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NRG Energy, Inc. 1999 Annual Report | REMARKABLE | “We have the right
people to lead the business forward and continue its pace of growth. | We’re a
very successful company that has demonstrated our ability to deliver earnings to
our owner.” David H. Peterson, Chairman, President and Chief Executive
Officer, NRG Energy, Inc. “I think a lot of the customers or partners that we
work for are impressed by the professionalism that the NRG employees exude
along with the enthusiasm. The integrity of our employees is very high. We
say what we’re going to do, and then we do what we said we’d do, and then
we tell the people what we did.” Ronald J. Will, President and Chief Executive
Officer, NRG Europe “Our strategy | is to remain a very entrepreneurial
company that can move quickly, be very fluid, very flexible, be able to move
effectively within the competitive environment and continue to be successful
as that world changes.” Roy R. Hewitt, Vice President, Administrative Services,
NRG Energy, Inc. “We have our eye on being a low risk, high quality company
and making sure our assets produce what they’re intended to do while, at the
same time, we’re growing full speed ahead.” Leonard A. Bluhm, Executive Vice
President and Chief Financial Officer, NRG Energy, Inc. “NRG understands that
extracting exceptional value | from its assets and operations demands creativity
and flexibility. Our people are excited by the idea that tomorrow they
could be asked to do something they’ve never done before.” Keith G. Hilless,
Managing Director and Chief Executive Officer, NRG Asia-Pacific, Ltd.
NRG Energy, Inc. | NRG is an international leader in independent power
production. Founded in 1989, NRG develops, acquires, owns and operates a variety
of energy-related operations worldwide, including independent power production
and cogeneration facilities, district heating and cooling production, thermal energy
production and transmission facilities, as well as resource recovery facilities. NRG
has built a global portfolio of high-quality projects spanning North America, Latin
America, Asia-Pacific and Europe. At year-end 1999, those projects represented over
23,000 megawatts of installed generating capacity (approximately 176 facilities in
operation, under construction or subject to signed acquisition agreements). Our
projects use such diverse fuel sources as fossil fuels (natural gas, oil, coal and coal
seam methane), and green power renewable fuels (biomass, landfill gas, hydro and
geothermal energy) as well as refuse-derived fuels. Vision | NRG will be a leading
global generation company, with a top three position in selected core markets,
that provides superior performance to all stakeholders. Mission | To provide the best
value for customers, shareholders and employees by developing and operating a balanced,
financially sound portfolio of electric and thermal generation and selected energy
investments worldwide.
1
(In thousands, except per share amounts) 1999 1998 1997 1996
Earnings per NSP Share* $ 0.37 $ 0.28 $ 0.16 $ 0.15
Net Income 57,195 41,732 21,982 19,978
Equity in Earnings of Unconsolidated Affiliates 67,500 81,706 26,200 32,815
Investments in Projectsand Capitalized Development Costs 991,263 814,609 712,446 375,016
Stockholder’s Equity $893,654 $579,332 $450,698 $421,914
* All financial information pertaining to per share amounts and number of common shares outstanding has been adjusted to reflect a two-for-one stock split that occurred on June 1, 1998.
NRG Energy, Inc. 1999 Annual Report | Financial Highlights
* Excludes gains of 11 cents.** Excludes write-downs of 4 cents.
Project Investment in Percent
3% Czech Republic 5% Latin America
65-55
Country Rating*
55-35
100-85
92% United States, Australia, Germany, Canada, United Kingdom
Country Risk Rating: 93
Earnings per NSP Share NRG Portfolio Risk
94
.20
97
.20**
96
.15
95
.12*
98
.28
99
.37(in dollars)
0
.10
.20
.30
.40.
* Source Euromoney, September 1999(100 is the lowest risk.)
2
1999 was quite a year. Once again, we fulfilled our promises, delivered on
expectations, and proved that we have earned and deserve the acclaim we receive
as a leading, energy growth company.
Our earnings grew by 35 percent, ending the year at 37 cents per Northern States
Power Company (NSP) share. We added 7,690 net equity megawatts to our portfolio,
an astounding 233 percent growth rate. New acquisitions in 1999, added to our exist-
ing asset base in the United States, Europe, Australia and Latin America, brought us to
nearly 11,000 megawatts of net ownership and more than 23,000 megawatts of
installed generating capacity. We will complete the acquisition of at least 4,248 net
equity megawatts in 2000.
How did we do it? Three basic tenets support our global activities: smart growth, market-
focused strategies, and a relentless drive to deliver increasing value to our shareholder.
We identified opportunities that fit our product mix and operating strategy, bought at the
right price and closed those deals on a timely basis. Our expertise at improving and
operating power plants kept our generating assets ready to meet market demands. The
combination of our extensive market knowledge and very high plant availability allowed
us to meet and, in many cases, exceed our net revenue goals. In all markets, national
and international, our objective with all assets and activities is to make decisions and take
actions that will maximize value for our shareholder, our employees and our communities.
North America dominated our activities during the year. We completed purchases in
New York, Massachusetts, Connecticut and Southern California, and we were
confirmed as the winning bidder for the 1,708 megawatts of fossil-fueled assets of
Louisiana-based Cajun Electric Power Cooperative. In January 2000, we signed an
agreement to acquire 1,875 megawatts of assets located in four states from Conectiv of
Wilmington, Delaware. We opened business offices in San Diego, California and
Pittsburgh, Pennsylvania.
NRG Energy, Inc. 1999 Annual Report | Letter to Shareholder | “Our rapid
growth has added significant value to the company by raising our visibility
within the industry and positioning us for continued high rates of earnings
growth.” David H. Peterson, Chairman, President and Chief Executive Officer,
NRG Energy, Inc.
3
In Europe, we signed a purchase agreement to acquire the 665 megawatt Killingholme A
Station from National Power plc in the United Kingdom. We won the bid for a 600
megawatt plant in Turkey, and we opened a development office in Warsaw, Poland.
In the United States, we are among the top three Northeast independent generators and
the top three companies in district heating and cooling, refuse-derived fuel and landfill gas
generation. In partnership with Dynegy Inc., we are among the top four West Coast inde-
pendent generators. Also, we are the largest independent power producer in Australia.
We reduced our ownership in CogenAmerica from 45 percent to 20 percent by selling
a portion of our interest to Calpine Corporation. When we purchased Cogen’s prede-
cessor, O’Brien Environmental Energy, in early 1996, the company was bankrupt and
valued by the Court at approximately $7.50 per share. Based on the $25.00 price for
the sale to Calpine, the shares have appreciated by more than 40 percent annually.
Our rapid growth has added significant value to the company by raising our visibility
within the industry and positioning us for continued high rates of earnings growth.
Customers and partners are seeking us out for new projects. And the mix of our
assets— from electric power generation utilizing coal, natural gas, landfill gas, oil, hydro
and biomass, to district heating and cooling and refuse-derived fuel—positions us as a
unique, expert generation company in additional markets, for many more opportunities.
We have garnered recognition as a “must watch” energy growth company from many
in the investment community during the last three years. They see a team that has
built an attractive, diverse, global portfolio; a development machine that acts strategi-
cally and tenaciously; a solid reputation as an operator that can predict and achieve
profitability from its assets; and an enviable position as the seventh largest independent
power producer in the world. We have established the momentum that will sustain our
growth and profitability in the years to come.
“We have garnered recognition as a ‘must watch’ energy growth company from
many in the investment community during the last three years.” David H.
Peterson, Chairman, President and Chief Executive Officer, NRG Energy, Inc.
To focus our ongoing initiatives, we have developed three primary financial objectives:
increase earnings by at least 25 percent annually; improve our investment grade bond
rating; and earn a premium return for our shareholder, Northern States Power Company.
NSP has supported us financially since our beginning in 1989 and has helped enable
the success we realize today.
