EAST COAST POWER LLC - 10-Q Quarterly Report

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

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FORM 10-Q
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(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002

OR

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

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER: 333-45124

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EAST COAST POWER L.L.C.
(Exact Name of Registrant as Specified in its Charter)

DELAWARE 52-2143667
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)

EL PASO BUILDING
1001 LOUISIANA STREET
HOUSTON, TEXAS 77002
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, Including Area Code: (713) 420-2600

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 such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

98.01 percent of the membership interests of East Coast Power L.L.C. is
owned directly by Mesquite Investors, L.L.C., 0.99 percent of the membership
interests is owned by Bonneville Pacific Corporation, and 1 percent of
membership interests is owned directly or indirectly by East Coast Power Holding
Company, L.L.C. Such membership interests are not publicly traded and therefore
have no separate, quantifiable market value.

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PART I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

EAST COAST POWER L.L.C.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS)
(UNAUDITED)

See accompanying notes.

1

EAST COAST POWER L.L.C.

CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
(UNAUDITED)

See accompanying notes.

2

EAST COAST POWER L.L.C.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
(UNAUDITED)

See accompanying notes.

3

EAST COAST POWER L.L.C.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. BASIS OF PRESENTATION

We are a Delaware limited liability company formed in December 1998. We are
owned by three members: Mesquite Investors, L.L.C. directly owns 98.01 percent
of the membership interests in us; Bonneville Pacific Corporation, a wholly
owned subsidiary of Mesquite Investors, owns 0.99 percent of the membership
interests in us; and East Coast Power Holding Company, L.L.C., which is
indirectly owned by Enron Corporation, owns a 1 percent non-voting preferred
membership interest in us.

Our sole business is the ownership and operation of four power generation
facilities located in Camden, Linden, and Bayonne, New Jersey. The facilities
are commonly referred to as Linden Venture, Camden Venture, Bayonne Venture and
Linden 6.

We prepared this Quarterly Report on Form 10-Q under the rules and
regulations of the United States Securities and Exchange Commission. Because
this is an interim period filing presented using a condensed format, it does not
include all of the disclosures required by generally accepted accounting
principles. You should read it along with our December 31, 2001 audited
financial statements on Form 10-K which includes a summary of our significant
accounting policies and other disclosures. The financial statements as of June
30, 2002, and for the quarters and six months ended June 30, 2002 and 2001, are
unaudited. The balance sheet as of December 31, 2001 is derived from our audited
balance sheet included in our Form 10-K. We believe we have made all
adjustments, all of which are of a normal, recurring nature, to fairly present
our interim period results. Information for interim periods may not necessarily
indicate the results of operations for the entire year due to the seasonal
nature of our business. The prior period information also includes
reclassifications which were made to conform to the current period presentation.
These reclassifications have no effect on our reported net income or members'
capital.

Our accounting policies are consistent with those discussed in our Form
10-K as of December 31, 2001, except as discussed below.

Asset Impairments

Effective January 1, 2002, we began evaluating the impairment of our
long-lived assets in accordance with Statement of Financial Accounting Standards
(SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.
This statement requires that long-lived assets that are to be disposed of by
sale be measured at the lower of book value or fair value less cost to sell. The
standard also expanded the scope of discontinued operations to include all
components of an entity with operations that can be distinguished from the rest
of the entity and will be eliminated from the ongoing operations of the entity
in a disposal transaction. The adoption of this standard had no initial impact
on our financial statements.

Derivatives Implementation Group Issue C-16

In September 2001, the Derivatives Implementation Group of the Financial
Accounting Standards Board (FASB) cleared guidance on Issue C-16, Scope
Exceptions: Applying the Normal Purchases and Normal Sales Exception to
Contracts that Combine a Forward Contract and a Purchased Option Contract. This
guidance impacts the accounting for fuel supply contracts that require delivery
of a contractual minimum quantity of fuel at a fixed price and have an option
that permits the holder to take specified additional amounts of fuel at the same
fixed price at various times. This guidance requires companies to account for
these contracts as derivative instruments under SFAS No. 133, as amended, and
requires them to be recorded at their fair value. We use fuel supply contracts
in our power producing operations and currently do not reflect them in our
balance sheet since they are not classified as derivative instruments under SFAS
No. 133, as amended, under its current interpretation. This guidance became
effective April 1, 2002. The implementation of this guidance had no impact on
our financial statements.

