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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
[  ] Transition report pursuant to section 13 or 15(d) of the securities exchange act of 1934

NRG South Central Generating LLC
(Exact name of Registrant as specified in its charter)

(612) 373-5300
(Registrant’s telephone number, including area code)

None
Former name, former address and former fiscal year, if changed since last report

Indicate by check mark whether the Registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes [X]  No [  ]

     Indicate by checkmark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ]  No [X]

     Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes [X]  No [  ]

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Index

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NRG South Central Generating LLC and Subsidiaries
Consolidated Statements of Operations
(UNAUDITED)

See accompanying notes to consolidated financial statements.

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NRG South Central Generating LLC and Subsidiaries
Consolidated Balance Sheets
(UNAUDITED)

See accompanying notes to consolidated financial statements.

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NRG South Central Generating LLC and Subsidiaries
Consolidated Statements of Members’ Equity
(UNAUDITED)

See accompanying notes to consolidated financial statements.

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NRG South Central Generating LLC and Subsidiaries
Consolidated Statements of Cash Flows
(UNAUDITED)

See accompanying notes to consolidated financial statements.

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NRG South Central Generating LLC and Subsidiaries
Notes To Consolidated Financial Statements
(Unaudited)

     NRG South Central Generating LLC (NRG South Central or the Company), a Delaware Corporation formed in 2000, is an indirect wholly-owned subsidiary of NRG Energy, Inc. (NRG Energy or NRG). NRG South Central owns 100% of Louisiana Generating LLC (Louisiana Generating or LaGen), NRG New Roads Holding LLC (New Roads), NRG Sterlington Power LLC (Sterlington), Big Cajun I Peaking Power LLC (Big Cajun Peaking), NRG Bayou Cove LLC and NRG Bayou Cove Peaking Power LLC (collectively Bayou Cove) and Big Cajun II Unit 4 LLC (Big Cajun). NRG South Central’s members are NRG Central U.S. LLC (NRG Central) and South Central Generation Holding LLC (South Central Generation). NRG Central and South Central Generation are wholly owned subsidiaries of NRG Energy, each of which owns a 50% interest in NRG South Central.

     NRG South Central was formed for the purpose of financing, acquiring, owning, operating and maintaining through its subsidiaries and affiliates the facilities owned by Louisiana Generating and any other facilities that it or its subsidiaries may acquire in the future.

     In connection with its restructuring efforts, on May 14, 2003 NRG Energy and 26 of its U.S. affiliates (the Debtors) (including NRG South Central, Louisiana Generating, Big Cajun and New Roads) filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code (the Bankruptcy Code) in the United States Bankruptcy Court for the Southern District of New York (the Bankruptcy Court). It is possible that additional subsidiaries will file petitions for reorganization under Chapter 11. International operations and certain other subsidiaries were not included in the filing. NRG Energy expects operations to continue as normal during the restructuring process, while it operates its business as a “debtor-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. For more information about NRG Energy’s restructuring process, refer to the Form 10-K filed by NRG Energy on March 31, 2003 and Form 10-Q filed by NRG Energy on May 20, 2003.

     The accompanying unaudited consolidated financial statements have been prepared in accordance with the Securities and Exchange Commission (SEC) regulations for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The accounting policies followed by the Company are set forth in Item 15 — Note 2 to the Company’s financial statements in its annual report on Form 10-K for the year ended December 31, 2002 (Form 10-K). The following notes should be read in conjunction with such policies and other disclosures in the Form 10-K. Interim results are not necessarily indicative of results for a full year.

     The Financial Statements have been prepared on a “going concern” basis in accordance with GAAP. The “going concern” basis of presentation assumes that NRG South Central will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of business. Because of the Chapter 11 Cases and the circumstances leading to the filing thereof, NRG South Central's ability to continue as a “going concern” is subject to substantial doubt and is dependent upon, among other things, confirmation of a plan of reorganization, NRG South Central's ability to comply with the terms of, and if necessary renew at its expiry in May 2004, the Debtor in Possession Credit Facility, and NRG South Central's ability to generate sufficient cash flows from operations, asset sales and financing arrangements to meet its obligations. There can be no assurance that this can be accomplished and if it were not, NRG South Central's ability to realize the carrying value of its assets and discharge its liabilities would be subject to substantial uncertainty. Therefore, if the “going concern” basis were not used for the Financial Statements, then significant adjustments could be necessary to the carrying value of assets and liabilities, the revenues and expenses reported, and the balance sheet classifications used.

     The Financial Statements also have been prepared in accordance with The American Institute of Certified Public Accountants Statement of Position 90-7, “Financial Reporting by Entities in Reorganization under the Bankruptcy Code”. Accordingly, all pre-petition liabilities believed to be subject to compromise have been segregated in the consolidated balance sheet and classified as liabilities subject to compromise, at the estimated amount of allowable claims. Liabilities not believed to be subject to compromise are separately classified as current and non-current. Interest expense is reported only to the extent that it will be paid or that it is probable that it will be an allowed claim.

