UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2009

OR

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

For the transition period from                  to                 

Mirant Americas Generation, LLC

(Exact Name of Registrant as Specified in Its Charter)

Commission File Number: 333-63240

51-0390520 (I.R.S. Employer Identification No.)

Mirant North America, LLC

(Exact Name of Registrant as Specified in Its Charter)

Commission File Number: 333-134722

20-4514609 (I.R.S. Employer Identification No.)

Mirant Mid-Atlantic, LLC

(Exact Name of Registrant as Specified in Its Charter)

Commission File Number: 333-61668

58-2574140 (I.R.S. Employer Identification No.)

Delaware

(State or Other Jurisdiction of Incorporation or Organization of All Registrants)

1155 Perimeter Center West, Suite 100, Atlanta, Georgia 30338

(Address of Principal Executive Offices, Including Zip Code, of All Registrants)

(678) 579-5000

(Registrant’s Telephone Number, Including Area Code)

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

Mirant Americas Generation, LLC	x  Yes  ¨  No
Mirant North America, LLC	x  Yes  ¨  No
Mirant Mid-Atlantic, LLC	x  Yes  ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Mirant Americas Generation, LLC	¨  Yes  ¨  No
Mirant North America, LLC	¨  Yes  ¨  No
Mirant Mid-Atlantic, LLC	¨  Yes  ¨  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

	Large Accelerated Filer	Accelerated Filer	Non-accelerated Filer	Smaller Reporting Company
Mirant Americas Generation, LLC	¨	¨	x	¨
Mirant North America, LLC	¨	¨	x	¨
Mirant Mid-Atlantic, LLC	¨	¨	x	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Mirant Americas Generation, LLC	¨  Yes  x  No
Mirant North America, LLC	¨  Yes  x  No
Mirant Mid-Atlantic, LLC	¨  Yes  x  No

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

Mirant Americas Generation, LLC	x  Yes  ¨  No
Mirant North America, LLC	x  Yes  ¨  No
Mirant Mid-Atlantic, LLC	x  Yes  ¨  No

All of the registrant’s outstanding membership interests are held by its parent and there are no membership interest held by nonaffiliates.

Registrant	Parent
Mirant Americas Generation, LLC	Mirant Americas, Inc.
Mirant North America, LLC	Mirant Americas Generation, LLC
Mirant Mid-Atlantic, LLC	Mirant North America, LLC

This combined Form 10-Q is separately filed by Mirant Americas Generation, LLC, Mirant North America, LLC and Mirant Mid-Atlantic, LLC. Information contained in this combined Form 10-Q relating to Mirant Americas Generation, LLC, Mirant North America, LLC and Mirant Mid-Atlantic, LLC is filed by such registrant on its own behalf and each registrant makes no representation as to information relating to registrants other than itself.

NOTE: WHEREAS MIRANT AMERICAS GENERATION, LLC, MIRANT NORTH AMERICA, LLC AND MIRANT MID-ATLANTIC, LLC MEET THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q, THIS COMBINED FORM 10-Q IS BEING FILED WITH THE REDUCED DISCLOSURE FORMAT PURSUANT TO GENERAL INSTRUCTION H(2).

2

TABLE OF CONTENTS

		Page
	Glossary of Certain Defined Terms	i-iii
	Cautionary Statement Regarding Forward-Looking Information	4
	PART I—FINANCIAL INFORMATION
Item 1.	Interim Financial Statements (Unaudited):
	Mirant Americas Generation, LLC
	Condensed Consolidated Statements of Operations	7
	Condensed Consolidated Balance Sheets	8
	Condensed Consolidated Statements of Member’s Equity	9
	Condensed Consolidated Statements of Cash Flows	10
	Mirant North America, LLC
	Condensed Consolidated Statements of Operations	11
	Condensed Consolidated Balance Sheets	12
	Condensed Consolidated Statements of Member’s Equity	13
	Condensed Consolidated Statements of Cash Flows	14
	Mirant Mid-Atlantic, LLC
	Condensed Consolidated Statements of Operations	15
	Condensed Consolidated Balance Sheets	16
	Condensed Consolidated Statements of Member’s Equity	17
	Condensed Consolidated Statements of Cash Flows	18
	Combined Notes to Condensed Consolidated Financial Statements	19
Item 2.	Management’s Discussion and Analysis of Results of Operations and Financial Condition
	Mirant Americas Generation, LLC	66
	Mirant North America, LLC	90
	Mirant Mid-Atlantic, LLC	100
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	115
Item 4.	Controls and Procedures	120
	PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	121
Item 1A.	Risk Factors	121
Item 6.	Exhibits	121
	Mirant Americas Generation, LLC	121
	Mirant North America, LLC	122
	Mirant Mid-Atlantic, LLC	123

3

Glossary of Certain Defined Terms

Administrative Services Agreement—Management, personnel and services agreement with Mirant Services, effective January 3, 2006.

APSA—Asset Purchase and Sale Agreement dated June 7, 2000, between Mirant and Pepco.

Bankruptcy Code—United States Bankruptcy Code.

Bankruptcy Court—United States Bankruptcy Court for the Northern District of Texas, Fort Worth Division.

Baseload Generating Units—Units that satisfy minimum baseload requirements of the system and produce electricity at an essentially constant rate and run continuously.

CAIR—Clean Air Interstate Rule.

CAISO—California Independent System Operator.

Cal PX—California Power Exchange.

Clean Air Act—Federal Clean Air Act.

Clean Water Act—Federal Water Pollution Control Act.

CO2—Carbon dioxide.

Companies—Mirant Americas Generation, LLC, Mirant North America, LLC, Mirant Mid-Atlantic, LLC and their subsidiaries.

CPUC—California Public Utilities Commission.

DWR—California Department of Water Resources.

EBITDA—Earnings before interest, taxes, depreciation and amortization.

EOB—California Electricity Oversight Board.

EPA—United States Environmental Protection Agency.

Exchange Act—Securities Exchange Act of 1934.

FASB—Financial Accounting Standards Board.

FERC—Federal Energy Regulatory Commission.

GAAP—United States generally accepted accounting principles.

Gross Margin—Operating revenue less cost of fuel, electricity and other products, excluding depreciation and amortization.

Hudson Valley Gas—Hudson Valley Gas Corporation.

Intermediate Generating Units—Units that meet system requirements that are greater than baseload and less than peaking.

ISO—Independent System Operator.

ISO-NE—Independent System Operator-New England.

LIBOR—London InterBank Offered Rate.

MDE—Maryland Department of the Environment.

Mirant—Old Mirant prior to January 3, 2006, and New Mirant on or after January 3, 2006.

Mirant Americas—Mirant Americas, Inc.

i

Mirant Americas Energy Marketing—Mirant Americas Energy Marketing, LP.

Mirant Bowline—Mirant Bowline, LLC.

Mirant California—Mirant California, LLC.

Mirant Canal—Mirant Canal, LLC.

Mirant Chalk Point—Mirant Chalk Point, LLC.

Mirant Delta—Mirant Delta, LLC.

Mirant Energy Trading—Mirant Energy Trading, LLC.

Mirant Lovett—Mirant Lovett, LLC, owner of the Lovett generating facility, which was shut down on April 19, 2008.

Mirant MD Ash Management—Mirant MD Ash Management, LLC.

Mirant New York—Mirant New York, LLC.

Mirant NY-Gen—Mirant NY-Gen, LLC sold by Mirant North America in the second quarter of 2007.

Mirant Potomac River—Mirant Potomac River, LLC.

Mirant Potrero—Mirant Potrero, LLC.

Mirant Services—Mirant Services, LLC.

Mirant Texas—Mirant Texas, LP, which owned the Bosque generating facility, sold by Mirant North America in the second quarter of 2007.

Mirant Zeeland—Mirant Zeeland, LLC sold by Mirant North America in the second quarter of 2007.

MW—Megawatt.

MWh—Megawatt hour.

Net Capacity Factor—Actual production of electricity as a percentage of net dependable capacity to produce electricity.

New Mirant—Mirant Corporation on or after January 3, 2006.

NOL—Net operating loss.

NOx—Nitrogen oxides.

NSR—New source review.

NYISO—New York Independent System Operator.

NYMEX—New York Mercantile Exchange.

Old Mirant—MC 2005, LLC, known as Mirant Corporation prior to January 3, 2006.

OTC—Over-the-Counter.

Peaking Generating Units—Units used to meet demand requirements during the periods of greatest or peak load on the system.

Pepco—Potomac Electric Power Company.

PG&E—Pacific Gas & Electric Company.

PJM—PJM Interconnection, LLC.

Plan—The plan of reorganization that was approved in conjunction with Mirant’s and the Companies’ emergence from bankruptcy protection on January 3, 2006.

ii

Power Sale, Fuel Supply and Services Agreement—Power sale, fuel supply and services agreement with Mirant Americas Energy Marketing, effective January 3, 2006.

PPA—Power purchase agreement.

Reserve Margin—Excess capacity over peak demand.

RGGI—Regional Greenhouse Gas Initiative.

RMR—Reliability-must-run.

RTO—Regional Transmission Organization.

Securities Act—Securities Act of 1933, as amended.

SO2—Sulfur dioxide.

Spark Spread—The difference between the price received for electricity generated compared to the market price of the natural gas required to produce the electricity.

VaR—Value at risk.

Virginia DEQ—Virginia Department of Environmental Quality.

iii

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

In addition to historical information, the information presented in this combined Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements involve known and unknown risks and uncertainties and relate to future events, our future financial performance or our projected business results. In some cases, one can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “intend,” “seek,” “plan,” “think,” “anticipate,” “estimate,” “predict,” “target,” “potential” or “continue” or the negative of these terms or other comparable terminology.

Forward-looking statements are only predictions. Actual events or results may differ materially from any forward-looking statement as a result of various factors, which include:

• legislative and regulatory initiatives regarding deregulation, regulation or restructuring of the industry of generating, transmitting and distributing electricity (the “electricity industry”); changes in state, federal and other regulations affecting the electricity industry (including rate and other regulations); changes in, or changes in the application of, environmental and other laws and regulations to which we and our subsidiaries and affiliates are or could become subject;

• failure of our plants to perform as expected, including outages for unscheduled maintenance or repair;

• environmental regulations that restrict our ability or render it uneconomic to operate our business, including regulations related to the emission of CO2 and other greenhouse gases;

• increased regulation that limits our access to adequate water supplies and landfill options needed to support power generation or that increases the costs of cooling water and handling, transporting and disposing off-site of ash and other byproducts;

• changes in market conditions, including developments in the supply, demand, volume and pricing of electricity and other commodities in the energy markets, including efforts to reduce demand for electricity, and the extent and timing of the entry of additional competition in our markets;

• continued poor economic and financial market conditions, including impacts on financial institutions and other current and potential counterparties, and negative impacts on liquidity in the power and fuel markets in which we hedge and transact;

• increased credit standards, margin requirements, market volatility or other market conditions that could increase the obligations of Mirant Americas Generation, Mirant North America and affiliates of Mirant Mid-Atlantic to post collateral beyond amounts that are expected, including additional collateral costs associated with OTC hedging activities as a result of proposed OTC regulation;

• our inability to access effectively the OTC and exchange-based commodity markets or changes in commodity market conditions and liquidity, including as a result of proposed OTC regulation, which may affect our ability to engage in asset management and, for Mirant Americas Generation and Mirant North America, proprietary trading and fuel oil management activities as expected, or result in material gains or losses from open positions;

• deterioration in the financial condition of Mirant Americas Generation, Mirant North America and Mirant Mid-Atlantic counterparties or Mirant Mid-Atlantic affiliates and the failure of counterparties or Mirant Mid-Atlantic affiliates to pay amounts owed to Mirant Americas Generation, Mirant North America and Mirant Mid-Atlantic or to perform obligations or services due to Mirant Americas Generation, Mirant North America and Mirant Mid-Atlantic beyond collateral posted;

• hazards customary to the power generation industry and the possibility that we may not have adequate insurance to cover losses resulting from such hazards or the inability of our insurers to provide agreed upon coverage;

4

• price mitigation strategies employed by ISOs or RTOs that reduce our revenue and may result in a failure to compensate our generating units adequately for all of their costs;

• changes in the rules used to calculate capacity, energy and ancillary services payments;

• legal and political challenges to the rules used to calculate capacity, energy and ancillary services payments;

• volatility in our gross margin as a result of our accounting for derivative financial instruments used in our asset management and Mirant Americas Generation’s and Mirant North America’s proprietary trading and fuel oil management activities and volatility in our cash flow from operations resulting from working capital requirements, including collateral, to support our asset management and Mirant Americas Generation’s and Mirant North America’s proprietary trading and fuel oil management activities;

• our ability to enter into intermediate and long-term contracts to sell power and to obtain adequate supply and delivery of fuel for our facilities, at our required specifications and on terms and prices acceptable to us;

• the failure to utilize new or advancements in power generation technologies;

• the inability of Mirant Americas Generation’s and Mirant North America’s operating subsidiaries to generate sufficient cash flow to support their operations;

• our and our affiliates’ ability to borrow additional funds and access capital markets;

• strikes, union activity or labor unrest;

• our ability to obtain or develop capable leaders and our ability to retain or replace the services of key employees;

• weather and other natural phenomena, including hurricanes and earthquakes;

• the cost and availability of emissions allowances;

• curtailment of operations and reduced prices for electricity resulting from transmission constraints;

• our inability to complete construction of our emissions reduction equipment by January 2010 to meet the requirements of the Maryland Healthy Air Act, which may result in reduced unit operations and reduced cash flows and revenues from operations;

• the ability of Mirant Americas Generation and Mirant North America to execute the business plan in California, including entering into new tolling arrangements for their existing generating facilities;

• our relative lack of geographic diversification in revenue sources resulting in concentrated exposure to the Mid-Atlantic market;

• the ability of lenders under Mirant North America’s revolving credit facility to perform their obligations;

• war, terrorist activities, cyberterrorism and inadequate cybersecurity, or the occurrence of a catastrophic loss;

• the failure to provide a safe working environment for our employees and visitors thereby increasing our exposure to additional liability, loss of productive time, other costs and a damaged reputation;

• Mirant Americas Generation’s and Mirant North America’s consolidated indebtedness and the possibility that Mirant Americas Generation, Mirant North America or their subsidiaries may incur additional indebtedness in the future;

• restrictions on the ability of Mirant Americas Generation’s subsidiaries to pay dividends, make distributions or otherwise transfer funds to Mirant Americas Generation, including restrictions on Mirant North America contained in its financing agreements and restrictions on Mirant Mid-Atlantic contained in its leveraged lease documents, which may affect Mirant Americas Generation’s ability to access the cash flows of those subsidiaries to make debt service and other payments;

5

• restrictions on the ability of Mirant North America’s subsidiaries to pay dividends, make distributions or otherwise transfer funds to Mirant North America, including restrictions on Mirant Mid-Atlantic contained in its leveraged lease documents, which may affect Mirant North America’s ability to access the cash flows of those subsidiaries to make debt service and other payments;

• the failure to comply with or monitor provisions of our loan agreements and debt may lead to a breach and, if not remedied, result in an event of default thereunder, which would limit access to needed capital and damage our reputation and relationships with financial institutions; and

• the disposition of the pending litigation described in this combined Form 10-Q.

Many of these risks, uncertainties and assumptions are beyond our ability to control or predict. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by cautionary statements contained throughout this report. Because of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. Furthermore, forward-looking statements speak only as of the date they are made.

Factors that Could Affect Future Performance

We undertake no obligation to update publicly or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this report.

In addition to the discussion of certain risks in Management’s Discussion and Analysis of Results of Operations and Financial Condition and the accompanying combined Notes to Mirant Americas Generation, LLC’s, Mirant North America, LLC’s and Mirant Mid-Atlantic, LLC’s unaudited condensed consolidated financial statements, other factors that could affect the Companies’ future performance (business, results of operations or financial condition and cash flows) are set forth in the Companies’ 2008 Annual Report on Form 10-K and in Part II. Item 1A. Risk Factors in this Form 10-Q.

Certain Terms

As used in this report, “we,” “us,” “our,” and the “Companies” refer to Mirant Americas Generation, LLC, Mirant North America, LLC, Mirant Mid-Atlantic, LLC and their subsidiaries, unless the context requires otherwise. In addition, as used in this report, “Mirant Americas Generation” refers to Mirant Americas Generation, LLC and its subsidiaries, “Mirant North America” refers to Mirant North America, LLC and its subsidiaries and “Mirant Mid-Atlantic” refers to Mirant Mid-Atlantic, LLC and its subsidiaries, unless the context requires otherwise.

6

MIRANT AMERICAS GENERATION, LLC AND SUBSIDIARIES

(Wholly-Owned Indirect Subsidiary of Mirant Corporation)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
	(in millions)
Operating revenues (including unrealized gains (losses) of $(193) million, $1.438 billion, $18 million and $225 million, respectively)	$	454		$	2,172		$	1,828		$	2,081
Cost of fuel, electricity and other products—nonaffiliate (including unrealized (gains) losses of $(19) million, $43 million, $(48) million and $7 million, respectively)		160			359			577			761
Cost of fuel, electricity and other products—affiliate (including unrealized (gains) losses of $0, $0, $0 and $0, respectively)		2			1			6			5
Total cost of fuel, electricity and other products		162			360			583			766
Gross Margin (excluding depreciation and amortization)		292			1,812			1,245			1,315
Operating Expenses:
Operations and maintenance—nonaffiliate		77			80			258			286
Operations and maintenance—affiliate		73			67			210			213
Depreciation and amortization		36			33			104			102
Impairment losses		14			—			14			—
Gain on sales of assets, net		(3	)		(10	)		(20	)		(26	)
Total operating expenses, net		197			170			566			575
Operating Income		95			1,642			679			740
Other Expense (Income), net:
Interest expense		33			46			105			146
Interest income		—			(4	)		(1	)		(15	)
Other, net		(1	)		3			—			9
Total other expense, net		32			45			104			140
Net Income	$	63		$	1,597		$	575		$	600

The accompanying combined notes are an integral part of these unaudited condensed consolidated financial statements.

7

MIRANT AMERICAS GENERATION, LLC AND SUBSIDIARIES

(Wholly-Owned Indirect Subsidiary of Mirant Corporation)

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	At September 30, 2009			At December 31, 2008
	(in millions)
ASSETS
Current Assets:
Cash and cash equivalents	$	593		$	354
Funds on deposit		182			196
Receivables—nonaffiliate		492			742
Receivables—affiliate		2			1
Derivative contract assets		2,001			2,582
Inventories		255			238
Prepaid rent and other payments		129			120
Total current assets		3,654			4,233
Property, Plant and Equipment, net		3,588			3,192
Noncurrent Assets:
Intangible assets, net		174			195
Derivative contract assets		637			585
Prepaid rent		287			258
Debt issuance costs, net		31			38
Other		37			51
Total noncurrent assets		1,166			1,127
Total Assets	$	8,408		$	8,552
LIABILITIES AND MEMBER’S EQUITY
Current Liabilities:
Current portion of long-term debt	$	40		$	45
Accounts payable and accrued liabilities		720			813
Payable to affiliate		36			34
Derivative contract liabilities		1,650			2,268
Other		14			22
Total current liabilities		2,460			3,182
Noncurrent Liabilities:
Long-term debt, net of current portion		2,592			2,630
Derivative contract liabilities		266			244
Other		47			112
Total noncurrent liabilities		2,905			2,986
Commitments and Contingencies
Member’s Equity:
Member’s interest		3,319			2,729
Preferred stock in affiliate		(276	)		(345	)
Total member’s equity		3,043			2,384
Total Liabilities and Member’s Equity	$	8,408		$	8,552

The accompanying combined notes are an integral part of these unaudited condensed consolidated financial statements.

8

MIRANT AMERICAS GENERATION, LLC AND SUBSIDIARIES

(Wholly-Owned Indirect Subsidiary of Mirant Corporation)

CONDENSED CONSOLIDATED STATEMENTS OF MEMBER’S EQUITY (UNAUDITED)

	Member’s Interest		Preferred Stock in Affiliate			Total Member’s Equity
	(in millions)
Balance, December 31, 2008	$	2,729	$	(345	)	$	2,384
Net income		575		—			575
Amortization of discount on preferred stock in affiliate		15		(15	)		—
Redemption of preferred stock		—		84			84
Balance, September 30, 2009	$	3,319	$	(276	)	$	3,043

The accompanying combined notes are an integral part of these unaudited condensed consolidated financial statements.

9

MIRANT AMERICAS GENERATION, LLC AND SUBSIDIARIES

(Wholly-Owned Indirect Subsidiary of Mirant Corporation)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Nine Months Ended September 30,
	2009			2008
	(in millions)
Cash Flows from Operating Activities:
Net income	$	575		$	600
Adjustments to reconcile net income and changes in other operating assets and liabilities to net cash provided by operating activities:
Depreciation and amortization		111			109
Impairment losses		14			—
Gain on sales of assets, net		(20	)		(26	)
Unrealized gains on derivative contracts, net		(66	)		(218	)
Lower of cost or market inventory adjustments		29			8
Other, net		—			9
Funds on deposit		21			69
Changes in other operating assets and liabilities		13			62
Total adjustments		102			13
Net cash provided by operating activities of continuing operations		677			613
Net cash provided by operating activities of discontinued operations		—			1
Net cash provided by operating activities		677			614
Cash Flows from Investing Activities:
Capital expenditures		(500	)		(462	)
Proceeds from the sales of assets		21			26
Restricted deposit payments and other		—			(34	)
Net cash used in investing activities of continuing operations		(479	)		(470	)
Net cash provided by investing activities of discontinued operations		—			18
Net cash used in investing activities		(479	)		(452	)
Cash Flows from Financing Activities:
Redemption of preferred stock		84			31
Repayment of long-term debt—nonaffiliate		(43	)		(340	)
Repayment of debt—affiliate		—			(6	)
Capital contributions		—			210
Distribution to member		—			(187	)
Net cash provided by (used in) financing activities		41			(292	)
Net Increase (Decrease) in Cash and Cash Equivalents		239			(130	)
Cash and Cash Equivalents, beginning of period		354			698
Cash and Cash Equivalents, end of period	$	593		$	568
Supplemental Cash Flow Disclosures:
Cash paid for interest, net of amounts capitalized	$	64		$	96

The accompanying combined notes are an integral part of these unaudited condensed consolidated financial statements.

10

MIRANT NORTH AMERICA, LLC AND SUBSIDIARIES

(Wholly-Owned Indirect Subsidiary of Mirant Corporation)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
	(in millions)
Operating revenues (including unrealized gains (losses) of $(193) million, $1.438 billion, $18 million and $225 million, respectively)	$	454		$	2,172		$	1,828		$	2,081
Cost of fuel, electricity and other products—nonaffiliate (including unrealized (gains) losses of $(19) million, $43 million, $(48) million and $7 million, respectively)		160			359			577			761
Cost of fuel, electricity and other products—affiliate (including unrealized (gains) losses of $0, $0, $0 and $0, respectively)		2			1			6			5
Total cost of fuel, electricity and other products		162			360			583			766
Gross Margin (excluding depreciation and amortization)		292			1,812			1,245			1,315
Operating Expenses:
Operations and maintenance—nonaffiliate		77			80			258			286
Operations and maintenance—affiliate		73			67			210			213
Depreciation and amortization		36			33			104			102
Impairment losses		14			—			14			—
Gain on sales of assets, net		(3	)		(10	)		(20	)		(26	)
Total operating expenses, net		197			170			566			575
Operating Income		95			1,642			679			740
Other Expense (Income), net:
Interest expense		2			13			14			42
Interest income—nonaffiliate		—			(4	)		(1	)		(15	)
Interest income—affiliate		—			—						(1	)
Other, net		(1	)		1			—			1
Total other expense, net		1			10			13			27
Net Income	$	94		$	1,632		$	666		$	713

The accompanying combined notes are an integral part of these unaudited condensed consolidated financial statements.

11

MIRANT NORTH AMERICA, LLC AND SUBSIDIARIES

(Wholly-Owned Indirect Subsidiary of Mirant Corporation)

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	At September 30, 2009			At December 31, 2008
	(in millions)
ASSETS
Current Assets:
Cash and cash equivalents	$	574		$	354
Funds on deposit		182			196
Receivables—nonaffiliate		492			742
Receivables—affiliate		11			10
Notes receivables—affiliate		93			93
Derivative contract assets		2,001			2,582
Inventories		255			238
Prepaid rent and other payments		129			120
Total current assets		3,737			4,335
Property, Plant and Equipment, net		3,585			3,189
Noncurrent Assets:
Intangible assets, net		174			195
Derivative contract assets		637			585
Prepaid rent		287			258
Debt issuance costs, net		25			32
Other		37			51
Total noncurrent assets		1,160			1,121
Total Assets	$	8,482		$	8,645
LIABILITIES AND MEMBER’S EQUITY
Current Liabilities:
Current portion of long-term debt	$	40		$	45
Accounts payable and accrued liabilities		666			789
Payable to affiliate		36			34
Derivative contract liabilities		1,650			2,268
Other		14			22
Total current liabilities		2,406			3,158
Noncurrent Liabilities:
Long-term debt, net of current portion		1,210			1,248
Derivative contract liabilities		266			244
Other		47			112
Total noncurrent liabilities		1,523			1,604
Commitments and Contingencies
Member’s Equity:
Member’s interest		4,689			4,094
Preferred stock in affiliate		(136	)		(211	)
Total member’s equity		4,553			3,883
Total Liabilities and Member’s Equity	$	8,482		$	8,645

The accompanying combined notes are an integral part of these unaudited condensed consolidated financial statements.

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MIRANT NORTH AMERICA, LLC AND SUBSIDIARIES

(Wholly-Owned Indirect Subsidiary of Mirant Corporation)

CONDENSED CONSOLIDATED STATEMENTS OF MEMBER’S EQUITY (UNAUDITED)

	Member’s Interest			Preferred Stock in Affiliate			Total Member’s Equity
	(in millions)
Balance, December 31, 2008	$	4,094		$	(211	)	$	3,883
Net income		666			—			666
Amortization of discount on preferred stock in affiliate		9			(9	)		—
Redemption of preferred stock		—			84			84
Distribution to member		(80	)		—			(80	)
Balance, September 30, 2009	$	4,689		$	(136	)	$	4,553

The accompanying combined notes are an integral part of these unaudited condensed consolidated financial statements.

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MIRANT NORTH AMERICA, LLC AND SUBSIDIARIES

(Wholly-Owned Indirect Subsidiary of Mirant Corporation)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Nine Months Ended September 30,
	2009			2008
	(in millions)
Cash Flows from Operating Activities:
Net income	$	666		$	713
Adjustments to reconcile net income and changes in other operating assets and liabilities to net cash provided by operating activities:
Depreciation and amortization		110			108
Impairment losses		14			—
Gain on sales of assets, net		(20	)		(26	)
Unrealized gains on derivative contracts, net		(66	)		(218	)
Lower of cost or market inventory adjustments		29			8
Other, net		—			8
Funds on deposit		21			69
Changes in other operating assets and liabilities		(16	)		32
Total adjustments		72			(19	)
Net cash provided by operating activities of continuing operations		738			694
Net cash provided by operating activities of discontinued operations		—			1
Net cash provided by operating activities		738			695
Cash Flows from Investing Activities:
Capital expenditures		(500	)		(462	)
Proceeds from the sales of assets		21			26
Restricted deposit payments and other		—			(34	)
Net cash used in investing activities of continuing operations		(479	)		(470	)
Net cash provided by investing activities of discontinued operations		—			18
Net cash used in investing activities		(479	)		(452	)
Cash Flows from Financing Activities:
Redemption of preferred stock		84			31
Repayment of long-term debt—nonaffiliate		(43	)		(140	)
Repayment of debt—affiliate		—			(20	)
Distribution to member		(80	)		(261	)
Settlement of member’s obligations pursuant to the Plan		—			(1	)
Net cash used in financing activities		(39	)		(391	)
Net Increase (Decrease) in Cash and Cash Equivalents		220			(148	)
Cash and Cash Equivalents, beginning of period		354			697
Cash and Cash Equivalents, end of period	$	574		$	549
Supplemental Cash Flow Disclosures:
Cash paid for interest, net of amounts capitalized	$	4		$	23

The accompanying combined notes are an integral part of these unaudited condensed consolidated financial statements.

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MIRANT MID-ATLANTIC, LLC AND SUBSIDIARIES

(Wholly-Owned Indirect Subsidiary of Mirant Corporation)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
	(in millions)
Operating revenues—nonaffiliate (including unrealized gains (losses) of $(44) million, $944 million, $101 million and $140 million, respectively)	$	27		$	912		$	293		$	74
Operating revenues—affiliate (including unrealized gains (losses) of $(82) million, $380 million, $11 million and $60 million, respectively)		317			887			1,114			1,336
Total operating revenues		344			1,799			1,407			1,410
Cost of fuel, electricity and other products—nonaffiliate (including unrealized (gains) losses of $0, $0, $0 and $0, respectively)		5			5			15			15
Cost of fuel, electricity and other products—affiliate (including unrealized (gains) losses of $(2) million, $6 million, $(7) million and $0, respectively)		126			165			415			407
Total cost of fuel, electricity and other products		131			170			430			422
Gross Margin (excluding depreciation and amortization)		213			1,629			977			988
Operating Expenses:
Operations and maintenance—nonaffiliate		56			53			173			176
Operations and maintenance—affiliate		48			43			137			130
Depreciation and amortization		25			23			73			67
Gain on sales of assets, net		(2	)		(7	)		(12	)		(9	)
Total operating expenses, net		127			112			371			364
Operating Income		86			1,517			606			624
Other Expense (Income), net:
Interest expense		—			1			2			3
Interest income		—			—			—			(3	)
Other, net		—			—			—			1
Total other expense, net		—			1			2			1
Net Income	$	86		$	1,516		$	604		$	623

The accompanying combined notes are an integral part of these unaudited condensed consolidated financial statements.

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MIRANT MID-ATLANTIC, LLC AND SUBSIDIARIES

(Wholly-Owned Indirect Subsidiary of Mirant Corporation)

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	At September 30, 2009			At December 31, 2008
	(in millions)
ASSETS
Current Assets:
Cash and cash equivalents	$	300		$	125
Funds on deposit		11			3
Receivables—nonaffiliate		27			16
Receivables—affiliate		207			211
Derivative contract assets—nonaffiliate		168			87
Derivative contract assets—affiliate		626			603
Inventories		120			129
Prepaid rent		96			96
Other		13			9
Total current assets		1,568			1,279
Property, Plant and Equipment, net		2,986			2,622
Noncurrent Assets:
Goodwill, net		799			799
Other intangible assets, net		140			144
Derivative contract assets—nonaffiliate		364			314
Derivative contract assets—affiliate		169			172
Prepaid rent		287			258
Other		23			32
Total noncurrent assets		1,782			1,719
Total Assets	$	6,336		$	5,620
LIABILITIES AND MEMBER’S EQUITY
Current Liabilities:
Current portion of long-term debt	$	4		$	3
Accounts payable and accrued liabilities		61			118
Payable to affiliate		171			143
Derivative contract liabilities—nonaffiliate		2			—
Derivative contract liabilities—affiliate		516			485
Contract retention liability		106			1
Other		6			20
Total current liabilities		866			770
Noncurrent Liabilities:
Long-term debt, net of current portion		22			25
Derivative contract liabilities—nonaffiliate		30			1
Derivative contract liabilities—affiliate		134			164
Contract retention liability		—			64
Other		13			13
Total noncurrent liabilities		199			267
Commitments and Contingencies
Member’s Equity:
Member’s interest		5,407			4,794
Preferred stock in affiliate		(136	)		(211	)
Total member’s equity		5,271			4,583
Total Liabilities and Member’s Equity	$	6,336		$	5,620

The accompanying combined notes are an integral part of these unaudited condensed consolidated financial statements.

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MIRANT MID-ATLANTIC, LLC AND SUBSIDIARIES

(Wholly-Owned Indirect Subsidiary of Mirant Corporation)

CONDENSED CONSOLIDATED STATEMENTS OF MEMBER’S EQUITY (UNAUDITED)

	Member’s Interest		Preferred Stock in Affiliate			Total Member’s Equity
	(in millions)
Balance, December 31, 2008	$	4,794	$	(211	)	$	4,583
Net income		604		—			604
Amortization of discount on preferred stock in affiliate		9		(9	)		—
Redemption of preferred stock		—		84			84
Balance, September 30, 2009	$	5,407	$	(136	)	$	5,271

The accompanying combined notes are an integral part of these unaudited condensed consolidated financial statements.

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MIRANT MID-ATLANTIC, LLC AND SUBSIDIARIES

(Wholly-Owned Indirect Subsidiary of Mirant Corporation)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Nine Months Ended September 30,
	2009			2008
	(in millions)
Cash Flows from Operating Activities:
Net income	$	604		$	623
Adjustments to reconcile net income and changes in other operating assets and liabilities to net cash provided by operating activities:
Depreciation and amortization		73			67
Gain on sales of assets, net		(12	)		(9	)
Unrealized gains on derivative contracts, net		(119	)		(200	)
Lower of cost or market inventory adjustments		28			1
Funds on deposit		—			2
Changes in other operating assets and liabilities		(45	)		10
Total adjustments		(75	)		(129	)
Net cash provided by operating activities		529			494
Cash Flows from Investing Activities:
Capital expenditures		(448	)		(409	)
Proceeds from the sales of assets		12			4
Restricted deposit payments and other		—			(34	)
Net cash used in investing activities		(436	)		(439	)
Cash Flows from Financing Activities:
Redemption of preferred stock		84			31
Repayment of long-term debt—nonaffiliate		(2	)		(1	)
Capital contributions		—			232
Distribution to member		—			(325	)
Other		—			(1	)
Net cash provided by (used in) financing activities		82			(64	)
Net Increase (Decrease) in Cash and Cash Equivalents		175			(9	)
Cash and Cash Equivalents, beginning of period		125			242
Cash and Cash Equivalents, end of period	$	300		$	233
Supplemental Cash Flow Disclosures:
Cash paid for interest	$	2		$	2

The accompanying combined notes are an integral part of these unaudited condensed consolidated financial statements.

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MIRANT AMERICAS GENERATION, LLC AND SUBSIDIARIES

MIRANT NORTH AMERICA, LLC AND SUBSIDIARIES

MIRANT MID-ATLANTIC, LLC AND SUBSIDIARIES

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

A. Description of Business and Accounting and Reporting Policies (Mirant Americas Generation, Mirant North America and Mirant Mid-Atlantic)

Mirant Americas Generation and Mirant North America are competitive energy companies that produce and sell electricity in the United States. Mirant Americas Generation and Mirant North America own or lease 10,112 MW of net electric generating capacity in the Mid-Atlantic and Northeast regions and in California. Mirant Americas Generation and Mirant North America also operate an integrated asset management and energy marketing organization based in Atlanta, Georgia.

