  Derivative Instruments
and Hedging Activity

On January 1, 2001, the Company adopted
Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging
Activities (SFAS No. 133), as amended by SFAS
No. 137 and SFAS No. 138. SFAS No. 133 requires
NRG Northeast to record all derivatives on the balance sheet at
fair value. Changes in the fair value of non-hedge derivatives
are immediately recognized in earnings. Derivatives that have
been designated as hedges of assets, liabilities or firm
commitments, are accounted for using the fair value method.
Changes in the fair value of these instruments are recognized in
earnings as offsets to the changes in the fair value of the
related hedged assets, liabilities and firm commitments.
Derivatives that have been designated as hedges of forecasted
transactions are accounted for using the cash flow method.
Changes in the fair value of these instruments are deferred and
recorded as a component of accumulated other comprehensive
income (OCI) until the hedged transactions occur and are
recognized in earnings. Reclassifications of the deferred gains
and losses are included on the same line of the statement of
operations in which the hedged item is recorded. The ineffective
portion of the change in fair value of a derivative instrument
designated as a cash flow hedge is immediately recognized in
earnings. NRG Northeast formally assesses both at inception and
at least quarterly thereafter, whether the derivatives used in
hedging transactions are highly effective in offsetting the
changes in either the fair value or cash flows of the hedged

54



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NRG NORTHEAST GENERATING LLC AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

item. This assessment includes all components of
each derivatives gain or loss unless otherwise noted. When
it is determined that a derivative ceases to be a highly
effective hedge, hedge accounting is discontinued.

SFAS No. 133 applies to NRG Northeasts
long-term power sales contracts, long-term gas purchase
contracts and other energy related commodities financial
instruments used to mitigate variability in earnings due to
fluctuations in spot market prices, hedge fuel requirements at
generation facilities and protect investments in fuel
inventories. At December 31, 2002, the Company had various
commodity contracts extending through 2006.



| |                                           
| | ------------------------------------------
| | Accumulated Other Comprehensive
    Income

The following table summarizes the effects of
SFAS No. 133 on the Companys accumulated other
comprehensive income balance as of December 31, 2002 and
2001, respectively:

|                                                                     |                                                        |                         |         |         |   |   |         |        | 
|-------------------------------------------------------------------- | ------------------------------------------------------ | ----------------------- | ------- | ------- | - | - | ------- | ------ | 
|                                                                     |                                                        |                        
|                                                                     |                                                        | Energy Commodities     
|                                                                     |                                                        |                        
|                                                                     |                                                        |                        
|                                                                     |                                                        | Year Ended December 31,
|                                                                     |                                                        |                        
|Gains/(Losses)                                                       |                                                        | 2002                    |         | 2001   
|                                                                     |                                                        |                         |         |        
|                                                                     |                                                        |                        
|                                                                     |                                                        | (In thousands)         
|Beginning balance                                                    |                                                        | $                       | 107,741 |         |   | $ |        |       
|                                                                     | Initial adoption of SFAS No. 133.                      |                         |         |        |   |   |         | 14,100 | 
|                                                                     | Unwound from OCI during period:                        |                         |         |         |   |   |         |        | 
|                                                                     |  due to forecasted transaction no
    longer probable |                         |         |        |   |   |         |       | 
|                                                                     |  due to unwinding of previously
    deferred amounts  |                         |         | (48,086 | ) |   |         | 14,623 | 
|                                                                     | Mark to market of hedge contracts                      |                         |         | (30,820 | ) |   |         | 79,018 | 
|                                                                     |                                                        |                         |         |         |   |   |         |       
|Ending balance                                                       |                                                        | $                       | 28,835  |         |   | $ | 107,741 |       
|                                                                     |                                                        |                         |         |         |   |   |         |       
|Gains/(Losses) expected to unwind from OCI during
    next 12 months |                                                        | $                       | 28,835  |         |   |   |         |       
|                                                                     |                                                        |                         |         |         |   |   |         |       

The adoption of SFAS No. 133 on
January 1, 2001, resulted in an unrealized gain of
$14.1 million recorded to OCI related to previously
deferred net gains on derivatives designated as cash flow
hedges. During the years ended December 31, 2002 and 2001, the
Company reclassified gains of $48.1 million and losses of
$14.6 million, respectively, from OCI to current-period
earnings. This amount is recorded on the same line in the
statement of operations in which the hedged item is recorded.
Also during the years ended December 31, 2002 and 2001, the
Company recorded losses in OCI of approximately
$30.8 million and gains of $79.0 million,
respectively, related to changes in the fair values of
derivatives accounted for as hedges. The net balance in OCI
relating to SFAS No. 133 as of December 31, 2002 and 2001
was a gain of approximately $28.8 million and
$107.7 million, respectively. The Company expects
$28.8 million of the deferred net gains on derivative
instruments accumulated in OCI to be recognized as earnings
during the next twelve months.

55



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NRG NORTHEAST GENERATING LLC AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Statement of
Operations

The following tables summarize the effects of
SFAS No. 133 on the Companys statement of operations
for the years ended December 31, 2002 and 2001,
respectively:

|                                                  |                                      |                         |         |        |  |   |         |         |  
|------------------------------------------------- | ------------------------------------ | ----------------------- | ------- | ------ |  | - | ------- | ------- | -
|                                                  |                                      |                        
|                                                  |                                      | Energy Commodities     
|                                                  |                                      |                        
|                                                  |                                      |                        
|                                                  |                                      | Year Ended December 31,
|                                                  |                                      |                        
|Gains/(Losses)                                    |                                      | 2002                    |         | 2001  
|                                                  |                                      |                         |         |       
|                                                  |                                      |                        
|                                                  |                                      | (In thousands)         
|Revenue from majority owned subsidiaries          |                                      | $                       | (10,706 | )      |  | $ | (7,630  | )      
|Equity in earnings of unconsolidated subsidiaries |                                      |                         |        |        |  |   |        |        
|Cost of operations                                |                                      |                         | 25,163  |        |  |   | (23,597 | )      
|Interest expense                                  |                                      |                         |        |        |  |   |        |        
|Other income                                      |                                      |                         |        |        |  |   |        |        
|                                                  |                                      |                         |         |        |  |   |         |        
|                                                  | Total Statement of Operations impact |                         | $       | 14,457 |  |   | $       | (31,227 | )
|                                                  |                                      |                         |         |        |  |   |         |        

|                                               |                                                  |                                      |   |        |        |  |   |         |         |  
|---------------------------------------------- | ------------------------------------------------ | ------------------------------------ | - | ------ | ------ |  | - | ------- | ------- | -
|                                               |                                                  |                                     
|                                               |                                                  | Energy Commodities                  
|                                               |                                                  |                                     
|                                               |                                                  |                                     
|                                               |                                                  | Year Ended December 31,             
|                                               |                                                  |                                     
|Gains/(Losses)                                 |                                                  | 2002                                 |   | 2001  
|                                               |                                                  |                                      |   |       
|                                               |                                                  |                                     
|                                               |                                                  | (In thousands)                      
|Net gain/(loss) recognized in earnings due to: |                                                  |                                      |   |        |        |  |   |        
|                                               |  ineffectiveness                                |                                      | $ |       |        |  | $ |        |        
|                                               |  exclusion from assessment of
    effectiveness |                                      |   |       |        |  |   |        |        
|                                               |  instrument not accounted for as hedge          |                                      |   | 14,457 |        |  |   | (31,227 | )      
|                                               |                                                  |                                      |   |        |        |  |   |        
|                                               |                                                  | Total Statement of Operations impact |   | $      | 14,457 |  |   | $       | (31,227 | )
|                                               |                                                  |                                      |   |        |        |  |   |        

During the years ended December 31, 2002 and
2001, respectively, NRG Northeast recognized no gain or loss due
to ineffectiveness of commodity cash flow hedges.

NRG Northeasts earnings for the years ended
December 31, 2002 and 2001 were increased by an unrealized
gain of $14.5 million and decreased by an unrealized loss
of $31.2 million, respectively, associated with changes in
the fair value of energy related derivative instruments not
accounted for as hedges in accordance with SFAS No. 133.

Note 9  Financial
Instruments

The estimated December 31 fair values of NRG
Northeasts recorded financial instruments are as follows:

|                                          |  |                |         |       |  |          |         |            |  |   |         |  |  |   |         | 
|----------------------------------------- |  | -------------- | ------- | ----- |  | -------- | ------- | ---------- |  | - | ------- |  |  | - | ------- | 
|                                          |  |                |         |      
|                                          |  | 2002           |         | 2001 
|                                          |  |                |         |      
|                                          |  | Carrying       |         | Fair  |  | Carrying |         |           
|                                          |  | Amount         |         | Value |  | Amount   |         | Fair Value
|                                          |  |                |         |       |  |          |         |           
|                                          |  |               
|                                          |  | (In thousands)
|Cash and cash equivalents                 |  | $              | 14,354  |       |  | $        | 14,354  |            |  | $ | 370     |  |  | $ | 370     | 
|Long-term debt, including current Portion |  |                | 556,500 |       |  |          | 486,250 |            |  |   | 610,000 |  |  |   | 590,284 | 

For cash and cash equivalents, the carrying
amount approximates fair value because of the short-term
maturity of those instruments. The fair value of long-term debt
is estimated based on the quoted market prices for similar
issues.

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NRG NORTHEAST GENERATING LLC AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Energy and
Energy Related Commodities

NRG Northeast is exposed to commodity price
variability in electricity, emission allowances, natural gas,
oil derivatives and coal used to meet fuel requirements. In
order to manage these commodity price risks, NRG Northeast may
enter into transactions for physical delivery of particular
commodities for a specific period. Financial instruments are
used to hedge physical deliveries, which may take the form of
fixed price, floating price or indexed sales or purchases, and
options, such as puts, calls, basis transactions and swaps.
These transactions are utilized to:



| |   |                                                                     
| | - | --------------------------------------------------------------------
| |  | Manage and hedge its fixed-price purchase and
    sales commitments;
|
| |  | Reduce its exposure to the volatility of spot
    market prices;    
|
| |  | Hedge fuel requirements at its generation
    facilities; and       
|
| |  | Protect its investment in fuel inventories.                         