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2. INVESTMENTS IN UNCONSOLIDATED AFFILIATES

The following table presents summary statement of operations information
for our unconsolidated affiliates for the quarter and six months ended June 30,
2002 and 2001:

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(1) In March 2001, we acquired the remaining partnership interest in Bayonne
Venture and, in December 2001, we acquired the remaining partnership
interest in Camden Venture. As a result, we are the sole owner of Bayonne
Venture and Camden Venture whose financial statements were consolidated
during 2001, and, only Linden Venture is represented in 2002.

3. INVENTORY

Our inventory is as follows:

4. DEBT AND FINANCING TRANSACTIONS

Our debt consisted of the following:

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5. COMMITMENTS AND CONTINGENCIES

COMMITMENTS

There have been no material changes to our agreements from those reported
in our Form 10-K as of December 31, 2001, except as follows.

Linden 6 Material Agreements

Electricity Sale Agreements. Linden 6 entered into an energy services
agreement with Tosco Refining L.P., a subsidiary of Tosco Corporation, effective
February 14, 2000 and terminating on April 30, 2017. This agreement was amended
in January 2002 to clarify how charges incurred by Tosco pursuant to a contract
between Tosco and Public Service Electric and Gas Company would be treated under
this agreement. This agreement provides for the sale of a nominated quantity of
electricity of no less than 90 megawatts. The sales price for electric energy
delivered is primarily based on a fixed base component plus variable factors
including an operations and maintenance component, and a fuel component. Total
electricity revenues under this agreement were $16.0 million for the six months
ended June 30, 2002.

Linden 6 also entered into an electricity supply agreement with Infineum
effective December 21, 2001 and terminating on January 25, 2007. This agreement
provides for Infineum's requirements of electricity up to but not exceeding a
maximum quantity of 10 megawatts. Total electricity revenues under this
agreement were $1.1 million for the six months ended June 30, 2002.

In March 2002, Public Service Electric agreed to buy electricity generated
by Linden 6 but not purchased by Tosco. Total electricity revenues from Public
Service Electric were $2.4 million for the six months ended June 30, 2002.

The electricity sale agreements qualify for the "normal sales" exclusion
under SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, as amended, and, accordingly, are not accounted for as derivative
instruments. We evaluate the agreements on a regular basis to verify that the
exclusion continues to apply.

Gas Purchase Agreements. Under the terms of our energy services agreement
with Tosco, Linden 6 may purchase fuel for the operation of our facility with
approval from Tosco for any contract with a term greater than six months. Tosco
also has the option, with 30 days notice, to arrange for delivery of fuel to us
from Public Service Electric. Linden 6 provides Tosco with a credit for all
Public Service Electric charges they may incur. Included in fuel expenses was
$10.7 million for the six months ended June 30, 2002.

In February 2002, Linden 6 contracted with Conectiv Energy Supply, Inc. to
purchase natural gas up to 50,000 million British thermal units per day through
November 2005 at an index price plus $0.04 per million British thermal unit.
Included in fuel expenses was $4.5 million recognized under this agreement for
the six months ended June 30, 2002.

The gas purchase agreements qualify for the "normal purchase" exclusion
under SFAS No. 133, as amended, and, accordingly, are not accounted for as
derivative instruments. We evaluate the agreements on a regular basis to verify
that the exclusion continues to apply.

During 2002, Linden 6 purchased natural gas from El Paso Merchant Energy,
L.P., our affiliates, at an index price plus $0.04 per million British thermal
unit. Included in fuel expenses was $1.4 million for the six months ended June
30, 2002.

Gas Transportation Agreement. Linden 6 operates under a gas services
agreement between Tosco and Public Service Electric. This agreement requires
Public Service Electric to provide non-firm transportation within their system
for up to 70 million cubic feet of natural gas per day to the Linden 6 facility
at the published tariff rate and shall continue until April 30, 2017. Included
in fuel expenses is $0.7 million recognized under this agreement for the six
months ended June 30, 2002.

Standby Service Agreement. In January 2002, Linden 6 contracted with
Public Service Electric to purchase standby electric service should the facility
fail to operate. The maximum electric requirement that

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can be purchased by Linden 6 at any time and under any circumstance during the
year is 100 megawatts. This agreement expires on January 25, 2003. Fees under
this agreement were approximately $1.4 million during the six months ended June
30, 2002.

