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

FORM 10-Q

[X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2003

Commission File Number 33-83618

SELKIRK COGEN PARTNERS, L.P.
(Exact name of Registrant (Guarantor) as specified in its charter)

SELKIRK COGEN FUNDING CORPORATION
(Exact name of Registrant as specified in its charter)

7600 Wisconsin Avenue, Bethesda, Maryland 20814
(Address of principal executive offices, including zip code)

(301) 280-6800
(Registrant’s telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OR 12 (g) OF THE ACT:
None

     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     

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes      No X

     As of November 12, 2003, there were 10 shares of common stock of Selkirk Cogen Funding Corporation, $1 par value, outstanding.

TABLE OF CONTENTS

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SELKIRK COGEN PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)

The accompanying Notes to the Consolidated Financial Statements are an integral part of these financial statements.

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SELKIRK COGEN PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands)
(Unaudited)

The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.

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SELKIRK COGEN PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)

The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.

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SELKIRK COGEN PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

Note 1. Basis of Presentation

The accompanying unaudited consolidated financial statements include Selkirk Cogen Partners, L.P. and its wholly owned subsidiary, Selkirk Cogen Funding Corporation (collectively the “Partnership”). All significant intercompany accounts and transactions have been eliminated.

The consolidated financial statements for the interim periods presented are unaudited and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted pursuant to rules and regulations applicable to interim financial statements. The information furnished in the consolidated financial statements reflects all normal recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements. Certain reclassifications have been made to the consolidated balance sheet at December 31, 2002, consolidated statements of operations for the three and nine months ended September 30, 2002 and consolidated statements of cash flows for the three and nine months ended September 30, 2002 to conform with the current period’s basis of presentation. Operating results for the three and nine months ended September 30, 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003.

These consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Partnership’s December 31, 2002 Annual Report on Form 10-K.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingencies. Actual results could differ from these estimates.

Comprehensive Income

The Partnership’s comprehensive income consists principally of net income and changes in the market value of certain financial hedges under Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended (“SFAS No. 133”).

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The schedule below summarizes the activities affecting comprehensive income for the three and nine months ended September 30, 2003 and 2002 (in thousands):

Note 2. Significant Accounting Policies

Except as disclosed, the Partnership is following the same accounting principles discussed in the Partnership’s December 31, 2002 Annual Report on Form 10-K.

Adoption of New Accounting Pronouncements

On January 1, 2003, the Partnership adopted SFAS No. 143, Accounting for Asset Retirement Obligations (“SFAS No. 143”). SFAS No. 143 provides accounting requirements for costs associated with legal obligations to retire tangible, long-lived assets. The statement requires that an asset retirement obligation be recorded at fair value in the period in which it is incurred, if a reasonable estimate of fair value can be made. In the same period, the associated asset retirement costs are capitalized as part of the carrying amount of the related long-lived asset. In each subsequent period, the liability is accreted to its present value and the capitalized cost is depreciated over the useful life of the long-lived asset.

Upon implementation of this statement, the Partnership recorded approximately $45,000 to its plant and equipment to reflect the fair value of the asset retirement costs as of the date the obligation was incurred, and recognized approximately $83,000 for asset retirement obligations. The cumulative effect of the change in accounting principle as a result of adopting this statement was a loss of approximately $53,000.

If this statement had been adopted on January 1, 2002, the pro forma effects on earnings of the accounting change for the nine months ended September 30, 2002 would not have been material.

In June 2002, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, which is effective for exit and disposal activities initiated after December 31, 2002. In November 2002, the FASB issued Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. This interpretation

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establishes new disclosure requirements for all guarantees, but the measurement criteria are applicable to guarantees issued and modified after December 31, 2002. Both SFAS No. 146 and Interpretation No. 45 were adopted on January 1, 2003 and did not have an impact on the Partnership’s consolidated financial statements.

