ESI TRACTEBEL ACQUISITION CORP - 10-Q Quarterly Report

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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 March 31, 2004 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number	Exact name of registrants as specified in their charters, State of Organization, address of principal executive offices and registrants' telephone number	IRS Employer Identification Number

33-87902	ESI TRACTEBEL FUNDING CORP. (a Delaware corporation)	04-3255377
33-87902-02	NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP (a Massachusetts limited partnership)	04-2955642
33-87902-01	NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP (a New Jersey limited partnership)	04-2955646
333-52397	ESI TRACTEBEL ACQUISITION CORP. (a Delaware corporation)	65-0827005
333-52397-01	NORTHEAST ENERGY, LP (a Delaware limited partnership)	65-0811248
c/o FPL Energy, LLC 700 Universe Boulevard Juno Beach, Florida 33408 (561) 691-7171

Indicate by check mark whether the registrants (1) have 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 and (2) have been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrants are accelerated filers as defined in Rule 12b-2 of the Securities Exchange Act of 1934. Yes [ ] No [X]

APPLICABLE ONLY TO CORPORATE ISSUERS:
As of April 30, 2004, there were issued and outstanding 10,000 shares of ESI Tractebel Funding Corp.'s common stock. As of April 30, 2004, there were issued and outstanding 20 shares of ESI Tractebel Acquisition Corp.'s common stock.

This combined Form 10-Q represents separate filings by ESI Tractebel Funding Corp., Northeast Energy Associates, a limited partnership, North Jersey Energy Associates, a limited partnership, ESI Tractebel Acquisition Corp. and Northeast Energy, LP. Information contained herein relating to an individual registrant is filed by that registrant on its own behalf. Each registrant makes representations only as to itself and makes no representations whatsoever as to any other registrant.

