<PAGE>

================================================================================
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

   [X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

   For the fiscal year ended December 31, 2001

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


   For the transition period from __________ to _____________


                      COMMISSION FILE NUMBER: 333-64842-02
                            DYNEGY DANSKAMMER, L.L.C.
             (Exact name of registrant as specified in its charter)


              DELAWARE                                     76-065670
   (State or other jurisdiction of                      (I.R.S. Employer
    incorporation or organization)                    Identification Number)

             994 RIVER ROAD
              NEWBURGH, NY                                   12550
 (Address of principal executive offices)                 (Zip Code)

                                 (845) 561-2468
              (Registrant's telephone number, including area code)


           Securities registered pursuant to Section 12(b) of the Act:

   Title of each class:               Name of each exchange on which registered:
   NONE                               NONE


           Securities registered pursuant to Section 12(g) of the Act:
                              Title of each class:
                                      NONE.
                         ------------------------------

      All of the outstanding equity interests in Dynegy Danskammer, L.L.C. are
held by Hudson Power, L.L.C., an indirect wholly owned subsidiary of Dynegy
Holdings Inc.

      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 the
filing requirements for the past 90 days. Yes [X]  No [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

DOCUMENTS INCORPORATED BY REFERENCE. NONE.

REDUCED DISCLOSURE FORMAT. DYNEGY DANSKAMMER, L.L.C. MEETS THE CONDITIONS SET
FORTH IN GENERAL INSTRUCTION (I)(1)(A) AND (B) OF FORM 10-K AND IS THEREFORE
FILING THIS FORM 10-K WITH THE REDUCED DISCLOSURE FORMAT.


================================================================================

<PAGE>

                                DYNEGY DANSKAMMER

                                    FORM 10-K


                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                                              PAGE

                                                           PART I
<S>      <C>                                                                                                     <C>
    Item 1.    Business...................................................................................       1

    Item 2.    Properties.................................................................................       4
    Item 3.    Legal Proceedings..........................................................................       4
    Item 4.    Submission of Matters to a Vote of Security Holders........................................       5


                                                           PART II

    Item 5.    Market for the Registrant's Common Equity and Related Stockholder Matters..................       5
    Item 6.    Selected Financial Data....................................................................       5
    Item 7.    Management's Discussion and Analysis of Financial Condition and Results of
               Operations.................................................................................       5
    Item 7A.   Quantitative and Qualitative Disclosures About Market Risk.................................       9
    Item 8.    Financial Statements and Supplementary Data................................................       9
    Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial
               Disclosure.................................................................................      10

                                                           PART III

    Item 10.   Directors and Executive Officers of the Registrant.........................................      10
    Item 11.   Executive Compensation.....................................................................      10
    Item 12.   Security Ownership of Certain Beneficial Owners and Management.............................      10
    Item 13.   Certain Relationships and Related Transactions.............................................      10

                                                            PART IV

    Item 14.   Exhibits, Financial Statement Schedules, and Reports on Form 8-K...........................      10

    Signatures............................................................................................      12

</TABLE>


<PAGE>

                                     PART I

ITEM 1.  BUSINESS

      Dynegy Danskammer, L.L.C. ("Dynegy Danskammer" or the "Company") is a
Delaware limited liability company formed on September 14, 2000 for the purpose
of owning or leasing, making improvements to and operating the Danskammer power
generation facility. Dynegy Danskammer acquired the Danskammer facility from
Central Hudson Gas and Electric Corporation ("Central Hudson") on January 30,
2001. The Danskammer facility consists of the following:

      o     Danskammer units 1 and 2, which are two gas-fired and oil-fired
            generating units with a combined generation capacity of 130
            megawatts ("MW"); and

      o     Danskammer units 3 and 4, which are two coal-fired and gas-fired
            generating units with a combined generation capacity of 370 MW.

      The Danskammer units are competitive generation units connected to the
Northeast Power Coordinating Council ("NPCC") and are located close to New York
City. NPCC adjoins the Mid-Atlantic Area Council ("MAAC") and, together, they
represent two of the ten regional reliability councils that form the North
American Electric Reliability Council. The Danskammer units compete primarily in
the New York wholesale market, which is operated and maintained by the New York
Independent System Operator (the "New York ISO"). The generation from these
units can also be sold to the Pennsylvania/New Jersey/Maryland Power Pool, New
England, Quebec and Ontario.

THE DANSKAMMER FACILITY

      The Danskammer facility has a net generating capacity of 500 MW and is
located in Newburgh, NY. All four units are connected to the 115 kilovolt
transmission system of Central Hudson. Units 3 and 4 operate in the base load
mode while units 1 and 2 are considered to be peaking units. Historically, units
3 and 4 have had capacity factors of approximately 80 percent, with an average
heat rate of 9,750 British thermal units per kilowatt hour ("Btu/kWh").

FUEL RECEPTION, HANDLING AND STORAGE FACILITY

      The Danskammer facility receives coal supply by ship and rail. In 1996,
Central Hudson constructed a receiver hopper next to the dock of the adjacent
Roseton facility and a 3,500-foot conveyor system to receive up to 2,000 metric
tons per hour of waterborne coal. The Danskammer facility also receives rail
deliveries of coal via its rail siding and unloading facility. The Danskammer
facility is connected and has access to the same natural gas pipelines as the
Roseton facility and the underground network supplying fuel oil.

      The Danskammer facility utilizes an underground fuel oil pipeline network
that is interconnected with the Roseton oil tank farm. In addition, the pipeline
network is interconnected to a 20-inch Amerada Hess line, connecting to the Hess
terminal. This section of line is currently blanked and purged of oil.

INFRASTRUCTURE AND SUPPORT

      The 115 kilovolt switchyard located adjacent to the plant is owned by
Central Hudson. The single-bus single-breaker switchyard is connected to the
Central Hudson 115 kilovolt system through five transmission lines. The 115
kilovolt switchyard bus is separated into three sections using two bus tie
breakers. Each generator has a dedicated 115 kilovolt breaker and disconnect
switch. The disconnect switch is located on the switchyard side of the breaker
and is identified as the ownership transfer point. Dynegy Danskammer owns the
equipment up to and including this 115 kilovolt disconnect switch.



                                       1
<PAGE>


DANSKAMMER SUMMARY INFORMATION

<TABLE>
<CAPTION>

SUMMARY INFORMATION                                   UNIT 1           UNIT 2            UNIT 3          UNIT 4
-------------------                                 -----------      ------------      -----------     ------------
<S>                                                  <C>               <C>              <C>              <C>
Unit Type....................................        Steam             Steam            Steam            Steam
Commercial Operation Date....................        1951              1954             1959             1967
Primary Fuel.................................        Gas               Gas              Coal             Coal
Net Nominal Capacity (MW)....................        65                65               135              235
Typical Unit Loading.........................        Peaking           Peaking          Base Load        Base LoAD

</TABLE>

FACILITIES, INTERCONNECTION AND EASEMENT AGREEMENTS

      In connection with its acquisition of the Danskammer facility, Dynegy
Danskammer entered into facility, interconnection and easement agreements
covering the Danskammer facility. These agreements delineate the ownership
rights regarding easements and interconnection systems associated with the
Danskammer facility. The agreements also describe the procedures that Dynegy
Danskammer and Central Hudson are to follow with respect to operation of certain
Danskammer facilities, the interconnection of the facilities with Central
Hudson's electric and transmission and distribution system and maintenance of
equipment at the Danskammer facility.

POWER MARKET/SALES STRATEGY

      Dynegy Danskammer has entered into contracts with marketing affiliates for
scheduling and related services for the electricity produced by the Danskammer
facility. The marketing affiliates also purchase fuel, including gas, coal and
fuel oils, and enter into fuel hedging arrangements on Dynegy Danskammer's
behalf.

      Dynegy Danskammer's strategy is to combine its facility with the marketing
and operational expertise of its affiliates to:

      o     enhance the competitive position of the low cost, base-load gas- and
            coal-fired units;

      o     utilize the peaking units to supply capacity, energy and ancillary
            services during periods of peak demand and high prices; and

      o     maximize the availability of the facility by optimizing the
            maintenance schedules.

EMPLOYEES

      Dynegy Danskammer does not have any employees. The Danskammer facility is
staffed by a combination of 105 non-union and union personnel that are employed
by an affiliate. Substantially all of the operating personnel were involved in
the operation of the Danskammer facility before the facility was acquired by
Dynegy Danskammer. The costs associated with the personnel are allocated to
Dynegy Danskammer under shared service arrangements.

