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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------

                                   FORM 10-K

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

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
                        COMMISSION FILE NUMBER 333-89725
                            ------------------------

                          EDISON MISSION HOLDINGS CO.
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                             <C>
               CALIFORNIA                                      33-0826940
     (State or other jurisdiction of              (I.R.S. Employer Identification No.)
     incorporation or organization)

   18101 VON KARMAN AVENUE, SUITE 1700                            92612
           IRVINE, CALIFORNIA                                  (Zip Code)
(Address of principal executive offices)
</TABLE>

                            ------------------------

                      SEE TABLE OF ADDITIONAL REGISTRANTS
                            ------------------------

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

<TABLE>
<CAPTION>
                  NONE                                       NOT APPLICABLE
                  ----                                       --------------
<S>                                             <C>
          (Title of each class)                      (Name of each exchange on which
                                                               registered)
</TABLE>

          Securities registered pursuant to Section 12(g) of the Act:
                      8.137% SENIOR SECURED BONDS DUE 2019
                      8.734% SENIOR SECURED BONDS DUE 2026
                                (Title of Class)

       Registrant's telephone number, including area code: (949) 752-5588
                            ------------------------

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

    Aggregate market value of the registrant's Common Stock held by
non-affiliates of the registrant as of December 31, 2000: $0. Number of shares
outstanding of the registrant's Common Stock as of March 30, 2001: 100 shares
(all shares held by an affiliate of the registrant).

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<PAGE>
                        TABLE OF ADDITIONAL REGISTRANTS

<TABLE>
<CAPTION>
                                                    STATE OF           PRIMARY STANDARD            I.R.S.
                                                  INCORPORATION    INDUSTRIAL CLASSIFICATION      EMPLOYER
NAME AND NUMBER                                  OR ORGANIZATION          CODE NUMBER          IDENTIFICATION
---------------                                  ---------------   -------------------------   --------------
<S>                                              <C>               <C>                         <C>
Edison Mission Finance Co. ....................    California                4991                33-0839202
  18101 Von Karman Avenue, Suite 1700
  Irvine, California
  949-752-5588

Homer City Property Holdings, Inc. ............    California                4991                33-0851685
  18101 Von Karman Avenue, Suite 1700
  Irvine, California
  949-752-5588

Mission Energy Westside, Inc. .................    California                4991                33-0550657
  18101 Von Karman Avenue, Suite 1700
  Irvine, California
  949-752-5588

Chestnut Ridge Energy Company .................    California                4991                33-0826590
  18101 Von Karman Avenue, Suite 1700
  Irvine, California
  949-752-5588

EME Homer City Generation L.P. ................   Pennsylvania               4991                33-0826938
  18101 Von Karman Avenue, Suite 1700
  Irvine, California
  949-752-5588
</TABLE>
<PAGE>
                               TABLE OF CONTENTS

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<CAPTION>
ITEM                                                                                    PAGE
----                                                                                  --------
<C>                     <S>                                                           <C>
                                            PART I

          1.            Business....................................................      1

          2.            Properties..................................................     17

          3.            Legal Proceedings...........................................     17

          4.            Submission of Matters to a Vote of Security Holders.........     17

                                           PART II

          5.            Market for Registrant's Common Equity and Related
                          Stockholder Matters.......................................     17

          6.            Selected Financial Data.....................................     18

          7.            Management's Discussion and Analysis of Results of
                          Operations and Financial Condition........................     19

         7a.            Quantitative and Qualitative Disclosures About Market
                          Risk......................................................     26

          8.            Financial Statements and Supplementary Data.................     26

          9.            Changes in and Disagreements with Accountants on Accounting
                          and Financial Disclosure..................................     27

                                           PART III

         10.            Directors and Executive Officers of the Registrant..........     27

         11.            Executive Compensation......................................     28

         12.            Security Ownership of Certain Beneficial Owners and
                          Management................................................     28

         13.            Certain Relationships and Related Transactions..............     28

                                           PART IV

         14.            Exhibits, Financial Statement Schedules and Reports on Form
                          8-K.......................................................     30

                        Signatures..................................................     94
</TABLE>

                                       i
<PAGE>
                                     PART I

ITEM 1.  BUSINESS

THE COMPANY

    Edison Mission Holdings Co. is a special-purpose California corporation
formed on October 7, 1998 for the purpose of acquiring, owning and operating,
through our subsidiaries, the Homer City facilities, which are comprised of
three coal-fired electric generating units with an aggregate capacity of 1,884
megawatts (MW), and related facilities. The Homer City facilities are located
near Pittsburgh, Pennsylvania.

    On March 18, 1999, our subsidiary, EME Homer City Generation L.P. (EME Homer
City), completed its acquisition of 100% of the ownership interests in the Homer
City facilities from wholly-owned subsidiaries of GPU Inc. and Energy East
Corporation for approximately $1.8 billion. The acquisition was financed through
a capital contribution by Edison Mission Energy of approximately $1.1 billion
and a short-term loan of approximately $800 million. The short-term loan was
replaced by $300 million aggregate principal amount of 8.137% Senior Secured
Bonds due 2019 and $530 million aggregate principal amount of 8.734% Senior
Secured Bonds due 2026. We subsequently completed an exchange offer in which we
exchanged the bonds for substantially similar bonds that were registered with
the Securities and Exchange Commission. We are filing this annual report under
Section 15(d) of the Securities Exchange Act of 1934.

    We formed five subsidiaries, including EME Homer City, in order to effect
the acquisition, ownership, financing and operation of the Homer City
facilities. Each of these subsidiaries has provided a guarantee with respect to
the bonds and our other senior secured debt as well as a pledge of substantially
all of its assets and cash flow as collateral for the bonds and our other senior
secured debt. The only income available to us to pay principal of, premium, if
any, and interest on the bonds will be repayments of subordinated loans and
equity distributions from our subsidiaries.

    Edison Mission Energy is our parent company. Edison Mission Energy's
ultimate parent company is Edison International, which also owns Southern
California Edison, one of the largest electric utilities in the United States.
Each of these companies is registered with the Securities and Exchange
Commission and has financial statements that are filed in accordance with rules
enacted by the Securities and Exchange Commission. For more information
regarding each of these companies, see their respective Forms 10-K for the year
ended December 31, 2000.