Interest
Rates

From time to time, NRG Northeast may use interest
rate hedging instruments to protect it from an increase in the
cost of borrowing. As of December 31, 2002 and 2001, there
were no such instruments outstanding.

Note 10  Related Party
Transactions

The Companys subsidiaries have entered into
agency agreements with NRG Power Marketing Inc. (NRG Power
Marketing), a wholly-owned subsidiary of NRG. The
agreements are effective until December 31, 2030. Under the
agreements, NRG Power Marketing will (i) have the exclusive
right to manage, market, hedge and sell all power not otherwise
sold or committed to by such subsidiaries, (ii) procure,
provide and hedge for such subsidiaries all fuel required to
operate their respective facilities and (iii) market, sell
and purchase all emission credits owned, earned or acquired by
such subsidiaries. In addition, NRG Power Marketing will have
the exclusive right and obligation to effect the dispatch of the
power output from the facilities.

Under the agreements, NRG Power Marketing pays to
the subsidiaries gross receipts generated through sales, less
costs incurred by NRG Power Marketing relative to its providing
services (e.g. transmission and delivery costs, fuel cost,
taxes, labor, contract services, etc.) The Company incurs no
fees related to these power sales and agency agreements with NRG
Power Marketing.

The Company has no employees and has entered into
operation and maintenance agreements with subsidiaries of NRG
Operating Services, Inc., a wholly-owned subsidiary of NRG
(NRG Operating Services). The agreements are
effective for five years, with options to extend beyond five
years. Under the agreements, the NRG Operating Services company
operator operates and maintains its respective facility,
including (i) coordinating fuel delivery, unloading and
inventory, (ii) managing facility spare parts,
(iii) meeting external performance standards for
transmission of electricity, (iv) providing operating and
maintenance consulting and (v) cooperating with and
assisting the Company in performing the Companys
obligations under agreements related to its facilities.

Under the agreements, the operator charges an
annual fee, and in addition, will be reimbursed for usual and
customary costs related to providing the services including
plant labor and other operating costs. A demobilization payment
will be made if the subsidiary elects not to renew the
agreement. There are also incentive fees and penalties based on
performance under the approved operating budget, the heat rate
and safety.

57



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NRG NORTHEAST GENERATING LLC AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

During 2002 and 2001, the Company incurred annual
operating and maintenance costs billed from NRG Operating
Services totaling $4.4 million. In addition, the Company
incurred $117.9 million and $172.4 million,
respectively, for usual and customary costs related to providing
the services including plant labor and other operating costs.

The Companys subsidiaries have entered into
agreements with NRG for corporate support and services. The
agreements are perpetual in term, unless terminated in writing
by a subsidiary. Under the agreements, NRG will provide
services, as requested, in areas such as human resources,
accounting, finance, treasury, tax, office administration,
information technology, engineering, construction management,
environmental, legal and safety. Under the agreements, NRG is
paid for personnel time as well as out-of-pocket costs.

During 2002 and 2001, the Company paid NRG
approximately $4.2 million and $5.1 million,
respectively, for corporate support and services.

Note 11  Sales to Significant
Customers

During 2002, one customer, NYISO, accounted for
72.5% of NRG Northeasts gross revenues. During 2001, two
customers accounted for 72.5% of NRG Northeasts total
revenues, NYISO (58.4%) and Niagara Mohawk Power Corporation
(NiMo) (14.1%). During 2000, three customers accounted for 73.1%
of NRG Northeasts total revenues, NYISO (39.9%), CL&P
(22.0%) and NiMo (11.2%). Such amounts include revenues from
customers under contract with Power Marketing, Inc.

Note 12  Commitments and
Contingencies



| |                            
| | ---------------------------
| | Operating Lease Commitments

NRG Northeast leases certain of its storage space
and equipment under operating leases expiring on various dates
through 2018. Rental expense under these operating leases was
approximately $0.8 million, $0.9 million, and
$0.6 million in 2002, 2001, and 2000, respectively. Future
minimum lease commitments under these leases for the years
ending after December 31, 2002 are as follows:

|           |       |             |       |       | 
|---------- | ----- | ----------- | ----- | ----- | 
|           |       | (Thousands 
|           |       | of dollars)
|           |       |            
|2003       |       | $           | 780   |      
|2004       |       |             | 775   |      
|2005       |       |             | 761   |      
|2006       |       |             | 760   |      
|2007       |       |             | 288   |      
|Thereafter |       |             | 3,312 |      
|           |       |             |       |      
|           | Total |             | $     | 6,676 | 
|           |       |             |       |      



| |                    
| | -------------------
| | Capital Commitments

Management currently forecasts that cash flow
from operations for 2003 will be insufficient to cover capital
expenditures, which include minor refurbishments and
environmental compliance. Given this shortfall, NRG Northeast
anticipates funding its ongoing capital requirements through
operating cash flows and existing cash, as well as potential
external financing. NRG Northeasts capital expenditure
program is subject to continuing review and modification. The
timing and actual amount of expenditures may differ
significantly based upon plant operating history, unexpected
plant outages, changes in the regulatory environment, the
availability of cash and restructuring efforts.

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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                      
| | ---------------------
| | Environmental Matters

The construction and operation of power projects
are subject to stringent environmental and safety protection and
land use laws and regulations in the United States. These laws
and regulations generally require lengthy and complex processes
to obtain licenses, permits and approvals from federal, state
and local agencies. If such laws and regulations become more
stringent and NRG Northeasts facilities are not exempted
from coverage, NRG Northeast could be required to make extensive
modifications to further reduce potential environmental impacts.
Also, NRG Northeast could be held responsible under
environmental and safety laws for the cleanup of pollutant
releases at its facilities or at off-site locations where it has
sent wastes.

NRG Northeast and its subsidiaries strive to
exceed the standards of compliance with applicable environmental
and safety regulations. Nonetheless, NRG Northeast expects that
future liability under or compliance with environmental and
safety requirements could have a material effect on its
operations or competitive position. It is not possible at this
time to determine when or to what extent additional facilities
or modifications of existing or planned facilities will be
required as a result of possible changes to environmental and
safety regulations, regulatory interpretations or enforcement
policies. In general, the effect of future laws or regulations
is expected to require the addition of pollution control
equipment or the imposition of restrictions on NRG
Northeasts operations.

As part of acquiring existing generating assets,
NRG Northeast has inherited certain environmental liabilities
associated with regulatory compliance and site contamination.
Often potential compliance implementation plans are changed,
delayed or abandoned due to one or more of the following
conditions: (a) extended negotiations with regulatory
agencies, (b) a delay in promulgating rules critical to
dictating the design of expensive control systems,
(c) changes in governmental/regulatory personnel,
(d) changes in governmental priorities or
(e) selection of a less expensive compliance option than
originally envisioned.

In response to liabilities associated with these
activities, NRG Northeast has established accruals where
reasonable estimates of probable liabilities are possible. As of
December 31, 2002 and 2001, NRG Northeast has established
such accruals in the amount of approximately $3.8 million
and $5.0 million, respectively, primarily related to its
Arthur Kill and Astoria projects. NRG Northeast has not used
discounting in determining its accrued liabilities for
environmental remediation and no claims for possible recovery
from third party issuers or other parties related to
environmental costs have been recognized in NRG Northeasts
consolidated financial statements. NRG Northeast adjusts the
accruals when new remediation responsibilities are discovered
and probable costs become estimable, or when current remediation
estimates are adjusted to reflect new information. During the
years ended December 31, 2002, 2001 and 2000, NRG Northeast
recorded expenses of approximately $5.8 million, $7.2
million and $3.0 million related to environmental matters,
respectively.

Under various federal, state and local
environmental laws and regulations, a current or previous owner
or operator of any facility, including an electric generating
facility, may be required to investigate and remediate releases
or threatened releases of hazardous or toxic substances or
petroleum products located at the facility, and may be held
liable to a governmental entity or to third parties for property
damage, personal injury and investigation and remediation costs
incurred by the party in connection with any releases or
threatened releases. These laws, including the Comprehensive
Environmental Response, Compensation and Liability Act of 1980,
as amended by the Superfund Amendments and Reauthorization Act
of 1986, impose liability without regard to whether the owner
knew of or caused the presence of the hazardous substances, and
courts have interpreted liability under such laws to be strict
(without fault) and joint and several. The cost of
investigation, remediation or removal of any hazardous or toxic
substances or petroleum products could be substantial. Although
NRG Northeast has been involved in on-site contamination
matters, to date, NRG Northeast has not been named as a
potentially responsible party with respect to any off-site waste
disposal matter.

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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Coal ash is produced as a by-product of coal
combustion at the Dunkirk, Huntley, and Somerset Generating
Stations. NRG Northeast attempts to direct its coal ash to
beneficial uses. Even so, significant amounts of ash are
landfilled at on-site and off-site locations. At Dunkirk and
Huntley, ash is disposed at landfills owned and operated by NRG
Northeast. No material liabilities outside the costs associated
with closure, post-closure care and monitoring are expected at
these facilities. NRG Northeast maintains financial assurance to
cover costs associated with closure, post-closure care and
monitoring activities. In the past, NRG Northeast has provided
financial assurance via financial test and corporate guarantee.
NRG Northeast must re-establish financial assurance via an
instrument requiring complete collateralization of closure and
post-closure-related costs, currently estimated at approximately
$5.8 million. NRG Northeast is required to provide an
alternative instrument to provide such financial assurance on or
before April 30, 2003.