Mirant Mid-Atlantic operates and owns or leases 5,230 MW of net electric generating capacity in the Washington, D.C. area. Mirant Mid-Atlantic’s electric generating capacity is part of the 10,112 MW of net electric generating capacity of Mirant Americas Generation and Mirant North America. Mirant Mid-Atlantic’s generating facilities serve the PJM markets. The PJM ISO operates the largest centrally dispatched control area in the United States.

Mirant Americas Generation, Mirant North America and Mirant Mid-Atlantic are Delaware limited liability companies and indirect wholly-owned subsidiaries of Mirant Corporation. Mirant North America is a wholly-owned subsidiary of Mirant Americas Generation. Mirant Mid-Atlantic is a wholly-owned subsidiary of Mirant North America and an indirect wholly-owned subsidiary of Mirant Americas Generation. The chart below is a summary representation of the Companies’ organizational structure and is not a complete organizational chart of Mirant Corporation.

Mirant Americas Generation, Mirant North America and Mirant Mid-Atlantic have a number of service agreements for labor and administrative services with Mirant Services. See Note F for further discussion of arrangements with these related parties.

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Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Companies and their wholly-owned subsidiaries have been prepared in accordance with GAAP for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the consolidated financial statements and notes thereto included in the Companies’ 2008 Annual Report on Form 10-K.

The accompanying unaudited condensed consolidated financial statements include the accounts of the Companies and their wholly-owned subsidiaries and have been prepared from records maintained by the Companies and their subsidiaries. All significant intercompany accounts and transactions within consolidated entities have been eliminated in consolidation.

The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make various estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. Certain prior period amounts have been reclassified to conform to the current period financial statement presentation.

The Companies evaluate events that occur after their balance sheet date but before their financial statements are issued for potential recognition or disclosure. Based on their evaluations, as of November 5, 2009, the Companies determined that there were no material subsequent events for recognition or disclosure other than those disclosed herein.

In preparing Mirant Americas Generation’s and Mirant North America’s unaudited condensed consolidated financial statements for the three months ended March 31, 2009, management discovered that the amounts previously disclosed for cash paid for interest and cash paid for interest, net of amount capitalized were overstated for each interim period in 2008. For the three and nine months ended September 30, 2008, Mirant Americas Generation’s and Mirant North America’s cash paid for interest was overstated by approximately $4 million and $27 million, respectively. The Capitalization of Interest Cost discussed later in Note A has been adjusted to reflect the immaterial correction of these misstatements. For the nine months ended September 30, 2008, cash paid for interest, net of amounts capitalized was overstated by approximately $27 million. The supplemental cash flow disclosure for the unaudited condensed consolidated statements of cash flows for the nine months ended September 30, 2008, has been adjusted to reflect the immaterial correction of this misstatement. The misstatement of cash paid for interest and cash paid for interest, net of amount capitalized had no effect on Mirant Americas Generation’s and Mirant North America’s cash and cash equivalents, net income or member’s equity.

Inventories

Inventories consist primarily of fuel oil, coal, materials and supplies, and purchased emissions allowances. Inventory is generally stated at the lower of cost or market value. Fuel stock is removed from the inventory account as it is used in the generation of electricity. Materials and supplies are removed from the inventory account on a weighted average cost basis when they are used for repairs, maintenance or capital projects. The cost of purchased emissions allowances is also computed on a weighted average cost basis. Purchased emissions allowances are removed from inventory and charged to cost of fuel, electricity and other products in the Companies’ accompanying unaudited condensed consolidated statements of operations as they are utilized for emissions volumes.

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Inventories were comprised of the following (in millions):

Mirant Americas Generation and Mirant North America

	At September 30, 2009		At December 31, 2008
Fuel stock:
Fuel oil	$	125	$	113
Coal		53		43
Other		1		1
Materials and supplies		66		63
Purchased emissions allowances		10		18
Total inventories	$	255	$	238

For the nine months ended September 30, 2009, Mirant Americas Generation and Mirant North America recognized lower of cost or market inventory adjustments of $29 million, primarily related to coal inventory.

Mirant Mid-Atlantic

	At September 30, 2009		At December 31, 2008
Fuel stock:
Fuel oil	$	23	$	25
Coal		53		43
Other		1		1
Materials and supplies		43		41
Purchased emissions allowances		—		19
Total inventories	$	120	$	129

For the nine months ended September 30, 2009, Mirant Mid-Atlantic recognized lower of cost or market inventory adjustments of $28 million, primarily related to coal inventory.

Impairment of Long-Lived Assets (Mirant Americas Generation and Mirant North America)

The Companies evaluate long-lived assets, such as property, plant and equipment and purchased intangible assets subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Such evaluations are performed in accordance with the accounting guidance related to evaluating long-lived assets for impairment. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized as the amount by which the carrying amount of the asset exceeds its fair value. In the second quarter of 2009, Mirant Americas Generation and Mirant North America evaluated the Bowline generating facility for impairment. In the third quarter of 2009, Mirant Americas Generation and Mirant North America also evaluated the Potrero generating facility and certain of its intangible assets for impairment. See Note C for further discussion.

Capitalization of Interest Cost (Mirant Americas Generation and Mirant North America)

Mirant Americas Generation and Mirant North America capitalize interest on projects during their construction period. Mirant Americas Generation and Mirant North America determine which debt instruments represent a reasonable measure of the cost of financing construction in terms of interest costs incurred that otherwise could have been avoided. These debt instruments and associated interest costs are included in the

21

calculation of the weighted average interest rate used for determining the capitalization rate. Once a project is placed in service, capitalized interest, as a component of the total cost of the construction, is amortized over the estimated useful life of the asset constructed.

For the three and nine months ended September 30, 2009 and 2008, Mirant Americas Generation and Mirant North America incurred the following interest costs on debt to nonaffiliates (in millions):

Mirant Americas Generation

	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
Total interest costs	$	53		$	58		$	158		$	181
Capitalized and included in property, plant and equipment, net		(20	)		(12	)		(53	)		(35	)
Interest expense	$	33		$	46		$	105		$	146

The amounts of capitalized interest above include interest accrued. For the three and nine months ended September 30, 2009, cash paid for interest was $3 million and $99 million, respectively, of which $2 million and $35 million, respectively, were capitalized. For the three and nine months ended September 30, 2008, cash paid for interest was $6 million and $123 million, respectively, of which $4 million and $27 million, respectively, were capitalized.

Mirant North America

	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
Total interest costs	$	22		$	25		$	67		$	77
Capitalized and included in property, plant and equipment, net		(20	)		(12	)		(53	)		(35	)
Interest expense	$	2		$	13		$	14		$	42

The amounts of capitalized interest above include interest accrued. For the three and nine months ended September 30, 2009, cash paid for interest was $2 million and $39 million, respectively, of which $2 million and $35 million, respectively, were capitalized. For the three and nine months ended September 30, 2008, cash paid for interest was $5 million and $50 million, respectively, of which $4 million and $27 million, respectively, were capitalized.

Recently Adopted Accounting Guidance

In December 2007, the FASB issued revised guidance related to accounting for business combinations. This guidance requires an acquirer of a business to recognize the assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree at their acquisition-date fair values. The guidance also requires disclosure of information necessary for investors and other users to evaluate and understand the nature and financial effect of the business combination. Additionally, the guidance requires that acquisition-related costs be expensed as incurred. The provisions of this guidance became effective for acquisitions completed on or after January 1, 2009; however, the income tax considerations included in the guidance were effective as of that date for all acquisitions, regardless of the acquisition date. The Companies adopted this accounting guidance on January 1, 2009, and the adoption had no effect on the Companies’ consolidated statements of operations, financial position or cash flows.

On February 12, 2008, the FASB issued guidance related to fair value measurements, which deferred the effective date of fair value measurements for one year for certain nonfinancial assets and liabilities, with the

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exception of those nonfinancial assets and liabilities that are recognized or disclosed on a recurring basis (at least annually). The Companies’ non-recurring nonfinancial assets and liabilities that could be measured at fair value in the Companies’ unaudited condensed consolidated financial statements include long-lived asset impairments and the initial recognition of asset retirement obligations. The Companies adopted the guidance related to fair value measurements for non-recurring nonfinancial assets and liabilities on January 1, 2009, and the adoption had no effect on the Companies’ consolidated statements of operations, financial position or cash flows. The Companies incorporated the recognition and disclosure provisions related to fair value measurements for non-recurring nonfinancial assets and liabilities, when applicable. See Note C for these disclosures.

On March 19, 2008, the FASB issued guidance that enhances the required disclosures for derivative instruments and hedging activities. The Companies utilize derivative financial instruments to manage their exposure to commodity price risks and for Mirant Americas Generation’s and Mirant North America’s proprietary trading and fuel oil management activities. The Companies adopted this guidance on January 1, 2009. See Note B for these disclosures.

On April 9, 2009, the FASB issued guidance that requires disclosures about the fair value of financial instruments in interim financial statements. These fair value disclosures were effective for interim periods ending after June 15, 2009. The Companies adopted this accounting guidance for their disclosures of the fair value of financial instruments for the quarter ended June 30, 2009, and the adoption had no effect on the Companies’ consolidated statements of operations, financial position or cash flows. See “Fair Value of Other Financial Instruments” in Note B for these disclosures.

On April 9, 2009, the FASB issued guidance which provides additional direction on determining whether a market for a financial asset is not active and a transaction is not distressed for fair value measurements. Under distressed market conditions, the Companies need to weigh all available evidence in determining whether a transaction occurred in an orderly market. This guidance requires additional judgment by the Companies when determining the fair value of derivative contracts in the current economic environment. The Companies adopted this accounting guidance for their fair value measurements for the quarter ended June 30, 2009, and the adoption did not have a material effect on the Companies’ consolidated statements of operations, financial position or cash flows.

On May 28, 2009, the FASB issued guidance which requires the Companies to disclose the date through which they have evaluated subsequent events and whether that date represents the date the financial statements were issued or were available to be issued. This guidance defines two types of subsequent events; recognized and non-recognized events, with recognized events reflecting conditions that existed as of the balance sheet date. Subsequent event disclosure is effective for interim periods ending after June 15, 2009. The Companies adopted the subsequent event disclosure requirements for the quarter ended June 30, 2009, and the adoption had no effect on the Companies’ consolidated statements of operations, financial position or cash flows.

On July 1, 2009, the FASB issued guidance which codified all authoritative nongovernmental GAAP into a single source. This guidance is effective for interim and annual periods ending after September 15, 2009. The codified guidance supersedes all existing accounting standards, but does not change the contents of those standards. The Companies adopted this accounting guidance for the quarter ended September 30, 2009, and the Companies changed their references to accounting literature to conform to the codified source of authoritative nongovernmental GAAP.

On August 27, 2009, the FASB issued updated guidance for measuring the fair value of liabilities. The guidance clarifies that a quoted price for the identical liability in an active market is the best evidence of fair value for that liability, and in the absence of a quoted market price, the liability may be measured at fair value at the amount that the Companies would receive as proceeds if they were to issue that liability at the measurement date. The Companies adopted this accounting guidance for their fair value measurements of liabilities for the quarter ended September 30, 2009, and the adoption did not have a material effect on the Companies’ consolidated statements of operations, financial position or cash flows.

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B. Financial Instruments (Mirant Americas Generation, Mirant North America and Mirant Mid-Atlantic)

Derivative Financial Instruments

In connection with generating electricity, the Companies are exposed to energy commodity price risk associated with the acquisition of fuel needed to generate electricity, the price of electricity produced and sold, and the fair value of fuel inventories. In addition, the open positions in Mirant Americas Generation’s and Mirant North America’s trading activities, comprised of proprietary trading and fuel oil management activities, expose them to risks associated with changes in energy commodity prices. The Companies, through their asset management activities, enter into a variety of exchange-traded and OTC energy and energy-related derivative financial instruments, such as forward contracts, futures contracts, option contracts and financial swap agreements to manage exposure to commodity price risks. These contracts have varying terms and durations, which range from a few days to years, depending on the instrument. Mirant Americas Generation’s and Mirant North America’s proprietary trading activities also utilize similar derivative contracts in markets where they have a physical presence to attempt to generate incremental gross margin. Mirant Americas Generation’s and Mirant North America’s fuel oil management activities use derivative financial instruments to hedge economically the fair value of their physical fuel oil inventories and to optimize the approximately three million barrels of storage capacity that they own or lease.

Changes in the fair value and settlements of derivative financial instruments used to hedge electricity economically are reflected in operating revenue, and changes in the fair value and settlements of derivative financial instruments used to hedge fuel economically are reflected in cost of fuel, electricity and other products in the accompanying unaudited condensed consolidated statements of operations. Most of Mirant Americas Generation’s and Mirant North America’s long-term coal agreements are not required to be recorded at fair value under the accounting guidance for derivative financial instruments. As such, these contracts are not included in derivative contract assets and liabilities in the accompanying condensed consolidated balance sheets and are not included in the tables below. Changes in the fair value and settlements of derivative contracts for trading activities, comprised of proprietary trading and fuel oil management, are recorded on a net basis as operating revenue in the accompanying unaudited condensed consolidated statements of operations. As of September 30, 2009, the Companies do not have any derivative financial instruments for which hedge accounting has been elected.

The Companies also consider risks associated with interest rates, counterparty credit and Mirant Americas Generation’s, Mirant North America’s and Mirant Mid-Atlantic’s own non-performance risk when valuing their derivative financial instruments. The nominal value of the derivative contract assets and liabilities is discounted to account for time value using a LIBOR forward interest rate curve based on the tenor of the Companies’ transactions being valued.

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Mirant Americas Generation and Mirant North America

The following table presents the fair value of derivative financial instruments related to commodity price risk (in millions):

		Fair Value at
Commodity Derivative Contracts	Balance Sheet Location	September 30, 2009			December 31, 2008
Asset management	Derivative contract assets	$	1,410		$	1,285
Trading activities	Derivative contract assets		1,228			1,882
Total derivative contract assets			2,638			3,167
Asset management	Derivative contract liabilities		(724	)		(736	)
Trading activities	Derivative contract liabilities		(1,192	)		(1,776	)
Total derivative contract liabilities			(1,916	)		(2,512	)
Asset management, net			686			549
Trading activities, net			36			106
Total derivative contracts, net		$	722		$	655

The following tables present the net gains (losses) for derivative financial instruments recognized in income in the unaudited condensed consolidated statements of operations (in millions):

Commodity Derivative Contracts	Location of Net Gains (Losses) Recognized in Income	Amount of Net Gains (Losses) Recognized in Income for the Three Months Ended
		September 30, 2009									September 30, 2008
		Realized			Unrealized			Total			Realized			Unrealized			Total
Asset management	Operating revenues	$	292		$	(169	)	$	123		$	(57	)	$	1,368		$	1,311
Trading activities	Operating revenues		32			(24	)		8			9			70			79
Asset management	Cost of fuel, electricity and other products		(25	)		19			(6	)		(15	)		(43	)		(58	)
Total		$	299		$	(174	)	$	125		$	(63	)	$	1,395		$	1,332

Commodity Derivative Contracts	Location of Net Gains (Losses) Recognized in Income	Amount of Net Gains (Losses) Recognized in Income for the Nine Months Ended
		September 30, 2009									September 30, 2008
		Realized			Unrealized			Total			Realized			Unrealized			Total
Asset management	Operating revenues	$	619		$	91		$	710		$	(167	)	$	204		$	37
Trading activities	Operating revenues		106			(73	)		33			(10	)		21			11
Asset management	Cost of fuel, electricity and other products		(69	)		48			(21	)		2			(7	)		(5	)
Total		$	656		$	66		$	722		$	(175	)	$	218		$	43

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The following table presents the notional quantity on long (short) positions for derivative financial instruments on a gross and net basis at September 30, 2009 (in equivalent MWh):

	Notional Quantity
	Derivative Contract Assets		Derivative Contract Liabilities		Net Derivative Contracts
	(in millions)
Commodity Type:
Power1	(100	)	56		(44	)
Natural gas	15		(15	)	—
Fuel oil	1		(2	)	(1	)
Coal	1		(1	)	—
Total	(83	)	38		(45	)

¹ Includes MWh equivalent of natural gas transactions used to hedge power.

Mirant Mid-Atlantic

The following table presents the fair value of derivative financial instruments related to commodity price risk (in millions):

Commodity Derivative Contracts	Balance Sheet Location	Fair Value at
		September 30, 2009			December 31, 2008
Asset management—nonaffiliate	Derivative contract assets—nonaffiliate	$	532		$	401
Asset management—affiliate	Derivative contract assets—affiliate		795			775
Total derivative contract assets			1,327			1,176
Asset management—nonaffiliate	Derivative contract liabilities—nonaffiliate		(32	)		(1	)
Asset management—affiliate	Derivative contract liabilities—affiliate		(650	)		(649	)
Total derivative contract liabilities			(682	)		(650	)
Asset management—nonaffiliate, net			500			400
Asset management—affiliate, net			145			126
Total derivative contracts, net		$	645		$	526

The following tables present the net gains (losses) for derivative financial instruments recognized in income in the unaudited condensed consolidated statements of operations (in millions):

Commodity Derivative Contracts	Location of Net Gains (Losses) Recognized in Income	Amount of Net Gains (Losses) Recognized in Income for the Three Months Ended
		September 30, 2009								September 30, 2008
		Realized			Unrealized			Total		Realized			Unrealized			Total
Asset management	Operating revenues	$	241		$	(126	)	$	115	$	(58	)	$	1,324		$	1,266
Asset management	Cost of fuel, electricity and other products		(1	)		2			1		(1	)		(6	)		(7	)
Total		$	240		$	(124	)	$	116	$	(59	)	$	1,318		$	1,259

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Commodity Derivative Contracts	Location of Net Gains (Losses) Recognized in Income	Amount of Net Gains (Losses) Recognized in Income for the Nine Months Ended
		September 30, 2009						September 30, 2008
		Realized		Unrealized		Total		Realized			Unrealized		Total
Asset management	Operating revenues	$	524	$	112	$	636	$	(170	)	$	200	$	30
Asset management	Cost of fuel, electricity and other products		3		7		10		—			—		—
Total		$	527	$	119	$	646	$	(170	)	$	200	$	30

The following table presents the notional quantity on long (short) positions for derivative financial instruments on a gross and net basis at September 30, 2009 (in equivalent MWh):

	Notional Quantity
	Derivative Contract Assets		Derivative Contract Liabilities	Net Derivative Contracts
	(in millions)
Commodity Type:
Power1	(77	)	34	(43	)
Total	(77	)	34	(43	)

¹ Includes MWh equivalent of natural gas transactions used to hedge power.

Fair Value Hierarchy

Based on the observability of the inputs used in the valuation techniques for fair value measurement, the Companies are required to classify recorded fair value measurements according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The fair value measurement inputs the Companies use vary from readily observable prices for exchange-traded instruments to price curves that cannot be validated through external pricing sources. The Companies’ financial assets and liabilities carried at fair value in the consolidated financial statements are classified in three categories based on the inputs used.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls must be determined based on the lowest level input that is significant to the fair value measurement. The Companies’ assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and consideration of factors specific to the asset or liability.

The following tables set forth by level within the fair value hierarchy the Companies’ financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2009, by category and tenor, respectively. At September 30, 2009, the Companies’ only financial assets and liabilities measured at fair value on a recurring basis are derivative financial instruments.

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Mirant Americas Generation and Mirant North America

The following table presents financial assets and liabilities, net accounted for at fair value on a recurring basis as of September 30, 2009, by category (in millions):

	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Other Unobservable Inputs (Level 3)			Total
Assets:
Commodity contracts—asset management	$	13		$	1,368		$	29		$	1,410
Commodity contracts—trading activities		425			775			28			1,228
Total derivative contract assets		438			2,143			57			2,638
Liabilities:
Commodity contracts—asset management		(17	)		(705	)		(2	)		(724	)
Commodity contracts—trading activities		(415	)		(767	)		(10	)		(1,192	)
Total derivative contract liabilities		(432	)		(1,472	)		(12	)		(1,916	)
Net:
Commodity contracts—asset management, net		(4	)		663			27			686
Commodity contracts—trading activities, net		10			8			18			36
Total derivative contract assets and liabilities, net	$	6		$	671		$	45		$	722

The following table presents financial assets and liabilities, net accounted for at fair value on a recurring basis as of December 31, 2008, by category (in millions):

	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Other Unobservable Inputs (Level 3)			Total
Assets:
Commodity contracts—asset management	$	5		$	1,256		$	24		$	1,285
Commodity contracts—trading activities		540			1,319			23			1,882
Total derivative contract assets		545			2,575			47			3,167
Liabilities:
Commodity contracts—asset management		(22	)		(714	)		—			(736	)
Commodity contracts—trading activities		(539	)		(1,236	)		(1	)		(1,776	)
Total derivative contract liabilities		(561	)		(1,950	)		(1	)		(2,512	)
Net:
Commodity contracts—asset management, net		(17	)		542			24			549
Commodity contracts—trading activities, net		1			83			22			106
Total derivative contract assets and liabilities, net	$	(16	)	$	625		$	46		$	655

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The following table presents financial assets and liabilities, net accounted for at fair value on a recurring basis as of September 30, 2009, by tenor (in millions):

	Commodity Contracts
	Asset Management		Trading Activities			Total
Remainder of 2009	$	118	$	34		$	152
2010		254		(1	)		253
2011		60		3			63
2012		47		—			47
2013		98		—			98
Thereafter		109		—			109
Total	$	686	$	36		$	722

The volumetric weighted average maturity, or weighted average tenor, of the asset management derivative contract portfolio at both September 30, 2009 and December 31, 2008, was approximately 23 months. The volumetric weighted average maturity, or weighted average tenor, of the trading derivative contract portfolio at September 30, 2009 and December 31, 2008, was approximately 9 months and 8 months, respectively.

Mirant Mid-Atlantic

The following table presents financial assets and liabilities, net accounted for at fair value on a recurring basis as of September 30, 2009, by category (in millions):

	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Other Unobservable Inputs (Level 3)		Total
Total assets	$	4		$	1,314		$	9	$	1,327
Total liabilities		(5	)		(677	)		—		(682	)
Total	$	(1	)	$	637		$	9	$	645

The following table presents financial assets and liabilities, net accounted for at fair value on a recurring basis as of December 31, 2008, by category (in millions):

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Other Unobservable Inputs (Level 3)		Total
Total assets	$	3	$	1,173		$	—	$	1,176
Total liabilities		—		(650	)		—		(650	)
Total	$	3	$	523		$	—	$	526

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The following table presents financial assets and liabilities, net accounted for at fair value on a recurring basis as of September 30, 2009, by tenor (in millions):

	Asset Management
Remainder of 2009	$	105
2010		230
2011		56
2012		47
2013		98
Thereafter		109
Total	$	645

The volumetric weighted average maturity, or weighted average tenor, of the derivative contract portfolio at September 30, 2009 and December 31, 2008, was approximately 24 months and 26 months, respectively.

Level 3 Disclosures

Mirant Americas Generation and Mirant North America

The following tables present a roll forward of fair values of assets and liabilities, net categorized in Level 3 for the nine months ended September 30, 2009 and 2008 and the amount included in income for the three and nine months ended September 30, 2009 and 2008 (in millions):

	Commodity Contracts
	Asset Management			Trading Activities			Total
Fair value of assets and liabilities categorized in Level 3 at January 1, 2009	$	24		$	22		$	46
Total gains or losses (realized/unrealized):
Included in income of existing contracts (or changes in net assets or liabilities)1		(37	)		(43	)		(80	)
Purchases, issuances and settlements2		40			39			79
Transfers in and/or out of Level 33		—			—			—
Fair value of assets and liabilities categorized in Level 3 at September 30, 2009	$	27		$	18		$	45

	Commodity Contracts
	Asset Management			Trading Activities			Total
Fair value of assets and liabilities categorized in Level 3 at January 1, 2008	$	12		$	—		$	12
Total gains or losses (realized/unrealized):
Included in income of existing contracts (or changes in net assets or liabilities)1		(12	)		(14	)		(26	)
Purchases, issuances and settlements2		10			6			16
Transfers in and/or out of Level 33		—			17			17
Fair value of assets and liabilities categorized in Level 3 at September 30, 2008	$	10		$	9		$	19

¹ Reflects the total gains or losses on contracts included in Level 3 at the beginning of each quarterly reporting period and at the end of each quarterly reporting period, and contracts entered into during each quarterly reporting period that remain at the end of each quarterly reporting period.

² Represents the total cash settlements of contracts during each quarterly reporting period that existed at the beginning of each quarterly reporting period.

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³ Denotes the total contracts that existed at the beginning of each quarterly reporting period and were still held at the end of each quarterly reporting period that were either previously categorized as a higher level for which the inputs to the model became unobservable or assets and liabilities that were previously classified as Level 3 for which the lowest significant input became observable during each quarterly reporting period. Amounts reflect fair value as of the end of each quarterly reporting period.

	Three Months Ended September 30, 2009								Nine Months Ended September 30, 2009
	Operating Revenues			Cost of Fuel		Total			Operating Revenues			Cost of Fuel		Total
Gains (losses) included in income	$	(22	)	$	2	$	(20	)	$	(6	)	$	5	$	(1	)
Gains (losses) included in income (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2009	$	(22	)	$	2	$	(20	)	$	(4	)	$	5	$	1

	Three Months Ended September 30, 2008								Nine Months Ended September 30, 2008
	Operating Revenues		Cost of Fuel			Total			Operating Revenues		Cost of Fuel			Total
Gains (losses) included in income	$	1	$	(9	)	$	(8	)	$	19	$	(12	)	$	7
Gains (losses) included in income (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2008	$	2	$	(9	)	$	(7	)	$	21	$	(7	)	$	14

Mirant Mid-Atlantic

The following tables present a roll forward of fair values of assets and liabilities, net categorized in Level 3 for the nine months ended September 30, 2009 and 2008 and the amount included in income for the three and nine months ended September 30, 2009 and 2008 (in millions):

	Asset Management
Fair value of assets and liabilities categorized in Level 3 at January 1, 2009	$	—
Total gains or losses (realized/unrealized):
Included in income of existing contracts (or changes in net assets or liabilities)1		5
Purchases, issuances and settlements2		4
Transfers in and/or out of Level 33		—
Fair value of assets and liabilities categorized in Level 3 at September 30, 2009	$	9

	Asset Management
Fair value of assets and liabilities categorized in Level 3 at January 1, 2008	$	2
Total gains or losses (realized/unrealized):
Included in income of existing contracts (or changes in net assets or liabilities)1		(8	)
Purchases, issuances and settlements2		5
Transfers in and/or out of Level 33		1
Fair value of assets and liabilities categorized in Level 3 at September 30, 2008	$	—

¹ Reflects the total gains or losses on contracts included in Level 3 at the beginning of each quarterly reporting period and at the end of each quarterly reporting period, and contracts entered into during each quarterly reporting period that remain at the end of each quarterly reporting period.

² Represents the total cash settlements of contracts during each quarterly reporting period that existed at the beginning of each quarterly reporting period.

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³ Denotes the total contracts that existed at the beginning of each quarterly reporting period and were still held at the end of each quarterly reporting period that were either previously categorized as a higher level for which the inputs to the model became unobservable or assets and liabilities that were previously classified as Level 3 for which the lowest significant input became observable during each quarterly reporting period. Amounts reflect fair value as of the end of each quarterly reporting period.

	Three Months Ended September 30, 2009						Nine Months Ended September 30, 2009
	Operating Revenues		Cost of Fuel		Total		Operating Revenues		Cost of Fuel		Total
Gains included in income	$	2	$	2	$	4	$	4	$	5	$	9
Gains included in income (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2009	$	2	$	2	$	4	$	4	$	5	$	9

	Three Months Ended September 30, 2008							Nine Months Ended September 30, 2008
	Operating Revenues		Cost of Fuel			Total		Operating Revenues		Cost of Fuel			Total
Gains (losses) included in income	$	15	$	(9	)	$	6	$	5	$	(7	)	$	(2	)
Gains (losses) included in income (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2008	$	15	$	(9	)	$	6	$	5	$	(7	)	$	(2	)

Counterparty Credit Concentration Risk

The Companies are exposed to the default risk of the counterparties with which they transact. The Companies manage their credit risk by entering into master netting agreements and requiring counterparties to post cash collateral or other credit enhancements based on the net exposure and the credit standing of the counterparty. The Companies also have non-collateralized power hedges entered into by Mirant Mid-Atlantic. These transactions are senior unsecured obligations of Mirant Mid-Atlantic and the counterparties and do not require either party to post cash collateral for initial margin or for securing exposure as a result of changes in power or natural gas prices. The Companies’ credit reserve on their derivative contract assets was $16 million and $52 million for Mirant Americas Generation and Mirant North America at September 30, 2009 and December 31, 2008, respectively, and $16 million and $51 million for Mirant Mid-Atlantic at September 30, 2009 and December 31, 2008, respectively.

At September 30, 2009 and December 31, 2008, approximately $31 million and $20 million, respectively, of cash collateral posted to Mirant Americas Generation and Mirant North America by counterparties under master netting agreements were included in accounts payable and accrued liabilities on Mirant Americas Generation’s and Mirant North America’s condensed consolidated balance sheets.

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The Companies also monitor counterparty credit concentration risk on both an individual basis and a group counterparty basis. The following tables highlight the credit quality and the balance sheet settlement exposures related to these activities as of September 30, 2009 and December 31, 2008 (dollars in millions):

Mirant Americas Generation and Mirant North America

	At September 30, 2009
Credit Rating Equivalent	Gross Exposure Before Collateral1		Net Exposure Before Collateral2		Collateral3		Exposure Net of Collateral		% of Net Exposure
Clearing and Exchange	$	1,103	$	111	$	111	$	—	—
Investment Grade:
Financial institutions		1,200		653		30		623	82	%
Energy companies		665		114		14		100	13	%
Other		—		—		—		—	—
Non-investment Grade:
Financial institutions		—		—		—		—	—
Energy companies		—		—		—		—	—
Other		—		—		—		—	—
No External Ratings:
Internally-rated investment grade		36		34		—		34	4	%
Internally-rated non-investment grade		6		6		—		6	1	%
Not internally rated		—		—		—		—	—
Total	$	3,010	$	918	$	155	$	763	100	%

	At December 31, 2008
Credit Rating Equivalent	Gross Exposure Before Collateral1		Net Exposure Before Collateral2		Collateral3		Exposure Net of Collateral		% of Net Exposure
Clearing and Exchange	$	1,428	$	107	$	107	$	—	—
Investment Grade:
Financial institutions		1,219		553		20		533	72	%
Energy companies		1,060		232		73		159	22	%
Other		—		—		—		—	—
Non-investment Grade:
Financial institutions		—		—		—		—	—
Energy companies		—		—		—		—	—
Other		—		—		—		—	—
No External Ratings:
Internally-rated investment grade		41		41		—		41	6	%
Internally-rated non-investment grade		4		4		—		4	—
Not internally rated		—		—		—		—	—
Total	$	3,752	$	937	$	200	$	737	100	%

¹ Gross exposure before collateral represents credit exposure, including realized and unrealized transactions, before applying the terms of master netting agreements with counterparties and netting of transactions with clearing brokers and exchanges. The table excludes amounts related to contracts classified as normal purchases/normal sales and non-derivative contractual commitments that are not recorded at fair value in the condensed consolidated balance sheets, except for any related accounts receivable. Such contractual commitments contain credit and economic risk if a counterparty does not perform. Non-performance could have a material adverse effect on the future results of operations, financial condition and cash flows.

² Net exposure before collateral represents the credit exposure, including both realized and unrealized transactions, after applying the terms of master netting agreements.

³ Collateral includes cash and letters of credit received from counterparties.

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Mirant Mid-Atlantic

	At September 30, 2009
Credit Rating Equivalent	Gross Exposure Before Collateral1,4		Net Exposure Before Collateral2		Collateral3		Exposure Net of Collateral		% of Net Exposure
Clearing and Exchange	$	—	$	—	$	—	$	—	—
Investment Grade:
Financial institutions		579		559		—		559	99	%
Energy companies		—		—		—		—	—
Other		—		—		—		—	—
Non-investment Grade:
Financial institutions		—		—		—		—	—
Energy companies		—		—		—		—	—
Other		—		—		—		—	—
No External Ratings:
Internally-rated investment grade		—		—		—		—	—
Internally-rated non-investment grade		6		6		—		6	1	%
Not internally rated		—		—		—		—	—
Total	$	585	$	565	$	—	$	565	100	%

	At December 31, 2008
Credit Rating Equivalent	Gross Exposure Before Collateral1,4		Net Exposure Before Collateral2		Collateral3		Exposure Net of Collateral		% of Net Exposure
Clearing and Exchange	$	—	$	—	$	—	$	—	—
Investment Grade:
Financial institutions		477		477		—		477	100	%
Energy companies		—		—		—		—	—
Other		—		—		—		—	—
Non-investment Grade:
Financial institutions		—		—		—		—	—
Energy companies		—		—		—		—	—
Other		—		—		—		—	—
No External Ratings:
Internally-rated investment grade		—		—		—		—	—
Internally-rated non-investment grade		2		2		—		2	—
Not internally rated		—		—		—		—	—
Total	$	479	$	479	$	—	$	479	100	%

¹ Gross exposure before collateral represents credit exposure, including realized and unrealized transactions, before applying the terms of master netting agreements with counterparties and netting of transactions with clearing brokers and exchanges. The table excludes amounts related to contracts classified as normal purchases/normal sales and non-derivative contractual commitments that are not recorded at fair value in the condensed consolidated balance sheets, except for any related accounts receivable. Such contractual commitments contain credit and economic risk if a counterparty does not perform. Non-performance could have a material adverse effect on the future results of operations, financial condition and cash flows.

² Net exposure before collateral represents the credit exposure, including both realized and unrealized transactions, after applying the terms of master netting agreements.

³ Collateral includes cash and letters of credit received from counterparties.

⁴ Amounts do not include exposures with affiliates or exposures incurred by Mirant Mid-Atlantic in connection with transactions entered into with external counterparties by affiliates on its behalf, with the exception of coal purchases.

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Mirant Americas Generation and Mirant North America had aggregate credit exposure to three investment grade counterparties that each represented an exposure of more than 10% of total credit exposure, net of collateral and that totaled $488 million and $491 million at September 30, 2009 and December 31, 2008, respectively.

Mirant Mid-Atlantic had aggregate credit exposure to four investment grade counterparties at September 30, 2009, and credit exposure to two investment grade counterparties at December 31, 2008, that each represented an exposure of more than 10% of total credit exposure, net of collateral and that totaled $519 million and $378 million at September 30, 2009 and December 31, 2008, respectively.