    As of the date of this annual report, our authorized capital stock consists
of 10,000 shares of common stock, no par value, of which 100 shares are issued
and outstanding. There is no public trading market for our common stock. All our
common stock is owned by Edison Mission Energy. The address of our principal
executive offices is 18101 Von Karman Avenue, Suite 1700, Irvine, California
92612-1046, and our telephone number is (949) 752-5588.

FORWARD-LOOKING STATEMENTS

    This annual report includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events based upon our knowledge of facts as of the date of this annual
report and our assumptions about future events. These forward-looking statements
are subject to various risks and uncertainties that may be outside our control,
including, among other things:

    - governmental, statutory, regulatory or administrative changes or
      initiatives affecting us, or the electricity industry generally;

    - supply, demand and price for electric capacity and energy in the markets
      served by our generating units;

                                       1
<PAGE>
    - competition from other power plants, including new plants that may be
      developed in the future;

    - operating risks, including equipment failure, dispatch levels,
      availability, heat rate and output; and

    - the cost, availability and pricing of fuel and fuel transportation
      services for our generating units.

    We use words like "believe," "expect," "anticipate," "intend," "may,"
"will," "should," "estimate," "projected" and similar expressions to help
identify forward-looking statements in this annual report. For additional
factors that could affect the validity of our forward-looking statements, you
should read "Management's Discussion and Analysis of Results of Operations and
Financial Condition;" and in the "Notes to Consolidated Financial Statements"
contained in Part II, Item 8. The information contained in this report is
subject to change without notice. Readers should review future reports filed by
Edison Mission Holdings Co. with the Securities and Exchange Commission. In
light of these and other risks, uncertainties and assumptions, actual events or
results may be very different from those expressed or implied in the
forward-looking statements in this annual report or may not occur. We have no
obligation to publicly update or revise any forward-looking statement, whether
as a result of new information, future events or otherwise.

DESCRIPTION OF BUSINESS

INDUSTRY OVERVIEW

    The United States electric industry, including companies engaged in
providing generation, transmission, distribution and ancillary services, has
undergone significant change over the last several years, leading to significant
deregulation and increased competition. The Federal Energy Regulatory
Commission, under Order No. 888 and Order No. 889, which are referred to as the
Open Access Rules, requires the owners and operators of electric transmission
facilities to make those facilities available for transmission on a
non-discriminatory basis to all wholesale generators, sellers and buyers of
electricity. In addition to this wholesale transmission, or wheeling, throughout
the United States, there has been a number of proposals at the state level to
allow retail customers to choose their electricity suppliers, with incumbent
utilities required to deliver that electricity over their transmission and
distribution systems. Numerous electric utilities nationwide have divested all
or a portion of their electricity generation business as legislative and
regulatory developments have driven the industry to disaggregate. Edison Mission
Energy, through Edison Mission Holdings Co. and its other subsidiaries, is among
a group of companies actively pursuing opportunities created by the deregulating
domestic electric markets to operate as competitive electric generation and
wholesale supply companies in a deregulated marketplace.

POWER MARKETS

    PJM.  PJM is the largest centrally dispatched electric control area in North
America and the third largest in the world, consisting of over 530 generating
units with a total installed capacity of 56,709 MW. PJM serves 8.7% of the
United States population and covers portions of Pennsylvania, New Jersey,
Maryland, Delaware, the District of Columbia and Virginia. PJM was restructured
in 1998 as a competitive, non-discriminatory market in response to the Open
Access Rules and includes bid-based energy and capacity markets. The independent
system operator for the PJM operates the spot energy market and determines the
market-clearing price for each hour based on bids submitted by participating
generators which indicate the minimum prices a bidder is willing to accept to be
dispatched at various incremental generation levels. Beginning June 1, 2000, PJM
conducts both day-ahead and real-time energy markets. A transmission charge
based on the location of the energy purchaser is added to the energy price if
the transmission system becomes constrained and generators with higher bids are
dispatched prior to those with lower bids. PJM has a day-ahead installed
capacity market and monthly installed capacity markets extending twelve months
in the future. Each installed

                                       2
<PAGE>
capacity market has a single market-clearing price for each day during which the
market is in operation.

    NYISO.  NYISO includes 34,881 MW of installed capacity and serves over 99%
of New York State's electric power requirements. The NYISO was established in
1999 as a competitive, non-discriminatory market in response to the Open Access
Rules and includes bid-based electricity and transmission usage markets. The
market-clearing price for NYISO's day-ahead and real-time energy markets is set
by supplier generation bids and customer demand bids.

    We can transmit 1,884 MW from the Homer City units into NYISO through two
345 kilovolts (kV) high voltage transmission lines and can transmit 1,884 MW
into PJM through two 230 kV lines. We do not incur any access or wheeling
charges for any energy delivered into PJM. A 13-mile 230 kV line from the Homer
City units also provides an indirect interconnection to the East Central Area
Reliability Council, one of the largest regional electricity markets in the
United States.

FACILITY OVERVIEW

    We believe the Homer City facilities are among the lowest cost generating
facilities in the Northeast region. In 2000, these units had fuel expenses and
operating and maintenance costs of approximately $19.51/MWh, and, in our belief,
are among the first coal-fired units to be called upon for the dispatch of
electric power within both PJM and the NYISO. The Homer City facilities are
located on a 2,413-acre site approximately 45 miles northeast of Pittsburgh
within Indiana County, Pennsylvania. The Homer City facilities consist of the
Homer City units, a coal cleaning facility, the Two Lick Dam and associated
support facilities. The Homer City units benefit from direct transmission access
to both PJM and NYISO through four high voltage lines which interconnect through
a switchyard located on the site.

    The Homer City units are coal-fired boiler and steam generating units. Units
1 and 2, which are essentially identical to one another, were constructed as
positive pressure units, which utilize boilers with internal air pressure
slightly higher than atmospheric pressure, and were placed into commercial
operation in 1969. Units 1 and 2 were converted to balanced draft units, which
utilize boilers with internal air pressure balanced at approximately atmospheric
pressure, in 1976 and 1977, respectively. Unit 1 has an installed capacity of
620 MW, and Unit 2 has an installed capacity of 614 MW. The steam turbines and
generators for Units 1 and 2 were manufactured by Westinghouse Electric
Corporation, and the boilers for these units were manufactured by Foster Wheeler
Energy Corporation. The Unit 1 and 2 boilers have been retrofitted with Foster
Wheeler dual air register and internal flame staging low nitrogen oxide burners
to meet Phase I nitrogen oxide Clean Air Act standards. See "Environmental
Matters--Air Quality." In addition, both boilers have supplemental over-fired
air systems to further reduce nitrogen oxide emissions to satisfy Pennsylvania
Title I (ozone) requirements.