NRG Northeast must also maintain financial
assurance for closing interim status RCRA facilities at the
Devon, Middletown, Montville and Norwalk Generating Stations.
Previously, NRG Northeast has provided financial assurance via
financial test. NRG Northeast must re-establish financial
assurance via an instrument requiring complete collateralization
of closure and post-closure-related costs. NRG Northeast is
required to provide an alternative instrument to provide such
financial assurance on or before April 30, 2003.

Historical clean-up liabilities were inherited as
a part of acquiring the Somerset, Devon, Middletown, Montville,
Norwalk, Arthur Kill and Astoria Generating Stations. NRG
Northeast has recently satisfied clean-up obligations associated
with the Ledge Road property (inherited as part of the Somerset
acquisition). Site contamination liabilities arising under the
Connecticut Transfer Act at the Devon, Middletown, Montville and
Norwalk Stations have been identified and are currently being
refined as part of on-going site investigations. NRG Northeast
does not expect to incur material costs associated with
completing the investigations at these Stations or future work
to cover and monitor landfill areas pursuant to the Connecticut
requirements. Remedial obligations at the Arthur Kill Generating
Station have been established in discussions between NRG
Northeast and the New York State DEC and are estimated at
$1.0 million. Remedial investigations are on-going at the
Astoria Generating Station. At this time, NRG Northeasts
long-term cleanup liability at this site is estimated at
$1.5 million. However, the magnitude of cleanup costs for
the Astoria Station cannot be estimated with certainty until the
results of the remedial investigation are available.

NRG Northeast estimates that it will incur total
environmental capital expenditures of $53 million during
2003 through 2007. These expenditures will be primarily related
to landfill construction, installation of NOx controls,
installation of the best technology available for minimizing
environmental impacts associated with impingement and
entrainment of fish and larvae, particulate matter control
improvements, spill prevention controls, and undertaking
remedial actions. NRG Northeast estimates that it will incur in
2003 at all of its plants approximately $8 million in
capital expenditures for plant modifications and upgrades
required to comply with environmental regulations.

As of December 31, 2002, NRG Energy had
recorded an accrual in the amount of $1.6 million to cover
penalties associated with historical opacity exceedances.



| |                        
| | -----------------------
| | Contractual Commitments

In connection with the acquisition of certain
generating facilities NRG Northeast entered into various
long-term transition agreements and standard offer agreements
that obligated NRG Northeast to provide its customers, primarily
the previous owners of the acquired facilities, with a certain
portion of the energy and capacity output of the acquired
facilities.

During 1999, NRG Northeast acquired the Huntley
and Dunkirk generating facilities from Niagara Mohawk Power
Corporation (NiMo). In connection with this acquisition, NRG
Northeast entered into a 4-year agreement with NiMo that
requires NRG Northeast to provide to NiMo pursuant to a
predetermined

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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

schedule fixed quantities of energy and capacity
at a fixed price. The contract is recorded as a cash flow hedge
for financial reporting purposes (see Note 8).

During 1999, NRG Northeast acquired certain
generating facilities from Connecticut Light and Power Company
(CL&P). NRG Power Marketing also entered into a 4-year
standard offer agreement that requires Power Marketing to
provide to CL&P a portion of its load requirements through
the year 2003 at a fixed rate of $43.83 per mwh. This is a
round-the-clock obligation. Through its agency agreement with
NRG Northeast, NRG Power Marketing utilizes the capacity
available in the Connecticut facilities in order to serve the
contract.

During 1999, NRG Northeast acquired the Oswego
generating facilities from NiMo and entered into a 4-year
transition power sales contract with NiMo in order to hedge
NiMos transition to market rates. Under the agreement,
NiMo will pay to Oswego Power a fixed monthly price plus start
up fees for the right to claim, at a specified delivery
point(s), the installed capacity of unit 5 and for the right to
exercise an option for an additional 350 MW of installed
capacity.

NRG Power Marketing has entered into a wholesale
standard offer service agreement with Blackstone Valley Electric
Company, Eastern Edison Company and Newport Electric Corporation
(collectively the EUA Companys). Under the agreement, NRG
Power Marketing is obligated to provide each of the EUA
Companys with firm all-requirements electric service,
including capacity, energy, reserves, line losses and related
services necessary to serve the aggregate load attributable to
retail customers taking standard offer service. The price the
EUA Companys pay to NRG Power Marketing for each unit of
electricity is a fixed price plus a fuel adjustment factor.

In July 2002, NRG Power Marketing reached a
tentative agreement with Connecticut Light & Power
(CL&P) that would result in increased compensation to NRG
Power Marketing, a supplier of CL&Ps wholesale supply
agreement. CL&P filed an emergency petition with the
Connecticut Department of Public Utility Control (DPUC) asking
for approval of a shift of wholesale supply agreement revenues,
effective August 1, 2002, through December 31, 2003,
that would reallocate 0.7 cents per kilowatt-hour in the
wholesale price paid to existing suppliers. On July 26,
2002, the DPUC denied the request of CL&P for an emergency
letter ruling. On August 9, 2002, NRG Northeast announced
that it had reached an agreement with ISO-NE to keep three units
at its Devon station in service in return for a fixed
reliability must run (RMR) capacity payment. The agreement
expires on September 30, 2003.



| |             
| | ------------
| | NYISO Claims

In November 2002, the NYISO notified NRG
Northeast of claims related to New York City mitigation
adjustments, general NYISO billing adjustments and other
miscellaneous charges related to sales between November 2000 and
October 2002. NRG Northeast strenuously disagrees with both the
validity and calculation of the claims and is currently
negotiating with the NYISO over the ultimate disposition. NRG
Northeast reduced its revenues by $21.7 million and recorded a
corresponding reserve for the receivables during 2002.



| |           
| | ----------
| | Guarantees

In November 2002, The FASB issued FASB
Interpretation No. 45, Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. The initial
recognition and initial measurement provisions of this
interpretation are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002,
irrespective of the guarantors fiscal year-end. The
disclosure requirements are effective for financial statements
of interim or annual periods ending after December 15,
2002. The interpretation addresses the disclosures to be made by
a guarantor in its interim and annual financial statements about
its obligations under guarantees. The interpretation also
clarifies the

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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

requirements related to the recognition of a
liability by a guarantor at the inception of the guarantee for
the obligations the guarantor has undertaken in issuing the
guarantee.

NRG Northeast is directly liable for the
obligations of certain of its affiliates pursuant to guarantees
relating to certain of their performance obligations. In
addition, in connection with the purchase and sale of fuel,
emission credits and power generation products to and from third
parties with respect to the operation of some of NRG
Northeasts generation facilities, NRG Northeast may be
required to guarantee a portion of the obligations of certain of
its subsidiaries.

As of December 31, 2002, NRG
Northeasts obligations pursuant to its guarantees of the
performance obligations of its affiliates and subsidiaries
totaled approximately $140.8 million.

As of December 31, 2002, the nature and
details of NRG Northeasts guarantees were as follows:

|                                                                  |     |            |               |                     |  |            |             |                  |  |  |             |         |  |  |                |                | 
|----------------------------------------------------------------- | --- | ---------- | ------------- | ------------------- |  | ---------- | ----------- | ---------------- |  |  | ----------- | ------- |  |  | -------------- | -------------- | 
|                                                                  |     | Guarantee/ |               |                     |  |            |             |                 
|                                                                  |     | Maximum    |               |                     |  | Expiration |             |                 
|Project/Subsidiary                                                |     | Exposure   |               | Nature of Guarantee |  | Date       |             | Triggering Event
|                                                                  |     |            |               |                     |  |            |             |                 
|Astoria/Arthur Kill                                               |     |            | Indeterminate |                     |  |            | Performance |                  |  |  | None stated |         |  |  | Nonperformance |               
|Power Marketing, Inc., as Agent for NRG Northeast
    Generating, |     |            |               |                     |  |            |             |                  |  |  |             |         |  |  |                |               
|                                                                  | LLC |            | $             | 140,839             |  |            |             | Performance      |  |  |             | Various |  |  |                | Nonperformance | 

NRG Northeast provides performance guarantees to
third parties on behalf of NRG Power Marketing in relation to
certain of its sales and supply agreements.

Litigation

Fortistar Capital Inc. v. NRG Energy, Inc.,Hennepin County District
Court.

On July 12, 1999, Fortistar Capital Inc.
sued NRG Energy in Minnesota state court. The complaint sought
injunctive relief and damages of over $50 million resulting from
NRG Energys alleged breach of a letter agreement with
Fortistar relating to the Oswego Steam Station. NRG Energy
asserted counterclaims. After considerable litigation, the
parties entered into a conditional, confidential settlement
agreement, which was subject to necessary board and lender
approvals. NRG Energy was unable to obtain necessary approvals.
Fortistar has moved the court to enforce the settlement, seeking
damages in excess of $35 million plus interest and
attorneys fees. NRG Energy is opposing Fortistars
motion on the grounds that conditions to contract performance
have not been satisfied. No decision has been made on the
pending motion, and NRG Energy cannot predict the outcome of
this dispute.

Connecticut Light & Power Company v.
NRG Power Marketing Inc.,Docket No.
3:01-CV-2373 (A WT), pending in the United States District
Court, District of Connecticut

This matter involves a claim by Connecticut Light
& Power Company for recovery of amounts it claims is owing
for congestion charges under the terms of a Standard Offer
Services contract between the parties, dated October 29,
1999. CL&P has served and filed its motion for summary
judgment to which NRG Power Marketing filed a response on
March 21, 2003. CL&P has offset approximately
$30 million from amounts owed to NRG Power Marketing
claiming that it has the right to offset those amounts under the
contract. NRG Power Marketing has counterclaimed seeking to
recover those amounts, arguing among other things that CL&P
has no rights under the contract to offset them. NRG Power
Marketing cannot estimate at this time the likelihood of an
unfavorable outcome in this matter, or the overall exposure for
congestion charges for the full term of the contract.