                                       COMPETITION

      The United States electric power industry includes investor-owned,
cooperative, municipal, state and federal utilities, as well as non-utility
power generating companies. Historically, electricity was generated, distributed
and sold by regulated, vertically integrated utilities with exclusive franchises
to provide electric services to retail customers, usually within a given state,
in contiguous areas outside the state, or both. This industry structure,
however, is being fundamentally transformed as a result of federal and state
legislative and regulatory changes. Over the last several years, many vertically
integrated utilities have restructured, including divesting their generation
assets and transferring control over their transmission system to regional
transmission operators. This restructuring is being undertaken in some cases to
comply with state laws opening retail markets to competition and in other cases
to adapt to increased wholesale competition from new merchant generators. The
increasingly competitive environment is also resulting in significant industry
consolidation and the growth of national and regional wholesale power generation
companies.

      The Danskammer units are competitive generation units connected to the
NPCC and are located close to New York City. NPCC adjoins the MAAC and,
together, they represent two of the ten regional reliability councils that form
the North American Electric Reliability Council. While the Company has access to
the Pennsylvania/New Jersey/Maryland Power Pool, New England, Quebec and
Ontario, it primarily competes in the New York wholesale



                                       2
<PAGE>

market, which is operated and maintained by the New York ISO. The Company
competes on the basis of price and the operating characteristics of its
generating facilities to supply capacity, energy and ancillary services to the
market when needed.

      In January 1999, the FERC approved the New York ISO tariffs and market
rules for operating bid-based energy markets. The New York ISO and bid-based
energy markets became operational in November 1999.

       The FERC approved the New York ISO proposal to operate a multi-settlement
system entailing day-ahead and real-time energy spot markets. All transactions
are scheduled through the New York ISO and the New York ISO schedules all
transmission within and on the New York ISO controlled grid. The New York ISO
has control over system security and reliability, including authority to take
any action to preserve control area operation, such as load curtailment and/or
shedding, consistent with its standards.

      The generation from the Danskammer units can also be sold to the
Pennsylvania/New Jersey/Maryland Power Pool, New England, Quebec and Ontario.

                                   REGULATION

      Dynegy Danskammer is subject to regulation by various federal, state and
local agencies, including the regulations described below. Although significant
capital expenditures may be required to comply with these regulations, such
compliance has not materially adversely affected Dynegy Danskammer's historical
earnings or competitive position.

      FEDERAL POWER GENERATION REGULATION. Dynegy Danskammer's power generation
operations are subject to regulation by the FERC under the Public Utility
Regulatory Policies Act of 1978, or PURPA, which grants the FERC exclusive
ratemaking jurisdiction over wholesale sales of electricity in interstate
commerce. Dynegy Danskammer has received authority from the FERC to sell
wholesale power at market-based rates. Dynegy Danskammer also has received a
FERC determination that it is an exempt wholesale generator under applicable
law.

      The FERC has from time to time approved taxpayer price caps on wholesale
power sales in New York. Due to concerns over potential short supply and high
prices in the summer of 2001, the New York ISO filed an Automated Mitigation
Procedure ("AMP") with the FERC. The AMP caps bid prices based on the costs
characteristic of generating facilities in New York, such as the Danskammer
facility. In an order based on June 28, 2001, the FERC accepted the AMP proposal
for the summer of 2001. In a subsequent order issued on November 27, 2001, the
FERC extended the AMP through April 30, 2002. The AMP may be further extended in
the future.

      On November 20, 2001, the FERC issued an order that would subject the
sales of all entities with market-based rate tariffs to "refunds or other
remedies" in the event the seller engages in "anticompetitive behavior or the
expertise of market power." The FERC has postponed the effectiveness of this
refund condition pending its consideration of comments submitted by interested
parties. Affiliates of Dynegy Danskammer and other similar-situated parties have
submitted comments in opposition to the proposed refund condition. It is
uncertain how the FERC will act regarding this matter.

      STATE REGULATION. Dynegy Danskammer's power generation business also is
subject to various regulations from the State of New York, including the New
York State Public Service Commission. While the impact of these state
regulations and any proposed reforms to such state regulations on Dynegy
Danskammer's business cannot be predicted with certainty, Dynegy Danskammer does
not believe that any such matters will have a material adverse effect on Dynegy
Danskammer's earnings or competitive position.

                         ENVIRONMENTAL AND OTHER MATTERS

      Dynegy Danskammer's operations are subject to extensive federal, state and
local statutes, rules and regulations governing the discharge of materials into
the environment or otherwise relating to environmental protection. Compliance
with these statutes, rules and regulations requires capital and operating
expenditures including those related to monitoring, pollution control equipment,
emission fees, permitting and remediation obligations. Failure to comply with
these statutes, rules and regulations may result in the assessment of civil and
even criminal penalties. Dynegy Danskammer's environmental expenditures have not
been prohibitive in the past, but are anticipated to increase in the future with
the trend toward stricter standards, greater regulation and more extensive



                                       3
<PAGE>

permitting requirements. No assurance can be given that future compliance with
these environmental statutes, rules and regulations will not have a material
adverse effect on Dynegy Danskammer's operations or its financial condition.

      The vast majority of federal environmental remediation provisions are
contained in the Superfund laws--the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") and the Superfund Amendments and
Reauthorization Act ("SARA") and in the corrective action provisions of the
Federal Resource Conservation and Recovery Act ("RCRA"). Typically, the U.S.
Environmental Protection Agency ("EPA") acts pursuant to Superfund legislation
to remediate facilities that are abandoned or inactive or whose owners are
insolvent; however, the legislation may be applied to sites still in operation.
Superfund law imposes liability, regardless of fault or the legality of the
original conduct, on certain classes of persons that contributed to the release
of a "hazardous substance" into the environment. These persons include the
current or previous owner and operator of a facility and companies that
disposed, or arranged for the disposal, of the hazardous substance found at a
facility. CERCLA also authorizes the EPA and, in certain instances, private
parties to take actions in response to threats to public health or the
environment and to seek recovery for the costs of cleaning up the hazardous
substances that have been released and for damages to natural resources from
such responsible party. Further, it is not uncommon for neighboring landowners
and other third parties to file claims for personal injury and property damage
allegedly caused by the hazardous substances released into the environment. RCRA
provisions apply to facilities that have been used to manage or are currently
managing hazardous waste and which are either still in operation or have
recently been closed. As amended, RCRA requires facilities to remedy any
releases of hazardous wastes or hazardous waste constituents at waste treatment,
storage or disposal facilities.

      Management believes that Dynegy Danskammer is in substantial compliance
with, and is expected to continue to comply in all material respects with,
applicable environmental statues, regulations, orders and rules. Dynegy
Danskammer's aggregate expenditures for compliance with laws and regulations
related to the discharge of materials into the environment or otherwise related
to the protection of the environment approximated $2.8 million in 2001. Total
environmental expenditures for both capital and operating maintenance and
administrative costs are estimated to approximate $19.6 million in 2002.

      Dynegy Danskammer's operations are subject to the requirements of the
Federal Occupational Safety and Health Act ("OSHA") and other comparable
federal, state and provincial statutes. The OSHA hazard communication standard,
the EPA community right-to-know regulation under Title III of SARA and similar
50 state statutes require that information be organized and maintained about
hazardous materials used or produced in Dynegy Danskammer's operations. Certain
of this information must be provided to employees, state and local government
authorities and citizens. Dynegy Danskammer believes it is currently in
substantial compliance, and expects to continue to comply in all material
respects, with these rules and regulations.

                                OPERATIONAL RISKS

      Dynegy Danskammer is subject to various operating risks as described under
"Results of Operations-Operational Risk" below. The Risk and Environment
Committee of Dynegy Danskammer's parent company establishes metrics and assesses
compliance with corporate risk guidelines. Dynegy Danskammer maintains general
public liability, property and business interruption insurance in amounts that
it considers to be adequate for such risk through its parent company. Such
insurance is subject to deductibles that the Company considers reasonable and
not excessive. The occurrence of a significant event not fully insured or
indemnified against, and/or the failure of a party to meet its indemnification
obligations, could materially and adversely affect Dynegy Danskammer's
operations and financial condition. Moreover, no assurance can be given that
Dynegy will be able to maintain insurance in the future at rates it considers
reasonable.

ITEM 2.  PROPERTIES

      The Danskammer site is the 185-acre parcel of land on which the Danskammer
facility is located. The land is owned in fee by Dynegy Danskammer. Danskammer
units 3 and 4 are leased by Dynegy Danskammer.

      Dynegy Danskammer purchased the property from Central Hudson in January
2001.

ITEM 3.  LEGAL PROCEEDINGS

      No material legal proceedings are presently pending against Dynegy
Danskammer.



                                       4
<PAGE>

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      Omitted pursuant to General Instruction (I)(2)(c) of Form 10-K.

