EX-99.3 6 c60217ex99-3.txt FINANCIAL STATEMENTS OF "SUNSHINES" 1 EXHIBIT 99.3 Financial Statements of "Sunshine" SUNSHINE STATE POWER B.V. ANNUAL FINANCIAL REPORT DECEMBER 31, 2000, 1999 AND 1998 2 SUNSHINE STATE POWER B.V. INDEX TO ANNUAL FINANCIAL REPORT DECEMBER 31, 2000, 1999 AND 1998 --------------------------------------------------------------------------------
PAGE(S) ------- Auditors' Report 1 Balance Sheet at December 31, 2000, 1999 and 1998 2 Statement of Income for the years ended December 31, 2000, 1999 and 1998 3 Statement of Cash Flows for the years ended December 31, 2000, 1999 and 1998 4 Notes to the Annual Accounts for the years ended December 31, 2000, 1999 and 1998 5-12
3 TO THE SHAREHOLDERS OF SUNSHINE STATE POWER B.V. AUDITORS' REPORT INTRODUCTION We have audited the accompanying balance sheet of Sunshine State Power B.V. as of December 31, 2000, 1999 and 1998, and the related statements of income and of cash flows for each of the three years ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. SCOPE We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. OPINION In our opinion, the financial statements give a true and fair view of the financial position of the Company as of December 31, 2000, 1999 and 1998 and of the results for the years then ended in accordance with accounting principles generally accepted in the Netherlands and comply with the financial reporting requirements included in Part 9, Book 2 of the Netherlands Civil Code. PRICEWATERHOUSECOOPERS N.V. March 2, 2001 Amsterdam, Netherlands 4 SUNSHINE STATE POWER B.V. BALANCE SHEET AT DECEMBER 31, 2000, 1999 AND 1998 (Amounts expressed in thousands of Australian dollars) --------------------------------------------------------------------------------
ASSETS 2000 1999 1998 ----------- ----------- ---------- Fixed assets: Intangible fixed assets 6,513 6,984 7,455 Tangible fixed assets 153,210 155,857 157,432 ----------- ----------- ---------- 159,723 162,841 164,887 Current assets: Stocks 2,716 6,210 3,497 Receivables 5,740 4,891 5,521 Cash and bank balances 13,202 11,206 11,471 ----------- ----------- ---------- 21,658 22,307 20,489 ----------- ----------- ---------- Total assets 181,381 185,148 185,376 =========== =========== ========== SHAREHOLDERS' EQUITY AND LIABILITIES Shareholders' equity: Issued share capital 30 30 30 Retained earnings 42,472 32,406 26,580 Result for the year 3,169 10,066 5,826 ----------- ----------- ---------- 45,671 42,502 32,436 ----------- ----------- ---------- Provisions 19,824 18,369 17,918 Long-term liabilities 103,549 113,050 125,480 Current liabilities 12,337 11,227 9,542 ----------- ----------- ---------- Total shareholders' equity and liabilities 181,381 185,148 185,376 =========== =========== ==========
The accompanying notes form an integral part of the annual accounts. 2 5 SUNSHINE STATE POWER B.V. STATEMENT OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Amounts expressed in thousands of Australian dollars) --------------------------------------------------------------------------------
2000 1999 1998 --------- ---------- --------- Net turnover: Enertrade 20,305 16,649 18,819 Boyne Smelters Limited 40,337 39,586 38,377 --------- ---------- --------- Total 60,642 56,235 57,196 Cost of turnover: Non-fuel 10,055 9,847 9,345 Fuel 28,050 24,541 24,864 --------- ---------- --------- Total 38,105 34,388 34,209 --------- ---------- --------- Gross profit on turnover 22,537 21,847 22,987 --------- ---------- --------- Operating expenses 1,541 2,236 1,624 Depreciation and amortization expense 4,750 4,806 6,409 --------- ---------- --------- Total expenses 6,291 7,042 8,033 --------- ---------- --------- Net profit on turnover 16,246 14,805 14,954 --------- ---------- --------- Interest expense 7,182 6,530 6,942 Interest income (652) (545) (566) Foreign exchange (gain) loss 5,141 (1,721) 995 Disposal of assets (gain) loss 48 135 19 --------- ---------- --------- Net financial expense 11,719 4,399 7,390 --------- ---------- --------- Result from ordinary operations before taxation 4,527 10,406 7,564 Taxation 1,358 340 1,738 --------- ---------- --------- Net result 3,169 10,066 5,826 ========= ========== =========
The accompanying notes form an integral part of the annual accounts. 3 6 SUNSHINE STATE POWER B.V. STATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Amounts expressed in thousands of Australian dollars) --------------------------------------------------------------------------------
2000 1999 1998 --------- ---------- --------- Cash flows from operating activities: Net result 3,169 10,066 5,826 Adjustments to reconcile net result to net cash provided by operating activities: Depreciation and amortization 4,750 4,806 6,409 Deferred income taxes 1,358 340 1,738 Foreign exchange loss (gain) 5,141 (1,721) 995 (Gain) loss on sale of fixed assets 48 146 19 Changes in operating assets and liabilities: Stocks 3,494 (2,713) (1,243) Receivables (849) 630 (1,051) Provisions 97 111 (15) Current liabilities 435 1,060 164 --------- ---------- --------- Net cash flows provided by operating activities 17,643 12,725 12,842 --------- ---------- --------- Cash flows from investing activities: Purchases of tangible fixed assets (1,694) (2,918) (1,867) Proceeds from sale of fixed assets 14 12 23 --------- ---------- --------- Net cash flows used by investing activities (1,680) (2,906) (1,844) --------- ---------- --------- Cash flows from financing activities: Proceeds (repayments) of notes payable (7,367) (4,109) (4,974) Repayments of long-term debt (6,600) (5,975) (5,438) --------- ---------- --------- Net cash flows used by financing activities (13,967) (10,084) (10,412) --------- ---------- --------- Net increase (decrease) in cash and bank balances 1,996 (265) 586 Cash and bank balances: Beginning of year 11,206 11,471 10,885 --------- ---------- --------- End of year 13,202 11,206 11,471 ========= ========== ========= Supplemental disclosure of cash paid for interest 7,182 6,229 7,744 ========= ========== =========