Standby Letters of Credit

Under our loan agreements and other commercial commitments, we maintained
letters of credit in the amount of $57.7 million as of June 30, 2002. No amounts
have been drawn under these letters of credit.

CONTINGENCIES

Linden 6 Project

During February 2000, we entered into an energy services agreement with
Tosco under which we are required to construct, own and operate the Linden 6
facility, a 172-megawatt cogeneration facility on part of the existing Linden
site under a sublease entered into with Linden Venture. Our engineering,
procurement and construction agreement with National Energy Production
Corporation, an affiliate of Enron, provided for liquidated damages in the event
the completion of the expansion did not occur by late October 2001. Completion
of the facility was delayed. Linden 6 began commercial operations on January 25,
2002. Due to the Enron bankruptcy, the engineering, procurement and construction
contract was amended to allow us to pay National Energy Production
subcontractors directly, and we were precluded from collecting liquidated
damages from National Energy Production until the earlier of their bankruptcy or
April 30, 2002. We have a $2.2 million receivable for liquidated damages from
National Energy Production which is fully reserved. National Energy Production
filed for bankruptcy on May 20, 2002. We are preparing to file a bankruptcy
claim against National Energy Production for liquidated damages of $2.2 million
due to us. National Energy Production's subcontractors have filed liens totaling
approximately $20.6 million against the Linden 6 facility to secure claims for
amounts due to them and unpaid by National Energy Production. Proceedings have
begun in the New Jersey state court to have the liens released from the Linden 6
facility. Under state law, Linden 6 is required to pay to the subcontractors
only that portion of the total contract price that has not yet been paid to
National Energy Production. In August 2002, we paid $10.4 million in order to
have all of the liens released on the facility. Such liabilities were previously
accrued.

Total expenditures for Linden 6 were approximately $116.5 million and have
been reclassed from construction in progress to property, plant and equipment on
our balance sheet as of June 30, 2002. As part of the construction costs, we
capitalized interest costs of $9.8 million over the construction period.

In connection with obtaining the consent of the Linden Venture partners and
lenders for the transactions contemplated by the energy services agreement, we
have indemnified Linden Venture from any and all losses that may be incurred as
a result of Linden 6. El Paso Corporation, our affiliate, guaranteed our
obligations under this indemnity in an aggregate amount of up to $15.0 million.

Legal Proceedings

On June 30, 2000, Infineum filed an action against Linden Venture in the
United States District Court for the District of New Jersey seeking actual and
punitive damages. The suit claims that Linden Venture tortuously interfered with
Infineum's ability to sell steam purchased from the Linden facility to Bayway
Refining Company, and that such interference is in violation of federal and New
Jersey antitrust laws, and in breach of Linden Venture's agreement with
Infineum. Linden Venture filed an answer and a counterclaim on September 26,
2000. On December 21, 2001, the court denied Linden Venture's motion to dismiss
for lack of antitrust standing. Discovery is now proceeding. The court has
ordered the parties to mediate the dispute. A conference with the judge on this
matter has been scheduled for the middle of September 2002.

For each of our outstanding legal matters, we evaluate the merits of the
case, our exposure to the matter, possible legal or settlement strategies and
the likelihood of an unfavorable outcome. If we determine that an unfavorable
outcome is probable and can be estimated, we establish the necessary accruals.
As of June 30, 2002, we had reserves totaling $1.5 million for all outstanding
legal matters.

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While the outcome of our outstanding legal matters cannot be predicted with
certainty, based on the information known to date and our existing accruals, we
do not expect that the ultimate resolution of these matters to have a material
adverse effect on our financial position, results of operations or cash flows.
As new information becomes available or relevant developments occur, we will
review our accruals and make any appropriate adjustments. The impact of these
changes may have a material effect on our financial position, results of
operations or cash flows.

6. RESTRUCTURING OF POWER PURCHASE AGREEMENT

Jersey Central Power and Light

On February 27, 2002, we reached an agreement, subject to lender, partner,
and other unaffiliated party approval, with Jersey Central Power to restructure
the long-term power purchase agreement relating to our Bayonne Venture facility.
Completion of the restructuring is subject to customary conditions to closing
for similar transactions, including prior approval by the New Jersey Board of
Public Utilities, which was received in May 2002. However, since many of the
conditions to closing, such as securing financing, are outside of our control,
we cannot assure that we will be able to complete the restructuring. We also
agreed with Public Service Electric to modifications of the gas services and
interconnection agreements relating to the Bayonne facility effective upon the
consummation of the restructuring.