In April 2003, the FASB issued Statement No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities (“SFAS No. 149”). SFAS No. 149 amends and clarifies the accounting and reporting for derivative instruments, including certain derivatives embedded in other contracts, and for hedging activities under SFAS No. 133. SFAS No. 149 clarifies under what circumstances a contract with an initial net investment meets the characteristics of a derivative according to SFAS No. 133 and when a derivative contains a financing component that warrants special reporting in the statement of cash flows. The provisions of SFAS No. 149 that relate to SFAS No. 133 implementation issues that have been effective for periods that began prior to June 15, 2003, should continue to be applied in accordance with their respective effective dates. This statement was adopted on July 1, 2003 and did not have an impact on the Partnership’s consolidated financial statements.

Accounting Principles Issued But Not Yet Adopted

In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities (“FIN No. 46”), which expands upon existing accounting guidance addressing when a company should include in its financial statements the assets, liabilities, and activities of another entity or arrangement with which it is involved. A “variable interest entity” is an entity that does not have sufficient equity investment at risk to permit the entity to finance its activities without additional subordinated financial support from other parties or an entity where equity investors lack the essential characteristics of a controlling financial interest.

The consolidation requirements of FIN No. 46 apply immediately to variable interest entities created after January 31, 2003. There were no new variable interest entities created by the Partnership between February 1, 2003 and September 30, 2003. The consolidation requirements related to entities or arrangements existing before February 1, 2003 were originally effective July 1, 2003. However, due to implementation issues, the FASB deferred implementation until fourth quarter 2003. The Partnership is currently evaluating the impacts of FIN No. 46’s initial recognition, measurement, and disclosure provisions and does not expect that implementation of this interpretation will have a significant impact on its consolidated financial statements.

Note 3. Related Party Transactions

JMCS I Management, Inc., an affiliate of JMC Selkirk Inc., manages the day-to-day operation of the Partnership and is compensated at agreed-upon billing rates that are adjusted quadrennially in accordance with an administrative services agreement. The cost of services provided by JMCS I Management, Inc. are included in administrative services – affiliates in the accompanying consolidated statements of operations. The total amount due to JMCS I Management, Inc. at September 30, 2003 was approximately $268,000.

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The Partnership purchases from and sells gas to affiliates of JMC Selkirk, Inc. As of March 18, 2003, PG&E Energy Trading, Canada Corporation (“ET Canada”) ceased to be a related party and, as of May 31, 2003, the Partnership ceased transactions with NEGT Energy Trading — Gas Corporation (“NEGT Energy Trading - Gas”, formerly PG&E Energy Trading – Gas Corporation). Gas purchases are recorded as fuel costs and sales of gas are recorded as fuel revenues in the accompanying consolidated statements of operations. There were no amounts due to/from ET Canada or NEGT Energy Trading – Gas at September 30, 2003. Amounts due to Pittsfield Generating Company, L.P. (“Pittsfield Generating”) and MASSPOWER at September 20, 2003 were approximately $21,000 and $1,338,000, respectively.

Gas purchased from affiliates is as follows (in thousands):

Gas sold to affiliates is as follows (in thousands):

In May 1996, the Partnership entered into an enabling agreement with NEGT Energy Trading – Power, L.P., an affiliate of JMC Selkirk, Inc. (“NEGT Energy Trading — Power”, formerly PG&E Energy Trading – Power, L.P.), to purchase and sell electric capacity, electric energy, and other services. As of May 31, 2003, the Partnership ceased transactions with NEGT Energy Trading – Power. There were no sales of energy, capacity and other services pursuant to this enabling agreement for the nine months ended September 30, 2003, as compared to sales of approximately $1,563,000 for the same period in the prior year. There were no amounts due to or from NEGT Energy Trading – Power at September 30, 2003.

The Partnership has two agreements with Iroquois Gas Transmission System (“IGTS”), an affiliate of JMC Selkirk, Inc., to provide firm transportation of natural gas from Canada. Firm fuel transportation services for the nine months ended September 30, 2003 totaled approximately $5,275,000, compared to approximately $5,552,000 for the same period in the prior year. These services are recorded as fuel costs in the accompanying consolidated statements of operations. The total amount due to IGTS for firm transportation at September 30, 2003 was approximately $556,000.