CAUTIONARY STATEMENTS AND RISK FACTORS THAT MAY AFFECT FUTURE RESULTS
In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (Reform Act), ESI Tractebel Funding Corp. (Funding Corp.), Northeast Energy Associates, a limited partnership (NEA) and North Jersey Energy Associates, a limited partnership (NJEA) (collectively, the Partnerships), ESI Tractebel Acquisition Corp. (Acquisition Corp.) and Northeast Energy, LP (NE LP) (all five entities collectively, the registrants) are hereby filing cautionary statements identifying important factors that could cause the registrants' actual results to differ materially from those projected in forward-looking statements (as such term is defined in the Reform Act) made by or on behalf of the registrants in this combined Form 10-Q, in presentations, in response to questions or otherwise. Any statements that express, or involve discussions as to expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases su ch as "will likely result," "are expected to," "will continue," "is anticipated," "believe," "could," "estimated," "may," "plan," "potential," "projection," "target," "outlook") are not statements of historical facts and may be forward-looking. Forward-looking statements involve estimates, assumptions and uncertainties. Accordingly, any such statements are qualified in their entirety by reference to, and are accompanied by, the following important factors (in addition to any assumptions and other factors referred to specifically in connection with such forward-looking statements) that could cause the registrants' actual results to differ materially from those contained in forward-looking statements made by or on behalf of any of the registrants.
Any forward-looking statement speaks only as of the date on which such statement is made, and the registrants undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for management to predict all of such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.
The following are some important factors that could have a significant impact on the registrants' operations and financial results, and could cause the registrants' actual results or outcomes to differ materially from those discussed in the forward-looking statements:
·	The registrants are subject to changes in laws or regulations, including the Public Utility Regulatory Policies Act of 1978, as amended (PURPA), changing governmental policies and regulatory actions, including those of the Federal Energy Regulatory Commission (FERC), with respect to, but not limited to, acquisition and disposal of assets and facilities, and present or prospective competition.
·	The registrants are subject to extensive federal, state and local environmental statutes, rules and regulations relating to air quality, water quality, waste management, natural resources and health and safety that could, among other things, restrict or limit the output of certain facilities or the use of certain fuels required for the production of electricity and/or increase costs. There are significant capital, operating and other costs associated with compliance with these environmental statutes, rules and regulations, and those costs could be even more significant in the future.
·	The registrants operate in a changing market environment influenced by various legislative and regulatory initiatives regarding deregulation, regulation or restructuring of the energy industry, including deregulation of the production and sale of electricity. The registrants will need to adapt to these changes and may face increasing competitive pressure.
·	The Partnerships were developed and operated as qualifying facilities (QFs) under PURPA and the regulations promulgated thereunder by the FERC. However, in December 2003, an amended and restated power purchase agreement of NJEA became effective and NJEA no longer operates as a QF. NEA continues to operate as a QF. FERC regulations require that at least 5% of a QF's total energy output be useful thermal energy. To meet the QF requirement, NEA sells steam under a long-term sales agreement to an unrelated third party for use in a gas and chemical processing facility to maintain NEA's QF status. NEA is dependent upon the on-going operations of this facility. Loss of QF status would entitle one power purchaser to renegotiate the price provisions of its power purchase agreement.
·	A substantial portion of the output from the Partnerships' power generation facilities is sold under long-term power purchase agreements to four regulated utilities, two of which are under common control. The limited number of power purchasers creates a concentration of counterparty risk. The remaining output from the power generation facilities is sold, from time to time, in the merchant markets. In addition, it is expected that upon expiration of the power purchase agreements, the residual portion of the electrical output will be sold in the merchant market. Merchant plants sell power based on market conditions at the time of sale. The amount and timing of revenues to be received from the merchant markets in the future is uncertain. In December 2003, an amended and restated power purchase agreement between NJEA and a New Jersey utility became effective. The agreement provides for, among other things, the ability to deliver electricity to the New Jersey utility from sources other than the NJEA facility.
·	The operation of power generation facilities involves many risks, including start up risks, breakdown or failure of equipment, transmission lines or pipelines, use of new technology, the dependence on a specific fuel source or the impact of unusual or adverse weather conditions (including natural disasters), as well as the risk of performance below expected or contracted levels of output or efficiency. This could result in lost revenues and/or increased expenses. Insurance, warranties or performance guarantees may not cover any or all of the lost revenues or increased expenses, including the cost of replacement power. Breakdown or failure of an operating facility may prevent the facility from performing under applicable power sales agreements which, in certain situations, could result in termination of the agreement or payment of liquidated damages.
·	The registrants use derivative instruments, such as swaps and options, to manage their commodity and financial market risks. The registrants could recognize financial losses as a result of volatility in the market values of these contracts, or if a counterparty fails to perform. In the absence of actively quoted market prices and pricing information from external sources, the valuation of these derivative instruments involves management's judgment or use of estimates. As a result, changes in the underlying assumptions or use of alternative valuation methods could affect the value of the reported fair value of these contracts.
·	In addition to risks discussed elsewhere, risk factors specifically affecting the registrants' success include the ability to efficiently operate generating assets, the successful and timely completion of project restructuring activities, the price and supply of fuel, transmission constraints, competition from new sources of generation, excess generation capacity and demand for power. There can be significant volatility in market prices for fuel, and there are other financial, counterparty and market risks that are beyond the control of the registrants. The registrants' inability or failure to effectively hedge their assets or positions against changes in commodity prices, interest rates, counterparty credit risk or other risk measures could significantly impair their future financial results.
·	The registrants' results of operations can be affected by changes in the weather. Severe weather can be destructive, causing outages and/or property damage, which could require additional costs to be incurred.
·	The registrants are subject to costs and other effects of legal and administrative proceedings, settlements, investigations and claims, as well as the effect of new, or changes in, tax rates or policies, rates of inflation, accounting standards, securities laws or corporate governance requirements.
·	The registrants are subject to direct and indirect effects of terrorist threats and activities. Generation and transmission facilities, in general, have been identified as potential targets. The effects of terrorist threats and activities include, among other things, terrorist actions or responses to such actions or threats, the inability to generate, purchase or transmit power, the risk of a significant slowdown in growth or a decline in the U.S. economy, delay in economic recovery in the U.S., and the increased cost and adequacy of security and insurance.
·	The registrants' ability to obtain insurance, and the cost of and coverage provided by such insurance, could be affected by national events as well as registrant-specific events.
·	The registrants are substantially leveraged. The ability of the registrants to make interest and principal payments and fund capital expenditures is dependent on the future performance of the Partnerships. Future performance is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond the control of the registrants. The registrants are also subject to restrictive covenants under their debt agreements that will limit the ability to borrow additional funds.
·	All obligations of the Partnerships are non-recourse to the direct and indirect owners of the registrants. Following any default by the Partnerships, security is limited to the owners' economic interests in the Partnerships. The owners have no meaningful revenues other than the distributions they receive from the Partnerships. In the event of default, the ability of the owners to satisfy any obligations will be limited to amounts payable by the Partnerships as distributions.
The issues and associated risks and uncertainties described above are not the only ones the registrants may face. Additional issues may arise or become material as the energy industry evolves. The risks and uncertainties associated with these additional issues could impair the registrants' businesses in the future.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

NORTHEAST ENERGY, LP (A PARTNERSHIP) AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
(Unaudited)

						March 31, 2004		December 31, 2003

ASSETS
Current assets:
	Cash and cash equivalents					$	109,087	$	58,907
	Accounts receivable						25,002		33,957
	Due from related party						4,552		3,237
	Spare parts inventories						4,298		3,055
	Fuel inventories						1,508		10,362
	Prepaid expenses and other current assets						10,639		2,784

				Total current assets			155,086		112,302


Non-current assets:
		Deferred debt issuance costs (net of accumulated amortization of $3,809 and $3,666, respectively)					3,151		3,294
		Land					4,712		4,712
		Cogeneration facilities and carbon dioxide facility (net of accumulated depreciation of $133,450 and $128,494, respectively)					386,053		391,108
		Power purchase agreements (net of accumulated amortization of $333,863 and $318,743, respectively)					581,081		596,201
		Other assets					42,013		9,602

					Total non-current assets		1,017,010		1,004,917


TOTAL ASSETS						$	1,172,096	$	1,117,219


LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
	Current portion of notes payable - the Funding Corp.					$	28,564	$	28,564
	Current portion of notes payable - the Acquisition Corp.						8,800		8,800
	Current portion of note payable - affiliate						2,605		2,605
	Accrued interest payable						12,999		48
	Accounts payable						9,406		13,959
	Due to related parties						17,525		11,840
	Other accrued expenses						16,535		12,405

			Total current liabilities				96,434		78,221


Non-current liabilities:
		Deferred credit - fuel contracts					-		108,274
		Notes payable - the Funding Corp.					323,650		323,650
		Notes payable - the Acquisition Corp.					193,600		193,600
		Note payable - affiliate					23,583		23,583
		Energy bank and other liabilities					111,525		108,582
		Lease payable					815		815

					Total non-current liabilities		653,173		758,504


COMMITMENTS AND CONTINGENCIES

Partners' equity:
	General partners						8,281		5,431
	Limited partners						412,686		273,044
	Accumulated other comprehensive income						1,522		2,019

			Total partners' equity				422,489		280,494


TOTAL LIABILITIES AND PARTNERS' EQUITY						$	1,172,096	$	1,117,219

This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements herein and the Notes to Consolidated and Combined Financial Statements appearing in the combined Annual Report on Form 10-K for the fiscal year ended December 31, 2003 (2003 Form 10-K) for NE LP and Subsidiaries.