The accompanying notes form an integral part of the annual accounts. 4 7 SUNSHINE STATE POWER B.V. NOTES TO THE ANNUAL ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Amounts expressed in thousands of Australian dollars) -------------------------------------------------------------------------------- 1. GENERAL ACTIVITIES Sunshine State Power B.V. (the Company) was incorporated on November 11, 1993 and is seated in Amsterdam, the Netherlands. The Company's principal operating activity is the ownership of 20% of the Gladstone Power Station Joint Venture. The Gladstone Power Station Joint Venture owns and operates the Gladstone Power Station located in Queensland, Australia which it acquired on March 30, 1994. The Gladstone Power Station Joint Venture is an unincorporated joint venture and therefore not a separate legal entity. Accordingly, the Gladstone Power Station Joint Venture owners act as tenants in common owning their proportionate shares of the unincorporated joint venture's assets, liabilities and results of operations. The unincorporated joint venture's assets, liabilities, results of operations and cash flows have been taken up in this annual financial report on a proportionate basis. The accounts have been prepared for the years ended December 31, 2000, 1999 and 1998. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES GENERAL Unless otherwise stated assets and liabilities are carried at nominal value. BASIS OF PREPARATION The Company's financial statements have been prepared in accordance with generally accepted accounting principles in the Netherlands (Netherlands GAAP) which may differ in certain respects from generally accepted accounting principles in the United States (US GAAP). With regard to the Company's balance sheet and statement of income, there are no material differences between Netherlands GAAP and US GAAP. With regard to the Company's statement of cash flows, under US GAAP the foreign exchange loss (gain) would be classified under the cash flows from financing activities section as US GAAP requires that such items be netted with the related cash flow item. FOREIGN CURRENCIES Assets and liabilities at year-end and transactions during the period denominated in a foreign currency are translated into the Company's local currency (Australian dollars) at the exchange rates ruling at year-end and at the time of the transaction, respectively. Exchange adjustments are taken to the statement of income. INTANGIBLE FIXED ASSETS Project Development Expenditures - Project development expenditures represent the Company's share of project development expenditures incurred by the Gladstone Power Station Joint Venture to organize the acquisition of the Gladstone Power Station and operate it subsequent to the acquisition. Capitalized development expenditures are being amortized over the term of the Gladstone Power Station Power sales agreements (35 years), commencing from the date the investment in the project was consummated. The carrying values of capitalized development expenditures and the 5 8 SUNSHINE STATE POWER B.V. NOTES TO THE ANNUAL ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Amounts expressed in thousands of Australian dollars) -------------------------------------------------------------------------------- amortization periods are reviewed annually and any necessary write down is charged against income. Research expenditures and expenditures on development of existing projects are charged against income in the year in which they are incurred. Financing Costs - Financing costs represent the Company's share of the costs incurred by the Gladstone Power Station Joint Venture to acquire the long-term debt used to finance the acquisition of the Gladstone Power Station. Capitalized financing costs are being amortized over a ten-year period, which represents the timeframe until the Company expects the long-term debt will be refinanced. TANGIBLE FIXED ASSETS All tangible fixed assets are stated at cost. The Company has not had any reevaluations performed on its tangible fixed assets. Tangible fixed assets, with the exception of land, are depreciated over their estimated useful lives or over the life of the power purchase agreement by the straight-line method. Ordinary maintenance and repairs are expensed as incurred; replacements and improvements are capitalized. The estimated useful lives are: Site roads and preparation 50 years Generators, systems, stacks, etc. 50 years Coal handling plant 10-50 years Other operating fixed assets 3-10 years