                                     PART II

ITEM 5.  MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

      All of the outstanding equity interests in Dynegy Danskammer, L.L.C. are
held by Hudson Power, L.L.C., an indirect wholly owned subsidiary of Dynegy
Holdings Inc. Dynegy Holdings Inc. has no publicly traded common equity
outstanding.

ITEM 6.  SELECTED FINANCIAL DATA

      The following table sets forth Dynegy Danskammer, L.L.C.'s selected
financial data for the period indicated. In January 2001, Dynegy Danskammer
acquired power generation facilities from Central Hudson. Dynegy Danskammer had
no activity prior to the acquisition. There are no separate financial statements
available with regard to the operations of the Danskammer facility prior to
Dynegy Danskammer taking ownership because the facility's operations were fully
integrated with, and the results of operations were consolidated into, its
former owner's results. The selected information presented below is derived from
and qualified by reference to the financial statements of Dynegy Danskammer,
L.L.C., including the notes thereto, contained elsewhere herein. This selected
financial data should be read in conjunction with such financial statements and
the related notes and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained herein.


                             SELECTED FINANCIAL DATA

                                                               YEAR ENDED
                                                            DECEMBER 31, 2001
                                                             (In Thousands)
                                                          ---------------------
STATEMENT OF OPERATIONS DATA:
Revenues ...........................................           $  53,249
Net loss ...........................................           $ (45,691)



                                                            DECEMBER 31, 2001
                                                             (In Thousands)
                                                          ---------------------
BALANCE SHEET DATA:
Current assets .....................................           $  16,745
Current liabilities ................................             116,688
Total assets .......................................             389,432
Property, plant and equipment, net .................             367,570
Long-term debt .....................................             308,171
Total equity .......................................           $ (43,416)





ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

      The following discussion and analysis should be read in conjunction with
the financial statements of Dynegy Danskammer, L.L.C. ("Dynegy Danskammer" or
the "Company") included elsewhere herein.


                                 COMPANY PROFILE

      Dynegy Danskammer was formed as an indirect wholly owned subsidiary of
Dynegy Holdings Inc. ("DHI") on September 14, 2000 for the purpose of owning or
leasing, making improvements to and operating the Danskammer power generation
facility. Dynegy Danskammer acquired the Danskammer facility from Central Hudson
on January 30, 2001.



                                       5

<PAGE>

The Danskammer facility was purchased for approximately $324.0 million,
including adjustments for inventories and pro-rations related to specific items
such as taxes, rents and fees.

      Prior to the acquisition of the Danskammer facility, Dynegy Danskammer had
no operations. As a result of the acquisition and its subsequent financing,
Dynegy Danskammer currently owns or leases approximately 500 megawatts ("MW") of
generation capacity.

                             LIQUIDITY AND CAPITAL RESOURCES

      The Company's capital requirements consist primarily of:

   o  expenditures to maintain the operation of its existing facilities,
      including expenditures for repairs;

   o  replacement and refurbishment of equipment and environmental compliance;
      and

   o  working capital related to the seasonal nature of its business.

      Dynegy Danskammer relies on operating cash flow and borrowings from DHI
and third parties for its liquidity and capital resource requirements.

      The following table provides a synopsis of financial obligations as of
December 31, 2001. This table includes cash obligations related to principal
outstanding under existing debt agreements and unconditional purchase
obligations, which includes a commitment to purchase coal as described in Note 6
to the audited financial statements located elsewhere herein.

<TABLE>
<CAPTION>

=============================================================================================================================
                            FINANCIAL OBLIGATIONS AS OF DECEMBER 31, 2001
=============================================================================================================================
                                                                         PAYMENTS DUE BY PERIOD
                                                   --------------------------------------------------------------------------
                                                                             ($ IN THOUSANDS)

                                                                   LESS THAN         YEARS            YEARS          AFTER 5
        CASH OBLIGATIONS *                            TOTAL          1 YEAR         2 AND 3          4 AND 5          YEARS
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>             <C>             <C>             <C>             <C>
Current Portion of Long-Term Debt                   $    207        $    207        $     --        $     --        $     --

Long-Term Debt-Affiliate                               8,477              --              --           8,477              --

Long-Term Debt -Third Party                          299,694              --             456             516         298,722

Unconditional Purchase Obligation (1)                 38,494          38,494              --              --              --
                                                    --------        --------        --------        --------        --------
Total Financial Obligations                         $346,872        $ 38,701        $    456        $  8,993        $298,722
                                                    ========        ========        ========        ========        ========

* Cash Obligations herein do not include related interest or accretion.
=============================================================================================================================
(1) See Note 6 to the audited financial statements for more information on Danskammer's coal purchase obligation.

</TABLE>

      The table above reflects the results of a sale-leaseback transaction
described herein. In January 2001, Dynegy Danskammer completed the acquisition
of the Danskammer facility for approximately $324.0 million including
adjustments for inventories and pro-rations related to specific items such as
taxes, rents and fees. Dynegy Danskammer financed the acquisition with funds it
received from a subordinated loan agreement with DHI. On May 8, 2001, Dynegy
Danskammer completed a sale-leaseback transaction to provide the term financial
for the acquisition of the Danskammer Units 3 and 4 and related facilities.
Under the terms of the sale-leaseback transaction, the Company sold certain
plants and equipment and agreed to lease it back for 30 years with renewal
options. Proceeds of $300.0 million were used to repay a significant portion of
the demand note payable to DHI. The Company will make semi-annual debt and
interest payments each May 8 and November 8 through 2025.

                                  OTHER MATTERS

      COMMITMENTS AND CONTINGENCIES. See Part I, Item 1, Condensed Financial
Statements, Note 6, which is incorporated herein by reference, for a discussion
of the Company's Commitments and Contingencies.

      ACCOUNTING PRONOUNCEMENTS. See Item 8, Financial Statements and
Supplementary Data, Note 2, which is incorporated herein by reference, for a
discussion of Statement of Financial Accounting Standards No. 143, "Accounting
for Asset Retirement Obligations" ("Statement No. 143"), and Statement of
Financial Accounting Standards No. 144, " Accounting for the Impairment or
Disposal of Long-Lived Assets" ("Statement No. 144").


                                       6
<PAGE>


      CONCLUSION. The Company believes it will meet all foreseeable cash
requirements, including working capital, capital expenditures and debt service,
from operating cash flow, supplemented as necessary by borrowings. The Company
has obtained representation from DHI that it will assist the Company in funding
any cash requirements in 2002.

                                   SEASONALITY

      The Company's revenues are seasonal and are affected by unusual weather
conditions. Short-term prices for capacity, energy and ancillary services in the
northeast are particularly impacted by weather conditions. Peak demand for
electricity typically occurs during the summer months, caused by increased use
of air-conditioning. Cooler than normal summer temperatures may lead to reduced
use of air-conditioners. This reduces short-term demand for capacity, energy and
ancillary services and may lead to a reduction in wholesale prices.

                              RESULTS OF OPERATIONS

      Provided below is a narrative presentation of certain operating and
financial data for the Company's business for the period ended December 31,
2001. For purposes of the following discussion, the period includes the period
from the date of the facility acquisition (January 30, 2001) to December 31,
2001. Prior to January 30, 2001, Dynegy Danskammer had no operations. Separate
financial statements related to the Danskammer facility's operations are
available only for the period since Dynegy Danskammer's acquisition of the
facility. There are no separate financial statements available with regard to
the operations of the Danskammer facility prior to Dynegy Danskammer taking
ownership because the facility's operations were fully integrated with, and the
results of operations were consolidated into, its former owner's results. In
addition, the electric output of the facility was sold based on rates set by
regulatory authorities. As a result of these factors and because electricity
rates are now set under separate power purchase agreements or by market forces,
historical financial data with respect to the Danskammer facility is not
meaningful or indicative of future results. Dynegy Danskammer's future results
of operations will depend primarily on revenues from the unregulated sale of
energy, capacity and other ancillary services and the level of the facility's
operating expenses.

      The following factors may influence the market prices for energy, capacity
and ancillary services in the Company's markets:

Factors affecting demand, including:

   o  weather conditions;

   o  seasonality; and

   o  possible reductions in the projected rate of growth in electricity usage
      due to regional economic conditions, the implementation of conservation
      programs and other factors.

 Factors affecting supply, including:

   o  prevailing market prices for coal, fuel oil and natural gas and associated
      transportation costs and possible disruptions and interruptions from time
      to time in fuel supplies;

   o  changes in supplies and prices of capacity, energy and ancillary services
      available from current competitors or new market entrants, including the
      development of new generation facilities or transmission lines that may be
      able to price or deliver electricity more cheaply or allow greater access
      to competitors; and

   o  transmission congestion or other limitations on transmitting power from
      generators to users.