NORTHEAST ENERGY, LP (A PARTNERSHIP) AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands of Dollars)
(Unaudited)

				Three Months Ended March 31,

					2004			2003

REVENUES				$	119,116		$	108,221


COSTS AND EXPENSES (INCOME):
	Fuel				32,638			54,818
	Operations and maintenance				3,433			3,361
	Depreciation and amortization				20,096			19,249
	General and administrative				1,954			2,619
	Gain on energy bank settlement				-			(11,112	)
		Net gain on restructuring of contracts			(103,176	)		-

			Total costs and expenses/(income)		(45,055	)		68,935


OPERATING INCOME					164,171			39,286


OTHER EXPENSE (INCOME):
		Amortization of debt issuance costs			143			148
		Interest expense			15,784			16,428
		Interest income			(90	)		(125	)
		Other (income)/expense			842			(105	)

			Total other expense - net		16,679			16,346


NET INCOME				$	147,492		$	22,940

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)

			Three Months Ended March 31,

				2004			2003

NET CASH PROVIDED BY OPERATING ACTIVITIES			$	55,180		$	26,944


CASH FLOWS FROM INVESTING ACTIVITIES:
	Capital expenditures			-			-

		Net cash used in investing activities		-			-


CASH FLOWS FROM FINANCING ACTIVITIES:
	Distributions to partners			(5,000	)		-

		Net cash used in financing activities		(5,000	)		-


Net increase in cash and cash equivalents				50,180			26,944
Cash and cash equivalents at beginning of period				58,907			45,878

Cash and cash equivalents at end of period			$	109,087		$	72,822

NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
CONDENSED COMBINED BALANCE SHEETS
(Thousands of Dollars)
(Unaudited)

						March 31, 2004		December 31, 2003

ASSETS
Current assets:
	Cash and cash equivalents					$	108,266	$	58,092
	Accounts receivable						24,995		33,944
	Due from related party						4,552		3,237
	Spare parts inventories						4,298		3,055
	Fuel inventories						1,508		10,362
	Prepaid expenses and other current assets						10,639		2,784

				Total current assets			154,258		111,474


Non-current assets:
		Land					4,712		4,712
		Cogeneration facilities and carbon dioxide facility (net of accumulated depreciation of $133,450 and $128,494, respectively)					386,053		391,108
		Power purchase agreements (net of accumulated amortization of $333,863 and $318,743, respectively)					581,081		596,201
		Other assets					42,013		9,602

					Total non-current assets		1,013,859		1,001,623


TOTAL ASSETS						$	1,168,117	$	1,113,097


LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
	Current portion of notes payable - the Funding Corp.					$	28,564	$	28,564
	Accrued interest payable						8,400		-
	Accounts payable						9,406		13,959
	Due to related parties						17,150		11,517
	Other accrued expenses						16,535		12,405

			Total current liabilities				80,055		66,445


Non-current liabilities:
		Deferred credit - fuel contracts					-		108,274
		Notes payable - the Funding Corp.					323,650		323,650
		Energy bank and other liabilities					111,372		108,430
		Lease payable					815		815

					Total non-current liabilities		435,837		541,169


COMMITMENTS AND CONTINGENCIES

Partners' equity:
	General partners						6,507		5,035
	Limited partners						644,196		498,429
	Accumulated other comprehensive income						1,522		2,019

			Total partners' equity				652,225		505,483


TOTAL LIABILITIES AND PARTNERS' EQUITY						$	1,168,117	$	1,113,097

This report should be read in conjunction with the Notes to Condensed Combined Financial Statements herein and the Notes to Consolidated and Combined Financial Statements appearing in the 2003 Form 10-K for NEA and NJEA.

NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP

CONDENSED COMBINED STATEMENTS OF OPERATIONS
(Thousands of Dollars)
(Unaudited)

				Three Months Ended March 31,

				2004			2003

REVENUES				$	119,166		$	108,221


COSTS AND EXPENSES (INCOME):
	Fuel				32,638			54,818
	Operations and maintenance				3,433			3,361
	Depreciation and amortization				20,096			19,249
	General and administrative				1,954			2,619
	Gain on energy bank settlement				-			(11,112	)
		Net gain on restructuring of contracts			(103,176	)		-

			Total costs and expenses/(income)		(45,055	)		68,935


OPERATING INCOME					164,221			39,286


OTHER EXPENSE (INCOME):
		Interest expense			11,230			12,209
		Interest income			(90	)		(125	)
		Other (income)/expense			842			(108	)

			Total other expense - net		11,982			11,976


NET INCOME				$	152,239		$	27,310

CONDENSED COMBINED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)

			Three Months Ended March 31,

			2004			2003

NET CASH PROVIDED BY OPERATING ACTIVITIES			$	55,174		$	26,935


CASH FLOWS FROM INVESTING ACTIVITIES:
	Capital expenditures			-			-

		Net cash used in investing activities		-			-


CASH FLOWS FROM FINANCING ACTIVITIES:
	Distributions to partners			(5,000	)		-

		Net cash used in financing activities		(5,000	)		-


Net increase in cash and cash equivalents				50,174			26,935
Cash and cash equivalents at beginning of period				58,092			44,943

Cash and cash equivalents at end of period			$	108,266		$	71,878

ESI TRACTEBEL FUNDING CORP.