Mirant Americas Generation, Mirant North America and Mirant Mid-Atlantic Credit Risk

The Companies’ standard industry contracts contain credit-risk-related contingent features such as ratings-related thresholds and adequate assurance language whereby the Companies would be required to post additional cash collateral as a result of a credit event, including a downgrade. However, as a result of the Companies’ current credit ratings, the Companies are typically required to post collateral in the normal course of business to offset completely their net liability positions, after applying the terms of master netting agreements. At September 30, 2009, the fair value of Mirant Americas Generation’s and Mirant North America’s financial instruments with credit-risk-related contingent features in a net liability position were approximately $8 million for which Mirant Americas Generation and Mirant North America posted collateral, including cash and letters of credit, of $5 million to offset partially the position. At September 30, 2009, Mirant Mid-Atlantic did not have any financial instruments with credit-risk-related contingent features in a net liability position.

In addition, at both September 30, 2009 and December 31, 2008, Mirant Americas Generation and Mirant North America had approximately $1 million of cash collateral posted with counterparties under master netting agreements that was included in funds on deposit on the condensed consolidated balance sheets.

Fair Values of Other Financial Instruments (Mirant Americas Generation and Mirant North America)

Other financial instruments recorded at fair value include cash and interest-bearing cash equivalents. The following methods are used by Mirant Americas Generation and Mirant North America to estimate the fair value of financial instruments that are not otherwise carried at fair value on the accompanying condensed consolidated balance sheets:

Notes and Other Receivables. The fair value of Mirant Americas Generation’s and Mirant North America’s notes receivable are estimated using interest rates they would receive currently for similar types of arrangements.

Long- and Short-Term Debt. The fair value of Mirant Americas Generation’s and Mirant North America’s long- and short-term debt is estimated using quoted market prices, when available.

The carrying amounts and fair values of Mirant Americas Generation’s and Mirant North America’s financial instruments are as follows (in millions):

Mirant Americas Generation

	At September 30, 2009				At December 31, 2008
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Liabilities:
Long- and short-term debt	$	2,632	$	2,483	$	2,675	$	2,344

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Mirant North America

	At September 30, 2009				At December 31, 2008
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets:
Notes and other receivables	$	93	$	93	$	93	$	93
Liabilities:
Long- and short-term debt	$	1,250	$	1,224	$	1,293	$	1,203

C. Impairments on Assets Held and Used (Mirant Americas Generation and Mirant North America)

Bowline Generating Facility

Background

During the second quarter of 2009, the NYISO issued its annual peak load and energy forecast in its Load and Capacity Data report (the “Gold Book”). The Gold Book reports projected supply and demand for the New York control area for the next ten years. The Gold Book reflected a significant decrease in future demand as a result of current economic conditions and the expected future effects of demand-side management programs in New York. The reduction in future demand as a result of demand-side management programs is being driven primarily by an energy efficiency program being instituted within the State of New York that will seek to achieve a 15% reduction from 2007 energy volumes by 2015. The decrease in the projected future demand resulted in a decrease in Mirant Americas Generation’s and Mirant North America’s forecast of the capacity revenue that their 1,139 MW Bowline generating facility will earn in future periods.

In addition to the change in the forecasted capacity revenue, Mirant Bowline also received its property tax assessment during the second quarter of 2009. The assessment significantly exceeds the estimated fair value of the generating facility.

Based on Mirant Americas Generation’s and Mirant North America’s current five-year forecast incorporating these developments, Mirant Bowline is projected to operate at a net loss for the current year and to continue to have operating losses for the next several years because of the excessive level of taxation imposed on the Bowline generating facility combined with the forecasted decrease in capacity revenues. Therefore, Mirant Americas Generation and Mirant North America determined that the Bowline generating facility should be evaluated for impairment in the second quarter of 2009.

Asset Grouping

For purposes of impairment testing, a long-lived asset or assets must be grouped at the lowest level of identifiable cash flows. Mirant Americas Generation and Mirant North America included their Hudson Valley Gas subsidiary in the impairment analysis as the sole function of the pipeline operated by Hudson Valley Gas is to supply gas to the Bowline generating facility.

Assumptions and Results

Mirant Americas Generation and Mirant North America developed estimates related to the future costs of the facility, including future property tax payments. Additionally, Mirant Americas Generation and Mirant North America developed capacity and energy revenue forecasts based on supply and demand assumptions from the NYISO’s Gold Book and proprietary fundamental modeling. Mirant Americas Generation and Mirant North America also assumed they would monetize excess emissions allowances by selling them. The cash flows for the Bowline generating facility were projected through its estimated remaining useful life of 2027. The sum of the probability weighted undiscounted cash flows for the Bowline generating facility exceeded the carrying value as

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of June 30, 2009. There were no additional events in the third quarter that required Mirant Americas Generation and Mirant North America to update their previous impairment analysis. As a result, Mirant Americas Generation and Mirant North America did not record an impairment charge for the nine months ended September 30, 2009. The carrying value of the Bowline generating facility represented approximately 4% of Mirant Americas Generation’s and Mirant North America’s total property, plant and equipment, net at September 30, 2009.

Potrero Generating Facility

Background

In the third quarter of 2009, Mirant Potrero executed a settlement agreement with the City of San Francisco in which it agreed to shut down the Potrero generating facility when it is no longer needed for reliability, as determined by the CAISO. That settlement agreement must be approved by an ordinance adopted by the City of San Francisco before it becomes effective, which approval Mirant Potrero expects to occur in the fourth quarter of 2009. There are several projects underway in the San Francisco area to increase reliability for the region that once completed are expected to reduce and possibly eliminate the need for the Potrero generating facility to operate for reliability reasons. Mirant Potrero agreed in the settlement agreement to submit to the CAISO a notice of intent to shut down the facility as of December 31, 2010. The CAISO will make the final determination on when each of the units at the Potrero generating facility is no longer needed for reliability and may be shut down. As a result of the settlement agreement, Mirant Americas Generation and Mirant North America evaluated the Potrero generating facility for impairment during the third quarter. See Note J for further discussion of the settlement agreement with the City of San Francisco.

Asset Grouping

For purposes of impairment testing, a long-lived asset or assets must be grouped at the lowest level of identifiable cash flows. All of the units at Mirant Potrero are viewed as a single asset group. Additionally, the asset group includes intangible assets recorded at Mirant California for trading and development rights related to Mirant Potrero.

Assumptions and Results

Mirant Americas Generation and Mirant North America evaluated the Potrero generating facility for impairment during the third quarter of 2009. Mirant Americas Generation’s and Mirant North America’s assessment of Mirant Potrero under the accounting guidance related to the impairment of a long-lived asset involved developing scenarios for the future expected operations of the Potrero generating facility. One such scenario assumed the complete shutdown of the Potrero generating facility in December 2010 in accordance with the timeline proposed in the settlement agreement. Mirant Americas Generation and Mirant North America also considered additional scenarios that assumed the CAISO would not allow complete shutdown of the facility in December 2010 as expected reliability projects in the City of San Francisco were not completed. Mirant Americas Generation and Mirant North America determined that the tangible assets for the Potrero generating facility were not impaired because the weighted average sum of the undiscounted cash flows exceeded the carrying value of the tangible assets in the third quarter of 2009. The carrying value of the Potrero generating facility represented approximately 1% of Mirant Americas Generation’s and Mirant North America’s total property, plant and equipment, net at September 30, 2009.

As a result of certain terms included in the settlement agreement, Mirant Americas Generation and Mirant North America separately evaluated the trading and development rights associated with the Potrero generating facility for impairment and determined that both of these intangible assets were fully impaired as of September 30, 2009. Accordingly, Mirant Americas Generation and Mirant North America recognized an impairment loss of $9 million on the unaudited condensed consolidated statements of operations to write off the carrying value of the intangible assets related to the Potrero generating facility. This impairment loss is included in the results of Mirant Americas Generation’s and Mirant North America’s California segment for the three and nine months ended September 30, 2009.

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Contra Costa Generating Facility

Background

On September 2, 2009, Mirant Delta entered into an extension of its existing PPA with PG&E for Contra Costa units 6 and 7 from November 2011 through April 2013. At the end of the extension, and subject to any necessary regulatory approval, Mirant Delta has agreed to retire Contra Costa units 6 and 7, which began operations in 1964, in furtherance of state and federal policies to retire aging power plants that utilize once-through cooling technology. The agreement to retire these units did not significantly affect the remaining useful life of the Contra Costa generating facility. The Mirant Delta PPA extension is subject to approval by the CPUC.

Assumptions and Results

Mirant Americas Generation and Mirant North America evaluated the intangible asset of trading rights related to their Contra Costa generating facility for impairment during the third quarter of 2009 as a result of the shutdown provisions in the extension of the tolling agreement. Since the Contra Costa generating facility is under contract with PG&E through its expected shutdown date of April 2013, Mirant Americas Generation and Mirant North America determined the intangible asset was fully impaired as of September 30, 2009. Mirant Americas Generation and Mirant North America recorded an impairment loss of $5 million on the unaudited condensed consolidated statements of operations to write off the carrying value of the trading rights related to the Contra Costa generating facility. This impairment loss is included in the results of Mirant Americas Generation’s and Mirant North America’s California segment for the three and nine months ended September 30, 2009.

The following table sets forth by level within the fair value hierarchy the Mirant Americas Generation’s and Mirant North America’s intangible assets that were accounted for at fair value on a non-recurring basis. All of Mirant Americas Generation’s and Mirant North America’s intangible assets that were measured at fair value as a result of an impairment during the current period were categorized in Level 3 as of September 30, 2009 (in millions):

	Fair Value at September 30, 2009
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Loss Included in Earnings
Potrero intangible assets	$	—	$	—	$	—	$	—	$	9
Contra Costa intangible assets		—		—		—		—		5
Total	$	—	$	—	$	—	$	—	$	14

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D. Long-Term Debt (Mirant Americas Generation, Mirant North America and Mirant Mid-Atlantic)

Long-term debt was as follows (dollars in millions):

	At September 30, 2009			At December 31, 2008			Interest Rate		Secured/ Unsecured
Long-term debt:
Mirant Mid-Atlantic:
Mirant Chalk Point capital lease, due 2009 to 2015	$	26		$	28		8.19	%	—
Less: current portion of long-term debt		(4	)		(3	)
Total Mirant Mid-Atlantic long-term debt, net of current portion		22			25
Mirant North America:
Senior secured term loan, due 2009 to 2013		374			415		LIBOR + 1.75	%	Secured
Senior notes, due December 2013.		850			850		7.375	%	Unsecured
Less: current portion of senior secured term loan		(36	)		(42	)
Total Mirant North America long-term debt, net of current portion		1,210			1,248
Mirant Americas Generation:
Senior notes:
Due May 2011		535			535		8.30	%	Unsecured
Due October 2021		450			450		8.50	%	Unsecured
Due May 2031		400			400		9.125	%	Unsecured
Unamortized debt premiums (discounts), net		(3	)		(3	)
Total Mirant Americas Generation long-term debt, net of current portion	$	2,592		$	2,630

Mirant Americas Generation Senior Notes

The senior notes are senior unsecured obligations of Mirant Americas Generation having no recourse to any subsidiary or affiliate of Mirant Americas Generation.

Mirant North America Senior Secured Credit Facilities

Mirant North America, a wholly-owned subsidiary of Mirant Americas Generation, entered into senior secured credit facilities in January 2006, which are comprised of a senior secured term loan, due January 2013, and a senior secured revolving credit facility, due January 2012. The senior secured term loan had an initial principal balance of $700 million, which has amortized to $374 million as of September 30, 2009. At the closing, $200 million drawn under the senior secured term loan was deposited into a cash collateral account to support the issuance of up to $200 million of letters of credit. During 2008, Mirant North America transferred to the senior secured revolving credit facility approximately $78 million of letters of credit previously supported by the cash collateral account and withdrew approximately $78 million from the cash collateral account, thereby reducing the cash collateral account to approximately $122 million. At September 30, 2009, the cash collateral balance was approximately $124 million as a result of interest earned on the invested cash balances. At September 30, 2009, there were approximately $106 million of letters of credit outstanding under the senior secured revolving credit facility and $124 million of letters of credit outstanding under the senior secured term loan cash collateral account. At September 30, 2009, $649 million was available under the senior secured revolving credit facility and $0.1 million was available under the senior secured term loan for cash draws or for the issuance of letters of credit. Although the senior secured revolving credit facility has lender commitments of $800 million, availability thereunder reflects a $45 million reduction as a result of the expectation that Lehman Commercial Paper, Inc., which filed for bankruptcy in October 2008, will not honor its $45 million commitment under the facility. In addition, CIT Capital USA Inc. (“CIT Capital”) has outstanding a $50 million commitment under the Mirant North America senior secured revolving credit facility. CIT Capital is a subsidiary of the CIT Group Inc. (“CIT”)

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which, together with CIT Group Funding Company of Delaware LLC, filed voluntary petitions for bankruptcy on November 1, 2009, pursuant to an announced prepackaged plan of reorganization. None of the operating subsidiaries of CIT, including CIT Capital, was included in the bankruptcy filings and CIT has said that it expects all of its operating entities to continue operations during the pendency of the bankruptcy cases. If, however, CIT Capital were unable to honor its $50 million commitment under the Mirant North America senior secured revolving credit facility, the amount available under the credit facilities would be reduced by a corresponding amount.

In addition to quarterly principal installments, which are currently $1.2 million, Mirant North America is required to make annual principal prepayments under the senior secured term loan equal to a specified percentage of its excess free cash flow, which is based on adjusted EBITDA less capital expenditures and as further defined in the loan agreement. On March 19, 2009, Mirant North America made a mandatory principal prepayment of approximately $37 million on the term loan. At September 30, 2009, the current estimate of the mandatory principal prepayment of the term loan in March 2010 is approximately $32 million. This amount has been reclassified from long-term debt to current portion of long-term debt at September 30, 2009.

The senior secured credit facilities are senior secured obligations of Mirant North America. In addition, certain subsidiaries of Mirant North America (not including Mirant Mid-Atlantic or Mirant Energy Trading) have jointly and severally guaranteed, as senior secured obligations, the senior secured credit facilities. The senior secured credit facilities have no recourse to any other Mirant entities.

Mirant North America Senior Notes

The senior notes due in 2013 are senior unsecured obligations of Mirant North America. In addition, certain subsidiaries of Mirant North America (not including Mirant Mid-Atlantic or Mirant Energy Trading) have jointly and severally guaranteed, as senior unsecured obligations, the senior notes. The Mirant North America senior notes have no recourse to any other Mirant entities, including Mirant Americas Generation.

E. Guarantees and Letters of Credit (Mirant Americas Generation and Mirant North America)

Mirant generally conducts its business through various intermediate holding companies, including Mirant Americas Generation and Mirant North America, and various operating subsidiaries, which enter into contracts as a routine part of their business activities. In certain instances, the contractual obligations of such subsidiaries are guaranteed by, or otherwise supported by, Mirant or another of its subsidiaries, including guarantees of Mirant North America or letters of credit issued under the credit facilities of Mirant North America.

In addition, Mirant Americas Generation and its subsidiaries and Mirant North America and its subsidiaries enter into various contracts that include indemnification and guarantee provisions. Examples of these contracts include financing and lease arrangements, purchase and sale agreements, commodity purchase and sale agreements, construction agreements and agreements with vendors. Although the primary obligation of Mirant Americas Generation, Mirant North America or a subsidiary under such contracts is to pay money or render performance, such contracts may include obligations to indemnify the counterparty for damages arising from the breach thereof and, in certain instances, other existing or potential liabilities. In many cases Mirant Americas Generation’s and Mirant North America’s maximum potential liability cannot be estimated, because some of the underlying agreements contain no limits on potential liability.

Upon issuance or modification of a guarantee, Mirant Americas Generation and Mirant North America determine if the obligation is subject to initial recognition and measurement of a liability and/or disclosure of the nature and terms of the guarantee. Generally, guarantees of the performance of a third party are subject to the recognition and measurement, as well as the disclosure provisions, of the accounting guidance related to guarantees. Such guarantees must initially be recorded at fair value, as determined in accordance with the accounting guidance. Mirant Americas Generation and Mirant North America did not have any guarantees at September 30, 2009, that met the recognition requirements under the accounting guidance.

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For the nine months ended September 30, 2009, Mirant Americas Generation and Mirant North America had net decreases to their guarantees of approximately $88 million, which included a decrease of approximately $64 million to their letters of credit and a decrease of $25 million to their surety bonds, partially offset by an increase of $1 million in other guarantees.

This Note should be read in conjunction with the complete description under Note 9, Commitments and Contingencies—Guarantees, to the Companies’ financial statements in their 2008 Annual Report on Form 10-K.

F. Related Party Arrangements and Transactions (Mirant Americas Generation, Mirant North America and Mirant Mid-Atlantic)

Administrative Services Agreement with Mirant Services

Mirant Services provides the Companies with various management, personnel and other services as set forth in the Administrative Services Agreement. The Companies reimburse Mirant Services for amounts equal to Mirant Services’ direct costs of providing such services.

The total costs incurred by the Companies under the Administrative Services Agreement with Mirant Services have been included in the Companies’ accompanying unaudited condensed consolidated statements of operations as follows (in millions):

Mirant Americas Generation and Mirant North America

	Three Months Ended September 30,				Nine Months Ended September 30,
	2009		2008		2009		2008
Cost of fuel, electricity and other products—affiliate	$	2	$	1	$	6	$	5
Operations and maintenance expense—affiliate		39		35		113		109
Total	$	41	$	36	$	119	$	114

Mirant Mid-Atlantic

	Three Months Ended September 30,				Nine Months Ended September 30,
	2009		2008		2009		2008
Cost of fuel, electricity and other products—affiliate	$	2	$	1	$	6	$	4
Operations and maintenance expense—affiliate		22		19		62		58
Total	$	24	$	20	$	68	$	62

Power Sales and Fuel Supply Arrangement with Mirant Energy Trading (Mirant Mid-Atlantic)

Mirant Mid-Atlantic operates under a Power Sale, Fuel Supply and Services Agreement with Mirant Energy Trading. Amounts due to Mirant Energy Trading for fuel purchases and due from Mirant Energy Trading for power and capacity sales are recorded as a payable to affiliate or accounts receivable—affiliate in Mirant Mid-Atlantic’s accompanying condensed consolidated balance sheets.

Under the Power Sale, Fuel Supply and Services Agreement, Mirant Energy Trading resells Mirant Mid-Atlantic’s energy products in the PJM spot and forward markets and to other third parties. Mirant Mid-Atlantic is paid the amount received by Mirant Energy Trading for such capacity and energy. Mirant Mid-Atlantic has counterparty credit risk in the event that Mirant Energy Trading is unable to collect amounts owed from third parties for the resale of Mirant Mid-Atlantic’s energy products.

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Services Provided by Mirant Energy Trading (Mirant Mid-Atlantic)

Mirant Mid-Atlantic receives services from Mirant Energy Trading which include the bidding and dispatch of its generating units, fuel procurement and the execution of contracts, including economic hedges, to reduce price risk. Amounts due to and from Mirant Energy Trading under the Power Sale, Fuel Supply and Services Agreement are recorded as a net payable to affiliate or accounts receivable—affiliate, as appropriate. Substantially all energy marketing overhead expenses are allocated to Mirant’s operating subsidiaries. During the three and nine months ended September 30, 2009, Mirant Mid-Atlantic incurred approximately $3 million and $10 million of energy marketing overhead expense, compared to $4 million and $11 million, respectively, for the same periods in 2008. These costs are included in operations and maintenance expense—affiliate in Mirant Mid-Atlantic’s accompanying unaudited condensed consolidated statements of operations.

Administration Arrangements with Mirant Services

Substantially all of Mirant’s corporate overhead costs are allocated to Mirant’s operating subsidiaries. For the three and nine months ended September 30, 2009 and 2008, the Companies incurred the following in costs under these arrangements, which are included in operations and maintenance expense—affiliate in the Companies’ accompanying unaudited condensed consolidated statements of operations (in millions):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2009		2008		2009		2008
Mirant Americas Generation	$	34	$	32	$	97	$	104
Mirant North America	$	34	$	32	$	97	$	104
Mirant Mid-Atlantic	$	23	$	20	$	65	$	61

Notes Receivable from Affiliate (Mirant North America)

During the pendency of the Chapter 11 proceedings, Mirant Americas Generation and certain of its subsidiaries and Mirant and certain of its subsidiaries (excluding Mirant Americas Generation and its subsidiaries) participated in separate intercompany cash management programs whereby cash balances at Mirant and the respective participating subsidiaries were transferred to central concentration accounts to fund working capital and other needs of the respective participants. At September 30, 2009 and December 31, 2008, Mirant North America had current notes receivable from Mirant Americas Generation of $93 million related to its pre-emergence intercompany cash management program. For the three and nine months ended September 30, 2009, Mirant North America earned interest income of less than $1 million, compared to $0 and $1 million, respectively, for the same periods in 2008, which is recorded in interest income—affiliate in Mirant North America’s accompanying unaudited condensed consolidated statements of operations.

Purchased Emissions Allowances (Mirant Mid-Atlantic)

In the first quarter of 2009, Mirant Energy Trading began maintaining the inventory of certain purchased emissions allowances on behalf of Mirant Mid-Atlantic. The emissions allowances are sold by Mirant Energy Trading to Mirant Mid-Atlantic as they are needed for operations. Mirant Mid-Atlantic purchases emissions allowances from Mirant Energy Trading at Mirant Energy Trading’s original cost to purchase the allowances. For allowances that have been purchased by Mirant Energy Trading from a Mirant affiliate, the price paid by Mirant Energy Trading is determined by market indices. As of September 30, 2009 and December 31, 2008, Mirant Mid-Atlantic had $0 and $19 million, respectively, of emissions allowances recorded in inventories in Mirant Mid-Atlantic’s accompanying condensed consolidated balance sheets.

Emissions allowances purchased from Mirant Energy Trading that were utilized in the three and nine months ended September 30, 2009, were $12 million and $37 million, respectively, compared to $1 million and $10 million, respectively, for the same periods in 2008 and are recorded in cost of fuel, electricity and other

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products—affiliate in Mirant Mid-Atlantic’s accompanying unaudited condensed consolidated statements of operations. Amounts expensed as a result of writing down emissions allowances to the lower of cost or market were $1 million and $2 million, respectively, for the three and nine months ended September 30, 2008, and were recorded in cost of fuel, electricity and other products—affiliate in Mirant Mid-Atlantic’s accompanying unaudited condensed consolidated statements of operations.

Preferred Shares in Mirant Americas

Series A (Mirant Americas Generation, Mirant North America and Mirant Mid-Atlantic)

Mirant Americas issued mandatorily redeemable Series A preferred shares to Mirant Mid-Atlantic for the purpose of funding future environmental capital expenditures. For the nine months ended September 30, 2009, the Companies recorded $9 million in preferred stock in affiliate and member’s interest in the accompanying unaudited condensed consolidated balance sheets of each entity related to the amortization of the discount on the preferred stock in Mirant Americas.

The Series A preferred shares issued by Mirant Americas are mandatorily redeemable by Mirant Americas at various dates. In June 2009, Mirant Americas was required to and did redeem $84 million in the Series A preferred stock held by Mirant Mid-Atlantic.

Series B (Mirant Americas Generation)

Mirant Americas issued mandatorily redeemable Series B preferred shares to Mirant Americas Generation for the purpose of supporting the refinancing of Mirant Americas Generation senior notes due in 2011. For the nine months ended September 30, 2009, Mirant Americas Generation recorded $6 million in preferred stock in affiliate and member’s interest in Mirant Americas Generation’s unaudited condensed consolidated balance sheets related to the amortization of the discount on the preferred stock in Mirant Americas.

G. Income Taxes (Mirant Americas Generation, Mirant North America and Mirant Mid-Atlantic)

Mirant Americas Generation and Mirant North America

Mirant Americas Generation and Mirant North America are limited liability companies treated as branches of Mirant Americas for income tax purposes. As a result, Mirant Americas and Mirant have direct liability for the majority of the United States federal and state income taxes relating to Mirant Americas Generation’s and Mirant North America’s operations. Certain of Mirant Americas Generation’s and Mirant North America’s subsidiaries continue to exist as regarded corporate entities for income tax purposes. For those regarded corporate entities, Mirant Americas Generation and Mirant North America allocate current and deferred income taxes to each regarded corporate entity as if such entity were a single taxpayer utilizing the asset and liability method to account for income taxes. To the extent Mirant Americas Generation and Mirant North America provide tax provision or benefit, any related tax payable or receivable to Mirant is reclassified to equity in the same period.

If Mirant Americas Generation were to be allocated income taxes attributable to its operations, the pro forma income tax provision (benefit) attributable to income before tax would be $5 million and $13 million, respectively, for the three and nine months ended September 30, 2009, compared to $(6) million and $5 million, respectively, for the three and nine months ended September 30, 2008. The pro forma balance of Mirant Americas Generation’s net deferred income taxes would be $0 as of September 30, 2009. If Mirant North America were to be allocated income taxes attributable to its operations, the pro forma income tax provision (benefit) attributable to income before tax would be $38 million and $253 million, respectively, for the three and nine months ended September 30, 2009, compared to $(148) million and $116 million, respectively, for the three and nine months ended September 30, 2008. The pro forma balance of Mirant North America’s deferred income taxes would be a net deferred tax liability of $275 million as of September 30, 2009.

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If Mirant experiences another “ownership change” within the meaning of Section (“§”) 382 of the Internal Revenue Code of 1986, Mirant Americas Generation’s and Mirant North America’s annual limitation on their NOLs as regarded corporate entities and the pro forma annual limitation on Mirant Americas Generation’s pro forma NOLs could be lower and could result in the recognition of additional current tax expense for the regarded corporate entities and additional pro forma current tax expense in future periods. Given §382’s broad definition, an ownership change could be the unintended consequence of otherwise normal market trading in Mirant’s stock that is outside Mirant’s control. On March 26, 2009, Mirant announced the adoption of a stockholder rights plan (the “Stockholder Rights Plan”) to reduce the likelihood of an unintended ownership change. However, there can be no assurance that the Stockholder Rights Plan will prevent such an ownership change.

Mirant Mid-Atlantic

Mirant Mid-Atlantic is a single member limited liability corporation for income tax purposes. Mirant Mid-Atlantic is treated as though it were a branch or division of Mirant Americas Generation’s parent, Mirant Americas for income tax purposes. As a result Mirant Mid-Atlantic is not subject to United States federal and state income taxes. If Mirant Mid-Atlantic were to be allocated income taxes attributable to its operations, the pro forma income tax provision attributable to income before tax would be $35 million and $242 million for the three and nine months ended September 30, 2009, respectively, compared to $606 million and $249 million, respectively, for the same periods in 2008. The balance of Mirant Mid-Atlantic’s pro forma deferred income taxes would be a net deferred tax liability of $486 million as of September 30, 2009.

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H. Segment Reporting (Mirant Americas Generation and Mirant North America)

Mirant Americas Generation and Mirant North America have four operating segments: Mid-Atlantic, Northeast, California and Other Operations. The Mid-Atlantic segment consists of four generating facilities located in Maryland and Virginia with total net generating capacity of 5,230 MW. The Northeast segment consists of three generating facilities located in Massachusetts and one generating facility located in New York with total net generating capacity of 2,535 MW. For the nine months ended September 30, 2008, the Northeast region also included the Lovett generating facility, which was shut down on April 19, 2008. The California segment consists of three generating facilities located in or near the City of San Francisco, with total net generating capacity of 2,347 MW. Other Operations includes proprietary trading and fuel oil management activities, parent company adjustments for affiliate transactions, interest expense on debt at Mirant Americas Generation and Mirant North America and interest income on the invested cash balances of Mirant Americas Generation and Mirant North America. In the following tables, eliminations are primarily related to intercompany sales of emissions allowances, intercompany revenues, intercompany cost of fuel and interest on intercompany notes receivable and notes payable.

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Mirant Americas Generation Operating Segments

	Mid-Atlantic			Northeast			California			Other Operations			Eliminations			Total
	(in millions)
Three Months Ended September 30, 2009:
Operating revenues—nonaffiliate1	$	27		$	3		$	21		$	403		$	—		$	454
Operating revenues—affiliate2		317			54			22			180			(573	)		—
Total operating revenues		344			57			43			583			(573	)		454
Cost of fuel, electricity and other products—nonaffiliate3		5			1			—			154			—			160
Cost of fuel, electricity and other products—affiliate4		126			22			10			417			(573	)		2
Total cost of fuel, electricity and other products		131			23			10			571			(573	)		162
Gross margin		213			34			33			12			—			292
Operating Expenses:
Operations and maintenance—nonaffiliate		56			13			7			1			—			77
Operations and maintenance—affiliate		48			13			10			2			—			73
Depreciation and amortization		25			4			5			2			—			36
Impairment losses		—			—			14			—			—			14
Gain on sales of assets, net		(2	)		(1	)		—			—			—			(3	)
Total operating expenses, net		127			29			36			5			—			197
Operating income (loss)		86			5			(3	)		7			—			95
Total other expense, net		—			—			1			31			—			32
Net income (loss)	$	86		$	5		$	(4	)	$	(24	)	$	—		$	63
Total assets at September 30, 2009	$	6,336		$	647		$	148		$	4,203		$	(2,926	)	$	8,408

¹ Includes unrealized losses of $44 million and $149 million for Mid-Atlantic and Other Operations, respectively.

² Includes unrealized gains of $125 million for Other Operations and unrealized losses of $82 million and $43 million for Mid-Atlantic and Northeast, respectively.

³ Includes unrealized gains of $19 million for Other Operations.

⁴ Includes unrealized losses of $19 million for Other Operations and unrealized gains of $2 million and $17 million for Mid-Atlantic and Northeast, respectively.

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Mirant Americas Generation Operating Segments

	Mid-Atlantic			Northeast			California			Other Operations			Eliminations			Total
	(in millions)
Nine Months Ended September 30, 2009:
Operating revenues—nonaffiliate1	$	293		$	11		$	78		$	1,449		$	(3	)	$	1,828
Operating revenues—affiliate2		1,114			256			33			164			(1,567	)		—
Total operating revenues		1,407			267			111			1,613			(1,570	)		1,828
Cost of fuel, electricity and other products—nonaffiliate3		15			2			—			560			—			577
Cost of fuel, electricity and other products—affiliate4		415			122			22			1,014			(1,567	)		6
Total cost of fuel, electricity and other products		430			124			22			1,574			(1,567	)		583
Gross margin		977			143			89			39			(3	)		1,245
Operating Expenses:
Operations and maintenance—nonaffiliate		173			54			28			3			—			258
Operations and maintenance—affiliate		137			39			29			5			—			210
Depreciation and amortization		73			13			15			3			—			104
Impairment losses		—			—			14			—			—			14
Gain on sales of assets, net		(12	)		(3	)		(1	)		—			(4	)		(20	)
Total operating expenses (income), net		371			103			85			11			(4	)		566
Operating income		606			40			4			28			1			679
Total other expense, net		2			—			2			100			—			104
Net income (loss)	$	604		$	40		$	2		$	(72	)	$	1		$	575
Total assets at September 30, 2009	$	6,336		$	647		$	148		$	4,203		$	(2,926	)	$	8,408

¹ Includes unrealized gains of $101 million for Mid-Atlantic and unrealized losses of $83 million for Other Operations.

² Includes unrealized gains of $11 million and $10 million for Mid-Atlantic and Other Operations, respectively, and unrealized losses of $21 million for Northeast.

³ Includes unrealized gains of $48 million for Other Operations.

⁴ Includes unrealized losses of $48 million for Other Operations and unrealized gains of $7 million and $41 million for Mid-Atlantic and Northeast, respectively.

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Mirant Americas Generation Operating Segments

	Mid-Atlantic			Northeast			California			Other Operations			Eliminations			Total
	(in millions)
Three Months Ended September 30, 2008:
Operating revenues—nonaffiliate1	$	912		$	4		$	33		$	1,219		$	4		$	2,172
Operating revenues—affiliate2		887			222			19			(345	)		(783	)		—
Total operating revenues		1,799			226			52			874			(779	)		2,172
Cost of fuel, electricity and other products—nonaffiliate3		5			1			—			355			(2	)		359
Cost of fuel, electricity and other products—affiliate4		165			170			17			432			(783	)		1
Total cost of fuel, electricity and other products		170			171			17			787			(785	)		360
Gross margin		1,629			55			35			87			6			1,812
Operating Expenses:
Operations and maintenance—nonaffiliate		53			19			8			—			—			80
Operations and maintenance—affiliate		43			14			9			1			—			67
Depreciation and amortization		23			5			5			—			—			33
Loss (gain) on sales of assets, net		(7	)		(5	)		(2	)		—			4			(10	)
Total operating expenses, net		112			33			20			1			4			170
Operating income		1,517			22			15			86			2			1,642
Total other expense (income), net		1			(1	)		—			45			—			45
Net income	$	1,516		$	23		$	15		$	41		$	2		$	1,597
Total assets at December 31, 2008	$	5,620		$	722		$	181		$	5,083		$	(3,054	)	$	8,552

¹ Includes unrealized gains of $944 million and $494 million for Mid-Atlantic and Other Operations, respectively.

² Includes unrealized gains of $380 million and $44 million for Mid-Atlantic and Northeast, respectively, and unrealized losses of $424 million for Other Operations.

³ Includes unrealized losses of $43 million for Other Operations.

⁴ Includes unrealized losses of $6 million and $37 million for Mid-Atlantic and Northeast, respectively, and unrealized gains of $43 million for Other Operations.

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Mirant Americas Generation Operating Segments

	Mid-Atlantic			Northeast			California			Other Operations			Eliminations			Total
	(in millions)
Nine Months Ended September 30, 2008:
Operating revenues—nonaffiliate1	$	74		$	15		$	96		$	1,892		$	4		$	2,081
Operating revenues—affiliate2		1,336			465			42			92			(1,935	)		—
Total operating revenues		1,410			480			138			1,984			(1,931	)		2,081
Cost of fuel, electricity and other products—nonaffiliate3		15			13			—			735			(2	)		761
Cost of fuel, electricity and other products—affiliate4		407			310			43			1,180			(1,935	)		5
Total cost of fuel, electricity and other products		422			323			43			1,915			(1,937	)		766
Gross margin		988			157			95			69			6			1,315
Operating Expenses:
Operations and maintenance—nonaffiliate		176			81			29			—			—			286
Operations and maintenance—affiliate		130			49			28			6			—			213
Depreciation and amortization		67			15			19			1			—			102
Loss (gain) on sales of assets, net		(9	)		(21	)		(3	)		—			7			(26	)
Total operating expenses, net		364			124			73			7			7			575
Operating income (loss)		624			33			22			62			(1	)		740
Total other expense (income), net		1			(1	)		—			140			—			140
Net income (loss)	$	623		$	34		$	22		$	(78	)	$	(1	)	$	600
Total assets at December 31, 2008	$	5,620		$	722		$	181		$	5,083		$	(3,054	)	$	8,552

¹ Includes unrealized gains of $140 million and $85 million for Mid-Atlantic and Other Operations, respectively.