     During the Chapter 11 Cases, the Debtors may, subject to any necessary Bankruptcy Court and lender approvals, sell assets and settle liabilities for amounts other than those reflected in the financial statements. The administrative and reorganization expenses resulting from Chapter 11 Cases will unfavorably affect the Debtors' results of operations. Future results of operations may also be adversely affected by other factors related to Chapter 11 Cases.

     The Company is in the process of reconciling recorded prepetition liabilities with claims filed by creditors with the Bankruptcy Court. Differences resulting from that reconciliation process will be recorded as adjustments to prepetition liabilities. The Company recently began this process and has not yet determined the reorganization adjustments.

     In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all material adjustments necessary to present fairly the consolidated financial position of the Company as of June 30, 2003 and December 31, 2002, the results of its operations for the three and six months ended June 30, 2003 and 2002, and its cash flows and members’ equity for the six months ended June 30, 2003 and 2002.

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

1. Restructuring Activities

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

     In response to a possible downgrade during 2002, Xcel Energy contributed $500 million to NRG Energy, and NRG Energy and its subsidiaries sold assets and businesses that provided NRG Energy in excess of $286 million in cash and eliminated approximately $432 million in debt. NRG Energy also cancelled or deferred construction of approximately 3,900 MW of new generation projects. On July 26, 2002, Standard & Poors’ (S&P) downgraded NRG Energy’s senior unsecured bonds to below investment grade, and three days later Moody’s also downgraded NRG Energy’s senior unsecured debt rating to below investment grade. Since July 2002, NRG Energy senior unsecured debt, as well as the secured NRG Northeast Generating LLC bonds, the secured NRG South Central Generating LLC bonds and the secured LSP Energy (Batesville) bonds were downgraded multiple times. After NRG Energy failed to make payments due under certain unsecured bond obligations on September 16, 2002, both Moody’s and S&P once again lowered their ratings on NRG Energy’s unsecured bonds and its subsidiaries’ secured bonds. Currently, NRG Energy’s unsecured bonds carry a rating of D at S&P and Ca at Moody’s. NRG South Central Generating LLC secured bonds carry a rating of D at S&P and Caa1 at Moody’s.

     As a result of the downgrade of NRG Energy’s credit rating, declining power prices, increasing fuel prices, the overall down-turn in the energy industry, and the overall down-turn in the economy, NRG Energy has experienced severe financial difficulties. These difficulties have caused NRG Energy to, among other things, miss scheduled principal and interest payments due to its corporate lenders and bondholders, prepay for fuel and other related delivery and transportation services and provide performance collateral in certain instances. NRG Energy has also recorded asset impairment charges of approximately $3.1 billion as of December 31, 2002, related to various operating projects as well as for projects that were under construction which NRG Energy has stopped funding.

     NRG Energy and certain wholly owned subsidiaries have failed to timely make several interest and/or principal payments on indebtedness. These missed payments have resulted in cross-defaults of numerous other non-recourse and limited recourse debt instruments of NRG Energy and have caused the acceleration of multiple debt instruments of NRG Energy, rendering such debt

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immediately due and payable.

     NRG Energy failed to make a first-quarter payment of $19.1 million due on March 31, 2003 relating to interest and fees on the $1.0 billion unsecured 364-day revolving credit facility; a $13.6 million interest payment due on April 1, 2003 on the $350 million of 7.75% senior unsecured notes maturing 2011; a $21.6 million interest payment due on April 1, 2003 on the $500 million of 8.625% senior unsecured notes maturing 2031; and a $9.6 million interest payment due on May 1, 2003 on the $240 million of 8.0% senior unsecured notes maturing 2013. On May 13, 2003, XL Capital Assurance, as controlling party, accelerated the approximately $319 million of debt issued by NRG Peaker Finance Company LLC. Accordingly, these facilities are in default.

     NRG Energy failed to make a second quarter payment of $18.0 million due on June 30, 2003 relating to interest and fees on the $1.0 billion unsecured 364-day revolving credit facility; a $11.3 million interest payment due on June 1, 2003 on the $300 million of 7.50% senior unsecured notes maturing 2009; and a $9.4 million interest payment due on June 15, 2003 on the $250 million of 7.50% senior unsecured notes due 2007.

     Prior to the downgrades, many corporate guarantees and commitments of NRG Energy and its subsidiaries required that they be supported or replaced with letters of credit or cash collateral within 5 to 30 days of a ratings downgrade below Baa3 or BBB — by Moody’s or Standard & Poor’s, respectively. As a result of the downgrades on July 26, 2002 and July 29, 2002, NRG Energy received demands to post collateral aggregating approximately $1.2 billion. NRG Energy is presently working with various secured project lender groups with respect to working towards establishing a comprehensive plan of restructuring.