The restructuring could be deemed a power purchase agreement buyout under
the indenture executed in connection with our notes, in which case we would be
required to seek confirmation from the rating agencies that the restructuring
will not cause a rating downgrade.

7. NEW ACCOUNTING PRONOUNCEMENTS ISSUED BUT NOT YET ADOPTED

Accounting for Asset Retirement Obligations

In August 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. This statement requires companies to record a liability
relating to the retirement and removal of assets used in their business. The
liability is discounted to the present value, and the related asset value is
increased by the amount of the resulting liability. Over the life of the asset,
the liability will be accreted to its future value and eventually extinguished
when the asset is taken out of service. The provisions of this statement are
effective for fiscal years beginning after June 15, 2002. We are currently
evaluating the effects of this pronouncement.

Reporting Gains and Losses from the Early Extinguishment of Debt

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. This statement addresses how to report gains or losses resulting
from the early extinguishment of debt. Previously, any gains or losses were
reported as an extraordinary item. When we adopt SFAS No. 145, we will be
required to evaluate whether the debt extinguishment is truly extraordinary in
nature, in accordance with Accounting Principles Board Opinion No. 30. If we
routinely extinguish debt early, the gain or loss may be included in income from
continuing operations. This statement will be effective for our 2003 year-end
reporting.

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Accounting for Costs Associated with Exit or Disposal Activities

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. This statement will require us to recognize
costs associated with exit or disposal activities when they are incurred rather
than when we commit to an exit or disposal plan. Examples of costs covered by
this guidance include lease termination costs, employee severance costs that are
associated with a restructuring, discontinued operations, plant closings, or
other exit or disposal activities. The provisions of this statement are
effective for fiscal years beginning after December 31, 2002. The provisions of
this statement will impact any exit or disposal activities after January 1,
2003.

8. RELATED PARTY TRANSACTIONS

During the quarter and six months ended June 30, 2002, we purchased fuel
from El Paso Merchant, our affiliate, totaling $13.2 million and $24.0 million
and we recognized revenues of $7.2 million and $14.4 million related to
electricity sales to El Paso Merchant.

As of June 30, 2002, we had affiliate notes payable of $187.9 million. For
the quarter and six months ended June 30, 2002, we incurred interest expense of
$4.2 million and $8.5 million associated with these notes. Additionally, for the
six months ended June 30, 2002, we recorded $0.1 million for a guarantee fee due
to our affiliate in accrued liabilities.

We entered into a management agreement with El Paso Merchant to provide
project management, finance and accounting services to us for a fee of
approximately $3.6 million per year which is adjusted annually for increases in
the Consumer Price Index and is renewed annually. We recorded operating expenses
associated with this agreement of $0.9 million and $1.8 million for the quarter
and six months ended June 30, 2002.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The information contained in Item 2 should be read in conjunction with
information disclosed in our Form 10-K for the year ended December 31, 2001
dated April 15, 2002, in addition to the financial statements and notes
presented in Item 1, Financial Statements, of this Quarterly Report on Form
10-Q.

LINDEN 6 PROJECT

The Linden 6 facility, a 172-megawatt cogeneration facility operates on
part of the existing Linden site under a sublease entered into with Linden
Venture. Linden 6 is owned and operated by one of our wholly owned subsidiaries.
Linden 6 began commercial operations on January 25, 2002. Linden 6 was
constructed at a total cost of $116.5 million, which includes capitalized
interest costs of $9.8 million. Upon its completion in January 2002, we
classified these costs as part of property, plant, and equipment.

RESTRUCTURING OF CAMDEN AND BAYONNE POWER PURCHASE AGREEMENTS

Many domestic power plants have long-term power purchase agreements with
regulated utilities that were entered into under the Public Utility Regulatory
Policies Act of 1978 (PURPA). The power sold to the utility under the PURPA
contracts is required to be delivered from a specified power generation plant at
power prices that are usually significantly higher than the cost of power in the
wholesale power market. The cost of generating power at these PURPA power plants
is typically higher than the cost that would be incurred by obtaining the power
in the wholesale power generation market, principally because PURPA power plants
are less efficient than newer power generation facilities.