² Includes unrealized gains of $60 million and $4 million for Mid-Atlantic and Northeast, respectively, and unrealized losses of $64 million for Other Operation.

³ Includes unrealized losses of $7 million for Other Operations.

⁴ Includes unrealized losses of $7 million for Northeast and unrealized gains of $7 million for Other Operations.

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Mirant North America Operating Segments

	Mid-Atlantic			Northeast			California			Other Operations		Eliminations			Total
	(in millions)
Three Months Ended September 30, 2009:
Operating revenues—nonaffiliate1	$	27		$	3		$	21		$	403	$	—		$	454
Operating revenues—affiliate2		317			54			22			180		(573	)		—
Total operating revenues		344			57			43			583		(573	)		454
Cost of fuel, electricity and other products—nonaffiliate3		5			1			—			154		—			160
Cost of fuel, electricity and other products—affiliate4		126			22			10			417		(573	)		2
Total cost of fuel, electricity and other products		131			23			10			571		(573	)		162
Gross margin		213			34			33			12		—			292
Operating Expenses:
Operations and maintenance—nonaffiliate		56			13			7			1		—			77
Operations and maintenance—affiliate		48			13			10			2		—			73
Depreciation and amortization		25			4			5			2		—			36
Impairment losses		—			—			14			—		—			14
Gain on sales of assets, net		(2	)		(1	)		—			—		—			(3	)
Total operating expenses, net		127			29			36			5		—			197
Operating income (loss)		86			5			(3	)		7		—			95
Total other expense, net		—			—			1			—		—			1
Net income (loss)	$	86		$	5		$	(4	)	$	7	$	—		$	94
Total assets at September 30, 2009	$	6,336		$	647		$	148		$	4,176	$	(2,825	)	$	8,482

¹ Includes unrealized losses of $44 million and $149 million for Mid-Atlantic and Other Operations, respectively.

² Includes unrealized gains of $125 million for Other Operations and unrealized losses of $82 million and $43 million for Mid-Atlantic and Northeast, respectively.

³ Includes unrealized gains of $19 million for Other Operations.

⁴ Includes unrealized losses of $19 million for Other Operations and unrealized gains of $2 million and $17 million for Mid-Atlantic and Northeast, respectively.

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Mirant North America Operating Segments

	Mid-Atlantic			Northeast			California			Other Operations		Eliminations			Total
	(in millions)
Nine Months Ended September 30, 2009:
Operating revenues—nonaffiliate1	$	293		$	11		$	78		$	1,449	$	(3	)	$	1,828
Operating revenues—affiliate2		1,114			256			33			164		(1,567	)		—
Total operating revenues		1,407			267			111			1,613		(1,570	)		1,828
Cost of fuel, electricity and other products—nonaffiliate3		15			2			—			560		—			577
Cost of fuel, electricity and other products—affiliate4		415			122			22			1,014		(1,567	)		6
Total cost of fuel, electricity and other products		430			124			22			1,574		(1,567	)		583
Gross margin		977			143			89			39		(3	)		1,245
Operating Expenses:
Operations and maintenance—nonaffiliate		173			54			28			3		—			258
Operations and maintenance—affiliate		137			39			29			5		—			210
Depreciation and amortization		73			13			15			3		—			104
Impairment losses		—			—			14			—		—			14
Gain on sales of assets, net		(12	)		(3	)		(1	)		—		(4	)		(20	)
Total operating expenses (income), net		371			103			85			11		(4	)		566
Operating income		606			40			4			28		1			679
Total other expense, net		2			—			2			9		—			13
Net income	$	604		$	40		$	2		$	19	$	1		$	666
Total assets at September 30, 2009	$	6,336		$	647		$	148		$	4,176	$	(2,825	)	$	8,482

¹ Includes unrealized gains of $101 million for Mid-Atlantic and unrealized losses of $83 million for Other Operations.

² Includes unrealized gains of $11 million and $10 million for Mid-Atlantic and Other Operations, respectively, and unrealized losses of $21 million for Northeast.

³ Includes unrealized gains of $48 million for Other Operations.

⁴ Includes unrealized losses of $48 million for Other Operations and unrealized gains of $7 million and $41 million for Mid-Atlantic and Northeast, respectively.

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Mirant North America Operating Segments

	Mid-Atlantic			Northeast			California			Other Operations			Eliminations			Total
	(in millions)
Three Months Ended September 30, 2008:
Operating revenues—nonaffiliate1	$	912		$	4		$	33		$	1,219		$	4		$	2,172
Operating revenues—affiliate2		887			222			19			(345	)		(783	)		—
Total operating revenues		1,799			226			52			874			(779	)		2,172
Cost of fuel, electricity and other products—nonaffiliate3		5			1			—			355			(2	)		359
Cost of fuel, electricity and other products—affiliate4		165			170			17			432			(783	)		1
Total cost of fuel, electricity and other products		170			171			17			787			(785	)		360
Gross margin		1,629			55			35			87			6			1,812
Operating Expenses:
Operations and maintenance—nonaffiliate		53			19			8			—			—			80
Operations and maintenance—affiliate		43			14			9			1			—			67
Depreciation and amortization		23			5			5			—			—			33
Loss (gain) on sales of assets, net		(7	)		(5	)		(2	)		—			4			(10	)
Total operating expenses, net		112			33			20			1			4			170
Operating income		1,517			22			15			86			2			1,642
Total other expense (income), net		1			(1	)		—			10			—			10
Net income	$	1,516		$	23		$	15		$	76		$	2		$	1,632
Total assets at December 31, 2008	$	5,620		$	722		$	181		$	5,074		$	(2,952	)	$	8,645

¹ Includes unrealized gains of $944 million and $494 million for Mid-Atlantic and Other Operations, respectively.

² Includes unrealized gains of $380 million and $44 million for Mid-Atlantic and Northeast, respectively, and unrealized losses of $424 million for Other Operations.

³ Includes unrealized losses of $43 million for Other Operations.

⁴ Includes unrealized losses of $6 million and $37 million for Mid-Atlantic and Northeast, respectively, and unrealized gains of $43 million for Other Operations.

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Mirant North America Operating Segments

	Mid-Atlantic			Northeast			California			Other Operations		Eliminations			Total
	(in millions)
Nine Months Ended September 30, 2008:
Operating revenues—nonaffiliate1	$	74		$	15		$	96		$	1,892	$	4		$	2,081
Operating revenues—affiliate2		1,336			465			42			92		(1,935	)		—
Total operating revenues		1,410			480			138			1,984		(1,931	)		2,081
Cost of fuel, electricity and other products—nonaffiliate3		15			13			—			735		(2	)		761
Cost of fuel, electricity and other products—affiliate4		407			310			43			1,180		(1,935	)		5
Total cost of fuel, electricity and other products		422			323			43			1,915		(1,937	)		766
Gross margin		988			157			95			69		6			1,315
Operating Expenses:
Operations and maintenance—nonaffiliate		176			81			29			—		—			286
Operations and maintenance—affiliate		130			49			28			6		—			213
Depreciation and amortization		67			15			19			1		—			102
Loss (gain) on sales of assets, net		(9	)		(21	)		(3	)		—		7			(26	)
Total operating expenses, net		364			124			73			7		7			575
Operating income (loss)		624			33			22			62		(1	)		740
Total other expense (income), net		1			(1	)		—			27		—			27
Net income (loss)	$	623		$	34		$	22		$	35	$	(1	)	$	713
Total assets at December 31, 2008	$	5,620		$	722		$	181		$	5,074	$	(2,952	)	$	8,645

¹ Includes unrealized gains of $140 million and $85 million for Mid-Atlantic and Other Operations, respectively.

² Includes unrealized gains of $60 million and $4 million for Mid-Atlantic and Northeast, respectively, and unrealized losses of $64 million for Other Operation.

³ Includes unrealized losses of $7 million for Other Operations.

⁴ Includes unrealized losses of $7 million for Northeast and unrealized gains of $7 million for Other Operations.

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I. Litigation and Other Contingencies (Mirant Americas Generation, Mirant North America and Mirant Mid-Atlantic)

The Companies are involved in a number of significant legal proceedings. In certain cases, plaintiffs seek to recover large and sometimes unspecified damages, and some matters may be unresolved for several years. The Companies cannot currently determine the outcome of the proceedings described below or the ultimate amount of potential losses and therefore have not made any provision for such matters unless specifically noted below. Pursuant to guidance related to accounting for contingencies, management provides for estimated losses to the extent information becomes available indicating that losses are probable and that the amounts are reasonably estimable. Additional losses could have a material adverse effect on the Companies’ results of operations, financial position or cash flows.

Environmental Matters

EPA Information Request. In January 2001, the EPA issued a request for information to Mirant concerning the implications under the EPA’s NSR regulations promulgated under the Clean Air Act of past repair and maintenance activities at the Potomac River facility in Virginia and the Chalk Point, Dickerson and Morgantown facilities in Maryland. The requested information concerned the period of operations that predates the ownership and lease of those facilities by Mirant Potomac River, Mirant Chalk Point and Mirant Mid-Atlantic. Mirant responded fully to this request. Under the APSA, Pepco is responsible for fines and penalties arising from any violation of the NSR regulations associated with operations prior to the acquisition or lease of the facilities by Mirant Potomac River, Mirant Chalk Point and Mirant Mid-Atlantic. If a violation is determined to have occurred at any of the facilities, Mirant Potomac River, Mirant Chalk Point and Mirant Mid-Atlantic, as the owner or lessee of the facility, may be responsible for the cost of purchasing and installing emissions control equipment, the cost of which may be material. Mirant Chalk Point and Mirant Mid-Atlantic have installed and are installing a variety of emissions control equipment on the Chalk Point, Dickerson and Morgantown facilities in Maryland to comply with the Maryland Healthy Air Act, but that equipment may not include all of the emissions control equipment that could be required if a violation of the EPA’s NSR regulations is determined to have occurred at one or more of those facilities. If such a violation is determined to have occurred after the acquisition or lease of the facilities by Mirant Potomac River, Mirant Chalk Point and Mirant Mid-Atlantic or, if occurring prior to the acquisition or lease, is determined to constitute a continuing violation, Mirant Potomac River, Mirant Chalk Point or Mirant Mid-Atlantic could also be subject to fines and penalties by the state or federal government for the period after its acquisition or lease of the facility at issue, the cost of which may be material, although applicable bankruptcy law may bar such liability for periods prior to January 3, 2006, when the Plan became effective for Mirant Potomac River, Mirant Chalk Point and Mirant Mid-Atlantic.

Faulkner Fly Ash Facility. By letter dated April 2, 2008, the Environmental Integrity Project and the Potomac Riverkeeper notified Mirant, the Companies and various of the Companies’ subsidiaries that they and certain individuals intend to file suit alleging that violations of the Clean Water Act are occurring at the Faulkner Fly Ash Facility owned by Mirant MD Ash Management. The April 2, 2008, letter alleges that the Faulkner facility discharges certain pollutants at levels that exceed Maryland’s water quality criteria, that it discharged certain pollutants without obtaining an appropriate National Pollutant Discharge Elimination System (“NPDES”) permit, and that Mirant MD Ash Management failed to perform monthly monitoring required under an applicable NPDES permit. The letter indicated that the organizations intend to file suit to enjoin the violations alleged, to obtain civil penalties for past violations occurring after January 3, 2006, and to recover attorneys’ fees. Mirant disputes the allegations of violations of the Clean Water Act made by the two organizations in the April 2, 2008, letter.

In May 2008, the MDE filed a complaint in the Circuit Court for Charles County, Maryland, against Mirant MD Ash Management and Mirant Mid-Atlantic. The complaint alleges violations of Maryland’s water pollution laws similar to those asserted in the April 2, 2008, letter from the Environmental Integrity Project and the Potomac Riverkeeper. The MDE complaint requests that the court (1) prohibit continuation of the alleged unpermitted discharges, (2) require Mirant MD Ash Management and Mirant Mid-Atlantic to cease from

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disposing of any further coal combustion byproducts at the Faulkner Fly Ash Facility and close and cap the existing disposal cells within one year and (3) assess civil penalties of up to $10,000 per day for each violation. The discharges that are the subject of the MDE’s complaint result from a leachate treatment system installed by Mirant MD Ash Management in accordance with a December 18, 2000, Complaint and Consent Order (the “December 2000 Consent Order”) entered by the Maryland Secretary of the Environment, Water Management Administration pursuant to an agreement between the MDE and Pepco, the previous owner of the Faulkner Fly Ash Facility. Mirant MD Ash Management and Mirant Mid-Atlantic on July 23, 2008, filed a motion seeking dismissal of the MDE complaint, arguing that the discharges are permitted by the December 2000 Consent Order. In September 2009, the court denied a motion by Environmental Integrity Project seeking to intervene as a party to the suit and the Environmental Integrity Project has appealed that ruling.

Suit Regarding Chalk Point Emissions. On June 25, 2009, the Chesapeake Climate Action Network and four individuals filed a complaint against Mirant Mid-Atlantic and Mirant Chalk Point in the United States District Court for the District of Maryland. The plaintiffs allege that Mirant Chalk Point has violated the Clean Air Act and Maryland environmental regulations by failing to install controls to limit emissions of particulate matter on unit 3 and unit 4 of the Chalk Point generating facility, which at times burn residual fuel oil. The plaintiffs seek to enjoin the alleged violations, to obtain civil penalties of up to $32,500 per day for past noncompliance and to recover attorney’s fees. Mirant Mid-Atlantic and Mirant Chalk Point dispute the plaintiffs’ allegations of violations of the Clean Air Act and Maryland environmental regulations.

Riverkeeper Suit Against Mirant Lovett (Mirant Americas Generation and Mirant North America). On March 11, 2005, Riverkeeper, Inc. filed suit against Mirant Lovett in the United States District Court for the Southern District of New York under the Clean Water Act. The suit alleges that Mirant Lovett failed to implement a marine life exclusion system at its Lovett generating facility and to perform monitoring for the exclusion of certain aquatic organisms from the facility’s cooling water intake structures in violation of Mirant Lovett’s water discharge permit issued by the State of New York. The plaintiff requested the court to impose civil penalties of $32,500 per day of violation and to award the plaintiff attorneys’ fees. Mirant Lovett’s view is that it complied with the terms of its water discharge permit, as amended by a Consent Order entered June 29, 2004. Mirant Lovett has filed a motion seeking dismissal of the suit on the grounds that it complied with the terms of its water discharge permit, the closure of the Lovett generating facility in April 2008 moots the plaintiff’s request for injunctive relief, and the discharge in bankruptcy received by Mirant Lovett in 2007 bars any claim for penalties.

Notices of Intent to Sue for Alleged Violations of the Endangered Species Act (Mirant Americas Generation and Mirant North America). By letter dated September 27, 2007, the Coalition for a Sustainable Delta, four water districts, and an individual (the “Noticing Parties”) provided notice to Mirant and Mirant Delta of their intent to file suit alleging that Mirant Delta has violated, and continues to violate, the Federal Endangered Species Act through the operation of its Contra Costa and Pittsburg generating facilities. The Noticing Parties contend that the facilities use of water drawn from the Sacramento-San Joaquin Delta for cooling purposes results in harm to four species of fish listed as endangered species. The Noticing Parties assert that Mirant Delta’s authorizations to take (i.e., cause harm to) those species, a biological opinion and incidental take statement issued by the National Marine Fisheries Service on October 17, 2002, for three of the fish species and a biological opinion and incidental take statement issued by the United States Fish and Wildlife Service on November 4, 2002, for the fourth fish species, have been violated by Mirant Delta and no longer apply to permit the effects on the four fish species caused by the operation of the Contra Costa and Pittsburg generating facilities. Following receipt of these letters, in late October 2007, Mirant Delta received correspondence from the United States Fish and Wildlife Service, the National Marine Fisheries Service and the United States Army Corps of Engineers (the “Corps”) clarifying that Mirant Delta continued to be authorized to take the four species of fish protected under the Federal Endangered Species Act. The agencies have initiated a process that will review the environmental effects of Mirant Delta’s water usage, including effects on the protected species of fish. That process could lead to changes in the manner in which Mirant Delta can use river water for the operation of the Contra Costa and Pittsburg generating facilities. In a subsequent letter, the Coalition for a Sustainable Delta also alleged violations of the

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National Environmental Policy Act and the California Endangered Species Act associated with the operation of Mirant Delta’s facilities. On May 14, 2009, the Coalition for a Sustainable Delta, Kern County Water Agency and an individual sent a new notice of intent to sue to the Corps alleging that the Corps had violated the Federal Endangered Species Act by issuing permits related to the operation of Mirant Delta’s Contra Costa and Pittsburg generating facilities without ensuring that conservation measures would be implemented to minimize and mitigate the harm to the four endangered fish species and their habitat allegedly resulting from such operation. Mirant Delta disputes the allegations made by the Noticing Parties and those made in the May 14, 2009, notice.

Chapter 11 Proceedings

On July 14, 2003, and various dates thereafter, the Mirant Debtors, including the Companies and their subsidiaries, filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. Mirant, the Companies and most of the Mirant Debtors emerged from bankruptcy on January 3, 2006, when the Plan became effective. The remaining Mirant Debtors (Mirant New York, Mirant Bowline, Mirant Lovett, Mirant NY-Gen and Hudson Valley Gas) emerged from bankruptcy on various dates in 2007. As of September 30, 2009, approximately 837,000 of the shares of Mirant common stock to be distributed under the Plan had not yet been distributed and have been reserved for distribution with respect to claims disputed by the Mirant Debtors that have not been resolved. Under the terms of the Plan, upon the resolution of such a disputed claim, the claimant will receive the same pro rata distributions of Mirant common stock, cash, or both common stock and cash as previously allowed claims, regardless of the price at which Mirant common stock is trading at the time the claim is resolved.

To the extent the aggregate amount of the payouts determined to be due with respect to disputed claims ultimately exceeds the amount of the funded claim reserve, Mirant would have to issue additional shares of common stock to address the shortfall, which would dilute existing Mirant stockholders, and Mirant and Mirant Americas Generation would have to pay additional cash amounts as necessary under the terms of the Plan to satisfy such pre-petition claims.

California and Western Power Markets (Mirant Americas Generation and Mirant North America)

FERC Refund Proceedings Arising Out of California Energy Crisis. High prices experienced in California and western wholesale electricity markets in 2000 and 2001 caused various purchasers of electricity in those markets to initiate proceedings seeking refunds. Several of those proceedings remain pending either before the FERC or on appeal to the United States Court of Appeals for the Ninth Circuit (the “Ninth Circuit”). The proceedings that remain pending include proceedings (1) ordered by the FERC on July 25, 2001, (the “FERC Refund Proceedings”) to determine the amount of any refunds and amounts owed for sales made by market participants, including Mirant Americas Energy Marketing, in the CAISO or the Cal PX markets from October 2, 2000, through June 20, 2001 (the “Refund Period”), (2) ordered by the FERC to determine whether there had been unjust and unreasonable charges for spot market bilateral sales in the Pacific Northwest from December 25, 2000, through June 20, 2001 (the “Pacific Northwest Proceeding”), and (3) arising from a complaint filed in 2002 by the California Attorney General that sought refunds for transactions conducted in markets administered by the CAISO and the Cal PX outside the Refund Period set by the FERC and for transactions between the DWR and various owners of generation and power marketers, including Mirant Americas Energy Marketing and subsidiaries of Mirant Americas Generation and Mirant North America. Various parties appealed the FERC orders related to these proceedings to the Ninth Circuit seeking review of a number of issues, including changing the Refund Period to include periods prior to October 2, 2000, and expanding the sales of electricity subject to potential refund to include bilateral sales made to the DWR and other parties. While various of these appeals remain pending, the Ninth Circuit ruled in orders issued on August 2, 2006, and September 9, 2004, that the FERC should consider further whether to grant relief for sales of electricity made in the CAISO and Cal PX markets prior to October 2, 2000, at rates found to be unjust, and, in the proceeding initiated by the California Attorney General, what remedies, including potential refunds, are appropriate where entities, including Mirant Americas Energy Marketing, purportedly did not comply with certain filing requirements for transactions conducted under market-based rate tariffs.

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On January 14, 2005, Mirant and certain of its subsidiaries, including Mirant Americas Generation and Mirant North America (the “Mirant Settling Parties”) entered into a Settlement and Release of Claims Agreement (the “California Settlement”) with PG&E, Southern California Edison Company, San Diego Gas and Electric Company, the CPUC, the DWR, the EOB and the Attorney General of the State of California (collectively, the “California Parties”). The California Settlement was approved by the FERC on April 13, 2005, and became effective on April 15, 2005, upon its approval by the Bankruptcy Court. The California Settlement resulted in the release of most of Mirant Americas Energy Marketing’s potential liability (1) in the FERC Refund Proceedings for sales made in the CAISO or the Cal PX markets, (2) in the Pacific Northwest Proceeding, and (3) in any proceedings at the FERC resulting from the complaint filed in 2002 by the California Attorney General. Based on the California Settlement, on April 15, 2008, the FERC dismissed Mirant Americas Energy Marketing and the other subsidiaries of Mirant Americas Generation and Mirant North America from the proceeding initiated by the complaint filed in 2002 by the California Attorney General.

Under the California Settlement, the California Parties and those other market participants who have opted into the settlement have released the Mirant Settling Parties, including Mirant Americas Energy Marketing, from any liability for refunds related to sales of electricity and natural gas in the western markets from January 1, 1998, through July 14, 2003. Also, the California Parties have assumed the obligation of Mirant Americas Energy Marketing to pay any refunds determined by the FERC to be owed by Mirant Americas Energy Marketing to other parties that do not opt into the settlement for transactions in the CAISO and Cal PX markets during the Refund Period, with the liability of the California Parties for such refund obligation limited to the amount of certain receivables assigned by Mirant Americas Energy Marketing to the California Parties under the California Settlement. The settlement did not relieve Mirant Americas Energy Marketing of liability for any refunds that the FERC determines it to owe (1) to participants in the Cal PX and CAISO markets that are not California Parties (or that did not elect to opt into the settlement) for periods outside the Refund Period and (2) to participants in bilateral transactions with Mirant Americas Energy Marketing that are not California Parties (or that did not elect to opt into the settlement).

Resolution of the refund proceedings that remain pending before the FERC or that currently are on appeal to the Ninth Circuit could ultimately result in the FERC concluding that the prices received by Mirant Americas Energy Marketing in some transactions occurring in 2000 and 2001 should be reduced. Mirant Americas Generation’s and Mirant North America’s view is that the bulk of any obligations of Mirant Americas Energy Marketing to make refunds as a result of sales completed prior to July 14, 2003, in the CAISO or Cal PX markets or in bilateral transactions either have been addressed by the California Settlement or have been resolved as part of Mirant Americas Energy Marketing’s bankruptcy proceedings. To the extent that Mirant Americas Energy Marketing’s potential refund liability arises from contracts that were transferred to Mirant Energy Trading as part of the transfer of the trading and marketing business under the Plan, Mirant Energy Trading may have exposure to any refund liability related to transactions under those contracts.

Mirant Americas Energy Marketing Contract Dispute with Nevada Power. On December 5, 2001, Nevada Power Company filed a complaint at the FERC seeking reformation of the purchase price of energy under a contract it had entered with Mirant Americas Energy Marketing, claiming that the prices under that contract were unjust and unreasonable because, when it entered into the contract, western power markets were dysfunctional and non-competitive. On June 25, 2003, the FERC dismissed the complaint. Nevada Power appealed that dismissal to the United States Court of Appeals for the Ninth Circuit, which on December 19, 2006, reversed the dismissal of the Nevada Power complaint and a number of other similar complaints and remanded the proceedings to the FERC. On June 26, 2008, the United States Supreme Court affirmed the remand of the Nevada Power proceeding and the other similar proceedings to the FERC, concluding that the FERC should analyze further (1) whether the contracts at issue imposed an excessive burden on consumers in the later periods covered by the contracts, not just at their outset, and (2) whether any of the sellers engaged in unlawful market manipulation, which the Court concluded would remove the premise underlying the FERC’s dismissal of the complaints that the rates agreed to in the contracts were based on fair, arm’s length negotiations. On December 18, 2008, the FERC issued an order on remand providing for the record to be supplemented through

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further written filings by the parties regarding the specific issues raised by the ruling entered by the United States Supreme Court. The sales made by Mirant Americas Energy Marketing under the contract with Nevada Power have been completed, and Mirant Americas Generation and Mirant North America expect that any refund claim related to that contract, if not now barred by the discharge in bankruptcy received by Mirant Energy Trading when the Plan became effective on January 3, 2006, will be addressed in the Chapter 11 proceedings.

Complaint Challenging Capacity Rates Under the RPM Provisions of PJM’s Tariff

On May 30, 2008, a variety of parties, including the state public utility commissions of Maryland, Pennsylvania, New Jersey, and Delaware, ratepayer advocates, certain electric cooperatives, various groups representing industrial electricity users, and federal agencies (the “RPM Buyers”), filed a complaint with the FERC asserting that capacity auctions held to determine capacity payments under PJM’s reliability pricing model (the “RPM”) tariff had produced rates that were unjust and unreasonable. PJM conducted the capacity auctions that are the subject of the complaint to set the capacity payments in effect under the RPM provisions of PJM’s tariff for twelve month periods beginning June 1, 2008, June 1, 2009, and June 1, 2010. The RPM Buyers allege that (i) the time between when the auctions were held and the periods that the resulting capacity rates would be in effect were too short to allow competition from new resources in the auctions, (ii) the administrative process established under the RPM provisions of PJM’s tariff was inadequate to restrain the exercise of market power through the withholding of capacity to increase prices, and (iii) the locational pricing established under the RPM provisions of PJM’s tariff created opportunities for sellers to raise prices while serving no legitimate function. The RPM Buyers asked the FERC to reduce significantly the capacity rates established by the capacity auctions and to set June 1, 2008, as the date beginning on which any rates found by the FERC to be excessive would be subject to refund. If the FERC were to reduce the capacity payments set through the capacity auctions to the rates proposed by the RPM Buyers, the capacity revenue the Companies have received or expect to receive for the period June 1, 2008 through May 31, 2011, would be reduced by approximately $600 million. On September 19, 2008, the FERC issued an order dismissing the complaint. The FERC found that no party had violated the RPM provisions of PJM’s tariff and that the prices determined during the auctions were in accordance with the tariff’s provisions. The RPM Buyers filed a request for rehearing, which the FERC denied on June 18, 2009. Certain of the RPM Buyers have appealed the orders entered by the FERC to the United States Court of Appeals for the Fourth Circuit.

Other Legal Matters

The Companies are involved in various other claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Companies’ results of operations, financial position or cash flows.

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J. Settlements and Other Charges (Mirant Americas Generation, Mirant North America and Mirant Mid-Atlantic)

Potomac River Settlement

In July 2008, the City of Alexandria, Virginia (in which the Potomac River generating facility is located) and Mirant Potomac River entered into an agreement containing certain terms that were included in a proposed comprehensive state operating permit for the Potomac River generating facility issued by the Virginia DEQ that month. Under that agreement, Mirant Potomac River committed to spend $34 million over several years to reduce particulate emissions. The $34 million was placed in escrow and is included in funds on deposit and other noncurrent assets in the accompanying condensed consolidated balance sheets and in the Companies’ estimated capital expenditures. On July 30, 2008, the Virginia State Air Pollution Control Board approved the comprehensive permit with terms consistent with the agreement between Mirant Potomac and the City of Alexandria, and the Virginia DEQ issued the permit on July 31, 2008.

Prior to the issuance of the comprehensive state operating permit in July 2008, the Potomac River generating facility operated under a state operating permit issued June 1, 2007, that significantly restricted the facility’s operations by imposing stringent limits on its SO2 emissions and constraining unit operations so that no more than three of the facility’s five units could operate at one time. In compliance with the comprehensive permit, in 2008 Mirant Potomac River merged the stacks for units 3, 4 and 5 into one stack at the Potomac River generating facility and, in January 2009, merged the stacks for units 1 and 2 into one stack. With the completion of the stack mergers, the permit issued in July 2008 does not constrain operations of the Potomac River generating facility below historical operations and allows operation of all five units at one time.

Mirant Potrero Settlement Agreement with City of San Francisco (Mirant Americas Generation and Mirant North America)

Mirant Potrero and the City and County of San Francisco, California have entered into a Settlement Agreement (the “Potrero Settlement”) dated August 13, 2009. The Potrero Settlement must be approved by an ordinance adopted by the City of San Francisco before it becomes effective, which approval Mirant Potrero expects to occur in the fourth quarter of 2009. The Potrero Settlement addresses certain disputes that had arisen between the City of San Francisco and Mirant Potrero related to the Potrero generating facility. Among other things, the Potrero Settlement obligates Mirant Potrero to close permanently each of the remaining units of the Potrero generating facility at the end of the year in which the CAISO determines that such unit is no longer needed to maintain the reliable operation of the transmission system. The agreement also bars Mirant Potrero from building any additional generating facilities on the site of the Potrero generating facility. Mirant Potrero expects that the completion of the TransBay Cable project, which is an underwater electric transmission cable in the San Francisco Bay that is expected to become operational by mid-2010, will decrease the need for generating resources in the City of San Francisco. As a result, Mirant Potrero expects the CAISO to determine in 2010 that unit 3 of the Potrero generating facility is no longer needed for reliability purposes and that unit 3 will close by the end of 2010. Mirant Potrero is uncertain whether the CAISO will determine that a reliability need continues to exist for the remaining units of the Potrero generating facility, units 4, 5 and 6, after the TransBay Cable goes into service.

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K. Guarantor/Non-Guarantor Condensed Consolidating Financial Information (Mirant North America)

Mirant North America’s revolving and term loan credit facilities and 7.375% senior notes are jointly and severally and fully and unconditionally guaranteed on a senior secured basis and senior unsecured basis, respectively, by certain subsidiaries of Mirant North America (all of which are wholly-owned). The accompanying condensed consolidating financial information has been prepared and presented pursuant to the Securities and Exchange Commission Regulation S-X Rule 3-10, “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or being Registered.” This information is not intended to present the financial position, results of operations and cash flows of the individual companies or groups of companies in accordance with GAAP.