      OPERATIONAL RISKS. The operation of the Company's power generation
facilities involves various operating risks, including possible or potential:

   o  performance below expected levels of availability, output or efficiency;

   o  interruptions in fuel availability or fuel transportation;

   o  increases in fuel or fuel transportation costs;

   o  poor quality fuel;

   o  disruptions in the transmission of electricity;

   o  breakdown or failure of processes or equipment, whether due to age or
      otherwise;

   o  shortages of equipment or spare parts;

   o  operator error;


                                       7
<PAGE>

   o  catastrophic events like fires, earthquakes, explosions, floods or other
      similar occurrences affecting power generation facilities;

   o  labor disputes; and

   o  curtailment of operations due to restrictions on emissions.

      If one or more of the events listed above occur, the revenues generated by
 Dynegy Danskammer's generation facilities could be reduced significantly or the
 costs of operating them could be increased significantly. If such a reduction
 in revenues or an increase in costs occurs, the ability of the Company to meet
 its obligations may be adversely affected.

PERIOD ENDED DECEMBER 31, 2001

      Revenues for the period ended December 31, 2001 were approximately $53.2
million. The revenues were derived from sales to an affiliate.

      Operating costs for the period ended December 31, 2001 were approximately
$68.4 million. Operating costs consist mainly of expenses for fuel, plant
operations and maintenance and property taxes. Fuel expenses are principally the
costs of coal, natural gas and fuel oil used in operating the generating
facility.

      Depreciation and amortization expense for the period ended December 31,
2001 of approximately $10.6 million primarily relates to the Danskammer
facility, which is being depreciated over periods ranging from three to 35
years.

      General and administrative costs for the period ended December 31, 2001
were approximately $1.3 million, which relate to support services provided by
affiliates for operations and maintenance management, construction management
and technical services, environmental health and safety, computer services and
other related support activities.

      Interest expense for the period ended December 31, 2001 was approximately
$18.6 million. Interest expense primarily relates to borrowings from a third
party beginning in early May 2001 and from DHI under the subordinated loan
agreement prior to such time.

CASH FLOW DISCLOSURES

      OPERATING CASH FLOW. Cash flow from operating activities totaled a source
of cash of approximately $103 thousand for the period ended December 31, 2001.
Operating cash flow reflects the net loss, offset by non-cash adjustments and
changes in working capital. Other non-cash adjustments relate to expenses
charged by affiliates, partially offset by revenues charged to an affiliate.
Fluctuations in accounts receivable, accounts payable and accrued liabilities
reflect changes in the timing of payments or recognition of liabilities.

      CAPITAL EXPENDITURES AND INVESTING ACTIVITIES. Cash used from investing
activities includes the acquisition of the Danskammer facility. The Company had
additional capital expenditures of approximately $6.4 million in the period
ended December 31, 2001, but such transactions were funded by an affiliate, and
thus are not reflected on the statement of cash flows.

      FINANCING ACTIVITIES. In January 2001, Dynegy Danskammer completed the
acquisition of the Danskammer facility for approximately $324.0 million. In
order to finance the acquisition, Dynegy Danskammer entered into a subordinated
loan agreement with DHI. On May 8, 2001, Dynegy Danskammer completed a
sale-leaseback transaction to provide the term financing for the acquisition of
Danskammer Units 3 and 4 and related facilities. Proceeds of $300.0 million were
utilized to repay substantially all of the demand note payable to DHI. Under the
terms of the sale-leaseback transaction, Dynegy Danskammer sold certain plant
and equipment and agreed to lease it back for 30 years with renewal options.
Dynegy Danskammer will make semi-annual debt and interest payments each May 8
and November 8 through 2025.



                                       8
<PAGE>

            UNCERTAINTY OF FORWARD-LOOKING STATEMENTS AND INFORMATION

      Dynegy Danskammer's reports, filings and other public announcements often
include statements reflecting assumptions, expectations, projections, intentions
or beliefs about future events. These statements are intended as
"forward-looking statements" under the Private Securities Litigation Reform Act
of 1995. You can identify these statements by the fact that they do not relate
strictly to historical or current facts. They use words such as "anticipate,"
"estimate," "project," "forecast," "may," "will," "should," "expect" and other
words of similar meaning.

      Any or all of Dynegy Danskammer's forward-looking statements may turn out
to be wrong. They can be affected by inaccurate assumptions or by known or
unknown risks and uncertainties, including the following:

      o     The timing and extent of changes in commodity prices for energy,
            particularly electricity, coal and fuel oil;

      o     Demand for electric capacity, energy and ancillary services in the
            markets served by Dynegy Danskammer's generation facility;

      o     Competition from other power plants, including new plants that may
            be developed in the future;

      o     The condition of the capital markets generally, which will be
            affected by interest rates and general economic conditions;

      o     Operational factors affecting the commercial operations of Dynegy
            Danskammer's power generation facility, including catastrophic
            weather related damage, unscheduled outages or repairs,
            unanticipated changes in costs or availability of fuel or emission
            credits, the unavailability of gas transportation, the
            unavailability of electric transmission service or workforce issues;

      o     Cost and other effects of legal and administrative proceedings,
            settlements, investigations and claims, including environmental
            liabilities, that may not be covered by indemnity or insurance; and

      o     Other U.S. or New York regulatory or legislative developments that
            affect Dynegy Danskammer's electricity markets or the demand for
            energy generally, increase the environmental compliance cost for
            Dynegy Danskammer's power generation facility or impose liabilities
            on the owners of such facility.

      Many of these factors will be important in determining Dynegy Danskammer's
actual future results. Consequently, no forward-looking statement can be
guaranteed. Dynegy Danskammer's actual future results may vary materially from
those expressed or implied in any forward-looking statements.

      All of Dynegy Danskammer's forward-looking statements, whether written or
oral, are expressly qualified by these cautionary statements and any other
cautionary statements that may accompany such forward-looking statements. In
addition, Dynegy Danskammer disclaims any obligation to update any
forward-looking statements to reflect events or circumstances after the date of
this report.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      The Company is exposed to certain market risks indigenous to its industry
or inherent in transactions entered into during the normal course of business.
In executing risk-management strategies intended to mitigate these market risks,
the Company may utilize various types of financial instruments. Some of the
risks that management may want to mitigate include changes in interest rates and
commodity prices related to coal and fuel oil to operate the generating
facility. To manage or reduce these market risks, the Company may enter into
interest rate swaps, commodity futures and price swap contracts.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      The financial statements of Dynegy Danskammer, L.L.C. are set forth at
pages F-1 through F-11 inclusive, found at the end of this report, and are
incorporated herein by reference.



                                       9
<PAGE>

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

             The Audit Committee of the Board of Directors of Dynegy Inc., the
          parent company of Dynegy Danskammer, annually considers and recommends
          to the Board the selection of independent public accountants for
          Dynegy and its subsidiaries, including Dynegy Danskammer. As
          recommended by Dynegy's Audit Committee, Dynegy's Board of Directors
          on March 15, 2002 decided to no longer engage Arthur Andersen LLP
          ("Andersen") as independent public accountants of Dynegy and its
          subsidiaries and engaged PricewaterhouseCoopers LLP to serve as
          independent public accountants of Dynegy and its subsidiaries for
          2002. The appointment of PricewaterhouseCoopers LLP is subject to
          ratification by Dynegy's shareholders at the 2002 annual meeting
          scheduled for May 17, 2002.

             Andersen's reports on Dynegy Danskammer's consolidated financial
          statements for the past two years did not contain an adverse opinion
          or disclaimer of opinion, nor were they qualified or modified as to
          uncertainty, audit scope or accounting principles.

             During Dynegy Danskammer's two most recent fiscal years and through
          the date of this Form 10-K, there were no disagreements with Andersen
          on any matter of accounting principles or practices, financial
          statement disclosure, or auditing scope or procedure which, if not
          resolved to Andersen's satisfaction, would have caused them to make
          reference to the subject matter in connection with their report on
          Dynegy Danskammer's financial statements for such years; and there
          were no reportable events, as listed in Item 304(a)(1)(v) of
          Regulation S-K.

             Dynegy Danskammer provided Andersen with a copy of the foregoing
          disclosures. Attached as Exhibit 16.1 is a copy of Andersen's letter,
          dated March 25, 2002, stating its agreement with such statements.