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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The State of New York and Erin M. Crotty,
as Commissioner of the New York State Department of
Environmental Conservation v. Niagara Mohawk Power Corporation
et al.,United States District Court
for the Western District of New York, Civil Action
No. 02-CV-002S

In January, 2002, NRG Energy and Niagara Mohawk
Power Corporation (NiMo) were sued by the New York
Department of Environmental Conservation in federal court in New
York. The complaint asserts that projects undertaken at NRG
Energys Huntley and Dunkirk plants by NiMo, the former
owner of the facilities, should have been permitted pursuant to
the Clean Air Act and that the failure to do so violated federal
and state laws. In July, 2002, NRG Energy filed a motion to
dismiss. On March 27, 2003 the court dismissed the
complaint against NRG Energy with prejudice as to the federal
claims and without prejudice as to the state claims. It is
possible the State will appeal this dismissal to the Second
Circuit Court of Appeals or re-file a case against NRG Energy.
If the case ultimately is litigated to a judgment and there is
an unfavorable outcome that could not be addressed through use
of compliant fuels and/or a plant wide applicability limit, NRG
Energy has estimated that the total investment that would be
required to install pollution control devices could be as high
as $300 million over a ten to twelve-year period, and NRG
Energy may be responsible for payment of certain penalties and
fines.

Niagara Mohawk Power Corporation v. NRG
Energy, Inc., Huntley Power, LLC, and Dunkirk Power, LLC,Supreme Court, State of New York,
County of Onondaga, Case No. 2001-4372

NRG Energy has asserted that NiMo is obligated to
indemnify it for any related compliance costs associated with
resolution of the enforcement action. NiMo has filed suit in
state court in New York seeking a declaratory judgment with
respect to its obligations to indemnify NRG Energy under the
asset sales agreement.

Huntley Power LLC, Dunkirk Power LLC and
Oswego Harbor Power LLC

All three of these facilities have been issued
Notices of Violation with respect to opacity exceedances. NRG
Energy has been engaged in consent order negotiations with the
New York State Department of Environmental Conservation relative
to opacity issues affecting all three facilities periodically
since 1999. One proposed consent order was forwarded by DEC
under cover of a letter dated January 22, 2002, which makes
reference to 7,890 violations at the three facilities and
contains a proposed payable penalty for such violations of
$900,000. On February 5, 2003, DEC sent a proposed Schedule
of Compliance and asserted that it is to be used in conjunction
with newly-drafted consent orders. NRG Energy has not yet
received the consent orders although NRG Energy has been told by
DEC that DEC is now seeking a penalty in excess of that cited in
its January 22, 2002 letter. NRG Energy expects to continue
negotiations with DEC regarding the proposed consent orders,
including the Schedule of Compliance and the penalty amount. NRG
Energy cannot predict whether those discussions with the DEC
will result in a settlement and, if they do, what sanctions will
be imposed. In the event that the consent order negotiations are
unsuccessful, NRG Energy does not know what relief DEC will seek
through an enforcement action and what the result of such action
will be.

Niagara Mohawk Power Corporation v. Dunkirk
Power LLC, et al.,Supreme Court, Erie
County, Index No. 1-2000-8681

On October 2, 2000, plaintiff Niagara Mohawk
Power Corporation commenced this action against NRG Energy to
recover damages, plus late fees, less payments received, through
the date of judgment, as well as any additional amounts due and
owing for electric service provided to the Dunkirk Plant after
September 18, 2000. Plaintiff Niagara Mohawk claims that
NRG Energy has failed to pay retail tariff amounts for utility
services commencing on or about June 11, 1999 and continuing to
September 18, 2000 and thereafter. Plaintiff has alleged
breach of contract, suit on account, violation of statutory
duty, and unjust enrichment claims. On or about October 23,
2000, NRG Energy served an answer denying liability and
asserting affirmative defenses.

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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

After proceeding through discovery, and prior to
trial, the parties and the court entered into a stipulation and
order filed August 9, 2002 consolidating this action with
two other actions against the Companys Huntley and Oswego
subsidiaries, both of which cases assert the same claims and
legal theories for failure to pay retail tariffs for utility
services.

On October 8, 2002, a Stipulation and Order
was filed in the Erie County Clerks Office staying this
action pending submission of some or all of the disputes in the
action to the FERC. NRG Energy cannot make an evaluation of the
likelihood of an unfavorable outcome. The cumulative potential
loss could exceed $35 million.

NRG Energy Credit Defaults

NRG Energy and various of its subsidiaries are in
default under various of their credit facilities, financial
instruments, construction agreements and other contracts, which
have given rise to liens, claims and contingencies against them
and may in the future give rise to additional liens, claims and
contingencies against them. In addition, NRG Energy and various
of its subsidiaries have entered into various guarantees, equity
contribution agreements, and other financial support agreements
with respect to the obligations of their affiliates, which have
given rise to liens, claims and contingencies against them and
may in the future give rise to additional liens, claims and
contingencies against the party or parties providing the
financial support. NRG Energy cannot at this time predict the
outcome or financial impact of these matters.

Note 13  Regulatory
Issues

New
England

On April 26, 2001 the Federal Energy
Regulatory Commission (FERC) approved, with a July 2001
implementation date, a change in the energy market bidding
structure in New England from a one part bidding structure with
hourly uplift compensation to a three part bidding system with
Net Commitment Period Compensation (NCPC). Under this three part
bidding system, a supplier submits separate bids for energy,
start up costs and no load. Also under this revised bidding
structure, a supplier is guaranteed of receiving an amount at
least equal to the combination of its start up, no load and
accepted energy bids over the course of the day when it is
dispatched to run in the energy market. The impact of this
change is that payments for operations dispatched out-of-merit,
or from operations required to relieve transmission congestion
are evaluated over a twenty four hour period and compensation is
paid if the monies received from the energy market are
insufficient to cover the as-bid offer. Previously, payments for
out-of-merit energy was awarded on an hourly basis and therefore
payments received for out-of-merit energy under three part
bidding with NCPC are expected to be lower than under previously
single part bid market.

On August 28, 2001, the FERC ruled that a
capacity deficiency of $4.87 per kilowatt (KW) per month
was appropriate. The deficiency charge acts as a price cap for
the Installed Capacity (ICAP) market because load-serving
entities (LSE) that do not satisfy their ICAP purchase
obligation must pay the deficiency charge. Previous to this
ruling, a temporary deficiency charge of $0.17 per KW per month
existed. In the same order, the FERC rejected ISO-NEs
proposed after-the-fact cure period for LSEs ICAP purchase
obligation.

Effective May 1, 2002 certain rule changes
went into effect which reflect in part the recommendations made
by ISO-NEs market advisor. Rule changes that are intended
to improve the efficiency of the price signal for energy during
high load periods include amending eligibility requirements for
resources eligible to set the clearing prices, changes to
reserve markets including the inclusion of Replacement Reserves
in the Thirty Minute Operating Reserve Markets and rules on
transaction across the tie lines to New York.

Effective March 1, 2003, ISO-NE implemented
its version of standard market design (SMD). This change
dramatically modifies the New England market structure by
incorporating locational marginal pricing

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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(LMP  pricing by location rather than
on a New England wide basis). Even though NRG Northeast views
this change as a significant improvement to the existing market
design, NRG Northeast still views the market in New England as
incapable of allowing NRG Northeast to recover its costs and
provide a reasonable return on investment. Consequently, on
February 26, 2003, Devon Power LLC, Middletown Power LLC,
Montville Power LLC, Norwalk Power LLC and NRG Power Marketing
(collectively, the NRG Filers) filed and requested a cost of
service rate with FERC for most of its Connecticut fleet,
requesting a February 27th effective date. The NRG Filers
remain committed to working with ISO-NE, FERC and other
stakeholders to continue to improve the New England market that
will hopefully make further reliance on a cost of service rate
unnecessary. While the NRG Filers have the right to file for
such rate treatment, there are no assurances that FERC will
grant such rates in the form or amount that the NRG Filers
petitioned for in their filing. On March 25, 2003, the
Federal Energy Regulatory Commission (FERC) issued an order
(the Order) in response to the NRG Filers Joint Motion for
Emergency Expedited Issuance of Order by March 17, 2003 in
Docket No. ER03-563-000 (the Emergency Motion). In the
Emergency Motion, the NRG Filers requested that FERC accept the
NRG Filers reliability must-run agreements and assure the
NRG Filers recovery of deferred maintenance costs for
their New England generating facilities prior to the peak summer
season. FERC accepted the NRG Filers filing as to the
recovery of spring 2003 maintenance costs, subject to refund.
FERCs Order authorizes the ISO New England Inc. to begin
collecting these maintenance costs in escrow for the benefit of
the NRG Filers as of February 27, 2003. Several intervenors
protested the Emergency Motion. FERC will rule on such protests
and the other issues raised in the Emergency Motion in a
subsequent order.

If FERC declines to grant cost of service-based
rates in Connecticut, there may be additional impairments
related to the Connecticut assets. Management is unable to
determine the possible magnitude of any such asset impairments.

New
York

On October 31, 2001, the extension of the
New York City mitigation measures to the real time market and
out-of-merit dispatches expired. Consolidated Edison Company of
New York (ConEd) has requested an extension of the expanded
mitigation measures. On November 27, 2001, the FERC denied
this request and directed the NYISO to address the concerns of
ConEd in a comprehensive mitigation filing, which is referenced
below. On March 20, 2002, the NYISO filed its comprehensive
mitigation proposal with the FERC. Under the proposal, the
Day-Ahead energy market (DAM) bids of New York City
suppliers would continue to be mitigated under the existing
ConEd mitigation rules with the following changes. Specifically,
the DAM bid for each hour would be compared to the energy price
at the Indian Point 2 bus and if the In-City bid exceeded
the Indian Point 2 price by more than 107%, all of the DAM
energy bids of the supplier would be mitigated to a reference
price. The reference price represents either an average of
accepted energy bids in the DAM over the last thirty days or a
level negotiated with the NYISO. Regarding the real-time energy
market (RTM), the NYISO proposal for New York City restricts the
ability of a facility to bid above its reference price according
to the level of congestion In-City. If congestion prohibits
energy from being imported into the City and is also present
within the New York City load pockets, the NYISO proposal would
restrict the ability to bid above the reference price by
approximately 2%. If there is no congestion found in New York
City, the facilities can bid approximately one hundred dollars
above its referenced price. Currently, the New York City
mitigation measures only apply in the day-ahead market. The
effect of the expiration of part of these mitigation measures
means that in the real time market and out-of-merit dispatches,
the Companys generating assets in New York City are
subject only to the NYISOs New York state mitigation
measures.

