SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

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

                   For the Fiscal Year Ended December 31, 2000

                         Commission File Number 33-82034

                          INDIANTOWN COGENERATION, L.P.
            (Exact name of co-registrant as specified in its charter)

         Delaware                                      52-1722490
         --------                                      ----------
 (State or other jurisdiction of         (I.R.S. Employer Identification Number)
 incorporation or organization)

                   Indiantown Cogeneration Funding Corporation
            (Exact name of co-registrant as specified in its charter)


          Delaware                                     52-1889595
          --------                                     ----------
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
incorporation or organization)


                      7500 Old Georgetown Road, 13th Floor
                          Bethesda, Maryland 20814-6161
              -----------------------------------------------------
              (Registrants' Address of principal executive offices)

                                 (301)-718-6800
              -----------------------------------------------------
              (Registrants' telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for 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. [ X ] Yes [ ] No

Indicate by check mark if disclosure of delinquent filer pursuant to Item 405 of
Regulation S-K is not contained herein,  and will not be contained,  to the best
of  registrant's  knowledge,  in  definitive  proxy  or  information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

As of March 29,  2001,  there  were 100  shares of  common  stock of  Indiantown
Cogeneration Funding Corporation, $1 par value outstanding.


<PAGE>


                          Indiantown Cogeneration, L.P.

                   Indiantown Cogeneration Funding Corporation

                                    PART I                          Page Number

Item 1  Business...............................................           1
Item 2  Properties.............................................           7
Item 3  Legal Proceedings......................................           7
Item 4  Submission of Matters to a Vote
               of Security Holders.............................           9

                                    PART II

Item 5  Market for the Registrant's Common
               Stock and Related Security Holder Matters........         10

Item 6  Selected Financial Data.................................         10
Item 7  Management's Discussion and Analysis of
               Financial Condition and Results of Operations....         11

Item 7A Qualitative and Quantitative Disclosures About
               Market Risk......................................         15

Item 8  Financial Statements and Supplementary Data.............         16
Item 9  Changes in and Disagreements with Accountants
               on Accounting and Financial Disclosure...........         39

                                    PART III

Item 10 Directors and Executive Officers........................         40
Item 11 Remuneration of Directors and Officers..................         41
Item 12 Security Ownership of Certain Beneficial Owners
               and Management...................................         41

Item 13 Certain Relationships and Related Transactions..........         41

                                    PART IV

Item 14 Exhibits, Financial Statement Schedules and
        Reports on Form 8-K.....................................         42

        Signatures..............................................         45



<PAGE>

Item 1         BUSINESS

The Partnership

       Indiantown  Cogeneration,  L.P. (the  "Partnership") is a special purpose
Delaware  limited  partnership  formed on October 4, 1991. The  Partnership  was
formed to develop,  construct,  and operate an approximately  330 megawatt (net)
pulverized  coal-fired  cogeneration  facility  (the  "Facility")  located on an
approximately 240 acre site in southwestern Martin County, Florida. The Facility
produces  electricity  for sale to Florida  Power & Light  Company  ("FPL")  and
supplies  steam to Caulkins  Indiantown  Citrus Co.  ("Caulkins")  for its plant
located near the Facility.

        The  original  general  partners  were Toyan  Enterprises  ("Toyan"),  a
California corporation and a wholly owned special purpose indirect subsidiary of
PG&E National  Energy Group,  Inc.  ("NEG,  Inc."),  and Palm Power  Corporation
("Palm"),  a Delaware  corporation and a special purpose indirect  subsidiary of
Bechtel Enterprises, Inc. ("Bechtel Enterprises").  The sole limited partner was
TIFD III-Y,  Inc.  ("TIFD"),  a special purpose  indirect  subsidiary of General
Electric Capital Corporation  ("GECC").  During 1994, the Partnership formed its
sole, wholly owned subsidiary, Indiantown Cogeneration Funding Corporation ("ICL
Funding"),  to  act as  agent  for,  and  co-issuer  with,  the  Partnership  in
accordance  with the 1994 bond offering of $505,000,000 of First Mortgage Bonds.
ICL Funding has no separate operations and has only $100 in assets.

        In 1998, Toyan consummated transactions with DCC Project Finance Twelve,
Inc.  ("PFT"),  whereby  PFT,  through  a new  partnership  (Indiantown  Project
Investment,  L.P.  ("IPILP"))  with Toyan,  became a new general  partner in the
Partnership.  Toyan is the  sole  general  partner  of  IPILP.  Prior to the PFT
transaction,  Toyan  converted some of its general  partnership  interest into a
limited  partnership  interest such that Toyan now directly holds only a limited
partnership  interest  in  the  Partnership.  In  addition,  Bechtel  Generating
Company, Inc. ("Bechtel Generating"),  sold all of the stock of Palm to a wholly
owned indirect subsidiary of Cogentrix Energy, Inc. ("Cogentrix").  Palm holds a
10% general partner interest in the Partnership.

        On June 4, 1999, Thaleia, LLC ("Thaleia"),  a wholly-owned subsidiary of
Palm and indirect  wholly-owned  subsidiary of  Cogentrix,  acquired from TIFD a
19.9%  limited  partner  interest in the  Partnership.  On  September  20, 1999,
Thaleia acquired another 20.0% limited partnership interest from TIFD and TIFD's
membership  on the Board of Control.  On November  24, 1999,  Thaleia  purchased
TIFD's remaining limited partner interest in the Partnership from TIFD.

        The net profits and losses of the  Partnership  are  allocated to Toyan,
Palm, TIFD and IPILP and Thaleia  (collectively,  the  "Partners")  based on the
following ownership percentages:


                                       1
<PAGE>
<TABLE>
<CAPTION>
<S>               <C>              <C>             <C>           <C>              <C>
                     As of           As of           As of           As of          As of
                  August 21,       October 20,      June 4,      September 20,    November 24,
                     1998             1998           1999            1999            1999
                     ----             ----           ----            ----            ----
Toyan               30.05%           30.05%         30.05%          30.05%           30.05%
Palm                  10%               10%*           10%*            10%*             10%*
IPILP              19.95%**          19.95%**       19.95%          19.95%           19.95%
TIFD                  40%               40%          20.1%            0.1%              --
Thaleia               --                --           19.9%*          39.9%*             40%*
</TABLE>


        *Now beneficially owned by Cogentrix.
       **PFT's beneficial ownership in the Partnership through IPILP was equal
         to 10% as of August 21, 1998, and 15% as of November 23, 1998.

        The   changes   in   ownership   were  the   subject   of   notices   of
self-recertification of Qualifying Facility status filed by the Partnership with
the Federal Energy Regulatory  Commission on August 20, 1998, November 16, 1998,
June 4, 1999, September 21, 1999, and November 24, 1999.

        All  distributions  other than  liquidating  distributions  will be made
based on the Partners'  percentage  interest as shown above,  in accordance with
the  project  documents  and at such  times and in such  amounts as the Board of
Control of the Partnership determines.

        The  Partnership  is  managed  by PG&E  National  Energy  Group  Company
("NEG"),  formerly known as PG&E  Generating  Company,  pursuant to a Management
Services  Agreement  (the  "MSA").  The  Facility is operated by PG&E  Operating
Services  Company  ("PG&E  OSC"),  formerly  known  as U.S.  Operating  Services
Company,   pursuant  to  an  Operation  and  Maintenance   Agreement  (the  "O&M
Agreement"). NEG and PG&E OSC are general partnerships wholly owned by NEG, Inc.

       NEG, Inc. is a  wholly-owned  indirect  subsidiary  of PG&E  Corporation.
Because  the   California   energy  markets   situation  has  caused   financial
difficulties for Pacific Gas and Electric Company,  a wholly owned subsidiary of
PG&E  Corporation,  PG&E  Corporation's  credit ratings were downgraded to below
investment  grade in January 2001,  which caused PG&E  Corporation to default on
outstanding  commercial  paper and bank  borrowings.  In January  2001,  certain
corporate  actions  were taken to insulate  the assets of NEG and its direct and
indirect  subsidiaries from an effort to substantively  consolidate those assets
in any insolvency or bankruptcy  proceeding of PG&E Corporation.  In March 2001,
PG&E  Corporation  refinanced all of its outstanding  commercial  paper and bank
borrowings,  and  Standard & Poor's  subsequently  removed its below  investment
grade  credit  rating  since PG&E  Corporation  no longer  had rated  securities
outstanding.  Management  of NEG  believes  that NEG and its direct and indirect
subsidiaries  as  described  above,  including  the  Partnership,  would  not be
substantively consolidated with PG&E Corporation in any insolvency or bankruptcy
proceeding involving PG&E Corporation.

        The Partnership  began  construction of the Facility in October 1992 and
was in the development  phase through the commencement of commercial  operation.
The Facility commenced  commercial  operation under its power purchase agreement
(the "Power  Purchase  Agreement"  or "PPA") with FPL on December 22, 1995.  The
Facility  synchronized  with the FPL system on June 30, 1995 and the Partnership
sold to FPL electricity produced by the

                                       2
<PAGE>

Facility during startup and testing.  The Partnership's  continued  existence is
dependent on the ability of the  Partnership to maintain  successful  commercial
operation  under the  Power  Purchase  Agreement.  The  Partnership  has filed a
complaint against FPL with respect to the  interpretation of a certain provision
of the Power Purchase  Agreement.  Please see "Item 3 Legal Proceedings"  below.
Management  of  the  Partnership  is of  the  opinion  that  the  assets  of the
Partnership are realizable at their current  carrying value. The Partnership has
no assets other than the Facility, the Facility site,  contractual  arrangements
relating to the Facility (the "Project Contracts") and the stock of ICL Funding.

Certain Project Contracts

        The Facility supplies (i) electric generating capacity and energy to FPL
pursuant to the Power Purchase  Agreement and (ii) steam to Caulkins  Indiantown
Citrus Company  ("Caulkins")  pursuant to a long-term energy services  agreement
(the "Energy Services Agreement").

        Payments  from FPL  pursuant  to the Power  Purchase  Agreement  provide
approximately 99% of Partnership revenues. Under and subject to the terms of the
Power  Purchase  Agreement,  FPL is  obligated to purchase  electric  generating
capacity made  available to it and associated  energy from the Facility  through
December 22, 2025.

        Payments by FPL consist of capacity payments and energy payments. FPL is
required to make  capacity  payments to the  Partnership  on a monthly basis for
electric  generating  capacity made available to FPL during the preceding  month
regardless of the amount of electric  energy  actually  purchased.  The capacity
payments have two  components,  an  un-escalated  fixed capacity  payment and an
escalated fixed operation and maintenance  payment,  which together are expected
by the Partnership to cover all of the Partnership's fixed costs, including debt
service.  Energy  payments  are made  only for the  amount  of  electric  energy
actually  delivered to FPL. The energy  payments made by FPL are expected by the
Partnership  to  cover  the  Partnership's  variable  costs of  electric  energy
production  but  will be  insufficient  to  cover  the  variable  costs of steam
production for steam  supplied to Caulkins.  The amount of this shortfall is not
expected by the Partnership to have a material  adverse effect on its ability to
service its debt.

        The  Partnership  supplies  thermal  energy to Caulkins in order for the
Facility to meet the operating and efficiency standards under the Public Utility
Regulatory  Policy  Act  of  1978,  as  amended,   and  the  FERC's  regulations
promulgated thereunder (collectively,  "PURPA"). The Facility has been certified
as a Qualifying  Facility under PURPA.  Under PURPA,  Qualifying  Facilities are
exempt from certain  provisions  of the Public  Utility  Holding  Company Act of
1935,  as amended  ("PUHCA"),  most  provisions  of the  Federal  Power Act (the
"FPA"),  and,  except under certain  limited  circumstances,  rate and financial
regulation under state law. The Energy Services Agreement with Caulkins requires
Caulkins to purchase  the lesser of (i) 525 million  pounds of steam per year or
(ii) the  minimum  quantity  of steam per year  necessary  for the  Facility  to
maintain its status as a Qualifying Facility under PURPA (currently estimated by
the Partnership not to exceed 525 million pounds per year).

        The  Partnership  has a coal  purchase  agreement  (the  "Coal  Purchase
Agreement") with Lodestar Energy, Inc.  ("Lodestar")  pursuant to which Lodestar
supplies all of the Facility's  coal needs,  which are estimated to be 1 million
tons of coal per year. The  Partnership  has no obligation to purchase a minimum
quantity of coal under the Coal Purchase  Agreement.  The fuel price  escalation
provisions  in the  Coal  Purchase  Agreement  are  substantially  the  same  as

                                       3
<PAGE>

escalation  of the fuel price  component  of the energy  price  contained in the
Power  Purchase  Agreement  with FPL. This mechanism is intended to mitigate any
mismatch between the price the Partnership pays for coal and the energy payments
received from FPL.  Lodestar's  parent,  Lodestar  Holding's Inc.,  announced in
November,  2000  that  it did  not  make a  scheduled  interest  payment  on its
outstanding debt and that its primary surety of its performance  bonds no longer
meets local, state, and federal credit  requirements.  As of March 19, 2001, the
interest  payment  remained unpaid and no alternative  bonding  arrangements had
been made. The Partnership is currently  evaluating  alternative sources of coal
and options for ash disposal.  Such  alternatives  may result in increased  fuel
costs and waste handling expenses to the Partnership.

        During  1997,  coal ash  produced  during  operation of the Facility was
disposed  of  pursuant  to the Coal  Purchase  Agreement  and  back-up  disposal
arrangements with Chambers Waste Systems, Inc. of Florida ("Chambers"). In 1998,
the  Partnership  entered  into  agreements  with  Lodestar  and VFL  Technology
Corporation ("VFL") for ash disposal at alternative sites. These agreements will
reduce  the  cost of ash  disposal.  The  Partnership  has  been  informed  that
Lodestar,  Chambers, and VFL have obtained the permits necessary to receive such
coal ash.

        The  Partnership  entered  into a lime  purchase  agreement  (the  "Lime
Purchase  Agreement")  with  Chemical  Lime  Company  ("Chemlime"),  an  Alabama
corporation,  to supply the lime requirements of the Facility's dry scrubber and
sulfur dioxide removal system.  The initial term of the Lime Purchase  Agreement
is 15 years from the commercial operation date. Chemlime is obligated to provide
all of the Facility's lime  requirements,  but the Partnership has no obligation
to purchase a minimum  quantity of lime. The price of lime was  renegotiated  in
1999 for a three-year  period beginning  January 1, 2000.  Chemlime notified the
Partnership  of its  intention  to cancel the  agreement  effective in the first
quarter of 2002. The Partnership expects to put a replacement  contract in place
during the third quarter of 2001.