             During Dynegy Danskammer's two most recent fiscal years and through
          the date of this Form 10-K, Dynegy Danskammer did not consult
          PricewaterhouseCoopers LLP with respect to the application of
          accounting principles to a specified transaction, either completed or
          proposed, or the type of audit opinion that might be rendered on
          Dynegy Danskammer's financial statements, or any other matters or
          reportable events listed in Items 304(a)(2)(i) and (ii) of Regulation
          S-K.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

          Omitted pursuant to General Instruction (I)(2)(c) of Form 10-K.

ITEM 11.  EXECUTIVE COMPENSATION OF EXECUTIVE OFFICERS

          Omitted pursuant to General Instruction (I)(2)(c) of Form 10-K.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

          Omitted pursuant to General Instruction (I)(2)(c) of Form 10-K.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

          Omitted pursuant to General Instruction (I)(2)(c) of Form 10-K.

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON 8-K


a)    The following documents are included as exhibits to this Form 10-K:

      4.1       Registration Rights Agreement, dated as of May 8, 2001, among
                Dynegy Holdings Inc., Dynegy Danskammer, L.L.C., Dynegy Roseton,
                L.L.C. and certain other parties named therein (incorporated by
                reference to Exhibit 4.1 to the Company's Registration Statement
                on Form S-4, Reg. No. 333-64842).

      4.2a      Pass Through Trust Agreement ST, dated as of May 1, 2001, among
                Dynegy Danskammer, L.L.C., Dynegy Roseton, L.L.C. and The Chase
                Manhattan Bank (incorporated by reference to Exhibit 4.2a to the
                Company's Registration Statement on Form S-4, Reg. No.
                333-64842).

      4.2b      Schedule identifying substantially identical agreement to Pass
                Through Trust Agreement ST (incorporated by reference to Exhibit
                4.2b to the Company's Registration Statement on Form S-4, Reg.
                No. 333-64842).

      4.3       Form of 144A Pass Through Trust Certificate ST (incorporated by
                reference to Exhibit 4.3 to the Company's Registration Statement
                on Form S-4, Reg. No. 333-64842).

      4.4       Form of 144A Pass Through Trust Certificate LT (incorporated by
                reference to Exhibit 4.4 to the Company's Registration Statement
                on Form S-4, Reg. No. 333-64842).

      4.5       Participation Agreement, dated as of May 1, 2001, among Dynegy
                Danskammer, L.L.C., Danskammer OL LLC, Wilmington Trust Company,
                Danskammer OP LLC and The Chase Manhattan Bank (incorporated by
                reference to Exhibit 4.7b to the Company's Registration
                Statement on Form S-4, Reg. No. 333-64842).

      4.6       Facility Lease, dated as of May 8, 2001, between Danskammer OL
                LLC and Dynegy Danskammer, L.L.C. (incorporated by reference to
                Exhibit 4.8b to the Company's Registration Statement on Form
                S-4, Reg. No. 333-64842).



                                       10
<PAGE>

      4.7       Indenture of Trust, Mortgage, Assignment of Leases and Rents and
                Security Agreement, dated as of May 8, 2001, between Danskammer
                OL LLC and The Chase Manhattan Bank (incorporated by reference
                to Exhibit 4.9b to the Company's Registration Statement on Form
                S-4, Reg. No. 333-64842).

      4.8       Lessor Note ST, dated May 8, 2001, issued by Danskammer OL LLC
                in favor of The Chase Manhattan Bank (incorporated by reference
                to Exhibit 4.10b to the Company's Registration Statement on Form
                S-4, Reg. No. 333-64842).

      4.9       Lessor Note LT, dated May 8, 2001, issued by Danskammer OL LLC
                in favor of The Chase Manhattan Bank (incorporated by reference
                to Exhibit 4.11b to the Company's Registration Statement on Form
                S-4, Reg. No. 333-64842).

      10.1      Site Lease, dated as of May 8, 2001, between Dynegy Danskammer,
                L.L.C. and Danskammer OL LLC (incorporated by reference to
                Exhibit 10.1b to the Company's Registration Statement on Form
                S-4, Reg. No. 333-64842).

      10.2      Site Sublease, dated as of May 8, 2001, between Dynegy
                Danskammer, L.L.C. and Danskammer OL LLC (incorporated by
                reference to Exhibit 10.2b to the Company's Registration
                Statement on Form S-4, Reg. No. 333-64842).

      10.3      Assignment and Reassignment of Facility Agreements, dated as of
                May 8, 2001, between Dynegy Danskammer, L.L.C. and Danskammer OL
                LLC (incorporated by reference to Exhibit 10.3b to the Company's
                Registration Statement on Form S-4, Reg. No. 333-64842).


      10.4      Shared Facilities Agreement, dated as of May 8, 2001, between
                Dynegy Danskammer, L.L.C. and Danskammer OL LLC (incorporated by
                reference to Exhibit 10.4b to the Company's Registration
                Statement on Form S-4, Reg. No. 333-64842).

      10.5      Cross Easement Agreement, dated as of May 8, 2001, between
                Dynegy Danskammer, L.L.C. and Dynegy Roseton, L.L.C.
                (incorporated by reference to Exhibit 10.7 to the Company's
                Registration Statement on Form S-4, Reg. No. 333-64842).

      10.6      Exempt Facilities Agreement, dated as of May 8, 2001, between
                Danskammer OL LLC and Dynegy Danskammer, L.L.C. (incorporated by
                reference to Exhibit 10.8b to the Company's Registration
                Statement on Form S-4, Reg. No. 333-64842).

      16.1      Arthur Andersen LLP Letter.

      23.1      Consent of Arthur Andersen LLP.

      99.1      Letter to SEC regarding Arthur Andersen LLP.

b) No reports on Form 8-K were filed during the quarter ended December 31, 2001.




                                       11
<PAGE>


                                        SIGNATURES


      Pursuant to the requirements of Section 13 or 15(d) 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.


                                          DYNEGY DANSKAMMER, L.L.C.



Date:  March 26, 2002                     By: /s/ALEC DREYER
                                              ----------------------------------
                                              Alec Dreyer, President


      Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.



Date:  March 26, 2002                     By: /s/ ALEC DREYER
                                              ----------------------------------
                                              Alec Dreyer, President (Principal
                                              Executive Officer)


Date:  March 26, 2002                     By: /s/ ROBERT D. DOTY, JR.
                                              ----------------------------------
                                              Robert D. Doty, Jr., Executive
                                              Vice President and Chief Financial
                                              Officer (Principal Financial
                                              Officer)


Date:  March 26, 2002                     By: /s/ MICHAEL R. MOTT
                                              ----------------------------------
                                              Michael R. Mott, Senior Vice
                                              President and Controller
                                              (Principal Accounting Officer)




                                       12

<PAGE>

                            DYNEGY DANSKAMMER, L.L.C.
                                TABLE OF CONTENTS


                                                                           PAGE

FINANCIAL STATEMENTS:


   Report of Independent Public Accountants............................    F- 2

   Balance Sheets:
      December 31, 2001 and December 31, 2000..........................    F- 3

   Statements of Operations:
      For the period from inception (September 14, 2000) to
        December 31, 2000 and for the year ended December 31, 2001 ....    F- 4

   Statements of Cash Flows:
      For the period from inception (September 14, 2000) to
        December 31, 2000 and for the year ended December 31, 2001 ....    F- 5

   Statements of Changes in Member's Equity:
      For the period from inception (September 14, 2000) to
        December 31, 2000 and for the year ended December 31, 2001.....    F- 6

   Notes to Financial Statements.......................................    F- 7




                                      F-1
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Member of Dynegy Danskammer, L.L.C.:

We have audited the accompanying balance sheets of Dynegy Danskammer, L.L.C. (a
Delaware limited liability company) as of December 31, 2001 and 2000, and the
related statements of operations, changes in member's equity and cash flows for
the year ended December 31, 2001 and the period from inception (September 14,
2000) to December 31, 2000. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Dynegy Danskammer, L.L.C. as of
December 31, 2001 and 2000, and the results of its operations and its cash flows
for the year ended December 31, 2001 and the period from inception (September
14, 2000) to December 31, 2000, in conformity with accounting principles
generally accepted in the United States.