STOCKS Stocks are carried at the lower of cost (principally by the FIFO method or another method which approximates FIFO) and net realizable value. In valuing stocks, appropriate allowance is made for obsolete or slow-moving items. TRADE DEBTORS Trade debtors are stated at nominal value. CASH AND BANK BALANCES The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash. PROVISIONS Employee Provisions - Provisions are made for amounts expected to be paid to the operator of the Gladstone Power Station in respect of its employees for the pro rata entitlements for long service and annual leave. These amounts are accrued at actual pay rates having regard to experience of employee's departure and period of service. The provisions are divided into current (expected to be paid in the ensuing twelve months) and non-current portions. Deferred Tax - Provisions for deferred taxes have been set up where items entering into the determination of accounting profit for one period are recognized for taxation purposes in another. 6 9 SUNSHINE STATE POWER B.V. NOTES TO THE ANNUAL ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Amounts expressed in thousands of Australian dollars) -------------------------------------------------------------------------------- The principal difference arises in connection with the depreciation of fixed assets. In calculating the provision, current tax rates are applied. 7 10 SUNSHINE STATE POWER B.V. NOTES TO THE ANNUAL ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Amounts expressed in thousands of Australian dollars) -------------------------------------------------------------------------------- COMPANY INCOME TAX Company income tax is based upon the results reported in the statement of income as adjusted for permanent differences. Current Australian tax rates are applied. CASH FLOW STATEMENT The cash flow statement has been prepared using the indirect method. COMPARATIVE AMOUNTS Comparative amounts are reclassified to conform with the current year's financial statement presentation. 3. INTANGIBLE FIXED ASSETS The movements in the intangible fixed assets are summarized as follows:
PROJECT DEVELOPMENT FINANCING EXPENDITURES COSTS TOTAL ------------ ---------- -------- COST Balance at December 31, 1998 6,984 2,707 9,691 Additions for the year ended December 31, 1999 -- -- -- -------- ------- ------- Balance at December 31, 1999 6,984 2,707 9,691 Additions for the year ended December 31, 2000 -- -- -- -------- ------- ------- Balance at December 31, 2000 6,984 2,707 9,691 -------- ------- ------- ACCUMULATED AMORTIZATION Balance at December 31, 1998 (949) (1,287) (2,236) Amortization for the year ended December 31, 1999 (200) (271) (471) Amortization for the year ended December 31, 2000 (200) (271) (471) -------- ------- ------- Balance at December 31, 2000 (1,349) (1,829) (3,178) -------- ------- ------- Net book value at December 31, 2000 5,635 878 6,513 ======== ======= =======
8 11 SUNSHINE STATE POWER B.V. NOTES TO THE ANNUAL ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Amounts expressed in thousands of Australian dollars) -------------------------------------------------------------------------------- 4. TANGIBLE FIXED ASSETS The movements in the tangible fixed assets are summarized as follows:
OTHER SITE ROADS GENERATORS, COAL OPERATING AND SYSTEMS, HANDLING FIXED LAND PREPARATION STACKS PLANT ASSETS TOTAL ------ ----------- ---------- --------- --------- -------- COST Balance at December 31, 1998 216 2,847 167,160 9,736 3,224 183,183 Additions -- 42 1,264 1,332 215 2,853 Disposals -- -- (135) -- (23) (158) ----- ------ -------- ------- ------- ------- Balance at December 31, 1999 216 2,889 168,289 11,068 3,416 185,878 Additions -- 11 902 61 153 1,127 Disposals -- -- (50) -- (12) (62) ----- ------ -------- ------- ------- ------- Balance at December 31, 2000 216 2,900 169,141 11,129 3,557 186,943 ===== ====== ======== ======= ======= ======= ACCUMULATED DEPRECIATION Balance at December 31, 1998 -- (488) (21,355) (2,749) (1,457) (26,049) Charge for the year -- (54) (3,352) (628) (301) (4,335) ----- ------ -------- ------- ------- ------- Balance at December 31, 1999 -- (542) (24,707) (3,377) (1,758) (30,384) Charge for the year -- (60) (3,189) (654) (376) (4,279) ----- ------ -------- ------- ------- ------- Balance at December 31, 2000 -- (602) (27,896) (4,031) (2,134) (34,663) ===== ====== ======== ======= ======= ======= Construction in progress at December 31, 2000 (construction in progress at December 31, 1999 and 1998 was AUD 363 and AUD 298, respectively) 930 ======= Net tangible fixed assets at December 31, 2000 153,210 =======
As of January 1, 1999, the depreciation lives for site roads and preparation, generators, systems and stacks and the coal handling plant were prospectively changed from 35 to 50 years. This prospective change reduced 1999 depreciation expense by 1,677. 9 12 SUNSHINE STATE POWER B.V. NOTES TO THE ANNUAL ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Amounts expressed in thousands of Australian dollars) -------------------------------------------------------------------------------- 5. STOCKS
DECEMBER 31 ------------------------------ 2000 1999 1998 --------- -------- --------- Coal 1,462 4,812 2,309 Fuel oils 164 159 84 Chemicals 9 10 7 Spares and consumables 1,081 1,229 1,097 --------- -------- --------- 2,716 6,210 3,497 ========= ======== =========
6. RECEIVABLES
DECEMBER 31 ------------------------------ 2000 1999 1998 --------- -------- --------- Trade debtors 5,651 4,701 5,444 Prepayments 89 190 77 --------- -------- --------- 5,740 4,891 5,521 ========= ======== =========
All receivables are due in less than one year. 7. CASH AND BANK BALANCES All cash and bank balances are held by banks and include investments with maturities of three months or less which are readily convertible to cash. The Company's long-term debt agreement places restrictions on the amount of cash and bank balances which must be maintained. At December 31, 2000, 1999 and 1998, the restricted cash and bank balances totaled AUD 7,292, AUD 6,460 and AUD 6,348, respectively. 8. ISSUED SHARE CAPITAL The authorized share capital consists of 2,000 shares each having a nominal value of 30 Australian dollars (40 Dutch Guilders), of which 1,000 shares have been issued and fully paid up at December 31, 2000, 1999 and 1998. In prior years, the Company's shares were owned by NRGenerating International B.V. (990) and Gunwale B.V. (10). Both NRGenerating International B.V. and Gunwale B.V. are wholly-owned by NRG Energy, Inc., which is incorporated in the United States of America. During 1999, the shares held by Gunwale B.V. were sold to NRGenerating International B.V. 10 13 SUNSHINE STATE POWER B.V. NOTES TO THE ANNUAL ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Amounts expressed in thousands of Australian dollars) -------------------------------------------------------------------------------- 9. RETAINED EARNINGS