Competition

        Since  the  Partnership  has  a  long-term  contract  to  sell  electric
generating  capacity  and energy  from the  Facility  to FPL, it does not expect
competitive  forces to have a significant  effect on its business.  As discussed
under  "Energy  Prices " below,  the cost of power  available  to FPL from other
sources will affect FPL's dispatch of the Facility and, therefore, the amount of
electric energy FPL purchases from the Partnership. The Partnership expects that
the capacity payments under the Power Purchase Agreement, which are not affected
by  the  level  of  FPL's  dispatch  of  the  Facility,  will  cover  all of the
Partnership's fixed costs, including debt service.

                                       4
<PAGE>


Energy Prices

       In October 1999, FPL filed with the Florida Public Service Commission its
projections for its 2000-2001 "as available" energy costs (in this context,  "as
available"  energy costs reflect actual energy  production  costs avoided by FPL
resulting  from the purchase of energy from the  Facility  and other  Qualifying
Facilities). The projections filed by FPL are lower for certain periods than the
energy prices  specified in the Power  Purchase  Agreement  for energy  actually
delivered by the Facility.  At other times,  the  projections  exceed the energy
prices  specified in the Power Purchase  Agreement.  Should FPL's "as available"
energy cost projections  prove to reflect actual rates, FPL may elect,  pursuant
to its  dispatch  and control  rights over the  Facility  set forth in the Power
Purchase  Agreement,  to run the Facility less frequently or at lower loads than
if the Facility's energy prices were lower than the cost of other energy sources
available to FPL. Since capacity payments under the Power Purchase Agreement are
not affected by FPL's dispatch of the Facility and because capacity payments are
expected  by the  Partnership  to cover all of the  Partnership's  fixed  costs,
including debt service,  the  Partnership  currently  expects that, if the filed
projections prove to reflect actual rates, such rates and the resulting dispatch
of the Facility  will not have a material  adverse  effect on the  Partnership's
ability to service its debt.  To the extent the  Facility is not operated by FPL
during Caulkins' processing season (November to June), the Partnership may elect
to run the  Facility  at a  minimum  load  or shut  down  the  Facility  and run
auxiliary  boilers to produce steam for Caulkins in amounts  required  under the
Partnership's  steam  agreement  with  Caulkins.  Such  operations may result in
decreased net operating  income for such periods.  The Partnership  expects that
the decrease, if any, will not be material.

Employees

        The  Partnership  has no employees  and does not  anticipate  having any
employees in the future because, under a management services agreement, NEG acts
as the Partnership's  representative in all aspects of managing the operation of
the Facility as directed by the Partnership's  Board of Control. As noted above,
PG&E OSC is providing operations and maintenance services for the Partnership.

Business Strategy and Outlook

        The  Partnership's  overall  business plan is to safely  produce  clean,
reliable  energy  at  competitive  prices.  The  Facility  commenced  commercial
operation on December 22, 1995 and  completed  its fifth full  calendar  year of
operation on December 31, 2000.

        During 2000, the Facility produced 2,343,677 MW-hr of energy for sale to
FPL  compared to 1,745,760  MW-hr in 1999.  This  increase was due  primarily to
FPL's higher dispatch of the Facility.  Dispatch of the Facility by FPL averaged
approximately 87.56% over the year compared to 65.41% for 1999.

        The Facility produced approximately 649 million pounds of steam for sale
to Caulkins in 2000 compared to approximately 390 million pounds in 1999 thereby
exceeding the minimum  requirements to maintain  Qualifying Facility status. The
259  million-pound  increase in steam  deliveries  was due  primarily  to higher
production of juice by Caulkins in 2000.

        The Facility ended the year with a twelve-month rolling average Capacity
Billing  Factor of 98.636% in 2000 and 100.636% in 1999.  The  Capacity  Billing
Factor measures the overall

                                       5
<PAGE>

availability  of  the  Facility,  but  gives  a  heavier  weighting  to  on-peak
availability.  Cash flows  during  2000 were  sufficient  to fund all  operating
expenses and debt repayment obligations.

          Dispatch of the unit by FPL during the summer months is expected to be
similar  to 2000  levels.  Dispatch  during the  winter is highly  dependent  on
weather and FPL's cost of running its oil and gas fired units.  Caulkins expects
a strong  citrus crop for  processing  in 2001 and steam demand from Caulkins is
expected to be similar to 2000 levels.

        The Facility is planning on four weeks of scheduled  outages during 2001
to perform routine inspections and maintenance.  The primary outage is scheduled
for October and  November  2001,  which is before or at the  beginning of citrus
production.

               In the absence of any major equipment failures, unit availability
is expected to be comparable to 2000 levels.  If this is achieved,  the Capacity
Billing Factor and associated capacity bonuses would be similar.

        The Partnership  believes that its current  financial  resources will be
adequate to cover operating expenses and debt repayment obligations in 2001.

Forward Looking Statements

       When used in this  report,  words or phrases that are  predictions  of or
indicate  future  events  and  trends  are  subject  to a number  of  risks  and
uncertainties  which could cause actual results to differ  materially from those
projected.  Given such  uncertainties,  readers are cautioned not to place undue
reliance  on such  statements.  The  Partnership  undertakes  no  obligation  to
publicly  update or revise any  forward-looking  statement to reflect current or
future events or circumstances.

Governmental Approvals

        The  Partnership  has obtained all  material  environmental  permits and
approvals  required,  as of December 31, 2000,  in order to continue  commercial
operation of the Facility. Certain of these permits and approvals are subject to
periodic renewal.  Certain  additional permits and approvals will be required in
the future for the continued  operation of the Facility.  The Partnership is not
aware of any  technical  circumstances  that would  prevent the issuance of such
permits  and  approvals  or  the  renewal  of  currently  issued  permits.   The
Partnership  timely  filed its  application  for a Title V air permit on May 24,
1996. The permit was issued on October 11, 1999.

        On  December  22,  1999,  the  Partnership   submitted  to  the  Florida
Department of Environmental  Protection  ("DEP") a request for amendments to the
Site Certification and an application for modifications of the Site Certificate.
The  amendments to the Site  Certification  are being  provided to inform DEP of
certain  changes to the Facility's  design and operation.  The requests will not
require changes to the Conditions of  Certification  for the Facility and do not
involve significant  environmental  impacts that would require new environmental
permits or approvals. Also submitted was an application for modifications of the
Site Certificate,  which describes other proposed changes to the Facility design
and  operations.  The  modifications  will require  changes to the Conditions of
Certification.  The requests  include  modifications  to allow the addition of a
carbon  dioxide  plant and  clarifications  of the  operation  of the  auxiliary
boilers  related to  operation  rules.  DEP  approved  these site  certification
changes on April 20, 2000.

                                       6
<PAGE>

        The DEP has proposed to modify the conditions of the Site  Certification
to allow  emergency  discharge of cooling  water and process water to conform to
NPDES Permit Number FL0183750, which was issued on January 19, 2000.

On November 10, 2000 the  Partnership  submitted to the DEP an  application  for
modifications  to the Site  Certificate.  The proposed  modifications  include a
requested increase of the groundwater withdrawal,  clarification of authority to
allow   emergency   water   withdrawals,   changes  to  groundwater   monitoring
requirements  and programs,  and changing the address of the facility.  On March
14, 2001 DEP  approved  and issued a final order  modifying  the  Conditions  of
Certification  related to South Florida Management  District ("SFWMD") authority
to  authorize  withdrawals  of ground or surface  water and a  modification  for
storage pond elevation changes. The remaining  modifications remain under review
with DEP.

Item 2         PROPERTIES

        The  Facility  is  located  in  a   predominantly   industrial  area  in
southwestern Martin County, Florida, on approximately 240 acres of land owned by
the Partnership (the "Site"). Other than the Facility, the Site, and the make-up
water pipeline and associated  equipment,  the Partnership does not own or lease
any material properties.

Item 3         LEGAL PROCEEDINGS

Dispute with FPL

        On March 19, 1999, the Partnership  filed a complaint against FPL in the
United States  District  Court for the Middle  District of Florida.  The lawsuit
stems from a course of action  pursued by FPL since March 10, 1999, in which FPL
purported to exercise its dispatch and control  rights under the Power  Purchase
Agreement in a manner which the Partnership  believes  violated the terms of the
power sales  agreement.  In its  complaint,  the  Partnership  charges that such
conduct was  deliberately  calculated to cause the  Partnership  to be unable to
meet the requirements to maintain the Facility's status as a Qualifying Facility
under the Public Utility Regulatory Policies Act of 1978.

        The complaint alleges that FPL took the position that if the Facility is
off-line for any reason,  then FPL is under no  obligation to allow the Facility
to reconnect to FPL's system. The original complaint asserted, however, that the
Partnership  specifically and successfully negotiated for a contractual right to
operate  the  Facility  up to 100 MW  ("Minimum  Load") in order to enable it to
cogenerate  sufficient steam to maintain its Qualifying  Facility status.  While
FPL has not disputed that the Partnership  may maintain  Minimum Load operations
if the  Facility  is  delivering  power when FPL  requests  the  Partnership  to
decommit  the  Facility,  the  complaint  states that FPL has  claimed  absolute
discretion  to deny the  Partnership  permission  to reconnect the Facility with
FPL's system.

        Since the loss of Qualifying  Facility  status may result in an event of
default under the Power Purchase Agreement,  the Partnership must take action to
address this matter.  The Partnership is investigating  various  alternatives to
mitigate its QF risk. These are described under "QF Mitigation Options" below.

                                       7
<PAGE>


        The complaint asserts causes of action for (i) FPL's breach of the Power
Purchase  Agreement,  (ii) FPL's anticipatory  repudiation of the Power Purchase
Agreement,  (iii) breach of the implied covenant of good faith, fair dealing and
commercial  reasonableness  and (iv) a declaratory  judgment by the court of the
rights of the parties under the Power Purchase Agreement.  The Partnership seeks
(a) a declaratory  ruling that FPL's actions constitute a breach of the terms of
the Power Purchase  Agreement and that the Partnership has the absolute right to
operate  the  Facility at Minimum  Load  (except for reasons of safety or system
security)  at the  rates  provided  for in the  Power  Purchase  Agreement,  (b)
injunctive  relief  preventing  FPL from further  violating  the Power  Purchase
Agreement,  (c) compensatory  damages and (d) other relief as the court may deem
appropriate.

        On April 14,  1999,  FPL filed a  responsive  pleading to the  complaint
including a motion to dismiss two of the four  counts  raised in the  complaint,
raising  certain  affirmative  defenses  and  seeking  declaration  that FPL has
unfettered  dispatch  rights under the Power  Purchase  Agreement.  On April 23,
1999, FPL filed answer to the counts, which were not challenged in the motion to
dismiss.  On May 13, 1999, the Partnership filed its response to FPL's motion to
dismiss and request for declaratory judgement. On May 18, 1999, the Court denied
FPL's  Motion to  Dismiss  in its  entirety.  The  Partnership  filed an amended
complaint,  which was accepted on June 17, 1999.  The amended  complaint  simply
consolidated the  Partnership's  claims for breach of contract and breach of the
implied  obligation  of good  faith and fair  dealing  which  was,  in part,  in
response to a recent  federal  court  decision.  FPL moved to dismiss the entire
amended  complaint and the  Partnership  filed its  opposition  papers August 2,
1999.  The Court  granted FPL's motion to dismiss only with respect to the first
count of the  complaint.  The  Partnership  has amended its complaint to address
issues  raised by the Court in its  decision  to  dismiss  this  count.  FPL was
expected  to file a new  motion to dismiss  the  amended  complaint.  The second
amended complaint,  which was filed on March 21, 2000, is attached as an exhibit
to the Report.

        This summary of the Partnership's  complaint against FPL is qualified in
its  entirety  by the  complaint,  which  was  filed  with the  court in  docket
99-317-CIV-ORL-19C.  This summary does not, nor does it purport to,  include all
of the  material  statements  and  claims  made in the  complaint,  and has been
provided solely for the reader's convenience. This summary is not intended to be
relied upon for any purpose without reference to the complaint.

        On  December  19,  2000,  FPL  and  the  Partnership  participated  in a
mediation  conference with respect to the pending litigations  described herein.
As a result of this conference,  FPL and the Partnership executed two Settlement
Agreements  intended  to resolve  all pending  litigation.  Only the  Settlement
Agreement for the pending  federal court  litigation  requires  amendment of the
power sales  agreement.  The  amendment  must be approved by the Florida  Public
Service  Commission,  and certain  conditions set forth in the Indenture for the
Bonds, including confirmation of the Bonds' investment grade rating, must be met
for it to become effective.

        An outline of the business terms set forth in this Settlement  Agreement
provides that if the Facility is off-line for any reason,  the Partnership shall
have the right,  upon up to 6 hours notice and subject only to safety and system
reliability  issues,  to reconnect to FPL's system and produce up to 100 MW. The
Settlement  Agreement  provides that if this occurs when FPL has decommitted the
Facility,  the Partnership will be paid FPL's actual "as available" energy rates
for the  first 360 of such  hours  each year (in this  context,  "as  available"
energy costs  reflect  actual energy  production  costs avoided by FPL resulting
from the production or purchase of energy from the Facility and other  sources).
If fewer than 360 hours are used in any year, FPL may carry the balance forward,
not to  exceed  a total of 1440  hours in any  year.  If the  hours

                                       8
<PAGE>

accumulated  exercising  this  reconnection  right  exceed  FPL's  balance,  the
Partnership  will be paid for energy  produced  during those hours at the energy
rates set forth under the power sales agreement.

        Management of the Partnership believes that this resolution provides the
Partnership with the flexibility it requires to maintain its Qualifying Facility
status without materially adversely affecting the Project.

        On December 12, 2000, FPL filed a complaint  against the  Partnership in
the  Circuit  Court of the 19th  Judicial  District  in and for  Martin  County,
Florida. In its complaint,  FPL alleged that the Partnership  breached the power
sales  agreement by failing to include  certain  payments from its coal supplier
and its coal  transporter  in the  Partnership's  calculation  of its fuel costs
which are included in the calculation of the actual energy costs under the power
sales agreement.  The power sales agreement  requires a sharing of actual energy
costs  between FPL and the  Partnership  to the extent the actual  costs  differ
(either  upward or  downward)  from a formula  contained in the  agreement.  FPL
sought  unspecified  damages and declaratory relief including a finding that the
Partnership  breached  the  power  sales  agreement.  The  Settlement  Agreement
provides that the  Partnership  will include in future  calculations of its fuel
costs all costs, credits, rebates,  discounts, and  allowances/concessions  from
all past, current or future vendors of fuel, ash, lime, and fuel  transportation
subject to  execution  of a  definitive  agreement  embodying  the terms of this
Settlement  Agreement.  The Partnership will make a one time payment of $800,000
to FPL as  settlement  for  disputed  amounts  under fuel audits  performed  for
calendar years 1997 and 1998.