    Unit 3 commenced commercial operation in 1977 and has an installed capacity
of 650 MW. The steam turbine and generator for Unit 3 were manufactured by
General Electric Corporation, and the Unit 3 boiler was manufactured by
Babcock & Wilcox. The boiler for Unit 3 was originally constructed with
Babcock & Wilcox low nitrogen oxide burners which satisfied Phase I nitrogen
oxide Clean Air Act standards, and a supplemental over-fired air system was
installed in 1995 at Unit 3 to further reduce nitrogen oxide emissions.

    Emission allowances were acquired by us as part of the acquisition of the
Homer City plant. Emission allowances are required by our facilities in order to
be certified by the local environmental authorities and are required to be
maintained throughout the period of operation of those facilities located in
Pennsylvania. We purchase additional emission allowances when necessary to meet
the environmental regulations. We also use forward sales and purchases, together
with options, to achieve our objective of stabilizing and enhancing the
operations from these merchant plants.

                                       3
<PAGE>
SALES STRATEGY

    Our subsidiary, EME Homer City, sells capacity, energy and voltage support
from the Homer City units into PJM's and NYISO's centralized power markets. We
believe the Homer City units comprise the second largest coal-fired facility
within PJM and the largest coal-fired facility servicing NYISO. EME Homer City
may also enter into bilateral contracts for the sale of capacity and energy to
power marketers and load serving entities within PJM, NYISO and surrounding
markets.

    MARKETING AND TRADING.  EME Homer City has entered into a contract with a
marketing affiliate for the sale of energy and capacity produced by the Homer
City units, which enables this marketing affiliate to engage in forward sales
and hedging transactions to manage EME Homer City's electricity price exposure.
The terms of the documents relating to the financing of the acquisition do not
permit EME Homer City to take speculative futures positions by selling capacity
and energy in excess of its anticipated output. It is the policy of the
marketing affiliate to make sales only to entities which have an investment
grade rating or whose obligations are guaranteed by an entity with an investment
grade rating.

    The marketing organization of our marketing affiliate is divided into
front-, middle- and back-office segments, with some duties segregated for
control purposes. The risk management personnel have a high level of knowledge
of utility operations, fuels procurement, energy marketing and futures and
options trading. The marketing affiliate has systems in place that monitor
real-time spot and forward pricing and perform option valuations and has a
wholesale power-scheduling group that operates on a 24-hour basis. We pay the
marketing affiliate fees of $0.02/MWh plus emission allowance fees, and all
revenue from transactions executed by the marketing affiliate is deposited into
the revenue account established for the benefit of the bondholders and the
holders of other senior debt. The net fees earned by the marketing affiliate
were $1.5 million and $0.2 million for the years ended December 31, 2000 and
1999, respectively.

    TRANSITION CONTRACTS.  EME Homer City has entered into separate transition
contracts (the "Transition Contracts") with Pennsylvania Electric Company
("Penelec") and New York State Electric & Gas Corporation ("NYSEG"), pursuant to
which EME Homer City may exercise a put option to sell certain quantities of
capacity to Penelec and NYSEG, and Penelec and NYSEG may exercise call options
to purchase certain quantities of capacity. The terms of the NYSEG Transition
Contract and the Penelec Transition Contract continue until December 31, 2001
and May 31, 2001, respectively. EME Homer City exercised its put options to sell
942 MW of capacity to Penelec for the full period from March 18, 1999 through
May 31, 2001 under the Penelec Transition Contract for a price of $49.90/MW-day
from March 18, 1999 through May 31, 1999, $59.90/MW-day through May 31, 2000,
and $77.40/MW-day through May 31, 2001. EME Homer City has amended the NYSEG
Transition Contract and sold 500 MW of capacity to NYSEG through May 31, 2000
for a price of $60.00/MW-day, 370 MW of capacity through September 30, 2000 for
$72.17/MW-day, and 430 MW of capacity through December 31, 2001 for
$72.17/MW-day.

FUEL SUPPLY

    UNITS 1 AND 2.  Units 1 and 2 typically consume approximately 4,200,000 tons
of mid-range sulfur coal per year. Approximately 90% to 95% of this coal is
obtained under contracts with local suppliers within approximately 50 miles of
the Homer City facilities, and the remainder is purchased in the spot market.
All this coal is delivered to the site by truck.

    The coal purchased for consumption by Units 1 and 2 is cleaned in our coal
cleaning facility, which has the capacity to clean up to 5,000,000 tons of coal
per year. Our coal cleaning facility utilizes heavy media cyclones, froth
flotation and spiral separators to reduce the ash and sulfur content of the raw
coal to meet both combustion and environmental requirements. Our coal cleaning
facility is

                                       4
<PAGE>
operated by Homer City Coal Processing Corporation under a Coal Cleaning
Agreement, dated August 8, 1990, which is scheduled to expire on August 31,
2002.

    UNIT 3.  Unit 3 typically consumes approximately 1,600,000 tons of
compliance coal per year. We purchase approximately 75% of this coal from one
supplier that is blended at a coal blending facility owned by the supplier on
our site. We obtain the remainder of the coal needed for Unit 3 in the spot
market. All coal purchased for Unit 3 is delivered to the site by truck. Upon
completion of the flue gas desulfurization system for Unit 3, this unit is
expected to be able to burn less expensive, higher sulfur coal.

    Our contractual commitments for the purchase of coal, subject to adjustment,
are currently estimated to aggregate $533 million during the next five years,
summarized as follows: $142 million in 2001; $141 million in 2002; $103 million
in 2003; $106 million in 2004; and $41 million in 2005.

ENVIRONMENTAL CAPITAL IMPROVEMENTS

    EME Homer City has contracted with a division of ABB Flakt to make
environmental capital improvements to the Homer City units. ABB Flakt will
construct a limestone-based, wet scrubber flue gas desulfurization system at
Unit 3 and a selective catalytic reduction system at each of the three units.
These improvements are expected to enable the Homer City units to comply with
Phase II of Title IV of the Clean Air Act regarding sulfur oxide emissions, the
Pennsylvania nitrogen oxide allowance regulations and Pennsylvania's response to
the Environmental Protection Agency's State Implementation Plan Call regarding
nitrogen oxide emissions. These improvements are estimated to cost approximately
$281 million, which includes a fixed price, turnkey engineering, procurement and
construction contract, project management costs and other project costs, and are
scheduled to be installed during 2001. We expect to spend $67 million during
2001 on the remaining capital expenditures related to these improvements. These
improvements are being funded with loans under an existing credit facility.