2000 1999 --------- ---------- Balance at January 1 32,406 26,580 Appropriation of prior year's result 10,066 5,826 --------- ---------- Balance at December 31 42,472 32,406 ========= ==========
10. RESULT FOR THE PERIOD Balance at December 31, 1998 5,826 1998 net result appropriated to retained earnings (5,826) Net result for the year ended December 31, 1999 10,066 1999 net result appropriated to retained earnings (10,066) Net result for the year ended December 31, 2000 3,169 ---------- Balance at December 31, 2000 3,169 ==========
11. PROVISIONS
EMPLOYEE DEFERRED PROVISIONS TAX TOTAL ---------- --------- ---------- Balance at December 31, 1998 1,229 16,689 17,918 Charged (released) to income 111 340 451 -------- --------- ---------- Balance at December 31, 1999 1,340 17,029 18,369 Charged (released) to income 97 1,358 1,455 -------- --------- ---------- Balance at December 31, 2000 1,437 18,387 19,824 ======== ========= ==========
Approximately AUD 713 of the employee provisions are current and expected to be paid during 2001. 11 14 SUNSHINE STATE POWER B.V. NOTES TO THE ANNUAL ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Amounts expressed in thousands of Australian dollars) -------------------------------------------------------------------------------- 12. LONG-TERM LIABILITIES Secured long-term debt due to third parties:
DECEMBER 31 --------------------------------- 2000 1999 1998 ---------- --------- ---------- Secured - with banks 83,533 90,808 97,408 ========== ========= ==========
Current installments of bank long-term debt are included under current liabilities. The interest rate for long-term debt is variable based on an average of the bid rates quoted by the banks plus a margin of 1.5% at December 31, 2000, 1999 and 1998. The bank long-term debt is repayable as follows: 2001 7,275 2002 8,013 2003 8,850 2004 9,738 2005 10,750 Thereafter 46,182 ---------- 90,808 ==========
The bank long-term debt is secured by the Company's ownership interest in the Gladstone Power Station Joint Venture. Unsecured Subordinated Notes Payable (AUD'000) On March 25, 1994, the Company received loans from NRGenerating International B.V. and Gunwale B.V., the primary shareholders of the Company, in the amounts of AUD 48,312 and AUD 488, respectively. The notes payable are subordinated to all other liabilities of the Company, bear no interest and are to be repaid in US dollars. The Company repaid AUD 7,367 and AUD 4,109 to NRGenerating International B.V. during 2000 and 1999, respectively, and repaid AUD 4,655 and AUD 319 to NRGenerating International B.V. and Gunwale B.V. during 1998. Repayments on the notes payable are at the discretion of the Company, unless certain events of termination occur, as defined, and then the entire balance of the notes becomes due. The note balances, as adjusted for current period activity and foreign exchange fluctuations, were AUD 20,016, AUD 22,242 and AUD 0 to NRGenerating International B.V. and Gunwale B.V. at December 31, 2000 and 1999, respectively, and AUD 28,072 and AUD 0 to NRGenerating International B.V. and Gunwale B.V. at December 31, 1998, respectively. 12 15 SUNSHINE STATE POWER B.V. NOTES TO THE ANNUAL ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Amounts expressed in thousands of Australian dollars) -------------------------------------------------------------------------------- 13. CURRENT LIABILITIES
DECEMBER 31 ---------------------------- 2000 1999 1998 -------- -------- -------- Current installments of bank long-term debt 7,275 6,600 5,975 Trade creditors/suppliers 782 819 538 Accrued coal/rail costs 2,635 2,433 2,337 Accrued interest 739 773 472 Other liabilities 906 602 220 -------- -------- -------- 12,337 11,227 9,542 ======== ======== ========
14. RELATED PARTIES An affiliate of the Company, Sunshine State Power (No. 2) B.V. owns 17.5% of the Gladstone Power Station Joint Venture. Sunshine State Power (No. 2) B.V. is owned by the owners of the Company. The Gladstone Power Station is operated by NRG Gladstone Operating Services Pty. Ltd., which is ultimately a wholly-owned subsidiary of NRG Energy, Inc. NRG Gladstone Operating Services Pty. Ltd. operates the Gladstone Power Station under the terms of the Operation and Maintenance Agreement with the Gladstone Power Station Joint Venture. During the periods ended December 31, 2000 and 1999, the Company paid NRG Gladstone Operating Services Pty. Ltd. approximately AUD 332 and AUD 386, respectively, in operators fees under the terms of the Operation and Maintenance Agreement. 15. NUMBER OF EMPLOYEES The average number of persons employed at the Gladstone Power Station during 2000 was approximately 410 (1999: 400). These individuals are primarily employed in the operations and maintenance areas of the station. The Company is responsible for 20% of the related costs for these employees. The Company itself has no employees. 16. REMUNERATION OF DIRECTORS During the periods ended December 31, 2000, 1999 and 1998, none of the directors received remuneration for their services as directors of the Company. 13 16 SUNSHINE STATE POWER (NO. 2) B.V. ANNUAL FINANCIAL REPORT DECEMBER 31, 2000, 1999 AND 1998 17 SUNSHINE STATE POWER (NO. 2) B.V. INDEX TO ANNUAL FINANCIAL REPORT DECEMBER 31, 2000, 1999 AND 1998 --------------------------------------------------------------------------------