The following sets forth unaudited condensed consolidating financial statements of the guarantor and non-guarantor subsidiaries:

MIRANT NORTH AMERICA

GUARANTOR/NON-GUARANTOR

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)

Three Months Ended September 30, 2009

(in millions)

	Parent			Guarantor			Non- Guarantor			Eliminations			Consolidated
Operating revenues	$	—		$	100		$	517		$	(163	)	$	454
Cost of fuel, electricity and other products		—			33			292			(163	)		162
Gross margin		—			67			225			—			292
Operating Expenses:
Operations and maintenance		—			42			108			—			150
Depreciation and amortization		—			10			25			1			36
Impairment losses		—			14			—			—			14
Gain on sales of assets, net		—			(1	)		(2	)		—			(3	)
Total operating expenses, net		—			65			131			1			197
Operating income (loss)		—			2			94			(1	)		95
Equity earnings of subsidiaries		(114	)		—			—			114			—
Other expense (income), net		20			1			—			(20	)		1
Net income (loss)	$	94		$	1		$	94		$	(95	)	$	94

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MIRANT NORTH AMERICA

GUARANTOR/NON-GUARANTOR

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)

Three Months Ended September 30, 2008

(in millions)

	Parent			Guarantor			Non- Guarantor			Eliminations			Consolidated
Operating revenues	$	4		$	278		$	2,147		$	(257	)	$	2,172
Cost of fuel, electricity and other products		(2	)		187			432			(257	)		360
Gross margin		6			91			1,715			—			1,812
Operating Expenses:
Operations and maintenance		—			50			97			—			147
Depreciation and amortization		—			8			24			1			33
Loss (gain) on sales of assets, net		3			(6	)		(7	)		—			(10	)
Total operating expenses, net		3			52			114			1			170
Operating income (loss)		3			39			1,601			(1	)		1,642
Equity earnings of subsidiaries		(1,651	)		—			—			1,651			—
Other expense (income), net		22			—			(1	)		(11	)		10
Net income (loss)	$	1,632		$	39		$	1,602		$	(1,641	)	$	1,632

MIRANT NORTH AMERICA

GUARANTOR/NON-GUARANTOR

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)

Nine Months Ended September 30, 2009

(in millions)

	Parent			Guarantor			Non- Guarantor			Eliminations			Consolidated
Operating revenues	$	(3	)	$	378		$	1,898		$	(445	)	$	1,828
Cost of fuel, electricity and other products		—			146			882			(445	)		583
Gross margin		(3	)		232			1,016			—			1,245
Operating Expenses:
Operations and maintenance		—			150			318			—			468
Depreciation and amortization		—			28			74			2			104
Impairment losses		—			14			—			—			14
Gain on sales of assets, net		(4	)		(4	)		(12	)		—			(20	)
Total operating expenses (income), net		(4	)		188			380			2			566
Operating income (loss)		1			44			636			(2	)		679
Equity earnings of subsidiaries		(727	)		—			—			727			—
Other expense (income), net		62			2			2			(53	)		13
Net income (loss)	$	666		$	42		$	634		$	(676	)	$	666

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MIRANT NORTH AMERICA

GUARANTOR/NON-GUARANTOR

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)

Nine Months Ended September 30, 2008

(in millions)

	Parent			Guarantor			Non- Guarantor			Eliminations			Consolidated
Operating revenues	$	4		$	618		$	2,065		$	(606	)	$	2,081
Cost of fuel, electricity and other products		(2	)		366			1,008			(606	)		766
Gross margin		6			252			1,057			—			1,315
Operating Expenses:
Operations and maintenance		—			187			312			—			499
Depreciation and amortization		—			33			68			1			102
Loss (gain) on sales of assets, net		7			(24	)		(9	)		—			(26	)
Total operating expenses, net		7			196			371			1			575
Operating income (loss)		(1	)		56			686			(1	)		740
Equity earnings of subsidiaries		(780	)		—			—			780			—
Other expense (income), net		66			(1	)		(3	)		(35	)		27
Net income (loss)	$	713		$	57		$	689		$	(746	)	$	713

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MIRANT NORTH AMERICA

GUARANTOR/NON-GUARANTOR

CONDENSED CONSOLIDATING BALANCE SHEETS (UNAUDITED)

At September 30, 2009

(in millions)

	Parent			Guarantor		Non- Guarantor		Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	118		$	—	$	456	$	—		$	574
Funds on deposit		124			—		58		—			182
Receivables—nonaffiliate		—			1		491		—			492
Receivables—affiliate		—			57		25		(71	)		11
Notes receivable—affiliate		21			116		—		(44	)		93
Derivative contract assets—nonaffiliate		—			—		2,001		—			2,001
Derivative contract assets—affiliate		—			62		39		(101	)		—
Inventories		—			31		224		—			255
Prepaid rent and other payments		—			16		113		—			129
Total current assets		263			283		3,407		(216	)		3,737
Property, Plant and Equipment, net		—			463		2,991		131			3,585
Noncurrent Assets:
Goodwill, net		(799	)		—		799		—			—
Intangible assets, net		—			34		140		—			174
Derivative contract assets—nonaffiliate		—			—		637		—			637
Derivative contract assets—affiliate		—			7		3		(10	)		—
Prepaid rent		—			—		287		—			287
Debt issuance costs, net		25			—		—		—			25
Investments in subsidiaries		6,329			—		—		(6,329	)		—
Other		—			14		23		—			37
Total noncurrent assets		5,555			55		1,889		(6,339	)		1,160
Total Assets	$	5,818		$	801	$	8,287	$	(6,424	)	$	8,482
LIABILITIES AND MEMBER’S EQUITY
Current Liabilities:
Current portion of long-term debt	$	36		$	—	$	4	$	—		$	40
Notes payable—affiliate		24			20		—		(44	)		—
Accounts payable and accrued liabilities		17			16		633		—			666
Payable to affiliate		—			32		75		(71	)		36
Derivative contract liabilities—nonaffiliate		—			—		1,650		—			1,650
Derivative contract liabilities—affiliate		—			39		62		(101	)		—
Other		—			8		6		—			14
Total current liabilities		77			115		2,430		(216	)		2,406
Noncurrent Liabilities:
Long-term debt, net of current portion		1,188			—		22		—			1,210
Derivative contract liabilities—nonaffiliate		—			—		266		—			266
Derivative contract liabilities—affiliate		—			2		8		(10	)		—
Other		—			32		15		—			47
Total noncurrent liabilities		1,188			34		311		(10	)		1,523
Commitments and Contingencies
Member’s Equity		4,553			652		5,546		(6,198	)		4,553
Total Liabilities and Member’s Equity	$	5,818		$	801	$	8,287	$	(6,424	)	$	8,482

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MIRANT NORTH AMERICA

GUARANTOR/NON-GUARANTOR

CONDENSED CONSOLIDATING BALANCE SHEETS

At December 31, 2008

(in millions)

	Parent			Guarantor		Non- Guarantor		Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	101		$	—	$	253	$	—		$	354
Funds on deposit		123			—		73		—			196
Receivables—nonaffiliate		—			4		738		—			742
Receivables—affiliate		—			111		76		(177	)		10
Notes receivable—affiliate		10			109		—		(26	)		93
Derivative contract assets—nonaffiliate		—			—		2,582		—			2,582
Derivative contract assets—affiliate		—			92		86		(178	)		—
Inventories		(2	)		30		210		—			238
Prepaid rent and other payments		—			13		107		—			120
Total current assets		232			359		4,125		(381	)		4,335
Property, Plant and Equipment, net		—			483		2,626		80			3,189
Noncurrent Assets:
Goodwill, net		(799	)		—		799		—			—
Intangible assets, net		—			51		144		—			195
Derivative contract assets—nonaffiliate		—			—		585		—			585
Derivative contract assets—affiliate		—			2		—		(2	)		—
Prepaid rent		—			—		258		—			258
Debt issuance costs, net		32			—		—		—			32
Investments in subsidiaries		5,700			—		—		(5,700	)		—
Other		—			19		32		—			51
Total noncurrent assets		4,933			72		1,818		(5,702	)		1,121
Total Assets	$	5,165		$	914	$	8,569	$	(6,003	)	$	8,645
LIABILITIES AND MEMBER’S EQUITY
Current Liabilities:
Current portion of long-term debt	$	42		$	—	$	3	$	—		$	45
Notes payable—affiliate		17			9		—		(26	)		—
Accounts payable and accrued liabilities		—			24		765		—			789
Payable to affiliate		—			85		126		(177	)		34
Derivative contract liabilities—nonaffiliate		—			—		2,268		—			2,268
Derivative contract liabilities—affiliate		—			86		92		(178	)		—
Other		—			13		9		—			22
Total current liabilities		59			217		3,263		(381	)		3,158
Noncurrent Liabilities:
Long-term debt, net of current portion		1,223			—		25		—			1,248
Derivative contract liabilities—nonaffiliate		—			—		244		—			244
Derivative contract liabilities—affiliate		—			—		2		(2	)		—
Other		—			30		82		—			112
Total noncurrent liabilities		1,223			30		353		(2	)		1,604
Commitments and Contingencies
Member’s Equity		3,883			667		4,953		(5,620	)		3,883
Total Liabilities and Member’s Equity	$	5,165		$	914	$	8,569	$	(6,003	)	$	8,645

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MIRANT NORTH AMERICA

GUARANTOR/NON-GUARANTOR

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED)

Nine Months Ended September 30, 2009

(in millions)

	Parent			Guarantor			Non- Guarantor			Eliminations			Consolidated
Cash Flows provided by (used in):
Operating activities	$	118		$	55		$	683		$	(118	)	$	738
Investing activities		(58	)		(79	)		(436	)		94			(479	)
Financing activities		(43	)		24			(44	)		24			(39	)
Net increase in cash and cash equivalents		17			—			203			—			220
Cash and cash equivalents, beginning of period		101			—			253			—			354
Cash and cash equivalents, end of period	$	118		$	—		$	456		$	—		$	574

MIRANT NORTH AMERICA

GUARANTOR/NON-GUARANTOR

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED)

Nine Months Ended September 30, 2008

(in millions)

	Parent			Guarantor			Non- Guarantor			Eliminations			Consolidated
Cash Flows provided by (used in):
Operating activities	$	477		$	94		$	521		$	(397	)	$	695
Investing activities		(39	)		(100	)		(422	)		109			(452	)
Financing activities		(521	)		6			(164	)		288			(391	)
Net decrease in cash and cash equivalents		(83	)		—			(65	)		—			(148	)
Cash and cash equivalents, beginning of period		224			—			473			—			697
Cash and cash equivalents, end of period	$	141		$	—		$	408		$	—		$	549

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

A. Mirant Americas Generation

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements of Mirant Americas Generation and the notes thereto, which are included elsewhere in this report.

Overview

Mirant Americas Generation, an indirect wholly-owned subsidiary of Mirant, is a competitive energy company that produces and sells electricity in the United States. Mirant Americas Generation owns or leases 10,112 MW of net electric generating capacity in the Mid-Atlantic and Northeast regions and in California. Mirant Americas Generation also operates an integrated asset management and energy marketing organization based in Atlanta, Georgia.

Contra Costa Toll Extension

On September 2, 2009, Mirant Delta entered into an extension of its existing PPA with PG&E for Contra Costa units 6 and 7 from November 2011 through April 2013. At the end of the extension, and subject to any necessary regulatory approval, Mirant Delta has agreed to retire Contra Costa units 6 and 7, which began operations in 1964, in furtherance of state and federal policies to retire aging power plants that utilize once-through cooling technology. The Mirant Delta PPA extension is subject to approval by the CPUC.

Hedging Activities

We hedge economically a substantial portion of our Mid-Atlantic coal-fired baseload generation and certain of our Mid-Atlantic and Northeast gas and oil-fired generation through OTC transactions. However, we generally do not hedge our intermediate and peaking units for tenors greater than 12 months. A significant portion of our hedges are financial swap transactions between Mirant Mid-Atlantic and financial counterparties that are senior unsecured obligations of such parties and do not require either party to post cash collateral either for initial margin or for securing exposure as a result of changes in power or natural gas prices. At October 13, 2009, our aggregate hedge levels based on expected generation for each period were as follows:

	Aggregate Hedge Levels Based on Expected Generation
	2010		2011		2012		2013		2014
Power	86	%	52	%	48	%	30	%	22	%
Fuel	78	%	61	%	32	%	9	%	—	%

Legislation has been proposed in Congress to increase the regulation of transactions involving OTC derivatives. The proposed legislation provides that standardized swap transactions between dealers and large market participants would have to be cleared and must be traded on an exchange or electronic platform. Although the proposed legislation provides exclusions from the clearing and certain other requirements for market participants, such as Mirant, utilizing OTC derivatives to hedge commercial risks, such exclusions are the focus of debate and may not ultimately be part of any final legislation. Greater regulation of OTC derivatives could materially affect our ability to hedge economically our generation by reducing liquidity in the energy and commodity markets and, if we are required to clear such transactions on exchanges, by significantly increasing the collateral costs associated with such activities.

Capital Expenditures and Capital Resources

For the nine months ended September 30, 2009, we paid $465 million for capital expenditures, excluding capitalized interest, of which $336 million related to compliance with the Maryland Healthy Air Act. As of September 30, 2009, we have paid approximately $1.333 billion for capital expenditures related to compliance with the Maryland Healthy Air Act. Including amounts already spent to date, we expect to incur total capital expenditures of $1.674 billion to comply with the limitations on SO2, NOx and mercury emissions imposed by the Maryland Healthy Air Act.

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The following table details the expected timing of payments for our estimated capital expenditures, excluding capitalized interest, for the remainder of 2009 and for 2010 (in millions):

	2009		2010
Maryland Healthy Air Act	$	136	$	205
Other environmental		12		20
Maintenance		58		116
Construction		2		29
Other		7		7
Total		$215		$377

The 2010 estimated capital expenditures for compliance with the Maryland Healthy Air Act include amounts that are withheld from progress payments under construction contracts and that will be paid after final completion of the project. As of September 30, 2009, we have a contract retention liability related to our compliance with the Maryland Healthy Air Act of $105 million, which is included in current accounts payable and accrued liabilities in our unaudited condensed consolidated balance sheet.

We expect that available cash, proceeds from redemption of preferred shares in Mirant Americas and future cash flows from operations will be sufficient to fund these capital expenditures.

Scrubber Operating Expenses

Our capital expenditures related to compliance with the Maryland Healthy Air Act include the installation of flue gas desulfurization emissions controls (“scrubbers”) at our Chalk Point, Dickerson and Morgantown coal-fired units. We expect to recognize additional variable costs associated with operating the scrubbers. Examples of these costs include limestone, water and chemicals used during the removal of SO2 emissions and also include handling and marketing related to the recyclable gypsum byproduct created during the scrubbing process. In addition, we expect to recognize higher depreciation expense because the scrubbers will be placed in service and we will begin depreciating the capitalized costs associated with them over the shorter of their expected life or the remaining lease term for the leased Dickerson and Morgantown generating units.

Commodity Prices

The prices for delivered natural gas in the third quarter of 2009 reached their lowest level in more than seven years. The energy gross margin from our baseload coal units was negatively affected by this price decline in two ways. First, the price of natural gas contributed to a decrease in power prices. However, we are generally economically neutral for that portion of the generation volumes that we have hedged because our realized gross margin will reflect the contractual prices of our power and fuel contracts. Second, the decrease in natural gas prices at times made it uneconomic for certain of our baseload coal-fired units to generate.

Granted Emissions Allowances

As a result of the capital expenditures we are incurring to comply with the requirements of the Maryland Healthy Air Act, we anticipate that we will have excess SO2 and NOx emissions allowances in future periods. We plan to continue to maintain some SO2 and NOx emissions allowances above those needed for our current expected generation in case our actual generation exceeds our current forecasts for future periods and for possible future additions of generating capacity. At September 30, 2009, the estimated fair value of our anticipated excess SO2 and NOx emissions allowances was approximately $58 million.

Results of Operations

The following discussion of our performance is organized by reportable segment, which is consistent with the way we manage our business.

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In the tables below, the Mid-Atlantic region includes our Chalk Point, Dickerson, Morgantown and Potomac River facilities. The Northeast region includes our Bowline, Canal, Kendall and Martha’s Vineyard facilities. For the nine months ended September 30, 2008, the Northeast region also included the Lovett generating facility, which was shut down on April 19, 2008. The California region includes our Contra Costa, Pittsburg and Potrero facilities. Other Operations includes proprietary trading and fuel oil management activities. Other Operations also includes interest expense on debt at Mirant Americas Generation and Mirant North America and interest income on our invested cash balances.

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Three Months Ended September 30, 2009 versus Three Months Ended September 30, 2008

Consolidated Financial Performance

We reported net income of $63 million and $1.597 billion for the three months ended September 30, 2009 and 2008, respectively. The change in net income is detailed as follows (in millions):

	Three Months Ended September 30,						Increase/ (Decrease)
	2009			2008
Realized gross margin	$	466		$	417		$	49
Unrealized gross margin		(174	)		1,395			(1,569	)
Total gross margin		292			1,812			(1,520	)
Operating Expenses:
Operations and maintenance—nonaffiliate		77			80			(3	)
Operations and maintenance—affiliate		73			67			6
Depreciation and amortization		36			33			3
Impairment losses		14			—			14
Gain on sales of assets, net		(3	)		(10	)		7
Total operating expenses, net		197			170			27
Operating income		95			1,642			(1,547	)
Total other expense, net		32			45			(13	)
Net income	$	63		$	1,597		$	(1,534	)

The following discussion includes non-GAAP financial measures because we present our consolidated financial performance in terms of gross margin. Gross margin is our operating revenue less cost of fuel, electricity and other products, and excludes depreciation and amortization. We present gross margin, excluding depreciation and amortization, and realized gross margin separately from unrealized gross margin in order to be consistent with how we manage our business. Realized gross margin and unrealized gross margin are both non-GAAP financial measures. Realized gross margin represents our gross margin less unrealized gains and losses on derivative financial instruments for the periods presented. Conversely, unrealized gross margin is our unrealized gains and losses on derivative financial instruments for the periods presented. Management generally evaluates our operating results excluding the impact of unrealized gains and losses. None of our derivative financial instruments recorded at fair value are designated as hedges and changes in their fair values are therefore recognized currently in income as unrealized gains or losses. As a result, our financial results are, at times, volatile and subject to fluctuations in value primarily because of changes in forward electricity and fuel prices. Adjusting our gross margin to exclude unrealized gains and losses provides a measure of performance that eliminates the volatility created by significant shifts in market values between periods. However, our realized and unrealized gross margin may not be comparable to similarly titled non-GAAP financial measures used by other companies. We encourage our investors to review our unaudited condensed consolidated financial statements and other publicly filed reports in their entirety and not to rely on a single financial measure.

For the three months ended September 30, 2009, our realized gross margin increase of $49 million was principally a result of the following:

• an increase of $175 million in realized value of hedges. In 2009, realized value of hedges was $247 million, which reflects the amount by which the settlement value of power contracts exceeded market prices for power, partially offset by the amount by which contract prices for fuel exceeded market prices for fuel. In 2008, realized value of hedges was $72 million, which reflects the amount by which market prices for fuel exceeded contract prices for fuel, offset in part by the amount by which market prices for power exceeded the settlement value of power contracts; partially offset by

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• a decrease of $123 million in energy, primarily as a result of a decrease in power prices, an increase in the cost of emissions allowances, including $12 million to comply with the RGGI during the three months ended September 30, 2009, and lower generation volumes. The lower generation volumes were a result of lower demand and decreases in natural gas prices which at times made it uneconomic for certain of our coal-fired units to generate. The decreases in energy gross margin were partially offset by a decrease in the price of fuel; and

• a decrease of $3 million in contracted and capacity primarily related to a decrease in revenues from ancillary services as a result of a decrease in generation volumes and a decrease in power prices.

Our unrealized gross margin for both periods reflects the following:

• unrealized losses of $174 million in 2009, which included unrealized losses of $233 million from power and fuel contracts that settled during the period for which net unrealized gains had been recorded in prior periods, partially offset by a $59 million net increase in the value of hedges and trading contracts for future periods primarily related to decreases in forward power and natural gas prices; and

• unrealized gains of $1.395 billion in 2008, which included a $1.126 billion net increase in the value of hedge contracts for future periods primarily related to decreases in forward power and natural gas prices and unrealized gains of $269 million from power and fuel contracts that settled during the period for which net unrealized losses had been recorded in prior periods.

Our operating expense increase of $27 million was primarily a result of a $14 million impairment loss on intangible assets related to our Potrero and Contra Costa generating facilities and a decrease of $7 million in gain on sales of assets. See Note C to our unaudited condensed consolidated financial statements contained elsewhere in this report for additional information related to our impairments.

Other expense, net decreased $13 million for the three months ended September 30, 2009, and reflects lower interest expense as a result of lower outstanding debt and higher interest capitalized on projects under construction, partially offset by lower interest income as a result of lower interest rates on invested cash in 2009 compared to the same period in 2008.

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Gross Margin Overview

The following tables detail realized and unrealized gross margin for the three months ended September 30, 2009 and 2008, by operating segments (in millions):

	Three Months Ended September 30, 2009
	Mid- Atlantic			Northeast			California		Other Operations			Eliminations		Total
Energy	$	33		$	3		$	—	$	36		$	—	$	72
Contracted and capacity		90			24			33		—			—		147
Realized value of hedges		214			33			—		—			—		247
Total realized gross margin		337			60			33		36			—		466
Unrealized gross margin		(124	)		(26	)		—		(24	)		—		(174	)
Total gross margin	$	213		$	34		$	33	$	12		$	—	$	292
	Three Months Ended September 30, 2008
	Mid- Atlantic			Northeast			California		Other Operations			Eliminations		Total
Energy	$	148		$	23		$	1	$	17		$	6	$	195
Contracted and capacity		93			23			34		—			—		150
Realized value of hedges		70			2			—		—			—		72
Total realized gross margin		311			48			35		17			6		417
Unrealized gross margin		1,318			7			—		70			—		1,395
Total gross margin	$	1,629		$	55		$	35	$	87		$	6	$	1,812

Energy represents gross margin from the generation of electricity, fuel sales and purchases at market prices, fuel handling, steam sales and our proprietary trading and fuel oil management activities.

Contracted and capacity represents gross margin received from capacity sold in ISO and RTO administered capacity markets, through RMR contracts, through tolling agreements and from ancillary services.

Realized value of hedges represents the actual margin upon the settlement of our power and fuel hedging contracts and the difference between market prices and contract costs for coal that we purchased under long-term agreements. Power hedging contracts include sales of both power and natural gas used to hedge power prices as well as hedges to capture the incremental value related to the geographic location of our physical assets.

Unrealized gross margin represents the net unrealized gain or loss on our derivative contracts, including the reversal of unrealized gains and losses recognized in prior periods and changes in value for future periods.

Operating Statistics

The following table summarizes Net Capacity Factor by region for the three months ended September 30, 2009 and 2008:

	Three Months Ended September 30,				Increase/ (Decrease)
	2009		2008
Mid-Atlantic	32	%	37	%	(5	)%
Northeast	9	%	15	%	(6	)%
California	9	%	7	%	2	%
Total	21	%	25	%	(4	)%

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The following table summarizes power generation volumes by region for the three months ended September 30, 2009 and 2008 (in gigawatt hours):

	Three Months Ended September 30,		Increase/ (Decrease)		Increase/ (Decrease)
	2009	2008
Mid-Atlantic:
Baseload	3,401	4,046	(645	)	(16	)%
Intermediate	194	168	26		15	%
Peaking	28	46	(18	)	(39	)%
Total Mid-Atlantic	3,623	4,260	(637	)	(15	)%
Northeast:
Baseload	378	198	180		91	%
Intermediate	111	650	(539	)	(83	)%
Peaking	2	3	(1	)	(33	)%
Total Northeast	491	851	(360	)	(42	)%
California:
Intermediate	457	345	112		32	%
Peaking	1	1	—		—	%
Total California	458	346	112		32	%
Total	4,572	5,457	(885	)	(16	)%

The total decrease in power generation volumes for the three months ended September 30, 2009, as compared to the three months ended September 30, 2008, is primarily the result of the following:

Mid-Atlantic. A decrease in our Mid-Atlantic baseload generation as a result of a decrease in demand in 2009 compared to 2008, planned outages in 2009 and the decrease in natural gas prices which at times made it uneconomic for certain of our coal-fired units to generate.

Northeast. A decrease in our Northeast intermediate generation as a result of transmission upgrades in 2009 which reduced the demand for certain of our intermediate units, partially offset by an increase in our Northeast baseload generation as a result of an increase in market spark spreads.

California. All of our California facilities operate under tolling agreements or are subject to RMR arrangements. Our natural gas-fired units in service at Contra Costa and Pittsburg operate under tolling agreements with PG&E for 100% of the capacity from these units and our Potrero units are subject to RMR arrangements. Therefore, changes in power generation volumes from those facilities, which can be caused by weather, planned outages or other factors, generally do not affect our gross margin.

Mid-Atlantic

Our Mid-Atlantic segment, which accounts for approximately 50% of our net generating capacity, includes four generating facilities with total net generating capacity of 5,230 MW.

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The following table summarizes the results of operations of our Mid-Atlantic segment (in millions):

	Three Months Ended September 30,						Increase/ (Decrease)
	2009			2008
Gross Margin:
Energy	$	33		$	148		$	(115	)
Contracted and capacity		90			93			(3	)
Realized value of hedges		214			70			144
Total realized gross margin		337			311			26
Unrealized gross margin		(124	)		1,318			(1,442	)
Total gross margin		213			1,629			(1,416	)
Operating Expenses:
Operations and maintenance		104			96			8
Depreciation and amortization		25			23			2
Gain on sales of assets, net		(2	)		(7	)		5
Total operating expenses, net		127			112			15
Operating income		86			1,517			(1,431	)
Total other expense, net		—			1			(1	)
Net income	$	86		$	1,516		$	(1,430	)

Gross Margin

The increase of $26 million in realized gross margin was principally a result of the following:

• an increase of $144 million in realized value of hedges. In 2009, realized value of hedges was $214 million, which reflects the amount by which the settlement value of power contracts exceeded market prices for power, partially offset by the amount by which contract prices for coal that we purchased under long-term agreements exceeded market prices for coal. In 2008, realized value of hedges was $70 million, which reflects the amount by which market prices for coal exceeded contract prices for coal that we purchased under long-term agreements, offset in part by the amount by which market prices for power exceeded the settlement value of power contracts; partially offset by

• a decrease of $115 million in energy, primarily as a result of a decrease in power prices and an increase in the cost of emissions allowances, including $11 million to comply with the RGGI during the three months ended September 30, 2009, and lower generation volumes. The lower generation volumes were a result of lower demand and decreases in natural gas prices which at times made it uneconomic for certain of our coal-fired units to generate. The decreases in energy gross margin were partially offset by a decrease in the price of coal; and

• a decrease of $3 million in contracted and capacity primarily related to a decrease in revenues from ancillary services as a result of a decrease in generation volumes and a decrease in power prices.

Our unrealized gross margin for both periods reflects the following:

• unrealized losses of $124 million in 2009, which included unrealized losses of $188 million from power and fuel contracts that settled during the period for which net unrealized gains had been recorded in prior periods, partially offset by a $64 million net increase in the value of hedge contracts for future periods primarily related to decreases in forward power and natural gas prices; and

• unrealized gains of $1.318 billion in 2008, which included an $1.077 billion net increase in the value of hedge contracts for future periods primarily related to decreases in forward power and natural gas prices and unrealized gains of $241 million from power and fuel contracts that settled during the period for which net unrealized losses had been recorded in prior periods.

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Operating Expenses

The increase of $15 million in operating expenses was principally the result of the following:

• an increase of $8 million in operations and maintenance expense primarily as a result of maintenance at our Morgantown facility in 2009 performed in conjunction with planned outages for the installation of pollution control equipment, increased labor costs related to the operation of our pollution control equipment and an increase in Maryland property taxes;

• an increase of $2 million in depreciation and amortization expense related to assets that were placed in service; and

• a decrease of $5 million in gain on sales of assets related to emissions allowances sold to third parties.

Northeast

Our Northeast segment is comprised of our three generating facilities located in Massachusetts and one generating facility located in New York with total net generating capacity of 2,535 MW.

The following table summarizes the results of operations of our Northeast segment (in millions):

	Three Months Ended September 30,						Increase/ (Decrease)
	2009			2008
Gross Margin:
Energy	$	3		$	23		$	(20	)
Contracted and capacity		24			23			1
Realized value of hedges		33			2			31
Total realized gross margin		60			48			12
Unrealized gross margin		(26	)		7			(33	)
Total gross margin		34			55			(21	)
Operating Expenses:
Operations and maintenance		26			33			(7	)
Depreciation and amortization		4			5			(1	)
Gain on sales of assets, net		(1	)		(5	)		4
Total operating expenses, net		29			33			(4	)
Operating income		5			22			(17	)
Total other income, net		—			(1	)		1
Net income	$	5		$	23		$	(18	)

Gross Margin

The increase of $12 million in realized gross margin was principally a result of the following:

• an increase of $31 million in realized value of hedges. In 2009, realized value of hedges was $33 million, which reflects the amount by which the settlement value of power contracts exceeded market prices for power, partially offset by the amount by which contract prices for fuel exceeded market prices for fuel. In 2008, realized value of hedges was $2 million, which reflects the amount by which the settlement value of power contracts exceeded market prices for power, partially offset by the amount by which contract prices for fuel exceeded market prices for fuel; and

• an increase of $1 million in contracted and capacity primarily related to higher capacity prices in 2009; partially offset by

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• a decrease of $20 million in energy, primarily as a result of a decrease in power prices and a 42% decrease in generation volumes because of transmission upgrades in 2009, partially offset by lower fuel costs.

Our unrealized gross margin for both periods reflects the following:

• unrealized losses of $26 million in 2009, which included unrealized losses of $32 million from power and fuel contracts that settled during the period for which net unrealized gains had been recorded in prior periods, partially offset by a $6 million net increase in the value of hedge contracts for future periods primarily related to decreases in forward power and fuel prices; and

• unrealized gains of $7 million in 2008, which included unrealized gains of $5 million from power and fuel contracts that settled during the period for which net unrealized losses had been recorded in prior periods and a $2 million net increase in the value of hedge contracts for future periods.

Operating Expenses

The decrease of $4 million in operating expenses included a decrease of $7 million in operations and maintenance expense primarily related to a decrease in property taxes related to the Lovett site and lower maintenance expense as a result of planned outages at the Canal generating facility in 2008, partially offset by a decrease of $4 million in gain on sales of assets related to emissions allowances sold to third parties.

California

Our California segment consists of the Contra Costa, Pittsburg and Potrero facilities with total net generating capacity of 2,347 MW.

The following table summarizes the results of operations of our California segment (in millions):

	Three Months Ended September 30,						Increase/ (Decrease)
	2009			2008
Gross Margin:
Energy	$	—		$	1		$	(1	)
Contracted and capacity		33			34			(1	)
Total realized gross margin		33			35			(2	)
Unrealized gross margin		—			—			—
Total gross margin		33			35			(2	)
Operating Expenses:
Operations and maintenance		17			17			—
Depreciation and amortization		5			5			—
Impairment losses		14			—			14
Gain on sales of assets, net		—			(2	)		2
Total operating expenses, net		36			20			16
Operating income (loss)		(3	)		15			(18	)
Total other expense, net		1			—			1
Net income (loss)	$	(4	)	$	15		$	(19	)

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Operating Expenses

The increase of $16 million in operating expenses was primarily a result of a $14 million impairment loss on intangible assets related to our Potrero and Contra Costa generating facilities during 2009 and a decrease of $2 million in gain on sales of assets related to emissions allowances sold to third parties in 2008. See Note C to our unaudited condensed consolidated financial statements contained elsewhere in this report for additional information related to our impairment reviews.

Other Operations

Other Operations includes proprietary trading and fuel oil management activities, interest expense on debt at Mirant Americas Generation and Mirant North America and interest income on our invested cash balances.

The following table summarizes the results of operations of our Other Operations segment (in millions):

	Three Months Ended September 30,					Increase/ (Decrease)
	2009			2008
Gross Margin:
Energy	$	36		$	17	$	19
Total realized gross margin		36			17		19
Unrealized gross margin		(24	)		70		(94	)
Total gross margin		12			87		(75	)
Operating Expenses:
Operations and maintenance		3			1		2
Depreciation and amortization		2			—		2
Total operating expenses, net		5			1		4
Operating income		7			86		(79	)
Total other expense, net		31			45		(14	)
Net income (loss)	$	(24	)	$	41	$	(65	)

Gross Margin

The increase of $19 million in realized gross margin was a result of a $27 million increase in gross margin from proprietary trading activities, partially offset by an $8 million decrease in gross margin from our fuel oil management activities. The increase in gross margin from proprietary trading activities was a result of higher realized value associated with power positions in 2009 as compared to 2008.

Our unrealized gross margin for both periods reflects the following:

• unrealized losses of $24 million in 2009, which included unrealized losses of $13 million from power and fuel contracts that settled during the period for which net unrealized gains had been recorded in prior periods and a $11 million net decrease in the value of contracts for future periods; and

• unrealized gains of $70 million in 2008, which included a $47 million net increase in the value of contracts for future periods and unrealized gains of $23 million from power and fuel contracts that settled during the period for which net unrealized losses had been recorded in prior periods.

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Other Expense, Net

The decrease of $14 million in other expense, net was principally the result of the following:

• a decrease of $12 million in interest expense primarily as a result of lower outstanding debt and higher interest capitalized on projects under construction; and

• a decrease of $3 million in other expenses, net, primarily related to the loss on the 2008 purchase of Mirant Americas Generation senior notes due in 2011; partially offset by

• a decrease of $1 million in interest income primarily related to lower interest rates on invested cash.

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Nine Months Ended September 30, 2009 versus Nine Months Ended September 30, 2008

Consolidated Financial Performance

We reported net income of $575 million and $600 million for the nine months ended September 30, 2009 and 2008, respectively. The change in net income is detailed as follows (in millions):

	Nine Months Ended September 30,						Increase/ (Decrease)
	2009			2008
Realized gross margin	$	1,179		$	1,097		$	82
Unrealized gross margin		66			218			(152	)
Total gross margin		1,245			1,315			(70	)
Operating Expenses:
Operations and maintenance—nonaffiliate		258			286			(28	)
Operations and maintenance—affiliate		210			213			(3	)
Depreciation and amortization		104			102			2
Impairment losses		14			—			14
Gain on sales of assets, net		(20	)		(26	)		6
Total operating expenses, net		566			575			(9	)
Operating income		679			740			(61	)
Total other expense, net		104			140			(36	)
Net income	$	575		$	600		$	(25	)

For the nine months ended September 30, 2009, our realized gross margin increase of $82 million was principally a result of the following:

• an increase of $418 million in realized value of hedges. In 2009, realized value of hedges was $507 million, which reflects the amount by which the settlement value of power contracts exceeded market prices for power, partially offset by the amount by which contract prices for fuel exceeded market prices for fuel. In 2008, realized value of hedges was $89 million, which reflects the amount by which market prices for fuel exceeded contract prices for fuel, partially offset by the amount by which market prices for power exceeded the settlement value of power contracts; and

• an increase of $6 million in contracted and capacity primarily related to higher capacity prices in 2009; partially offset by

• a decrease of $342 million in energy, primarily as a result of a decrease in power prices and an increase in the cost of emissions allowances, including $39 million to comply with the RGGI in 2009, and lower generation volumes. The lower generation volumes were a result of lower demand and decreases in natural gas prices which at times made it uneconomic for certain of our coal-fired units to generate. The decreases in energy gross margin were partially offset by a decrease in the price of fuel.

Our unrealized gross margin for both periods reflects the following:

• unrealized gains of $66 million in 2009, which included a $552 million net increase in the value of hedge and trading contracts for future periods primarily related to decreases in forward power and natural gas prices, partially offset by unrealized losses of $486 million from power and fuel contracts that settled during the period for which net unrealized gains had been recorded in prior periods; and

• unrealized gains of $218 million in 2008, which included unrealized gains of $333 million from power and fuel contracts that settled during the period for which net unrealized losses had been recorded in prior periods, partially offset by a $115 million net decrease in the value of hedge contracts for future periods primarily related to increases in forward power and natural gas prices.

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Our operating expense decrease of $9 million was primarily a result of a decrease of $31 million in operations and maintenance expense, partially offset by $14 million of impairment losses in 2009 and a decrease of $6 million in gain on sales of assets, net. The decrease in operations and maintenance expense was primarily a result of the shutdown of the Lovett generating facility in April 2008 and a decrease in maintenance costs associated with planned outages at our Mid-Atlantic generating facilities during 2009 compared to 2008. See Note C to our unaudited condensed consolidated financial statements contained elsewhere in this report for additional information related to our impairments.

Other expense, net decreased $36 million for the nine months ended September 30, 2009, and reflects lower interest expense as a result of lower outstanding debt and higher interest capitalized on projects under construction, partially offset by lower interest income as a result of lower interest rates on invested cash and lower average cash balances in 2009 compared to the same period in 2008.

Gross Margin Overview

The following tables detail realized and unrealized gross margin for the nine months ended September 30, 2009 and 2008, by operating segments (in millions):

	Nine Months Ended September 30, 2009
	Mid- Atlantic		Northeast			California		Other Operations			Eliminations			Total
Energy	$	124	$	21		$	—	$	112		$	(3	)	$	254
Contracted and capacity		261		68			89		—			—			418
Realized value of hedges		473		34			—		—			—			507
Total realized gross margin		858		123			89		112			(3	)		1,179
Unrealized gross margin		119		20			—		(73	)		—			66
Total gross margin	$	977	$	143		$	89	$	39		$	(3	)	$	1,245
	Nine Months Ended September 30, 2008
	Mid- Atlantic		Northeast			California		Other Operations			Eliminations			Total
Energy	$	474	$	65		$	3	$	48		$	6		$	596
Contracted and capacity		252		68			92		—			—			412
Realized value of hedges		62		27			—		—			—			89
Total realized gross margin		788		160			95		48			6			1,097
Unrealized gross margin		200		(3	)		—		21			—			218
Total gross margin	$	988	$	157		$	95	$	69		$	6		$	1,315

Energy represents gross margin from the generation of electricity, fuel sales and purchases at market prices, fuel handling, steam sales and our proprietary trading and fuel oil management activities.

Contracted and capacity represents gross margin received from capacity sold in ISO and RTO administered capacity markets, through RMR contracts, through tolling agreements and from ancillary services.

Realized value of hedges represents the actual margin upon the settlement of our power and fuel hedging contracts and the difference between market prices and contract costs for coal that we purchased under long-term agreements. Power hedging contracts include sales of both power and natural gas used to hedge power prices as well as hedges to capture the incremental value related to the geographic location of our physical assets.