OPERATING PERFORMANCE

    The Homer City units have historically had high equivalent availability,
which is the ratio, expressed as a percentage, of the amount of production that
each unit was able to produce during a given time period divided by the amount
of production that each unit would have produced if operated at its full
capacity during that given time period. The Homer City units have also
historically had efficient heat rates and low costs. The following charts
indicate selected historical operating data for the Homer City units.

<TABLE>
<CAPTION>
                                                EQUIVALENT    NET HEAT    FUEL AND
                                               AVAILABILITY     RATE      O&M COSTS
                                                FACTOR (%)    (BTU/KWH)    ($/MWH)
                                               ------------   ---------   ---------
<S>                                            <C>            <C>         <C>
Homer City units--1,884 MW
    2000.....................................       80.22       9,928       19.51
    1999.....................................       86.81       9,962       17.90
    1998.....................................       89.79       9,793       17.12
    1997.....................................       85.83       9,804       18.17
    1996.....................................       85.04       9,718       18.00
    5-Year Average...........................       85.54       9,841       18.14
</TABLE>

OPERATION AND MAINTENANCE

    We employ a skilled and disciplined workforce that is well prepared to
operate within a competitive and deregulated environment. We believe that our
staffing levels are comparable with benchmark standards for facilities of a
similar size and type. The majority of the technical staff at the

                                       5
<PAGE>
Homer City facilities has been retained after completing the acquisition, thus
providing us with a knowledgeable and experienced base of employees.

    Our workforce is employed under a collective bargaining agreement that was
restructured in 1994. The collective bargaining agreement provides us with a
measure of labor cost certainty through 2002. The collective bargaining
agreement enables us to manage our workforce and to establish flexible work
rules going forward. We plan to cross train employees to perform different
functions, thus minimizing the use of more expensive or less efficient
subcontractors.

    Our operating and maintenance plan, as well as several planned overhauls of
major equipment and controls, are consistent with our goal of extending the
remaining life of the units for an additional 39 years from the date of
acquisition. We utilize a state-of-the-art computerized maintenance system to
plan and schedule all maintenance activities. We also employ a preventative
maintenance program complemented by new predictive maintenance technologies such
as ferrography, thermography, vibration analysis and acoustic analysis.
Reliability-centered maintenance techniques are currently being developed for
critical systems to better define condition-monitoring parameters and redefine
maintenance strategies.

    We provide engineering, maintenance, operation and facility management
services and will receive functional direction from, and are held to the
operating standards and guidelines of, Edison Mission Energy's operation and
maintenance organization.

TRANSMISSION AND INTERCONNECTION

    Existing transmission lines leaving the Homer City units are interconnected
with both PJM and NYISO. We are able to transmit into PJM full plant output of
up to 1,884 MW through a 126-mile 345 kV line and 19-mile and 15-mile 230 kV
lines owned by Pennsylvania Electric Company. We have the ability to transmit
into NYISO full plant output of up to 1,884 MW through 175-mile and 207-mile 345
kV lines owned by New York State Electric & Gas. In addition, a 13-mile 230 kV
line from the Homer City units provides an indirect interconnection to the East
Central Area reliability market.

    The points of interconnection with the Homer City units include:

    (1) the 230 kV circuit from the Unit 1 main power transformer,

    (2) the 345 kV circuit from the Unit 2 main power transformer,

    (3) the 345 kV circuit from the Unit 3 main power transformer,

    (4) the 345/230/23 kV north and south autotransformers, and

    (5) substation services No. 1 and No. 2.

    The ownership of the transmission and distribution assets for the Homer City
facilities, including the site switchyard, substation and support equipment,
remained with Pennsylvania Electric Company and New York State Electric & Gas
following the acquisition. These companies have agreed to provide us with all
services necessary to interconnect the Homer City units with their transmission
systems, other than services provided under existing tariffs, under the
Interconnection Agreement.

                                       6
<PAGE>
WATER SUPPLY AND OTHER SUPPORT FACILITIES

    The Homer City units receive their water supply from Two Lick Creek. The
water supply to Two Lick Creek is regulated by releases from Two Lick Dam, which
is located approximately eight miles upstream from the Homer City units and is
owned, operated and maintained by EME Homer City in accordance with a dam safety
permit and a drought management plan and related consent order and agreement
with the Pennsylvania Department of Environmental Protection. Each of the Homer
City units has a natural draft-cooling tower. A portion of the waste heat in the
water leaving the units' condensers is diverted from these towers to a 14-acre
polyethylene roofed greenhouse complex located adjacent to the Homer City units.
After the water passes through this greenhouse complex, it is returned to the
basin of the cooling towers for reuse.

    Other support facilities located on the site include an ash disposal area, a
coal refuse disposal area, coal receiving and storage facilities and water
treatment and pumping facilities.

COMPETITION

    FEDERAL.  The Energy Policy Act of 1992 laid the groundwork for a
competitive wholesale market for electricity. Among other things, the Energy
Policy Act expanded the Federal Energy Regulatory Commission's authority to
order electric utilities to transmit, or wheel, third-party electricity over
their transmission lines, thus allowing qualifying facilities under the Public
Utility Regulatory Policies Act of 1978, power marketers and those qualifying as
exempt wholesale generators under the Public Utility Holding Company Act of 1935
to more effectively compete in the wholesale market.

    In April 1996, the Federal Energy Regulatory Commission issued the Open
Access Rules, which require utilities to offer eligible wholesale transmission
customers non-discriminatory open access on utility transmission lines on a
comparable basis to the utilities' own use of the lines. In addition, the Open
Access Rules directed the regional power pools, including PJM and NYISO, that
control the major electric transmission networks to file uniform,
non-discriminatory open access tariffs. The Open Access Rules have been the
subject of rehearing at the Federal Energy Regulatory Commission and now are
undergoing judicial review.