PAGE(S) ------- Auditors' Report 1 Balance Sheet at December 31, 2000, 1999 and 1998 2 Statement of Income for the years ended December 31, 2000, 1999 and 1998 3 Statement of Cash Flows for the years ended December 31, 2000, 1999 and 1998 4 Notes to the Annual Accounts for the years ended December 31, 2000, 1999 and 1998 5-13
18 TO THE SHAREHOLDERS OF SUNSHINE STATE POWER (NO. 2) B.V. AUDITORS' REPORT INTRODUCTION We have audited the accompanying balance sheet of Sunshine State Power (No. 2) B.V. as of December 31, 2000, 1999 and 1998, and the related statements of income and of cash flows for each of the three years ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. SCOPE We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. OPINION In our opinion, the financial statements give a true and fair view of the financial position of the Company as of December 31, 2000, 1999 and 1998 and of the results for the years then ended in accordance with accounting principles generally accepted in the Netherlands and comply with the financial reporting requirements included in Part 9, Book 2 of the Netherlands Civil Code. PRICEWATERHOUSECOOPERS N.V. March 2, 2001 Amsterdam, Netherlands 19 SUNSHINE STATE POWER (NO. 2) B.V. BALANCE SHEET AT DECEMBER 31, 2000, 1999 AND 1998 (Amounts expressed in thousands of Australian dollars) --------------------------------------------------------------------------------
ASSETS 2000 1999 1998 ----------- ----------- ---------- Fixed assets: Intangible fixed assets 5,704 6,115 6,526 Tangible fixed assets 134,051 136,369 137,749 ----------- ----------- ---------- 139,755 142,484 144,275 Current assets: Stocks 2,377 5,434 3,060 Receivables 5,023 4,280 4,830 Cash and bank balances 11,556 9,816 10,037 ----------- ----------- ---------- 18,956 19,530 17,927 ----------- ----------- ---------- Total assets 158,711 162,014 162,202 =========== =========== ========== SHAREHOLDERS' EQUITY AND LIABILITIES Shareholders' equity: Issued share capital 30 30 30 Retained earnings 37,081 28,343 23,247 Result for the year 2,791 8,738 5,096 ----------- ----------- ---------- 39,902 37,111 28,373 ----------- ----------- ---------- Provisions 17,319 16,038 15,671 Long-term liabilities 90,591 98,937 109,669 Current liabilities 10,899 9,928 8,489 ----------- ----------- ---------- Total shareholders' equity and liabilities 158,711 162,014 162,202 =========== =========== ==========
The accompanying notes form an integral part of the annual accounts. 2 20 SUNSHINE STATE POWER (NO. 2) B.V. STATEMENT OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Amounts expressed in thousands of Australian dollars) --------------------------------------------------------------------------------
2000 1999 1998 --------- ---------- --------- Net turnover: Enertrade 17,766 14,568 16,466 Boyne Smelters Limited 35,295 34,638 33,580 --------- ---------- --------- Total 53,061 49,206 50,046 Cost of turnover: Non-fuel 8,798 8,616 8,177 Fuel 24,544 21,473 21,756 --------- ---------- --------- Total 33,342 30,089 29,933 --------- ---------- --------- Gross profit on turnover 19,719 19,117 20,113 --------- ---------- --------- Operating expenses 1,349 2,068 1,424 Depreciation and amortization expense 4,157 4,205 5,608 --------- ---------- --------- Total expenses 5,506 6,273 7,032 --------- ---------- --------- Net profit on turnover 14,213 12,844 13,081 --------- ---------- --------- Interest expense 6,284 5,713 6,074 Interest income (602) (467) (458) Foreign exchange (gain) loss 4,502 (1,529) 833 Disposal of assets (gain) loss 42 119 17 --------- ---------- --------- Net financial expense 10,226 3,836 6,466 --------- ---------- --------- Result from ordinary operations before taxation 3,987 9,008 6,615 Taxation 1,196 270 1,519 --------- ---------- --------- Net result 2,791 8,738 5,096 ========= ========== =========
The accompanying notes form an integral part of the annual accounts. 3 21 SUNSHINE STATE POWER (NO. 2) B.V. STATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Amounts expressed in thousands of Australian dollars) --------------------------------------------------------------------------------
2000 1999 1998 --------- ---------- --------- Cash flows from operating activities: Net result 2,791 8,738 5,096 Adjustments to reconcile net result to net cash provided by operating activities: Depreciation and amortization 4,157 4,205 5,608 Deferred income taxes 1,196 270 1,519 Foreign exchange loss (gain) 4,502 (1,529) 833 (Gain) loss on sale of fixed assets 42 139 17 Changes in operating assets and liabilities: Stocks 3,057 (2,374) (1,088) Receivables (743) 550 (920) Provisions 85 97 (12) Current liabilities 380 892 302 --------- ---------- --------- Net cash flows provided by operating activities 15,467 10,988 11,355 --------- ---------- --------- Cash flows from investing activities: Purchases of tangible fixed assets (1,482) (2,553) (1,633) Proceeds from sale of fixed assets 12 -- 19 --------- ---------- --------- Net cash flows used by investing activities (1,470) (2,553) (1,614) --------- ---------- --------- Cash flows from financing activities: Repayments of notes payable (6,482) (3,428) (4,481) Repayments of long-term debt (5,775) (5,228) (4,758) --------- ---------- --------- Net cash flows used by financing activities (12,257) (8,656) (9,239) --------- ---------- --------- Net increase (decrease) in cash and bank balances 1,740 (221) 502 Cash and bank balances: Beginning of year 9,816 10,037 9,535 --------- ---------- --------- End of year 11,556 9,816 10,037 --------- ---------- --------- Supplemental disclosure of cash paid for interest 6,284 5,450 5,998 ========= ========== =========