CONDENSED BALANCE SHEETS
(Thousands of Dollars)
(Unaudited)

			March 31, 2004		December 31, 2003

ASSETS
Current assets:
	Cash		$	1	$	1
	Interest receivable from the Partnerships			8,400		-
	Current portion of notes receivable from the Partnerships			28,564		28,564

		Total current assets		36,965		28,565

Notes receivable from the Partnerships				323,650		323,650


TOTAL ASSETS			$	360,615	$	352,215


LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Current portion of debt securities payable		$	28,564	$	28,564
	Accrued interest payable			8,400		-

		Total current liabilities		36,964		28,564

Debt securities payable				323,650		323,650

COMMITMENTS AND CONTINGENCIES

Stockholders' equity:
	Common stock, no par value, 10,000 shares authorized, issued and outstanding			1		1


TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY			$	360,615	$	352,215

CONDENSED STATEMENTS OF OPERATIONS
(Thousands of Dollars)
(Unaudited)

	Three Months Ended March 31,

	2004			2003

Interest income	$	8,400		$	8,955
Interest expense		(8,400	)		(8,955	)


NET INCOME	$	-		$	-

These reports should be read in conjunction with the Notes to Condensed Financial Statements herein and the Notes to Financial Statements appearing in the 2003 Form 10-K for the Funding Corp.

ESI TRACTEBEL ACQUISITION CORP.

CONDENSED BALANCE SHEETS
(Thousands of Dollars)
(Unaudited)

				March 31, 2004		December 31, 2003

ASSETS
Current assets:
	Interest receivable from NE LP			$	4,043	$	-
	Current portion of note receivable from NE LP				8,800		8,800

			Total current assets		12,843		8,800


Non-current assets:
	Due from NE LP				152		152
	Note receivable from NE LP				193,600		193,600

			Total non-current assets		193,752		193,752


TOTAL ASSETS				$	206,595	$	202,552


LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Income taxes payable			$	28	$	27
	Current portion of debt securities payable				8,800		8,800
	Accrued interest payable				4,043		-

		Total current liabilities			12,871		8,827


Non-current liabilities:
	Debt securities payable				193,600		193,600
	Other				69		72

			Total non-current liabilities		193,669		193,672


TOTAL LIABILITIES					206,540		202,499

COMMITMENTS AND CONTINGENCIES

Stockholders' equity:
	Common stock, $.10 par value, 100 shares authorized, 20 shares issued and outstanding				-		-
	Retained earnings				55		53


TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY				$	206,595	$	202,552

CONDENSED STATEMENTS OF OPERATIONS
(Thousands of Dollars)
(Unaudited)

	Three Months Ended March 31,

	2004			2003

Interest income	$	4,043		$	4,219
Interest expense		(4,040	)		(4,216	)

Income before income taxes		3			3
Income tax expense		(1	)		(1	)


NET INCOME	$	2		$	2

These reports should be read in conjunction with the Notes to Condensed Financial Statements herein and the Notes to Financial Statements appearing in the 2003 Form 10-K for the Acquisition Corp.

NORTHEAST ENERGY, LP (A PARTNERSHIP) AND SUBSIDIARIES
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
ESI TRACTEBEL FUNDING CORP.
ESI TRACTEBEL ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)

The accompanying Condensed Consolidated Financial Statements, Condensed Combined Financial Statements and Condensed Financial Statements should be read in conjunction with the 2003 Form 10-K for the registrants. In the opinion of the registrants' management, all adjustments (consisting of normal recurring accruals) considered necessary for fair financial statement presentation have been made. Certain amounts included in the prior year's consolidated and combined financial statements have been reclassified to conform to the current year's presentation. The Funding Corp. and the Acquisition Corp. had no cash transactions for the three months ended March 31, 2004 and 2003 and therefore have not presented a statement of cash flows. The results of operations for an interim period may not give a true indication of results for the year.

1. Combined Statement of Partners' Equity

NEA's and NJEA's general partner (GP) and limited partner (LP) equity balances are comprised of the following:

	NEA						NJEA						Combined

	GP		LP		Total		GP		LP		Total		GP		LP		Total

	(Thousands of Dollars)

Balances, December 31, 2003	$	1,717	$	170,049	$	171,766	$	3,318	$	328,380	$	331,698	$	5,035	$	498,429	$	503,464	^(a)
Balances, March 31, 2004	$	2,917	$	288,863	$	291,780	$	3,590	$	355,333	$	358,923	$	6,507	$	644,196	$	650,703	^(b)


(a)	Exclusive of accumulated other comprehensive income of $2,019.
(b)	Exclusive of accumulated other comprehensive income of $1,522.