In a power contract restructuring, the PURPA power purchase agreement is
amended so that the power sold to the utility does not have to be provided from
the specific power plant. Because we are able to buy lower cost power in the
wholesale power market, we have the ability to reduce the cost paid by the
utility, thereby inducing the utility to enter into the power contract
transaction. Following the contract restructuring, the power plant operates on a
merchant basis, which means that it is no longer dedicated to one buyer and will
operate only when power prices are high enough to make operations economical.
Prior to a power contract restructuring, the power plant and its related PURPA
power purchase agreements are accounted for at their historical cost, which is
either the cost of construction or, if acquired, the acquisition cost. Revenues
and expenses prior to restructuring are, in most cases, accounted for on an
accrual basis, as power is generated and sold to the utility. As part of the
restructuring, any related fuel supply and steam contracts are generally amended
or terminated, the value of the remaining merchant plant is evaluated for
possible impairment, and the restructured power purchase agreement is adjusted
to their estimated fair value. The restructured power purchase agreement can
then be sold, or the entity that the power purchase agreement is contributed to
can enter into an offsetting, or mirror, power purchase agreement. In cases when
our affiliate enters into a mirror power purchase agreement, our affiliate uses
the restructured power purchase agreement, and the mirror power purchase
agreement, along with the fixed price spread between these contracts, as
collateral to obtain financing. The offsetting power purchase agreement requires
the power supplier, which can be an affiliate or third-party, to provide
long-term fixed price power in amounts sufficient to meet the obligations under
the restructured power purchase agreement.

On May 23, 2001, we reached an agreement to restructure the long-term power
purchase agreements with Public Service Electric at our Camden Venture and
Bayonne Venture facilities. On July 19, 2001, the New Jersey Board of Public
Utilities approved the restructurings, and we received written approval on July
27, 2001. This order became final and non-appealable on September 11, 2001, and
the restructuring was completed on December 12, 2001.

In the restructurings, we distributed the Bayonne Venture and Camden
Venture power purchase agreements with Public Service Electric, which had a book
value of approximately $233.7 million, to our common members, Bonneville Pacific
Corporation and Mesquite Investors, L.L.C. Our common members, in turn,
contributed the power purchase agreements to our affiliate, Cedar Brakes II,
L.L.C., causing the restructured power purchase agreement to become effective.
In addition, our Camden Venture and Bayonne Venture facilities were released
from their obligations under their power purchase agreements with Public

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Service Electric. Camden Venture began operations under an agreement with El
Paso Merchant on December 13, 2001. Additionally, Bayonne Venture began
operations under an agreement with El Paso Merchant on December 13, 2001, for
approximately 24 percent of the electric energy produced by the Bayonne facility
that had previously been purchased by Public Service Electric. As a result of
the distribution of Bayonne Venture and Camden Venture's power purchase
agreements, and the changes in the operations of these ventures following those
distributions, we reevaluated the carrying amount of our plant assets and
recorded an impairment charge of $62.8 million on our Camden facility and an
impairment charge of $4.5 million on our Bayonne facility to report these assets
at their estimated fair values. These charges were reflected in our consolidated
statement of operations for the year ended December 31, 2001. The estimated fair
value of our plants was based on sales data on similar plants, adjusted for
liquidity in the marketplace and locational differences.

In conjunction with the restructurings, we retired $44.7 million of Camden
Venture project level debt and $55.1 million of Bayonne Venture project level
debt in 2001. As a result of the early retirement of debt, we also incurred
extraordinary costs of $13.8 million at Bayonne Venture and incurred
extraordinary costs of $10.1 million at Camden Venture. These costs were
reported as extraordinary items in our consolidated statement of operations for
the year ended December 31, 2001.

The restructurings constituted a power purchase agreement buyout under our
indenture executed in connection with our senior secured notes. We received
confirmation from the ratings agencies that the restructurings did not cause a
rating downgrade provided that we redeem a portion of our notes. Consequently,
we redeemed $176.4 million of our notes on December 12, 2001.

RESULTS OF OPERATIONS

The following are our results for the second quarter of 2002 compared to
the second quarter of 2001 and for the six months ended June 30, 2002 compared
to the six months ended June 30, 2001. The operating results discussed below are
not necessarily indicative of the results that may be achieved for any
subsequent interim period or for a full year.