I’ve said often that this is a remarkable company. In 1999, many other people, inside
and outside our company, also were impressed by our achievements. They sang our
praises at our 10th anniversary events in the United States, Australia and the Czech
Republic. This report captures some of those comments and shares them with you.
My personal thanks to each of our employees and our partners for their smart and
determined work. My thanks to NSP for its strong financial and moral support over
the last 10 years. We will work hard to sustain our place among the top 10 global
power generators. And we will succeed again in the year 2000 and beyond.
David H. Peterson
Chairman, President and Chief Executive Officer
5
Location Capacity (MW) NRG Ownership (Net MW)
Asia-PacificLoy Yang Power A Traralgon, Vic., Australia 2,000.0 507.4Gladstone Power Station Gladstone, Qld., Australia 1,680.0 630.0Energy Investors Fund ***◊◊ China & Australia 970.0 2.4Collinsville Collinsville, Qld., Australia 192.0 96.0Energy Developments, Ltd. Australia, Taiwan 264.0 76.1
EuropeSchkopau Halle, Germany 960.0 200.0Killingholme** North Lincolnshire, England 665.0 665.0Enfield Energy Centre * England 396.0 99.0ECK Generating *** Kladno, Czech Republic 345.0 153.5MIBRAG Thiessen, Germany 233.0 77.7Energy Developments Ltd. England 10.0 3.0Energy Center Kladno Kladno, Czech Republic 28.0 12.4EIF—Ashcogen◊◊ Israel 25.0 0.2
Latin AmericaBolivian Power Company*** Bolivia 306.2 134.5Scudder Latin American Power Various Locations 772.0 51.2Energy Investors Fund◊◊ Guatemala 40.0 0.1
North AmericaConectiv** DE, NJ, MD, PA 5,062.0 1,874.7Cajun Electric ** Baton Rouge, LA 1,708.5 1,708.5Oswego Oswego, NY 1,700.0 1,700.0Energy Investors Fund ***◊◊ Various Locations 1,033.5 11.5El Segundo Power El Segundo, CA 1,020.0 510.0Encina Carlsbad, CA 965.0 482.5Middletown Middletown, CT 856.2 856.2Arthur Kill Staten Island, NY 842.0 842.0Huntley Tonawanda, NY 760.0 760.0Astoria Gas Turbines Queens, NY 614.0 614.0Dunkirk Dunkirk, NY 600.0 600.0CogenAmerica Various Locations 575.0 99.3Long Beach Generating Long Beach, CA 530.0 265.0Montville Uncasville, CT 497.6 497.6Devon Milford, CT 400.5 400.5Norwalk Harbor So. Norwalk, CT 353.0 353.0San Diego Turbines San Diego, CA 253.0 126.5Rocky Road East Dundee, IL 250.0 125.0Crockett Cogeneration Crockett, CA 240.0 138.4Somerset Power◊◊◊ Somerset, MA 160.0 160.0NEO *** Various Locations 174.5 90.3Connecticut remote jets Connecticut 127.4 127.4Kingston Cogeneration Kingston, Ontario, Canada 110.0 27.5Power Smith Cogeneration Oklahoma City, OK 110.0 9.6Curtis-Palmer Hydroelectric Corinth, NY 58.3 5.0Mt. Poso Bakersfield, CA 49.5 19.4San Joaquin Valley Energy◊ Chowchilla, CA 43.0 19.4Cadillac Cadillac, MI 39.0 19.5Penobscot Energy Recovery Orrington, ME 25.3 7.3Maine Energy Recovery Biddeford, ME 22.0 3.6Turners Falls◊ Turners Falls, MA 20.1 1.8Jackson Valley Energy◊ Ione, CA 16.0 8.0
* Facilities under construction** Facilities subject to signed acquisition agreements*** Facilities in operation and under construction◊ Operations are suspended◊◊ Investment only◊◊◊ Excludes 69 megawatts on deactivated reserve
NRG Energy, Inc. 1999 Annual Report | Power Generation Facilities
NRG Energy, Inc. 1999 Annual Report | Growth | “I believe that the reason
NRG has been successful is because of our determination. We have never
given up. We have been very fair—and we’ve been very lucky. But often-
times, we have made our own luck.” Michael Carroll, President, NRG
Thermal “Your accomplishments in the energy industry, or in any industry
for that matter, are formidable. Your successful entry and development of
difficult international markets and your ability to seize domestic divestiture
opportunities have made you a leader worldwide in the independent power
production market.” Bill Richardson, United States Secretary of Energy “ I think
the best years are certainly ahead for NRG.” James J. Howard, Chairman,
President and Chief Executive Officer, Northern States Power Company “NRG is
now a very significant entity in its own right and it will be very important
that NRG continue to have the appropriate infrastructure from which to
continue to grow but still keep the discipline and the hands-on approach that
has helped it to achieve its success to-date.” Edward J. McIntyre, Vice President
and Chief Financial Officer, Northern States Power Company “ We do things in
a matter of weeks that it takes a number of companies months to do. If you’re
not going to be able to have the ability to function that quickly and effi-
ciently, you may as well get out of the business. I think other people in the
industry are doing it too. It’s necessary to compete.” James J. Bender, Vice
President, General Counsel and Corporate Secretary, NRG Energy, Inc.
Acquisitions in the Northeastern United
States were largely responsible for an
increase in operating revenue of 175
percent from 1998 to 1999.
In 1999 we grew in earnings, in megawatts and in reputation.
Earnings grew by 35 percent to 37 cents per NSP share, giving
NRG Energy an average earnings growth rate of 35 percent per year
since 1996. By the end of the year, in 15 countries, on four continents,
we had 176 facilities in operation, under construction or with signed
acquisition agreements. Our net equity in megawatts grew by a
remarkable 233 percent, garnering NRG Energy a place among the
world’s top 10 independent power generation companies in size and
annual growth rate.
Our 1999 earnings were enhanced by a combination of factors that
allowed us to capture maximum returns from newly acquired assets.
We acted quickly to seize growth opportunities around the world and
particularly in the United States. As divestitures continued to unfold
in California, restructuring and divestitures emerged in the Northeast.
Opportunities to build or acquire opened in Europe, as well.
We bought at prices that should allow us to earn premium returns.
Our skilled development teams swiftly completed transactions and
operational transitions, giving us increased earnings from operations.
Our newly acquired assets in the Northeastern United States per-
formed well throughout the summer of 1999, delivering excellent
returns during this critical operating period.
Turbine-generator at the Arthur Kill
Generating Station, NRG’s second acquisition
in New York following deregulation.
Refuse-derived fuel conveyor at Newport Resource
Recovery Facility, Minnesota, one of four NRG facilities
processing more than one million tons of waste per year.
7
95
$104,464
($ in thousands)
96
$118,252
97
$182,130
98
$500,018
99
$87,819
Operating Revenue
8
We acquired 1,218 megawatts of power generation facilities in
Southern California. Added to our purchases there in 1998, we
now own a 50 percent interest in 2,768 megawatts of capacity.
With our partner, Dynegy Inc., we have become one of the top
four independent power producers in that region.
Income from plant operations has grown
significantly over the past five years.
NRG Energy, Inc. 1999 Annual Report | Growth | “What has been accom-
plished at NRG in just 10 years has been nothing short of remarkable. NRG
has become a global powerhouse in power around the world. Energy production
is vital to our growth here in the United States and around the world.
Everything starts with energy. As we become more involved in the global
marketplace, companies such as NRG will lead the way.” Rod Grams, United
States Senator from Minnesota
In the Northeastern United States, with 100 percent interest in
nearly 7,000 megawatts of generation acquired from four utilities,
we have become one of the top three independent power producers.