On April 30, 2002, the automatic mitigation
measure for the entire New York State DAM expired. On
May 1, 2002, the FERC approved a NYISO request for
extension of the automatic mitigation procedures until
May 31, 2002. The extension was granted to permit the FERC
to consider the NYISOs comprehensive mitigation proposal
noted above. The automatic mitigation measures evaluate a
suppliers bids to determine if

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STATEMENTS  (Continued)

(1) the bid exceeds the suppliers
historically accepted bids (over the past 90 days) by more
than $100 and (2) that there is an impact on the state-wide
or a portion of the states energy price by more than $100.
If both of these occur, the suppliers energy bid is
reduced to the facilitys historically accepted bids. The
impact of the expiration of the automatic mitigation measures
means that the Company and other market participants have
greater flexibility in submitting bids in the DAM.

The New York energy markets are subject to a
price cap of $1,000 per megawatt hour (MWh). This cap will
continue indefinitely.

On September 4, 2001, the FERC approved the
request of the NYISO to revise the ICAP market to one based on
unforced capacity similar to the capacity market in the
Pennsylvania New Jersey Maryland Interconnection. The change
from a capacity market that is based on ICAP to one based on
unforced capacity requires that certain New York City Capacity
requirements be revised to reflect the change. Under ICAP
methodology, ICAP sold by the Company and other New York City
generators was capped at $105 per KW year. In the
September 4th order, the FERC increased the price cap to
approximately $112 per KW year. Also in the order the FERC
reduced the amount of In-City Capacity an LSE must purchase by
8.6%. The amount of New York City capacity that can be sold as
unforced capacity is dependent on the availability of the
generating assets to NYISO dispatch instructions. Initially, the
FERC reduced the amount of capacity available from New York City
generation by approximately 7.1%. The effect of these changes is
that the capacity price cap is higher while the amount of
capacity an LSE must purchase from New York City generation and
the amount of available New York City generating capacity is
reduced.

In New York, NRG Northeast anticipates that the
NYISO will implement a demand curve in its capacity market. In
PJM, NRG Northeast is closely following market power mitigation
modifications that may significantly impact the revenues
achievable in that market by modifying PJMs price capping
mechanisms. The potential modifications are unknown at this
time, and it is unclear whether such changes would have a
positive or a negative effect on NRG Northeast.

Note 14  Unaudited Quarterly
Financial Data

Subsequent to the issuance of NRG
Northeasts financial statements for the quarter ended
September 30, 2002, NRG Northeasts management
determined that the accounting for certain transactions required
restatement.

NRG Northeast determined that it had misapplied
the provisions of SFAS No. 144 related to asset groupings
in connection with the review for impairment of its long-lived
assets during the quarter ended September 30, 2002. SFAS
No. 144 requires that for purposes of testing
recoverability, assets be grouped at the lowest level for which
identifiable cash flows are largely independent of the cash
flows of other assets. NRG Northeast recalculated the asset
impairment tests in accordance with SFAS No. 144 using the
appropriate asset grouping for independent cash flows for each
generation facility. As a result, NRG Northeast concluded that
an asset impairment should have been recorded for its project
known as Somerset Power LLC. Since NRG Northeast concluded that
triggering events that led to the impairment charge were
experienced in the third quarter of 2002, the asset impairment
related to this project should have been recorded as of
September 30, 2002. NRG Northeast calculated the asset
impairment charge for Somerset Power LLC to be
$49.3 million.

66



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NRG NORTHEAST GENERATING LLC AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

A summary of the significant effects of the
restatement on our consolidated statements of operations for the
three and nine months ended September 30, 2002 is as
follows:

|                            |  |                     |         |             |  |              |         |             |  |   |         |   |  |   |         | 
|--------------------------- |  | ------------------- | ------- | ----------- |  | ------------ | ------- | ----------- |  | - | ------- | - |  | - | ------- | 
|                            |  |                     |         |            
|                            |  | Previously Reported |         | As Restated
|                            |  |                     |         |            
|                            |  | Three Months        |         | Nine Months |  | Three Months |         | Nine Months
|                            |  | Ended               |         | Ended       |  | Ended        |         | Ended      
|                            |  |                     |         |             |  |              |         |            
|                            |  |                    
|                            |  | (In thousands)     
|Revenue and equity earnings |  | $                   | 233,604 |             |  | $            | 550,252 |             |  | $ | 233,064 |   |  | $ | 550,252 | 
|Operating income/(loss)     |  |                     | 32,531  |             |  |              | 103,134 |             |  |   | (16,758 | ) |  |   | 53,845  | 
|Net income/(loss)           |  |                     | 19,787  |             |  |              | 68,680  |             |  |   | (29,502 | ) |  |   | 19,391  | 

A summary of the significant effects of the
restatement on our consolidated balance sheet as of
September 30, 2002 is as follows:

|                                  |  |                          |           |             |  |   |           | 
|--------------------------------- |  | ------------------------ | --------- | ----------- |  | - | --------- | 
|                                  |  |                         
|                                  |  | As of September 30, 2002
|                                  |  |                         
|                                  |  | Previously               |           |            
|                                  |  | Reported                 |           | As Restated
|                                  |  |                          |           |            
|                                  |  |                         
|                                  |  | (In thousands)          
|Net property, plant and equipment |  | $                        | 1,385,316 |             |  | $ | 1,336,027 | 
|Members equity                   |  |                          | 1,101,330 |             |  |   | 1,052,041 | 

Summarized quarterly unaudited financial data is
as follows:

|                            |  |                        |         |         |  |         |         |        |  |            |         |   |  |   |         |   |  |   |         | 
|--------------------------- |  | ---------------------- | ------- | ------- |  | ------- | ------- | ------ |  | ---------- | ------- | - |  | - | ------- | - |  | - | ------- | 
|                            |  |                       
|                            |  | Quarter Ended 2002    
|                            |  |                       
|                            |  |                       
|                            |  | (Thousands of dollars)
|                            |  | Mar 31                 |         | June 30 |  | Sept 30 |         | Dec 31 |  | Total Year
|                            |  |                        |         |         |  |         |         |        |  |           
|                            |  |                       
|                            |  | Restated              
|Revenue and equity earnings |  | $                      | 131,568 |         |  | $       | 185,080 |        |  | $          | 233,604 |   |  | $ | 143,617 |   |  | $ | 693,869 | 
|Operating income/(loss)     |  |                        | 17,550  |         |  |         | 53,053  |        |  |            | (16,758 | ) |  |   | (3,435  | ) |  |   | 50,410  | 
|Net income/(loss)           |  |                        | 2,140   |         |  |         | 46,753  |        |  |            | (29,502 | ) |  |   | (15,506 | ) |  |   | 3,885   | 

|                            |  |                        |         |         |  |         |         |        |  |            |         |  |  |   |         |  |  |   |           | 
|--------------------------- |  | ---------------------- | ------- | ------- |  | ------- | ------- | ------ |  | ---------- | ------- |  |  | - | ------- |  |  | - | --------- | 
|                            |  |                       
|                            |  | Quarter Ended 2001    
|                            |  |                       
|                            |  |                       
|                            |  | (Thousands of dollars)
|                            |  | Mar 31                 |         | June 30 |  | Sept 30 |         | Dec 31 |  | Total Year
|                            |  |                        |         |         |  |         |         |        |  |           
|Revenue and equity earnings |  | $                      | 275,732 |         |  | $       | 270,819 |        |  | $          | 352,158 |  |  | $ | 151,979 |  |  | $ | 1,050,688 | 
|Operating income            |  |                        | 64,179  |         |  |         | 32,029  |        |  |            | 129,467 |  |  |   | 39,593  |  |  |   | 265,268   | 
|Net income                  |  |                        | 49,478  |         |  |         | 17,685  |        |  |            | 114,804 |  |  |   | 29,288  |  |  |   | 211,255   | 

67



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REPORT OF INDEPENDENT ACCOUNTANTS ON

FINANCIAL STATEMENT SCHEDULES


To the Management Committee of

NRG Northeast Generating LLC:


Our audits of the consolidated financial
statements referred to in our report dated March 28, 2003
appearing in this Annual Report on Form 10-K also included
an audit of the financial statement schedule listed in
Item 15(a)(2) of this Annual Report on Form 10-K. In
our opinion, this financial statement schedule presents fairly,
in all material respects, the information set forth therein when
read in conjunction with the related consolidated financial
statements.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Minneapolis, Minnesota


March 28, 2003


68



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##### Table of Contents



NRG NORTHEAST GENERATING LLC

SCHEDULE II. VALUATION AND QUALIFYING
ACCOUNTS

For the years ended December 31, 2002,
2001 and 2000


|                                                                                             |      |                |   |            |  |            |   |           |   |  |   |   |  |  |   |        | 
|-------------------------------------------------------------------------------------------- | ---- | -------------- | - | ---------- |  | ---------- | - | --------- | - |  | - | - |  |  | - | ------ | 
|Column A                                                                                     |      | Column B       |   | Column C   |  | Column D   |   | Column E 
|                                                                                             |      |                |   |            |  |            |   |          
|                                                                                             |      |                |   | Additions  |  |            |   |          
|                                                                                             |      | Balance at     |   | Charged to |  |            |   | Balance  
|                                                                                             |      | Beginning      |   | Costs and  |  |            |   | at End of
|Description                                                                                  |      | of Period      |   | Expenses   |  | Deductions |   | Period   
|                                                                                             |      |                |   |            |  |            |   |          
|                                                                                             |      |               
|                                                                                             |      | (In thousands)
|Allowance for doubtful accounts, deducted from
    accounts receivable in the balance sheet: |      |                |   |            |  |            |   |           |   |  |   |   |  |  |   |       
|                                                                                             | 2002 |                | $ |           |  |            | $ | 50,712(1  | ) |  | $ |  |  |  | $ | 50,712 | 
|                                                                                             | 2001 |                |   | 8,165      |  |            |   | (8,165    | ) |  |   |  |  |  |   |       | 
|                                                                                             | 2000 |                |   |           |  |            |   | 8,165     |   |  |   |  |  |  |   | 8,165  | 



---



|    |                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------
|(1) | A total of $28.4 million was recorded as a
    reduction of revenues in the accompanying financial statements.