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Note 4. Accounting For Derivative Contracts

Currency Exchange Contracts

The Partnership has had two foreign currency exchange contracts to hedge against fluctuations in fuel transportation costs, which are denominated in Canadian dollars. Under the Unit 1 currency exchange agreement, which had a term of ten years and expired on December 25, 2002, the Partnership exchanged approximately $368,000 U.S. dollars for $458,000 Canadian dollars on a monthly basis. Under the Unit 2 currency exchange agreement, which commenced on May 25, 1995 and terminates on December 25, 2004, the Partnership exchanges approximately $1,044,000 U.S. dollars for $1,300,000 Canadian dollars on a monthly basis. The Partnership accounts for its foreign exchange contracts as cash flow hedges and has recorded on the consolidated balance sheets a liability for derivative contracts with the offset in other comprehensive income (loss).

The amount charged to fuel costs as a result of losses realized from these contracts for the nine months ended September 30, 2003 totaled approximately $1,024,000, compared to approximately $2,494,000 for the same period in the prior year. The Partnership expects that net derivative losses of approximately $986,000, included in accumulated other comprehensive loss as of September 30, 2003, will be charged to earnings within the next twelve months.

The schedule below summarizes the activities affecting accumulated other comprehensive loss from derivative contracts for the three and nine months ended September 30, 2003 and 2002 (in thousands):

Peak shaving arrangements

The Partnership enters into peak shaving arrangements whereby it grants to local distribution companies or other purchasers a call on a specified portion of the Partnership’s firm natural gas supply for a specified number of days during the winter season. Such arrangements are

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derivatives under SFAS No. 133. Changes in the fair value of these peak shaving arrangements are recorded on the consolidated statements of operations as an unrealized gain or loss on derivative contracts. The unrealized loss on derivative contracts for the nine months ended September 30, 2002 was approximately $446,000. The Partnership had not entered into any peak shaving arrangements at September 30, 2003.

Note 5. Concentrations of Credit Risk

Credit risk is the risk of loss the Partnership would incur if counterparties fail to perform their contractual obligations (including accounts receivable and due from affiliates). The Partnership primarily conducts business with customers in the energy industry, such as investor-owned utilities, energy trading companies, financial institutions, gas production companies and gas transportation companies located in the United States and Canada. This concentration of counterparties may impact the Partnership’s overall exposure to credit risk in that its counterparties may be similarly affected by changes in economic, regulatory or other conditions. The Partnership mitigates potential credit losses in accordance with established credit approval practices and limits by dealing primarily with counterparties it considers to be of investment grade.

As of September 30, 2003, the Partnership’s credit risk is primarily concentrated with the following customers: Consolidated Edison Company of New York, Inc., Niagara Mohawk Power Corporation and the New York Independent System Operator, all of which are considered to be of investment grade.

Note 6. Relationship with National Energy & Gas Transmission, Inc. (“NEGT”, formerly PG&E National Energy Group, Inc.)

JMC Selkirk, Inc. is the managing general partner of the Partnership. Approximately 90% of the ownership interest in JMC Selkirk, Inc. is held by an indirect subsidiary of NEGT. NEGT is an indirect subsidiary of PG&E Corporation.

On July 8, 2003, NEGT and certain subsidiaries voluntarily filed petitions for relief under the provisions of Chapter 11 of the U.S. Bankruptcy Code (collectively, the “NEGT Bankruptcy”) in the Greenbelt Division of the United States Bankruptcy Court for the District of Maryland (the “Bankruptcy Court”). The subsidiaries that filed voluntarily petitions and were disclosed in previous filings as related parties of the Partnership with which it engaged in transactions are: NEGT Energy Trading-Power, L.P. (formerly PG&E Energy Trading-Power, L.P.) and NEGT Energy Trading–Gas Corporation (formerly PG&E Energy Trading-Gas Corporation).