     In August 2002, NRG Energy retained financial and legal restructuring advisors to assist its management in the preparation of a comprehensive financial and operational restructuring. In November 2002, NRG Energy and Xcel Energy presented a comprehensive plan of restructuring to an ad hoc committee of its bond holders and a steering committee of its bank lenders (the Ad Hoc Creditors Committees). The restructuring plan has served as a basis for continuing negotiations between the Ad Hoc Creditors Committees, NRG Energy and Xcel Energy related to a consensual plan of reorganization for NRG Energy.

     On November 22, 2002, five former NRG Energy executives filed an involuntary Chapter 11 petition against NRG Energy in U.S. Bankruptcy Court for the District of Minnesota (the Minnesota Bankruptcy Court). On February 19, 2003, NRG Energy announced that it had reached a settlement with the petitioners. On May 12, 2003, the Minnesota Bankruptcy Court issued an Order abstaining from exercising jurisdiction over any aspect of the case and dismissed the case.

     On March 26, 2003, Xcel Energy announced that its board of directors had approved a tentative settlement agreement with holders of most of NRG Energy’s long-term notes and the steering committee representing NRG Energy’s bank lenders. The settlement was subject to certain conditions, including the approval of at least a majority in dollar amount of the NRG Energy bank lenders and long-term noteholders and definitive documentation. There can be no assurance that such approvals will be obtained. The terms of the tentative settlement called for Xcel Energy to make payments to NRG Energy over the next 10 months totaling up to $752 million for the benefit of NRG Energy’s creditors in consideration for their waiver of any existing and potential claims against Xcel Energy. Under the settlement, Xcel Energy would make the following payments: (i) $350 million at or shortly following the consummation of a restructuring of NRG Energy’s debt. It is expected this payment would be made prior to year-end 2003; (ii) $50 million on January 1, 2004. At Xcel Energy’s option, it may fill this requirement with either cash or Xcel Energy common stock or any combination thereof; and (iii) $352 million in April 2004. Since the announcement on March 26, 2003, representatives of NRG Energy, Xcel Energy, the bank lenders and noteholders have continued to meet to draft the definitive documentation necessary to fully implement the terms and conditions of the tentative settlement agreement.

     On May 14, 2003, NRG Energy and certain of its U.S. affiliates (including NRG South Central, Louisiana Generating, Big Cajun and New Roads) filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York (the Bankruptcy Court), In re: NRG ENERGY, INC., et al., Case No. 03-13024 (PCB). See Note 3 for complete list of NRG South Central debtors. NRG Energy expects operations to continue as normal during the restructuring process, while it operates its business as a “debtor-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. In connection with its Chapter 11 filing, NRG Energy also announced that a $250 million debtor-in-possession (DIP) financing facility from GE Capital Corporation, subject to Bankruptcy Court approval, to be utilized by NRG Northeast Generating LLC (NEG) and some NEG subsidiaries. NRG Energy anticipates that the DIP, together with its cash reserves and its ongoing revenue stream, will be sufficient to fund its operations, including payment of employee wages and benefits, during the reorganization process.

     On May 15, 2003, NRG Energy announced that it has been notified that the New York Stock Exchange (NYSE) has suspended trading in NRG Energy’s corporate units that trade under the ticker symbol NRZ and that an application to the Securities and Exchange Commission to delist the Units is pending the completion of applicable procedures, including appeal by NRG Energy of the NYSE staff’s decision. NRG Energy does not plan to make such an appeal. The NYSE took this action following NRG Energy’s

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announcement that it and certain of its U.S. affiliates had filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code.

     In addition, on May 15, 2003, NRG Energy, NRG Power Marketing, Inc., NRG Finance Company I LLC, NRGenerating Holding (No. 23) B.V. and NRG Capital LLC (collectively, the Plan Debtors) filed their Disclosure Statement for Reorganizing Debtors’ Joint Plan of Reorganization Pursuant to Chapter 11 of the United States Bankruptcy Code (as subsequently amended, the Disclosure Statement). The Bankruptcy Court held a hearing on the Disclosure Statement on June 30, 2003, and instructed the Plan Debtors to include certain additional disclosure. The Plan Debtors amended the Disclosure Statement and obtained Bankruptcy Court approval for the Third Amended Disclosure Statement for Debtors Second Amended Joint Plan of Reorganization Pursuant to Chapter 11 of the Bankruptcy Code (respectively, the Amended Disclosure Statement, the Plan).

     The Plan must be approved by the SEC prior to its becoming effective. As subsidiaries of a registered holding company (Xcel Energy) under the Public Utility Holding Company Act of 1935 (PUHCA), any reorganization plan for NRG Energy or NRG Energy’s subsidiaries must be approved by the SEC prior to such plan becoming effective. Furthermore, each solicitation of any consent in respect of any reorganization plan must be accompanied or preceded by a copy of a report on the plan made by the SEC, or an abstract thereof made or approved by the SEC. The Plan and Amended Disclosure Statement were submitted to the SEC for review on Monday, July 28, 2003. The Plan Debtors will not be able to solicit acceptances or rejections in connection with the Plan prior to obtaining the required SEC approval. As a result, no deadlines or dates have been set regarding voting or confirmation.