Property Tax Matter

        The  Partnership  was  contacted  in 1998  by the  local  Martin  County
property appraiser  concerning the proper qualification of some of its pollution
control  equipment,  which equipment receives reduced valuation for property tax
purposes.  After review by the  Partnership,  and  discussion  directly with the
appraiser's  office,  the Partnership  provided the appraiser with all requested
information. The appraiser has not taken any further action on this matter.

Item 4         SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        No  matters  were  submitted  to a vote of the  security  holders of the
Partnership during 2000.



                                       9
<PAGE>



                                     PART II

Item 5  MARKET FOR THE REGISTRANT'S COMMON STOCK AND
        RELATED SECURITY HOLDER MATTERS
        --------------------------------------------

        The Partnership is a Delaware limited  partnership wholly owned by Palm,
Toyan,  Thaleia  and IPILP.  Beneficial  interests  in the  Partnership  are not
available to other persons except with the consent of the Partners.

        There is no  established  public market for ICL Funding's  common stock.
The 100 shares of $1 par common stock are owned by the Partnership.  ICL Funding
has not paid, and does not intend to pay, dividends on the common stock.

Item 6   SELECTED FINANCIAL DATA
         -----------------------

The selected  financial data of the Partnership  presented below, which consists
primarily of certain  summary  consolidated  balance  sheet  information  of the
Partnership as of December 31, 2000, 1999, 1998, 1997, and 1996,  should be read
in conjunction with Item 7 of this report,  "Management's Discussion an Analysis
of Financial  Condition And Results of Operations",  and with the  Partnership's
consolidated  financial  statements  appearing  elsewhere  in this  report.  The
Partnership, which was in the development stage through December 21, 1995, began
construction of the Facility in October 1992 and declared  commercial  operation
of the Facility on December 22, 1995. The financial statements and supplementary
data required by this item are presented under Item 8.

<TABLE>
<CAPTION>
<S>                                       <C>              <C>               <C>                <C>                <C>
                                           2000              1999                1998               1997              1996
                                           ----              ----                ----               ----              ----
Total Assets                             $680,669,565     $694,852,029        $708,139,691      $735,468,011       $753,669,863
Long-Term Debt                            572,521,507      583,994,031         595,835,699       606,119,747        616,651,805
Total Liabilities                         595,689,890      606,607,479         616,339,161       629,342,447        637,472,694
Capital Distributions                      25,400,000       25,970,000          35,680,000        28,080,382         36,395,054
Total Partners' Capital                    84,979,675       88,244,550          91,800,530       106,125,564        116,197,169

Property, Plant & Equipment, Net
                                          628,354,758      641,449,0555        654,188,458       668,464,373        682,214,731
Operating Revenues                        177,790,391      163,270,119         159,183,399       162,517,435        158,845,947

Net Income                                 22,135,125       22,414,021          21,354,967        18,008,777         11,790,051

</TABLE>

                                       10

<PAGE>


     The  following  is  a  summary  of  the  quarterly  results  of  operations
(unaudited) for the years ended December 31, 2000 and 1999.
<TABLE>
<CAPTION>

                                                                    Quarter Ended
<S>                              <C>            <C>        <C>               <C>               <C>
                                 March 31       June 30    September 30      December 31       Total
                                 --------       -------    ------------      -----------       -----
                                                         (in thousands)

2000
----
Operating revenues                $44,106       $42,589       $47,318          $43,777        $177,790
Gross profit                       22,611        20,965        22,977           20,813          87,367
Net income before
  cumulative change in
  accounting principle
                                    5,794         4,529         6,466            4,426          21,215
Net income                          6,714         4,529         6,466            4,426          22,135


1999
----
Operating revenues                $35,751       $40,457       $45,600          $41,462        $163,270
Gross profit                       23,190        21,743        22,313           21,235          88,481
Net income                          6,517         5,108         5,794            4,995          22,414

</TABLE>


Item 7   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS
         -----------------------------------

Results of Operations

Year ended December 31, 2000 Compared to the Year Ended December 31, 1999
-------------------------------------------------------------------------

        For the years ended  December  31, 2000 and 1999,  the  Partnership  had
total  operating  revenues of $177.8 million and $163.3  million,  respectively.
This increase in 2000 was attributable primarily to increased energy revenues of
$14.2  million and by increased  capacity  bonus and  capacity  revenues of $0.3
million.  For the years ending December 31, 2000 and 1999, the Facility achieved
an average  Capacity  Billing  Factor of 98.64% and 100.64%  respectively.  This
decrease was primarily  attributable to minor  mechanical  problems with turbine
control  valves.  This  resulted  in  earning  full  monthly  capacity  payments
aggregating  $112.8 million for the year in 2000 and $112.5 million for the year
in 1999.  Bonuses  aggregated  $11.2 million for the year in both 2000 and 1999.
The  increased  revenues  from  capacity  are  due  primarily  to the  quarterly
escalations  on the fixed  operating &  maintenance  component  of the  capacity
charge.  The higher energy revenues are due primarily to greater dispatch levels
by FPL.  During 2000 and 1999,  the Facility was dispatched by FPL and generated
2,343,677 megawatt-hours and 1,745,760 megawatt-hours, respectively. The monthly
average dispatch rate requested by FPL was 87.6% and 65.4% for the twelve months
ended  December  31, 2000 and 1999,  respectively.  Total  operating  costs were
$102.1 million and $85.5 million for the years ended December 31, 2000 and 1999,
respectively. This increase

                                       11
<PAGE>

was due  primarily to an increase of $16.1  million in fuel and ash costs,  both
resulting  from  higher  dispatch by FPL,  and an  increase  of $0.7  million in
general and  administrative  expenses  relating to the FPL litigation costs. For
the years ended December 31, 2000 and 1999,  the total net interest  expense was
approximately  $54.5 million and $55.4 million,  respectively.  The decrease was
primarily  due to a $0.8  million  reduction  in bond  interest  expense  due to
installment payments of the Series A-9 First Mortgage Bonds on June 15, 2000 and
on December 15, 2000,  an increase in interest  income of $0.3  million,  and an
increase in letter of credit fees of $0.2 million.  Net income was $22.1 million
and $22.4  million  for the twelve  months  ended  December  31,  2000 and 1999,
respectively.  This $0.3 million decrease was primarily  attributable to a $16.6
million  increase in operating  costs offset by the increased  revenues of $14.5
million,  the effect of a cumulative  change in  accounting  principle for major
maintenance  of $0.9  million,  and a decrease in net  interest  expense of $0.9
million.

        As of  December  31,  2000 and 1999 the  Partnership  had  approximately
$628.4  million  and  $641.4  million,  respectively,  of  property,  plant  and
equipment  consisting  primarily of purchased  equipment,  construction  related
labor and materials,  interest during  construction,  financing costs, and other
costs directly  associated with the construction of the Facility.  This decrease
is due primarily to  depreciation  of $15.0  million,  offset by $2.1 million of
capital improvements.

Year ended December 31, 1999 Compared to the Year Ended December 31, 1998
-------------------------------------------------------------------------

        For the years ended  December  31, 1999 and 1998,  the  Partnership  had
total  operating  revenues of $163.3 million and $159.2  million,  respectively.
This increase was  attributable  primarily to increased  energy revenues of $3.9
million and by increased  capacity bonus and capacity  revenues of $0.2 million.
For the years  ending  December  31,  1999 and 1998,  the  Facility  achieved an
average  Capacity  Billing  Factor of 100.64%  and  101.038%  respectively.  The
decrease was primarily attributable to minor mechanical problems.  This resulted
in earning full monthly  capacity  payments  aggregating  $112.5 million for the
year in 1999 and $112.3 million for the year in 1998.  Bonuses  aggregated $11.2
million for the year in both 1999 and 1998. The increased revenues from capacity
are due primarily to the quarterly  escalations on the Fixed O&M component.  The
higher  energy  revenues are due  primarily to greater  dispatch  levels by FPL.
Total  operating  costs were $85.5 million and $80.6 million for the years ended
December 31, 1999 and 1998, respectively.  This increase was due primarily to an
increase  of $3.6  million in fuel and ash costs,  both  resulting  from  higher
dispatch by FPL and an increase of $1.0 million in  operations  and  maintenance
expenses. During 1999 and 1998, the Facility was dispatched by FPL and generated
1,745,760 megawatt-hours and 1,485,008 megawatt-hours, respectively. The monthly
average dispatch rate requested by FPL was 65.4% and 51.6% for the twelve months
ended December 31, 1999 and 1998, respectively. For the years ended December 31,
1999 and 1998, the total net interest  expense was  approximately  $55.4 million
and $56.4  million,  respectively.  The  decrease  was  primarily  due to a $0.8
million  reduction in bond interest expense due to the maturity of Series A-7 of
the First  Mortgage  Bonds on June 15, 1999 and Series A-8 of the First Mortgage
Bonds on December  15,  1999,  a reduction  in LOC fees of $0.4  million,  and a
reduction in interest  income of $0.2 million.  Net income was $22.4 million and
$21.4  million  for  the  twelve  months  ended  December  31,  1999  and  1998,
respectively.  This $1.0 million  increase  was  primarily  attributable  to the
increased  revenues of $4.1  million and the effect in 1998 for the write off of
$0.8 million for start-up costs, a $1.0 million decrease in net interest expense
and offset by a $4.9 million increase in operating costs.

                                       12
<PAGE>

        As of December  31, 1999 and 1998,  the  Partnership  had  approximately
$641.4  million  and  $654.2  million,  respectively,  of  property,  plant  and
equipment  consisting  primarily of purchased  equipment,  construction  related
labor and materials,  interest during  construction,  financing costs, and other
costs directly  associated with the construction of the Facility.  This decrease
is due primarily to  depreciation  of $15.2  million,  offset by $2.1 million of
capital improvements.

Liquidity and Capital Resources

        On November  22,  1994,  the  Partnership  and ICL Funding  issued first
mortgage  bonds in an  aggregate  principal  amount of $505  million (the "First
Mortgage  Bonds").  Of this amount,  $236.6  million of the First Mortgage Bonds
bear an average  interest rate of 9.05% and $268.4 million of the First Mortgage
Bonds bear an interest rate of 9.77%. Concurrent with the Partnership's issuance
of its First Mortgage Bonds, the Martin County Industrial  Development Authority
issued $113 million of Industrial  Development  Refunding  Revenue Bonds (Series
1994A) which bear an interest rate of 7.875% (the "1994A Tax Exempt  Bonds").  A
second series of tax exempt bonds (Series  1994B) in the  approximate  amount of
$12  million,  which bear an interest  rate of 8.05%,  were issued by the Martin
County  Industrial  Development  Authority  on December 20, 1994 (the "1994B Tax
Exempt  Bonds"  and,  together  with the 1994A Tax Exempt  Bonds,  the "1994 Tax
Exempt  Bonds").  The First  Mortgage  Bonds and the 1994 Tax  Exempt  Bonds are
hereinafter collectively referred to as the "Bonds."

        Certain proceeds from the issuance of the First Mortgage Bonds were used
to repay $421 million of the Partnership's indebtedness,  and financing fees and
expenses  incurred in connection with the  development  and  construction of the
Facility. The balance of the proceeds were deposited in various restricted funds
that are being  administered  by an independent  disbursement  agent pursuant to
trust  indentures  and a  disbursement  agreement.  Funds  administered  by such
disbursement agent are invested in specified  investments.  These funds together
with  other  funds  available  to the  Partnership  were  used:  (i) to  finance
completion of construction, testing, and initial operation of the Facility; (ii)
to finance construction  interest and  construction-related  contingencies;  and
(iii) to provide for initial working capital.

        The  proceeds  of the 1994 Tax  Exempt  Bonds  were used to refund  $113
million principal amount of Industrial  Development  Revenue Bonds (Series 1992A
and Series 1992B) previously issued by the Martin County Industrial  Development
Authority  for the  benefit of the  Partnership,  and to fund,  in part,  a debt
service reserve  account for the benefit of the holders of its tax-exempt  bonds
and to complete construction of certain portions of the Facility.

         The Partnership's total borrowings from inception through December 2000
were $769  million.  The equity loan of $139  million was repaid on December 26,
1995. As of December 31, 2000, the outstanding  borrowings included $125 million
from the 1994 Tax Exempt  Bonds and all of the  available  First  Mortgage  Bond
proceeds. The First Mortgage Bonds have matured as follows:

<TABLE>
<CAPTION>
<S>   <C>                 <C>                             <C>
      Series              Aggregate Principal Amount      Date Matured and Paid
      ------              --------------------------      ---------------------
       A-1                     $4,397,000                    June 15, 1996
       A-2                      4,398,000                    December 15, 1996
       A-3                      4,850,000                    June 15, 1997
       A-4                      4,851,000                    December 15, 1997

                                       13
<PAGE>

       A-5                      5,132,000                    June 15, 1998
       A-6                      5,133,000                    December 15, 1998
       A-7                      4,998,000                    June 15, 1999
       A-8                      4,999,000                    December 15, 1999**
</TABLE>


       **Note the A-9 Series does not fully mature until December 15, 2010.

       The weighted  average  interest rate paid by the  Partnership on its debt
for the  years  ended  December  31,  2000  and  1999,  was  9.204%  and  9.182%
respectively.

        The  Partnership,  pursuant  to certain  of the  Project  Contracts,  is
required to post letters of credit  which,  in the  aggregate,  will have a face
amount of no more than $65 million. Certain of these letters of credit have been
issued  pursuant to a Letter of Credit and  Reimbursement  Agreement with Credit
Suisse  First  Boston and the  remaining  letters of credit  will be issued when
required under the Project  Contracts,  subject to conditions  contained in such
Letter of Credit and  Reimbursement  Agreement.  As of  December  31,  2000,  no
drawings have been made on any of these letters of credit.  The Letter of Credit
and  Reimbursement  Agreement  has a term of seven years subject to extension at
the discretion of the banks party thereto.

        The Partnership entered into a debt service reserve letter of credit and
reimbursement  agreement,  dated  as of  November  1,  1994,  with  BNP  Paribas
(formerly  known as Banque  Nationale de Paris) pursuant to which a debt service
reserve letter of credit in the amount of approximately  $60 million was issued.
This  agreement has a term of five years subject to extension at the  discretion
of the banks party  thereto.  Drawings  on the debt  service  reserve  letter of
credit became available on the Commercial  Operation Date of the Facility to pay
principal and interest on the First  Mortgage  Bonds,  the 1994 Tax Exempt Bonds
and  interest  on any loans  created by drawings  on such debt  service  reserve
letter of credit.  Cash and other  investments  held in the debt service reserve
account  will be drawn on for the Tax Exempt  Bonds prior to any drawings on the
debt service reserve letter of credit. As of December 31, 2000, no drawings have
been made on the debt service reserve letter of credit.  On January 11, 1999, in
accordance with the Partnership's financing documents,  the debt service reserve
letter of credit was reduced to approximately $30 million,  which, together with
cash in the debt  service  reserve  account,  represents  the maximum  remaining
semi-annual  debt  service on the First  Mortgage  Bonds and the 1994 Tax Exempt
Bonds.