Unrealized gross margin represents the net unrealized gain or loss on our derivative contracts, including the reversal of unrealized gains and losses recognized in prior periods and changes in value for future periods.

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Operating Statistics

The following table summarizes Net Capacity Factor by region for the nine months ended September 30, 2009 and 2008:

	Nine Months Ended September 30,				Increase/ (Decrease)
	2009		2008
Mid-Atlantic	32	%	33	%	(1	)%
Northeast	11	%	14	%	(3	)%
California	6	%	4	%	2	%
Total	20	%	22	%	(2	)%

The following table summarizes power generation volumes by region for the nine months ended September 30, 2009 and 2008 (in gigawatt hours):

	Nine Months Ended September 30,		Increase/ (Decrease)		Increase/ (Decrease)
	2009	2008
Mid-Atlantic:
Baseload	10,568	11,020	(452	)	(4	)%
Intermediate	333	352	(19	)	(5	)%
Peaking	64	134	(70	)	(52	)%
Total Mid-Atlantic	10,965	11,506	(541	)	(5	)%
Northeast:
Baseload	1,076	773	303		39	%
Intermediate	683	1,565	(882	)	(56	)%
Peaking	2	4	(2	)	(50	)%
Total Northeast	1,761	2,342	(581	)	(25	)%
California:
Intermediate	846	634	212		33	%
Peaking	2	21	(19	)	(90	)%
Total California	848	655	193		29	%
Total	13,574	14,503	(929	)	(6	)%

The total decrease in power generation volumes for the nine months ended September 30, 2009, as compared to the nine months ended September 30, 2008, is primarily the result of the following:

Mid-Atlantic. A decrease in our Mid-Atlantic baseload generation as a result of a decrease in demand in 2009 compared to 2008 and a decrease in natural gas prices which at times made it uneconomic for certain of our coal-fired units to generate.

Northeast. A decrease in our Northeast intermediate generation as a result of transmission upgrades in 2009 which reduced the demand for certain of our intermediate units, partially offset by an increase in our Northeast baseload generation as a result of an increase in market spark spreads.

California. All of our California facilities operate under tolling agreements or are subject to RMR arrangements. Our natural gas-fired units in service at Contra Costa and Pittsburg operate under tolling agreements with PG&E for 100% of the capacity from these units and our Potrero units are subject to RMR arrangements. Therefore, changes in power generation volumes from those facilities, which can be caused by weather, planned outages or other factors, generally do not affect our gross margin.

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Mid-Atlantic

Our Mid-Atlantic segment, which accounts for approximately 50% of our net generating capacity, includes four generating facilities with total net generating capacity of 5,230 MW.

The following table summarizes the results of operations of our Mid-Atlantic segment (in millions):

	Nine Months Ended September 30,						Increase/ (Decrease)
	2009			2008
Gross Margin:
Energy	$	124		$	474		$	(350	)
Contracted and capacity		261			252			9
Realized value of hedges		473			62			411
Total realized gross margin		858			788			70
Unrealized gross margin		119			200			(81	)
Total gross margin		977			988			(11	)
Operating Expenses:
Operations and maintenance		310			306			4
Depreciation and amortization		73			67			6
Gain on sales of assets, net		(12	)		(9	)		(3	)
Total operating expenses, net		371			364			7
Operating income		606			624			(18	)
Total other expense, net		2			1			1
Net income	$	604		$	623		$	(19	)

Gross Margin

The increase of $70 million in realized gross margin was principally a result of the following:

• an increase of $411 million in realized value of hedges. In 2009, realized value of hedges was $473 million, which reflects the amount by which the settlement value of power contracts exceeded market prices for power, partially offset by the amount by which contract prices for coal that we purchased under long-term agreements exceeded market prices for coal. In 2008, realized value of hedges was $62 million, which reflects the amount by which market prices for coal exceeded contract prices for coal that we purchased under long-term agreements, partially offset by the amount by which market prices for power exceeded the settlement value of power contracts; and

• an increase of $9 million in contracted and capacity primarily related to higher capacity prices in 2009; partially offset by

• a decrease of $350 million in energy, primarily as a result of a decrease in power prices and an increase in the cost of emissions allowances, including $35 million to comply with the RGGI in 2009, and lower generation volumes. The lower generation volumes were a result of lower demand and decreases in natural gas prices which at times made it uneconomic for certain of our coal-fired units to generate. These decreases were partially offset by a decrease in the price of coal.

Our unrealized gross margin for both periods reflects the following:

• unrealized gains of $119 million in 2009, which included a $498 million net increase in the value of hedge contracts for future periods primarily related to decreases in forward power and natural gas prices, partially offset by unrealized losses of $379 million from power and fuel contracts that settled during the period for which net unrealized gains had been recorded in prior periods; and

• unrealized gains of $200 million in 2008, which included unrealized gains of $307 million from power and fuel contracts that settled during the period for which net unrealized losses had been recorded in prior periods, partially offset by a $107 million net decrease in the value of hedge contracts for future periods primarily related to increases in forward power and natural gas prices.

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Operating Expenses

The increase of $7 million in operating expenses was primarily a result of the following:

• an increase of $6 million in depreciation and amortization expense related to pollution control equipment for NOx emissions that were placed in service in 2008 as part of our compliance with the Maryland Healthy Air Act; and

• an increase of $4 million in operations and maintenance expense primarily as a result of an increase in labor costs related to the operation of our pollution control equipment and an increase in Maryland property taxes, offset in part by a decrease in maintenance costs associated with a decrease in planned outages; partially offset by

• an increase of $3 million in gain on sales of assets related to emissions allowances sold to third parties.

Northeast

Our Northeast segment is comprised of our three generating facilities located in Massachusetts and one generating facility located in New York with total net generating capacity of 2,535 MW.

The following table summarizes the results of operations of our Northeast segment (in millions):

	Nine Months Ended September 30,						Increase/ (Decrease)
	2009			2008
Gross Margin:
Energy	$	21		$	65		$	(44	)
Contracted and capacity		68			68			—
Realized value of hedges		34			27			7
Total realized gross margin		123			160			(37	)
Unrealized gross margin		20			(3	)		23
Total gross margin		143			157			(14	)
Operating Expenses:
Operations and maintenance		93			130			(37	)
Depreciation and amortization		13			15			(2	)
Gain on sales of assets, net		(3	)		(21	)		18
Total operating expenses, net		103			124			(21	)
Operating income		40			33			7
Total other income, net		—			(1	)		1
Net income	$	40		$	34		$	6

Gross Margin

The decrease of $37 million in realized gross margin was principally a result of the following:

• a decrease of $44 million in energy, primarily as a result of a decrease in power prices, an increase in the cost of emissions allowances, including $4 million to comply with the RGGI in 2009, the shutdown of the Lovett generating facility in 2008 and a 25% decrease in generation volumes because of transmission upgrades, offset in part by lower fuel costs; partially offset by

• an increase of $7 million in realized value of hedges. In 2009, realized value of hedges was $34 million, which reflects the amount by which the settlement value of power contracts exceeded market prices for power, partially offset by the amount by which contract prices for fuel exceeded market prices for fuel. In 2008, realized value of hedges was $27 million, which reflects the amount by which market prices for fuel exceeded contract prices for fuel and the amount by which the settlement value of power contracts exceeded market prices for power.

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Our unrealized gross margin for both periods reflects the following:

• unrealized gains of $20 million in 2009, which included a $60 million net increase in the value of hedge contracts for future periods primarily related to decreases in forward power and fuel prices, partially offset by unrealized losses of $40 million from power and fuel contracts that settled during the period for which net unrealized gains had been recorded in prior periods; and

• unrealized losses of $3 million in 2008, which included a $4 million net decrease from power and fuel contracts that settled during the period for which net unrealized gains had been recorded in prior periods, partially offset by a $1 million net increase in the value of hedge contracts for future periods.

Operating Expenses

The decrease of $21 million in operating expenses included a decrease of $37 million in operations and maintenance expense primarily related to the shutdown of the Lovett generating facility in April 2008 and lower maintenance expense as a result of planned outages at the Canal generating facility in 2008, partially offset by a decrease of $18 million in gain on sales of assets related to emissions allowances sold to third parties.

California

Our California segment consists of the Contra Costa, Pittsburg and Potrero facilities with total net generating capacity of 2,347 MW.

The following table summarizes the results of operations of our California segment (in millions):

	Nine Months Ended September 30,						Increase/ (Decrease)
	2009			2008
Gross Margin:
Energy	$	—		$	3		$	(3	)
Contracted and capacity		89			92			(3	)
Total realized gross margin		89			95			(6	)
Unrealized gross margin		—			—			—
Total gross margin		89			95			(6	)
Operating Expenses:
Operations and maintenance		57			57			—
Depreciation and amortization		15			19			(4	)
Impairment losses		14			—			14
Gain on sales of assets, net		(1	)		(3	)		2
Total operating expenses, net		85			73			12
Operating income		4			22			(18	)
Total other expense, net		2			—			2
Net income	$	2		$	22		$	(20	)

Operating Expenses

The increase of $12 million in operating expenses was primarily a result of a $14 million impairment loss on intangible assets related to our Potrero and Contra Costa generating facilities during 2009. See Note C to our unaudited condensed consolidated financial statements contained elsewhere in this report for additional information related to our impairment reviews.

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Other Operations

Other Operations includes proprietary trading and fuel oil management activities, interest expense on debt at Mirant Americas Generation and Mirant North America and interest income on our invested cash balances.

The following table summarizes the results of operations of our Other Operations segment (in millions):

	Nine Months Ended September 30,						Increase/ (Decrease)
	2009			2008
Gross Margin:
Energy	$	112		$	48		$	64
Total realized gross margin		112			48			64
Unrealized gross margin		(73	)		21			(94	)
Total gross margin		39			69			(30	)
Operating Expenses:
Operations and maintenance		8			6			2
Depreciation and amortization		3			1			2
Total operating expenses, net		11			7			4
Operating income		28			62			(34	)
Total other expense, net		100			140			(40	)
Net loss	$	(72	)	$	(78	)	$	6

Gross Margin

The increase of $64 million in realized gross margin was a result of a $61 million increase in gross margin from proprietary trading activities and a $3 million increase in gross margin from our fuel oil management activities. The increase in gross margin from proprietary trading activities was a result of higher realized value associated with power positions in 2009 as compared to 2008.

Our unrealized gross margin for both periods reflects the following:

• unrealized losses of $73 million in 2009, which included unrealized losses of $67 million from power and fuel contracts that settled during the period for which net unrealized gains had been recorded in prior periods and a $6 million net decrease in the value of contracts for future periods; and

• unrealized gains of $21 million in 2008, which included unrealized gains of $30 million from power and fuel contracts that settled during the period for which net unrealized losses had been recorded in prior periods, partially offset by a $9 million net decrease in the value of contracts for future periods.

Other Expense, Net

The decrease of $40 million in other expense, net was principally the result of the following:

• a decrease of $42 million in interest expense primarily as a result of lower outstanding debt and higher interest capitalized on projects under construction; and

• a loss of $8 million in 2008 related to the purchase of $200 million of Mirant Americas Generation senior notes due in 2011; partially offset by

• a decrease of $10 million in interest income primarily related to lower interest rates on invested cash and lower average cash balances.

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Financial Condition

Liquidity and Capital Resources

We expect that we have sufficient liquidity for our future operations, capital expenditures and to service our debt obligations. We regularly monitor our ability to finance the needs of our operating, investing and financing activities. See Note D to our unaudited condensed consolidated financial statements contained elsewhere in this report for additional discussion of our debt.

Sources of Funds

The principal sources of our liquidity are expected to be: (1) existing cash on hand and cash flows from the operations of our subsidiaries; (2) letters of credit issued or borrowings made under Mirant North America’s senior secured revolving credit facility; (3) letters of credit issued under Mirant North America’s senior secured term loan; (4) capital contributions received upon redemptions of preferred shares in Mirant Americas; and (5) at their discretion, additional capital contributions from Mirant Corporation and Mirant Americas.

The table below sets forth total cash, cash equivalents and availability under credit facilities of Mirant Americas Generation and its subsidiaries at September 30, 2009 and December 31, 2008 (in millions):

	At September 30, 2009		At December 31, 2008
Cash and Cash Equivalents:
Mirant Americas Generation	$	19	$	—
Mirant North America		274		229
Mirant Mid-Atlantic		300		125
Total cash and cash equivalents		593		354
Available under credit facilities		649		583
Total cash, cash equivalents and credit facilities availability	$	1,242	$	937

We consider all short-term investments with an original maturity of three months or less to be cash equivalents. At September 30, 2009 and December 31, 2008, except for amounts held in bank accounts to cover upcoming payables, all of our cash and cash equivalents were invested in AAA-rated United States Treasury money market funds.

Available under credit facilities at September 30, 2009 and December 31, 2008, reflects a $45 million reduction as a result of the expectation that Lehman Commercial Paper, Inc., which filed for bankruptcy protection in October 2008, will not honor its $45 million commitment under the Mirant North America senior secured revolving credit facility. In addition, CIT Capital USA Inc. (“CIT Capital”) has outstanding a $50 million commitment under the Mirant North America senior secured revolving credit facility. CIT Capital is a subsidiary of the CIT Group Inc. (“CIT”) which, together with CIT Group Funding Company of Delaware LLC, filed voluntary petitions for bankruptcy on November 1, 2009, pursuant to an announced prepackaged plan of reorganization. None of the operating subsidiaries of CIT, including CIT Capital, was included in the bankruptcy filings and CIT has said that it expects all of its operating entities to continue operations during the pendency of the bankruptcy cases. If, however, CIT Capital were unable to honor its $50 million commitment under the Mirant North America senior secured revolving credit facility, our “Available under credit facilities” would be reduced by a corresponding amount.

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Mirant Americas Generation is a holding company. The chart below is a summary representation of our capital structure and is not a complete organizational chart.

Except for existing cash on hand and, in the case of Mirant North America, borrowings and letters of credit under its credit facilities, the Mirant Americas Generation and Mirant North America holding companies are dependent for liquidity on the distributions and dividends of their subsidiaries, capital contributions received upon redemptions of preferred shares in Mirant Americas and, at their discretion, additional capital contributions from Mirant Corporation and Mirant Americas. The ability of Mirant North America and its subsidiary Mirant Mid-Atlantic to make distributions and pay dividends is restricted under the terms of Mirant North America’s debt agreements and Mirant Mid-Atlantic’s leveraged lease documentation, respectively. At September 30, 2009, Mirant North America had distributed to us all available cash that was permitted to be distributed under the terms of its debt agreements, leaving $574 million at Mirant North America and its subsidiaries. Of this amount, $300 million was held by Mirant Mid-Atlantic, which, as of September 30, 2009, met the tests under the leveraged lease documentation permitting it to make distributions to Mirant North America. After taking into account the financial results of Mirant North America for the nine months ended September 30, 2009, we expect Mirant North America will distribute approximately $116 million to us in November 2009. Although we expect Mirant North America to remain in compliance with its financial covenants in future periods, and to have sufficient liquidity and capital resources to meet its obligations, it is likely that it will be restricted from making distributions by the free cash flow requirements under the restricted payment test of its senior credit facility in future periods. The primary factor lowering the free cash flow calculation for Mirant North America is the significant capital expenditure program of Mirant Mid-Atlantic to install emissions controls at its Chalk Point, Dickerson and Morgantown coal-fired units to comply with the Maryland Healthy Air Act. Upon completion of its capital expenditure program, and after such expenditures no longer affect the calculation of its free cash flow, Mirant North America is expected to be able again to make distributions. We do not expect the liquidity effect of the potential restriction on distributions under the Mirant North America senior credit facility to be material given that the majority of our liquidity needs arise from the activities of Mirant North America and its subsidiaries, the restriction does not limit Mirant North America from making distributions to us to fund interest payments on our senior notes and Mirant Corporation has significant unrestricted cash and cash equivalents available, at its discretion, to make capital contributions to us and our subsidiaries.

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Uses of Funds

Our requirements for liquidity and capital resources, other than for the day-to-day operation of our generating facilities, are significantly influenced by the following activities: (1) capital expenditures; (2) debt service and payments under the Mirant Mid-Atlantic leveraged leases; and (3) collateral required for our asset management and proprietary trading and fuel oil management activities.

Capital Expenditures. Our capital expenditures, excluding capitalized interest, for the nine months ended September 30, 2009, were $465 million. Our estimated capital expenditures, excluding capitalized interest, for the period October 1, 2009, through December 31, 2010, are $592 million. See “Capital Expenditures and Capital Resources” in this Item 2 for further discussion of our capital expenditures.

Cash Collateral and Letters of Credit. In order to sell power and purchase fuel in the forward markets and perform other energy trading and marketing activities, we often are required to provide credit support to our counterparties or make deposits with brokers. In addition, we often are required to provide cash collateral or letters of credit to access the transmission grid, to participate in power pools, to fund debt service and rent reserves and for other operating activities. Credit support includes cash collateral, letters of credit and financial guarantees. In the event that we default, the counterparty can draw on a letter of credit or apply cash collateral held to satisfy the existing amounts outstanding under an open contract. As of September 30, 2009, we had approximately $88 million of posted cash collateral and $230 million of letters of credit outstanding primarily to support our asset management activities, trading activities, debt service and rent reserve requirements and other commercial arrangements. Our liquidity requirements are highly dependent on the level of our hedging activities, forward prices for energy, emissions allowances and fuel, commodity market volatility and credit terms with third parties.

The following table summarizes cash collateral posted with counterparties and brokers, letters of credit issued and surety bonds as of September 30, 2009 and December 31, 2008 (in millions):

	At September 30, 2009		At December 31, 2008
Cash collateral posted—energy trading and marketing	$	48	$	67
Cash collateral posted—other operating activities		40		43
Letters of credit—energy trading and marketing		54		76
Letters of credit—debt service and rent reserves		75		101
Letters of credit—other operating activities		101		117
Surety bonds—energy trading and marketing		—		25
Total	$	318	$	429

Debt Obligations, Off-Balance Sheet Arrangements and Contractual Obligations

There were no significant changes to our debt obligations, off-balance sheet arrangements and contractual obligations as of September 30, 2009, from those presented in our 2008 Annual Report on Form 10-K.

Cash Flows

Continuing Operations

Operating Activities. Our cash provided by operating activities is affected by seasonality, changes in energy prices and fluctuations in our working capital requirements. Net cash provided by operating activities from continuing operations increased $64 million for the nine months ended September 30, 2009, compared to the same period in 2008, primarily as a result of the following:

• Realized gross margin. An increase in cash provided of $103 million in 2009, compared to the same period in 2008, excluding an increase in non-cash lower of cost or market fuel inventory adjustments of

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$21 million. See Results of Operations for additional discussion of our performance in 2009 compared to the same period in 2008;

• Net accounts receivable and payable. An increase in cash provided of $67 million primarily related to a decrease in our net accounts receivable and payable as a result of a decrease in power prices in 2009 compared to the same period in 2008. In addition, the implementation in June 2009 of weekly settlements with PJM (in lieu of monthly settlements) has reduced the amount of outstanding receivables for the PJM market;

• Other operating assets and liabilities. An increase in cash provided of $31 million related to changes in other operating assets and liabilities, including an $11 million increase in cash posted by counterparties;

• Interest expense, net. A decrease in cash used of $27 million for interest expense, net reflecting lower interest expense from lower outstanding debt partially offset by lower interest income primarily as a result of lower interest rates on invested cash; and

• Operating expense. A decrease in cash used related to lower operations and maintenance expense of $23 million. See “Results of Operations” for additional discussion of our performance in 2009 compared to the same period in 2008.

The decreases in cash used in and increases in cash provided by operating activities were partially offset by the following:

• Inventories. An increase in cash used of $116 million as a result of higher inventory levels of coal and fuel oil, partially offset by lower market prices in 2009 as compared to 2008;

• Funds on deposit. A decrease in cash provided of $48 million. In 2009, we had net cash collateral returned to us of $21 million, primarily as a result of decreases in forward energy prices. In 2008, we had net cash collateral returned to us of $69 million primarily related to the cash collateral account to support issuance of letters of credit under the Mirant North America senior secured term loan; and

• Prepaid rent. An increase in cash used of $23 million because the scheduled rent payments for our Mirant Mid-Atlantic leveraged leases were higher for 2009 than 2008.

Investing Activities. Net cash used in investing activities from continuing operations increased by $9 million for the nine months ended September 30, 2009, compared to the same period in 2008. This difference was primarily a result of the following:

• Capital expenditures. An increase in cash used of $38 million primarily related to our environmental capital expenditures for our Maryland generating facilities related to our compliance with the Maryland Healthy Air Act; and

• Proceeds from the sales of assets. A decrease in cash provided of $5 million primarily related to sales of emissions allowances to third parties; partially offset by

• Payments into restricted accounts. A decrease in cash used of $34 million as a result of funds placed in an escrow account in September 2008, to satisfy the conditions of Mirant Potomac River’s settlement agreement with the City of Alexandria, Virginia. See Note J to our unaudited condensed consolidated financial statements contained elsewhere in this report for additional information on Mirant Potomac River’s settlement agreement with the City of Alexandria, Virginia.

Financing Activities. Net cash provided by financing activities increased by $333 million for the nine months ended September 30, 2009, compared to the same period in 2008. This difference was primarily a result of the following:

• Repayment of long-term debt—nonaffiliate. A decrease in cash used of $297 million for repayments and repurchases of debt, including $200 million for the 2008 purchase and retirement of Mirant Americas Generation senior notes due in 2011;

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• Distribution to member. A decrease in cash used of $187 million as a result of distributions in 2008. We made no distributions in 2009;

• Redemption of preferred stock. An increase in cash provided of $53 million as result of the redemption of Series A preferred stock held by Mirant Mid-Atlantic. See Note F to our unaudited condensed consolidated financial statements contained elsewhere in this report for additional information;

• Repayment of debt—affiliate. A decrease in cash used of $6 million as a result of the repayment in 2008; partially offset by

• Capital contributions. A decrease in cash provided of $210 million as a result of contributions from Mirant Americas primarily for the purchase of our bonds in 2008. We received no contributions in 2009.

Discontinued Operations

Operating Activities. In 2008, net cash provided by operating activities from discontinued operations was a result of final working capital adjustments related to the 2007 dispositions of the Zeeland and Bosque natural gas-fired facilities and Mirant NY-Gen.

Investing Activities. In 2008, net cash provided by investing activities from discontinued operations was $18 million, of which $16 million related to insurance recoveries for repairs of the Swinging Bridge facility of Mirant NY-Gen.

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B. Mirant North America

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements of Mirant North America and the notes thereto, which are included elsewhere in this report.

Overview

Mirant North America, an indirect wholly-owned subsidiary of Mirant and a direct subsidiary of Mirant Americas Generation, is a competitive energy company that produces and sells electricity in the United States. Mirant North America owns or leases 10,112 MW of net electric generating capacity in the Mid-Atlantic and Northeast regions and in California. Mirant North America also operates an integrated asset management and energy marketing organization based in Atlanta, Georgia.

Contra Costa Toll Extension

Refer to “Contra Costa Toll Extension” above for Mirant Americas Generation.

Hedging Activities

Refer to “Hedging Activities” above for Mirant Americas Generation.

Capital Expenditures and Capital Resources

Refer to “Capital Expenditures and Capital Resources” above for Mirant Americas Generation.

Scrubber Operating Expenses

Refer to “Scrubber Operating Expenses” above for Mirant Americas Generation.

Commodity Prices

Refer to “Commodity Prices” above for Mirant Americas Generation.

Granted Emissions Allowances

Refer to “Granted Emissions Allowances” above for Mirant Americas Generation.

Results of Operations

The following discussion of our performance is organized by reportable segment, which is consistent with the way we manage our business.

The Mid-Atlantic region includes our Chalk Point, Dickerson, Morgantown and Potomac River facilities. The Northeast region includes our Bowline, Canal, Kendall and Martha’s Vineyard facilities. For the nine months ended September 30, 2008, the Northeast region also included the Lovett generating facility, which was shut down on April 19, 2008. The California region includes our Contra Costa, Pittsburg and Potrero facilities. Other Operations includes proprietary trading and fuel oil management activities, interest expense on our debt and interest income on our invested cash balances.

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Three Months Ended September 30, 2009 versus Three Months Ended September 30, 2008

Consolidated Financial Performance

We reported net income of $94 million and $1.632 billion for the three months ended September 30, 2009 and 2008, respectively. The change in net income is detailed as follows (in millions):

	Three Months Ended September 30,						Increase/ (Decrease)
	2009			2008
Realized gross margin	$	466		$	417		$	49
Unrealized gross margin		(174	)		1,395			(1,569	)
Total gross margin		292			1,812			(1,520	)
Operating Expenses:
Operations and maintenance—nonaffiliate		77			80			(3	)
Operations and maintenance—affiliate		73			67			6
Depreciation and amortization		36			33			3
Impairment losses		14			—			14
Gain on sales of assets, net		(3	)		(10	)		7
Total operating expenses, net		197			170			27
Operating income		95			1,642			(1,547	)
Total other expense, net		1			10			(9	)
Net income	$	94		$	1,632		$	(1,538	)

The following discussion includes non-GAAP financial measures because we present our consolidated financial performance in terms of gross margin. Gross margin is our operating revenue less cost of fuel, electricity and other products, and excludes depreciation and amortization. We present gross margin, excluding depreciation and amortization, and realized gross margin separately from unrealized gross margin in order to be consistent with how we manage our business. Realized gross margin and unrealized gross margin are both non-GAAP financial measures. Realized gross margin represents our gross margin less unrealized gains and losses on derivative financial instruments for the periods presented. Conversely, unrealized gross margin is our unrealized gains and losses on derivative financial instruments for the periods presented. Management generally evaluates our operating results excluding the impact of unrealized gains and losses. None of our derivative financial instruments recorded at fair value are designated as hedges and changes in their fair values are therefore recognized currently in income as unrealized gains or losses. As a result, our financial results are, at times, volatile and subject to fluctuations in value primarily because of changes in forward electricity and fuel prices. Adjusting our gross margin to exclude unrealized gains and losses provides a measure of performance that eliminates the volatility created by significant shifts in market values between periods. However, our realized and unrealized gross margin may not be comparable to similarly titled non-GAAP financial measures used by other companies. We encourage our investors to review our unaudited condensed consolidated financial statements and other publicly filed reports in their entirety and not to rely on a single financial measure.

Refer to “Consolidated Financial Performance—Mirant Americas Generation” above for realized and unrealized gross margin and operating expenses, additional related details and variance explanations.

Other expense, net decreased $9 million for the three months ended September 30, 2009, and reflects lower interest expense as a result of lower outstanding debt and higher interest capitalized on projects under construction, partially offset by lower interest income as a result of lower interest rates on invested cash in 2009 compared to the same period in 2008.

Gross Margin Overview

Refer to “Gross Margin Overview” in “Results of Operations—Mirant Americas Generation” above for realized and unrealized gross margin by operating segments, additional related details and variance explanations.

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Operating Statistics

Refer to “Operating Statistics” in “Results of Operations—Mirant Americas Generation” above for Net Capacity Factor and power generation volumes by region.

Mid-Atlantic

Refer to “Mid-Atlantic” in “Results of Operations—Mirant Americas Generation” above for our Mid-Atlantic segment summary.

Northeast

Refer to “Northeast” in “Results of Operations—Mirant Americas Generation” above for our Northeast segment summary.

California

Refer to “California” in “Results of Operations—Mirant Americas Generation” above for our California segment summary.

Other Operations

Other Operations includes proprietary trading and fuel oil management activities, interest expense on our debt and interest income on our invested cash balances.

The following table summarizes the results of operations of our Other Operations segment (in millions):

	Three Months Ended September 30,					Increase/ (Decrease)
	2009			2008
Gross Margin:
Energy	$	36		$	17	$	19
Total realized gross margin		36			17		19
Unrealized gross margin		(24	)		70		(94	)
Total gross margin		12			87		(75	)
Operating Expenses:
Operations and maintenance		3			1		2
Depreciation and amortization		2			—		2
Total operating expenses, net		5			1		4
Operating income		7			86		(79	)
Total other expense, net		—			10		(10	)
Net income	$	7		$	76	$	(69	)

Gross Margin

Refer to “Other Operations” in “Results of Operations—Mirant Americas Generation” above for our gross margin variance explanations.

Other Expense, Net

The decrease of $10 million in other expense, net was principally the result of the following:

• a decrease of $11 million in interest expense primarily as a result of lower outstanding debt and higher interest capitalized on projects under construction; partially offset by

• a decrease of $1 million in interest income primarily related to lower interest rates on invested cash.

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Nine Months Ended September 30, 2009 versus Nine Months Ended September 30, 2008

Consolidated Financial Performance

We reported net income of $666 million and $713 million for the nine months ended September 30, 2009 and 2008, respectively. The change in net income is detailed as follows (in millions):

	Nine Months Ended September 30,						Increase/ (Decrease)
	2009			2008
Realized gross margin	$	1,179		$	1,097		$	82
Unrealized gross margin		66			218			(152	)
Total gross margin		1,245			1,315			(70	)
Operating Expenses:
Operations and maintenance—nonaffiliate		258			286			(28	)
Operations and maintenance—affiliate		210			213			(3	)
Depreciation and amortization		104			102			2
Impairment losses		14			—			14
Gain on sales of assets, net		(20	)		(26	)		6
Total operating expenses, net		566			575			(9	)
Operating income		679			740			(61	)
Total other expense (income), net:
Nonaffiliate		13			28			(15	)
Affiliate		—			(1	)		1
Net income	$	666		$	713		$	(47	)

Refer to “Consolidated Financial Performance—Mirant Americas Generation” above for realized and unrealized gross margin and operating expenses, additional related details and variance explanations.

Other expense (income), net decreased $14 million for the nine months ended September 30, 2009, and reflects lower interest expense as a result of lower outstanding debt and higher interest capitalized on projects under construction, partially offset by lower interest income as a result of lower interest rates on invested cash and lower average cash balances in 2009 compared to the same period in 2008.

Gross Margin Overview

Refer to “Gross Margin Overview” in “Results of Operations—Mirant Americas Generation” above for realized and unrealized gross margin by operating region, additional related details and variance explanations.

Operating Statistics

Refer to “Operating Statistics” in “Results of Operations—Mirant Americas Generation” above for Net Capacity Factor and power generation volumes by region.

Mid-Atlantic

Refer to “Mid-Atlantic” in “Results of Operations—Mirant Americas Generation” above for our Mid-Atlantic segment summary.

Northeast

Refer to “Northeast” in “Results of Operations—Mirant Americas Generation” above for our Northeast segment summary.

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California

Refer to “California” in “Results of Operations—Mirant Americas Generation” above for our California segment summary.

Other Operations

Other Operations includes proprietary trading and fuel oil management activities, interest expense on our debt and interest income on our invested cash balances.

The following table summarizes the results of operations of our Other Operations segment (in millions):

	Nine Months Ended September 30,					Increase/ (Decrease)
	2009			2008
Gross Margin:
Energy	$	112		$	48	$	64
Total realized gross margin		112			48		64
Unrealized gross margin		(73	)		21		(94	)
Total gross margin		39			69		(30	)
Operating Expenses:
Operations and maintenance		8			6		2
Depreciation and amortization		3			1		2
Total operating expenses, net		11			7		4
Operating income		28			62		(34	)
Total other expense, net		9			27		(18	)
Net income	$	19		$	35	$	(16	)

Gross Margin

Refer to “Other Operations” in “Results of Operations—Mirant Americas Generation” above for our gross margin variance explanations.

Other Expense, Net

The decrease of $18 million in other expense, net was principally the result of the following:

• a decrease of $28 million in interest expense primarily as a result of lower outstanding debt and higher interest capitalized on projects under construction; partially offset by

• a decrease of $10 million in interest income primarily related to lower interest rates on invested cash and lower average cash balances.

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Financial Condition

Liquidity and Capital Resources

We expect that we have sufficient liquidity for our future operations, capital expenditures and to service our debt obligations. We regularly monitor our ability to finance the needs of our operating, investing and financing activities. See Note D to our unaudited condensed consolidated financial statements contained elsewhere in this report for additional discussion of our debt.

Sources of Funds

The principal sources of our liquidity are expected to be: (1) existing cash on hand and cash flows from the operations of our subsidiaries; (2) letters of credit issued or borrowings made under our senior secured revolving credit facility; (3) letters of credit issued under our senior secured term loan; (4) capital contributions received upon redemptions of preferred shares in Mirant Americas; and (5) at their discretion, additional capital contributions from Mirant Corporation and Mirant Americas.

The table below sets forth total cash, cash equivalents and availability under credit facilities of Mirant North America and its subsidiaries at September 30, 2009 and December 31, 2008 (in millions):

	At September 30, 2009		At December 31, 2008
Cash and Cash Equivalents:
Mirant North America	$	274	$	229
Mirant Mid-Atlantic		300		125
Total cash and cash equivalents		574		354
Available under credit facilities		649		583
Total cash, cash equivalents and credit facilities availability	$	1,223	$	937

We consider all short-term investments with an original maturity of three months or less to be cash equivalents. At September 30, 2009 and December 31, 2008, except for amounts held in bank accounts to cover upcoming payables, all of our cash and cash equivalents were invested in AAA-rated United States Treasury money market funds.

Available under credit facilities at September 30, 2009 and December 31, 2008, reflects a $45 million reduction as a result of the expectation that Lehman Commercial Paper, Inc., which filed for bankruptcy protection in October 2008, will not honor its $45 million commitment under the Mirant North America senior secured revolving credit facility. In addition, CIT Capital USA Inc. (“CIT Capital”) has outstanding a $50 million commitment under the Mirant North America senior secured revolving credit facility. CIT Capital is a subsidiary of the CIT Group Inc. (“CIT”) which, together with CIT Group Funding Company of Delaware LLC, filed voluntary petitions for bankruptcy on November 1, 2009, pursuant to an announced prepackaged plan of reorganization. None of the operating subsidiaries of CIT, including CIT Capital, was included in the bankruptcy filings and CIT has said that it expects all of its operating entities to continue operations during the pendency of the bankruptcy cases. If, however, CIT Capital were unable to honor its $50 million commitment under our senior secured revolving credit facility, our “Available under credit facilities” would be reduced by a corresponding amount.

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Mirant North America is a holding company. The chart below is a summary representation of our capital structure and is not a complete organizational chart.