     On June 5, 2003 NRG Nelson Turbines LLC and LSP-Nelson Energy LLC (both wholly owned subsidiaries of NRG Energy) filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York.

2. Comprehensive Income

     For all periods, net income is equal to comprehensive income as there were no additional items impacting comprehensive income for these periods.

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3. Debtors’ Statements

     As stated above, NRG Energy and certain of its subsidiaries (including NRG South Central, Louisiana Generating, Big Cajun and New Roads) filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code on May 14, 2003. As of the bankruptcy filing date, the Debtors’ financial records were closed for the prepetition period. As required by SOP 90-7 “Financial Reporting by Entities in Reorganization under the Bankruptcy Code,” below are the condensed combined financial statements of the Debtors since the date of the bankruptcy filings (the Debtors’ Statements). The Debtors’ Statements have been prepared on the same basis as NRG South Central’s Consolidated Financial Statements and include the balances and operations of NRG South Central, Louisiana Generating and New Roads.

DEBTORS’ CONDENSED COMBINED STATEMENT OF OPERATIONS

DEBTORS’ CONDENSED COMBINED BALANCE SHEET

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DEBTORS’ CONDENSED COMBINED STATEMENT OF CASH FLOWS

4. Property, Plant and Equipment

     Property, plant and equipment consists of the following:

5. Debt

     NRG Energy has failed to make scheduled payments on interest and/or principal on approximately $4.0 billion of its recourse debt and is in default under the related debt instruments. These missed payments also have resulted in cross-defaults of numerous other non-recourse and limited recourse debt instruments of NRG Energy. In addition to the missed debt payments, a significant amount of NRG Energy’s debt and other obligations contain terms, which require that they be supported with letters of credit or cash collateral following a ratings downgrade. As a result of the downgrades that NRG Energy experienced in 2002, NRG Energy estimates that it is in default of its obligations to post collateral of approximately $1.2 billion, principally to fund equity guarantees associated with its construction revolver financing facility, to fund debt service reserves and other guarantees related to NRG Energy projects and to fund trading operations.

     Absent an agreement on a comprehensive restructuring plan, NRG Energy will remain in default under its debt and other obligations, because it does not have sufficient funds to meet such requirements and obligations. There can be no assurance that NRG Energy’s creditors ultimately will accept any consensual restructuring plan under the bankruptcy process. For discussion of NRG Energy’s restructuring activities, refer to Note 1 in the Form 10-Q filed by NRG Energy for the six months ended June 30, 2003 and Form 8-K filed by NRG Energy on May 16, 2003.

     In June 2002, NRG Energy’s Peaker Finance Company LLC (NRG Peaker), an indirect wholly owned subsidiary of NRG Energy, completed the issuance of $325 million of Series A Floating Rate Senior Secured Bonds due 2019. The bonds bear interest at a floating rate equal to three months USD-LIBOR — BBA plus 1.07%. NRG Peaker entered into an interest rate swap by which NRG Peaker pays a fixed rate 6.667% through the final maturity of the bonds. As of March 31, 2003, NRG South Central’s outstanding amount on this facility was $105.5 million, unchanged from December 31, 2002. On May 13, 2003, XL Capital Assurance, as controlling party, accelerated the debt issued by NRG Peaker, rendering the debt immediately due and payable.

     Since September, 2002, NRG South Central has failed to make on time $25.6 million of principal payments and $34.4 million of interest payments on its Series A-1 and Series B-1 bonds. NRG South Central has also failed to fund the debt service reserve account. On November 21, 2002, a notice of acceleration was received, rendering the bonds immediately due and payable. However, NRG South Central made a total of $34.4 million interest payments on Series A-1 and Series B-1 bonds, and has made interest payments when due on

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the NRG Peaker Finance Company LLC Series A bonds. NRG South Central is current on interest payments due on the above referenced bonds, but remain in default with respect to principal payments, debt service reserve funds, and cross-defaults.

     As a result of NRG Energy’s bankruptcy filing, NRG South Central has classified its bonds as a prepetition obligation subject to compromise. Accrued Interest continues to be recorded as the debt is fully secured.

6. Inventory

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

7. Derivative Instruments and Hedging Activity

     On January 1, 2001, NRG South Central adopted Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS No. 133), as amended by SFAS No. 137 and SFAS No. 138. SFAS No. 133 requires the Company to record all derivatives on the balance sheet at fair value. Changes in the fair value of non-hedge derivatives are immediately recognized in earnings. Changes in fair values of derivatives accounted for as hedges are either recognized in earnings as offsets to the changes in fair value of related hedged assets, liabilities and firm commitments or for forecasted transactions, deferred and recorded as a component of accumulated other comprehensive income (OCI) until the hedged transactions occur and are recognized in earnings. The ineffective portion of a hedging derivative instrument’s change in fair value is immediately recognized in earnings. NRG South Central also formally assesses, both at inception and at least quarterly thereafter, whether the derivatives used in hedging transactions are highly effective in offsetting the changes in either the fair value or cash flows of the hedged item. This assessment includes all components of each derivative’s gains or losses unless otherwise noted. When it is determined that a derivative ceases to be a highly effective hedge, hedge accounting is discontinued.