        In order to provide for the  Partnership's  working  capital needs,  the
Partnership  entered into a Revolving  Credit Agreement with Credit Suisse First
Boston dated as of November 1, 1994.  This  Agreement  has a term of seven years
subject to extension at the discretion of the banks party thereto. The revolving
credit agreement has a maximum  available amount of $15 million and may be drawn
on by the Partnership from time to time. The interest rate is based upon various
short-term indices at the Partnership's option and is determined  separately for
each draw. During 2000, working capital loans were made to the Partnership under
the working  capital loan facility.  All working  capital loans were repaid in a
timely manner and as of December 31, 2000 no borrowings were outstanding.

       For 2001, we have  identified  possible  capital  improvements  that will
enhance the  reliability  of the  facility.  This list  includes the purchase of
heavy mobile equipment,  baghouse upgrades,  additional upper aquifer wells, and
water treatment modifications.

                                       14
<PAGE>

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

        The only  material  market risk to which the  Partnership  is exposed is
interest  rate risk.  The  Partnership's  exposure to market risk for changes in
interest rates relates  primarily to the  opportunity  costs of long-term  fixed
rate obligations in a falling interest rate environment.

The table  below  presents  principal,  interest  and related  weighted  average
interest rates by year of maturity (in thousands).

<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------------------------------------
<S>                             <C>         <C>         <C>         <C>         <C>
DEBT (all fixed rate)           2001        2002        2003        2004        2005       Thereafter       Total     Fair Value
                                ----        ----        ----        ----        ----       ----------       -----     ----------

Tax Exempt Bonds:
Principal                       $0.0        $0.0        $0.0        $0.0        $0.0        $125,010      $125,010     $127,510

Interest                      $9,865      $9,865      $9,865      $9,865      $9,865        $175,683      $225,012

Average Interest Rate          7.89%       7.89%       7.89%       7.89%       7.89%           7.89%

First Mortgage Bonds:
Principal                    $11,141     $11,460     $14,566     $16,785     $16,257        $384,499      $454,708     $492,484

Interest                     $43,217     $42,178     $41,045     $39,645     $38,102        $282,582      $486,769

Average Interest Rate          9.56%       9.57%       9.58%       9.59%       9.61%           9.71%
--------------------------------------------------------------------------------------------------------------------------------

</TABLE>



                                       15
<PAGE>
<TABLE>
<CAPTION>
Item 8         FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
               -------------------------------------------

<S>     <C>                                                           <C>
        Index to Financial Statements                                  Page
        -----------------------------                                  ----
        Report of Independent Public Accountants                        18
        Consolidated Balance Sheets                                     19
        Consolidated Statements of Operations                           21
        Consolidated Statements of Changes in Partners' Capital         22
        Consolidated Statements of Cash Flows                           23
        Notes to Consolidated Financial Statements                      24
</TABLE>

                                       16

<PAGE>


                    Report of independent public accountants

To Indiantown Cogeneration, L.P.:

We have  audited the  accompanying  consolidated  balance  sheets of  Indiantown
Cogeneration,  L.P., (a Delaware  limited  partnership)  and  subsidiaries  (the
"Partnership")  as of December 31, 2000 and 1999,  and the related  consolidated
statements of operations,  changes in partners'  capital and cash flows for each
of the three  years in the period  ended  December  31,  2000.  These  financial
statements  are  the  responsibility  of  the  Partnership's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Indiantown  Cogeneration,  L.P.
and  subsidiaries  as of December  31,  2000 and 1999,  and the results of their
operations  and their cash flows for each of the three years in the period ended
December 31, 2000, in conformity with accounting  principles  generally accepted
in the United States.

As discussed in Note 2 to the financial statements,  the Partnership changed its
method of accounting for scheduled major overhauls in 2000 and costs of start-up
activities in 1998.

Vienna, Virginia

January 11, 2001  (except  with  respect to matters  discussed  in Note 1, as to
which the date is March 15, 2001)


                                       17

<PAGE>
<TABLE>
<CAPTION>


                 Indiantown Cogeneration, L.P. and Subsidiaries
                           Consolidated Balance Sheets
                        As of December 31, 2000 and 1999
                        --------------------------------

<S>                                                                                   <C>                       <C>
                                  ASSETS                                              2000                      1999
----------------------------------------------------------------------       ------------------        ------------------

CURRENT ASSETS:
     Cash and cash equivalents                                               $          821,955         $       2,416,997
     Accounts receivable-trade                                                       13,853,485                13,471,985
     Inventories                                                                      2,116,636                 1,146,017
     Prepaid expenses                                                                   800,238                   807,372
     Deposits                                                                            44,450                    44,450
     Investments held by Trustee, including restricted funds
     of $2,694,068 and $2,752,669 respectively                                        2,980,292                 3,283,909
                                                                             ------------------        ------------------
               Total current assets                                                  20,617,056                21,170,730

INVESTMENTS HELD BY TRUSTEE,
     restricted funds                                                                15,108,428                14,501,877

DEPOSITS                                                                                159,365                    80,000

PROPERTY, PLANT & EQUIPMENT:
     Land                                                                             8,582,363                 8,582,363
     Electric and steam generating facilities                                       700,310,050               698,401,089
     Less - accumulated depreciation                                               (80,537,655)              (65,534,397)
                                                                             ------------------        ------------------
              Net property, plant & equipment                                      628,354,758               641,449,055

FUEL RESERVE                                                                           922,254                 1,318,099

DEFERRED FINANCING COSTS, net of accumulated
amortization of $44,679,212 and $43,854,648 respectively                            15,507,704                16,332,268
                                                                             ------------------        ------------------
               Total assets                                                   $    680,669,565         $     694,852,029
                                                                             ==================        ==================
</TABLE>


The accompanying notes are an integral part of these consolidated
balance sheets.

                                       18

<PAGE>
<TABLE>
<CAPTION>


                 Indiantown Cogeneration, L.P. and Subsidiaries
                           Consolidated Balance Sheets
                        As of December 31, 2000 and 1999
                        --------------------------------

<S>                                                                              <C>                       <C>
LIABILITIES AND PARTNERS' CAPITAL                                                2000                      1999
---------------------------------------------------------------           -----------------         -----------------

CURRENT LIABILITIES:
     Accounts payable and accrued liabilities                              $      9,325,173         $       7,584,226
     Accrued interest                                                             2,370,686                 2,267,017
     Current portion - First Mortgage Bonds                                      11,140,896                11,533,135
     Current portion of lease payable - railcars                                    331,628                   308,534
                                                                          -----------------         -----------------
               Total current liabilities                                         23,168,383                21,692,912
                                                                          -----------------         -----------------

LONG TERM DEBT:
     First Mortgage Bonds                                                       443,567,969               454,708,865
     Tax Exempt Facility Revenue Bonds                                          125,010,000               125,010,000
     Lease payable - railcars                                                     3,943,538                 4,275,166
                                                                          -----------------         -----------------
               Total long term debt                                             572,521,507               583,994,031
    Scheduled major overhaul costs                                                       --                   920,536
                                                                          -----------------         -----------------
               Total liabilities                                                595,689,890               606,607,479
                                                                          -----------------         -----------------

COMMITMENTS AND CONTINGENCIES

PARTNERS' CAPITAL:
    Toyan Enterprises                                                            25,536,395                26,517,489
    Palm Power Corporation                                                        8,497,967                 8,824,455
    Indiantown Project Investment, L.P. Partnership                              16,953,444                17,604,787

    Thaleia, LLC                                                                 33,991,869                35,297,819
                                                                          -----------------         -----------------
               Total partners' capital                                           84,979,675                88,244,550
                                                                          -----------------         -----------------

               Total liabilities and partners' capital                     $    680,669,565         $     694,852,029
                                                                          =================         =================
</TABLE>

                                       19


 The accompanying notes are an integral part of these consolidated
 balance sheets.

<PAGE>
<TABLE>
<CAPTION>
                 Indiantown Cogeneration, L.P. and Subsidiaries
                      Consolidated Statements of Operations
              For the Years Ended December 31, 2000, 1999 and 1998
              ----------------------------------------------------

<S>                                                            <C>                 <C>                  <C>
                                                               2000                1999                 1998
                                                          ------------        ------------         ------------
Operating Revenues:
     Electric capacity and capacity bonus                $124,029,498        $123,682,957         $123,461,237
     Electric energy revenue                               53,652,475          39,461,349           35,549,353
     Steam                                                    108,418             125,813              172,809
                                                         --------------      -------------        ------------
         Total operating revenues                         177,790,391         163,270,119          159,183,399
                                                         --------------      -------------        ------------

Cost of Sales:
     Fuel and ash                                          55,910,214          39,794,007           36,220,511
     Operating and maintenance                             19,353,798          19,767,743           18,807,227
     Depreciation                                          15,003,258          15,227,631           15,091,155
     Loss on disposal of assets                               155,780                  --                   --
                                                         -------------        ------------        -------------
         Total cost of sales                               90,423,050          74,789,381           70,118,893
                                                         -------------        ------------        -------------

Gross Profit                                               87,367,341          88,480,738           89,064,506
                                                         -------------        ------------        -------------

Other Operating Expenses:
     General and administrative                             5,179,313           4,501,136            3,826,290
     Insurance and taxes                                    6,475,006           6,212,453            6,689,843
                                                          ------------         -----------         ------------
         Total other operating expenses                    11,654,319          10,713,589           10,516,133
                                                          ------------         -----------          -----------
Operating Income                                           75,713,022          77,767,149           78,548,373
                                                          ------------         -----------          -----------

Non-Operating Income (Expense):
     Interest expense                                     (56,905,787)        (57,475,271)         (58,868,345)
     Interest income                                        2,407,354            2,122,142            2,493,655
                                                          -------------       -------------       --------------
         Net non-operating expense                        (54,498,433)        (55,353,129)         (56,374,690)
                                                          --------------      -------------        -------------

Income before cumulative effect of change in accounting
principles                                                 21,214,589          22,414,020           22,173,683


Cumulative effect of a change in accounting
for costs of start-up activities (Note 2)                          --                 --             (818,716)

Cumulative effect of a change in accounting
for scheduled major overhaul costs (Note 2)                   920,536                 --                   --
                                                            --------------       -----------      ------------
Net Income                                                  $22,135,125          $22,414,020      $21,354,967
                                                            ===========          ===========      ============
</TABLE>

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

                                       20
<PAGE>
<TABLE>
<CAPTION>


                 Indiantown Cogeneration, L. P. and Subsidiaries
             Consolidated Statements of Changes in Partners' Capital
              For the Years Ended December 31, 2000, 1999 and 1998
              ----------------------------------------------------

<S>                                      <C>            <C>           <C>              <C>        <C>              <C>
                                            Toyan        Palm Power   TIFD III-Y,
                                         Enterprises    Corporation        Inc.        IPILP      Thaleia, LLC       Total
                                         -----------    -----------   -----------      -----      ------------       -----
Partners' capital,
December 31, 1997                        $53,062,783    $10,612,556   $42,450,225       $--        $ --            $106,125,564
Net Income (1/1/98 through 8/21/98)        7,228,833      1,445,767     5,783,066                                    14,457,666
Capital Distributions (1/1/98 through    (13,240,000)    (2,648,000)  (10,592,000)       --          --             (26,480,000)
8/21/98)
                                        ------------  ------------    ------------    --------     ------------    -------------

Partners' capital, August 21, 1998       $47,051,616    $ 9,410,323   $37,641,291       $--        $ --             $94,103,230
                                        ===========      ===========    ===========   =========    ============    =============

Transfer Toyan 19.95% interest to IPILP  (18,773,594)           --             --     18,773,594     --                     --

Net Income (8/22/98 through 12/31/98)      2,072,639        689,730     2,758,920      1,376,011     --               6,897,300
Capital Distributions (8/22/98 through    (2,764,600)      (920,000)   (3,680,000)    (1,835,400)    --              (9,200,000)
12/31/98                                ------------- --------------  --------------  -------------  ----------    --------------
Partners' capital, December 31, 1998     $27,586,061     $9,180,053   $36,720,211    $18,314,205     $--            $91,800,530
                                        ============= =============   =============  =============   ==========    ==============
Net Income (1/1/99 through 6/4/99)         3,139,325      1,044,700     4,178,802      2,084,177      --             10,447,004

Partners' capital, June 4, 1999          $30,725,386    $10,224,753   $40,899,013    $20,398,382     $--           $102,247,534
                                        ============= ==============  ============   =============   ==========    ==============

Transfer TIFD 19.90% interest to
Thaleia, LLC                                      --           --     (20,347,259)       --           20,347,259            --

Net Income (6/5/99 through 9/20/99)        1,915,912        637,575     1,281,525      1,271,961       1,268,773     6,375,746
Capital distributions (6/5/99 through)                                                    --
9/20/99)                                  (5,039,385)    (1,677,000)   (3,370,770)    (3,345,615)     (3,337,230)  (16,770,000)
                                         ------------ --------------  -------------  -------------  ------------   --------------
Partners' capital, September 20, 1999    $27,601,913    $ 9,185,328   $18,462,509    $18,324,728    $18,278,802    $91,853,280
                                         ===========  ==============  =============  =============  ============   ==============
Transfer TIFD 20.00% interest to
Thaleia, LLC                                    --               --   (18,370,656)         --        18,370,656         --

Net Income (9/21/99 through 11/24/99)      1,175,664        391,236         3,912        780,517      1,561,032      3,912,361

Partners' capital, November 24, 1999     $28,777,577    $ 9,576,564     $  95,765    $19,105,245    $38,210,490    $95,765,641
                                         ===========    ============    ==========   ============   ===========    =============
Transfer TIFD 0.10% interest to
Thaleia, LLC
                                                --              --        (95,765)        --            95,76           --
Net Income (11/25/99 through 12/31/99)        504,51        167,891            --        334,942       671,564       1,678,90
Capital distributions (11/25/99 through
12/31/99)                                 (2,764,600)      (920,000)           --     (1,835,400)    (3,680,000)    (9,200,000)
                                         ------------   -------------  ------------  -------------  ------------   -------------

Partners' capital,   December 31, 1999   $26,517,489      $8,824,455           --   $ 17,604,787    $35,297,819    $88,244,550
                                         ===========    ============   ============ ============    ============   =============