Our current portfolio consists of 1,456 megawatts of generation
acquired from Consolidated Edison in New York; 2,235 megawatts
of generation acquired from Connecticut Light & Power; more than
3,000 megawatts acquired from Niagara Mohawk; and 229 megawatts
of generation acquired from Eastern Utility Associates in
Massachusetts. In January 2000, we executed an agreement to
acquire 1,875 megawatts of fossil-fueled generation and other assets
in four states from Conectiv of Delaware. We expect to complete
the purchase in late 2000.
In Louisiana, we were confirmed as the winning bidder for Cajun
Electric Power Cooperative’s 1,708 megawatts of fossil-fueled gener-
ation, opening new opportunities for growth in the South Central
United States. Cajun produces and sells electricity to three off-system
customers and 11 distribution cooperatives which deliver power to
more than one million people in Louisiana. This purchase will close
in the spring of 2000.
Operating Income
95
$20,276
($ in thousands)
96
$18,109
97
$57,012
98
$109,520
99
$12,354
Winning Cajun was a tribute to our tenaciousness and our growth
strategy of leveraging our expertise in restructuring financially dis-
tressed projects. Cajun had sought bankruptcy protection in 1994
because of financial problems related to a nuclear plant investment.
For more than four years, we worked with the bankruptcy courts
and regulators to develop the final plans to own and operate the
fossil-fueled facilities of Cajun.
Our development activities in the United States also included
greenfield opportunities. With partners, Salt River Project and
Dynegy Inc., we announced plans to develop an 825 megawatt, natural
gas-fired, combined-cycle generating facility to serve the growing
demand for electricity in the greater Phoenix area. Final negotiations
on project agreements are in progress, and site permitting has begun.
Similarly, greenfield development is underway in Minnesota where
we and partner Tenaska, Inc. have received approval for a Certificate
of Need to build a 550 megawatt peaking facility.
Strategic development and growth opportunities continue for us
around the world. In Europe, we opened a development office in
Warsaw, Poland—adding to our active development offices in
London, Prague, Berlin, Tallinn and Istanbul.
Outboard bearing for Unit 3 turbine-driven boiler feed
pump at Middletown Generating Station, one of four stations
and remote jets totaling 2,235 megawatts, an acquisition
that marked NRG’s entry into Connecticut.
“I was one of the first ones—and to see where we came from, five people
and a dream, up to where we are today in 10 years is just phenomenal.”
Doug Walker, Managing Director, NRG Resource Recovery
Feedwater heater drains and
vent piping at Schkopau,
NRG’s first new, supercritical
coal-fired generating station.
Located in eastern Germany,
Schkopau is fueled by
MIBRAG coal.
10
We and our partners were selected as winning bidder for the 600
megawatt Seyitömer Power Station in Küthya, Turkey. Seyitömer is
our second successful bid in Turkey. In 1998, also with partners, we
won a bid to acquire the 450 megawatt coal-fired Kangal plant in
central Turkey. Our strategy is to build a long-term position in the
high-growth energy market in Turkey.
In the United Kingdom, our project partnership continued building
Enfield Energy Centre, a 396 megawatt, combined-cycle merchant
plant in North London. We expect Enfield to begin commercial
operations in the first half of 2000.
Our net income grew by 37 percent from
1998 to 1999.
NRG Energy, Inc. 1999 Annual Report | Growth | “NRG’s growth in the
Northeastern United States is the result of a focused team working together
to provide increased shareholder value by manufacturing reliable, efficient,
clean, electric energy.” Bryan Riley, Vice President, NRG North America
Eastern Region
Expanding our presence in the United Kingdom, we announced
plans to acquire Killingholme A, a 665 megawatt, gas-fired, combined-
cycle power station, from National Power plc. Also, we are negotiating
the purchase of National Power’s Blyth generating facilities, two
coal-fired stations totaling 1,140 megawatts of generation capacity.
And we are developing Langage Energy Park, an 800 megawatt
gas-fired, combined-cycle, greenfield merchant plant located near
Plymouth, England.
In Australia in 1999, our development team in Brisbane moved into
new offices to better manage the increasing development activities
in our Asia-Pacific region. We are the largest independent power
producer in Australia and have ownership and operational interests
in 4,072 megawatts of generation.
Net Income
95
$19,978
96
$21,982
97
$41,732
98
$57,195
99
$31,201
($ in thousands)
In Latin America, we have ownership and operational interests in
more than 1,110 megawatts of generation. In January 2000, with
our partner, Vattenfall AB, we took direct control of the South
American power development activities, previously conducted
through our jointly owned company, Cobee Energy Development
LLC. The new management approach allows us to streamline and
focus our companies’ development efforts around our regional base
at COBEE Bolivia. COBEE is the second largest generating company
in Bolivia.
COBEE and Pan American Energy LLC are nearing completion of
the Bulo Bulo project near Cochabamba, Bolivia. This 87megawatt
natural gas-fired generator is scheduled for a May 2000 in-service date.
Constantly paying attention to where we grow and how we grow is
key to our success. Smart strategic planning and project develop-
ment helped us win top positions in high growth, national and
international markets. Our expertise and performance in diverse
fuels, refurbishing assets, greenfield development, superior operations,
and power marketing drive profitability and make us attractive to
customers and partners. Our tenacious determination to grow
profitability has become more than a goal. It is an expectation of
each and every employee.
At Bolivian Power Company (COBEE) hydro plants,
custom, Swiss-made, water wheels are used in the conversion
of water energy to electrical energy. COBEE is the second
largest power generation company in Bolivia.
“I have great confidence in the tenaciousness, cleverness and expertise of NRG
to develop new markets. I think we’re building a 100-year company at NRG.”
John Noer, President Worldwide Operations, NRG Energy, Inc.
Control panel from NRG’s
Loy Yang A Power Station in
Victoria, Australia. The most
efficient power plant in
Australia, it operates at a 95
percent capacity factor.
NRG Energy, Inc. 1999 Annual Report | Strategy | “We’ve got a very fine
crew here, probably one of the best strategic plans we’ve ever had as well
as an implementation plan. And so the company gets stronger every year.”
David H. Peterson, Chairman, President and Chief Executive Officer, NRG
Energy, Inc. “ For me, NRG is innovative. It’s exciting. And I think one
of the qualities that distinguish us from the other developers in the world
is that we’re very persistent.” Robert Brown, Vice President and Managing
Director, Western Europe, NRG Energy, Ltd. “I am proud of the ties that have
been developed between the Czech Republic and NRG during the last few
years. After so many years of Communist oppression and Marxist economy,
we terribly needed to open the country to foreign investment. NRG was
among the first American companies that came to my country to start
to do business. NRG was a very young company, filled with activity and
dynamics, and it was just what was needed in my country.” Alexandr
Vondra, Ambassador of the Czech Republic to the United States “ The folks
that I’ve talked to at the power plants we’ve recently acquired in New York
are very excited to be part of the NRG team because they’ve heard what
we’re doing in Europe, in Australia, in South America and—where they’ve
been part of a hometown utility—now they’re part of a global player.”
Louis P. Matis, Vice President, Corporate Operating Services, NRG Energy, Inc.
NRG’s vision is to be a well-positioned, top three generator in
selected markets. Our rapid growth in the United States from
1998 through 1999 was accomplished by focusing on five strategic
objectives: 1) maintain a base level of contract support; 2) offer
a broad set of energy products; 3) maintain a diverse fuel mix;
4) build market presence within specific markets; and 5) leverage
opportunities for sales to adjacent markets.
This strategic approach allows us to maintain a portfolio of assets
offering a variety of energy and capacity products, from baseload to
higher valued ancillary products, and it provides the scale and
flexibility we require to maximize each product’s value in the
marketplace. Expertise in asset management, operations and power
marketing also comes together at NRG Energy to create a synergistic
team approach that enhances value from operations. In 1999, we
concentrated as much on operational and sales excellence as we
did on growth strategies.
Our development teams identified the right acquisition opportunities,
offered competitive bids and completed purchases quickly to capture
additional revenues. Our experienced team of plant managers, asset
managers and fuel and power marketers worked together to deliver
exceptional operational and financial performance from our growing
generation portfolio.