    In December, 1999, the Federal Energy Regulatory Commission issued Order
No. 2000 for the purpose of further enhancing and removing residual impediments
to fully competitive wholesale bulk power markets through the formation of
regional transmission organizations ("RTOs") nationwide. Under Order No. 2000,
all public utilities regulated by the Federal Energy Regulatory Commission that
own, operate or control transmission facilities must submit to the Federal
Energy Regulatory Commission a proposal for formation of and participation in an
RTO by October 2000, or by January 2001 if a utility's transmission facilities
are already subject to a Federal Energy Regulatory Commission-approved
Independent System Operator. While the precise nature and timing of the
implementation of Order No. 2000 cannot be predicted with certainty, it can be
expected to result in additional fundamental changes in the electric marketplace
intended to increase opportunities for competitive electric suppliers.

    Over the past few years, Congress has considered various pieces of
legislation to restructure the electric industry that would require, among other
things, customer choice, and repeal of the Public Utility Holding Company Act
and of the Public Utility Regulatory Policies Act. The debate is likely to
continue, and perhaps intensify. The effect of enacting such legislation cannot
be predicted with any degree of certainty.

    STATE.  The Energy Policy Act did not preempt state authority to regulate
retail electric service. Historically, in most states, competition for retail
customers is limited by statutes or regulations granting existing electric
utilities exclusive retail franchises and service territories. Since the passage
of the Energy Policy Act, the advisability of retail competition has been the
subject of intense debate in

                                       7
<PAGE>
federal and state legislative and regulatory forums. Many states have taken
steps to facilitate retail competition as a means to stimulate competitive
generation rates. Retail competition commenced in New York in 1998. Retail
competition in Pennsylvania commenced on January 1, 1999.

INSURANCE

    We maintain insurance coverages consistent with those normally carried by
companies engaged in similar businesses and owning similar properties. The
insurance program includes all-risk insurance and covers commercial general
public liability, replacement value of all real and personal property, including
losses from boiler and machinery breakdowns, and the perils of earthquake and
flood, subject to certain sublimits. We also carry general liability insurance
covering liabilities to third parties for bodily injury or property damage
resulting from operations, automobile liability insurance and excess liability
insurance. Further, we have the benefit of title insurance and business
interruption insurance. Limits and deductibles in respect of these insurance
policies are comparable to those carried by other electric generating facilities
of similar size.

ENVIRONMENTAL MATTERS

GENERAL

    Under various federal, state and local environmental laws and regulations, a
current or previous owner or operator of any facility, including an electric
generating facility, may be required to investigate and remediate releases or
threatened releases of hazardous or toxic substances or petroleum products
located at that facility, and may be held liable to a governmental entity or to
third parties for property damage, personal injury and investigation and
remediation costs incurred by these parties in connection with these releases or
threatened releases. Many of these laws, including the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986, impose liability
without regard to whether the owner knew of or caused the presence of the
hazardous substances, and courts have interpreted liability under these laws to
be strict and joint and several. The cost of investigation, remediation or
removal of these substances may be substantial. In connection with our ownership
and operation of the Homer City facilities, we may be liable for these costs.

    We, in the course of operating the Homer City facilities, must comply with
all applicable environmental laws and regulations, including numerous federal
and state statutes and regulations. These requirements include, but are not
limited to, the federal Clean Water Act, the Clean Air Act, the Resources
Conservation and Recovery Act and similar state requirements. For more
information on environmental regulation, see "Management's Discussion and
Analysis of Results of Operations and Financial Condition--Environmental Matters
or Regulations."

    In addition, persons who arrange for the disposal or treatment of hazardous
or toxic substances at a disposal or treatment facility may be liable for the
costs of removal or remediation of a release or threatened release of hazardous
or toxic substances at that disposal or treatment facility, whether or not that
facility is owned or operated by that person. Some environmental laws and
regulations create a lien on a contaminated site in favor of the government for
damages and costs it incurs in connection with the contamination. The owner of a
contaminated site and persons who arrange for the disposal of hazardous
substances at that site also may be subject to common law claims by third
parties based on damages and costs resulting from environmental contamination
emanating from that site. In connection with our ownership and operation of the
Homer City facilities, we may be liable for these costs.

    Several federal, state and local laws, regulations and ordinances also
govern the removal, encapsulation or disturbance of asbestos-containing
materials when these materials are in poor condition or in the event of
construction, remodeling, renovation or demolition of a building. Those laws and
regulations may impose liability for release of asbestos-containing materials
and may provide

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<PAGE>
for the ability of third parties to seek recovery from owners or operators of
these properties for personal injury associated with asbestos-containing
materials. In connection with our ownership and operation of the Homer City
facilities, we may be liable for these costs.

AIR QUALITY

    GENERAL.  We believe that the Homer City facilities are in material
compliance with applicable state and federal air quality requirements. Further
reductions in the Homer City units' emissions may be required for the
achievement and maintenance of National Ambient Air Quality Standards for ozone
and fine particulate matter and with respect to the implementation of
regulations designed to reduce regional haze. In August 1995, the sellers of the
Homer City facilities submitted a Title V operating permit application to the
Pennsylvania Department of Environmental Protection for review. EME Homer City
revised the Title V application with regard to ownership in April 2000. The
application is currently under review by the Department, and we expect the
permit will be issued in 2001. A continuous emissions monitoring system was
installed at the Homer City units in 1993 for measuring sulfur dioxide, nitrogen
oxide, carbon dioxide, and exhaust gas flow on a real-time basis, in order to
comply with regulatory requirements.

    NITROGEN OXIDES.  All three units must comply with Reasonably Available
Control Technology requirements for NO(x) that result in a limit of 0.5
lbs/MMBtu on a 30-day rolling average. In order to comply with these
requirements and reduce NO(x) emissions, the sellers installed low NO(x) burners
and supplemental over-fired air systems on Units 1 and 2 and a supplemental
over-fired air system on Unit 3. Low NO(x) burners were installed on Unit 3 when
it was first constructed. The three units have routinely operated below the 0.5
lbs/MMBtu limit.

    The sellers of the Homer City facilities obtained Environmental Protection
Agency approval for the Clean Air Act Amendment Title IV Early Election Program
for NO(x) with an annual average NO(x) emission limit of 0.5 lbs/MMBtu through
2007. In 2008, the units become subject to Phase II emission rate limitations
under Title IV for wall-fired dry bottom boilers of 0.46 lbs/MMBtu on an annual
average basis. The Homer City units' annual average NO(x) emissions for 2000
were well below the current Title IV requirements.