Additionally, on July 8, 2003, NEGT filed its plan of reorganization (the “NEGT Plan”). The NEGT Plan anticipates that PG&E Corporation will have no equity interest in NEGT or any of its subsidiaries after the NEGT Plan is confirmed by the Bankruptcy Court and implemented. On July 7, 2003, the officers of PG&E Corporation who were serving on the Board of Directors of NEGT resigned their positions. On July 7 and July 8, 2003, the NEGT Board elected replacement directors who are not affiliated with PG&E Corporation. While continuing to maintain legal ownership, effective with this change in control of the Board and

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the NEGT Bankruptcy, PG&E Corporation no longer retains significant influence over the ongoing operations of NEGT.

Neither the Partnership nor any of its NEGT affiliated partners, including JMC Selkirk, Inc. and PentaGen Investors, L.P., are parties to the NEGT Bankruptcy. The Managing General Partner believes that JMC Selkirk, Inc., PentaGen Investors, L.P. and the Partnership will not be substantively consolidated with NEGT in any bankruptcy proceeding involving NEGT. The Partnership believes that the NEGT Bankruptcy will not have a material adverse impact on its operations.

However, the Partnership cannot be certain that the NEGT Bankruptcy will not affect NEGT’s arrangements with respect to the Partnership or the ability of JMC Selkirk, Inc. or JMCS I Management, Inc. to manage the Partnership. The Partnership Agreement provides certain management rights to RCM Selkirk GP, Inc. in the event that JMC Selkirk, Inc. were to be included in a bankruptcy involving NEGT, or either JMC Selkirk, Inc. or JMCS I Management, Inc. were to be in material default of its obligations to the Partnership (following notice and a 120 day cure period), including (i) the removal of JMC Selkirk, Inc. as the managing general partner, (ii) the appointment of itself as the successor managing general partner, and (iii) the termination of the administrative services agreement with JMCS I Management, Inc. and subsequent appointment of a RCM Selkirk GP, Inc. affiliate as the project management firm. Enforcement of these rights by RCM Selkirk GP, Inc. could, however, be delayed or impeded as a result of any bankruptcy proceeding involving JMC Selkirk, Inc. Moreover, the bankruptcy of any partner of the Partnership would be an event of default under the Partnership’s Credit Agreement.

As a result of the sustained downturn in the power industry, NEGT and certain of its affiliates have experienced a financial downturn, which caused the major credit rating agencies to downgrade NEGT and certain of its affiliates’ credit ratings to below investment grade. The credit rating agency action has had no material impact on the financial condition or results of operations of the Partnership.

As previously reported in the Partnership’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003, on June 4, 2003 Moody’s Investors Service (“Moody’s”) issued a press release announcing that it had confirmed the senior secured debt of Selkirk Cogen Funding Corporation at Baa3 with a stable rating outlook. Moody’s noted that its action concluded its review for possible downgrade that was initiated on October 8, 2002.

As previously reported in the Partnership’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003, on July 8, 2003 Standard and Poor’s (“S&P”) issued a press release announcing that it had lowered its corporate credit ratings on two of NEGT’s subsidiaries. S&P stated these ratings actions follow the NEGT Bankruptcy. S&P further stated that the ratings action on the two NEGT subsidiaries does not affect the rating on the senior secured debt of Selkirk Cogen Funding Corporation, which remains at BBB- with a stable outlook.

A downgrade of the credit ratings of the Partnership’s debt due in 2007 or 2012 by S&P or Moody’s (or both) would not be an event of default under any of the Partnership’s debt

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agreements and material project contracts or otherwise result in an adverse change to any material term of such agreements and contracts.

Note 7. Title V Permit

On November 6, 2001, the Partnership received from the New York State Department of Environmental Conservation (“DEC”) the Facility’s Title V operating permit endorsed by the DEC on November 2, 2001 (the “Title V Permit”). The Title V Permit as received by the Partnership contains conditions that conflict with the Partnership’s existing air permits, and the Facility’s compliance with these conditions under certain operating circumstances would be problematic. Further, the Partnership believes that certain of the conditions contained in the Title V Permit are inconsistent with the laws and regulations underlying the Title V program and Title V operating permits issued by the DEC to comparable electric generating facilities in New York. By letter dated November 12, 2001, the Partnership has filed with the DEC a request for an adjudicatory hearing to address and resolve the issues presented by the Title V Permit, and the terms and conditions of the Title V Permit will be stayed pending a final DEC decision on the appeal. At this time, the Partnership cannot assess whether a settlement can be achieved, the likely outcome of the adjudicatory hearing if no settlement is achieved, or the impact on the Facility.