2. Accounting for Derivative Instruments and Hedging Activities

Accumulated other comprehensive income is separately displayed in NE LP's and the Partnerships' balance sheets. Included in NE LP's and the Partnerships' accumulated other comprehensive income at March 31, 2004 is approximately $1.5 million of net unrealized gains associated with cash flow hedges of forecasted fuel purchases through December 2004, all of which are expected to be reclassified into earnings within the next twelve months. NE LP and the Partnerships reclassified a net gain of approximately $0.5 million and $6.1 million into earnings from accumulated other comprehensive income for the three months ended March 31, 2004 and 2003, respectively. The effective portion of the net gain/loss on cash flow hedges included within other comprehensive income was a net gain of approximately $8 thousand and approximately $13.8 million for the three months ended March 31, 2004 and 2003, respectively.

Unrealized mark-to-market gains and losses on derivative transactions represent the net unrealized effect of derivative transactions entered into as economic hedges (but which do not qualify for hedge accounting under Statement of Financial Accounting Standards No. (FAS) 133, "Accounting for Derivative Instruments and Hedging Activities," as amended) and the ineffective portion of transactions accounted for as cash flow hedges. These transactions have been entered into to reduce NE LP and the Partnerships' aggregate fuel cost and purchased power price risk. Changes in the derivatives' fair value for power purchases are recognized in operating revenues and fuel purchases are recognized in fuel expense in NE LP and the Partnerships' condensed consolidated and combined statements of operations, unless hedge accounting is applied.

3. Comprehensive Income

Comprehensive income below includes net income and net unrealized gains (losses) on cash flow hedges of forecasted fuel purchases for both NE LP and the Partnerships of approximately $(0.5) million and $7.6 million for the periods ended March 31, 2004 and 2003, respectively.

	Three Months Ended March 31,

	2004		2003

	(Thousands of Dollars)

NE LP	$	146,995	$	30,574
The Partnerships	$	151,742	$	34,944

4. Commitments and Contingencies

The long-term contractual obligations of NE LP and the Partnerships at March 31, 2004 are as follows:

NE LP AND THE PARTNERSHIPS
March 31, 2004
(Thousands of Dollars)

			2004		2005 - 06		2007 - 08		Thereafter		Total

CONTRACTUAL OBLIGATIONS

The Partnerships:
	Long-term debt		$	28,564	$	97,990	$	105,821	$	119,839	$	352,214
	Operating leases			198		558		606		1,086		2,448
	Other long-term obligations:
	Energy bank liability			-		-		-		96,379		96,379
	Administrative agreement^(a)			450		1,200		1,200		5,400		8,250
	O&M agreement^(a)			1,125		3,000		3,000		10,500		17,625
	Fuel management agreement^(a)			675		1,800		1,800		12,600		16,875
	Steam sales termination agreement			2,557		6,789		3,395		-		12,741

Total Partnerships				33,569		111,337		115,822		245,804		506,532

NE LP:
	Acquisition Corp. debt			8,800		22,000		44,000		127,600		202,400
	Affiliate debt			2,605		5,981		7,036		10,566		26,188

Total NE LP				11,405		27,981		51,036		138,166		228,588

Total contractual obligations			$	44,974	$	139,318	$	166,858	$	383,970	$	735,120



(a)		Represents the minimum obligation under the terms of the agreement. The minimum obligation is subject to an annual inflation factor adjustment, which is excluded from the minimum obligation included in the table.

5. Power Purchase Agreements, Fuel Supply Agreements and Steam Agreements

In December 2003, an agreement between NJEA and a New Jersey utility became effective to amend and restate the power purchase agreement in order to realize cost savings by sourcing power from the wholesale market rather than NJEA's facility during periods when market prices are lower than generation costs. In connection with this agreement, NJEA entered into two off-peak power purchase contracts with FPL Energy, LLC's power marketing subsidiary, FPL Energy Power Marketing, Inc. (PMI) and Tractebel Energy Marketing, Inc. (TEMI), which were effective in January 2004, each for the purchase of up to 125 megawatts (mw) per off-peak hour at a fixed price to supply power to the New Jersey utility under the amended and restated power purchase agreement. Under the terms of these contracts, PMI and TEMI will purchase power from the wholesale market to be sold to NJEA. The pricing in the NJEA power purchase agreement with the New Jersey utility is based on a gas index, thus NJEA's purchase of off-peak power at a f ixed price from PMI and TEMI and sale to the New Jersey utility at a gas indexed price exposes NJEA to decreases in the price of natural gas. Total power purchased under these contracts in the first quarter of 2004 was $7.4 million.

In order to hedge the Partnerships' exposure to natural gas prices relating to the amended and restated power purchase agreement, a Partial Termination Agreement between NEA and one of its fuel suppliers became effective in January 2004. Prior to the partial termination, the supplier provided 35,418 mmbtu/day to NEA, and now supplies 12,507 mmbtu/day or approximately 21% of NEA's daily fuel requirements, at a fixed price. The reduction in NEA's volume of fixed price gas exposes NEA to increases in the price of natural gas. When combined, NJEA's and NEA's exposures to changes in natural gas prices are expected to be minimized. The partial termination resulted in the fuel supplier paying the partnership $5.0 million, the removal of a $108.1 million liability representing the unamortized deferred credit as of the termination date, the addition of a $2.0 million asset representing the value of the remaining contract, and recognition of a $115.1 million gain.