Except for existing cash on hand and borrowings and letters of credit under our credit facilities, as a holding company we are dependent for liquidity on the distributions and dividends of our subsidiaries, capital contributions received upon redemptions of preferred shares in Mirant Americas and, at their discretion, additional capital contributions from Mirant Corporation and Mirant Americas. Our ability and the ability of our subsidiary, Mirant Mid-Atlantic, to make distributions and pay dividends is restricted under the terms of our debt agreements and Mirant Mid-Atlantic’s leveraged lease documentation, respectively. At September 30, 2009, we had distributed to our parent, Mirant Americas Generation, all available cash that was permitted to be distributed under the terms of our debt agreements, leaving $574 million with us and our subsidiaries. Of this amount, $300 million was held by Mirant Mid-Atlantic, which, as of September 30, 2009, met the tests under the leveraged lease documentation permitting it to make distributions to us. After taking into account our financial results for the nine months ended September 30, 2009, we expect to distribute approximately $116 million to our parent, Mirant Americas Generation, in November 2009. Although we expect to remain in compliance with our financial covenants in future periods, and to have sufficient liquidity and capital resources to meet our obligations, it is likely that we will be restricted from making distributions by the free cash flow requirements under the restricted payment test of our senior credit facility in future periods. The primary factor lowering our free cash flow calculation is the significant capital expenditure program of Mirant Mid-Atlantic to install emissions controls at its Chalk Point, Dickerson and Morgantown coal-fired units to comply with the Maryland Healthy Air Act. Upon completion of our capital expenditure program, and after such expenditures no longer affect the calculation of our free cash flow, we expect to be able again to make distributions.

Uses of Funds

Our requirements for liquidity and capital resources, other than for the day-to-day operation of our generating facilities, are significantly influenced by the following activities: (1) capital expenditures; (2) debt service and payments under the Mirant Mid-Atlantic leveraged leases; and (3) collateral required for our asset management and proprietary trading and fuel oil management activities.

Capital Expenditures. Our capital expenditures, excluding capitalized interest, for the nine months ended September 30, 2009, were $465 million. Our estimated capital expenditures, excluding capitalized interest, for the period October 1, 2009, through December 31, 2010, are $592 million. See “Capital Expenditures and Capital Resources” above under Mirant Americas Generation for further discussion of our capital expenditures.

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Cash Collateral and Letters of Credit. In order to sell power and purchase fuel in the forward markets and perform other energy trading and marketing activities, we often are required to provide credit support to our counterparties or make deposits with brokers. In addition, we often are required to provide cash collateral or letters of credit to access the transmission grid, to participate in power pools, to fund debt service and rent reserves and for other operating activities. Credit support includes cash collateral, letters of credit and financial guarantees. In the event that we default, the counterparty can draw on a letter of credit or apply cash collateral held to satisfy the existing amounts outstanding under an open contract. As of September 30, 2009, we had approximately $88 million of posted cash collateral and $230 million of letters of credit outstanding primarily to support our asset management activities, trading activities, debt service and rent reserve requirements and other commercial arrangements. Our liquidity requirements are highly dependent on the level of our hedging activities, forward prices for energy, emissions allowances and fuel, commodity market volatility and credit terms with third parties.

The following table summarizes cash collateral posted with counterparties and brokers, letters of credit issued and surety bonds as of September 30, 2009 and December 31, 2008 (in millions):

	At September 30, 2009		At December 31, 2008
Cash collateral posted—energy trading and marketing	$	48	$	67
Cash collateral posted—other operating activities		40		43
Letters of credit—energy trading and marketing		54		76
Letters of credit—debt service and rent reserves		75		101
Letters of credit—other operating activities		101		117
Surety bonds—energy trading and marketing		—		25
Total	$	318	$	429

Debt Obligations, Off-Balance Sheet Arrangements and Contractual Obligations

There were no significant changes to our debt obligations, off-balance sheet arrangements and contractual obligations as of September 30, 2009, from those presented in our 2008 Annual Report on Form 10-K.

Cash Flows

Continuing Operations

Operating Activities. Our cash provided by operating activities is affected by seasonality, changes in energy prices and fluctuations in our working capital requirements. Net cash provided by operating activities from continuing operations increased $44 million for the nine months ended September 30, 2009, compared to the same period in 2008, primarily as a result of the following:

• Realized gross margin. An increase in cash provided of $103 million in 2009, compared to the same period in 2008, excluding an increase in non-cash lower of cost or market fuel inventory adjustments of $21 million. See Results of Operations for additional discussion of our performance in 2009 compared to the same period in 2008;

• Net accounts receivable and payable. An increase in cash provided of $67 million primarily related to a decrease in our net accounts receivable and payable as a result of a decrease in power prices in 2009 compared to the same period in 2008. In addition, the implementation in June 2009 of weekly settlements with PJM (in lieu of monthly settlements) has reduced the amount of outstanding receivables for the PJM market;

• Other operating assets and liabilities. An increase in cash provided of $25 million related to changes in other operating assets and liabilities, including an $11 million increase in cash posted by counterparties;

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• Operating expense. A decrease in cash used related to lower operations and maintenance expense of $23 million. See “Results of Operations” for additional discussion of our performance in 2009 compared to the same period in 2008; and

• Interest expense, net. A decrease in cash used of $13 million for interest expense, net reflecting lower interest expense from lower outstanding debt partially offset by lower interest income primarily as a result of lower interest rates on invested cash.

The decreases in cash used in and increases in cash provided by operating activities were partially offset by the following:

• Inventories. An increase in cash used of $116 million as a result of higher inventory levels of coal and fuel oil, partially offset by lower market prices in 2009 as compared to 2008;

• Funds on deposit. A decrease in cash provided of $48 million. In 2009, we had net cash collateral returned to us of $21 million, primarily as a result of decreases in forward energy prices. In 2008, we had net cash collateral returned to us of $69 million primarily related to the cash collateral account to support issuance of letters of credit under the Mirant North America senior secured term loan; and

• Prepaid rent. An increase in cash used of $23 million because the scheduled rent payments for our Mirant Mid-Atlantic leveraged leases were higher for 2009 than 2008.

Investing Activities. Net cash used in investing activities from continuing operations increased by $9 million for the nine months ended September 30, 2009, compared to the same period in 2008. This difference was primarily a result of the following:

• Capital expenditures. An increase in cash used of $38 million primarily related to our environmental capital expenditures for our Maryland generating facilities related to our compliance with the Maryland Healthy Air Act; and

• Proceeds from the sales of assets. A decrease in cash provided of $5 million primarily related to sales of emissions allowances to third parties; partially offset by

• Payments into restricted accounts. A decrease in cash used of $34 million as a result of funds placed in an escrow account in September 2008, to satisfy the conditions of Mirant Potomac River’s settlement agreement with the City of Alexandria, Virginia. See Note J to our unaudited condensed consolidated financial statements contained elsewhere in this report for additional information on Mirant Potomac River’s settlement agreement with the City of Alexandria, Virginia.

Financing Activities. Net cash used in financing activities decreased by $352 million for the nine months ended September 30, 2009, compared to the same period in 2008. This difference was primarily a result of the following:

• Distribution to member. A decrease in cash used of $181 million as a result of a $80 million distribution in 2009, as compared to a $261 million distribution for the same period in 2008;

• Repayment of long-term debt—nonaffiliate. A decrease in cash used of $97 million for repayments;

• Redemption of preferred stock. An increase in cash provided of $53 million as result of the redemption of Series A preferred stock held by Mirant Mid-Atlantic. See Note F to our unaudited condensed consolidated financial statements contained elsewhere in this report for additional information; and

• Repayment of debt—affiliate. A decrease in cash used of $20 million as a result of the repayment in 2008.

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Discontinued Operations

Operating Activities. In 2008, net cash provided by operating activities from discontinued operations was a result of final working capital adjustments related to the 2007 dispositions of the Zeeland and Bosque natural gas-fired facilities and Mirant NY-Gen.

Investing Activities. In 2008, net cash provided by investing activities from discontinued operations was $18 million, of which $16 million related to insurance recoveries for repairs of the Swinging Bridge facility of Mirant NY-Gen.

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C. Mirant Mid-Atlantic

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements of Mirant Mid-Atlantic and the notes thereto, which are included elsewhere in this report.

Overview

Mirant Mid-Atlantic, an indirect wholly-owned subsidiary of Mirant and Mirant Americas Generation and a direct subsidiary of Mirant North America, is a competitive energy company that produces and sells electricity in the United States. Mirant Mid-Atlantic owns or leases 5,230 MW of net electric generating capacity in the Mid-Atlantic region.

Hedging Activities

We use derivative financial instruments, such as commodity forwards, futures, options and swaps, to manage our exposure to fluctuations in electric energy and fuel commodity prices. In addition, we hedge economically a substantial portion of our coal-fired baseload generation through OTC transactions. However, we generally do not hedge our intermediate and peaking units for tenors greater than 12 months. While some of our hedges are executed through our affiliate, Mirant Energy Trading, a significant portion of our hedges are financial swap transactions with counterparties that are senior unsecured obligations of such parties and do not require either party to post cash collateral either for initial margin or for securing exposure as a result of changes in power or natural gas prices. At October 13, 2009, our aggregate hedge levels based on expected generation for each period were as follows:

	Aggregate Hedge Levels Based on Expected Generation
	2010		2011		2012		2013		2014
Power	86	%	53	%	54	%	34	%	25	%
Fuel	79	%	64	%	35	%	10	%	—	%

Legislation has been proposed in Congress to increase the regulation of transactions involving OTC derivatives. The proposed legislation provides that standardized swap transactions between dealers and large market participants would have to be cleared and must be traded on an exchange or electronic platform. Although the proposed legislation provides exclusions from the clearing and certain other requirements for market participants, such as Mirant, utilizing OTC derivatives to hedge commercial risks, such exclusions are the focus of debate and may not ultimately be part of any final legislation. Greater regulation of OTC derivatives could materially affect our ability to hedge economically our generation by reducing liquidity in the energy and commodity markets and, if we are required to clear such transactions on exchanges, by significantly increasing the collateral costs associated with such activities.

Capital Expenditures and Capital Resources

For the nine months ended September 30, 2009, we paid $448 million for capital expenditures, of which $336 million related to compliance with the Maryland Healthy Air Act. As of September 30, 2009, we have paid approximately $1.333 billion for capital expenditures related to compliance with the Maryland Healthy Air Act. Including amounts already spent to date, we expect to incur total capital expenditures of $1.674 billion to comply with the limitations on SO2, NOx and mercury emissions imposed by the Maryland Healthy Air Act.

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The following table details the expected timing of payments for our estimated capital expenditures, excluding capitalized interest, for the remainder of 2009 and for 2010 (in millions):

	2009		2010
Maryland Healthy Air Act	$	136	$	205
Other environmental		12		18
Maintenance		55		97
Construction		2		29
Other		6		5
Total	$	211	$	354

The 2010 estimated capital expenditures for compliance with the Maryland Healthy Air Act include amounts that are withheld from progress payments under construction contracts and that will be paid after final completion of the project. As of September 30, 2009, we have a contract retention liability related to our compliance with the Maryland Healthy Air Act of $105 million, which is included in current accounts payable and accrued liabilities in our unaudited condensed consolidated balance sheet.

We expect that available cash, proceeds from redemption of preferred shares in Mirant Americas and future cash flows from operations will be sufficient to fund these capital expenditures.

Scrubber Operating Expenses

Refer to “Scrubber Operating Expenses” above for Mirant Americas Generation.

Commodity Prices

Refer to “Commodity Prices” above for Mirant Americas Generation.

Granted Emissions Allowances

As a result of the capital expenditures we are incurring to comply with the requirements of the Maryland Healthy Air Act, we anticipate that we will have excess SO2 and NOx emissions allowances in future periods. We plan to continue to maintain some SO2 and NOx emissions allowances above those needed for our current expected generation in case our actual generation exceeds our current forecasts for future periods and for possible future additions of generating capacity. At September 30, 2009, the estimated fair value of our anticipated excess SO2 and NOx emissions allowances was approximately $32 million.

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Results of Operations

Three Months Ended September 30, 2009 versus Three Months Ended September 30, 2008

Consolidated Financial Performance

We reported net income of $86 million and $1.516 billion for the three months ended September 30, 2009 and 2008, respectively. The change in net income is detailed as follows (in millions):

	Three Months Ended September 30,						Increase/ (Decrease)
	2009			2008
Realized gross margin	$	337		$	311		$	26
Unrealized gross margin		(124	)		1,318			(1,442	)
Total gross margin		213			1,629			(1,416	)
Operating Expenses:
Operations and maintenance—nonaffiliate		56			53			3
Operations and maintenance—affiliate		48			43			5
Depreciation and amortization		25			23			2
Gain on sales of assets, net		(2	)		(7	)		5
Total operating expenses, net		127			112			15
Operating income		86			1,517			(1,431	)
Total other expense, net		—			1			(1	)
Net income	$	86		$	1,516		$	(1,430	)

The following discussion includes non-GAAP financial measures because we present our consolidated financial performance in terms of gross margin. Gross margin is our operating revenue less cost of fuel, electricity and other products, and excludes depreciation and amortization. We present gross margin, excluding depreciation and amortization, and realized gross margin separately from unrealized gross margin in order to be consistent with how we manage our business. Realized gross margin and unrealized gross margin are both non-GAAP financial measures. Realized gross margin represents our gross margin less unrealized gains and losses on derivative financial instruments for the periods presented. Conversely, unrealized gross margin is our unrealized gains and losses on derivative financial instruments for the periods presented. Management generally evaluates our operating results excluding the impact of unrealized gains and losses. None of our derivative financial instruments recorded at fair value are designated as hedges and changes in their fair values are therefore recognized currently in income as unrealized gains or losses. As a result, our financial results are, at times, volatile and subject to fluctuations in value primarily because of changes in forward electricity and fuel prices. Adjusting our gross margin to exclude unrealized gains and losses provides a measure of performance that eliminates the volatility created by significant shifts in market values between periods. However, our realized and unrealized gross margin may not be comparable to similarly titled non-GAAP financial measures used by other companies. We encourage our investors to review our unaudited condensed consolidated financial statements and other publicly filed reports in their entirety and not to rely on a single financial measure.

Refer to “Mid-Atlantic” in “Results of Operations—Mirant Americas Generation” above for realized and unrealized gross margin and operating expenses, additional related details and variance explanations.

Operating Statistics

Our Net Capacity Factor for the three months ended September 30, 2009, was 32% compared to 37% for the same period in 2008. Our power generation volume for the three months ended September 30, 2009 (in gigawatt hours) was 3,623 compared to 4,260 for the same period in 2008. See “Operating Statistics” in “Results of

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Operations—Mirant Americas Generation” above for additional details on Net Capacity Factor and power generation volumes.

Gross Margin

Refer to “Mid-Atlantic” in “Results of Operations—Mirant Americas Generation” above for our realized and unrealized gross margin, additional related details and variance explanations.

Operating Expenses

Refer to “Mid-Atlantic” in “Results of Operations—Mirant Americas Generation” above for our operating expenses variance explanations.

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Nine Months Ended September 30, 2009 versus Nine Months Ended September 30, 2008

Consolidated Financial Performance

We reported net income of $604 million and $623 million for the nine months ended September 30, 2009 and 2008, respectively. The change in net income is detailed as follows (in millions):

	Nine Months Ended September 30,						Increase/ (Decrease)
	2009			2008
Realized gross margin	$	858		$	788		$	70
Unrealized gross margin		119			200			(81	)
Total gross margin		977			988			(11	)
Operating Expenses:
Operations and maintenance—nonaffiliate		173			176			(3	)
Operations and maintenance—affiliate		137			130			7
Depreciation and amortization		73			67			6
Gain on sales of assets, net		(12	)		(9	)		(3	)
Total operating expenses, net		371			364			7
Operating income		606			624			(18	)
Total other expense, net		2			1			1
Net income	$	604		$	623		$	(19	)

Refer to “Mid-Atlantic” in “Results of Operations—Mirant Americas Generation” above for realized and unrealized gross margin and operating expenses, additional related details and variance explanations.

Operating Statistics

Our Net Capacity Factor for the nine months ended September 30, 2009, was 32% compared to 33% for the same period in 2008. Our power generation volume for the nine months ended September 30, 2009 (in gigawatt hours) was 10,965 compared to 11,506 for the same period in 2008. See “Operating Statistics” in “Results of Operations—Mirant Americas Generation” above for additional details on Net Capacity Factor and power generation volumes.

Gross Margin

Refer to “Mid-Atlantic” in “Results of Operations—Mirant Americas Generation” above for our realized and unrealized gross margin, additional related details and variance explanations.

Operating Expenses

Refer to “Mid-Atlantic” in “Results of Operations—Mirant Americas Generation” above for our operating expenses variance explanations.

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Financial Condition

Liquidity and Capital Resources

We expect that we have sufficient liquidity for our future operations and capital expenditures. We regularly monitor our ability to finance the needs of our operating, investing and financing activities.

Sources of Funds

The principal sources of our liquidity are expected to be: (1) existing cash on hand and cash flows from our operations and the operations of our subsidiaries; (2) redemptions of the preferred shares in Mirant Americas; (3) at its discretion, capital contributions or advances from Mirant North America or letters of credit under its senior credit facilities; and (4) at their discretion, capital contributions from Mirant Corporation and Mirant Americas.

At September 30, 2009, we had $300 million of cash, which amount was available under the leveraged leases for distribution to Mirant North America.

The availability of capital contributions from Mirant Corporation and Mirant Americas and, from Mirant North America, capital contributions, advances or letters of credit under its senior credit facilities are subject to their discretion and such accommodations may not be available as a source of liquidity to Mirant Mid-Atlantic.

We consider all short-term investments with an original maturity of three months or less to be cash equivalents. At September 30, 2009 and December 31, 2008, except for amounts held in bank accounts to cover upcoming payables, all of our cash and cash equivalents were invested in AAA-rated United States Treasury money market funds.

Uses of Funds

Our requirements for liquidity and capital resources, other than for the day-to-day operation of our generating facilities, are significantly influenced by capital expenditures and payments under our leveraged leases.

Capital Expenditures. Our capital expenditures for the nine months ended September 30, 2009, were $448 million. Our estimated capital expenditures, excluding capitalized interest, for the period October 1, 2009, through December 31, 2010, are $565 million. See “Capital Expenditures and Capital Resources” above under Mirant Mid-Atlantic for further discussion of our capital expenditures.

Operating Leases. We lease the Dickerson and Morgantown baseload units and associated property through 2029 and 2034, respectively, and have an option to extend the leases. We are accounting for these leases as operating leases. Although there is variability in the scheduled payment amounts over the lease term, we recognize rent expense for these leases on a straight-line basis in accordance with the applicable accounting literature. Rent expense under our leases was $24 million and $72 million for the three and nine months ended September 30, 2009 and 2008, respectively.

Debt Obligations, Off-Balance Sheet Arrangements and Contractual Obligations

There were no significant changes to our debt obligations, off-balance sheet arrangements and contractual obligations as of September 30, 2009, from those presented in our 2008 Annual Report on Form 10-K.

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Cash Flows

Operating Activities. Our cash provided by operating activities is affected by seasonality, changes in energy prices and fluctuations in our working capital requirements. Net cash provided by operating activities increased $35 million for the nine months ended September 30, 2009, compared to the same period in 2008, primarily as a result of the following:

• Realized gross margin. An increase in cash provided of $97 million in 2009, compared to the same period in 2008, excluding an increase in non-cash lower of cost or market fuel inventory adjustments of $27 million. See “Results of Operations” for additional discussion of our performance in 2009 compared to the same period in 2008; partially offset by

• Prepaid rent. An increase in cash used of $23 million because the scheduled rent payments for our leveraged leases were higher for 2009 than 2008;

• Inventories. An increase in cash used of $19 million primarily related to increased fuel volumes in 2009 compared to the same period in 2008; and

• Other operating assets and liabilities. An increase in cash used of $20 million related to changes in other operating assets and liabilities.

Investing Activities. Net cash used in investing activities decreased by $3 million for the nine months ended September 30, 2009, compared to the same period in 2008. This difference was primarily a result of the following:

• Payments into restricted accounts. A decrease in cash used of $34 million as a result of funds placed in an escrow account in September 2008, to satisfy the conditions of Mirant Potomac River’s settlement agreement with the City of Alexandria, Virginia. See Note J to our unaudited condensed consolidated financial statements contained elsewhere in this report for additional information on Mirant Potomac River’s settlement agreement with the City of Alexandria, Virginia;

• Proceeds from the sales of assets. An increase in cash provided of $8 million related to sales of emissions allowances primarily to third parties; partially offset by

• Capital expenditures. An increase in cash used of $39 million primarily related to our environmental capital expenditures for our Maryland generating facilities related to our compliance with the Maryland Healthy Air Act.

Financing Activities. Net cash provided by financing activities increased by $146 million for the nine months ended September 30, 2009, compared to the same period in 2008. This difference was primarily a result of the following:

• Distribution to member. A decrease in cash used of $325 million as a result of distributions in 2008. We made no distributions in 2009;

• Redemption of preferred stock. An increase in cash provided of $53 million as result of the redemption of Series A preferred stock of Mirant Americas. See Note F to our unaudited condensed consolidated financial statements contained elsewhere in this report for additional information; partially offset by

• Capital contributions. A decrease in cash provided of $232 million as a result of contributions received from Mirant North America in 2008. We received no contributions in 2009.

Environmental and Regulatory Matters (Mirant Americas Generation, Mirant North America and Mirant Mid-Atlantic)

Regulation of Over-the-Counter Derivative Transactions. We hedge economically a substantial portion of our Mid-Atlantic coal-fired baseload generation and certain of our Mid-Atlantic and Northeast gas and oil-fired generation through OTC transactions. A significant portion of such hedges are financial swap transactions between Mirant Mid-Atlantic and financial counterparties that are senior unsecured obligations of such parties

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and do not require either party to post cash collateral either for initial margin or for securing exposure as a result of changes in power or natural gas prices. Legislation has been proposed in Congress to increase the regulation of transactions involving OTC derivatives. The proposed legislation sets out parallel regulatory frameworks for the regulation of swap markets, dealers, and major swap participants, with the authority to regulate such transactions being held jointly by the Commodity Futures Trading Commission (“CFTC”), which would have jurisdiction over swaps, and the Securities and Exchange Commission, which would have jurisdiction over security-based swaps. The proposed legislation provides that standardized swap transactions between dealers and large market participants would have to be cleared and must be traded on an exchange or electronic platform. Although the proposed legislation provides exclusions from the clearing and certain other requirements for market participants, such as Mirant, utilizing OTC derivatives to hedge commercial risks, such exclusions are the focus of debate and may not ultimately be part of any final legislation. Greater regulation of OTC derivatives could materially affect our ability to hedge economically our generation by reducing liquidity in the energy and commodity markets and, if we are required to clear such transactions on exchanges, by significantly increasing the collateral costs associated with such activities.

In addition to the proposed legislation, the CFTC has proposed designation of certain electricity contracts as significant price discovery contracts (“SPDCs”), including contracts traded on the Intercontinental Exchange based on CAISO and PJM West Hub locational marginal pricing. SPDC designation would subject these contracts to new more stringent requirements and could set a precedent for tighter requirements for other contracts.

PJM Reliability Pricing Model Forward Capacity Market. Our Mid-Atlantic facilities sell electricity into the markets operated by PJM. Load-serving entities within PJM are required to have adequate sources of generating capacity. Our facilities located in the Mid-Atlantic region that sell electricity into the PJM market participate in the reliability pricing model (the “RPM”) forward capacity market. On December 12, 2008, PJM filed with the FERC to revise elements of the RPM forward capacity market. PJM sought to implement these changes in time for the May 2009 annual auction for the provision of capacity from June 1, 2012, to May 31, 2013. We and others filed oppositions to the proposed changes with the FERC. On February 9, 2009, PJM, a coalition of PJM customers, and several state public service commissions filed a settlement agreement with the FERC that, if approved, would materially modify several provisions of the December 2008 filing to the detriment of suppliers in the RPM capacity auction. Under the FERC’s rules and regulations, any party to a contested proceeding may unilaterally file a settlement in that proceeding with the FERC. We and others filed comments opposing the settlement. On March 26, 2009, the FERC issued an order that accepted the majority of changes to elements of the RPM forward capacity market proposed in the December 2008 filing and rejected the majority of changes to elements of the RPM forward capacity market proposed in the February 2009 settlement filing. Other parties have sought rehearing of the FERC’s March 26, 2009, order. On August 14, 2009, the FERC issued an order granting limited requests for rehearing and clarification of the March 26, 2009, order but did not materially change its findings set forth in the March 26, 2009, order. No party sought judicial review of the FERC’s March 26 and August 14, 2009, orders.

Virginia CAIR Implementation. In April 2006, Virginia enacted legislation that, among other things, granted the Virginia State Air Pollution Control Board the discretion to prohibit electric generating facilities located in a non-attainment area from purchasing SO2 and NOx allowances to achieve compliance under the EPA’s CAIR. In the fourth quarter of 2007, the Virginia State Air Pollution Control Board approved regulations that it interprets as prohibiting the acquisition in any manner of SO2 and NOx allowances by facilities in non-attainment areas to satisfy the requirements of the CAIR as implemented by Virginia. Mirant Potomac River’s Potomac River facility is located in a non-attainment area for ozone. Thus, this Virginia regulation effectively caps the Potomac River facility’s SO2 and NOx emissions at amounts equal to the allowances allocated to the facility, which has constrained the facility’s operations. Mirant Potomac River challenged the legality of the regulations regarding the trading of NOx allowances in Virginia state court. In July 2008, the Circuit Court for the City of Richmond, Virginia issued a ruling dismissing that challenge, which ruling Mirant Potomac River appealed. On June 23, 2009, the Court of Appeals of Virginia issued an opinion reversing the circuit court, concluding that the Virginia

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State Air Pollution Control Board exceeded its statutory authority in the Virginia regulation by prohibiting facilities in non-attainment areas from using allowances acquired by any form of transfer to satisfy the requirements of the CAIR, rather than limiting the prohibition to purchased allowances. On August 4, 2009, the Virginia Court of Appeals denied a request for rehearing filed by the Virginia State Air Pollution Control Board. The Virginia State Air Pollution Control Board petitioned the Virginia Supreme Court to review the decision by the Virginia Court of Appeals, and the Virginia Supreme Court denied that request on October 15, 2009.

Regulation of Greenhouse Gases, including the RGGI. Concern over climate change has led to significant legislative and regulatory efforts at the state and federal level to limit greenhouse gas emissions. One such effort is the RGGI, a multi-state initiative in the Northeast outlining a cap-and-trade program to reduce CO2 emissions from electric generating units with capacity of 25 MW or greater. The RGGI program calls for signatory states, which include Maryland, Massachusetts and New York, to stabilize CO2 emissions to an established baseline from 2009 through 2014, followed by a 2.5% reduction each year from 2015 to 2018.

In 2009, Mirant Americas Generation and Mirant North America expect to produce approximately 14.5 million tons of CO2 at their Maryland, Massachusetts and New York generating facilities. In 2009, Mirant Mid-Atlantic expects to produce approximately 13.2 million tons of CO2 at its Maryland generating facilities. The RGGI regulations require those facilities to obtain allowances to emit CO2 beginning in 2009. No allowances were granted to existing sources of such emissions. Instead, allowances have been made available for such facilities only by purchase through periodic auctions conducted quarterly or through subsequent purchase from a party that holds allowances sold through a quarterly auction process. The Maryland regulations implementing the RGGI, which were amended on May 8, 2009, also provide that if the allowance clearing price reaches or exceeds $7 per ton of CO2 in the auctions of allowances that occur during the first three years, Maryland will withhold the remainder of that year’s allowances from sale in any future auction during that calendar year and make those allowances available by direct sale to generators in Maryland. In this scenario, between 0 and 50% of Maryland’s allowances allocated for sale in that year may be made available for purchase by such generators. Any such allowances made available for each generator to purchase at $7 per ton will be in proportion to each generator’s annual average heat input during specified historical periods as compared to the total average input for all affected Maryland generators in existence at that time. In none of the auctions held to date has the price reached $7 per ton.

The fifth auction of allowances by the RGGI states was held on September 9, 2009. The clearing price for the approximately 28 million allowances sold in the auction allocated for use beginning in 2009 was $2.19 per ton. Allowances allocated for use beginning in 2012 were also made available, and the clearing price for the approximately 2 million of such allowances sold in the auction was $1.87 per ton. The allowances sold in this auction can be used for compliance in any of the RGGI states. Further auctions will occur quarterly through the end of the first compliance period in 2011, with the next auction scheduled for December 2, 2009.

Complying with the RGGI could have a material adverse effect upon Mirant Americas Generation’s, Mirant North America’s and Mirant Mid-Atlantic’s operations and their operating costs, depending upon the availability and cost of emissions allowances and the extent to which such costs may be offset by higher market prices to recover increases in operating costs caused by the RGGI.

In California, emissions of greenhouse gases are governed by California’s Global Warming Solutions Act (“AB 32”), which requires that statewide greenhouse gas emissions be reduced to 1990 levels by 2020. In December 2008, the California Air Resource Board (“CARB”) approved a Scoping Plan for implementing AB 32. The Scoping Plan requires that the CARB adopt a cap-and-trade regulation by January 2011 and that the cap and trade program begin in 2012. The CARB’s schedule for developing regulations to implement AB 32 is being coordinated with the schedule of the Western Climate Initiative (“WCI”) for development of a regional cap-and-trade program for greenhouse gas emissions. Through the WCI, California is working with six other western states and four Canadian provinces to coordinate and implement a regional cap-and-trade program. AB 32, and any plans, rules and programs approved to implement AB 32, could have a material adverse effect on how Mirant Americas Generation and Mirant North America operate their California facilities and the costs of operating the facilities.

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In August 2008, Massachusetts adopted its Global Warming Solutions Act (the “Climate Protection Act”), which establishes a program to reduce greenhouse gas emissions significantly over the next 40 years. Under the Climate Protection Act, the Commonwealth of Massachusetts Department of Environmental Protection has established a reporting and verification system for statewide greenhouse gas emissions, including emissions from generating facilities producing all electricity consumed in Massachusetts, and determined the state’s greenhouse gas emissions level from 1990. The Massachusetts Executive Office of Energy and Environmental Affairs (“MAEEA”) is to establish statewide greenhouse gas emissions limits effective beginning in 2020 that will reduce such emissions from the 1990 levels by a range of 10% to 25% beginning in 2020, with the reduction increasing to 80% below 1990 levels by 2050. In setting these limits, the MAEEA is to consider the potential costs and benefits of various reduction measures, including emissions limits for electric generating facilities, and may consider the use of market-based compliance mechanisms. A violation of the emissions limits established under the Climate Protection Act may result in a civil penalty of up to $25,000 per day. Implementation of the Climate Protection Act could have a material adverse effect on how Mirant Americas Generation and Mirant North America operate their Massachusetts facilities and the costs of operating those facilities.

In April 2009, the Maryland General Assembly passed the Greenhouse Gas Emissions Reduction Act of 2009 (the “Maryland Act”), which became effective in October 2009. The Maryland Act requires a reduction in greenhouse gas emissions in Maryland by 25% from 2006 levels by 2020. However, this provision of the Maryland Act is only in effect through 2016 unless a subsequent statutory enactment extends its effective period. The Maryland Act requires the MDE to develop a proposed implementation plan to achieve these reductions by the end of 2011 and to adopt a final plan by the end of 2012.

Various bills have been proposed in Congress to govern CO2 emissions from generating facilities. Also, in light of the United States Supreme Court ruling in Massachusetts v. EPA that greenhouse gases fit within the Clean Air Act’s definition of “air pollutant,” the EPA may also promulgate regulations regarding the emission of greenhouse gases. On April 17, 2009, the EPA issued a proposed determination under a portion of the Clean Air Act that regulates vehicles that greenhouse gases in the atmosphere endanger the public’s health and welfare through their contribution to climate change. In September 2009, the EPA promulgated a rule that requires owners of facilities in many sectors of the economy, including power generation, to report annually to the EPA the quantity and source of greenhouse gas emissions released from those facilities in the preceding year. Neither the proposed determination nor the rule requiring reporting seeks to restrict the emission of CO2, but Congress or the EPA will likely take action to regulate CO2 emissions within the next several years. The final form of such regulation will be influenced by political and economic factors and is uncertain at this time. Current proposals include a cap-and-trade system that would require us to purchase allowances for some or all of the CO2 emitted by our generating facilities. Although we expect that market prices for electricity would increase following such regulation and would allow us to recover a portion of the cost of these allowances, we cannot predict with any certainty the actual increases in costs such regulation could impose upon us or our ability to recover such cost increases through higher market rates for electricity, and such regulation could have a material adverse effect on our consolidated statements of operations, financial position and cash flows. Mirant Americas Generation and Mirant North America expect to produce approximately 16.2 million total tons of CO2 at their generating facilities in 2009. Mirant Mid-Atlantic expects to produce approximately 14.0 million total tons of CO2 at its generating facilities in 2009.

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Critical Accounting Estimates (Mirant Americas Generation, Mirant North America and Mirant Mid-Atlantic)

The sections below contain updates to our summary of critical accounting estimates included under Item 7, Management’s Discussion and Analysis of Results of Operations and Financial Condition, in our 2008 Annual Report on Form 10-K.

Revenue Recognition and Accounting for Energy Trading and Marketing Activities

Nature of Estimates Required. We utilize two comprehensive accounting models, an accrual model and a fair value model, in reporting our results of operations and financial position. We determine the appropriate model for our operations based on applicable accounting standards.

The accrual model is used to account for our revenues from the sale of energy, capacity and ancillary services. We recognize revenue when it has been earned and collection is probable as a result of electricity delivered or capacity available to customers pursuant to contractual commitments that specify volume, price and delivery requirements. Sales of energy are based on economic dispatch, or they may be ‘as-ordered’ by an ISO or RTO, based on member participation agreements, but without an underlying contractual commitment. ISO and RTO revenues and revenues for sales of energy based on economic dispatch are recorded on the basis of MWh delivered, at the relevant day-ahead or real-time prices.

The fair value model is used to measure fair value on a recurring basis for derivative energy contracts that are used to manage our exposure to commodity price risk or that are used in Mirant Americas Generation’s and Mirant North America’s proprietary trading and fuel oil management activities. We use a variety of derivative financial instruments, such as futures, forwards, swaps and option contracts, in the management of our business. Such derivative financial instruments have varying terms and durations, or tenors, which range from a few days to a number of years, depending on the instrument.

Derivative financial instruments are reflected in our consolidated financial statements at fair value, with changes in fair value recognized currently in income unless they qualify for a scope exception pursuant to the accounting guidance. Management considers fair value techniques and valuation adjustments related to credit and liquidity to be critical accounting estimates. These estimates are considered significant because they are highly susceptible to change from period to period and are dependent on many subjective factors. The fair value of derivative financial instruments is included in derivative contract assets and liabilities in our condensed consolidated balance sheets. Transactions that are not accounted for using the fair value model under the accounting guidance for derivative financial instruments are either not derivatives or qualify for a scope exception and are accounted for under accrual accounting. We recognize inception gains and losses, for transactions at other than the bid price or ask price, immediately in income.