Second Quarter 2002 Compared to Second Quarter 2001

Operating revenues for the quarter ended June 30, 2002, were $17.4 million
higher than the same period in 2001. The increase was due to the consolidation
of Camden Venture beginning in December 2001, as a result of our purchase of its
outstanding partnership interests, resulting in additional revenue of $4.4
million. This increase in revenues would have been higher had the Camden
facility not been operating as a merchant facility. The increase was also due to
the commencement of commercial operations at Linden 6 in January 2002, resulting
in additional revenue of $15.6 million. These increases were offset by a
decrease in operating revenues at Bayonne Venture of $2.6 million, due to the
restructured power purchase agreement with El Paso Merchant.

Operating expenses for the quarter ended June 30, 2002, were $20.9 million
higher than the same period in 2001. The increase was due to the consolidation
of Camden Venture beginning in December 2001 resulting in $8.4 million of
additional operating expenses and from the commencement of commercial operations
at Linden 6 in January 2002 resulting in additional operating expenses of $13.3
million. The increase in operating

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expenses would have been higher had the Camden facility not been operating as a
merchant facility. Operating expenses increased by $1.7 million due to an
increase in management fees. These increases were offset by a decrease in
operating expenses at Bayonne Venture of $2.5 million, due to the restructured
power purchase agreement with El Paso Merchant.

Earnings from unconsolidated affiliates for the quarter ended June 30,
2002, were $8.7 million lower than the same period in 2001. The decrease was due
primarily to the consolidation of Camden Venture from December 1, 2001. As a
result, Camden Venture's earnings are consolidated into the operating results
for the quarter ended June 30, 2002, whereas they were presented as earnings
from unconsolidated affiliates for the same period in 2001.

Interest and debt expense, net decreased by $4.8 million for the quarter
ended June 30, 2002, compared to the same period in 2001 due primarily to a
lower outstanding debt balance, as a result of the power contract
restructurings.

Six Months Ended 2002 Compared to Six Months Ended 2001

Operating revenues for the six months ended June 30, 2002, were $55.7
million higher than the same period in 2001. The increase was due to the
consolidation of Bayonne Venture beginning in March 2001 and Camden Venture in
December 2001, as a result of our purchases of their outstanding partnership
interests. Operating revenues increased by $20.7 million due to the
consolidation of Bayonne Venture and $8.8 million due to the consolidation of
Camden Venture. The increase in revenues would have been higher had the Camden
facility not been operating as a merchant facility. The increase was also due to
the commencement of commercial operations at Linden 6 in January 2002, resulting
in additional operating revenues of approximately $19.5 million relating to
electricity sales and approximately $6.7 million relating to steam sales to our
affiliate.

Operating expenses for the six months ended June 30, 2002, were $46.8
million higher than the same period in 2001. The increase was due to the
consolidation of Bayonne Venture beginning in March 2001 and Camden Venture in
December 2001 and from the commencement of operations at Linden 6 in January
2002. Operating expenses increased by $12.4 million due to the consolidation of
Bayonne Venture and $13.2 million due to the consolidation of Camden Venture.
The increase in operating expenses would have been higher had the Camden
facility not been operating as a merchant facility. An increase of $21.2 million
in operating expenses is attributed to the commencement of operations at Linden
6.

Earnings from unconsolidated affiliates for the six months ended June 30,
2002, were $12.2 million lower than the same period in 2001. The decrease was
due primarily to the consolidation of Bayonne Venture from March 13, 2001 and
Camden Venture from December 1, 2001. As a result, Bayonne Venture's and Camden
Venture's earnings are consolidated into the operating results for the six
months ended June 30, 2002, whereas they were presented as earnings from
unconsolidated affiliates for the same period in 2001.

Interest and debt expense, net decreased by $9.4 million for the six months
ended June 30, 2002, compared to the same period in 2001 due primarily to a
lower outstanding debt balance as a result of the power contract restructurings.

LIQUIDITY AND CAPITAL RESOURCES

Cash from Operating Activities

Net cash provided by our operating activities was $78.2 million for the six
months ended June 30, 2002, compared to $30.7 million for 2001. The increase was
primarily due to Linden 6 operations that began in January 2002, lower fuel
costs at Bayonne Venture and reimbursement of 2001 fuel costs at Linden Venture
which were received in 2002.

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Cash from Investing Activities

Net cash used in our investing activities was $6.0 million for the six
months ended June 30, 2002. Our 2002 investing activities consisted of additions
to property, plant and equipment in connection with the Linden 6 expansion.

Our capital expenditures for the remainder of 2002 are expected to be
approximately $2.7 million. Future capital expenditures by us will be financed
by cash flows from operations or cash contributions by our members.