     SFAS No. 133 applies NRG South Central’s long-term power sales contracts, long-term gas purchase contracts and other energy related commodities financial instruments used to mitigate variability in earnings due to fluctuations in spot market prices, hedge fuel requirements at generation facilities and protect investments in fuel inventories. At June 30, 2003, NRG South Central had various commodity contracts extending through 2003. None of these contracts are designated as hedging instruments.

Accumulated Other Comprehensive Income

     During the six months ended June 30, 2003 and 2002, NRG South Central deferred no gains or losses to OCI.

Statement of Operations

     The following tables summarize the effects of SFAS No. 133 on NRG South Central’s statement of operations for the three and six months ended June 30, 2003 and 2002:

     During the three and six months ended June 30, 2003 and 2002, the Company recognized no gain or loss due to ineffectiveness of commodity cash flow hedges, and no components of the company’s derivative instruments’ gains or losses were excluded from the assessment of effectiveness.

     The Company’s earnings for the three months ended June 30, 2003 and 2002 were increased by an unrealized gain of $0.3 million and $0.4 million, respectively. For the six months ended June 30, 2003 and 2002 the Company’s earnings were increased by an unrealized

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gain of $0.4 million and decreased by an unrealized loss of $0.2 million, respectively, associated with changes in the fair value of energy related derivative instruments not accounted for as hedges in accordance with SFAS No. 133.

8. Commitments and Contingencies

Legal Issues

The New York Voluntary Bankruptcy Case

     On May 14, 2003, NRG Energy and certain of its U.S. affiliates filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code (the Bankruptcy Code) in the United States Bankruptcy Court for the Southern District of New York (the Bankruptcy Court), In re: NRG ENERGY, INC., et. al., Case No. 03-13024 (PCB). NRG Energy expects operations to continue as normal during the restructuring process, while it operates its business as a “debtor-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.

Pointe Coupee Parish Police Jury and Louisiana Generating, LLC v. United States Environmental Protection Agency and Christine Todd Whitman, Administrator, Adversary Proceeding No. 02-61021 on the docket of the United States Court of Appeals for the Fifth Circuit

     On December 2, 2002, a Petition for Review was filed to appeal the United States Environmental Protection Agency’s approval of the Louisiana Department of Environmental Quality’s (DEQ) revisions to the Baton Rouge State Implementation Plan (SIP). Pointe Coupee and NRG Energy’s subsidiary, Louisiana Generating, object to the approval of SIP Section 4.2.1. Permitting NOx Sources that purports to require DEQ to obtain offsets of major increases in emissions of nitrogen oxides (NOx) associated with major modifications of existing facilities or construction of new facilities both in the Baton Rouge Ozone Nonattainment Area and in four adjoining attainment parishes referred to as the Region of Influence, including Pointe Coupee Parish. The plaintiffs’ challenge is based on DEQ’s failure to comply with Administrative Procedures Act requirements related to rulemaking and EPA’s regulations, which prohibit EPA from approving a SIP not prepared in accordance with state law. The court granted a sixty (60) day stay of this proceeding on February 25, 2003 to allow the parties to conduct settlement discussions, which has now been further extended to August 26, 2003, while the parties continue their settlement efforts. At this time, NRG Energy is unable to predict the eventual outcome of this matter or the potential loss contingencies, if any, to which the Company may be subject.

In the Matter of Louisiana Generating, LLC, Adversary Proceeding No. 2002-1095 1-EQ on the docket of the Louisiana Division of Administrative Law.

     During 2000, DEQ issued a Part 70 Air Permit modification to Louisiana Generating to construct and operate two 240 MW natural gas-fired turbines. The Part 70 Air Permit set emissions limits for the criteria air pollutants, including NOx, based on the application of Best Available Control Technology (BACT). The BACT limitation for NOx was based on the guarantees of the manufacturer, Siemens-Westinghouse. Louisiana Generating sought an interim emissions limit to allow Siemens-Westinghouse time to install additional control equipment. To establish the interim limit, DEQ issued a Compliance Order and Notice of Potential Penalty, No. AE-CN-02-0022, on September 8, 2002, which is, in part, subject to the referenced administrative hearing. DEQ alleged that Louisiana Generating did not meet its NOx emissions limit on certain days, did not conduct all opacity monitoring and did not complete all record keeping and certification requirements. Louisiana Generating intends to vigorously defend certain claims and any future penalty assessment, while also seeking an amendment of its limit for NOx. An initial status conference has been held with the Administrative Law Judge and quarterly reports will be submitted to describe progress, including settlement and amendment of the limit. The extension of an amended BACT analysis has been granted until December 31, 2003. In addition, NRG Energy may assert breach of warranty claims against the manufacturer. With respect to the administrative action described above, at this time NRG Energy is unable to predict the eventual outcome of this matter or the potential loss contingencies, if any, to which the Company may be subject.