Key Assumptions and Approach Used. Determining the fair value of our derivatives is based largely on observable quoted prices from exchanges and independent brokers in active markets. We think that these prices represent the best available information for valuation purposes. For most delivery locations and tenors where we have positions, we receive multiple independent broker price quotes. If no active market exists, we estimate the fair value of certain derivative financial instruments using price extrapolation, interpolation and other quantitative methods. We have not identified any distressed market conditions that would alter our valuation techniques at September 30, 2009. Fair value estimates involve uncertainties and matters of significant judgment. Our techniques for fair value estimation include assumptions for market prices, correlation and volatility. The degree of estimation increases for longer duration contracts, contracts with multiple pricing features, option contracts and off-hub delivery points. Note B to our unaudited condensed consolidated financial statements contained elsewhere in this report explains the fair value hierarchy. Mirant Americas Generation’s and Mirant North America’s assets and liabilities classified as Level 3 in the fair value hierarchy represent approximately 2% of their total assets and less than 1% of their total liabilities measured at fair value at September 30, 2009. Mirant Mid-Atlantic’s assets classified as Level 3 in the fair value hierarchy represented less than 1% of its total assets and its liabilities measured at fair value classified as Level 3 were inconsequential.

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The fair value of derivative contract assets and liabilities in our condensed consolidated balance sheets is also affected by our assumptions as to time value, credit risk and non-performance risk. The nominal value of the contracts is discounted using a forward interest rate curve based on LIBOR. In addition, the fair value of our derivative contract assets is reduced to reflect the estimated default risk of counterparties on their contractual obligations to us. The default risk of our counterparties for a significant portion of our overall net position is measured based on published spreads on credit default swaps. The fair value of our derivative contract liabilities is reduced to reflect our estimated risk of default on our contractual obligations to counterparties and is measured based on published default rates of our debt. The credit risk reflected in the fair value of our derivative contract assets and the non-performance risk reflected in the fair value of our derivative contract liabilities are calculated with consideration of our master netting agreements with counterparties and our exposure is reduced by cash collateral posted to us against these obligations.

Effect if Different Assumptions Used. The amounts recorded as revenue or cost of fuel, electricity and other products change as estimates are revised to reflect actual results and changes in market conditions or other factors, many of which are beyond our control. Because we use derivative financial instruments and have not elected cash flow or fair value hedge accounting, certain components of our financial statements, including gross margin, operating income and balance sheet ratios, are at times volatile and subject to fluctuations in value primarily as a result of changes in energy and fuel prices. Significant negative changes in fair value could require us to post additional collateral either in the form of cash or letters of credit. Because the fair value measurements of our material assets and liabilities are based on observable market information, there is not a significant range of values around the fair value estimate. For our derivative financial instruments that are measured at fair value using quantitative pricing models, a significant change in estimate could affect our results of operations and cash flows at the time contracts are ultimately settled. See Item 3. “Quantitative and Qualitative Disclosures about Market Risk” for further sensitivities in our assumptions used to calculate fair value. See Note B to our unaudited condensed consolidated financial statements contained elsewhere in this report for further information on derivative financial instruments related to energy trading and marketing activities.

Asset Impairments

Nature of Estimates Required. We evaluate our long-lived assets, including intangible assets, for impairment in accordance with applicable accounting guidance. The amount of an impairment charge is calculated as the excess of the asset’s carrying value over its fair value, which generally represents the discounted expected future cash flows attributable to the asset, or, in the case of an asset we expect to sell, as its fair value less costs to sell.

The accounting guidance related to impairments of long-lived assets requires management to recognize an impairment charge if the sum of the undiscounted expected future cash flows from a long-lived asset or definite-lived intangible asset is less than the carrying value of that asset. We evaluate our long-lived assets (property, plant and equipment) and definite-lived intangible assets for impairment whenever indicators of impairment exist or when we commit to sell the asset. These evaluations of long-lived assets and definite-lived intangible assets may result from significant decreases in the market price of an asset, a significant adverse change in the extent or manner in which an asset is being used or in its physical condition, a significant adverse change in legal factors or in the business climate that could affect the value of an asset, as well as other economic or operational analyses. If the carrying amount is not recoverable, an impairment charge is recorded.

The continued decline in natural gas prices has caused power prices to continue to decline over the past year, thereby affecting the energy gross margin earned by our generating facilities. Additionally, the current economic recession and various demand-response programs have resulted in a decrease in the forecasted generation volumes of our generating facilities. On an ongoing basis, we evaluate our long-lived assets for indications of impairment; however, given the remaining useful lives for many of our generating facilities, the total undiscounted cash flows for these generating facilities are more significantly affected by the long-term view of supply and demand than by the short term fluctuations in energy prices and demand. As such, we typically do not consider short term decreases in either energy prices or demand to cause an impairment evaluation.

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Key Assumptions and Approach Used. The impairment evaluation is a two-step process, the first of which involves comparing the undiscounted cash flows to the carrying value of the asset. If the carrying value exceeds the undiscounted cash flows, the fair value of the asset must be calculated on a discounted basis. The fair value of an asset is the price that would be received from a sale of the asset in an orderly transaction between market participants at the measurement date. Quoted market prices in active markets are the best evidence of fair value and are used as the basis for the measurement, when available. In the absence of quoted prices for identical or similar assets, fair value is estimated using various internal and external valuation methods. These methods include discounted cash flow analyses and reviewing available information on comparable transactions. The determination of fair value requires management to apply judgment in estimating future capacity and energy prices, environmental and maintenance expenditures and other cash flows. Our estimates of the fair value of the assets include significant assumptions about the timing of future cash flows, remaining useful lives and the selection of a discount rate that reflects the risk inherent in future cash flows.

Mirant Bowline—Based on Mirant Americas Generation’s and Mirant North America’s current five-year forecast, Mirant Bowline is projected to operate at a net loss for the current year and to continue to have operating losses for the next several years. Therefore, Mirant Americas Generation and Mirant North America determined that their 1,139 MW Bowline generating facility should be evaluated for impairment in the second quarter. Mirant Americas Generation’s and Mirant North America’s estimates of the asset’s undiscounted future cash flows for purposes of their impairment analysis required significant judgments related to future property tax assessments of the asset. Mirant Americas Generation’s and Mirant North America’s estimates also included assumptions related to the future capacity and energy revenues their Bowline generating facility is projected to earn. Additionally, Mirant Americas Generation and Mirant North America assumed they would monetize excess emissions allowances by selling them. The sum of the probability weighted undiscounted cash flows through the facility’s estimated remaining useful life of 2027 exceeded the carrying value as of June 30, 2009. There were no additional events in the third quarter that required Mirant Americas Generation and Mirant North America to update their previous impairment analysis. As a result, Mirant Americas Generation and Mirant North America did not record an impairment charge for the nine months ended September 30, 2009. The carrying value of the Bowline generating facility represented approximately 4% of Mirant Americas Generation’s and Mirant North America’s total property, plant and equipment, net at September 30, 2009. See Note C to our unaudited condensed consolidated financial statements contained elsewhere in this report for further information related to Mirant Americas Generation’s and Mirant North America’s impairment analysis of the Bowline generating facility.

Mirant Potrero—In the third quarter of 2009, Mirant Potrero executed a settlement agreement with the City of San Francisco in which it agreed to shut down the Potrero facility when it is no longer needed for reliability, as determined by the CAISO. That settlement agreement must be approved by an ordinance adopted by the City of San Francisco before it becomes effective, which approval Mirant Potrero expects to occur in the fourth quarter of 2009. Mirant Potrero agreed in the settlement agreement to submit to the CAISO a notice of intent to shut down the facility as of December 31, 2010. The CAISO will make the final determination on when each of the units at the Potrero generating facility is no longer needed for reliability and may be shut down. As a result of the settlement agreement, Mirant Americas Generation and Mirant North America evaluated their 362 MW Potrero generating facility for impairment during the third quarter. Mirant Americas Generation and Mirant North America developed multiple scenarios for the future expected operations of the Potrero generating facility based on the settlement agreement and the expected timing of certain projects to ensure reliability of electricity supply for the City of San Francisco. One such project is the TransBay Cable, an underwater electric transmission cable in the San Francisco Bay that is expected to decrease the need for generating resources in the City of San Francisco, which we expect to become operational by mid-2010 and reduce the reliability need for our Potrero unit 3. Mirant Americas Generation’s and Mirant North America’s cash flows included assumptions about the future operating costs of the Potrero facility as well as the corresponding revenues to be received under an RMR agreement. Mirant Americas Generation and Mirant North America also obtained multiple appraisals to value the land. The sum of the probability weighted undiscounted cash flows for the Potrero generating facility exceeded the carrying value as of September 30, 2009. As a result, Mirant Americas Generation and Mirant North America

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did not record an impairment charge for the tangible assets at the Potrero generating facility for the three and nine months ended September 30, 2009. The carrying value of the Potrero generating facility represented approximately 1% of Mirant Americas Generation’s and Mirant North America’s total property, plant and equipment, net at September 30, 2009.

The asset group for Mirant Potrero included intangible assets recorded at Mirant California related to trading rights and development rights. As a result of certain terms included in the settlement agreement, Mirant Americas Generation and Mirant North America separately evaluated the trading and development rights associated with the Potrero generating facility for impairment and determined that both of these intangible assets were fully impaired as of September 30, 2009. Accordingly, Mirant Americas Generation and Mirant North America recognized an impairment loss of $9 million on their unaudited condensed consolidated statements of operations to write off the carrying value of the intangible assets related to the Potrero generating facility. See Note C to Mirant Americas Generation’s and Mirant North America’s unaudited condensed consolidated financial statements contained elsewhere in this report for further information related to our impairment analysis of the Potrero generating facility and related intangible assets.

Mirant Delta—On September 2, 2009, Mirant Delta entered into an agreement with PG&E to extend the existing tolling agreement for units 6 and 7 of the Contra Costa facility from November 2011 through April 2013. As part of the extension agreement, and subject to any necessary regulatory approval, Mirant Delta agreed to retire Contra Costa units 6 and 7. Mirant Americas Generation and Mirant North America evaluated the trading rights related to Mirant Delta’s Contra Costa generating facility for impairment during the third quarter of 2009 as a result of the retirement provisions in the extension of the tolling agreement. Since the Contra Costa generating facility is under contract with PG&E through the expected shutdown date of April 2013, they determined the intangible asset was fully impaired as of September 30, 2009. Mirant Americas Generation and Mirant North America recorded an impairment loss of $5 million on their unaudited condensed consolidated statements of operations to write off the carrying value of the trading rights related to the Contra Costa generating facility.

Mirant Canal—Mirant Americas Generation’s and Mirant North America’s 1,126 MW Canal generating facility is located in the lower Southeastern Massachusetts (“SEMA”) load zone in the ISO-NE control area. ISO-NE previously has determined that, at times, it is necessary for the Canal generating facility to operate to meet local reliability criteria for SEMA when it is not economic for the Canal generating facility to operate based upon prevailing market prices. When the Canal facility operates to meet local reliability criteria, Mirant Americas Generation and Mirant North America are compensated at the price they bid into the ISO-NE, pursuant to ISO-NE market rules, rather than at the lower market price.

During 2009, NSTAR Electric completed planned upgrades to the SEMA transmission system. These upgrades are expected to reduce the need for the Canal generating facility to operate to maintain local reliability. The final phase of these transmission upgrades was completed in the third quarter of 2009. Mirant Americas Generation and Mirant North America will continue to monitor the effect of the transmission upgrades and other developments related to the Canal generating facility. The carrying value of the Canal generating facility represented approximately 5% of Mirant Americas Generation’s and Mirant North America’s total property, plant and equipment, net at September 30, 2009.

Effect if Different Assumptions Used. The estimates and assumptions used to determine whether an impairment exists are subject to a high degree of uncertainty. The estimated fair value of an asset would change if different estimates and assumptions were used in our applied valuation techniques, including estimated undiscounted cash flows, discount rates and remaining useful lives for assets held and used. If actual results are not consistent with the assumptions used in estimating future cash flows and asset fair values, we may be exposed to additional losses that could be material to our results of operations.

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Litigation

See Note I to our unaudited condensed consolidated financial statements contained elsewhere in this report for further information related to our legal proceedings.

We are currently involved in certain legal proceedings. We estimate the range of liability through discussions with applicable legal counsel and analysis of case law and legal precedents. We record our best estimate of a loss, or the low end of our range if no estimate is better than another estimate within a range of estimates, when the loss is considered probable and can be reasonably estimated. As additional information becomes available, we reassess the potential liability related to our pending litigation and revise our estimates. Revisions in our estimates of the potential liability could materially affect our results of operations and the ultimate resolution may be materially different from the estimates that we make.

Recently Adopted Accounting Guidance

See Note A to our unaudited condensed consolidated financial statements contained elsewhere in this report for further information related to our recently adopted accounting guidance.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk (Mirant Americas Generation, Mirant North America and Mirant Mid-Atlantic)

We are exposed to market risk, primarily associated with commodity prices. We also consider risks associated with interest rates and credit when valuing our derivative financial instruments.

Mirant Americas Generation and Mirant North America

The estimated net fair value of our derivative contract assets and liabilities was a net asset of $722 million at September 30, 2009. The estimated net fair value of our derivative contract assets and liabilities was a net asset of $87 million at September 30, 2008. The following tables provide a summary of the factors affecting the change in fair value of the derivative contract asset and liability accounts for the nine months ended September 30, 2009 and 2008, respectively (in millions):

	Commodity Contracts
	Asset Management			Trading Activities			Total
Fair value of portfolio of assets and liabilities at January 1, 2009	$	549		$	106		$	655
Gains (losses) recognized in the period, net:
New contracts and other changes in fair value1		6			(109	)		(103	)
Roll off of previous values2		(419	)		(67	)		(486	)
Purchases, issuances and settlements3		550			106			656
Fair value of portfolio of assets and liabilities at September 30, 2009	$	686		$	36		$	722

	Commodity Contracts
	Asset Management			Trading Activities			Total
Fair value of portfolio of assets and liabilities at January 1, 20084	$	(133	)	$	4		$	(129	)
Gains (losses) recognized in the period, net:
New contracts and other changes in fair value 1		64			(10	)		54
Roll off of previous values2		304			33			337
Purchases, issuances and settlements3		(165	)		(10	)		(175	)
Fair value of portfolio of assets and liabilities at September 30, 2008	$	70		$	17		$	87

¹ The fair value, as of the end of each quarterly reporting period, of contracts entered into during each quarterly reporting period and the gains or losses attributable to contracts that existed as of the beginning of each quarterly reporting period and were still held at the end of each quarterly reporting period.

² The fair value, as of the beginning of each quarterly reporting period, of contracts that settled during each quarterly reporting period.

³ Denotes cash settlements during each quarterly reporting period of contracts that existed at the beginning of each quarterly reporting period.

⁴ Reflects our portfolio of derivative contract assets and liabilities at December 31, 2007, adjusted for a day one net gain of $1 million recognized upon adoption of the fair value measurements accounting guidance on January 1, 2008.

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Mirant Mid-Atlantic

The estimated net fair value of our derivative contract assets and liabilities was a net asset of $645 million at September 30, 2009. The estimated net fair value of our derivative contract assets and liabilities was a net asset of $49 million at September 30, 2008. The following tables provide a summary of the factors affecting the change in fair value of the derivative contract asset and liability accounts for the nine months ended September 30, 2009 and 2008, respectively (in millions):

	Asset Management
Fair value of portfolio of assets and liabilities at January 1, 2009	$	526
Gains (losses) recognized in the period, net:
New contracts and other changes in fair value1		(29	)
Roll off of previous values2		(379	)
Purchases, issuances and settlements3		527
Fair value of portfolio of assets and liabilities at September 30, 2009	$	645

	Asset Management
Fair value of portfolio of assets and liabilities at January 1, 20084	$	(150	)
Gains (losses) recognized in the period, net:
New contracts and other changes in fair value1		63
Roll off of previous values2		307
Purchases, issuances and settlements3		(171	)
Fair value of portfolio of assets and liabilities at September 30, 2008	$	49

¹ The fair value, as of the end of each quarterly reporting period, of contracts entered into during each quarterly reporting period and the gains or losses attributable to contracts that existed as of the beginning of each quarterly reporting period and were still held at the end of each quarterly reporting period.

² The fair value, as of the beginning of each quarterly reporting period, of contracts that settled during each quarterly reporting period.

³ Denotes cash settlements during each quarterly reporting period of contracts that existed at the beginning of each quarterly reporting period.

⁴ Reflects our portfolio of derivative contract assets and liabilities at December 31, 2007, adjusted for a day one net gain of $3 million recognized upon adoption of the fair value measurements accounting guidance on January 1, 2008.

The tables above do not include long-term coal agreements that are not required to be recorded at fair value under the accounting guidance for derivative financial instruments. See “Long-Term Coal Agreement Risk” for further discussion later in this section.

We did not elect the fair value option for any financial instruments under the accounting guidance. However, we do transact using derivative financial instruments, which are required to be recorded at fair value under the accounting guidance related to derivative financial instruments in our unaudited condensed consolidated balance sheets.

Counterparty Credit Risk

The valuation of our derivative contract assets is affected by the default risk of the counterparties with which we transact. Mirant Americas Generation and Mirant North America recognized a reserve, which is reflected as a reduction of their derivative contract assets, related to counterparty credit risk of $16 million and $52 million at September 30, 2009 and December 31, 2008, respectively. Mirant Mid-Atlantic recognized a reserve, which is reflected as a reduction of its derivative contract assets, related to counterparty credit risk of $16 million and $51 million at September 30, 2009 and December 31, 2008, respectively.

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We have historically calculated the credit reserve for all of our derivative contract assets considering our current exposure, net of the effect of credit enhancements, and potential loss exposure from the financial commitments in our risk management portfolio, and applied historical default probabilities using current credit ratings of our counterparties. In accordance with the fair value measurements accounting guidance, we calculate the credit reserve through consideration of observable market inputs, when available. Our non-collateralized power hedges entered into by Mirant Mid-Atlantic with our major trading partners, which represent 69% of the net notional position for Mirant Americas Generation and Mirant North America and 72% of the net notional position for Mirant Mid-Atlantic at September 30, 2009, are senior unsecured obligations of Mirant Mid-Atlantic and the counterparties, and do not require either party to post cash collateral for initial margin or for securing exposure as a result of changes in power or natural gas prices. We calculate a credit reserve using published spreads on credit default swaps for our counterparties applied to our current exposure and potential loss exposure from the financial commitments in our risk management portfolio. Potential loss exposure is calculated as our current exposure plus a calculated VaR over the remaining life of the contracts. We apply a similar approach to calculate the fair value of our coal contracts that are not included in derivative contract assets and liabilities in the condensed consolidated balance sheets and which also do not require either party to post cash collateral for initial margin or for securing exposure as a result of changes in coal prices. We do not, however, transact in credit default swaps or any other credit derivative. An increase of 10% in the spread of credit default swaps of our major trading partners for our non-collateralized power hedges entered into by Mirant Mid-Atlantic would result in an increase of $2 million in the credit reserve of Mirant Americas Generation, Mirant North America and Mirant Mid-Atlantic as of September 30, 2009. An increase of 10% in the spread of credit default swaps of our coal suppliers would result in an increase of less than $1 million in the credit reserve for Mirant Americas Generation’s, Mirant North America’s and Mirant Mid-Atlantic’s long-term coal agreements that are not included in derivative contract assets and liabilities in the accompanying unaudited condensed consolidated balance sheets as of September 30, 2009.

The default risk for the remainder of the portfolio is generally offset by cash collateral or other credit enhancements. For the remainder of our risk management portfolio, we use published historical default probabilities to calculate a credit reserve applied to our current exposure, net of the effect of credit enhancements, and potential loss exposure from the financial commitments. Potential loss exposure is calculated as our current exposure plus a calculated five-day VaR. An increase in counterparty credit risk could affect the ability of our counterparties to deliver on their obligations to us. As a result, we may require our counterparties to post additional collateral or provide other credit enhancements. A downgrade of one notch in the average credit rating of our counterparties in this portion of the portfolio would have an immaterial effect on Mirant Americas Generation’s, Mirant North America’s and Mirant Mid-Atlantic’s credit reserve as of September 30, 2009. For Mirant Mid-Atlantic, the potential loss exposure does not include the effect of a credit downgrade on exposure with affiliates.

Once Mirant Americas Generation and Mirant North America have delivered a physical commodity or have financially settled the credit risk, they are subject to collection risk. Collection risk is similar to credit risk and collection risk is accounted for when we establish our provision for uncollectible accounts. We manage this risk using the same techniques and processes used in credit risk discussed above.

We also monitor counterparty credit concentration risk on both an individual basis and a group counterparty basis. See Note B to our unaudited condensed consolidated financial statements contained elsewhere in this report for further discussion of our counterparty credit concentration risk.

Mirant Americas Generation, Mirant North America and Mirant Mid-Atlantic Credit Risk

In valuing our derivative contract liabilities, we apply a valuation adjustment for non-performance, which is based on the probability of our default. We determine this non-performance adjustment value by multiplying our liability exposure, including outstanding balances for realized transactions, unrealized transactions and the effect of credit enhancements, by the one-year probability of our default based on the current credit ratings of the Companies. The one-year probability of default rate considers the tenor of our portfolio and the correlation of

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default between counterparties within our industry. The Companies non-performance adjustments related to their credit risk at September 30, 2009, were immaterial. A downgrade of one notch in the credit ratings of the Companies would have an effect of less than $1 million on Mirant Americas Generation’s, Mirant North America’s or Mirant Mid-Atlantic’s unaudited condensed consolidated statements of operations as of September 30, 2009.

Broker Quotes

In determining the fair value of our derivative contract assets and liabilities, we use third-party market pricing where available. We consider active markets to be those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Our transactions in Level 1 of the fair value hierarchy primarily consist of natural gas and crude oil futures traded on the NYMEX and swaps cleared against NYMEX prices. For these transactions, we use the unadjusted published settled prices on the valuation date. Our transactions in Level 2 of the fair value hierarchy typically include non-exchange-traded derivatives such as OTC forwards, swaps and options. We value these transactions using quotes from independent brokers or other widely accepted valuation methodologies. Transactions are classified in Level 2 if substantially all (greater than 90%) of the fair value can be corroborated using observable market inputs such as transactable broker quotes. In accordance with the exit price objective under the fair value measurements accounting guidance, the fair value of our derivative contract assets and liabilities is determined using bid prices for our assets and ask prices for liabilities. The quotes that we obtain from brokers are non-binding in nature, but are from brokers that typically transact in the market being quoted and are based on their knowledge of market transactions on the valuation date. We typically obtain multiple broker quotes on the valuation date for each delivery location that extend for the tenor of our underlying contracts. The number of quotes that we can obtain depends on the relative liquidity of the delivery location on the valuation date. If multiple broker quotes are received for a contract, we use an average of the quoted bid or ask prices. If only one broker quote is received for a delivery location and it cannot be validated through other external sources, we will assign the quote to a lower level within the fair value hierarchy. In some instances, we may combine broker quotes for a liquid delivery hub with broker quotes for the price spread between the liquid delivery hub and the delivery location under the contract. We also may apply interpolation techniques to value monthly strips if broker quotes are only available on a seasonal or annual basis. We perform validation procedures on the broker quotes at least on a monthly basis. The validation procedures include reviewing the quotes for accuracy and comparing them to our internal price curves. In certain instances, we may discard a broker quote if it is a clear outlier and multiple other quotes are obtained. At September 30, 2009, the Companies obtained broker quotes for 100% of their delivery locations classified in Level 2 of the fair value hierarchy.

Inactive markets are considered those markets with few transactions, non-current pricing or prices that vary over time or among market makers. Our transactions in Level 3 of the fair value hierarchy may involve transactions whereby observable market data, such as broker quotes, are not available for substantially all of the tenor of the contract or we are only able to obtain indicative broker quotes that cannot be corroborated by observable market data. In such cases, we may apply valuation techniques such as extrapolation to determine fair value. Proprietary models may also be used to determine the fair value of certain of our derivative contract assets and liabilities that may be structured or otherwise tailored. The degree of estimation increases for longer duration contracts, contracts with multiple pricing features, option contracts and off-hub delivery points. Our techniques for fair value estimation include assumptions for market prices, correlation and volatility. At September 30, 2009, Mirant Americas Generation’s and Mirant North America’s assets and liabilities classified as Level 3 in the fair value hierarchy represented approximately 2% of their total assets and less than 1% of their total liabilities measured at fair value. At September 30, 2009, Mirant Mid-Atlantic’s assets classified as Level 3 in the fair value hierarchy represented less than 1% of its total assets. At September 30, 2009, Mirant Mid-Atlantic’s liabilities measured at fair value classified as Level 3 were inconsequential. See Note B to our unaudited condensed consolidated financial statements contained elsewhere in this report for further explanation of the fair value hierarchy.

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Interest Rate Risk

Fair Value Measurement

We are also subject to interest rate risk when determining the fair value of our derivative contract assets and liabilities. The nominal value of our derivative contract assets and liabilities is also discounted to account for time value using a LIBOR forward interest rate curve based on the tenor of our transactions. An increase of 100 basis points in the average LIBOR rate would result in a decrease of $3 million to Mirant Americas Generation’s and Mirant North America’s derivative contract assets and a decrease of $2 million to Mirant Americas Generation’s and Mirant North America’s derivative contract liabilities at September 30, 2009. An increase of 100 basis points in the average LIBOR rate would result in a decrease of $2 million to Mirant Mid-Atlantic’s derivative contract assets and a decrease of $1 million to Mirant Mid-Atlantic’s derivative contract liabilities at September 30, 2009.

Debt (Mirant Americas Generation and Mirant North America)

Our debt that is subject to variable interest rates consists of the Mirant North America senior secured term loan and senior secured revolving credit facility. If both were fully drawn, the amount subject to variable interest rates would be approximately $1.1 billion and a 1% per annum increase in the average market rate would result in an increase in our annual interest expense of approximately $11 million.

Long-Term Coal Agreement Risk

Our coal supply comes primarily from the Central Appalachian and Northern Appalachian coal regions. Mirant Americas Generation and Mirant North America enter into contracts of varying tenors to secure appropriate quantities of fuel that meet the varying specifications of their generating facilities. For Mirant Americas Generation’s and Mirant North America’s coal-fired generating facilities, they purchase coal from a variety of suppliers under contracts with varying lengths, some of which extend to 2013. Most of Mirant Americas Generation’s and Mirant North America’s coal contracts are not required to be recorded at fair value under the accounting guidance for derivative financial instruments. As such, these contracts are not included in derivative contract assets and liabilities in the accompanying condensed consolidated balance sheets. Mirant Mid-Atlantic’s coal supply is procured through long-term coal agreements entered into on its behalf by its affiliate, Mirant Energy Trading. See Note F to the unaudited condensed consolidated financial statements contained elsewhere in this report for further information. As of September 30, 2009, the estimated net fair value of these long-term coal agreements was approximately $(171) million.

In addition, we have non-performance risk associated with our long-term coal agreements. There is risk that our coal suppliers may not provide the contractual quantities on the dates specified within the agreements or the deliveries may be carried over to future periods. If our coal suppliers do not perform in accordance with the agreements, we may have to procure coal in the market to meet our needs, or power in the market to meet our obligations. In addition, a number of the coal suppliers do not currently have an investment grade credit rating and, accordingly, we may have limited recourse to collect damages in the event of default by a supplier. We seek to mitigate this risk through diversification of coal suppliers and through guarantees. Despite this, there can be no assurance that these efforts will be successful in mitigating credit risk from coal suppliers. Non-performance or default risk by our coal suppliers could have a material adverse effect on our future results of operations, financial condition and cash flows. See Note B to our unaudited condensed consolidated financial statements contained elsewhere in this report for further explanation of these agreements and our credit concentration tables.

For a further discussion of market risks, our risk management policy and our use of VaR to measure some of these risks, see Item 7A. “Quantitative and Qualitative Disclosures about Market Risk” in our 2008 Annual Report on Form 10-K.

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Item 4. Controls and Procedures (Mirant Americas Generation, Mirant North America and Mirant Mid-Atlantic)

Effectiveness of Disclosure Controls and Procedures

As required by Exchange Act Rule 13a-15(b), our management, including our Chief Executive Officer and our Chief Financial Officer, conducted an assessment of the effectiveness of the design and operation of our disclosure controls and procedures (as defined by Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of September 30, 2009. Based upon this assessment, our management concluded that, as of September 30, 2009, the design and operation of these disclosure controls and procedures were effective.

Appearing as exhibits to this report are the certifications of the Chief Executive Officer and the Chief Financial Officer required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002.

Changes in Internal Control over Financial Reporting

There have been no changes in the Companies’ internal control over financial reporting that have occurred during the quarter ended September 30, 2009, that have materially affected, or are reasonably likely to materially affect, the Companies’ internal control over financial reporting.

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PART II

Item 1. Legal Proceedings (Mirant Americas Generation, Mirant North America and Mirant Mid-Atlantic)

See Note I to our unaudited condensed consolidated financial statements contained elsewhere in this report for discussion of the material legal proceedings to which we are a party.

Item 1A. Risk Factors (Mirant Americas Generation, Mirant North America and Mirant Mid-Atlantic)

Part I, Item 1A. Risk Factors of our 2008 Annual Report on Form 10-K includes a discussion of our risk factors. There have been no material changes in our risk factors since those reported in our 2008 Annual Report on Form 10-K.

Item 6. Exhibits (Mirant Americas Generation, Mirant North America and Mirant Mid-Atlantic)

(a) Exhibits.

Mirant Americas Generation

Exhibit No.	Exhibit Name
3.1	Certificate of Formation for Mirant Americas Generation, LLC, filed with the Delaware Secretary of State on November 1, 2001 (Incorporated herein by reference to Exhibit 3.1 to Registrant’s Form 10-Q filed November 9, 2001)
3.2	Amended and Restated Limited Liability Company Agreement for Mirant Americas Generation, LLC dated January 3, 2006 (Incorporated herein by reference to Exhibit 3.2 Registrant’s Form 10-Q filed November 13, 2006)
4.1	Mirant Americas Generation agrees to furnish to the Securities and Exchange Commission, upon request, a copy of any instrument defining the rights of holders of long-term debt of Mirant Americas Generation and all of its consolidated subsidiaries for which financial statements are required to be filed with the Securities and Exchange Commission.
10.1*†	Engineering, Procurement and Construction Agreement, dated as of July 30, 2007, between Mirant Mid-Atlantic, LLC, Mirant Chalk Point, LLC and Stone & Webster, Inc.
10.2*	Mirant North America, LLC—Credit Agreement with Deutsche Bank Securities Inc., Goldman Sachs Credit Partners L.P., and JPMorgan Chase Bank, N.A
31.1A1*	Certification of the Chief Executive Officer Pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a))
31.2A4*	Certification of the Chief Financial Officer Pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a))
32.1A1*	Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(b))
32.2A4*	Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(b))

* Asterisk indicates exhibits filed herewith.

† The Registrant has requested confidential treatment for certain portions of this Exhibit pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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Mirant North America

Exhibit No.	Exhibit Name
3.1	Certificate of Formation of Mirant North America, LLC (Incorporated herein by reference to Exhibit 3.1 to Registrant’s Form S-4 filed June 5, 2006)
3.2	Limited Liability Company Agreement of Mirant North America, LLC (Incorporated herein by reference to Exhibit 3.2 to Registrant’s Form S-4 filed June 5, 2006)
3.3	Certificate of Incorporation of MNA Finance Corp. (Incorporated herein by reference to Exhibit 3.3 to Registrant’s Form S-4 filed June 5, 2006)
3.4	Bylaws of MNA Finance Corp. (Incorporated herein by reference to Exhibit 3.4 to Registrant’s Form S-4 filed June 5, 2006)
4.1	Mirant North America agrees to furnish to the Securities and Exchange Commission, upon request, a copy of any instrument defining the rights of holders of long-term debt of Mirant North America and all of its consolidated subsidiaries for which financial statements are required to be filed with the Securities and Exchange Commission.
10.1*†	Engineering, Procurement and Construction Agreement, dated as of July 30, 2007, between Mirant Mid-Atlantic, LLC, Mirant Chalk Point, LLC and Stone & Webster, Inc.
10.2*	Mirant North America, LLC—Credit Agreement with Deutsche Bank Securities Inc., Goldman Sachs Credit Partners L.P., and JPMorgan Chase Bank, N.A
31.1A2*	Certification of the Chief Executive Officer Pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a))
31.2A5*	Certification of the Chief Financial Officer Pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a))
32.1A2*	Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(b))
32.2A5*	Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(b))

* Asterisk indicates exhibits filed herewith.

† The Registrant has requested confidential treatment for certain portions of this Exhibit pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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Mirant Mid-Atlantic

Exhibit No.	Exhibit Name
3.1	Certificate of Formation of Southern Energy Mid-Atlantic, LLC (Incorporated herein by reference to Exhibit 3.1 to Registrant’s Form S-4 in Registration No. 333-61668)
3.2	Amended and Restated Limited Liability Company Agreement of Mirant Mid-Atlantic, LLC, dated as of January 3, 2006 (Incorporated herein by reference to Exhibit 3.2 to Registrant’s Form 10-Q filed November 13, 2006)
4.1	Mirant Mid-Atlantic agrees to furnish to the Securities and Exchange Commission, upon request, a copy of any instrument defining the rights of holders of long-term debt of Mirant Mid-Atlantic.
10.1*†	Engineering, Procurement and Construction Agreement, dated as of July 30, 2007, between Mirant Mid-Atlantic, LLC, Mirant Chalk Point, LLC and Stone & Webster, Inc.
31.1A3*	Certification of the Chief Executive Officer Pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a))
31.2A6*	Certification of the Chief Financial Officer Pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a))
32.1A3*	Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(b))
32.2A6*	Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(b))

* Asterisk indicates exhibits filed herewith.

† The Registrant has requested confidential treatment for certain portions of this Exhibit pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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SIGNATURES

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

	Mirant Americas Generation, LLC
Date: November 5, 2009	By:	/S/    ANGELA M. NAGY
		Angela M. Nagy
		Vice President and Controller
		(Duly Authorized Officer and Principal Accounting Officer)

SIGNATURES

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

	Mirant North America, LLC
Date: November 5, 2009	By:	/S/    ANGELA M. NAGY
		Angela M. Nagy
		Vice President and Controller
		(Duly Authorized Officer and Principal Accounting Officer)

SIGNATURES

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

	Mirant Mid-Atlantic, LLC
Date: November 5, 2009	By:	/S/    ANGELA M. NAGY
		Angela M. Nagy
		Vice President and Controller
		(Duly Authorized Officer and Principal Accounting Officer)