Key to our 1999 success was our project developers’ and senior
managers’ ability to define each facility’s operating strategy and
direction, and accurately match the appropriate level of investment in
each facility to its operating expectations. Our asset managers played a
decisive role in defining optimum plant readiness and product delivery.
At the end of 1999, NRG had interests
in generating facilities representing
23,102 megawatts, including projects
under construction and under signed
acquisition agreements.
Megawatt Growth
A control panel at NRG’s Encina Power Station, a reliable, must-
run facility. A strategic acquisition, Encina is the main provider of
electricity in the San Diego, California area.
Main and reheat steam piping at the El Segundo
Generating Station, NRG’s first acquisition in
California following deregulation.
13
95
4,394
96
8,516
97
14,868
98
23,102
99
3,280
14
We fostered a global network of plant management that is unique
to the independent power industry. Our plant managers in all of our
operations shared resources, expertise and experiences in engineering,
environmental and operating issues. We reaped ongoing benefits as
our managers used their accumulated knowledge to apply a rich set
of solutions to operating challenges that arose throughout the year.
In October 1999, we held our first International Plant Managers
Conference, bringing together leaders from our operations on three
continents for two days of information sharing and direction setting.
Meetings like this are invaluable in solidifying a team approach to
problem solving and enhancing our operating and financial
performance worldwide.
NRG maintains a well-balanced fuel mix
with multiple fuel capabilities at many of
its generating stations. This approach helps
to mitigate the impact on NRG’s operations
from price volatility in the fuel markets.
NRG Energy, Inc. 1999 Annual Report | Strategy | “We’ve done things
differently than others. We have gone out and we have been, to some extent,
in the right place at the right time. We have taken advantage of some of the
less marquee deals and focused on some of the deals that maybe didn’t look
as pretty but are going to be just as profitable at the end of the day.” Craig A.
Mataczynski, President and Chief Executive Officer, NRG North America
Teamwork, effective communication mechanisms and swift response
to any need kept our generating assets on-line and ready to meet
market demands. To that end, we worked hard to build strong
bonds between our plants and the power marketing function. We
moved quickly to develop our in-house power marketing skills and
solidify partnerships with power marketing companies. The operating
and marketing relationship is one of the most important variables to
increasing revenues, reducing costs and improving margins.
Our teamwork paid off, particularly in the Northeastern United
States where our power marketers worked closely with the plants
and asset managers to deliver returns beyond our expectations.
Dealing with evolving wholesale generation markets, our marketing
partner in California and our in-house power marketers in the
Northeast skillfully met the challenges of change as their regions
adjusted to the new ways of producing and selling energy.
Fuel Breakdown
Other
Natural Gas
Oil
Coal
(by net megawatts)
29%
2%
44%
25%
Around the world, our operations performed well. In Australia,
Gladstone, Collinsville and Loy Yang kept up their track records of
efficient, environmentally sensitive and safe operations. In Germany,
Schkopau and MIBRAG performed well—MIBRAG delivering better
results with more coal sales and lower operating costs. In the Czech
Republic, Energy Center Kladno’s (ECK) refurbished facility met
expectations and our 345 megawatt expansion, ECK Generating
(ECKG), entered its last phase of construction.
In the United States, our businesses in thermal heating and cooling,
landfill gas generation and refuse-derived fuel continue to be unique
parts of our growth and our operating strategies. They give us a
strong competitive profile as a company interested in large and small
generation projects, as a company expert in traditional and non-
traditional energy sources, and as a company with expertise in
environmentally sound energy alternatives. These operations continue
to meet and exceed our goals and increase earnings.
Each part of our business must operate well. Also, each part must
cooperate, sharing strategy and expertise. With cooperation, maxi-
mizing the synergy within our operations, we derive greater benefits
and drive greater value to our bottom line.
Air-cooled condenser unit at Enfield Energy
Centre, NRG’s first greenfield merchant
facility located in a north borough of
London, England.
“We enter into transactions looking to see how we can provide the most and
the best value to our existing customers as well as to new customers. We
look at strategic partners, financial partners and governmental relationships
as key aspects of our ongoing business.” Jay Carpenter, Executive Director,
Business Development, NRG Asia-Pacific, Ltd.
A view of water wall welding
performed during construction
at NRG’s first repowered
facility, Collinsville, in
Queensland, Australia.
NRG Energy, Inc. 1999 Annual Report | Value | “Our customers, the
communities that we move into, our partners all have a confidence in us
that we’re not in it to just make a quick buck. We’re in it to really grow the
company, be a good corporate citizen wherever we go. And that builds a bit
of a competitive advantage.” Stan Marks, Vice President, NRG North America
Western Region “NRG is continually doing upgrades, adding some equipment,
trying to be a little more efficient, you know, save some water, save some
chemicals, make the equipment more dependable.” Virgil Hathaway,
Maintenance Technician, NRG Thermal “Your accomplishments not only
involve global power generation, they involve local community commitment.
You truly reflect your corporate image: global power, local commitment.
I know you are dedicated to giving to the communities you serve.” John D.
Kemp, President and Chief Executive Officer, VSA arts “ Building projects like
Kladno means providing stable employment for the employees. For the people
of Kladno, it means improving the facility environmentally as well as providing
thermal energy to heat the city.” Karel Sykora, General Manager, NRG
Energeticky Provoz, s.r.o. “ They tell me when a pit bull bites you, it won’t
let go no matter what. I think NRG has been that way around the world.
When they get their teeth into a good project, it takes a lot to knock them
off.” James J. Howard, Chairman, President and Chief Executive Officer,
Northern States Power Company
We measure value in every part of our business. Smart, strategic
planning and development; reliable, efficient, safe operations;
improved environmental performance and effective power
marketing—all deliver value to our employees, our customers
and the communities in which we operate. And the bottom line
to all of this is value to the investor—our shareholder—with
earnings that are meeting our objectives today and a business
that will meet and exceed expectations for years to come.
We have earned our reputation as a company to watch. Our growth
in earnings is as impressive as our growth in megawatts, delivering
high value to our shareholder.
Our goal is to achieve 25 percent annual earnings growth for the
foreseeable future—a distinguishing characteristic of a high growth
company. Since 1996 our earnings have increased by an average rate
of 35 percent per year. Considering all of the projects we have initi-
ated in 1998 and 1999, we expect to make an even more significant
contribution to NSP earnings per share in 2000. Those projects
include: a full year of earnings from our assets in the Northeast; a
full year from Killingholme A and more than six months of earnings
from Enfield Energy Centre, both in the United Kingdom; and
several months from Cajun in Louisiana, an acquisition we expect to
complete in spring 2000. Also, we expect this year to complete the
acquisitions of the Narva Power Stations in Estonia as well as Kangal
and Seyitömer in Turkey.
Another dimension of value involves what we accomplish for our
customers, our employees and the communities where we operate.
We have developed a globally-renowned reputation for refurbishing
assets to operate efficiently and improve environmental performance.
Our work at ECK exemplifies the value this has for countries,
businesses, employees and communities. Located near Prague, ECK
is the first project-financed, independent power project in Central
Europe. It is a facility that provides electricity and district heating
to the town and adjacent industry.
Consistent with our goal of maintaining a
balanced portfolio of generation assets,
NRG’s facilities are 40 percent baseload, 20
percent intermediate and 40 percent peaking.
Dispatch
17
Intermediate
Peaking
Baseload
20%
40%
40%
(by net megawatts)
Insulators on top of substation circuit breakers at
Gladstone, NRG’s first privatized power acquisition
in Australia.