To replace the remaining fuel requirements, NEA entered into two additional replacement long-term gas supply agreements with PMI and TEMI which became effective in January 2004 and provide the partnership with gas indexed pricing. Fuel purchased under agreements between NEA and PMI and TEMI were $20.9 million in the first quarter of 2004.

In connection with the amended and restated power purchase agreement, in March 2004, NJEA exercised its option to terminate its steam sales contract since the NJEA facility is no longer operating as a base load facility. This resulted in the recognition of an $11.9 million loss representing the net present value of future payments to the steam offtaker. Under the terms of the termination agreement NJEA will no longer supply steam to the steam offtaker and NJEA is obligated to pay the offtaker a monthly fee of approximately $0.4 million through December 2007.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

This discussion should be read in conjunction with the Notes to Condensed Consolidated Financial Statements, Notes to Condensed Combined Financial Statements and Notes to Condensed Financial Statements contained herein (the Notes) and Management's Discussion and Analysis of Financial Condition and Results of Operations appearing in the 2003 Form 10-K for the registrants. All periods presented have been reclassified to reflect the guidance of Emerging Issues Task Force Issue No. (EITF) 03-11 and the SEC staff which were adopted by NE LP and the Partnerships effective October 1, 2003. This guidance relates to the reporting of realized gains and losses on derivative contracts and on the realized and unrealized effects of derivative instruments not accounted for as hedges. The results of operations for an interim period may not give a true indication of results for the year. In the following discussion, all comparisons are with the corresponding items in the prior year period.

Results of Operations

NE LP and the Partnerships - NE LP's net income for the first quarter of 2004 was $147.5 million compared to $22.9 million for the same period in 2003 and the Partnerships' net income for the first quarter of 2004 was $152.2 million compared to $27.3 for the same period in 2003. Net income reflects the following items which increased (decreased) reported results:

	2004		2003

	(in thousands)
Net gain on restructuring of contracts	$	103,176	$	- -
Unrealized gains (losses) on derivative instruments	$	35,997	$	(2,567	)
Gain on energy bank settlement	$	-	$	11,112

NE LP and the Partnership's management uses earnings excluding these items (adjusted earnings) internally for financial planning and reporting of results to partners. Management of NE LP and the Partnership's believes adjusted earnings provide a more meaningful representation of the registrants' fundamental earnings power. Although the excluded items are properly included in the determination of net income in accordance with generally accepted accounting principles, both the size and nature of such items make period to period comparisons of operations difficult and potentially confusing. Results for the first quarter of 2004 compared to the same period in 2003 were negatively affected by unfavorable pricing under one of the power purchase agreements and an increase in the use of market priced gas. The volume of fuel purchased during the first quarter of 2004 decreased since the NJEA facility did not operate during that time. Revenue increased for the first quarter of 2004 compared to the same perio d in 2003 primarily due to the unrealized gain on derivative instruments of approximately $36.0 million due to an increase in forward power prices, a decrease in utility energy bank balances of $3.1 million and an increase in power sold to utilities of $7.7 million (83.8 mw).

The net gain on restructurings of contracts in the first quarter of 2004 consists of a gain of $115.1 million recognized on the effective date of a partial termination agreement between NEA and one of its fuel suppliers, partially offset by a loss of $11.9 million recognized on the exercise date of NJEA's option to terminate its steam sales contract.

In December 2003, an agreement between NJEA and a New Jersey utility became effective to amend and restate the power purchase agreement in order to realize cost savings by sourcing power from the wholesale market rather than NJEA's facility during periods when market prices are lower than generation costs. In connection with this agreement, NJEA entered into two off-peak power purchase contracts with FPL Energy, LLC's power marketing subsidiary, FPL Energy Power Marketing, Inc. (PMI) and Tractebel Energy Marketing, Inc. (TEMI), which were effective in January 2004, each for the purchase of up to 125 mw per off-peak hour at a fixed price to supply power to the New Jersey utility under the amended and restated power purchase agreement. Under the terms of these contracts, PMI and TEMI will purchase power from the wholesale market to be sold to NJEA. The pricing in the NJEA power purchase agreement with the New Jersey utility is based on a gas index, thus NJEA's purchase of off-peak power at a fixed price f rom PMI and TEMI and sale to the New Jersey utility at a gas indexed price exposes NJEA to decreases in the price of natural gas.

Revenue increased for the first quarter of 2004 compared to the same period in 2003 primarily due to the unrealized gain on derivative instruments of approximately $36.0 million due to an increase in forward power prices, a decrease in utility energy bank balances of $3.1 million and an increase in power sold to utilities of $7.7 million (83.8 mw). This increase in revenue was partially offset by purchased power of $22.4 million and decreased revenue resulting from unfavorable pricing under one of the power purchase agreements due to lower fuel costs. Revenues for the three months ended March 31, 2004 and 2003 were comprised of $118.9 million and $107.4 million of power sales to utilities and $0.2 million and $0.8 million of steam sales, respectively. Power sales to utilities for the three months ended March 31, 2004 and 2003 reflect a decrease in utility energy bank balances which increased reported revenues by $10.6 million and $7.5 million, respectively. The decrease in the energy bank balances is determined in accordance with scheduled or specified rates under a certain power purchase agreement.