69



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##### Table of Contents



SIGNATURES

Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly
authorized.



| |                                              
| | ---------------------------------------------
| | NRG NORTHEAST GENERATING LLC                 
| | (Registrant)                                 
|
| | /s/ RICHARD C. KELLY                         
| |                                              
| | Richard C. Kelly                             
| | President and Management Committee
    Member

Date: April 14, 2003

POWER OF ATTORNEY

Each person whose signature appears below
constitutes and appoints Richard C. Kelly and George Schaefer,
each or any of them, such persons true and lawful
attorney-in-fact and agent with full power of substitution and
resubstitution for such person and in such persons name,
place and stead, in any and all capacities, to sign any and all
amendments to this report on Form 10-K, and to file the same,
with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and
thing necessary or desirable to be done in and about the
premises, as fully to all intents and purposes as such person,
hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them or his or their substitute or
substitutes, may lawfully do or cause to be done by virtue
hereof.

In accordance with the Exchange Act, this report
has been signed by the following persons on behalf of the
registrant in the capacities indicated on April 14, 2003:

|                                             |  |                                                                             |  | 
|-------------------------------------------- |  | --------------------------------------------------------------------------- |  | 
|                                             |  |                                                                            
|Signature                                    |  | Title                                                                      
|                                             |  |                                                                            
|/s/ RICHARD C. KELLYRichard C. Kelly         |  | President (Principal Executive Officer) and
    Management Committee Member
|                                            
|/s/ GEORGE SCHAEFERGeorge Schaefer           |  | Treasurer (Principal Financial Officer) and
    Management Committee Member
|                                            
|/s/ SCOTT J. DAVIDOScott J. Davido           |  | Vice President, Assistant Secretary and
    Management Committee Member    
|                                            
|/s/ ANDREW T. PANACCIONEAndrew T. Panaccione |  | Management Committee Member                                                
|                                            
|/s/ WILLIAM T. PIEPERWilliam T. Pieper       |  | Controller (Principal Accounting Officer)                                  

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH
REPORTS FILED PURSUANT TO SECTION 15(d) OF THE ACT BY
REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT.

An annual report will not be sent to security
holders. No proxy material will be sent to security holders.

70



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##### Table of Contents






CERTIFICATION

I, Richard C. Kelly, certify that:

1. I have reviewed this annual report on
Form 10-K of NRG Northeast Generating LLC;

2. Based on my knowledge, this annual report
does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this
annual report;

3. Based on my knowledge, the financial
statements, and other financial information included in this
annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual
report;

4. The registrants other certifying
officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:



| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                

5. The registrants other certifying
officers and I have disclosed, based on our most recent
evaluation, to the registrants auditors and the audit
committee of the registrants board of directors (or
persons performing the equivalent function):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    

6. The registrants other certifying
officers and I have indicated in this annual report whether or
not there were significant changes in internal controls or in
other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies
and material weaknesses.



| |                                              
| | ---------------------------------------------
| | /s/ RICHARD C. KELLY                         
| |                                              
| | Richard C. Kelly                             
| | President and Management Committee
    Member

Dated: April 14, 2003

71



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##### Table of Contents



CERTIFICATION

I, George Schaefer, certify that:

1. I have reviewed this annual report on
Form 10-Q of NRG Northeast Generating LLC;

2. Based on my knowledge, this annual report
does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this
annual report;

3. Based on my knowledge, the financial
statements, and other financial information included in this
annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual
report;

4. The registrants other certifying
officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:



| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                

5. The registrants other certifying
officers and I have disclosed, based on our most recent
evaluation, to the registrants auditors and the audit
committee of the registrants board of directors (or
persons performing the equivalent function):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    

6. The registrants other certifying
officers and I have indicated in this annual report whether or
not there were significant changes in internal controls or in
other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies
and material weaknesses.



| |                                              
| | ---------------------------------------------
| | /s/ GEORGE SCHAEFER                          
| |                                              
| | George Schaefer                              
| | Treasurer and Management Committee
    Member

Dated: April 14, 2003

72



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##### Table of Contents






Exhibit Index

|        |   |             |  |                                                                                                                                                                                                                                                                                                                                                              
|------- | - | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   |            
|No.     |   | Description
|        |   |            
|        | 3 | .1          |  | Certificate of Formation of NRG Northeast
    Generating LLC.(1)                                                                                                                                                                                                                                                                                             
|        | 3 | .2          |  | Limited Liability Company Agreement of NRG
    Northeast Generating LLC.(1)                                                                                                                                                                                                                                                                                  
|        | 3 | .3          |  | Certificate of Formation of Arthur Kill Power
    LLC.(1)                                                                                                                                                                                                                                                                                                    
|        | 3 | .4          |  | Limited Liability Company Agreement of Arthur
    Kill Power LLC.(1)                                                                                                                                                                                                                                                                                         
|        | 3 | .5          |  | Certificate of Formation of Astoria Gas Turbine
    Power LLC.(1)                                                                                                                                                                                                                                                                                            
|        | 3 | .6          |  | Limited Liability Company Agreement of Astoria
    Gas Turbine Power LLC.(1)                                                                                                                                                                                                                                                                                 
|        | 3 | .7          |  | Certificate of Formation of Connecticut Jet Power
    LLC.(1)                                                                                                                                                                                                                                                                                                
|        | 3 | .8          |  | Limited Liability Company Agreement of
    Connecticut Jet Power LLC.(1)                                                                                                                                                                                                                                                                                     
|        | 3 | .9          |  | Certificate of Formation of Devon Power LLC.(1)                                                                                                                                                                                                                                                                                                              
|        | 3 | .10         |  | Limited Liability Company Agreement of Devon
    Power LLC.(1)                                                                                                                                                                                                                                                                                               
|        | 3 | .11         |  | Certificate of Formation of Dunkirk Power LLC.(1)                                                                                                                                                                                                                                                                                                            
|        | 3 | .12         |  | Limited Liability Company Agreement of Dunkirk
    Power LLC.(1)                                                                                                                                                                                                                                                                                             
|        | 3 | .13         |  | Certificate of Formation of Huntley Power LLC.(1)                                                                                                                                                                                                                                                                                                            
|        | 3 | .14         |  | Limited Liability Company Agreement of Huntley
    Power LLC.(1)                                                                                                                                                                                                                                                                                             
|        | 3 | .15         |  | Certificate of Formation of Middletown Power
    LLC.(1)                                                                                                                                                                                                                                                                                                     
|        | 3 | .16         |  | Limited Liability Company Agreement of Middletown
    Power LLC.(1)                                                                                                                                                                                                                                                                                          
|        | 3 | .17         |  | Certificate of Formation of Montville Power LLC.
    (1)                                                                                                                                                                                                                                                                                                     
|        | 3 | .18         |  | Limited Liability Company Agreement of Montville
    Power LLC.(1)                                                                                                                                                                                                                                                                                           
|        | 3 | .19         |  | Certificate of Formation of Norwalk Power LLC.(1)                                                                                                                                                                                                                                                                                                            
|        | 3 | .20         |  | Limited Liability Company Agreement of Norwalk
    Power LLC.(1)                                                                                                                                                                                                                                                                                             
|        | 3 | .21         |  | Certificate of Formation of Oswego Harbor Power
    LLC.(1)                                                                                                                                                                                                                                                                                                  
|        | 3 | .22         |  | Limited Liability Company Agreement of Oswego
    Harbor Power LLC.(1)                                                                                                                                                                                                                                                                                       
|        | 3 | .23         |  | Certificate of Formation of Somerset Power LLC.(1)                                                                                                                                                                                                                                                                                                           
|        | 3 | .24         |  | Limited Liability Company Agreement of Somerset
    Power LLC.(1)                                                                                                                                                                                                                                                                                            
|        | 4 | .1          |  | Indenture, dated as of February 22, 2000,
    among NRG Northeast Generating LLC, the Guarantors party thereto
    and The Chase Manhattan Bank, as Trustee, relating to the Senior
    Secured Bonds.(1)                                                                                                                                                    
|        | 4 | .2          |  | First Supplemental Indenture, dated as of
    February 22, 2000, among NRG Northeast Generating LLC, the
    Guarantors party thereto and The Chase Manhattan Bank, as
    Trustee, relating to the 8.065% Series A Senior Secured
    Bonds due 2004, 8.842 Series B Senior Secured Bonds due
    2015 and 9.292% Series C Senior Secured Bonds due 2024.(1)
|        | 4 | .3          |  | Form of certificate of 8.065% Series A
    Senior Secured Bonds due 2004 (included in Exhibit 4.2).(1)                                                                                                                                                                                                                                                       
|        | 4 | .4          |  | Form of certificate of 8.842% Series B
    Senior Secured Bonds due 2015 (included in Exhibit 4.2).(1)                                                                                                                                                                                                                                                       
|        | 4 | .5          |  | Form of certificate of 9.292% Series C
    Senior Secured Bonds due 2024 (included in Exhibit 4.2).(1)                                                                                                                                                                                                                                                       
|        | 4 | .6          |  | Form of certificate of 8.065% Series A-1
    Senior Secured Bonds due 2004.(1)                                                                                                                                                                                                                                                                               
|        | 4 | .7          |  | Form of certificate of 8.842% Series B-1
    Senior Secured Bonds due 2015.(1)                                                                                                                                                                                                                                                                               
|        | 4 | .8          |  | Form of certificate of 9.292% Series C-1
    Senior Secured Bonds due 2024.(1)                                                                                                                                                                                                                                                                               
|        | 4 | .9          |  | Exchange and Registration Rights Agreement, dated
    as of February 15, 2000, by and among NRG Northeast
    Generating LLC, the Guarantors party thereto, Chase Securities
    Inc. and Salomon Smith Barney Inc., on behalf of the Initial
    Purchasers.(1)                                                                                             
|        | 4 | .10         |  | Security Agreement, dated as of February 22,
    2000, by and among NRG Northeast Generating LLC, the Guarantors
    party hereto and The Chase Manhattan Bank, as Trustee.(1)                                                                                                                                                                               