                                                Arthur Andersen LLP

Houston, Texas
February 25, 2002


                                      F-2
<PAGE>


                            DYNEGY DANSKAMMER, L.L.C.
                                 BALANCE SHEETS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                            DECEMBER 31,           DECEMBER 31,
                                                                               2001                   2000
                                                                           -------------           --------------
<S>                                                                          <C>                    <C>
                                    ASSETS
CURRENT ASSETS
Cash and cash equivalents                                                    $       4              $      --
Accounts receivable, net                                                            33                     --
Inventory                                                                       13,924                     --
Other current assets                                                             2,784                     --
                                                                             ---------              ---------
          TOTAL CURRENT ASSETS                                                  16,745                     --
                                                                             ---------              ---------

PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment                                                  378,209                     --
Accumulated depreciation and amortization                                      (10,639)                    --
                                                                             ---------              ---------
           PROPERTY, PLANT AND EQUIPMENT, NET                                  367,570                     --
                                                                             ---------              ---------

Other long-term assets                                                           5,117                     --
                                                                             ---------              ---------
          TOTAL ASSETS                                                       $ 389,432              $      --
                                                                             =========              =========


                 LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES
Accounts payable                                                             $     283              $      --
Accounts payable - affiliates (Note 5)                                         109,651                     --
Accrued liabilities and other                                                    6,547                     --
Current portion of long-term debt                                                  207                     --
                                                                             ---------              ---------
       TOTAL CURRENT LIABILITIES                                               116,688                     --

Long-term debt - third party (Note 7)                                          299,694                     --
Long-term debt - affiliate (Note 3)                                              8,477                     --
                                                                             ---------              ---------
         Total Long-Term Debt                                                  308,171                     --

Other long-term liabilities                                                      7,989                     --
                                                                             ---------              ---------
          TOTAL LIABILITIES                                                    432,848                     --
                                                                             ---------              ---------

COMMITMENTS AND CONTINGENCIES (NOTE 6)

MEMBER'S EQUITY
Membership interest                                                                  1                      1
Due from member                                                                     (1)                    (1)
Accumulated other comprehensive income                                           2,275                     --
Retained deficit                                                               (45,691)                    --
                                                                             ---------              ---------
      TOTAL MEMBER'S EQUITY                                                    (43,416)                    --
                                                                             ---------              ---------
      TOTAL LIABILITIES AND MEMBER'S EQUITY                                  $ 389,432              $      --
                                                                             =========              =========
</TABLE>


   The accompanying notes are an integral part of these financial statements.


                                      F-3
<PAGE>

                            DYNEGY DANSKAMMER, L.L.C.
                            STATEMENTS OF OPERATIONS
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                                              PERIOD FROM
                                                                                               INCEPTION
                                                                                             (SEPTEMBER 14,
                                                                         YEAR ENDED             2000) TO
                                                                         DECEMBER 31,          DECEMBER 31,
                                                                            2001                  2000
                                                                       ---------------      ------------------
<S>                                                                       <C>                  <C>
Revenues - affiliate (Note 5)                                             $ 53,249             $       --

Cost of sales -  third party                                                56,806                     --
Cost of sales -  affiliate (Note 5)                                         11,553                     --
                                                                          --------             ----------
     Total cost of sales                                                    68,359                     --
                                                                          --------             ----------

Operating margin                                                           (15,110)                    --
Depreciation and amortization                                               10,640                     --
General and administrative expenses - affiliate (Note 5)                     1,301                     --
                                                                          --------             ----------

Operating loss                                                             (27,051)                    --
Interest expense -  third party (Note 7)                                   (12,276)                    --
Interest expense -  affiliate (Note 3)                                      (6,364)                    --
                                                                          --------             ----------

     Total interest expense                                                (18,640)                    --
                                                                          --------             ----------

NET LOSS                                                                  $(45,691)            $       --
                                                                          ========             ==========
</TABLE>




   The accompanying notes are an integral part of these financial statements.


                                      F-4
<PAGE>

                            DYNEGY DANSKAMMER, L.L.C.
                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                                                 PERIOD FROM
                                                                                                                  INCEPTION
                                                                                                                (SEPTEMBER 14,
                                                                                          YEAR ENDED               2000) TO
                                                                                          DECEMBER 31,           DECEMBER 31,
                                                                                             2001                   2001
                                                                                         -------------          -------------
<S>                                                                                        <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES

Net loss                                                                                   $ (45,691)            $     --
Items not affecting cash flows from operating activities:
   Depreciation and amortization                                                              10,640                   --
   Amortization of prepaid property taxes                                                      6,183                   --
   Affiliate funding of working capital and other                                             22,174                   --

Change in assets and liabilities resulting from operating activities:
   Accounts receivable                                                                           (33)                  --
   Accounts payable                                                                              283                   --
   Accrued liabilities                                                                         6,547                   --
                                                                                           ---------             --------



Net cash provided by operating activities                                                        103                   --
                                                                                           ---------             --------

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of generation assets                                                            (308,477)                  --
                                                                                           ---------             --------

Net cash used in investing activities                                                       (308,477)                  --
                                                                                           ---------             --------

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from long-term borrowings - third party (Note 7)                                    300,000                   --
Repayments of long-term borrowings - third party                                                 (99)                  --
Proceeds from long-term borrowings - affiliate (Note 3)                                      324,161                   --
Repayments of long-term borrowings - affiliate                                              (315,684)                  --
                                                                                           ---------             --------

Net cash provided by financing activities                                                    308,378                   --
                                                                                           ---------             --------

Net increase in cash and cash equivalents                                                          4                   --
Cash and cash equivalents, beginning of period                                                    --                   --
                                                                                           ---------             --------

Cash and cash equivalents, end of period                                                   $       4             $     --
                                                                                           =========             ========




Interest paid                                                                              $   9,539             $     --
                                                                                           =========             ========
</TABLE>


   The accompanying notes are an integral part of these financial statements.



                                       F-5
<PAGE>

                            DYNEGY DANSKAMMER, L.L.C.
                    STATEMENTS OF CHANGES IN MEMBER'S EQUITY
             (IN THOUSANDS, EXCEPT FOR MEMBERSHIP INTEREST AMOUNTS)

<TABLE>
<CAPTION>
                                                           MEMBERSHIP INTEREST
                                                   ------------------------------------
                                                                               DUE FROM     RETAINED
                                                   INTERESTS      AMOUNT        MEMBER      EARNINGS        OTHER        TOTAL
                                                   ----------   ----------   ----------    ------------   --------    ---------
<S>                                                    <C>       <C>          <C>           <C>           <C>          <C>
As of September 14, 2000 ......................        1,000     $      1     $     (1)     $     --      $     --     $     --
Comprehensive income
   Net income .................................           --           --           --            --            --           --
   Other comprehensive income .................           --           --           --            --            --           --
                                                    --------     --------     --------      --------      --------     --------
          Total comprehensive income ..........           --           --           --            --            --           --
                                                    --------     --------     --------      --------      --------     --------
As of December 31, 2000 .......................        1,000     $      1     $     (1)     $     --      $     --           --
Comprehensive income
   Net loss ...................................           --           --           --       (45,691)           --      (45,691)
   Unrealized gain on hedge activity ..........           --           --           --            --         2,275        2,275
                                                    --------     --------     --------      --------      --------     --------
          Total comprehensive income ..........           --           --           --       (45,691)        2,275      (43,416)
                                                    --------     --------     --------      --------      --------     --------
As of December 31, 2001 .......................        1,000     $      1     $     (1)     $(45,691)     $  2,275     $(43,416)
                                                    ========     ========     ========      ========      ========     ========


</TABLE>



   The accompanying notes are an integral part of these financial statements.



                                      F-6
<PAGE>

                            DYNEGY DANSKAMMER, L.L.C.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     FOR THE PERIOD FROM INCEPTION (SEPTEMBER 14, 2000) TO DECEMBER 31, 2000
                    AND FOR THE YEAR ENDED DECEMBER 31, 2001


NOTE 1 -- ORGANIZATION AND OPERATIONS OF THE COMPANY

      Dynegy Danskammer, L.L.C. ("Dynegy Danskammer" or the "Company"), a wholly
owned subsidiary of Hudson Power, L.L.C., an indirect wholly owned subsidiary of
Dynegy Holdings Inc. ("DHI"), is a Delaware limited liability company that was
formed for the purpose of owning or leasing, making improvements to and
operating fossil-fuel electric generating facilities located in the State of New
York. The Company was originally formed on September 14, 2000, but did not
commence business operations until January 30, 2001, the date the Company
completed its acquisition of the Danskammer power generation facility (the
"Generation Assets"). The accompanying financial statements reflect the
operations of the Company from its inception, which includes the operations of
the Generation Assets commencing from the date of acquisition.

      On January 30, 2001, the Company completed its acquisition of the
Generation Assets (the "Acquisition") from Central Hudson Gas and Electric
Corporation ("Central Hudson"). The Acquisition was originally financed through
an intercompany demand note from DHI (see Note 3), a significant portion of
which was paid down with the proceeds of the sale-leaseback transaction
consummated in May 2001 (see Note 7).