NRG Sterlington Power, LLC

     During 2002, NRG Sterlington conducted a review of the Sterlington Power Facility’s Part 70 Air Permit obtained by the facility’s former owner and operator, Koch Power, Inc. Koch had outlined a plan to install eight 25 megawatt (MW) turbines to reach a 200 MW limit in the permit. Due to the inability of several units to reach their nameplate capacity, Koch determined that it would need additional units to reach the electric output target. In August 2000, NRG Sterlington acquired the remaining interests in the facility not originally held on a passive basis and sought the transfer of the Part 70 Air Permit along with a modification to incorporate two 17.5 MW turbines installed by Koch and to increase the total number of turbines to ten. The permit modification was issued February 13, 2002. During further review, NRG Sterlington determined that a ninth unit had been installed prior to issuance of the permit modification. In keeping with its environmental policy, it disclosed this matter to DEQ during April, 2002. Additional information was provided during July 2002. As DEQ has not acted to date to institute an enforcement proceeding, NRG Energy suspects that it may

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not. However, as it is not time barred from doing so, NRG Energy is unable at this time to predict the eventual outcome or potential loss contingencies, if any, to which the Company may be subject.

Kenneth W. Austin, James Gordon Chustz, Roger Morgan, Robert Perkins, Theodore Plauche’, Vaughn Reynolds, Charley Saizan, Thomas Palko, John Nichols, Doleen Lemoine, James Didier, Beverly Carnes, Anthony McMinn, Frank Neely, Joseph Lea, Emmitt Cavalier, William Geismer, Jess Hunger, Ronald Lewell McCabe, Allen Hetherwick, Laura Dabney, Ronald Saizon, Barbara Dickerson, Jeanette Johnson, Melinda Delhoste, Karen Herpich, Debra Jackson, Malcolm Stutes, Jesse Jarreau, Michael Armato, Sr., Dennis Johnson, Paul Dewey, and Clifford Nelson v. Ralph Mabey, as Bankruptcy Trustee of Cajun Electric Power Cooperative, Inc., Louisiana Generating, L.L.C., and NRG Energy, Inc., United States District Court for the Middle District of Louisiana, Civil Action No. 00-728-D-M1

     Plaintiffs are former employees of Cajun Electric Power Cooperative, Inc. (Cajun). After lengthy bankruptcy proceedings, Louisiana Generating, L.L.C. (LaGen), a wholly owned subsidiary of NRG Energy, acquired Cajun’s assets. Following dismissal of their Equal Employment Opportunity Commission (EEOC) charges without any investigation or finding, the plaintiffs sued Cajun, NRG Energy, and LaGen contending that they were not offered employment, or were offered undesirable employment, because of their race, gender, and/or age in violation of Title VII and/or the Age Discrimination in Employment Act (ADEA). This litigation is not a class action and the parties and court have generally agreed that separate jury trials are appropriate. Discovery is complete, including sixty-one depositions. Dispositive motions have been filed on behalf of NRG Energy and LaGen. The scheduled hearings are subject to the automatic stay resulting from the voluntary petition (In re: NRG Energy, Inc., et. al., Case No. 03-13024 (PCB)). In the absence of relief from the Bankruptcy Court, the trial court will not rule on NRG Energy and LaGen’s pending motions. The presiding Judge has already granted dispositive motions in favor of NRG Energy and LaGen in two separate, but related, discrimination cases arising from the same transaction. NRG Energy and LaGen are committed to a vigorous defense against the plaintiffs’ allegations.

Travis Ballou, George Brumfield, Anthony James, and John Wise, v. Ralph Mabey, as Bankruptcy Trustee of Cajun Electric Power Cooperative, Inc., Louisiana Generating, L.L.C., and NRG Energy, Inc., Civil Action No. 01-0125-B-M1, United States District Court for the Middle District of Louisiana

     This case arises from the same transaction described in connection with the Austin case above. Following dismissal of their EEOC charges with no investigation or finding, plaintiffs sued NRG Energy and LaGen for alleged race and/or age discrimination. After discovery, NRG Energy and LaGen filed dispositive motions, which the court granted. A final judgment was entered and the court awarded costs to NRG Energy and LaGen. The bill of costs has been filed. On February 14, 2003, Plaintiffs filed a notice of appeal to the United States Court of Appeals for the Fifth Circuit. NRG Energy and LaGen are committed to a vigorous defense against the plaintiffs’ allegations.

Randy Beach, et. al. v. Pointe Coupee Electric Membership Cooperative, et. al. (Nos. 35,945, 35,946, and 36,141 in the 18th Judicial District Court of Pointe Coupee Parish).