Cash from Financing Activities

Net cash used in our financing activities was $43.4 million for the six
months ended June 30, 2002. The 2002 activity includes payments to retire
long-term debt and distributions paid to our members.

Future Liquidity

Our primary source of liquidity is cash generated in the form of operating
revenues or distributions from unconsolidated affiliates arising from power
sales under existing and restructured power purchase agreements less the cost of
those sales and cash contributed by our members. We currently intend to
restructure our power purchase agreements at our Linden Venture and the Jersey
Central Power portion of our Bayonne Venture facilities. Although the ultimate
outcome relating to the consummation of the restructuring is not known at this
time, the following could affect our financial statements and future liquidity,
if the restructurings become effective: (i) we may sell or contribute the power
purchase agreements to an affiliate; (ii) the facility will operate on a
merchant basis; (iii) our assets, including the merchant facility, will be
evaluated for possible impairment; (iv) all costs associated with the
restructuring may be paid or accrued; (v) plant improvements may be necessary to
make the plant ready for merchant operations; (vi) we may be required to redeem
bonds pursuant to the terms of the indenture; and (vii) debt may be issued by
us. While we expect our future revenues to decline as a result of these power
purchase agreement restructurings, we intend to reduce our debt service
obligations contemporaneously such that our cash from operations will continue
to be our primary source of liquidity.

Our loan agreements require us to maintain compliance with financial
covenants. We believe that we are in compliance with the terms and conditions of
the loan agreements as of June 30, 2002.

Distributions

Distributions to our members are limited by our senior secured bond
indenture. As permitted by the senior secured bond indenture, a distribution of
$20.1 million was paid to our members during June 2002. As of June 30, 2002, our
ability to make distributions is limited to $35.4 million.

COMMITMENTS AND CONTINGENCIES

See Item 1, Financial Statements, Note 5, which is incorporated herein by
reference.

NEW ACCOUNTING PRONOUNCEMENTS ISSUED BUT NOT YET ADOPTED

See Item 1, Financial Statements, Note 7, which is incorporated herein by
reference.

13

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This report contains or incorporates by reference forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Where any forward-looking statement includes a statement of the
assumptions or bases underlying the forward-looking statement, we caution that,
while we believe these assumptions or bases to be reasonable and to be made in
good faith, assumed facts or bases almost always vary from the actual results,
and the differences between assumed facts or bases and actual results can be
material, depending upon the circumstances. Where, in any forward-looking
statement, we or our management express an expectation or belief as to future
results, that expectation or belief is expressed in good faith and is believed
to have a reasonable basis. We cannot assure you, however, that the statement of
expectation or belief will result or be achieved or accomplished. The words
"believe," "expect," "estimate," "anticipate" and similar expressions will
generally identify forward-looking statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our quantitative and qualitative
market risks from those reported in our Annual Report on Form 10-K for the year
ended December 31, 2001.

14

PART II -- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Part I, Item 1, Financial Statements, Note 5, which is incorporated
herein by reference.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULT UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

a. Exhibits

Each exhibit identified below is filed as part of this report. Exhibits not
incorporated by reference to a prior filing are designated by an "*"; all
exhibits not so designated are incorporated herein by reference to a prior
filing as indicated.

Undertaking

We hereby undertake, pursuant to Regulation S-K, Item 601(b),
paragraph (4)(iii), to furnish to the United States Securities and Exchange
Commission, upon request, all constituent instruments defining the rights
of holders of our long-term debt not filed herewith for the reason that the
total amount of securities authorized under any of such instruments does
not exceed 10 percent of our total consolidated assets.

b. Reports on Form 8-K

None.

15

SIGNATURES

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

EAST COAST POWER L.L.C.

Date: August 14, 2002 /s/ JOHN L. HARRISON
--------------------------------------
John L. Harrison
Senior Vice President, Chief Financial
Officer,
Treasurer and Class A Manager
(Principal Financial Officer)

Date: August 14, 2002 /s/ CECILIA T. HEILMANN
--------------------------------------
Cecilia T. Heilmann
Vice President, Managing
Director and Controller
(Principal Accounting Officer)

16

INDEX TO EXHIBITS

Each exhibit identified below is filed as part of this report. Exhibits not
incorporated by reference to a prior filing are designated by an "*"; all
exhibits not so designated are incorporated herein by reference to a prior
filing as indicated.