      Separate financial statements for the Company's operations of the
Generation Assets are available only for the period subsequent to the
Acquisition. There are no separate financial statements available for the
operation of the Generation Assets prior to the Company taking ownership, as the
pre-Acquisition operations were fully integrated with, and their results of
operations were consolidated into, the former owner's results. In addition,
prior to the Acquisition, the electric output of the Generation Assets was sold
based on rates set by regulatory authorities. As a result of these factors and
because electricity rates are now set under separate power purchase agreements
or by market forces, historical financial data with respect to the Generation
Assets are not available, not meaningful and not indicative of future results.
The Company's future results of operations will depend primarily on revenues
from the unregulated sale of energy, capacity and other ancillary services and
the level of its operating expenses.

NOTE 2 -- ACCOUNTING POLICIES

      The accounting policies of the Company conform to generally accepted
accounting principles in the United States. The more significant of such
accounting policies are described below. The preparation of the financial
statements in conformity with generally accepted accounting principles requires
management to develop estimates and make assumptions that affect reported
financial position and results of operations and that impact the nature and
extent of disclosure, if any, of contingent assets and liabilities. Actual
results could differ materially from those estimates.

      CASH.  Cash and cash equivalents consist of all demand deposits and
funds invested in short-term investments with original maturities of three
months or less.

      INVENTORY. Inventory consists primarily of fossil fuel of $7.8 million and
materials and supplies of $6.1 million at December 31, 2001. Inventory is
carried at the lower of market or the weighted-average purchase cost.

      PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment are recorded
at cost. Expenditures for major replacements and renewals are capitalized. The
Company considers major maintenance to be expenditures incurred on a cyclical
basis in order to maintain the efficient operation of its assets. Expenditures
for major maintenance are capitalized and amortized over their cyclical period.
Expenditures for repairs and minor renewals to maintain assets in operating
condition are expensed. Depreciation is provided using the straight-line method
over the estimated economic service lives of the assets, ranging from three to
35 years. The Company reviews the carrying value of its long-lived assets in
accordance with provisions of Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of."

      In August 2001, the  Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets" ("Statement No. 144").
Statement No. 144 addresses the accounting and reporting for the impairment or
disposal of long-lived assets and supersedes Statement No. 121 and APB Opinion
No. 30, "Reporting the Results of Operations - Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and



                                      F-7

<PAGE>

                            DYNEGY DANSKAMMER, L.L.C.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     FOR THE PERIOD FROM INCEPTION (SEPTEMBER 14, 2000) TO DECEMBER 31, 2000
                    AND FOR THE YEAR ENDED DECEMBER 31, 2001



Transactions."  The Company's adoption of Statement No. 144 on January 1, 2002
did not have any impact on the Company's financial condition or results of
operations.

      As part of the Acquisition, the Company acquired air emissions regulatory
allowances that have already been issued and allowances that the Company expects
to be allocated during the remaining useful life of the plant. Although the
emission allowances received are freely transferable, the Company intends to use
a significant portion of the emission allowances in the normal course of
business to generate electricity. Accordingly, the Company has classified
emission allowances expected to be utilized to generate electricity as part of
property, plant and equipment and amortizes the amount over the estimated useful
life of the plant on a straight-line basis.

      ENVIRONMENTAL COSTS AND OTHER CONTINGENCIES. Environmental costs relating
to current operations are expensed or capitalized, as appropriate, depending on
whether such costs provide future economic benefit. Liabilities are recorded
when environmental assessment indicates that remedial efforts are probable and
the costs can be reasonably estimated. Measurement of liabilities is based on
currently enacted laws and regulations, existing technology and site-specific
costs. Such liabilities may be recognized on a discounted basis if the amount
and timing of anticipated expenditures for a site are fixed or reliably
determinable; otherwise, such liabilities are recognized on an undiscounted
basis. Environmental liabilities in connection with assets that are sold or
closed are realized upon such sale or closure, to the extent they are probable,
can be estimated and have not previously been reserved. In assessing
environmental liabilities, no offset is made for potential insurance recoveries.
Recognition of any joint and several liabilities is based upon the Company's
best estimate of its final pro rata share of such liability.

      In June 2001, the FASB issued Statement of Financial Accounting
Standards No. 143, "Accounting for Asset Retirement Obligations" ("Statement
No. 143").  Statement No. 143 requires that the fair value of a liability for
an asset retirement obligation be recognized in the period in which it is
incurred with the associated asset retirement costs being capitalized as a
part of the carrying amount of the long-lived asset.  Statement No. 143 also
includes disclosure requirements that provide a description of asset
retirement obligations and reconciliation of changes in the components of
those obligations.  The Company is evaluating the future financial effects of
adopting Statement No. 143 and expects to adopt the standard effective January
1, 2003.

      Liabilities for other contingencies are recognized upon identification of
an exposure, which when analyzed indicates that it is both probable that an
asset has been impaired or that a liability has been incurred and that such loss
amount can be reasonably estimated. Costs to remedy such contingencies or other
exposures are charged to a reserve, if one exists, or otherwise to current
operations. When a range of probable loss exists, the Company accrues the lesser
end of the range.

      NEW ACCOUNTING PRONOUNCEMENTS. The FASB issued, and subsequently amended,
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("Statement No. 133"), which became
effective January 1, 2001. Provisions in Statement No. 133, as amended, affect
the accounting and disclosure of certain contractual arrangements and operations
of the Company. Under Statement No. 133, as amended, all derivative instruments
are recognized in the balance sheet at their fair values and changes in fair
value are recognized immediately in earnings, unless the derivatives qualify and
are designated as hedges of future cash flows, fair values or qualify and are
designated as normal purchases and sales. For derivatives treated as hedges of
future cash flows, the effective portion of changes in fair value is recorded in
other comprehensive income until the related hedged items impact earnings. Any
ineffective portion of a hedge is reported in earnings immediately. For
derivatives treated as fair value hedges, changes in the fair value of the
derivative and changes in the fair value of the related asset or liability are
recorded in current period earnings. Derivatives treated as normal purchases or
sales are recorded and recognized in income using accrual accounting. The
adoption of this pronouncement on January 1, 2001 did not have any impact on the
Company's financial statements.

      The nature of the Company's business necessarily involves certain market
and financial risks. The Company may enter into financial instrument contracts
in an attempt to mitigate or eliminate these various risks. After adoption of
the pronouncement, the Company executed interest rate swaps that were designated
as cash flow hedges of the


                                      F-8
<PAGE>

                            DYNEGY DANSKAMMER, L.L.C.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     FOR THE PERIOD FROM INCEPTION (SEPTEMBER 14, 2000) TO DECEMBER 31, 2000
                    AND FOR THE YEAR ENDED DECEMBER 31, 2001


benchmark interest rate component of certain operating lease rentals. Changes in
accumulated other comprehensive income related to these derivatives for the year
ended December 31, 2001 were as follows (in thousands):

      Transition adjustment as of January 1, 2001    $   ---
      Current period increases in fair value           2,437
      Reclassifications to earnings                     (162)
                                                     -------
      Balance at December 31, 2001                   $ 2,275
                                                     =======

      The accumulated balance in Other Comprehensive Income at December 30, 2001
is expected to be reclassified to future earnings, contemporaneously with the
related recognition of interest expense. Of this amount, approximately $251
thousand will be reclassified into earnings over the 12-month period ending
December 31, 2002.

      During the year ended December 31, 2001, there was no material
ineffectiveness from changes in fair value of hedge positions, and no amounts
were excluded from the assessment of hedge effectiveness related to the hedge of
future cash flows. Additionally, no amounts were reclassified to earnings in
connection with forecasted transactions that were no longer considered probable
of occurring.

      REVENUE RECOGNITION.  Revenues include energy and ancillary services
sales.  Revenue is recognized as electricity is generated and sold under
energy sales agreements or as services are provided.

      INCOME TAXES.  Dynegy Danskammer is a limited liability company that is
not taxable for federal income tax purposes.

      CONCENTRATION OF CREDIT RISK. The Company sells all of the power its
facility generates at fixed prices to an affiliate. The receivables associated
with these sales are not collateralized and are expected to be collected.

NOTE 3 - NOTE PAYABLE TO AFFILIATE

      In connection with the Acquisition, the Company entered into an
approximately $324.2 million demand note payable to DHI, bearing interest at 7%
per annum. Both principal and interest are due and payable upon demand by DHI
and, in any event, no later that January 29, 2006. The Company may, at its
option (though it is not obligated to do so), prepay principal or interest prior
to January 29, 2006, without penalty. Interest on all past due amounts, both
principal and accrued interest, shall accrue at a rate of 9% per annum. Failure
to pay interest does not constitute a default, unless such interest is due on
January 29, 2006. DHI has represented that it will not call for payment on this
note before December 31, 2002. In addition, the note was substantially
refinanced on a long-term basis in connection with the sale-leaseback
transaction consummated in May 2001 (see Note 7). The Company has repaid $315.7
million under the demand note.