Fuel expense for the three months ended March 31, 2004 decreased primarily as a result of the amended and restated power purchase agreement between NJEA and a New Jersey utility. Under the terms of the agreement, NJEA has the option to supply power from the market rather than the NJEA facility. During the first quarter of 2004, all of the power sold to the New Jersey utility was provided by the market and the NJEA facility did not operate, resulting in a decrease in fuel cost of approximately $27.7 million. Additionally, fuel sales increased in 2004 by $7.5 million primarily due to the sale of fuel held in storage at the NJEA facility. This decrease in fuel cost at NJEA was partially offset by the increased cost of market priced gas at the NEA facility due to the termination of certain fixed price fuel supply contracts and increased volume. Fuel costs for the three months ended March 2003, were partly offset by $3.7 million of deferred credit amortization for fuel contracts which were terminated in Augu st 2003 and January 2004.

Interest expense for NE LP and the Partnerships decreased as a result of decreasing principal balances on their outstanding debt to the Acquisition Corp. and Funding Corp., respectively.

On March 31, 2003, an energy bank was terminated resulting in an $11.1 million gain for NEA. In connection with the termination, the energy bank balance of $22.2 million was eliminated, and NE LP paid approximately $11.1 million plus interest in June 2003.

The Funding Corp. and the Acquisition Corp. - Both the Funding Corp. and the Acquisition Corp. use interest income and principal payments received from the notes receivable from the Partnerships and NE LP, respectively, to make scheduled interest and principal payments on their outstanding debt. Both entities are scheduled to make semi-annual principal and interest payments on June 30 and December 30. Interest expense for both the Funding Corp. and Acquisition Corp. decreased in 2004 as a result of decreasing principal balances on their outstanding debt.

Liquidity and Capital Resources

NE LP and the Partnerships - The changes in net cash provided by operating activities for NE LP and the Partnerships for the three months ended March 31, 2004 compared to the three months ended March 31, 2003 were primarily due to lower operating costs incurred in 2004 as a result of the amended and restated power purchase agreement discussed above.

Each of NE LP and the Partnerships make scheduled interest and principal payments on their outstanding debt. Each are scheduled to make semi-annual principal and interest payments on June 30 and December 30.

NE LP and the Partnerships' long-term contractual obligations at March 31, 2004 are shown in Note 4.

Guarantees in the amount of $5.0 million each were made by a subsidiary of FPL Group and a subsidiary of Tractebel, Inc. The guarantor unconditionally and irrevocably guarantees the payments to be made under the amended long-term gas supply agreement executed in December 2003 between NJEA and a fuel supplier.

Market Risk Sensitivity

Commodity price risk - The prices received by the Partnerships for power sales under their long-term contracts do not move precisely in tandem with the prices paid by the Partnerships for natural gas. To manage the price risk associated with purchases of natural gas and, beginning in December 2003, purchases of power, the Partnerships may, from time to time, enter into certain transactions either through public exchanges or by means of over-the-counter transactions with specific counterparties. The Partnerships manage their risk associated with purchases of natural gas and power through the use of natural gas and power swap agreements and options. The swap agreements require the Partnerships to pay a fixed price (absolutely or within a specified range) in return for a variable price on specified notional quantities of natural gas and power. The options consist of purchased call options to establish a maximum price for natural gas and power, and written put options are executed to offset the cost of th e purchased call options.

The Partnerships use a value-at-risk (VaR) model to measure market risk in their mark-to-market portfolios. The VaR is the estimated loss based on a one-day holding period at a 95% confidence level using an historical simulation methodology. As of March 31, 2004 and December 31, 2003, the VaR figures for hedges in Accumulated Other Comprehensive Income (in thousands) are as follows:

December 31, 2003	$	46
March 31, 2004	$	1,260
Average for the period ended March 31, 2004	$	939

Item 3. Quantitative and Qualitative Disclosures About Market Risk
See Management's Discussion and Analysis of Financial Condition and Results of Operations - Market Risk Sensitivity.
Item 4. Controls and Procedures
(a)	Evaluation of Disclosure Controls and Procedures
	As of March 31, 2004, each of the registrants had performed an evaluation, under the supervision and with the participation of its management, including the chief executive officer and chief financial officer of each of the registrants, or their equivalent (Principal Officers), of the effectiveness of the design and operation of the registrants' disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) or 15d-15(e)). Based upon that evaluation, the Principal Officers concluded that the registrants' disclosure controls and procedures are effective in timely alerting them to material information relating to the registrants required to be included in the registrants' reports filed or submitted under the Exchange Act. The registrants have a Disclosure Committee, which is made up of several key management employees and reports directly to the Principal Officers of each of the registrants to monitor and evaluate these disclosure controls and procedures. Due to the inherent limitations of t he effectiveness of any established disclosure controls and procedures, management of the registrants cannot provide absolute assurance that the objectives of their disclosure controls and procedures will be met.
(b)	Changes in Internal Controls
	The registrants are continuously seeking to improve the efficiency and effectiveness of their operations and of their internal controls. This results in refinements to processes. However, there has been no change in the registrants' internal control over financial reporting that occurred during the registrants' most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants' internal control over financial reporting.