---



##### Table of Contents



|        |    |             |  |                                                                                                                                                                                                                                                               
|------- | -- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|No.     |    | Description
|        |    |            
|        | 4  | .11         |  | Security Agreement, dated as of February 22,
    2000, between NRG Power Marketing LLC and The Chase Manhattan
    Bank, as Collateral Agent.(1)                                                                                                              
|        | 5  | .1          |  | Opinion and consent of Skadden, Arps, Slate,
    Meagher & Flom LLP as to the legality of the bonds to be
    issued by NRG Northeast Generating LLC.(2)                                                                                                      
|        | 10 | .1          |  | Collateral Agency and Intercreditor Agreement,
    dated as of February 22, 2000, by and among NRG Northeast
    Generating LLC, the Guarantors party thereto and The Chase
    Manhattan Bank, as Working Capital Agent, Collateral Agent and
    Trustee.(1)
|        | 10 | .2          |  | Working Capital Agreement, dated as of
    February 22, 2000, by and among NRG Northeast Generating
    LLC, the Guarantors party thereto and Citibank, N.A. and The
    Chase Manhattan Bank, as Working Capital Banks.(1)                                   
|        | 10 | .3          |  | Indemnification Agreement, dated as of
    December 23, 1999, by and among NRG Energy, The Chase
    Manhattan Bank and Citibank, N.A., as Lender Representatives and
    the Indemnified Parties.(1)                                                         
|        | 10 | .4          |  | Indemnification Consent Agreement, dated as of
    February 22, 2000, by and among NRG Energy, NRG Northeast
    Generating LLC, the Initial Purchasers party thereto and The
    Chase Manhattan Bank, as Trustee and Collateral Agent.(1)                   
|        | 10 | .5          |  | Restated Intercompany Note dated as of
    February 22, 2000 by Arthur Kill Power LLC in favor of NRG
    Northeast Generating LLC.(1)                                                                                                                        
|        | 10 | .6          |  | Restated Intercompany Note dated as of
    February 22, 2000 by Astoria Gas Turbine Power LLC in favor
    of NRG Northeast Generating LLC.(1)                                                                                                                
|        | 10 | .7          |  | Restated Intercompany Note dated as of
    February 22, 2000 by Devon Power LLC in favor of NRG
    Northeast Generating LLC.(1)                                                                                                                              
|        | 10 | .8          |  | Restated Intercompany Note dated as of
    February 22, 2000 by Dunkirk Power LLC in favor of NRG
    Northeast Generating LLC.(1)                                                                                                                            
|        | 10 | .9          |  | Restated Intercompany Note dated as of
    February 22, 2000 by Huntley Power LLC in favor of NRG
    Northeast Generating LLC.(1)                                                                                                                            
|        | 10 | .10         |  | Restated Intercompany Note dated as of
    February 22, 2000 by Middletown Power LLC in favor of NRG
    Northeast Generating LLC.(1)                                                                                                                         
|        | 10 | .11         |  | Restated Intercompany Note dated as of
    February 22, 2000 by Montville Power LLC in favor of NRG
    Northeast Generating LLC.(1)                                                                                                                          
|        | 10 | .12         |  | Restated Intercompany Note dated as of
    February 22, 2000 by Norwalk Power LLC in favor of NRG
    Northeast Generating LLC.(1)                                                                                                                            
|        | 10 | .13         |  | Restated Intercompany Note dated as of
    February 22, 2000 by Oswego Harbor Power LLC in favor of
    NRG Northeast Generating LLC.(1)                                                                                                                      
|        | 10 | .14         |  | Restated Intercompany Note dated as of
    February 22, 2000 by Somerset Power LLC in favor of NRG
    Northeast Generating LLC.(1)                                                                                                                           
|        | 10 | .15         |  | Working Capital Intercompany Note dated as of
    February 22, 2000 by each of the Guarantors in favor of NRG
    Northeast Generating LLC.(1)                                                                                                                
|        | 10 | .16         |  | Funds Administration Agreement, dated as of
    February 22, 2000, by and among NRG Northeast Generating
    LLC and the Guarantors party thereto.(1)                                                                                                         
|        | 10 | .17         |  | Power Sales and Agency Agreement dated as of
    June 25, 1999 between NRG Power Marketing, Inc. and Arthur
    Kill Power LLC.(1)                                                                                                                            
|        | 10 | .18         |  | Power Sales and Agency Agreement dated as of
    June 25, 1999 between NRG Power Marketing, Inc. and Astoria
    Gas Turbine Power LLC.(1)                                                                                                                    
|        | 10 | .19         |  | Power Sales and Agency Agreement dated as of
    December 15, 1999 between NRG Power Marketing, Inc. and
    Connecticut Jet Power LLC.(1)                                                                                                                    
|        | 10 | .20         |  | Power Sales and Agency Agreement dated as of
    December 15, 1999 between NRG Power Marketing, Inc. and
    Devon Power LLC.(1)                                                                                                                              
|        | 10 | .21         |  | Power Sales and Agency Agreement dated as of
    June 11, 1999 between NRG Power Marketing, Inc. and Dunkirk
    Power LLC.(1)                                                                                                                                



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##### Table of Contents



|        |    |             |  |                                                                                                                                                             
|------- | -- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|No.     |    | Description
|        |    |            
|        | 10 | .22         |  | Power Sales and Agency Agreement dated as of
    June 11, 1999 between NRG Power Marketing, Inc. and Huntley
    Power LLC.(1)                              
|        | 10 | .23         |  | Power Sales and Agency Agreement dated as of
    December 15, 1999 between NRG Power Marketing, Inc. and
    Middletown Power LLC.(1)                       
|        | 10 | .24         |  | Power Sales and Agency Agreement dated as of
    December 15, 1999 between NRG Power Marketing, Inc. and
    Montville Power LLC.(1)                        
|        | 10 | .25         |  | Power Sales and Agency Agreement dated as of
    December 15, 1999 between NRG Power Marketing, Inc. and
    Norwalk Power LLC.(1)                          
|        | 10 | .26         |  | Power Sales and Agency Agreement dated as of
    October 22, 1999 between NRG Power Marketing, Inc. and
    Oswego Harbor Power LLC.(1)                     
|        | 10 | .27         |  | Amended and Restated Power Sales and Agency
    Agreement dated as of July 15, 1999 between NRG Power Marketing,
    Inc. and Somerset Power LLC.(1)        
|        | 10 | .28         |  | Operation and Maintenance Agreement dated as of
    June 25, 1999 between NRG Arthur Kill Operations, Inc. and
    Arthur Kill Power LLC.(1)                
|        | 10 | .29         |  | Operation and Maintenance Agreement dated as of
    June 25, 1999 between NRG Astoria Gas Turbine Operations,
    Inc. and Astoria Gas Turbine Power LLC.(1)
|        | 10 | .30         |  | Operation and Maintenance Agreement dated as of
    December 15, 1999 between NRG Middletown Operations, Inc.
    and Connecticut Jet Power LLC.(1)         
|        | 10 | .31         |  | Operation and Maintenance Agreement dated as of
    December 15, 1999 between NRG Devon Operations, Inc. and
    Devon Power LLC.(1)                        
|        | 10 | .32         |  | Operation and Maintenance Agreement dated as of
    June 11, 1999 between NRG Dunkirk Operations, Inc. and
    Dunkirk Power LLC.(1)                        
|        | 10 | .33         |  | Operation and Maintenance Agreement dated as of
    June 11, 1999 between NRG Huntley Operations, Inc. and
    Huntley Power LLC.(1)                        
|        | 10 | .34         |  | Operation and Maintenance Agreement dated as of
    December 15, 1999 between NRG Middletown Operations, Inc.
    and Middletown Power LLC.(1)              
|        | 10 | .35         |  | Operation and Maintenance Agreement dated as of
    December 15, 1999 between NRG Montville Operations, Inc.
    and Montville Power LLC.(1)                
|        | 10 | .36         |  | Operation and Maintenance Agreement dated as of
    December 15, 1999 between NRG Norwalk Harbor Operations,
    Inc. and Norwalk Power LLC.(1)             
|        | 10 | .37         |  | Operation and Maintenance Agreement dated as of
    October 22, 1999 between NRG Oswego Harbor Power
    Operations, Inc. and Oswego Harbor Power LLC.(1)   
|        | 10 | .38         |  | Amended and Restated Operation and Maintenance
    Agreement dated as of July 15, 1999 between NRG Somerset
    Operations, Inc. and Somerset Power LLC.(1) 
|        | 10 | .39         |  | Corporate Services Agreement between NRG Energy,
    Inc. and Arthur Kill Power LLC dated as of June 25, 1999.(1)                                           
|        | 10 | .40         |  | Corporate Services Agreement between NRG Energy,
    Inc. and Astoria Gas Turbine Power LLC dated as of June 25,
    1999.(1)                               
|        | 10 | .41         |  | Corporate Services Agreement between NRG Energy,
    Inc. and Connecticut Jet Power LLC dated as of December 15,
    1999.(1)                               
|        | 10 | .42         |  | Corporate Services Agreement between NRG Energy,
    Inc. and Devon Power LLC dated as of December 15, 1999.(1)                                             
|        | 10 | .43         |  | Corporate Services Agreement between NRG Energy,
    Inc. and Dunkirk Power LLC dated as of June 11, 1999.(1)                                               
|        | 10 | .44         |  | Corporate Services Agreement between NRG Energy,
    Inc. and Huntley Power LLC dated as of June 11, 1999.(1)                                               
|        | 10 | .45         |  | Corporate Services Agreement between NRG Energy,
    Inc. and Middletown Power LLC dated as of December 15,
    1999.(1)                                    
|        | 10 | .46         |  | Corporate Services Agreement between NRG Energy,
    Inc. and Montville Power LLC dated as of December 15,
    1999.(1)                                     