      In March 2001, as protection against the impact fluctuating interest rates
were expected to have on the anticipated financing transaction (see Note 7),
DHI, on behalf of the Company, executed swaps to hedge its exposure. Under these
swaps, the Company pays interest at a fixed rate of 5.97% and receives interest
at a floating rate based on three-month LIBOR. The swap agreements, with a
combined notional amount allocable to the Company of approximately $127.3
million, mature in 2016.

      On behalf of the Company, DHI entered into additional swap agreements as a
cash flow hedge in April 2001, paying 5.99% and receiving three-month LIBOR on a
notional amount allocable to the Company of approximately $81.5 million. The
Company received approximately $2.4 million when all interest rate swaps were
liquidated in May 2001. The payment received was recorded by the Company in
Other Comprehensive Income and will be reclassified into earnings over the term
of the hedged transaction (see Note 2).



                                      F-9
<PAGE>

                            DYNEGY DANSKAMMER, L.L.C.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     FOR THE PERIOD FROM INCEPTION (SEPTEMBER 14, 2000) TO DECEMBER 31, 2000
                    AND FOR THE YEAR ENDED DECEMBER 31, 2001


NOTE 4 -- PROPERTY, PLANT AND EQUIPMENT

      At December 31, 2001, property, plant and equipment consisted of the
following (in thousands):

      Fossil-fired generating facility               $360,311
      Land                                              9,450
      Other                                             8,448
                                                     --------
                                                      378,209
      Less: Accumulated depreciation                  (10,639)
                                                     --------
      Property, plant and equipment, net             $367,570
                                                     ========

NOTE 5 -- RELATED PARTY TRANSACTIONS

      Transactions with affiliates result from various purchase and sale
agreements with other subsidiaries of DHI. The Company has obtained
representation from DHI that, through December 31, 2002, payments to affiliates
will not be required beyond the Company's currently available funds. In addition
to the demand note payable described in Note 3, the Company entered into the
following transactions with affiliates during the year ended December 31, 2001:

o  Coal Agency Agreement between the Company and Dynegy Coal Trading and
   Transportation, L.L.C. ("DCTT") pursuant to which DCTT negotiates all
   purchases and deliveries of coal used by the Company in the generation of
   electricity. A management fee of $0.25 per ton delivered is assessed as
   compensation for this service. Total management fees paid to DCTT for this
   service during the year ended December 31, 2001 were approximately $244
   thousand. There were no coal deliveries in 2000.

o  Gas Purchase and Sales Agreement between the Company and Dynegy Marketing and
   Trade ("DMT") pursuant to which the Company purchases at prevailing market
   rates and receives from DMT all of the gas used by the Company to generate
   electricity. Total gas purchases with affiliates for the year ended December
   31, 2001 were approximately $1.7 million. There were no such purchases in
   2000.

o  Power Purchase and Sale Agreement between the Company and Dynegy Power
   Marketing, Inc. ("DYPM") pursuant to which DYPM purchases electric energy and
   related products from the Company. Electrical energy is purchased from the
   Company at contractually stipulated fixed prices until termination of the
   contract by either party, while related products are purchased at market
   rates. Management intends to renegotiate the Purchase and Sale Contract
   between the Company and DYPM such that the fixed sales prices will cover
   estimated future costs. Sales to DYPM during the year ended December 31, 2001
   were approximately $53.2 million. There were no such sales in 2000.

o  As part of the Acquisition, the Company was required to enter into a
   Transition Power Agreement with Central Hudson. The terms of the agreement
   require that the Company supply power and ancillary services to Central
   Hudson at prices significantly below market levels. Since the contract was
   below market and the impairment was both estimable and reasonably probable,
   the Company recorded an accrued liability for the agreement. Subsequently,
   the agreement was assigned to DYPM, and an affiliated payable of
   approximately $70 million was established by the Company to compensate DYPM
   for assuming the rights and duties under the agreement. This obligation can
   be called by DYPM at any time and is therefore classified as current in the
   accompanying financial statements. However, the Company has obtained
   representation from DHI that, through December 31, 2002, payments to
   affiliates will not be required beyond the Company's currently available
   funds.

o  Certain administrative services such as payroll, employee benefits programs,
   insurance, accounting and information technology is shared among the
   affiliates of DHI, and the costs of these corporate support services are
   allocated to all affiliates. The total costs allocated to the Company for the
   year ended December 31, 2001 were approximately $1.3 million, which is
   reflected in the "General and Administrative" caption on the income
   statement. There were no such costs allocated in 2000.


                                      F-10
<PAGE>

                            DYNEGY DANSKAMMER, L.L.C.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     FOR THE PERIOD FROM INCEPTION (SEPTEMBER 14, 2000) TO DECEMBER 31, 2000
                    AND FOR THE YEAR ENDED DECEMBER 31, 2001



o  As the Company does not have employees, Dynegy Northeast Generation, Inc.
   ("DNE") administers the operation of the Company's facilities. Costs incurred
   by DNE are charged to the Company at cost. These costs include on-site
   technical, supervisory, engineering and clerical support necessary for the
   day-to-day operations of a power generation facility. The costs incurred by
   the Company during the year ended December 31, 2001 were approximately $9.6
   million. There were no such costs incurred in 2000.

NOTE 6 -- COMMITMENTS AND CONTINGENCIES

      The Company is subject to various legal proceedings and claims that arise
in the normal course of business. In the opinion of management, the amount of
ultimate liability with respect to these actions will not have a material
adverse effect on the financial position or results of operations of the
Company. However, no assurance can be given that the actual amount of any such
liability will not differ materially from the amount estimated.

      LOCAL AREA SUPPORT AGREEMENT. The Local Area Support Agreement ("LASA")
requires the Company to maintain the availability of Central Hudson's local
transmission system under certain circumstances. This agreement will be in place
until May 2003 or until the Company meets certain terms that will terminate the
agreement. If Central Hudson cannot supply power to its customers because of the
Company's failure to perform under the LASA, the Company must pay certain
penalties to Central Hudson. The LASA terminates upon the installation of, or
provision for, substitute generation or transmission facilities by the Company.
The Company has elected to fund the purchase and installation of additional
transmission facilities for Central Hudson. Although the risk of such penalties
is remote, insurance is being carried by the Company to cover the period prior
to the in-service date for the substitute transmission system.

      ENVIRONMENTAL. Dynegy Danskammer's operations are subject to extensive
federal, state and local statutes, rules and regulations governing the discharge
of materials into the environment or otherwise relating to environmental
protection. Compliance with these statutes, rules and regulations requires
capital and operating expenditures including those related to monitoring,
pollution control equipment, emission fees and permitting at various operating
facilities and remediation obligations. Failure to comply with these statutes,
rules and regulations may result in the assessment of civil and even criminal
penalties. The Company's environmental expenditures are anticipated to increase
in the future with the trend toward stricter standards, greater regulation, more
extensive permitting requirements and an increase in the number and types of
assets subject to environmental regulation operated by the Company. No assurance
can be given that future compliance with these environmental statutes, rules and
regulations will not have a material adverse effect on the Company's operations
or its financial condition.

      PURCHASE OBLIGATIONS. The Company has entered into two separate long-term
contracts to purchase coal. The contracts require approximately 746,000 metric
tons of coal to be purchased in 2002. The volume purchase requirements may be
reduced by up to 10% without penalty. In addition, the coal is purchased at a
fixed rate that can be adjusted based on certain market conditions.

NOTE 7 -- SALE-LEASEBACK TRANSACTION

      On May 8, 2001, Dynegy Danskammer completed a sale-leaseback transaction
to provide the term financing for the acquisition of the Danskammer Units 3 and
4 and related facilities. Under the terms of the sale-leaseback transaction, the
Company sold certain plant and equipment and agreed to lease it back for 30
years with renewal options. Proceeds of $300.0 million were used to repay a
significant portion of the demand note payable to DHI. The Company will make
semi-annual debt and interest payments each May 8 and November 8 through 2025.

      The terms of the sale-leaseback transaction required DHI to provide a
guarantee of the Company's obligations. The guarantee by DHI of the Company's
obligations is a form of continuing involvement that precludes the application
of sale-leaseback accounting in the Company's financial statements, but not in
DHI's consolidated financial statements. As such, the Company will account for
the obligations as a financing transaction. This will require the Company to
continue to record its property, plant and equipment within its financial
statements, and establish a note payable for the $300.0 million in proceeds
obtained to finance the transaction. Income will therefore be impacted in future
periods through continued depreciation of the generation assets and additional
interest expense associated with the note.


                                      F-11