Net Income                                 6,651,60        2,213,512           --      4,415,957      8,854,050     22,135,125

Capital distributions                     (7,632,700)     (2,540,000)                 (5,067,300)   (10,160,000)   (25,400,000)
                                         ------------   -------------  ------------ -------------  -------------  --------------

Partners' capital, December 31, 2000     $25,536,395      $8,497,967                $ 16,953,444    $ 33,991,869   $84,979,675
                                         ===========    ============   ============ =============   ============   =============

</TABLE>


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

                                       21


<PAGE>
<TABLE>
<CAPTION>


                 Indiantown Cogeneration, L.P. and Subsidiaries
                      Consolidated Statements of Cash Flows
              For the Years Ended December 31, 2000, 1999, and 1998
              -----------------------------------------------------

<S>                                                                               <C>                  <C>               <C>
                                                                                      2000              1999              1998
                                                                                      ----              ----              ----
  CASH FLOWS FROM OPERATING ACTIVITIES:
       Net income                                                                    $22,135,125       $22,414,020      $21,354,967
           Adjustments to reconcile net income to net cash
              provided by operating activities:
             Cumulative effect of a change in accounting principles                    (920,536)                --          818,716
             Depreciation and amortization                                            15,827,822        15,681,507       15,666,912
             Loss on disposal of assets                                                  155,780                --               --
      Effect of changes in assets and liabilities:

             (Increase) decrease in accounts receivable-trade                          (381,500)       (1,102,391)        2,113,496
             (Increase)  decrease in inventories and fuel reserve                      (574,774)         1,904,412        (890,538)
             (Increase)  decrease in deposits and prepaids                              (72,231)          (76,122)          428,029
          Increase (decrease) in accounts payable,
            accrued                               liabilities and                                                       (2,471,228)
                                                                                                                        -----------
            accrued interest                                                           1,844,616           552,186
                                                                                       ---------           -------
                         Net cash provided by operating activities                    38,014,302        39,373,612       37,020,354
                                                                                      ----------        ----------       ----------

  CASH FLOWS FROM INVESTING ACTIVITIES:
          Purchase of property, plant & equipment, net of retirements                (2,064,741)       (2,108,071)      (1,361,673)
          (Increase) decrease in investments held by trustee                           (302,934)       (1,013,585)        9,738,087
                                                                                       ---------       -----------        ---------
                         Net cash (used in) provided by investing activities         (2,367,675)       (3,121,656)        8,376,414
                                                                                     -----------       -----------        ---------

  CASH FLOWS FROM FINANCING ACTIVITIES:
          Decrease in lease payable--railcars                                           (308,534)         (287,048)        (267,058)
          Borrowings under revolving credit agreement                                12,835,436        14,568,378        17,662,159
          Repayments under revolving credit agreement                               (12,835,436)      (14,568,378)      (17,662,159)
          Payment of bonds                                                          (11,533,135)       (9,997,000)      (10,265,000)
          Capital distributions                                                     (25,400,000)      (25,970,000)      (35,680,000)
                                                                                    ------------      ------------     ------------
                 Net cash used in financing activities                              (37,241,669)      (36,254,048)      (46,212,058)
                                                                                    ------------      ------------     ------------

  CHANGE IN CASH AND CASH EQUIVALENTS                                                (1,595,042)           (2,092)         (815,290)

  Cash and cash equivalents, beginning of year                                         2,416,997         2,419,089        3,234,379
                                                                                       ---------         ---------        ---------
  Cash and cash equivalents, end of year                                                $821,955        $2,416,997       $2,419,089
                                                                                        ========        ==========       ==========


  SUPPLEMENTAL DISCLOSURE OF CASH FLOW
         INFORMATION:

                Cash paid for interest                                               $54,141,427       $55,039,501      $55,879,716
                                                                                     ===========       ===========      ===========
</TABLE>

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

                                       22


<PAGE>

                 Indiantown Cogeneration, L.P. and Subsidiaries
                   Notes to Consolidated Financial Statements
                        As of December 31, 2000 and 1999

1.   ORGANIZATION AND BUSINESS:
     -------------------------

         Indiantown Cogeneration,  L.P. (the "Partnership") is a special purpose
Delaware  limited  partnership  formed on October 4, 1991. The  Partnership  was
formed to develop,  construct,  and operate an approximately  330 megawatt (net)
pulverized  coal-fired  cogeneration  facility  (the  "Facility")  located on an
approximately 240 acre site in southwestern Martin County, Florida. The Facility
produces  electricity  for sale to Florida  Power & Light  Company  ("FPL")  and
supplies  steam to Caulkins  Indiantown  Citrus Co.  ("Caulkins")  for its plant
located near the Facility.

         The original  general  partners  were Toyan  Enterprises  ("Toyan"),  a
California corporation and a wholly owned special purpose indirect subsidiary of
PG&E  National  Energy  Group,  Inc.  ("NEG,  Inc.") and Palm Power  Corporation
("Palm"),  a Delaware  corporation and a special purpose indirect  subsidiary of
Bechtel Enterprises, Inc. ("Bechtel Enterprises").  The sole limited partner was
TIFD III-Y,  Inc.  ("TIFD"),  a special purpose  indirect  subsidiary of General
Electric Capital Corporation  ("GECC").  During 1994, the Partnership formed its
sole, wholly owned subsidiary, Indiantown Cogeneration Funding Corporation ("ICL
Funding"),  to  act as  agent  for,  and  co-issuer  with,  the  Partnership  in
accordance  with the 1994 bond offering  discussed in Note 4. ICL Funding has no
separate operations and has only $100 in assets.

         In  1998,  Toyan  consummated  transactions  with DCC  Project  Finance
Twelve, Inc. ("PFT"), whereby PFT, through a new partnership (Indiantown Project
Investment,  L.P.  ("IPILP"))  with Toyan,  became a new general  partner in the
Partnership.  Toyan is the  sole  general  partner  of  IPILP.  Prior to the PFT
transaction,  Toyan  converted some of its general  partnership  interest into a
limited  partnership  interest such that Toyan now directly holds only a limited
partnership  interest  in  the  Partnership.  In  addition,  Bechtel  Generating
Company, Inc. ("Bechtel Generating"),  sold all of the stock of Palm to a wholly
owned indirect subsidiary of Cogentrix Energy, Inc. ("Cogentrix").  Palm holds a
10% general partner interest in the Partnership.

         On June 4, 1999, Thaleia, LLC ("Thaleia"), a wholly owned subsidiary of
Palm and indirect  wholly owned  subsidiary of  Cogentrix,  acquired from TIFD a
19.9%  limited  partner  interest in the  Partnership.  On  September  20, 1999,
Thaleia acquired another 20% limited  partnership  interest from TIFD and TIFD's
membership  on the Board of Control.  On November  24, 1999,  Thaleia  purchased
TIFD's remaining limited partnership interest in the Partnership from TIFD.

The net profits and losses of the Partnership are allocated to Toyan, Palm, TIFD
and IPILP and Thaleia  (collectively,  the  "Partners")  based on the  following
ownership percentages:

                                       23
<PAGE>
<TABLE>
<CAPTION>


<S>              <C>              <C>                    <C>              <C>                    <C>
                     As of              As of              As of                As of            As of
                  August 21,       October 20,            June 4,         September 20,         November 24,
                     1998              1998                1999               1999                1999
                     ----              ----                -----              ----                ----
Toyan               30.05%              30.05%             30.05%              30.05%            30.05%
Palm                  10%                10%*               10%*                10%*              10%*
IPILP              19.95%**            19.95%**            19.95%              19.95%            19.95%
TIFD                  40%                40%               20.1%                0.1%               --
Thaleia               --                  --               19.9%                39.9%             40%
</TABLE>

        * Now beneficially owned by Cogentrix.
       ** PFT's beneficial ownership in the Partnership through IPILP was equal
          to 10% as of August 21, 1998, and 15% as of November 23, 1998.

        The   changes   in   ownership   were  the   subject   of   notices   of
self-recertification of Qualifying Facility status filed by the Partnership with
the Federal Energy Regulatory  Commission on August 21, 1998, November 16, 1998,
June 4, 1999, September 21, 1999, and November 24, 1999.

         All  distributions  other than liquidating  distributions  will be made
based on the Partners'  percentage  interest as shown above,  in accordance with
the  project  documents  and at such  times and in such  amounts as the Board of
Control of the Partnership determines.

         The  Partnership  is  managed by PG&E  National  Energy  Group  Company
("NEG"),  formerly  known as PG&E  Generating  Company  pursuant to a Management
Services  Agreement  (the  "MSA").  The  Facility is operated by PG&E  Operating
Services  Company  ("PG&E  OSC"),  formerly  known  as U.S.  Operating  Services
Company,   pursuant  to  an  Operation  and  Maintenance   Agreement  (the  "O&M
Agreement").  NEG and PG&E OSC are general partnerships  indirectly wholly owned
by NEG, Inc., an indirect wholly owned subsidiary of PG&E Corporation.

        The  Partnership  commenced  commercial  operations on December 22, 1995
(the "Commercial Operation Date").

                                       24
<PAGE>


        NEG, Inc. is a  wholly-owned  indirect  subsidiary of PG&E  Corporation.
Because  the   California   energy  markets   situation  has  caused   financial
difficulties for Pacific Gas and Electric Company,  a wholly owned subsidiary of
PG&E  Corporation,  PG&E  Corporation's  credit ratings were downgraded to below
investment  grade in January 2001,  which caused PG&E  Corporation to default on
outstanding  commercial  paper and bank  borrowings.  In January  2001,  certain
corporate  actions  were taken to insulate  the assets of NEG and its direct and
indirect  subsidiaries from an effort to substantively  consolidate those assets
in any insolvency or bankruptcy  proceeding of PG&E Corporation.  In March 2001,
PG&E  Corporation  refinanced all of its outstanding  commercial  paper and bank
borrowings,  and  Standard & Poor's  subsequently  removed its below  investment
grade  credit  rating  since PG&E  Corporation  no longer  had rated  securities
outstanding.  Management  of NEG  believes  that NEG and its direct and indirect
subsidiaries  as  described  above,  including  the  Partnership,  would  not be
substantively consolidated with PG&E Corporation in any insolvency or bankruptcy
proceeding involving PG&E Corporation.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:


Presentation

        The Partnership's  consolidated financial statements are prepared on the
accrual basis of accounting in accordance with accounting  principles  generally
accepted in the United  States.  The  preparation  of  financial  statements  in
conformity with accounting  principles  generally  accepted in the United States
requires  management to make  estimates  and  assumptions  that affect  reported
amounts  of assets and  liabilities  and  disclosure  of  contingent  assets and
liabilities at the date of the financial  statements and the reported amounts of
revenue and expenses  during the reporting  period.  Actual results could differ
from those estimates.

       The accompanying  consolidated  financial statements include the accounts
of the Partnership and ICL Funding. All significant  intercompany  balances have
been eliminated in consolidation.

Cash and Cash Equivalents

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

Inventories

        Coal and lime  inventories  are  stated  at the  lower of cost or market
using the average cost method.


                                       25

<PAGE>


Prepaid Expenses

        Prepaid  expenses of $800,238 as of December 31, 2000,  include $500,000
for operation and maintenance  funding,  $229,230 for insurance costs related to
property damage and other general liability policies and $71,008 for prepayments
of the annual administrative fees for the letters of credit and for the trustee.

        Prepaid  expenses of $807,372 as of December 31, 1999,  include $500,000
for operation and maintenance  funding,  $243,135 for insurance costs related to
property damage and other general liability policies and $64,237 for prepayments
of the annual administrative fees for the letters of credit and for the trustee.

Deposits

        Deposits are stated at cost and include  amounts  required under certain
of the Partnership's agreements as described in Note 3.

Investments Held by Trustee

        The investments  held by the trustee  represent bond and equity proceeds
held  by a bond  trustee/disbursement  agent  and are  carried  at  cost,  which
approximates   market.  All  funds  are  invested  in  either  Nations  Treasury
Fund-Class A or other permitted  investments for longer periods. The Partnership
also maintains  restricted  investments  covering a portion of the partnership's
debt as required by the financing documents. The proceeds include $12,501,000 of
restricted  tax-exempt debt service reserve required by the financing  documents
and are  classified  as a  noncurrent  asset  on the  accompanying  consolidated
balance sheets.  The Partnership  maintains  restricted  investments  covering a
portion of debt  principal  and interest  payable,  as required by the financing
documents.   These   investments   are  classified  as  current  assets  in  the
accompanying  consolidated  balance sheets. A qualifying facility ("QF") reserve
of $2,500,000 is also held as a non-current asset (see Note 4).

Property, Plant and Equipment

        Property, plant and equipment,  which consist primarily of the Facility,
are recorded at actual  cost.  The Facility is  depreciated  on a  straight-line
basis over 35 years  with a  residual  value on the  Facility  approximating  25
percent of the gross Facility costs.

        Other  property,  plant and equipment are depreciated on a straight-line
basis over the  estimated  economic or service  lives of the  respective  assets
(ranging from five to seven years).  Routine maintenance and repairs are charged
to expense as incurred.

        The Financial  Accounting  Standards Board issued Statement of Financial
Accounting  Standards  No. 121,  "Accounting  for the  Impairment  of Long-Lived
Assets and for Long-Lived  Assets to be Disposed Of" ("SFAS No. 121").  SFAS No.
121 establishes  criteria for recognizing and measuring  impairment  losses when
recovery of recorded  long-lived  asset values is  uncertain.  In the opinion of
Management  of the  Partnership,  there has been no impact on the  Partnership's
financial condition or results of operations in 2000, 1999, or 1998.

                                       26
<PAGE>

Fuel Reserve

        The fuel reserve,  carried at cost,  represents an  approximate  six-day
supply of coal held for emergency purposes. Management plans to rebuild the fuel
reserve in order to maintain an approximate twenty-day supply on hand throughout
the year.

Deferred Financing Costs

         Financing costs,  consisting  primarily of the costs incurred to obtain
project financing,  are deferred and amortized using the effective interest rate
method over the term of the related permanent financing.

Scheduled major overhauls

        The Securities and Exchange  Commission ("SEC") has recently stated that
it objects to the accrue in advance method for scheduled significant replacement
and  overhaul  costs.  The SEC has  asked  the  Accounting  Standards  Executive
Committee  ("AcSEC") to issue  guidance  related to accounting  for these costs,
which will not include the accrue in advance  method.  Prior to the  issuance of
guidance  from the AcSEC,  the SEC has stated  that it will allow  companies  to
recognize  the change from accrue in advance as a cumulative  effect of a change
in accounting principle.  The Partnership has, therefore,  changed its method of
accounting  for scheduled  major  overhaul to the as incurred  method  effective
January 1, 2000.