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##### Table of Contents



|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------- | -- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|No.     |    | Description
|        |    |            
|        | 10 | .47         |  | Corporate Services Agreement between NRG Energy,
    Inc. and Norwalk Power LLC dated as of December 15, 1999.(1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | 10 | .48         |  | Corporate Services Agreement between NRG Energy,
    Inc. and Oswego Harbor Power LLC dated as of October 22,
    1999.(1)                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        | 10 | .49         |  | Amended and Restated Corporate Services Agreement
    between NRG Energy, Inc. and Somerset Power LLC dated as of
    July 15, 1999.(1)                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | 10 | .50         |  | Transition Capacity Agreement between Arthur Kill
    Power LLC and Consolidated Edison Company of New York, Inc.
    dated as of June 25, 1999, incorporated by reference to
    Exhibit 10.30 to NRG Energy, Inc.s Form 10Q for
    the quarter ended June 30, 1999.                                                                                                                                                                                                                                                                                                           
|        | 10 | .51         |  | Transition Capacity Agreement between Astoria Gas
    Turbine Power LLC and Consolidated Edison Company of New York,
    Inc. dated as of June 25, 1999, incorporated by reference
    to Exhibit 10.29 to NRG Energy, Inc.s Form 10Q
    for the quarter ended June 30, 1999.                                                                                                                                                                                                                                                                                                   
|        | 10 | .52         |  | Swap Master Agreement dated as of June 11,
    1999 between Niagara Mohawk Power Corporation and NRG Power
    Marketing, Inc., incorporated by reference to Exhibit 10.34
    to NRG Energy, Inc.s Form 10Q for the quarter ended
    September 30, 1999.                                                                                                                                                                                                                                                                                                                       
|        | 10 | .53         |  | Transition Power Purchase Agreement (Huntley 65
    or 66 Secondary Call) between Niagara Mohawk Power Corporation
    and Huntley Power LLC dated as of June 11, 1999. (1)                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 10 | .54         |  | Transition Power Purchase Agreement (Huntley
    Power LLC  Call) between Niagara Mohawk Power
    Corporation and Huntley Power LLC dated as of June 11, 1999,
    incorporated by reference to Exhibit 10.24 to NRG Energy,
    Inc.s Form 10Q for the quarter ended June 30,
    1999.                                                                                                                                                                                                                                                                                       
|        | 10 | .55         |  | Wholesale Standard Offer Service Agreement among
    Blackstone Valley Electric Company, Eastern Edison Company,
    Newport Electric Corporation and NRG Power Marketing Inc. dated
    as of October 13, 1998 (incorporated by reference to
    Exhibit 10.18 to NRG Energy, Inc.s Form 10Q for
    the quarter ended June 30, 1999), as amended by First
    Amendment to Wholesale Standard Offer Service Agreement dated as
    of January 15, 1999 (incorporated by reference to
    Exhibit 10.20 to NRG Energy, Inc.s Form 10Q for the
    quarter ended June 30, 1999).
|        | 10 | .56         |  | Transition Power Purchase Agreement between
    Niagara Mohawk Power Corporation and Oswego Harbor Power LLC
    dated as of April 1, 1999, as amended by Transition Power
    Purchase 1st Amendment between Niagara Mohawk Power Corporation
    and Oswego Harbor Power LLC dated as of July 21, 1999 and 2nd
    Amendment between Niagara Mohawk Power Corporation and Oswego
    Harbor Power LLC dated as of October 19, 1999.(1)                                                                                                                                          
|        | 10 | .57         |  | Standard Offer Service Wholesale Sales Agreement
    between The Connecticut Light and Power Company and NRG Power
    Marketing, Inc. dated as of October 29, 1999, incorporated
    by reference to Exhibit 10.35 to NRG Energy, Inc.s
    Form 10Q for the quarter ended September 30, 1999.                                                                                                                                                                                                                                                                                  
|        | 10 | .58         |  | Site Agreement between Niagara Mohawk Power
    Corporation and Huntley Power LLC dated as of May 11,
    1999.(1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 10 | .59         |  | Site Agreement between Niagara Mohawk Power
    Corporation and Dunkirk Power LLC dated as of May 11,
    1999.(1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 10 | .60         |  | Site Agreement between Niagara Mohawk Power
    Corporation and Oswego Harbor Power LLC dated as of
    August 19, 1999.(1)                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 10 | .61         |  | Arthur Kill Continuing Site Agreement between
    Consolidated Edison Company of New York, Inc. and NRG Energy,
    Inc. dated as of January 27, 1999.(1)                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 10 | .62         |  | Astoria Gas Turbine Continuing Site Agreement
    between Consolidated Edison Company of New York, Inc. and NRG
    Energy, Inc. dated as of January 27, 1999.(1)                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | 10 | .63         |  | Interconnection Agreement between Niagara Mohawk
    Power Corporation and Huntley Power LLC dated as of
    April 14, 1999.(1)                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 10 | .64         |  | Interconnection Agreement between Niagara Mohawk
    Power Corporation and Dunkirk Power LLC dated as of
    April 14, 1999.(1)                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 10 | .65         |  | Interconnection Agreement between Niagara Mohawk
    Power Corporation and Oswego Harbor Power LLC dated as of
    July 30, 1999.(1)                                                                                                                                                                                                                                                                                                                                                                                                                                              



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##### Table of Contents



|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------- | -- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|No.     |    | Description
|        |    |            
|        | 10 | .66         |  | Interconnection Agreement between The Connecticut
    Light and Power Company and NRG Energy, Inc. dated as of
    July 1, 1999.(1)                                                                                                                                                                                                                                                                                                                                              
|        | 10 | .67         |  | Interconnection Agreement between Montaup
    Electric Company and NRG Energy, Inc. dated as of
    October 13, 1998.(1)                                                                                                                                                                                                                                                                                                                                                         
|        | 10 | .68         |  | Generating Plant and Gas Turbine Asset Purchase
    and Sale Agreement for Arthur Kill Generating Plants located at
    Staten Island, Richmond County, New York and Astoria Gas
    Turbines located at Astoria, Queens County, New York between
    Consolidated Edison Company of New York, Inc. and NRG Energy,
    Inc. dated as of January 27, 1999, incorporated by
    reference to Exhibit 10.21 to NRG Energy, Inc.s
    Form 10Q for the quarter ended June 30, 1999.
|        | 10 | .69         |  | Asset Purchase Agreement between Montaup Electric
    Company and NRG Energy, Inc. dated as of October 13,
    1998.(1)                                                                                                                                                                                                                                                                                                                                                          
|        | 10 | .70         |  | Asset Sales Agreement between Niagara Mohawk
    Power Corporation and NRG Energy, Inc. dated as of
    December 23, 1998 (incorporated by reference to
    Exhibit 10.19 to NRG Energy, Inc.s Form 10Q for
    the quarter ended June 30, 1999), as amended by Amendment
    to the Asset Sales Agreement dated as of June 11, 1999
    (incorporated by reference to Exhibit 10.28 to NRG Energy,
    Inc.s Form 10Q for the quarter ended June 30,
    1999).               
|        | 10 | .71         |  | Asset Sales Agreement among Niagara Mohawk Power
    Corporation, Rochester Gas and Electric Corporation, Oswego
    Harbor Power LLC and NRG Energy, Inc. dated as of April 1,
    1999.(1)                                                                                                                                                                                                                                                                                     
|        | 10 | .72         |  | Asset Demarcation Agreement among The Connecticut
    Light and Power Company, Connecticut Jet Power LLC, Devon Power
    LLC, Middletown Power LLC, Montville Power LLC, Norwalk Power
    LLC, NRG Devon Operations, Inc., NRG Middletown Operations,
    Inc., NRG Montville Operations, Inc., NRG Norwark Harbor
    Operations, Inc. and NRG Energy, Inc. dated as of
    December 15, 1999.(1)                                                                             
|        | 10 | .73         |  | Purchase and Sale Agreement between NRG Energy,
    Inc. and The Connecticut Light and Power Company dated as of
    July 1, 1999.(1)                                                                                                                                                                                                                                                                                                                                            
|        | 21 |             |  | Subsidiaries of the NRG Northeast                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 99 | .1          |  | Officer Certification                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | 99 | .2          |  | Financial statements of Dunkirk Power LLC                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        | 99 | .3          |  | Financial statements of Huntley Power LLC                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        | 99 | .4          |  | Financial statements of Arthur Kill Power LLC                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 99 | .5          |  | Financial statements of Middletown Power LLC                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 99 | .6          |  | Financial statements of Astoria Gas Turbine Power
    LLC                                                                                                                                                                                                                                                                                                                                                                                                                        



---



|    |                                                                                               
|--- | ----------------------------------------------------------------------------------------------
|(1) | Previously filed with Report on Form S-4
    filed on July 31, 2000 (File No. 333-42638).     
|   
|(2) | Previously filed with Report on Form S-4/A
    filed on October 23, 2000 (File No. 333-42638).



|   |                                                                     
|-- | --------------------------------------------------------------------
|** | There are no exhibits which relate to
    compensation arrangements.