The accompanying notes form an integral part of the annual accounts. 4 22 SUNSHINE STATE POWER (NO. 2) B.V. NOTES TO THE ANNUAL ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Amounts expressed in thousands of Australian dollars) -------------------------------------------------------------------------------- 1. GENERAL ACTIVITIES Sunshine State Power (No. 2) B.V. (the Company) was incorporated on February 24, 1994 and is seated in Amsterdam, the Netherlands. The Company's principal operating activity is the ownership of 17.5% of the Gladstone Power Station Joint Venture. The Gladstone Power Station Joint Venture owns and operates the Gladstone Power Station located in Queensland, Australia, which it acquired on March 30, 1994. The Gladstone Power Station Joint Venture is an unincorporated joint venture and therefore not a separate legal entity. Accordingly, the Gladstone Power Station Joint Venture owners act as tenants in common owning their proportionate shares of the unincorporated joint venture's assets, liabilities and results of operations. The unincorporated joint venture's assets, liabilities, results of operations and cash flows have been taken up in this annual financial report on a proportionate basis. The accounts have been prepared for the years ended December 31, 2000, 1999 and 1998. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES GENERAL Unless otherwise stated assets and liabilities are carried at nominal value. BASIS OF PREPARATION The Company's financial statements have been prepared in accordance with generally accepted accounting principles in the Netherlands (Netherlands GAAP) which may differ in certain respects from generally accepted accounting principles in the United States (US GAAP). With regard to the Company's balance sheet and statement of income, there are no material differences between Netherlands GAAP and US GAAP. With regard to the Company's statement of cash flows, under US GAAP the foreign exchange loss (gain) would be classified under the cash flows from financing activities section as US GAAP requires that such items be netted with the related cash flow item. FOREIGN CURRENCIES Assets and liabilities at year-end and transactions during the period denominated in a foreign currency are translated into the Company's local currency (Australian dollars) at the exchange rates ruling at year-end and at the time of the transaction, respectively. Exchange adjustments are taken to the statement of income. INTANGIBLE FIXED ASSETS Project Development Expenditures - Project development expenditures represent the Company's share of project development expenditures incurred by the Gladstone Power Station Joint Venture to organize the acquisition of the Gladstone Power Station and operate it subsequent to the acquisition. Capitalized development expenditures are being amortized over the term of the Gladstone Power Station Power sales agreements (35 years), commencing from the date the investment in the project was consummated. The carrying values of capitalized development expenditures and the 5 23 SUNSHINE STATE POWER (NO. 2) B.V. NOTES TO THE ANNUAL ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Amounts expressed in thousands of Australian dollars) -------------------------------------------------------------------------------- amortization periods are reviewed annually and any necessary write down is charged against income. Research expenditures and expenditures on development of existing projects are charged against income in the year in which they are incurred. Financing Costs - Financing costs represent the Company's share of the costs incurred by the Gladstone Power Station Joint Venture to acquire the long-term debt used to finance the acquisition of the Gladstone Power Station. Capitalized financing costs are being amortized over a ten-year period, which represents the timeframe until the Company expects the long-term debt will be refinanced. TANGIBLE FIXED ASSETS All tangible fixed assets are stated at cost. The Company has not had any revaluations performed on its tangible fixed assets. Tangible fixed assets, with the exception of land, are depreciated over their estimated useful lives by the straight-line method. Ordinary maintenance and repairs are expensed as incurred; replacements and improvements are capitalized. The estimated useful lives are: Site roads and preparation 50 years Generators, systems, stacks, etc. 50 years Coal handling plant 10-50 years Other operating fixed assets 3-10 years
STOCKS Stocks are carried at the lower of cost (principally by the FIFO method or another method which approximates FIFO) and net realizable value. In valuing stocks, appropriate allowance is made for obsolete or slow-moving items. TRADE DEBTORS Trade debtors are stated at nominal value net of provision for doubtful debtors. CASH AND BANK BALANCES The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash. PROVISIONS Employee Provisions - Provisions are made for amounts expected to be paid to the operator of the Gladstone Power Station in respect of its employees for the pro rata entitlements for long service and annual leave. These amounts are accrued at actual pay rates having regard to experience of employee's departure and period of service. The provisions are divided into current (expected to be paid in the ensuing twelve months) and non-current portions. Deferred Tax - Provisions for deferred taxes have been set up where items entering into the determination of accounting profit for one period are recognized for taxation purposes in another. The principal difference arises in connection with the depreciation of fixed assets. In calculating the provision, current tax rates are applied. 