        As such, the Partnership has recognized a cumulative  effect of a change
in  accounting  principle  of  $920,536 to  increase  net income.  The effect of
adopting  this new  accounting  principle  in 2000 was to reduce  operating  and
maintenance costs and increase net income by approximately $424,000.

Revenue Recognition

        Revenues  from the sale of  electricity  are  recorded  based on  output
delivered and capacity provided at rates as specified under contract terms.

Income Taxes

        Under current law, no Federal or state income taxes are paid directly by
the  Partnership.  All  items of  income  and  expense  of the  Partnership  are
allocable  to and  reportable  by the  Partners in their  respective  income tax
returns.  Accordingly,  no  provision is made in the  accompanying  consolidated
financial statements for Federal or state income taxes.

Reclassifications

        Certain   reclassifications   have  been  made  in  the  1999  financial
statements to conform to the 2000 presentation.

Derivative Financial Instruments


                                       27
<PAGE>

       The  Partnership  will  adopt  SFAS No. 133  "Accounting  for  Derivative
Instruments  and Hedging  Activities",  as amended by SFAS Nos.  137 and 138, on
January  1,  2001.  This  standard   requires  the  Partnership   recognize  all
derivatives,  as defined in the statements listed above, on the balance sheet at
fair value.  Derivatives,  or any portion thereof, that are not effective hedges
must be adjusted to fair value  through  income.  If  derivatives  are effective
hedges,  depending  on the  nature of the  hedges,  changes in the fair value of
derivatives  either will  offset the change in fair value of the hedged  assets,
liabilities,  or firm  commitments  through  earnings,  or will be recognized in
other  comprehensive  income until the hedged items are  recognized in earnings.
The  Partnership  has certain  derivative  commodity  contracts for the physical
delivery of purchase  and sale  quantities  transacted  in the normal  course of
business.  These  derivatives  are exempt from the  requirements of SFAS No. 133
under the normal purchases and sales  exception,  and thus will not be reflected
on the balance sheet at fair value. Due to this exception and the  Partnership's
current  adoption  of SFAS  No.  133  will not  have a  material  impact  on its
financial condition or results of operations.

Organization Costs

       The  Partnership  adopted the  American  Institute  of  Certified  Public
Accountants  Statement  of Position  98-5,  "Reporting  on the Costs of Start-up
Activities"  ("SOP  98-5")  during 1998 which  resulted in the  write-off of all
organization  costs  reflected  on  the  accompanying   consolidated   financial
statements.

3.  DEPOSITS:

     In 1991, in accordance  with a contract  between the Partnership and Martin
County,  the Partnership  provided Martin County with a security  deposit in the
amount  of  $149,357  to  secure   installation   and  maintenance  of  required
landscaping  materials.  In January 1998, the  Partnership  received a refund of
funds  in  excess  of the  required  deposit  as  security  for the  first  year
maintenance  as set forth in the  contract  between the  Partnership  and Martin
County.  The remaining  deposit in the amount of $39,804 was included in current
assets as of December 31, 1997. These funds were returned in September 1998 when
the  Partnership  submitted a surety bond for the refund  amount.  In July 1999,
Martin County Growth Management Environmental Division authorized release of the
funds securing the landscaping.

         In  1991,  in  accordance  with the  Planned  Unit  Development  Zoning
Agreement between the Partnership and Martin County,  the Partnership  deposited
$1,000,000 in trust with the Board of County Commissioners of Martin County (the
"PUD  Trustee").  Income  from  this  trust  will be used  solely  for  projects
benefiting  the community of  Indiantown.  On July 23, 2025,  the PUD Trustee is
required to return the deposit to the  Partnership.  As of December 31, 2000 and
1999,  estimated  present  values  of this  deposit  of  $159,365  and  $80,000,
respectively,  are included in deposits in the accompanying consolidated balance
sheets.  The remaining  balance is included in property,  plant and equipment as
part of total capitalized construction expenses.

                                       28
<PAGE>


4.   BONDS AND NOTES PAYABLE:
     -----------------------

First Mortgage Bonds

         The Partnership  and ICL Funding  jointly issued  $505,000,000 of First
Mortgage Bonds (the "First Mortgage Bonds") in a public issuance registered with
the SEC. Proceeds from the issuance were used to repay  outstanding  balances of
$273,513,000 on a prior construction loan and to complete the project. The First
Mortgage Bonds are secured by a lien on and security  interest in  substantially
all of the assets of the Partnership. The First Mortgage Bonds were issued in 10
separate  series with fixed interest rates ranging from 7.38 to 9.77 percent and
with maturities ranging from 1996 to 2020. Interest is payable  semi-annually on
June 15 and  December  15 of each year.  Interest  expense  related to the First
Mortgage Bonds was $44,275,872, $45,138,915, and $46,014,161, in 2000, 1999, and
1998 respectively.

Tax Exempt Facility Revenue Bonds

         The  proceeds  from the  issuance of  $113,000,000  of Series 1992A and
1992B Industrial Development Revenue Bonds (the "1992 Bonds") through the Martin
County  Industrial  Development  Authority  (the  "MCIDA")  were  invested in an
investment portfolio with Fidelity Investments  Institutional  Services Company.
On November 22, 1994, the Partnership refunded the 1992 Bonds with proceeds from
the issuance of  $113,000,000  Series 1994A and of $12,010,000  Series 1994B Tax
Exempt Facility  Refunding  Revenue Bonds which were issued on December 20, 1994
(the Series 1994A Bonds and the Series 1994B Bonds, collectively,  the "1994 Tax
Exempt Bonds").

        The 1994 Tax  Exempt  Bonds  were  issued  by the MCIDA  pursuant  to an
Amended and Restated  Indenture of Trust  between the MCIDA and  NationsBank  of
Florida, N.A. (succeeded by The Bank of New York Trust Company of Florida, N.A.)
as trustee (the "Trustee").  Proceeds from the 1994 Tax Exempt Bonds were loaned
to the  Partnership  pursuant to the MCIDA Amended and Restated  Authority  Loan
Agreement  dated as of November 1, 1994 (the  "Authority  Loan").  The Authority
Loan is secured by a lien on and a security interest in substantially all of the
assets of the Partnership.  The 1994 Tax Exempt Bonds, which mature December 15,
2025,  carry fixed  interest  rates of 7.875 percent and 8.05 percent for Series
1994A and  1994B,  respectively.  Total  interest  paid  related to the 1994 Tax
Exempt Bonds was $9,865,555 for each of the years ended December 31, 2000, 1999,
and  1998.  The Tax  Exempt  Bonds  and the  First  Mortgage  Bonds are equal in
seniority.


                                       29

<PAGE>



         Future minimum payments related to outstanding First Mortgage Bonds and
1994 Tax Exempt Bonds at December 31, 2000 are as follows:

                   2001                    $     11,140,896
                   2002                          11,460,408
                   2003                          14,566,086
                   2004                          16,785,152
                   2005                          16,257,206
                   Thereafter                   509,509,117
                                               -------------
                 Total                         $579,718,865
                                               =============

Equity Contribution Agreement

         Pursuant to an Equity Contribution  Agreement,  dated as of November 1,
1994,  between TIFD and NationsBank of Florida,  N.A.  (succeeded by The Bank of
New York Trust Company of Florida, N.A.), the Partners contributed approximately
$140,000,000  of equity on December  26, 1995.  Proceeds  were used to repay the
$139,000,000   outstanding  under  the  Equity  Loan  Agreement.  The  remaining
$1,000,000  was  deposited  with  the  Trustee  according  to  the  disbursement
agreement  among the  Partnership,  the  Trustee  and the other  lenders  to the
Partnership.  On June  15,  1998,  the  funds  were  released  and  subsequently
distributed in accordance with the Disbursement Agreement.

Revolving Credit Agreement

         The Revolving Credit  Agreement  provides for the availability of funds
for the working  capital  requirements  of the Facility.  It has a term of seven
years from November 1, 1994,  subject to extension at the discretion of the bank
party thereto. The interest rate is based upon various short-term indices chosen
at the  Partnership's  option and is determined  separately  for each draw.  The
weighted  average  interest rate for the borrowings  were  approximately  7.98%,
6.58% and 6.84% during 2000, 1999 and 1998,  respectively.  This credit facility
includes  commitment  fees,  to be  paid  quarterly,  of  0.375  percent  on the
unborrowed  portion.  The face amount of the original  working capital letter of
credit was increased in November 1994 from $10 million to $15 million. Under the
original  and new  working  capital  credit  facilities,  the  Partnership  paid
$52,919,  $52,836  and  $54,274  in  commitment  fees in 2000,  1999  and  1998,
respectively.  All borrowings  made under this agreement were repaid in the year
borrowed.  As  of  December  31,  2000,  1999,  and  1998,  no  borrowings  were
outstanding.  The Partnership incurred interest expense of $84,574,  $78,343 and
$90,274 in 2000,  1999 and 1998,  respectively,  related  to the  aforementioned
borrowings.


                                       30
<PAGE>


FPL Termination Fee Letter of Credit

         On or  before  the  Commercial  Operation  Date,  the  Partnership  was
required to provide FPL with a letter of credit  equal to the total  termination
fee as  defined  in the  Power  Purchase  Agreement  in each  year not to exceed
$50,000,000.  Pursuant  to the terms of the Letter of Credit  and  Reimbursement
Agreement, the Partnership obtained a commitment for the issuance of this letter
of credit. At the Commercial  Operation Date, this letter of credit replaced the
completion  letter of credit.  The initial amount of $13,000,000  was issued for
the first year of operations  and increased to  $40,000,000  in January 1999 and
then to $50,000,000 in January 2000.  During 2000,  1999, and 1998 no draws were
made on this  letter of  credit.  Commitment  fees of  $689,092,  $704,555,  and
$643,076,  were  paid  on  this  letter  of  credit  in  2000  1999,  and  1998,
respectively.

FPL QF Letter of Credit

        Within 60 days after the Commercial  Operation Date, the Partnership was
required  to  provide  a  letter  of  credit  for use in the  event of a loss of
Qualifying  Facility ("QF") status under the Public Utility Regulatory  Policies
Act of 1978  ("PURPA").  The initial amount was $500,000  increasing by $500,000
per  agreement  year to a maximum of  $5,000,000.  Pursuant  to the terms of the
Letter of  Credit  and  Reimbursement  Agreement,  the  Partnership  obtained  a
commitment for the issuance of this letter of credit. The amount will be used by
the Partnership as necessary to maintain or reinstate the Facility's  qualifying
facility  status.  The  Partnership  may,  in lieu of a letter of  credit,  make
regular  cash  deposits  to a  dedicated  account  in amounts  of  $500,000  per
agreement  year to a maximum of $5,000,000.  In February  1996, the  Partnership
established  a QF account  with the  Trustee.  The  balance  in this  account at
December 31, 2000 and 1999, was $2,500,000 and $2,000,000,  respectively, and is
included in  noncurrent,  restricted  funds held by trustee in the  accompanying
consolidated balance sheets.

Steam Host Letter of Credit

         At financial closing in October 1992, the Partnership provided Caulkins
a letter of credit in the amount of $10,000,000  pursuant to the Energy Services
Agreement  (see Note 6). This letter of credit was  terminated in 1994 and a new
one was issued with  essentially the same terms. In the event of a default under
the Energy  Services  Agreement (see Note 6), the Partnership is required to pay
liquidated  damages in the amount of $10,000,000.  Failure by the Partnership to
pay the  damages  within 30 days  allows the steam host to draw on the letter of
credit for the amount of damages suffered by Caulkins.  As of December 31, 2000,
1999, and 1998, no draws had been made on this letter of credit. Commitment fees
of $137,818,  $143,011 and $156,315  were paid relating to this letter of credit
in 2000, 1999 and 1998, respectively.



                                       31
<PAGE>


Debt Service Reserve Letter of Credit

     On November  22,  1994,  the  Partnership  also entered into a debt service
reserve letter of credit and  reimbursement  agreement with Banque  Nationale de
Paris pursuant to which a debt service reserve letter of credit in the amount of
approximately  $60,000,000 was issued. Such agreement has a rolling term of five
years  subject  to  extension  at the  discretion  of the banks  party  thereto.
Drawings  on the debt  service  reserve  letter of credit are  available  to pay
principal and interest on the First Mortgage Bonds,  the 1994  Tax-Exempt  Bonds
and  interest  on any loans  created by drawings  on such debt  service  reserve
letter of credit.  Cash and other  investments  held in the debt service reserve
account  will be  drawn on prior to any  drawings  on the debt  service  reserve
letter of credit.  As of December 31, 2000,  1999,  and 1998,  no draws had been
made on this  letter of  credit.  Commitment  fees of  $410,733,  $488,281,  and
$877,901  were  paid  on  this  letter  of  credit  in  2000,  1999,  and  1998,
respectively.  On January 11, 1999, pursuant to the Disbursement Agreement,  the
Debt Service Reserve Letter of Credit was reduced to $29,925,906.

5.   PURCHASE AGREEMENTS:
     -------------------

Coal Purchase and Transportation Agreement

         The Partnership  entered into a 30-year purchase contract with Lodestar
Energy,  Inc.  ("Lodestar")  (formerly known as Costain Coal, Inc.),  commencing
from the first day of the calendar  month  following  the  Commercial  Operation
Date, for the purchase of the  Facility's  annual coal  requirements  at a price
defined  in the  agreement,  as well as for the  disposal  of ash  residue.  The
Partnership has no obligation to purchase a minimum  quantity of coal under this
agreement.

         On June 8, 1998, the  Partnership  entered into a three-year  agreement
with Lodestar,  which established an arrangement for the Partnership's  disposal
of ash at  alternative  locations.  The  Partnership  also  entered a three-year
agreement with VFL Technology  Corporation  for the disposal of ash with similar
terms.

                                       32
<PAGE>


Lime Purchase Agreement

        On May 1, 1992, the Partnership  entered into a lime purchase  agreement
with Chemical Lime Company of Alabama,  Inc. for supply of the  Facility's  lime
requirements for the Facility's dry scrubber sulfur dioxide removal system.  The
initial term of the agreement is 15 years from the Commercial Operation Date and
may be extended  for a  successive  5-year  period.  Either party may cancel the
agreement  after January 1, 2000,  upon proper notice.  The  Partnership  has no
obligation to purchase a minimum quantity of lime under the agreement. The price
of lime was renegotiated in 1999 for a three-year  period  beginning  January 1,
2000. Chemlime notified the Partnership of its intention to cancel the agreement
effective  in the  first  quarter  of 2002.  The  Partnership  expects  to put a
replacement contract in place during the third quarter of 2001.