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

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Partnership’s consolidated financial statements and notes to the consolidated financial statements included herein. Further, this Quarterly Report on Form 10-Q should be read in conjunction with the Partnership’s 2002 Annual Report on Form 10-K.

Cautionary Statement Regarding Forward-Looking Statements

The information in this Quarterly Report on Form 10-Q includes forward-looking statements about the future that are necessarily subject to various risks and uncertainties. Use of words like “anticipate,” “estimate,” “intend,” “project,” “plan,” “expect,” “will,” “believe,” “could,” and similar expressions help identify forward-looking statements. These statements are based on current expectations and assumptions, which the Partnership believes are reasonable, and on information currently available to the Partnership. Actual results could differ materially from those contemplated by the forward-looking statements. Although the Partnership believes that the expectations reflected in the forward-looking statements are reasonable, future results, events, levels of activity, performance or achievements cannot be guaranteed. Although the Partnership is not able to predict all the factors that may affect future results, some of the factors that could cause future results to differ materially from those expressed or implied by the forward-looking statements include:

Operational Risks

The Partnership’s future results of operations and financial condition may be affected by the performance of equipment; levels of dispatch; the receipt of certain capacity and other fixed payments; electricity prices; natural gas resale prices; and fuel deliveries and prices.

Accounting and Risk Management

The Partnership’s future results of operations and financial condition may be affected by the effect of new accounting pronouncements; changes in critical accounting policies or estimates; the effectiveness of the Partnership’s risk management policies and procedures; the ability of the Partnership’s counterparties to satisfy their financial commitments to the Partnership and the impact of counterparties’ nonperformance on the Partnership’s liquidity position; and heightened rating agency criteria and the impact of changes in the Partnership’s credit ratings.

Legislative and Regulatory Matters

The Partnership’s business may be affected by legislative or regulatory changes affecting the electric and natural gas industries in the United States, including the pace and extent of efforts to restructure the electric and natural gas industries; heightened regulatory and enforcement agency focus on the energy business with the potential for changes in industry regulations and

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in the treatment of the Partnership by state and federal agencies; changes in or application of federal, state, and local laws and regulations to which the Partnership is subject; and changes in or application of Canadian laws, regulations, and policies which may impact the Partnership.

Litigation and Environmental Matters

The Partnership’s future results of operations and financial condition may be affected by compliance with existing and future environmental and safety laws, regulations, and policies, the cost of which could be significant; the outcome of future litigation and environmental matters; and the outcome of the negotiations with the DEC regarding the Facility’s Title V operating permit as described in “Regulations and Environmental Matters” below.

Overview

The Partnership owns a natural gas-fired, combined-cycle cogeneration facility consisting of two units designed to operate independently for electrical generation, but thermally integrated for steam generation. Revenues are derived primarily from sales of electricity and, to a lesser extent, from sales of steam and natural gas. Sales of natural gas typically occur when a unit is dispatched off-line or at less than full capacity (“Gas Resales”). In addition, sales of natural gas may also occur when the Partnership is able to optimize the long-term gas supply and transportation contracts and lower the cost of natural gas delivered to the Facility by purchasing and/or selling natural gas at favorable prices along the transportation route (“Gas Optimizations”). During the first nine months of 2003, natural gas resale prices and the price of natural gas under the firm gas supply contracts have been higher than prices during the first nine months of 2002. The Partnership cannot predict whether such prices will remain above 2002 levels for the balance of 2003.

The Facility will typically be scheduled on an economic basis, which takes into account the variable cost of electricity to be delivered by each unit compared to the variable cost of electricity available to the purchaser from other sources. At times, a unit will be dispatched off-line to perform scheduled maintenance. Differences in the timing and scope of scheduled maintenance can have a significant impact on revenues and the cost of revenues. During the second quarter of 2003 scheduled non-major maintenance was performed on the Facility for a four-week period. The Facility has a one-week non-major maintenance outage scheduled for the fourth quarter of 2003.