    SULFUR DIOXIDE.  Unit 3 is subject to New Source Performance Standards and,
therefore, has an SO(2) emission limit of 1.2 lbs/MMBtu on a three-hour and a
24-hour average. Units 1 and 2 are "existing" boilers with a Pennsylvania
Department of Environmental Protection SO(2) emission limit of 3.7 lbs/MMBtu on
a 30-day rolling average, a daily average limit of 4.0 lbs/MMBtu, up to two
exceedances per 30 days, and a not-to-be-exceeded limit of 4.8 lbs/MMBtu. To
control SO(2) emissions, EME Homer City relies on its coal cleaning facility to
manage the sulfur content of a significant amount of the coal feedstock for
Units 1 and 2. Unit 3 relies on the use of low-sulfur coal.

    All three units are Phase II Acid Rain Program-affected units. Accordingly,
since 2000, all the units are required to obtain sufficient SO(2) allowances to
account for the total SO(2) emissions from the units. EME Homer City believes
that it will be able to obtain these SO(2) allowances for the Homer City units
at a reasonable cost prior to the time required. In addition, we installed a
system on Unit 3 which will reduce SO(2) emissions.

    EMISSION REDUCTION CREDITS.  The Homer City units have a number of Emission
Reduction Credits that were generated through the retirement of dryers A and B
at our coal cleaning facility. These credits are pending Pennsylvania Department
of Environmental Protection approval, and EME Homer City believes that once
approved they will not expire until 2006.

    PARTICULATE MATTER.  Particulate matter is regulated through two separate
and distinct methods: mass emissions and visual opacity. The Homer City units'
particulate matter stack tests show that emissions are well below regulatory
limits. All three units control particulate matter through the use of

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<PAGE>
electrostatic precipitators; Units 1 and 2 also utilize an SO(2) flue gas
injection conditioning system. To improve precipitator performance, capital
improvements were made in 1997 and 1998 for Units 1 and 2. Recent modifications
to our coal cleaning facility have also resulted in reduced particulate
emissions from Units 1 and 2.

    NEW SOURCE REVIEW.  On November 3, 1999, the United States Department of
Justice filed suit against a number of electric utilities for alleged violations
of the Clean Air Act's "new source review" requirements related to modifications
of air emissions sources at electric generating stations located in the southern
and midwestern regions of the United States. Several states have joined these
lawsuits. In addition, the United States Environmental Protection Agency has
also issued administrative notices of violation alleging similar violations at
additional power plants owned by some of the same utilities named as defendants
in the Department of Justice lawsuit, as well as other utilities, and also
issued an administrative order to the Tennessee Valley Authority for similar
violations at certain of its power plants. The Environmental Protection Agency
has also issued requests for information pursuant to the Clean Air Act to
numerous other electric utilities, including the prior owners of the Homer City
plant, seeking to determine whether these utilities also engaged in activities
that may have been in violation of the Clean Air Act's new source review
requirements.

    To date, one utility, the Tampa Electric Company, has reached a formal
agreement with the United States to resolve alleged new source review
violations. Two other utilities, the Virginia Electric & Power Company and
Cinergy Corp., have reached agreements in principle with the Environmental
Protection Agency. In each case, the settling party has agreed to incur over
$1 billion in expenditures over several years for the installation of additional
pollution control, the retirement or repowering of coal-fired generating units,
supplemental environmental projects and civil penalties. These agreements
provide for a phased approach to achieving required emission reductions over the
next 10 to 15 years. The settling utilities have also agreed to pay civil
penalties ranging from $3.5 million to $8.5 million.

    Prior to our purchase of the Homer City plant, the Environmental Protection
Agency requested information from the prior owners of the plant concerning
physical changes at the plant. We have been in informal voluntary discussion
with the Environmental Protection Agency relating to these facilities, which may
also include payment of civil fines. We cannot assure that we will reach a
satisfactory agreement or that these facilities will not be subject to
proceedings in the future. Depending on the outcome of the proceedings, we could
be required to invest in additional pollution control requirements, over and
above the upgrades we are planning to install, and could be subject to fines and
penalties.

    A new ambient air quality standard was adopted by the Environmental
Protection Agency in July 1997 to address emissions of fine particulate matter.
It is widely understood that attainment of the fine particulate matter standard
may require reductions in nitrogen oxides and sulfur dioxides, although under
the time schedule announced by the Environmental Protection Agency when the new
standard was adopted, non-attainment areas were not to have been designated
until 2002 and control measures to meet the standard were not to have been
identified until 2005. In May 1999, the United States Court of Appeals for the
District of Columbia Circuit held that Section 109(b)(l) of the Clean Air Act,
the section of the Clean Air Act requiring the promulgation of national ambient
air quality standards, as interpreted by the Environmental Protection Agency,
was an unconstitutional delegation of legislative power. The Court of Appeals
remanded both the fine particulate matter standard and the revised ozone
standard to allow the EPA to determine whether it could articulate a
constitutional application of Section 109(b)(l). On February 27, 2001, the
Supreme Court, in WHITMAN V. AMERICAN TRUCKING ASSOCIATIONS, INC., reversed the
Circuit Court's judgment on this issue and remanded the case back to the Court
of Appeals to dispose of any other preserved challenges to the particulate
matter and ozone standards. Accordingly, as the final application of the revised
particulate matter ambient air quality standard is potentially subject to
further judicial proceedings, the impact of this standard on our facilities is
uncertain at this time.

                                       10
<PAGE>
WATER QUALITY

    The Homer City facilities are subject to regulations regarding the quality
of surface water, ground water and drinking water. To protect surface water
quality, the Homer City facilities rely on an industrial wastewater treatment
system, on-site sewage treatment and a number of settling ponds and
impoundments. The Homer City facilities' surface water discharges are governed
by two, five-year National Pollutant Discharge Elimination System (NPDES)
permits issued in 1995 and 2000. The Homer City coal-cleaning plant NPDES permit
issued in 1995 has been administratively extended in accordance with 25 PA Code
Section 92.9(b) until a new permit is issued by the PaDEP Bureau of Water
Management. Modeling results indicate that the Pennsylvania Department of
Environmental Protection may impose more stringent discharge limits for some
contaminants at the time of renewal of these permits, which may require upgrade
of the Homer City facilities' wastewater treatment systems with such approaches
as reverse osmosis, ozonation, dechlorination and/or recycling of water.