6.   SALES AND SERVICES AGREEMENTS:
     -----------------------------

Power Purchase Agreement

        On May 21, 1990, the Partnership entered into a Power Purchase Agreement
with FPL for sales of the Facility's electric output. As amended,  the agreement
is effective for a 30-year  period,  commencing  with the  Commercial  Operation
Date. The pricing structure provides for both capacity and energy payments.

         Capacity  payments remain  relatively stable because the amounts do not
vary  with  dispatch.  Price  increases  are  contractually  provided.  Capacity
payments  include a bonus or penalty  payment if actual capacity is in excess of
or below  specified  levels of available  capacity.  Energy payments are derived
from a contractual  formula defined in the agreement based on the actual cost of
domestic coal at another FPL plant, St. Johns River Power Park.

Energy Services Agreement

         On September 30, 1992, the Partnership  entered into an energy services
agreement  with  Caulkins.  Commencing  on the  Commercial  Operation  Date  and
continuing throughout the 15-year term of the agreement, Caulkins is required to
purchase  the  lesser of 525  million  pounds  of steam per year or the  minimum
quantity of steam per year  necessary for the Facility to maintain its status as
a Qualifying  Facility under PURPA. The Facility declared  Commercial  Operation
with Caulkins on March 1, 1996.

                                       33
<PAGE>


7.  COMMITMENTS AND CONTINGENCIES

Dispute with FPL

        On March 19, 1999, the Partnership  filed a complaint against FPL in the
United States  District  Court for the Middle  District of Florida.  The lawsuit
stems from a course of action  pursued by FPL since March 10, 1999, in which FPL
purported to exercise its dispatch and control  rights under the Power  Purchase
Agreement in a manner which the Partnership  believes  violated the terms of the
power sales  agreement.  In its  complaint,  the  Partnership  charges that such
conduct was  deliberately  calculated to cause the  Partnership  to be unable to
meet the requirements to maintain the Facility's status as a Qualifying Facility
under the Public Utility Regulatory Policies Act of 1978.

        The complaint alleges that FPL took the position that if the Facility is
off-line for any reason,  then FPL is under no  obligation to allow the Facility
to reconnect to FPL's system. The original complaint asserted, however, that the
Partnership  specifically and successfully negotiated for a contractual right to
operate  the  Facility  up to 100 MW  ("Minimum  Load") in order to enable it to
cogenerate  sufficient steam to maintain its Qualifying  Facility status.  While
FPL has not disputed that the Partnership  may maintain  Minimum Load operations
if the  Facility  is  delivering  power when FPL  requests  the  Partnership  to
decommit  the  Facility,  the  complaint  states that FPL has  claimed  absolute
discretion  to deny the  Partnership  permission  to reconnect the Facility with
FPL's system.

        Since the loss of Qualifying  Facility  status may result in an event of
default under the Power Purchase Agreement,  the Partnership must take action to
address this matter.  The Partnership is investigating  various  alternatives to
mitigate its QF risk. These are described under "QF Mitigation Options" below.

        The complaint asserts causes of action for (i) FPL's breach of the Power
Purchase  Agreement,  (ii) FPL's anticipatory  repudiation of the Power Purchase
Agreement,  (iii) breach of the implied covenant of good faith, fair dealing and
commercial  reasonableness  and (iv) a declaratory  judgment by the court of the
rights of the parties under the Power Purchase Agreement.  The Partnership seeks
(a) a declaratory  ruling that FPL's actions constitute a breach of the terms of
the Power Purchase  Agreement and that the Partnership has the absolute right to
operate  the  Facility at Minimum  Load  (except for reasons of safety or system
security)  at the  rates  provided  for in the  Power  Purchase  Agreement,  (b)
injunctive  relief  preventing  FPL from further  violating  the Power  Purchase
Agreement,  (c) compensatory  damages and (d) other relief as the court may deem
appropriate.

        On April 14,  1999,  FPL filed a  responsive  pleading to the  complaint
including a motion to dismiss two of the four  counts  raised in the  complaint,
raising  certain  affirmative  defenses  and  seeking  declaration  that FPL has
unfettered  dispatch  rights under the Power  Purchase  Agreement.  On April 23,
1999, FPL filed answer to the counts, which were not challenged in the motion to
dismiss.  On May 13, 1999, the Partnership filed its response to FPL's motion to
dismiss and request for declaratory judgement. On May 18, 1999, the Court denied
FPL's  Motion to  Dismiss  in its  entirety.  The  Partnership  filed an amended
complaint,  which was accepted on June 17, 1999.  The amended  complaint  simply
consolidated the  Partnership's  claims for breach of contract and breach of the
implied  obligation  of good  faith and fair  dealing  which  was,  in part,  in
response to a recent  federal  court  decision.  FPL moved to dismiss the entire
amended  complaint and the  Partnership  filed its  opposition  papers August 2,
1999.  The Court

                                       34
<PAGE>


granted  FPL's  motion to dismiss  only with  respect to the first  count of the
complaint. The Partnership has amended its complaint to address issues raised by
the Court in its decision to dismiss this count.  FPL was expected to file a new
motion to dismiss the amended complaint. The second amended complaint, which was
filed on March 21, 2000, is attached as an exhibit to the Report.

        This summary of the Partnership's  complaint against FPL is qualified in
its  entirety  by the  complaint,  which  was  filed  with the  court in  docket
99-317-CIV-ORL-19C.  This summary does not, nor does it purport to,  include all
of the  material  statements  and  claims  made in the  complaint,  and has been
provided solely for the reader's convenience. This summary is not intended to be
relied upon for any purpose without reference to the complaint.

        On  December  19,  2000,  FPL  and  the  Partnership  participated  in a
mediation  conference with respect to the pending litigations  described herein.
As a result of this conference,  FPL and the Partnership executed two Settlement
Agreements  intended  to resolve  all pending  litigation.  Only the  Settlement
Agreement for the pending  federal court  litigation  requires  amendment of the
power sales  agreement.  The  amendment  must be approved by the Florida  Public
Service  Commission,  and certain  conditions set forth in the Indenture for the
Bonds, including confirmation of the Bonds' investment grade rating, must be met
for it to become effective.

        An outline of the business terms set forth in this Settlement  Agreement
provides that if the Facility is off-line for any reason,  the Partnership shall
have the right,  upon up to 6 hours notice and subject only to safety and system
reliability  issues,  to reconnect to FPL's system and produce up to 100 MW. The
Settlement  Agreement  provides that if this occurs when FPL has decommitted the
Facility,  the Partnership will be paid FPL's actual "as available" energy rates
for the  first 360 of such  hours  each year (in this  context,  "as  available"
energy costs  reflect  actual energy  production  costs avoided by FPL resulting
from the production or purchase of energy from the Facility and other  sources).
If fewer than 360 hours are used in any year, FPL may carry the balance forward,
not to  exceed  a total of 1440  hours in any  year.  If the  hours  accumulated
exercising this reconnection right exceed FPL's balance, the Partnership will be
paid for energy  produced during those hours at the energy rates set forth under
the power sales agreement.

        Management of the Partnership believes that this resolution provides the
Partnership with the flexibility it requires to maintain its Qualifying Facility
status without materially adversely affecting the Project.

        On December 12, 2000, FPL filed a complaint  against the  Partnership in
the  Circuit  Court of the 19th  Judicial  District  in and for  Martin  County,
Florida. In its complaint,  FPL alleged that the Partnership  breached the power
sales  agreement by failing to include  certain  payments from its coal supplier
and its coal  transporter  in the  Partnership's  calculation  of its fuel costs
which are included in the calculation of the actual energy costs under the power
sales agreement.  The power sales agreement  requires a sharing of actual energy
costs  between FPL and the  Partnership  to the extent the actual  costs  differ
(either  upward or  downward)  from a formula  contained in the  agreement.  FPL
sought  unspecified  damages and declaratory relief including a finding that the
Partnership  breached  the  power  sales  agreement.  The  Settlement  Agreement
provides that the  Partnership  will include in future  calculations of its fuel
costs all costs, credits, rebates,  discounts, and  allowances/concessions  from
all past, current or future

                                       35
<PAGE>


vendors of fuel,  ash, lime, and fuel  transportation  subject to execution of a
definitive  agreement  embodying  the terms of this  Settlement  Agreement.  The
Partnership  will make a one time payment of $800,000 to FPL as  settlement  for
disputed amounts under fuel audits performed for calendar years 1997 and 1998.

8. RELATED PARTY TRANSACTIONS:
-----------------------------

Management Services Agreement

         The  Partnership  has a  Management  Services  Agreement  with  NEG,  a
California  general  partnership and a wholly owned indirect  subsidiary of NEG,
Inc., for the  day-to-day  management and  administration  of the  Partnership's
business relating to the Facility. The agreement commenced on September 30, 1992
and will  continue  through  August  31,  2026.  Compensation  to NEG  under the
agreement includes an annual base fee of $650,000 (adjusted annually), wages and
benefits for employees  performing  work on behalf of the  Partnership and other
costs directly related to the Partnership.  Payments of $4,324,042,  $4,120,468,
and  $2,800,644,  in 2000,  1999,  and 1998 were made to NEG,  respectively.  At
December 31, 2000 and 1999,  the  Partnership  owed NEG  $437,925 and  $432,068,
respectively,  which are included in accounts payable and accrued liabilities in
the accompanying consolidated balance sheets.

Operations and Maintenance Agreement

        The  Partnership  has an Operation and  Maintenance  Agreement with PG&E
OSC, a California general  partnership and a wholly owned indirect subsidiary of
NEG, Inc., for the operations and maintenance of the Facility for a period of 30
years  (starting  September  30,  1992).  Thereafter,   the  agreement  will  be
automatically  renewed for periods of 5 years until  terminated  by either party
with 12 months notice.  If targeted plant  performance is not reached,  PG&E OSC
will pay liquidated  damages to the Partnership.  Compensation to PG&E OSC under
the agreement  includes an annual base fee of $1.5 million ($900,000 of which is
subordinate  to debt service and certain other costs),  certain  earned fees and
bonuses based on the Facility's  performance and reimbursement for certain costs
including payroll,  supplies,  spare parts, equipment,  certain taxes, licensing
fees,  insurance  and indirect  costs  expressed as a percentage  of payroll and
personnel  costs.  The fees are adjusted  quarterly by a measure of inflation as
defined in the  agreement.  Payments of $9,921,638,  $9,790,473,  and $9,605,917
were made to PG&E OSC in 2000,  1999,  and 1998,  respectively.  At December 31,
2000 and 1999, the Partnership owed PG&E OSC $201,840 and $836,346 respectively,
which  is  included  in  accounts   payable  and  accrued   liabilities  in  the
accompanying consolidated balance sheets.

Railcar Lease

         The  Partnership  entered into a 15 year Car Leasing  Agreement with GE
Capital Railcar Services Corporation, an affiliate of GECC, to furnish and lease
72  pressure   differential   hopper   railcars  to  the   Partnership  for  the
transportation  of fly ash and lime. The cars were  delivered  starting in April
1995, at which time the lease was recorded as a capital lease.  The leased asset
of $5,753,375  and  accumulated  depreciation  of $2,168,022  and  $1,784,463 is
included in  property,  plant and  equipment  as of December  31, 2000 and 1999.
Payments of $629,856, including principal and interest, were made in 2000, 1999,
and 1998 and the lease obligation of approximately $4,275,166 and $4,583,700, as

                                       36
<PAGE>

of December 31, 2000 and 1999 is reported as a lease payable in the accompanying
consolidated balance sheets.

        Future  minimum  payments  related to the Car  Leasing  Agreement  as of
December 31, 2000 are as follows:

       2001                                              $ 629,856
       2002                                                629,856
       2003                                                629,856
       2004                                                629,856
       2005                                                629,856
       Thereafter                                        2,744,767
                                                         ---------
         Total minimum lease payments                    5,894,047

         Interest portion of lease payable              (1,618,881)
                                                        -----------
         Present value of future minimum lease
         payments                                        4,275,166
         Current portion                                  (331,628)
                                                        -----------
         Long-term portion                              $3,943,538
                                                        ===========


Distribution to Partners

         On June 15 and  December  15,  2000,  as  provided  in the  Partnership
Agreement, Indiantown distributed approximately $15.3 million and $10.1 million,
respectively,  to the Partners. An additional $0.6 million of distributable cash
was retained for capital  projects and is included in cash and cash  equivalents
as of December 31, 2000, on the accompanying consolidated balance sheet.

                                       37
<PAGE>



9.      DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

         The following  table  presents the carrying  amounts and estimated fair
values of certain of the Partnership's  financial instruments as of December 31,
2000 and 1999.

                               December 31, 2000
Financial Liabilities           Carrying Amount          Fair Value
---------------------           ---------------          ----------
Tax Exempt Bonds                   $125,010,000          $127,510,200
First Mortgage Bonds               $454,708,865          $492,483,915


                                 December 31, 1999
Financial Liabilities            Carrying Amount         Fair Value
---------------------           ---------------          ----------
Tax Exempt Bonds                   $125,010,000          $127,510,200
First Mortgage Bonds               $466,242,000          $465,188,912


         For the Tax Exempt Bonds and First Mortgage  Bonds,  the fair values of
the Partnership's  bonds payable are based on the stated rates of the Tax Exempt
Bonds and First  Mortgage  Bonds and current  market  interest rates to estimate
market values for the Tax Exempt Bonds and the First Mortgage Bonds.

         The carrying amounts of the  Partnership's  cash and cash  equivalents,
accounts receivable,  deposits,  prepaid expenses,  investments held by trustee,
accounts  payable,  accrued  liabilities and accrued  interest  approximate fair
value.


                                       38
<PAGE>



                    CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation of our
report dated January 11, 2001 (except with respect to matters  discussed in Note
1, as to which  the date is  March  15,  2001) in this  Form  10-K  included  in
Registration  Statement File No.  33-82034.  It should be noted that we have not
audited any financial  statements of the company subsequent to December 31, 2000
or performed any audit procedures subsequent to the date of our report.

/S/  ARTHUR ANDERSEN LLP

Vienna, VA
March 28, 2001

Item 9         CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
               ACCOUNTING AND FINANCIAL DISCLOSURE

        None.


                                       39

<PAGE>



                                    PART III

Item 10        DIRECTORS AND EXECUTIVE OFFICERS
               --------------------------------

Indiantown Cogeneration, L.P. Board of Control

        The  following  table sets forth the names,  ages and  positions  of the
members  of the Board of  Control  of the  Partnership.  Members of the Board of
Control are  selected  from time to time by, and serve at the  pleasure  of, the
Partners of the Partnership.