18
In 1999 we entered the last phase of construction of ECKG, the 345
megawatt expansion of the facility. The construction follows on the
heels of our work refurbishing the old facility to improve operations
and produce electricity more efficiently and more cleanly. We
replaced two coal-fired boilers having no sulfur dioxide or nitrogen
oxide controls with fluidized bed combustion boilers and other
environmental equipment that substantially improved environmental
performance. Also, we offered employee benefits to workers who
had few benefits when the plants were state-owned.
In February 2000, we announced a five-year plan to purchase 11
gas turbine generators and five steam turbine generators. The purchase
supports our strategy of acquiring facilities that offer an existing
earnings base and possess opportunities for future upgrades and
expansion. The turbines will deliver clean environmental perform-
ance and will have among the highest operating efficiencies of any
commercially available technology. We will deploy these turbines as
economic projections dictate at brownfield or greenfield sites in our
key regions.
Our expertise in diverse, environmentally responsible fuels and
operations also drives value to our bottom line, makes us an attractive
energy producer to potential partners and customers, and stimulates
our continued growth.
With ownership interests in four refuse-derived fuel (RDF) facilities
in Minnesota and Maine that process more than one million tons of
waste per year, we are the second largest producer of RDF in the
United States.
NRG’s safety record has been well under
OSHA industry-average incident rates for
three of the past four years.
*1999 OSHA rate not available
until 2001.
U.S. Occupational Safety and Health
Administration (OSHA)
NRG Energy, Inc. 1999 Annual Report | Value | “We are progressive, aggressive
and entrepreneurial. But also I think that people we deal with come away
using words such as honest, above the table, fair, know what they’re doing,
smart people.” Leonard A. Bluhm, Executive Vice President and Chief Financial
Officer, NRG Energy, Inc.
OSHA Incident Rate
95
7
96
6.9
97
6.9
98
6.3
99*
NRG Industry Average
8
6
4
2
0
Our subsidiary, NRG Thermal is among the top three district heat-
ing and cooling providers in the United States with operations in
five states: California, Minnesota, North Dakota, Pennsylvania
and Washington.
In 1999, NRG Thermal purchased the remaining half ownership
of interest in district heating facilities in Pittsburgh and San Francisco,
becoming sole owner and operator. Growth continues as it adds
service to new buildings in those cities as well as in San Diego. In
Pennsylvania, the company was selected to purchase Harrisburg Steam
Works, Ltd., a regulated utility providing steam to approximately
300 customers, including the downtown and state capitol complex.
NRG Thermal expects to close on this purchase in spring 2000.
NEO, our renewable energy subsidiary, is one of the top three
United States landfill gas generation companies, extracting methane
from landfills to generate electricity. NEO owns 27 landfill gas oper-
ations around the country, has three new facilities under construction
and owns 18 hydro facilities.
Employee safety simply cannot be compromised. It is a value that
permeates all of our operations. When we assume plant operations,
we implement structured, disciplined safety programs from the
plant manager on down. As a result, the frequency and severity of
accidents in our plants have dropped, sometimes dramatically. In
the last four years, while our employee count around the world has
increased, our record of safe performance has held firm.
Close-up view of the turbine
wheel for the 60 megawatt
peaking gas turbine at Energy
Center Kladno, NRG’s entry
into the Czech Republic.
“Being the seventh largest independent generation company has given us
more visibility. With a stronger profile, NRG is seen as a more serious player.
People seek us out.” Valorie A. Knudsen, Vice President, Corporate Strategy,
NRG Energy, Inc.
A chiller evaporator section
at Minneapolis Energy
Center (MEC), one of NRG
Thermal’s operations. MEC
provides heating and cooling
to buildings in downtown
Minneapolis, Minnesota.
20
We value our reputation as a company that operates with integrity
and ethics and fulfills its promises. We have implemented tough
environmental standards of operation that apply to every employee.
Each and every one is called upon to report environmental violations,
and we do—even at times when we are not required to report— to
help ensure trust in our operations. Similarly, in 1999 we implemented
a corporate compliance program to ensure that each employee
understands and practices the highest ethical standards we demand
around the world.
NRG Energy, Inc. 1999 Annual Report | Value | “The greatest thing is the
opportunity to contribute to some of the greatest changes in economic
conditions that have taken place in the last 50 or 60 years. When we work in
some areas, such as Estonia, Germany and the Czech Republic, we’re able to
participate in and contribute to the complete restructuring of an economy.”
Gary H. Boline, Executive Director Operations, Europe, NRG Energy, Inc.
Delivering value demands much from all of us. It demands people
who have worked hard, with personal sacrifice, to earn all that we
have achieved—people who can celebrate success yet not grow com-
placent with it. Every day it demands one’s personal best in market
savvy, discipline, drive, energy and integrity. Our vision is a constant
one: to sustain the momentum and continue to be, simply, remarkable.
Sodium vapor lights give the air ejectors at the
Huntley Generating Station a “golden cast.”
Huntley is NRG’s largest coal facility in the state
of New York.
Feedwater pipes and deaerator at the
Wählitz plant in Germany, one of three
cogeneration facilities at MIBRAG, NRG’s
multi-functional power corporation.
Condensed Consolidated Statement of Income 22
Condensed Consolidated Statement of Cash Flows 23
Condensed Consolidated Balance Sheet 24
Condensed Consolidated Statement of Stockholder’s Equity 26
Notes to Condensed Consolidated Financial Statements 27
Independent Accountant’s Report 34
NRG Energy, Inc. 1999 Annual Report | Financial Review
Condensed Consolidated Statement of Cash Flows | NRG Energy, Inc. and Subsidiaries
Year Ended December 31,
(Thousands of Dollars) 1999 1998 1997
Cash Flows from Operating ActivitiesNet income $ 57,195 $ 41,732 $ 21,982
Adjustments to reconcile net income to net cash (used) provided by operating activities
Undistributed equity earnings of unconsolidated affiliates (27,181) (23,391) 6,481
Depreciation and amortization 37,026 16,320 10,310
Deferred income taxes and investment tax credits (3,401) 7,618 3,107
Investment write-downs – 26,740 8,964
Gain on sale of investments (10,994) (29,950) (8,702)
Cash used by changes in other assets and liabilities (64,025) (17,071) (7,656)
Net Cash (Used) Provided by Operating Activities (11,380) 21,998 34,486
Cash Flows from Investing ActivitiesInvestments in projects (163,340) (132,379) (318,149)
Acquisitions, net of liabilities assumed (1,519,365) – (148,830)
Consolidation of equity subsidiaries 20,181 – –
Cash from sale of project investment 43,500 18,053 19,158
Decrease (increase) in notes receivable 58,331 16,858 (37,431)
Capital expenditures (94,853) (31,719) (26,936)
(Increase) decrease in restricted cash (13,067) (2,433) 16,100
Other, net – – 10,114
Net Cash Used by Investing Activities (1,668,613) (131,620) (485,974)
Cash Flows from Financing ActivitiesCapital contributions from parent 250,000 100,000 80,900
Net borrowing under line of credit 216,000 2,000 122,000
Proceeds from issuance of debt 1,257,729 23,169 254,061
Principal payments on long-term debt (18,634) (21,152) (5,925)
Net Cash Provided by Financing Activities 1,705,095 104,017 451,036
Net Increase (Decrease) in Cash and Cash Equivalents 25,102 (5,605) (452)
Cash and Cash Equivalents at Beginning of Period 6,381 11,986 12,438
Cash and Cash Equivalents at End of Period $ 31,483 $ 6,381 $ 11,986
See notes to condensed consolidated financial statements.