    We conduct ground water monitoring in a number of areas throughout the site,
including active and former ash disposal sites, wastewater and runoff settling
and drainage ponds and a coal refuse disposal site. A pump-and-treat ground
water treatment system is in operation for the industrial wastewater flow ponds.
To date, the Pennsylvania Department of Environmental Protection has not
requested that any additional remediation actions be performed at the site. The
Homer City facilities have a drinking water treatment system designed to meet
applicable potable water standards. Recent tests indicate that the Homer City
facilities' drinking water supply meets these standards.

SOLID AND HAZARDOUS WASTE

    Both ash from the Homer City facilities and coal refuse from our coal
cleaning facility are disposed of on-site in separate, permitted disposal areas.
We have entered into a joint services agreement with Helvetia Mining Company for
the treatment and disposal of leachate and runoff water from our coal refuse
disposal facility. Approximately 600,000 tons of ash and 1,000,000 tons of coal
refuse are disposed of annually. In 1997, the Pennsylvania Department of
Environmental Protection issued a 10-year permit for operation of the ash
disposal site. A 15-year permit for the operation of the coal refuse disposal
site was issued by the Pennsylvania Bureau of Mining and Reclamation in 1989.

MINING ACTIVITIES

    HELVETIA DISCHARGES.  The Homer City units were originally constructed as a
mine-mouth generating station, where coal produced from two adjacent deep mines
was delivered directly to the units by coal conveyors. The two adjacent deep
mines were owned by Helen Mining Company, a subsidiary of the Quaker State
Corporation, and Helvetia, a subsidiary of the Rochester and Pittsburgh Coal
Company. Both Helen Mining and Helvetia developed mine refuse sites, water
treatment facilities and other mine related facilities on the site. The Helen
Mining mine was closed in the early 1990s, and the mine surface operations and
maintenance shop areas were restored before Helen Mining left the site. Helen
Mining has continuing mine water and refuse site leachate treatment obligations
and remains obligated to perform any cleanup required with respect to its refuse
site. Helvetia's on-site mine was closed in 1995. As a result of the cessation
of its on-site mining activities, Helvetia has continuing mine discharge and
refuse site leachate discharge treatment obligations that it performs using
water treatment facilities owned by Helvetia and located on the site. Bonds
posted by Helvetia may not be sufficient to fund Helvetia's obligations in the
event of Helvetia's failure to comply with its mine-related permits at the site.
Current annual operating costs for Helvetia's treatment systems are estimated to
be approximately $0.4 million. Should Helvetia default on its treatment
obligations, the government may look to us to fund these commitments.

    The Comprehensive Environmental Response, Compensation, and Liability Act,
which is also known as CERCLA, and similar state statutes, require the cleanup
of sites from which there has been a

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<PAGE>
release or threatened release of hazardous substances. As of the date of this
report, we are unaware of any material liabilities under CERCLA or similar state
statutes; however, we cannot assure you that we will not incur such liability in
the future.

    TWO LICK CREEK RESERVOIR DEEP MINE DISCHARGES.  In connection with our
purchase of the Homer City facilities on March 18, 1999, we acquired the Two
Lick Creek Dam and Reservoir. Acid mine drainage discharges from the Penn Hill
No. 2 and Dixon Run No. 3 inactive deep mines were being collected and partially
treated on the reservoir property by Stanford Mining Company before being pumped
off the property for additional treatment at the nearby Chestnut Ridge Treatment
Plant. The mining company filed for bankruptcy and operated the collection and
treatment system until May 1999 when its assets were allegedly depleted.

    The Pennsylvania Department of Environmental Protection (PADEP) initially
advised us that we were potentially liable for treating the two discharges
solely because of our ownership of the property on which the discharges
emanated. Without any admission of our liability, we voluntarily entered into a
Letter Agreement to fund the operation of the collection and treatment system
for an interim period until the agency completed its investigation of
potentially liable parties and alternatives for permanent treatment of the
discharges were evaluated. After examining property records, PADEP concluded
that we are only responsible for treating the Dixon Run No. 3 discharge. The
agency has not completed its investigation of other potentially responsible
parties, particularly mining companies that previously operated the two mines.

    A draft consent agreement that addresses remedial responsibilities for the
two discharges has been prepared by PADEP. Under its terms, we are responsible
for designing and implementing a permanent system to collect and treat the Dixon
Run No. 3 discharge and the state will provide funding to a local watershed
association to develop and operate a collection and treatment system for the
other discharge. When the Dixon Run No. 3 treatment system becomes operational,
we will discontinue our funding of the existing collection and treatment system.
We will also be reimbursed a portion of the operational costs of that system.

    The cost of operating the collection and treatment system is approximately
$15,000 per month. We are evaluating options for permanent treatment of the
Dixon Run No. 3 discharge, including a passive system involving wetlands
treatment. The cost of a passive treatment system is estimated to be
$1 million, but its operational costs are considerably less than those of a
conventional chemical treatment system.

REGULATORY MATTERS

GENERAL

    Federal laws and regulations govern, among other things, transactions by and
with purchasers of power, including utility companies, the operations of a
project and the ownership of a project. Under limited circumstances where
exclusive federal jurisdiction is not applicable or specific exemptions or
waivers from state or federal laws or regulations are otherwise unavailable,
federal and/or state utility regulatory commissions may have broad jurisdiction
over non-utility owned electric power plants. Energy-producing projects are also
subject to federal, state and local laws and regulations that govern the
geographical location, zoning land use and operation of a project. Federal,
state and local environmental requirements generally require that a wide variety
of permits and other approvals be obtained before the commencement of
construction or operation of an energy-producing facility and that the facility
then operate in compliance with these permits and approvals.

    While we believe the requisite approvals for our existing projects have been
obtained and that our business is operated in substantial compliance with
applicable laws, we remain subject to a varied and complex body of laws and
regulations that both public officials and private parties may seek to enforce.

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<PAGE>
Regulatory compliance for the construction of new facilities is a costly and
time-consuming process. Intricate and changing environmental and other
regulatory requirements may necessitate substantial expenditures and may create
a significant risk of expensive delays or significant loss of value in a project
if the project is unable to function as planned due to changing requirements or
local opposition.