Relationship with National Energy & Gas Transmission, Inc. (“NEGT”, formerly PG&E National Energy Group, Inc.)

JMC Selkirk, Inc. is the managing general partner of the Partnership. Approximately 90% of the ownership interest in JMC Selkirk, Inc. is held by an indirect subsidiary of NEGT. NEGT is an indirect subsidiary of PG&E Corporation.

On July 8, 2003, NEGT and certain subsidiaries voluntarily filed petitions for relief under the provisions of Chapter 11 of the U.S. Bankruptcy Code (collectively, the “NEGT Bankruptcy”)

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in the Greenbelt Division of the United States Bankruptcy Court for the District of Maryland (the “Bankruptcy Court”). The subsidiaries that filed voluntarily petitions and were disclosed in previous filings as related parties of the Partnership with which it engaged in transactions are: NEGT Energy Trading-Power, L.P. (“NEGT Energy Trading-Power”, formerly PG&E Energy Trading–Power, L.P) and NEGT Energy Trading – Gas Corporation (“NEGT Energy Trading-Gas”, formerly PG&E Energy Trading–Gas Corporation). As of May 31, 2003, the Partnership ceased transactions with NEGT Energy Trading–Power and NEGT Energy Trading–Gas. The Partnership believes there are sufficient counterparties available with which to undertake transactions in the electric and gas market and, therefore, the bankruptcy filings of NEGT Energy Trading–Power and NEGT Energy Trading–Gas will not have a material impact on the results of operations of the Partnership.

Additionally, on July 8, 2003, NEGT filed its plan of reorganization (“the NEGT Plan”). The NEGT Plan anticipates that PG&E Corporation will have no equity interest in NEGT or any of its subsidiaries after the NEGT Plan is confirmed by the Bankruptcy Court and implemented. On July 7, 2003 the officers of PG&E Corporation who were serving on the Board of Directors of NEGT resigned their positions. On July 7 and July 8, 2003, the NEGT Board elected replacement directors who are not affiliated with PG&E Corporation. While continuing to maintain legal ownership, effective with this change in control of the Board and the NEGT Bankruptcy, PG&E Corporation no longer retains significant influence over the ongoing operations of NEGT.

Neither the Partnership nor any of its NEGT affiliated partners, including JMC Selkirk, Inc. and PentaGen Investors, L.P., are parties to the NEGT Bankruptcy. The Managing General Partner believes that JMC Selkirk, Inc., PentaGen Investors, L.P. and the Partnership will not be substantively consolidated with NEGT in any bankruptcy proceeding involving NEGT. The Partnership believes that the NEGT Bankruptcy will not have a material adverse impact on its operations.

However, the Partnership cannot be certain that the NEGT Bankruptcy will not affect NEGT’s arrangements with respect to the Partnership or the ability of JMC Selkirk, Inc. or JMCS I Management, Inc. to manage the Partnership. The Partnership Agreement provides certain management rights to RCM Selkirk GP, Inc. in the event that JMC Selkirk, Inc. were to be included in a bankruptcy involving NEGT, or either JMC Selkirk, Inc. or JMCS I Management, Inc. were to be in material default of its obligations to the Partnership (following notice and a 120 day cure period), including (i) the removal of JMC Selkirk, Inc. as the managing general partner, (ii) the appointment of itself as the successor managing general partner, and (iii) the termination of the administrative services agreement with JMCS I Management, Inc. and subsequent appointment of a RCM Selkirk GP, Inc. affiliate as the project management firm. Enforcement of these rights by RCM Selkirk GP, Inc. could, however, be delayed or impeded as a result of any bankruptcy proceeding involving JMC Selkirk, Inc. Moreover, the bankruptcy of any partner of the Partnership would be an event of default under the Partnership’s Credit Agreement. However, the Partnership believes that any contingent reimbursement obligations arising under letters of credit issued under this Credit Agreement could be secured with cash collateral financed with cash flows from operations.

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Results of Operations

The following tables set forth operating revenue and related data for the three and nine months ended September 30, 2003 and 2002 (dollars and volumes in millions).