22
NRG Energy, Inc. 1999 Annual Report | Financial Review
Condensed Consolidated Balance Sheet | NRG Energy, Inc. and Subsidiaries
December 31,
(Thousands of Dollars) 1999 1998
Assets
Current AssetsCash and cash equivalents $ 31,483 $ 6,381Restricted cash 17,441 4,021Accounts receivable less allowancefor doubtful accounts of $186 and $100 126,376 22,547
Current portion of notes receivable 287 30,660Income taxes receivable – 21,169Inventory 119,181 2,647Prepayments and other current assets 29,202 4,533
Total current assets 323,970 91,958
Property, Plant and Equipment, at Original CostIn service 2,022,724 291,558Under construction 53,448 5,352
Total property, plant and equipment 2,076,172 296,910
Less accumulated depreciation (156,849) (92,181)
Net property, plant and equipment 1,919,323 204,729
Other AssetsInvestments in projects 988,671 800,924Capitalized project costs 2,592 13,685Notes receivable, less current portion 71,281 105,631Intangible assets, net of accumulated amortization of $4,308 and $2,984 55,586 22,507
Debt issuance costs, net of accumulated amortization of $6,640 and $1,675 20,081 7,276
Other assets, net of accumulated amortization of $8,909 and $7,350 50,180 46,716
Total other assets 1,188,391 996,739
Total Assets $3,431,684 $1,293,426
See notes to condensed consolidated financial statements.
23
Condensed Consolidated Balance Sheet | NRG Energy, Inc. and Subsidiaries
December 31,
(Thousands of Dollars) 1999 1998
Liabilities and Stockholder’s Equity
Current LiabilitiesCurrent portion of project-level, long-term debt $ 30,462 $ 8,258
Revolving line of credit 340,000 –
Consolidated project-level, non-recourse debt 35,766 –
Accounts payable 67,615 7,371
Income taxes payable 4,730 –
Accrued salaries, benefits and related costs 9,648 7,551
Accrued interest 13,479 7,648
Other current liabilities 22,655 11,540
Total current liabilities 524,355 42,368
Minority Interest 14,373 13,516
Consolidated Project-Level, Long-Term, Non-Recourse Debt 1,026,398 113,437
Corporate-Level Long-Term Debt, Less Current Portion 915,000 504,781
Deferred Income Taxes 16,940 19,841
Deferred Investment Tax Credits 1,088 1,343
Post-Retirement and Other Benefit Obligations 24,613 11,060
Other Long-Term Obligations and Deferred Income 15,263 7,748
Total liabilities 2,538,030 714,094
Stockholder’s EquityCommon stock; $1 par value; 1,000 shares authorized;
1,000 shares issued and outstanding 1 1
Additional paid-in capital 781,913 531,913
Retained earnings 187,210 130,015
Accumulated other comprehensive income (75,470) (82,597)
Total stockholder’s equity 893,654 579,332
Total Liabilities and Stockholder’s Equity $3,431,684 $1,293,426
See notes to condensed consolidated financial statements.
24
25
NRG Energy, Inc. 1999 Annual Report | Financial Review
Condensed Consolidated Statement of Stockholder’s Equity | NRG Energy, Inc. and Subsidiaries
Accumulated
Additional Other Total
Common Paid-In Retained Comprehensive Stockholder’s
(Thousands of Dollars) Stock Capital Earnings Income Equity
Balances at December 31, 1996 $1 $351,013 $ 66,301 $ 4,599 $421,914
Net income 21,982 21,982
Foreign currency translation adjustments (74,098) (74,098)
Comprehensive income for 1997 (52,116)
Capital contributions from parent 80,900 80,900
Balances at December 31, 1997 1 431,913 88,283 (69,499) 450,698
Net income 41,732 41,732
Foreign currency translation adjustments (13,098) (13,098)
Comprehensive income for 1998 28,634
Capital contributions from parent 100,000 100,000
Balances at December 31, 1998 1 531,913 130,015 (82,597) 579,332
Net income 57,195 57,195
Foreign currency translation adjustments 7,127 7,127
Comprehensive income for 1999 64,322
Capital contributions from parent 250,000 250,000
Balances at December 31, 1999 $1 $781,913 $187,210 $(75,470) $893,654
See notes to condensed consolidated financial statements.
26
Notes to Condensed Consolidated Financial Statements | NRG Energy, Inc. and Subsidiaries
2
1N O T E O N E Organization
NRG Energy, Inc. (the Company), a Delaware corporation, was incorporated on May 29, 1992 as a wholly
owned subsidiary of Northern States Power Company (NSP). Beginning in 1989, the Company was doing
business through its predecessor companies NRG Energy, Inc. and NRG Group, Inc., Minnesota corpora-
tions which were merged into the Company subsequent to its incorporation. The Company and its
subsidiaries and affiliates develop, build, acquire, own and operate nonregulated energy-related businesses.
N O T E T W O Summary of Significant Accounting Policies
Principles of Consolidation and Basis of Presentation | The consolidated financial statements include the
accounts of the Company and its subsidiaries (referred to collectively herein as NRG). Accounting policies
for all of NRG operations are in accordance with accounting principles generally accepted in the United
States. All significant intercompany transactions and balances have been eliminated in consolidation.
NRG has investments in partnerships, joint ventures and projects for which the equity method of account-
ing is applied. Earnings from equity in international investments are recorded net of foreign income taxes.
Property, Plant and Equipment | Property, plant and equipment are capitalized at original cost.
Significant additions or improvements extending asset lives are capitalized, while repairs and maintenance
are charged to expense as incurred. Depreciation is computed using the straight-line method over the
following estimated useful lives:
Facilities and improvements 10 – 45 years
Machinery and equipment 7 – 30 years
Office furnishings and equipment 3 – 5 years
Development Costs and Capitalized Project Costs | These costs include professional services, dedicated
employee salaries, permits, and other costs which are incurred incidental to a particular project. Such costs
are expensed as incurred until a sales agreement or letter of intent is signed, and the project has been
approved by NRG’s Board of Directors. Additional costs incurred after this point are capitalized. When
project operations begin, previously capitalized project costs are reclassified to investment in projects and
amortized on a straight-line basis over the lesser of the life of the project’s related assets or revenue
contract period.
Intangibles | Intangibles consist principally of the excess of the cost of investment in subsidiaries over the
underlying fair value of the net assets acquired and are being amortized using the straight-line method
over 20 to 30 years. The Company periodically evaluates the recovery of goodwill and other intangibles
based on an analysis of estimated undiscounted future cash flows.
Other Long-Term Assets | Other long-term assets consist primarily of service agreements and operating
contracts. These assets are being amortized over the remaining terms of the individual contracts, which
range from 7 to 28 years.
Income Taxes | The Company is included in the consolidated tax returns of NSP. NRG calculates its
income tax provision on a separate return basis under a tax sharing agreement with NSP. Current federal
and state income taxes are payable to or receivable from NSP. NRG records income taxes using the liabil-
ity method. Income taxes are deferred on all temporary differences between pretax financial and taxable
income and between the book and tax bases of assets and liabilities. Deferred taxes are recorded using the
tax rates scheduled by law to be in effect when the temporary differences reverse.
Revenue Recognition | Under fixed-price contracts, revenues are recognized as products or services are
delivered. Revenues and related costs under cost reimbursable contract provisions are recorded as costs are
incurred. Anticipated future losses on contracts are charged against income when identified.
Foreign Currency Translation | The local currencies are generally the functional currency of NRG’s for-
eign operations. Foreign currency denominated assets and liabilities are translated at end-of-period rates
of exchange. The resulting currency adjustments are accumulated and reported as a separate component
of stockholder’s equity. Income, expense, and cash flows are translated at weighted-average rates of
exchange for the period.
Derivative Financial Instruments | Hedge Accounting is applied only if the derivative reduces the risk of
the underlying hedged item and is designated at inception as a hedge, with respect to the hedged item.
If a derivative instrument ceased to meet the criteria for deferral, any gains or losses would be currently
recognized in income. NRG does not hold or issue derivative financial instruments for trading purposes.
Reclassifications | Certain prior-year amounts have been reclassified for comparative purposes. These
reclassifications had no effect on net income or stockholder’s equity as previously reported.