                   Name                 Age              Position
                   ----                 ---              --------
Thomas J. Bonner.................        46      Palm Representative and
                                                 Thaleia Representative

Thomas F. Schwartz ............          39      Palm Representative and
                                                 Thaleia Representative
P. Chrisman Iribe..................      49      IPILP Representative
Sanford L. Hartman.................      47      IPILP Representative


     Thomas J. Bonner is Vice President - Asset Management for Cogentrix Energy,
Inc. and has been with Cogentrix since 1987. Prior to joining  Cogentrix Energy,
Inc., Mr. Bonner spent five years as a utilities  manager in an integrated fiber
and chemical  production  facility.  Mr. Bonner holds a B.S. from the U.S. Naval
Academy, and an M.B.A. from Old Dominion University.

     Thomas F.  Schwartz is Group  Senior  Vice  President  and Chief  Financial
Officer of Cogentrix  Energy,  Inc. He is responsible for the areas of corporate
finance and tax planning.  Mr. Schwartz joined Cogentrix  Energy,  Inc. in 1991,
and has held various  positions  in  accounting  and  finance.  Prior to joining
Cogentrix  Energy,  Inc., Mr.  Schwartz was Audit Manager with Arthur  Andersen,
LLP. Mr. Schwartz holds a B.A. degree in accounting from the University of North
Carolina - Charlotte.

     P.  Chrisman  Iribe is  President of NEG and has been with NEG since it was
formed in 1989.  Prior to joining NEG, Mr. Iribe was senior vice  president  for
planning,  state  relations  and public  affairs  with ANR Pipeline  Company,  a
natural gas pipeline  company and a subsidiary of the Coastal  Corporation.  Mr.
Iribe holds a B.A. degree in Economics from George Washington University.

         Sanford L.  Hartman  joined  NEG's  legal  group in 1990 and became its
General Counsel in April 1999. Prior to joining NEG, Hartman was counsel to Long
Lake Energy Corporation,  an independent power producer with headquarters in New
York  City  and was an  attorney  with  Bishop,  Cook,  Purcell  &  Reynolds,  a
Washington,  D.C., law firm. Mr. Hartman has a BA in Political Science from Drew
University and a JD from Temple University.

ICL Funding Corporation Board of Directors

        The  following  table sets forth the names,  ages and  positions  of the
directors and executive officers of ICL Funding.  Directors are elected annually
and each elected director

                                       40

<PAGE>

holds  office  until a successor  is elected.  Officers are elected from time to
time by vote of the Board of Directors.

       Name                     Age                      Position
       ----                     ---                      --------
     P. Chrisman Iribe           49                   Director, President
     Sanford L. Hartman          47                   Director
     John R. Cooper              52                   Vice President, Chief
                                                      Financial Officer and
                                                      Principal Accounting
                                                      Officer

Item 11  REMUNERATION OF DIRECTORS AND OFFICERS

        No cash compensation or non-cash compensation was paid in any prior year
or is currently  proposed to be paid in the current calendar year by ICL Funding
or  the  Partnership  to  any  of  the  officers  and  directors  listed  above.
Accordingly, the Summary Compensation Table and other tables required under Item
402 of the  Securities  and  Exchange  Commission's  Regulation  S-K  have  been
omitted, as presentation of such tables would not be meaningful.

        Management  services for the Partnership are being performed by NEG on a
cost-plus  basis  in  addition  to the  payment  of a base  fee.  Operation  and
maintenance  services  for the  Partnership  will be  performed by PG&E OSC on a
cost-plus basis. In addition to a base fee, PG&E OSC may earn certain additional
fees and bonuses based on specified performance criteria.

Item 12   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
               AND MANAGEMENT

        Partnership  interests in the Partnership,  as of December 31, 2000, are
held as follows:

                      Toyan                30.05% L.P.
                      IPILP                19.95% G.P.
                      Palm                 10.00% G.P.
                      Thaleia              40.00% L.P.

        All of the  outstanding  shares of common stock of ICL Funding are owned
by the Partnership.

Item 13  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        The Partnership has several material contracts with affiliated entities.
These  contracts,  which  include  the  Construction  Contract,  the  Management
Services  Agreement,  the Operations and  Maintenance  Agreement and the Railcar
Lease,  are  described  elsewhere in this report,  most notably in Note 7 to the
Partnership's consolidated financial statements.

                                       41
<PAGE>

                                     PART IV

Item 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
        REPORTS ON FORM 8-K

        a) Documents filed as of this Report                              Page
           (1)    Consolidated financial statements:

                  Report of Independent Public Accountants............     18

                  Consolidated Balance Sheets as of

                  December 31, 2000 and 1999 ........................      19

                  Consolidated Statements of Operations for the
                  years ended December 31, 2000, 1999 and 1998.......      21

                  Consolidated Statements of Changes
                  in Partners' Capital for the years ended
                  December 31, 2000, 1999 and 1998...................      22

                  Consolidated Statements of Cash Flows for the
                  years ended December 31, 2000, 1999 and 1998.......      23

                  Notes to Consolidated Financial
                  Statements.........................................      24

           (2)    Consolidated Financial Statement
                  Schedules..........................................    None

        b) Reports on Form 8-K:
              None

        c) Exhibits:

      Exhibit
        No.                          Description

        3.1       Certificate of Incorporation of Indiantown Cogeneration
                  Funding Corporation.*

        3.2       By-laws of Indiantown Cogeneration Funding Corporation.*

        3.3       Certificate of Limited Partnership of Indiantown
                  Cogeneration, L.P.*

        3.4       Amended and Restated Limited Partnership  Agreement of
                  Indiantown  Cogeneration,  L.P., among Palm Power Corporation,
                  Toyan Enterprises and TIFD III-Y Inc.*

        3.5       Form of First Amendment to Amended and Restated Limited
                  Partnership Agreement of Indiantown Cogeneration, L.P.*

                                       42
<PAGE>


        3.6       Dana Amendment to Amended and Restated Limited Partnership
                  Agreement of Indiantown Cogeneration, L.P.******

        3.7       Cogentrix Amendment to Amended and Restated Limited
                  Partnership Agreement of Indiantown Cogeneration, L.P.******

        3.8       Third Amendment to Amended and Restated Limited Partnership
                  Agreement of Indiantown Cogeneration, L.P.******

        4.1       Trust  Indenture,  dated as of  November 1, 1994,  among
                  Indiantown  Cogeneration  Funding  Corporation,  Indiantown
                  Cogeneration, L.P., and NationsBank of Florida, N.A., as
                  Trustee, and First Supplemental Indenture thereto.**

        4.2       Amended and Restated  Mortgage,  Assignment of Leases,  Rents,
                  Issues and Profits and Security  Agreement and Fixture  Filing
                  among Indiantown Cogeneration, L.P., as Mortgagor, and Bankers
                  Trust Company as Mortgagee,  and NationsBank of Florida, N.A.,
                  as Disbursement Agent and, as when and to the extent set forth
                  therein,  as Mortgagee with respect to the Accounts,  dated as
                  of November 1, 1994.**

         4.3      Assignment   and   Security   Agreement   between   Indiantown
                  Cogeneration,  L.P.,  as Debtor,  and Bankers Trust Company as
                  Secured  Party,   and   NationsBank   of  Florida,   N.A.,  as
                  Disbursement  Agent and, as when,  and to the extent set forth
                  therein,  a Secured Party with respect to the Accounts,  dated
                  as of November 1, 1994.**

         10.1.1   Amended and Restated  Indenture of Trust between Martin County
                  Industrial Development  Authority,  as Issuer, and NationsBank
                  of Florida, N.A., as Trustee, dated as of November 1, 1994.**

         10.1.2   Amended and Restated  Authority  Loan Agreement by and between
                  Martin County Industrial  Development Authority and Indiantown
                  Cogeneration, L.P., dated as of November 1, 1994.**

         10.1.3   Letter of Credit and Reimbursement  Agreement among Indiantown
                  Cogeneration,  L.P., as Borrower, and the Banks Named Therein,
                  and Credit Suisse, as Agent, dated as of November 1, 1994.**

         10.1.4   Disbursement  Agreement,  dated as of November 1, 1994,  among
                  Indiantown Cogeneration, L.P., Indiantown Cogeneration Funding
                  Corporation,  NationsBank  of  Florida,  N.A.,  as  Tax-Exempt
                  Trustee,  NationsBank  of Florida,  N.A.,  as Trustee,  Credit
                  Suisse,  as Letter  of  Credit  Provider,  Credit  Suisse,  as
                  Working Capital  Provider,  Banque Nationale de Paris, as Debt
                  Service  Reserve  Letter of  Credit  Provider,  Bankers  Trust
                  Company,   as  Collateral  Agent,   Martin  County  Industrial
                  Development  Authority,  and NationsBank of Florida,  N.A., as
                  Disbursement Agent.**

         10.1.5   Revolving  Credit  Agreement  among  Indiantown  Cogeneration,
                  L.P.,  as Borrower,  and the Banks Named  Therein,  and Credit
                  Suisse, as Agent, dated as of November 1, 1994.**

         10.1.6   Collateral  Agency and  Intercreditor  Agreement,  dated as of
                  November  1, 1994,  among  NationsBank  of Florida,  N.A.,  as
                  Trustee  under the Trust  Indenture,  dated as of  November 1,
                  1994,  NationsBank  of Florida,  N.A., as

                                       43
<PAGE>


                  Tax-Exempt Trustee under the Tax Exempt Indenture, dated as of
                  November 1, 1994, Credit Suisse, as letter of Credit Provider,
                  Credit Suisse, as Working Capital  Provider,  Banque Nationale
                  de Paris, as Debt Service  Reserve Letter of Credit  Provider,
                  Indiantown Cogeneration, L.P., Indiantown Cogeneration Funding
                  Corporation,  Martin County Industrial  Development Authority,
                  NationsBank of Florida,  N.A., as Disbursement Agent under the
                  Disbursement  Agreement  dated as of  November  1,  1994,  and
                  Bankers Trust Company, as Collateral Agent.**

         10.1.7   Amended  and  Restated  Equity  Loan  Agreement  dated  as  of
                  November 1, 1994,  between Indiantown  Cogeneration,  L.P., as
                  the Borrower, and TIFD III-Y Inc., as the Equity Lender.**

         10.1.8   Equity Contribution  Agreement,  dated as of November 1, 1994,
                  between TIFD III-Y Inc. and  NationsBank of Florida,  N.A., as
                  Disbursement Agent.**

         10.1.9   GE Capital Guaranty  Agreement,  dated as of November 1, 1994,
                  between General  Electric Capital  Corporation,  as Guarantor,
                  and NationsBank of Florida, N.A., as Disbursement Agent.**

         10.1.11  Debt  Service  Reserve  Letter  of  Credit  and  Reimbursement
                  Agreement among  Indiantown  Cogeneration,  L.P., as Borrower,
                  and the Banks Named Therein, and Banque Nationale de Paris, as
                  Agent, dated as of November 1, 1994.**

         10.2.18  Amendment No. 2 to Coal Purchase Agreement,  dated as of April
                  19, 1995.***

         10.2.19  Fourth  Amendment to Energy  Services  Agreement,  dated as of
                  January 30, 1996.****

21      Subsidiaries of Registrant*

99      Copy of Registrants' press release dated January 3, 1996.****

99.1    Copy of Registrant's complaint against FPL filed March 19, 1999.*****

99.2    Copy of Registrant's  Second Amended  Complaint against FPL filed
        March 21, 2000.*******

--------------------------
*  Incorporated  by  reference  from the  Registrant  Statement  on Form S-1, as
amended,  file no. 33-82034 filed by the Registrants  with the SEC in July 1994.
**  Incorporated  by reference from the quarterly  report on Form 10-Q, file no.
33-82034 filed by the Registrants with the SEC in December 1994.

***  Incorporated by reference from the quarterly  report on Form 10-Q, file no.
33-82034 filed by the Registrants with the SEC in May 1995. **** Incorporated by
reference  from the current  report on Form 8-K, file no.  33-82034 filed by the
Registrants with the SEC in January 1996.

*****  Incorporated  by reference  from the current  report on Form 8-K file no.
33-82034  filed  by  the  Registrants  with  the  SEC  in  March  1999.   ******
Incorporated  by  reference  from the  quarterly  report  on Form  10-Q file no.
33-82034  filed  by  the  Registrants  with  the  SEC  in  August  1999  *******
Incorporated  by  reference  from annual  report on Form 10-K file no.  33-82034
filed by Registrants with the SEC in March 2000.

                                       44
<PAGE>



                                    SIGNATURE

        Pursuant to the requirements of the Securities Exchange Act of 1934, the
co-registrant  has duly  caused this Form 10-K to be signed on its behalf by the
undersigned,  thereunto  duly  authorized,  in the  city of  Bethesda,  state of
Maryland, on March 30, 2001.

                                                INDIANTOWN COGENERATION, L.P.


Date:  March 30, 2001                           /s/ John R. Cooper
                                                -----------------------------
                                                Name: John R. Cooper
                                                Title: Chief Financial Officer,
                                                Principal Accounting Officer
                                                and Senior Vice President

        Pursuant to the  requirements  of the Securities Act of 1933,  this Form
10-K has been signed by the following persons in the capacities and on the dates
indicated.

Signature                          Title                              Date
---------                          -----                              ----


/s/ P. Chrisman Iribe         Member of Board of Control,        March 30, 2001
----------------------        President and Secretary
P. Chrisman Iribe

/s/ John R. Cooper            Chief Financial Officer,           March 30, 2001
----------------------        Principal Accounting
John R. Cooper                Officer and Senior
                              Vice President


/s/ Thomas J. Bonner          Member of Board of Control         March 30, 2001
--------------------
Thomas J. Bonner

/s/ Thomas F. Schwartz        Member of Board of Control         March 30, 2001
----------------------
Thomas F. Schwartz

/s/ Sanford L. Hartman        Member of Board of Control         March 30, 2001
----------------------        and Senior Vice President
Sanford L. Hartman








                                       45
<PAGE>


                                    SIGNATURE

        Pursuant to the requirements of the Securities Exchange Act of 1934, the
co-registrant  has duly  caused this Form 10-K to be signed on its behalf by the
undersigned,  thereunto  duly  authorized,  in the  city of  Bethesda,  state of
Maryland, on March 30, 2001.

                                           INDIANTOWN COGENERATION
                                           FUNDING CORPORATION

Date:  March 30, 2001                      /s/ John R. Cooper
                                           ------------------
                                            Name: John R. Cooper
                                            Title: Chief Financial Officer,
                                            Principal Accounting Officer
                                            and Vice President

        Pursuant to the  requirements  of the Securities Act of 1933,  this Form
10-K has been signed by the following persons in the capacities and on the dates
indicated.

Signature                            Title                            Date

/s/ P. Chrisman Iribe         Director and President             March 30, 2001
----------------------
P. Chrisman Iribe

/s/ John R. Cooper            Chief Financial Officer,            March 30, 2001
----------------------        Principal Accounting
John R. Cooper                Officer and Vice President






                                       46