     Three Louisiana Generating employees sued Pointe Coupee for injuries allegedly sustained while they were repairing a Pointe Coupee transformer pursuant to a Maintenance Agreement between Louisiana Generating and Pointe Coupee. The plaintiffs claim to have been “spewed by” hot transformer oil while repairing the transformer on August 11, 2001. No damages amounts are specified in their consolidated complaints. Pointe Coupee added Louisiana Generating to the suite asserting claims for indemnity and breach of contract. A number of depositions have been completed, discovery is ongoing, and a status conference has been requested. The court and plaintiffs have been advised of the filing of the voluntary petition (In re: NRG Energy, et. al., Case No. 03-13024 (PCB)). The Company cannot at this time predict the likelihood of an adverse determination in this dispute.

Quincy L. Adams, Jr. et. al. v. Owens Corning Fiberglass Corp. et. al. (No. 50,703 in the 18th Judicial District Court of Pointe Coupee Parish).

     The original petition in this asbestosis case was filed in 1995 and includes claims by numerous plaintiffs against various defendants (Miner/Manufacturer/Seller/Supplier/Distributor Defendants, Contractor Defendants and Premise Defendants). On December 18, 2002, NRG Energy Inc. was served with a supplemental petition adding it as a Premise Defendant based on the contract employment of seven plaintiffs at Big Cajun I or Big Cajun II at different times through November 2002. NRG has been granted an indefinite extension of time in which to reply to the petition, while plaintiffs’ counsel review materials sent to them by LaGen in support of LaGen’s request for voluntary dismissal. The court and plaintiffs have been advised of the filing of the voluntary petition (In re: NRG Energy, et. al., Case No. 03-13024 (PCB)). At the present time, the Company cannot predict the likelihood of an adverse determination in this suit.

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Faye Locroix Killingsworth, et. al. v. A. P. Green Industries, Inc. et. al. (No. 455666 in the 19th Judicial District Court of East Baton Rouge Parish).

     The original petition in this asbestosis case was filed in 1998 and includes numerous defendants. On April 8, 2003, Big Cajun II Unit 4 LLC and Big Cajun I Peaking Power LLC were served with a supplemental petition adding them as Premises Liability Defendants based on the decedent’s alleged asbestos exposure from 1973 to 1979. NRG Energy has been granted an indefinite extension of time in which to reply to the petition, while plaintiffs’ counsel review materials sent to them by LaGen in support of LaGen’s request for voluntary dismissal based on its assertions that (1) Big Cajun II Unit 4 LLC is not an entity that exists and, if plaintiffs meant to sue Big Cajun II Unit 4 LLC, the entity did not exist at the time of the alleged harm to the decedent; (2) Big Cajun I Peaking Power LLC did not exist at the time of the alleged harm to the decedent. The court and plaintiffs have been advised of the filing of the voluntary petition (In re: NRG Energy, et. al., Case No. 03-13024 (PCB)). At the present time, the Company cannot predict the likelihood of an adverse determination in this suit.

NRG Energy Credit Defaults

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

9. Guarantees

     NRG South Central guarantees the purchase and sale of fuel, emission credits and power generation to and from third parties in connection with the operation of some of NRG South Central’s generation facilities. As of June 30, 2003, NRG South Central’s obligations pursuant to its guarantees of the performance of its subsidiaries totaled approximately $15.3 million.

     In June 2002, NRG Peaker Finance Company LLC issued $325 million of secured bonds to make loans to affiliates which own natural gas fired “peaker” electric generating projects. As of June 30, 2003, $319.4 million remains outstanding. NRG Peaker Finance Company LLC has advanced unsecured loans outstanding in the amount of $105.5 million to Bayou Cove through project loan agreements. The remaining amount outstanding of $213.8 million was advanced to NRG Rockford LLC and Rockford II LLC, indirect wholly owned subsidiaries of NRG Energy. The principal and interest payments, in addition to the obligation to pay fees and other finance expenses, in connection with the bonds are jointly and severally guaranteed by each of the three projects. As a result, NRG South Central’s obligation pursuant to its guarantee of the secured bonds is $319.4 million as of June 30, 2003. As of June 30, 2003, Bayou Cove had an intercompany loan outstanding in the amount of $105.5 million. On May 13, 2003, XL Capital Assurance, as controlling party, accelerated the approximately $319.4 million of debt issued by NRG Peaker Finance Company LLC.

     Louisiana Generating is a guarantor of the bonds issued on March 30, 2000 to acquire the Cajun facilities.

10. Restructuring Charges

     NRG South Central incurred $2.8 million and $2.1 million of restructuring costs for the three and six months ended June 30, 2003, which includes $0.9 million of restructuring costs for the period May 14, 2003 (the date of the bankruptcy petition) to June 30, 2003. These costs were recognized as restructuring charges in the statement of operations. These costs consist of employee separation costs and advisor fees.