27
Notes to Condensed Consolidated Financial Statements | NRG Energy, Inc. and Subsidiaries
NRG Energy, Inc. 1999 Annual Report | Financial Review
N O T E T H R E E Business Acquisitions and Divestitures
In February 1999, NRG purchased from Thermal Ventures, Inc. (TVI) the remaining 50.1 percent limited
partnership interests held by TVI in San Francisco Thermal Limited Partnership and Pittsburgh Thermal
Limited Partnership for $12.3 million. In April 1999, NRG acquired TVI’s 50 percent member interest
in North American Thermal Systems LLC (the entity holding the general partnership interest in the San
Francisco and Pittsburgh partnerships) for $500,000.
In 1994, NRG, through a wholly owned subsidiary, purchased a 50 percent interest in Sunnyside
Generation Associates, which owns and operates a 58 megawatt waste coal plant in Utah. In March 1999,
NRG and its partner executed an agreement to sell the Sunnyside project to an affiliate of Baltimore Gas
& Electric for a purchase price of $2.0 million. There was no gain or loss on the sale which closed during
the second quarter of 1999.
In April 1999, NRG completed the acquisition of the Somerset power station for approximately $55 million
from the Eastern Utilities Association. The Somerset station, located in Somerset, Massachusetts, includes two
coal-fired generating facilities and two aeroderivative combustion turbine peaking units with a capacity
rating of 160 megawatts, excluding 69 megawatts on deactivated reserve.
In May 1999, NRG and Dynegy Power Corporation (Dynegy), through West Coast Power LLC, complet-
ed the acquisition of the Encina generating station and 17 combustion turbines for approximately $356 mil-
lion from San Diego Gas & Electric Company. The facilities, which have a combined capacity rating of
1,218 megawatts, are located near Carlsbad and San Diego, California. NRG and Dynegy each own a 50
percent interest in these facilities.
In June 1999, NRG completed its acquisition of the Huntley and Dunkirk generating stations from Niagara
Mohawk Power Corporation (NIMO) for approximately $355 million. The two coal-fired power genera-
tion facilities are located near Buffalo, New York, and have a combined capacity rating of 1,360 megawatts.
In June 1999, NRG completed its acquisition of the Arthur Kill generating station and the Astoria gas tur-
bine site from Consolidated Edison Company of New York, Inc. for approximately $505 million. These facil-
ities, which are located in the New York City area, have a combined capacity rating of 1,456 megawatts.
28
Notes to Condensed Consolidated Financial Statements | NRG Energy, Inc. and Subsidiaries
3
29
Notes to Condensed Consolidated Financial Statements | NRG Energy, Inc. and Subsidiaries
NRG, together with its partner and the Creditor’s committee, filed a plan with the United States Bankruptcy
court for the Middle District of Louisiana to acquire 1,708 megawatts of fossil generating assets from
Cajun Electric Power Cooperative of Baton Rouge, Louisiana (Cajun) for approximately $1.0 billion.
During the third quarter, the U.S. Bankruptcy Judge confirmed the Creditor’s Plan of Reorganization and
NRG exercised an option to purchase its partner’s 50 percent interest in the project. NRG expects to close
the acquisition of the Cajun assets in the spring of 2000.
In August, NRG agreed to sell all but a 20 percent ownership interest in Cogeneration Corporation of
America (CogenAmerica) to Calpine Corporation in connection with Calpine’s acquisition of the remaining
shares of CogenAmerica. Prior to December 1999, NRG owned approximately 45 percent of CogenAmerica.
Upon closing of the proposed transaction, all outstanding shares of CogenAmerica common stock
(other than those retained by NRG) were acquired by Calpine for a cash purchase price of $25.00 per
share. The transaction closed during the fourth quarter of 1999 and NRG retained a 20 percent ownership interest
in CogenAmerica.
In October 1999, NRG completed its acquisition of the Oswego generating station from NIMO and
Rochester Gas and Electric for approximately $85 million. The oil- and gas-fired power generating facility
which has a capacity rating of 1,700 megawatts is located on a 93-acre site in Oswego, New York. This
facility consists of two units each having a capacity rating of 850 megawatts.
On December 15, 1999, NRG acquired four fossil fuel generating stations and numerous remote gas turbines
from Connecticut Light & Power Company (CL&P) for approximately $460 million. These facili-
ties are located throughout Connecticut and have a combined capacity rating of 2,235 megawatts. NRG
entered into a Standard Offer Service Wholesale Sales Agreement with CL&P pursuant to which NRG
will supply CL&P with 35 percent of its standard offer service load during 2000, 40 percent during 2001
and 2002, and 45 percent during 2003. NRG estimates that 45 percent of CL&P’s standard offer service
load in 2003 will be approximately 2,070 megawatts at peak requirement. The Agreement terminates on
December 31, 2003.
In December 1999, NRG purchased a 50 percent interest in the Rocky Road Power Plant, a 250 megawatt
natural gas fired simple-cycle peaking facility in East Dundee, IL from Dynegy Inc., for approximately $60
million. The power plant began commercial operations on June 30, 1999 and received approval for the
NRG Energy, Inc. 1999 Annual Report | Financial Review
30
Notes to Condensed Consolidated Financial Statements | NRG Energy, Inc. and Subsidiaries
4
installation of an additional 100 megawatt natural gas combustion turbine in October 1999, increasing
the facility’s generating capacity to a nominal 350 megawatts. The expansion is expected to be in
service before the start of the peak summer 2000 season.
N O T E F O U R Investments Accounted for by the Equity Method
NRG has investments in various international and domestic energy projects. The equity method of accounting
is applied to such investments in affiliates, which include joint ventures and partnerships, because the
ownership structure prevents NRG from exercising a controlling influence over operating and financial
policies of the projects. Under this method, equity in pretax income or losses of domestic partnerships
and, generally, in the net income or losses of international projects are reflected as equity in earnings of
unconsolidated affiliates.
Summarized financial information for investments in unconsolidated affiliates accounted for under the
equity method as of and for the year ended December 31, is as follows:
(Thousands of Dollars) 1999 1998 1997
Operating Revenues $1,732,521 $1,491,197 $1,612,897
Costs and Expenses 1,531,958 1,346,569 1,522,727
Net Income $ 200,563 $ 144,628 $ 90,170
Current Assets $ 742,674 $ 710,159 $ 713,390
Noncurrent Assets 7,322,219 7,938,841 7,733,886
Total Assets $8,064,893 $8,649,000 $8,447,276
Current Liabilities $ 708,114 $ 527,196 $ 472,980
Noncurrent Liabilities 5,168,893 5,854,284 6,042,102
Equity 2,187,886 2,267,520 1,932,194
Total Liabilities and Equity $8,064,893 $8,649,000 $8,447,276
NRG’s Share of Equity $ 988,671 $ 800,924 $ 694,655
NRG’s Share of Income $ 67,500 $ 81,706 $ 26,200
31
Notes to Condensed Consolidated Financial Statements | NRG Energy, Inc. and Subsidiaries
5N O T E F I V E Commitments and Contingencies
Capital Commitments—International | In November 1999, NRG agreed to purchase the 665 megawatt
Killingholme A station from National Power plc. Killingholme A was commissioned in 1994 and is a
combined-cycle, gas-turbine power station located in England. The purchase price for the station will be
approximately 410 million pounds sterling (approximately U.S. $662 million at end-of-year exchange
rates), subject to commercial adjustments. The purchase price includes 20 million pounds sterling (approxi-
mately U.S. $32 million at end-of-year exchange rates) that is contingent upon the successful completion
of negotiations regarding NRG’s purchase of National Power’s Blyth generating facilities. The Blyth assets consist
of two coal-fired stations totaling 1,140 megawatts of generation capacity located in England.
Capital Commitments—Domestic | NRG expects to complete the acquisition of 1,708 megawatts of
fossil-fueled generating assets from Cajun Electric Power Cooperative of Baton Rouge, Louisiana for
approximately $1.0 billion. The transaction is expected to close in the spring of 2000.