6 24 SUNSHINE STATE POWER (NO. 2) B.V. NOTES TO THE ANNUAL ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Amounts expressed in thousands of Australian dollars) -------------------------------------------------------------------------------- COMPANY INCOME TAX Company income tax is based upon the results reported in the statement of income as adjusted for permanent differences. Current Australian tax rates are applied. CASH FLOW STATEMENT The cash flow statement has been prepared using the indirect method. COMPARATIVE AMOUNTS Comparative amounts are reclassified to conform with the current year's financial statement presentation. 3. INTANGIBLE FIXED ASSETS The movements in the intangible fixed assets are summarized as follows:
PROJECT DEVELOPMENT FINANCING EXPENDITURES COSTS TOTAL ------------ --------- ---------- COST Balance at December 31, 1998 6,111 2,369 8,480 Additions for the year ended December 31, 1999 -- -- -- ---------- --------- ---------- Balance at December 31, 1999 6,111 2,369 8,480 Additions for the year ended December 31, 2000 -- -- -- ---------- --------- ---------- Balance at December 31, 2000 6,111 2,369 8,480 ---------- --------- ---------- ACCUMULATED AMORTIZATION Balance at December 31, 1998 (829) (1,125) (1,954) Amortization for the year ended December 31, 1999 (175) (236) (411) Amortization for the year ended December 31, 2000 (174) (237) (411) ---------- --------- ---------- Balance at December 31, 2000 (1,178) (1,598) (2,776) ---------- --------- ---------- Net book value at December 31, 2000 4,933 771 5,704 ========== ========= ==========
7 25 SUNSHINE STATE POWER (NO. 2) B.V. NOTES TO THE ANNUAL ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Amounts expressed in thousands of Australian dollars) -------------------------------------------------------------------------------- 4. TANGIBLE FIXED ASSETS The movements in the tangible fixed assets are summarized as follows:
OTHER SITE ROADS GENERATORS, COAL OPERATING AND SYSTEMS, HANDLING FIXED LAND PREPARATION STACKS PLANT ASSETS TOTAL ------ ----------- ----------- -------- --------- ----- COST Balance at December 31, 1998 189 2,491 146,267 8,525 2,813 160,285 Additions -- 36 1,106 1,165 188 2,495 Disposals -- -- (118) -- (20) (138) ------ ------- ---------- --------- ------- ---------- Balance at December 31, 1999 189 2,527 147,255 9,690 2,981 162,642 Additions -- 10 789 53 134 986 Disposals -- -- (43) -- (11) (54) ------ ------- ---------- --------- ------- ---------- Balance at December 31, 2000 189 2,537 148,001 9,743 3,104 163,574 ====== ======= ========== ========= ======= ========== ACCUMULATED DEPRECIATION Balance at December 31, 1998 -- (427) (18,640) (2,407) (1,321) (22,795) Charge for the year -- (48) (2,933) (550) (264) (3,795) ------ ------- ---------- --------- ------- ---------- Balance at December 31, 1999 -- (475) (21,573) (2,957) (1,585) (26,590) Charge for the year -- (53) (2,792) (572) (329) (3,746) ------ ------- ---------- --------- ------- ---------- Balance at December 31, 2000 -- (528) (24,365) (3,529) (1,914) (30,336) ====== ======= ========== ========= ======= ========== Construction in progress at December 31, 2000 (construction in progress at December 31, 1999 and 1998 was AUD 317 and AUD 259, respectively) 813 =========== Net tangible fixed assets at December 31, 2000 134,051 ===========
8 26 SUNSHINE STATE POWER (NO. 2) B.V. NOTES TO THE ANNUAL ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Amounts expressed in thousands of Australian dollars) -------------------------------------------------------------------------------- As of January 1, 1999, the depreciation lives for site roads and preparation, generators, systems and stacks and the coal handling plant were prospectively changed from 35 to 50 years. This prospective change reduced 1999 depreciation expense by 1,468. 5. STOCKS
DECEMBER 31 ------------------------------ 2000 1999 1998 --------- -------- --------- Coal 1,279 4,210 2,021 Fuel oils 144 140 73 Chemicals 8 9 6 Spares and consumables 946 1,075 960 --------- -------- --------- 2,377 5,434 3,060 ========= ======== =========
6. RECEIVABLES
DECEMBER 31 ------------------------------ 2000 1999 1998 --------- -------- --------- Trade debtors 4,946 4,114 4,763 Prepayments 77 166 67 --------- -------- --------- 5,023 4,280 4,830 ========= ======== =========
All receivables are due in less than one year. 7. CASH AND BANK BALANCES All cash and bank balances are held by banks and include investments with maturities of three months or less which are readily convertible to cash. The Company's long-term debt agreement places restrictions on the amount of cash and bank balances which must be maintained. At December 31, 2000, 1999 and 1998, the restricted cash and bank balances totaled AUD 6,380, AUD 5,653 and AUD 5,554, respectively. 9 27 SUNSHINE STATE POWER (NO. 2) B.V. NOTES TO THE ANNUAL ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Amounts expressed in thousands of Australian dollars) -------------------------------------------------------------------------------- 8. ISSUED SHARE CAPITAL The authorized share capital consists of 2,000 shares each having a nominal value of 75 Australian dollars (100 Dutch Guilders), of which 400 shares have been issued and fully paid up at December 31, 2000, 1999 and 1998. In prior years, the Company's shares were owned by NRGenerating International B.V. (396) and Gunwale B.V. (4). Both NRGenerating International B.V. and Gunwale B.V. are wholly-owned by NRG Energy, Inc., which is incorporated in the United States of America. During 1999, the shares held by Gunwale B.V. were sold to NRGenerating International B.V. 9. RETAINED EARNINGS