11. Asset Retirement Obligation

     Effective January 1, 2003, NRG South Central adopted SFAS No. 143, “Accounting for Asset Retirement Obligations” (SFAS No. 143). SFAS No. 143 requires an entity to recognize the fair value of a liability for an asset retirement obligation in the period in which it is incurred. Upon initial recognition of a liability for an asset retirement obligation, an entity shall capitalize an asset retirement cost by increasing the carrying amount of the related long-lived asset by the same amount as the liability. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Retirement obligations associated with long-lived assets included within the scope of SFAS No. 143 are those for which a legal obligation exists under enacted laws, statutes and written or oral contracts, including obligations arising under the doctrine of promissory estoppel.

     NRG South Central has identified certain retirement obligations related to its operations at the Louisiana Generating and Sterlington projects. These asset retirement obligations are related primarily to future land remediation of leased property and environment obligations related to ash disposal site closures. NRG South Central has also identified other asset retirement obligations that could not be calculated because the assets associated with the retirement obligations were determined to have an indeterminate life. The adoption of SFAS No. 143 resulted in recording a $0.3 million increase to property, plant and equipment and a $0.4 million

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increase to other non-current liabilities. The cumulative effect of adopting SFAS No. 143 resulted in an increase in depreciation expense and an increase in cost of operations, which combined was approximately $0.1 million.

     The following represents the balances of the asset retirement obligation as of January 1, 2003 and the additions and accretion of the asset retirement obligation for the six months ended June 30, 2003:

     The following represents the pro-forma effect on NRG South Central’s net income for the three and six months ended June 30, 2002, as if NRG Central had adopted SFAS No. 143 as of January 1, 2002:

     NRG South Central has established a guarantor trust fund to accumulate the estimated funds necessary for asset retirement obligations. The fair value of the guarantor trust fund was $4.7 million at June 30, 2003 and at December 31, 2002.

12. Recent Accounting Pronouncements

     In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections,” (SFAS No. 145) that supercedes previous guidance for the reporting of gains and losses from extinguishment of debt and accounting for leases, among other things. SFAS No. 145 requires that only gains and losses from the extinguishment of debt that meet the requirements for classification as “Extraordinary Items,” as prescribed in Accounting Principles Board Opinion No. 30, should be disclosed as such in the financial statements. Previous guidance required all gains and losses from the extinguishment of debt to be classified as “Extraordinary Items.” This portion of SFAS No. 145 is effective for fiscal years beginning after May 15, 2002, with restatement of prior periods required. NRG South Central adopted this standard as of January 1, 2003 and has no extraordinary gains or losses resulting from extinguishment of debt that will require restatement.

     In addition, SFAS No. 145 amends SFAS No. 13, “Accounting for Leases,” (SFAS No. 13) as it relates to accounting by a lessee for certain lease modifications. Under SFAS No. 13, if a capital lease is modified in such a way that the change gives rise to a new agreement classified as an operating lease, the assets and obligation are removed, a gain or loss is recognized and the new lease is accounted for as an operating lease. Under SFAS No. 145, capital leases that are modified so the resulting lease agreement is classified as an operating lease are to be accounted for under the sale-leaseback provisions of SFAS No. 98, “Accounting for Leases.” These provisions of SFAS No. 145 were effective for transactions occurring after May 15, 2002. SFAS No. 145 will be applied as required.

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

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

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     In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities”, (SFAS No. 149). SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. The provisions of SFAS No. 149 are effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2002. In addition, provisions of SFAS No. 149 that relate to SFAS Statement No. 133 Implementation Issues that have been effective for fiscal quarters that began prior to June 15, 2003, should continue to be applied in accordance with their respective effective dates. SFAS No. 149 will be applied as required and is not expected to have a material impact on NRG South Central.

     In May 2003, the FASB issues SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity”, (SFAS No. 150). SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. The provisions of SFAS 150 are effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. SFAS No. 150 is not expected to have an impact on NRG South Central.

13. Condensed Consolidating Financial Information

     The following tables set forth the consolidating financial statements of NRG South Central Generating LLC (Bond Issuer); Louisiana Generating LLC (Bond Guarantor); NRG New Roads Holding LLC, NRG Sterlington Power LLC, Big Cajun I Peaking Power LLC, NRG Sabine River Works GP LLC, NRG Sabine River Works LP LLC, Big Cajun II Unit 4 LLC and NRG Bayou Cove Peaking Power LLC (Unrestricted, Non-guarantor subsidiaries). The condensed consolidating financial statements present the unrestricted non-guarantor subsidiaries on a combined basis. The consolidating financial statements as of and for the three and six months ended June 30, 2003 and 2002 have been derived from the unaudited historical consolidated financial statements of NRG South Central. The consolidating balance sheet as of December 31, 2002 has been derived from the audited historical consolidated balance sheet of NRG South Central.

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NRG South Central Generating LLC and Subsidiaries
Consolidating Balance Sheet
June 30, 2003
(UNAUDITED)