In January 2000, NRG agreed to purchase 1,875 megawatts of fossil-fueled electric generating capacity
and other assets from Conectiv of Wilmington, Delaware for $800 million. The fossil-fueled generating
facilities consist of Conectiv’s wholly owned BL England, Deepwater, Indian River and Vienna steam stations
plus Conectiv’s interest in the Conemaugh and Keystone steam stations. Other assets in the purchase are
the 241-acre Dorchester site located in Dorchester County, Maryland, certain Merrill Creek Reservoir
entitlements in Harmony Township, New Jersey and certain excess emission allowances.
In February 2000, NRG executed a memorandum of understanding with GE Power Systems, a division
of General Electric Company, to purchase 11 gas turbine generators and five steam turbine generators.
The purchase will take place over the next five years and is valued at approximately $500 million with an
option to purchase additional units. The 16 turbines have an equivalent generation output of 3,000
megawatts and will be installed at NRG’s existing North American plant sites.
NRG has contractually agreed to the monetization of certain tax credits generated from landfill gas sales
through the year 2007.
NRG Energy, Inc. 1999 Annual Report | Financial Review
Future capital commitments related to projects are as follows:
(Millions of Dollars)
2000 $2,700
2001 500
2002 500
2003 500
2004 500
Total $4,700
Source of Capital | NRG anticipates funding its ongoing capital commitments through the issuance of
debt, additional equity from NSP, and operating cash flows. In addition, NRG may issue a limited amount
of equity financing to third parties for funding a portion of the capital requirements.
Contractual Commitments | NRG has recently acquired various generating facilities from NIMO,
ConEd, CL&P, and others. In connection with these acquisitions NRG has entered into numerous transition
agreements that obligate NRG to maintain electric generating capability and availability at certain of these
newly acquired facilities.
In addition, NRG has entered into various transition power sales agreements related to these recent acqui-
sitions that have terms ranging from four to 10 years. These agreements generally require NRG to satisfy
specified capacity requirements and supply firm all-requirements electric service, including capacity, energy
reserves, and related services necessary to satisfy the aggregate load attributable to specified customers taking
standard offer service. NRG expects to serve these load requirements through a combination of existing
generation and power purchases.
Environmental Regulations | Environmental controls at the federal, state, regional and local levels have a
substantial impact on NRG’s operations due to the cost of installation and operation of equipment
required for compliance.
Site Contamination/Remediation | With the acquisition of the NRG Northeast assets, NRG assumed
certain liabilities for existing environmental conditions at the sites with the exception of off-site liabilities
associated with the disposal of hazardous materials and certain other environmental liabilities.
Claims and Litigation | NRG is involved in various litigation matters. NRG is actively defending these
matters and does not feel the outcome of such matters would materially impact NRG’s results of operations.
32
Notes to Condensed Consolidated Financial Statements | NRG Energy, Inc. and Subsidiaries
We have audited, in accordance with auditing standards generally accepted in the United States, the
consolidated financial statement of NRG Energy, Inc., a wholly owned subsidiary of Northern States Power
Company as of December 31, 1999 and 1998 and for each of the three years in the period ended December
31, 1999 appearing in the Form 10-K for the year ended December 31, 1999 (which statements are not
presented herein); and in our report dated March 17, 2000 we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheets as of December 31, 1999 and 1998 and the related condensed
consolidated statements of income, of stockholder’s equity, and of cash flows for each of the three years in
the period ended December 31, 1999, when read in conjunction with the consolidated financial statements
from which it has been derived, is fairly stated in all material respects in relation thereto.
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
March 17, 2000
33
To the Board of Directors and Stockholder of NRG Energy, Inc.
NRG Energy, Inc. 1999 Annual Report | Independent Accountant’s Report
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking
statements. Certain information included in this Annual Report contains statements that are forward-
looking, such as statements relating to business development activities as well as other capital spending
and financing sources. Such forward-looking information involves important risks and uncertainties that
could significantly affect anticipated results in the future and, accordingly, such results may differ from
those expressed in any forward-looking statements made by or on behalf of NRG. For more information
regarding these risks and uncertainties, review NRG’s filings with the Securities and Exchange Commission,
including NRG’s Registration Statement No. 333-93055, as amended.
34
NRG Energy, Inc. 1999 Annual Report | Forward-looking Statement
NRG Energy, Inc. (Headquarters)1221 Nicollet Mall, Suite 700Minneapolis, MN 55403
phone 612.373.5300 orphone 800.241.4NRGfax 612.373.8800
NRG North America (Western Region)Symphony Towers, Suite 2740750 “B” StreetSan Diego, CA 92101
phone 619.615.7666phone 800.973.6420fax 619.615.7663
NRG North America (Eastern Region)Blaymore 1, Fourth Floor1606 Carmody CourtSewickley, PA 15143
phone 724.934.4600fax 724.934.5630
NRG Energy, Inc. (Miami Office)95 Merrick WaySuite 380Coral Gables, FL 33134
phone 305.476.6600fax 305.445.1686
NRG Asia-Pacific, Ltd.Level 22, 307 Queen StreetLocked Bag 1480Brisbane, QLD 4000 Australia
phone 61.7.3218.7333fax 61.7.3218.7300
NRG Energy, Inc. Asikkerem Sokak Uras I
.s Merkezi
No. 30 Dikilitas - Besiktas 80700Istanbul, Turkey
phone 90.212.227.7775fax 90.212.227.7776
NRG Energy, Ltd.Bennet House54 St. James’s StreetLondon SW1A 1JT United Kingdom
phone 44.207.409.1025fax 44.207.409.1074
NRG Energy Development GmbHFriedrichstrasse 5010117 Berlin, Germany
phone 49.30.20.65.9219fax 49.30.20.65.9330
NRGenerating International B.V.Müürivahe 41, 2nd Floor10140 Tallinn, Estonia
phone 372.6.311.553fax 372.6.311.554
NRG Energy CZ, s.r.o.Husova 5-Berlém Palais110 00 Praha 1-Staré MestoPrague, Czech Republic
phone 420.2.24.40.11.38fax 420.2.24.40.15.41
NRG Energy PL Sp, z.o.o.Warsaw Financial Centre11th Floorul. Emili Plater 5300-113 Warsaw, Poland
phone 48.22.520.6962fax 48.22.520.6701
NRG Energy, Inc. 1999 Annual Report | Locations
35
NRG Energy, Inc. and Subsidiaries
NRG Energy, Inc. 1999 Annual Report | Officers & Directors
David H. Peterson (58) Chairman, President and Chief Executive Officer
Brian B. Bird (37)Vice President and Treasurer
Roy R. Hewitt (53)Vice President, Administrative Services
Craig A. Mataczynski (39)Senior Vice President, North America
John A. Noer (53)Senior Vice President, NRG Energy, Inc.President, Worldwide Operations
James J. Bender (43)Vice President and GeneralCounsel and Corporate Secretary
Leonard A. Bluhm (54)Executive Vice President and Chief Financial Officer
Valorie A. Knudsen (43)Vice President, Corporate Strategy
Louis P. Matis (48)Vice President, Corporate Operating Services
David E. Ripka (50) Vice President and Controller
Ronald J. Will (59)Senior Vice President, Europe
Keith G. Hilless (61)Senior Vice President, Asia-Pacific
Directors
Gary R. Johnson (53)Vice President and General CounselNorthern States Power Company
Edward J. McIntyre (49)Vice President and Chief Financial OfficerNorthern States Power Company
David H. Peterson (58)Chairman, President and Chief Executive Officer NRG Energy, Inc.
Cynthia L. Lesher (51)President–NSP GasNorthern States Power Company
Officers
NRG Energy, Inc. 1221 Nicollet MallSuite 700Minneapolis, MN 55403
(612) 373-5300
A subsidiary of Northern States Power Company