PART II - OTHER INFORMATION
Item 5. Other Information
(a)	Reference is made to Item 10 - Directors and Executive Officers of the Registrants - Management Committee of NE LP and the Partnerships in the 2003 Form 10-K for the registrants.
	In March 2004, William C. Harper, a former member of the Management Committee of NE LP and the Partnerships was replaced by Geert Peeters. Mr. Peeters, 40, joined Tractebel North America, Inc. in November 2002 as Vice President Finance. He was named Senior Vice President and Chief Financial Officer of Tractebel North America, Inc. in April 2003. He was vice president, construction management at the Gulf Total Tractebel Company from October 2001 to November 2002. Prior to that, he held a variety of positions at Suez-Tractebel S.A. since 1996 in finance and project management in Europe and Latin America. Mr. Peeters was appointed to the NE LP and Partnerships' management committee by Tractebel G.P.
Item 6. Exhibits and Reports on Form 8-K

(a)	Exhibits
	Exhibit Number	Description

	10(a)	Termination Agreement dated as of October 21, 2003 between Hercules Incorporated and NJEA
	10(b)	Letter Agreement dated October 9, 2003 by and between Public Service Electric and Gas Company and NJEA
	10(c)	Power Purchase Agreement dated as of January 1, 2004 by and between NJEA and TEMI
	10(d)	Power Purchase Agreement dated as of January 1, 2004 by and between NJEA and PMI
	10(e)	Base Contract for Sale and Purchase of Natural Gas dated January 1, 2004 between NEA and PMI
	10(f)	Base Contract for Sale and Purchase of Natural Gas dated January 1, 2004 between NEA and TEMI
	31(a)	Rule 13a-14(a)/15d-14(a) Certification of President (equivalent to the Chief Executive Officer) of ESI Tractebel Funding Corp.
	31(b)	Rule 13a-14(a)/15d-14(a) Certification of Treasurer (equivalent to the Chief Financial Officer) of ESI Tractebel Funding Corp.
	31(c)	Rule 13a-14(a)/15d-14(a) Certification of President (equivalent to the Chief Executive Officer) of ESI Tractebel Acquisition Corp.
	31(d)	Rule 13a-14(a)/15d-14(a) Certification of Treasurer (equivalent to the Chief Financial Officer) of ESI Tractebel Acquisition Corp.
	31(e)	Rule 13a-14(a)/15d-14(a) Certification of President (equivalent to the Chief Executive Officer) of ESI Northeast Energy GP, Inc. as Administrative General Partner of Northeast Energy Associates, a limited partnership
	31(f)	Rule 13a-14(a)/15d-14(a) Certification of Vice President and Treasurer (equivalent to the Chief Financial Officer) of ESI Northeast Energy GP, Inc. as Administrative General Partner of Northeast Energy Associates, a limited partnership
	31(g)	Rule 13a-14(a)/15d-14(a) Certification of President (equivalent to the Chief Executive Officer) of ESI Northeast Energy GP, Inc. as Administrative General Partner of North Jersey Energy Associates, a limited partnership
	31(h)	Rule 13a-14(a)/15d-14(a) Certification of Vice President and Treasurer (equivalent to the Chief Financial Officer) of ESI Northeast Energy GP, Inc. as Administrative General Partner of North Jersey Energy Associates, a limited partnership
	31(i)	Rule 13a-14(a)/15d-14(a) Certification of President (equivalent to the Chief Executive Officer) of ESI Northeast Energy GP, Inc. as Administrative General Partner of Northeast Energy, LP
	31(j)	Rule 13a-14(a)/15d-14(a) Certification of Vice President and Treasurer (equivalent to the Chief Financial Officer) of ESI Northeast Energy GP, Inc. as Administrative General Partner of Northeast Energy, LP
	32(a)	Section 1350 Certification of President (equivalent to the Chief Executive Officer) and Treasurer (equivalent to the Chief Financial Officer) of ESI Tractebel Funding Corp.
	32(b)	Section 1350 Certification of President (equivalent to the Chief Executive Officer) and Treasurer (equivalent to the Chief Financial Officer) of ESI Tractebel Acquisition Corp.
	32(c)	Section 1350 Certification of President (equivalent to the Chief Executive Officer) and Vice President and Treasurer (equivalent to the Chief Financial Officer) of ESI Northeast Energy GP, Inc. as Administrative General Partner of Northeast Energy Associates, a limited partnership
	32(d)	Section 1350 Certification of President (equivalent to the Chief Executive Officer) and Vice President and Treasurer (equivalent to the Chief Financial Officer) of ESI Northeast Energy GP, Inc. as Administrative General Partner of North Jersey Energy Associates, a limited partnership
	32(e)	Section 1350 Certification of President (equivalent to the Chief Executive Officer) and Vice President and Treasurer (equivalent to the Chief Financial Officer) of ESI Northeast Energy GP, Inc. as Administrative General Partner of Northeast Energy, LP
(b)	Reports on Form 8-K - None.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized.

	NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP (ESI Northeast Energy GP, Inc. as Administrative General Partner) NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP (ESI Northeast Energy GP, Inc. as Administrative General Partner) NORTHEAST ENERGY, LP (ESI Northeast Energy GP, Inc. as Administrative General Partner) ESI TRACTEBEL FUNDING CORP. ESI TRACTEBEL ACQUISITION CORP. (Registrants)

Date: May 12, 2004



	MARK R. SORENSEN

	Mark R. Sorensen Vice President and Treasurer of ESI Northeast Energy GP, Inc. Treasurer of ESI Tractebel Funding Corp. Treasurer of ESI Tractebel Acquisition Corp. (Principal Financial and Principal Accounting Officer of the Registrants)