2000 1999 --------- ---------- Balance at January 1 28,343 23,247 Appropriation of prior year's result 8,738 5,096 --------- ---------- Balance at December 31 37,081 28,343 ========= ==========
10. RESULT FOR THE PERIOD Balance at December 31, 1998 5,096 1998 net result appropriated to retained earnings (5,096) Net result for the year ended December 31, 1999 8,738 1999 net result appropriated to retained earnings (8,738) Net result for the year ended December 31, 2000 2,791 ---------- Balance at December 31, 2000 2,791 ==========
10 28 SUNSHINE STATE POWER (NO. 2) B.V. NOTES TO THE ANNUAL ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Amounts expressed in thousands of Australian dollars) -------------------------------------------------------------------------------- 11. PROVISIONS
EMPLOYEE DEFERRED PROVISIONS TAX TOTAL ---------- --------- ---------- Balance at December 31, 1998 1,076 14,595 15,671 Charged (released) to income 97 270 367 -------- --------- ---------- Balance at December 31, 1999 1,173 14,865 16,038 Charged (released) to income 85 1,196 1,281 -------- --------- ---------- Balance at December 31, 2000 1,258 16,061 17,319 ======== ========= ==========
Approximately AUD 624 of the employee provisions are current and expected to be paid during 2001. 12. LONG-TERM LIABILITIES Secured long-term debt due to third parties:
DECEMBER 31 --------------------------------- 2000 1999 1998 --------- --------- --------- Secured - with banks 73,091 79,457 85,232
Current installments of bank long-term debt are included under current liabilities. The interest rate for long-term debt is variable based on an average of the bid rates quoted by the banks plus a margin of 1.5% at December 31, 2000. The bank long-term debt is repayable as follows: 2001 6,366 2002 7,011 2003 7,744 2004 8,520 2005 9,406 Thereafter 40,410 ----------- 79,457 ===========
The bank long-term debt is secured by the Company's ownership interest in the Gladstone Power Station Joint Venture. 11 29 SUNSHINE STATE POWER (NO. 2) B.V. NOTES TO THE ANNUAL ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Amounts expressed in thousands of Australian dollars) -------------------------------------------------------------------------------- Unsecured subordinated note payable (AUD'000) On March 25, 1994, the Company received loans from NRGenerating International B.V. and Gunwale B.V., the primary shareholders of the Company, in the amount of AUD 42,273 and AUD 427, respectively. The notes payable are subordinated to all other liabilities of the Company, bear no interest and are to be repaid in U.S. dollars. The Company repaid AUD 6,482 and AUD 3,428 to NRGenerating International B.V. during 2000 and 1999, respectively, and AUD 4,202 and AUD 279 to NRGenerating International B.V. and Gunwale B.V., respectively, during 1998. Repayments on the notes payable are at the discretion of the Company, unless certain events of termination occur, as defined, and then the entire balance of the notes becomes due. The note balances, as adjusted for current period activity and foreign exchange flunctuations, were AUD 17,500 and AUD 19,480 to NRGenerating International B.V. at December 31, 2000 and 1999, respectively, and AUD 24,437 and AUD 0 to NRGenerating International B.V. and Gunwale B.V., respectively, at December 31, 1998. 13. CURRENT LIABILITIES
DECEMBER 31 ------------------------------ 2000 1999 1998 --------- -------- --------- Current installments of bank long-term debt 6,366 5,775 5,228 Trade creditors/suppliers 684 716 471 Accrued coal/rail costs 2,306 2,129 2,045 Accrued interest 646 677 413 Other accrued expenses 897 631 332 --------- -------- --------- 10,899 9,928 8,489 ========= ======== ==========
14. RELATED PARTIES An affiliate of the Company, Sunshine State Power B.V. owns 20% of the Gladstone Power Station Joint Venture. Sunshine State Power B.V. is owned by the owners of the Company. The Gladstone Power Station is operated by NRG Gladstone Operating Services Pty. Ltd., which is ultimately a wholly-owned subsidiary of NRG Energy, Inc. NRG Gladstone Operating Services Pty. Ltd. operates the Gladstone Power Station under the terms of the Operation and Maintenance Agreement with the Gladstone Power Station Joint Venture. During the periods ended December 31, 2000, 1999 and 1998, the Company paid NRG Gladstone Operating Services Pty. Ltd. approximately AUD 291, AUD 338 and AUD 345, respectively, in operators fees under the terms of the Operation and Maintenance Agreement. 12 30 SUNSHINE STATE POWER (NO. 2) B.V. NOTES TO THE ANNUAL ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Amounts expressed in thousands of Australian dollars) -------------------------------------------------------------------------------- 15. NUMBER OF EMPLOYEES The average number of persons employed at the Gladstone Power Station during 2000 was approximately 410 (1999: 400). These individuals are primarily employed in the operations and maintenance areas of the station. The Company is responsible for 17.5% of the related costs for these employees. The Company itself has no employees. 16. REMUNERATION OF DIRECTORS During the periods ended December 31, 2000, 1999 and 1998, none of the directors received remuneration for their services as directors of the Company. 13