STATE ENERGY REGULATION

    State public utility commissions have broad jurisdiction over non-qualifying
facility independent power projects, including exempt wholesale generators,
which are considered public utilities in many states. This jurisdiction often
includes the issuance of certificates of public convenience and necessity and/or
other certifications to construct, own and operate a facility, as well as the
regulation of organizational, accounting, financial and other corporate matters
on an ongoing basis. Qualifying facilities may also be required to obtain these
certificates of public convenience and necessity in some states.

    Some states that have restructured their electric industries require
generators to register to provide electric service to customers. Many states are
currently undergoing significant changes in their electric statutory and
regulatory frameworks that result from restructuring the electric industries
that may affect generators in those states. Although the Federal Energy
Regulatory Commission generally has exclusive jurisdiction over the rates
charged by a non-qualifying facility independent power project to its wholesale
customers, a state's public utility commission has the ability, in practice, to
influence the establishment of these rates by asserting jurisdiction over the
purchasing utility's ability to pass-through the resulting cost of purchased
power to its retail customers. A state's public utility commission also has the
authority to determine avoided costs for qualifying facilities and regulate the
retail rates charged by qualifying facilities. In addition, states may assert
jurisdiction over the siting and construction of independent power projects and,
among other things, the issuance of securities, related party transactions and
the sale or other transfer of assets by these facilities. The actual scope of
jurisdiction over independent power projects by state public utility commissions
varies from state to state.

    In addition, state public utility commissions may seek to modify, suspend or
terminate a qualifying facility's power sales contract under specified
circumstances. This could occur if the state public utility commission were to
determine that the pricing mechanism of the power sales contract is unfairly
high in light of the current prevailing market cost of power for the utility
purchasing the power. In this instance, the state public utility commission
could attempt to alter the terms of the power sales contract to reflect more
accurately market conditions for the prevailing cost of power. While we believe
that these attempts are not common and that the state public utility commission
may not have any jurisdiction to modify the terms of the wholesale power sales,
we cannot assure you that the power sales contracts of our projects will not be
subject to adverse regulatory actions.

    PENNSYLVANIA.  Under the Pennsylvania Public Utility Law, the Pennsylvania
Public Utility Commission regulates all "public utilities" operating in
Pennsylvania. A "public utility" under this law includes any entity that owns or
operates equipment or facilities for the production, generation, transmission or
distribution of gas, electricity or steam for the production of light, heat or
power to the public for consumption. The Pennsylvania Public Utility Law does
not specifically address the utility status of entities selling electricity at
wholesale within Pennsylvania. Because of EME Homer City's status as such an
entity that sells electricity exclusively in the wholesale market and does not
hold itself out to the public generally as a supplier of utility service, it is
not likely to be regulated as a public utility under the Pennsylvania Public
Utility Law. If, however, EME Homer City were deemed to be a Pennsylvania public
utility, the Pennsylvania Public Utility Commission could retroactively apply
several provisions of the Pennsylvania Public Utility Law to the Homer City
units. One of those provisions requires every public utility to obtain a
certificate of public convenience and necessity from the Pennsylvania Public
Utility Commission prior to rendering service as a public utility. If the
Pennsylvania Public Utility Commission were to require EME Homer City to obtain
a certificate of public

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<PAGE>
convenience and necessity, EME Homer City might be required to discontinue
operation of the Homer City units pending application for, and receipt of, this
certificate. Another provision requires every public utility to obtain
Pennsylvania Public Utility Commission approval before it issues or guarantees
securities. If EME Homer City were found to be a public utility, its failure to
have obtained this approval could call into question the validity of EME Homer
City's obligations under the Guarantee and Collateral Agreement. In addition,
EME Homer City would be subject to other laws and regulations, other than rate
regulation, applicable to Pennsylvania public utilities. EME Homer City's rates,
however, would remain subject to the jurisdiction of the Federal Energy
Regulatory Commission.

    NEW YORK.  Under the New York Public Service Law, the New York Public
Service Commission regulates all "public utility companies" or "utility
companies" operating in New York. A "public utility company" or "utility
company" under the New York Public Service Law includes, among other things, any
entity engaged in the production, transmission or distribution of electricity to
the public for light, heat or power purposes. EME Homer City, as an exempt
wholesale generator, will not provide electricity directly to the public and
plans to sell only to power marketers and energy service companies. Although the
New York Public Service Law is silent with respect to the utility status of
electric corporations selling wholesale within New York, EME Homer City will not
likely be subject to regulation as a New York public utility. If, however, EME
Homer City were deemed to be a public utility under the New York Public Service
Law, the New York Public Service Commission could retroactively apply specified
provisions of the statute to the Homer City units. EME Homer City would also be
subject to other laws and regulations, other than rate regulation, applicable to
New York public utility companies. EME Homer City's rates, however, would remain
subject to the jurisdiction of the Federal Energy Regulatory Commission.

U.S. FEDERAL ENERGY REGULATION

OVERVIEW

    The Federal Energy Regulatory Commission has ratemaking jurisdiction and
other authority with respect to interstate sales and transmission of electric
energy under the Federal Power Act and with respect to certain interstate sales,
transportation and storage of natural gas under the Natural Gas Act of 1938. The
Securities and Exchange Commission has regulatory powers with respect to
upstream owners of electric and natural gas utilities under the Public Utility
Holding Company Act of 1935. The enactment of the Public Utility Regulatory
Policies Act of 1978 and the adoption of regulations thereunder by the Federal
Energy Regulatory Commission provided incentives for the development of
cogeneration facilities and small power production facilities utilizing
alternative or renewable fuels by establishing certain exemptions from the
Federal Power Act and the Public Utility Holding Company Act for the owners of
qualifying facilities, for exempt wholesale generators and foreign utility
companies.

    An "EXEMPT WHOLESALE GENERATOR" under the Public Utility Holding Company Act
is an entity determined by the Federal Energy Regulatory Commission to be
exclusively engaged, directly or indirectly, in the business of owning and/or
operating specified eligible facilities and selling electric energy at wholesale
or, if located in a foreign country, at wholesale or retail.

    The effect of such amendments is to enhance the development of
non-qualifying facilities that do not have to meet the fuel, production and
ownership requirements of the Public Utility Regulatory Policies Act. Edison
Mission Energy believes that the amendments benefit it by expanding its ability
to own and operate facilities that do not qualify for qualifying facility
status, but also result in increased competition because utilities and other
companies (for example, equipment suppliers) may now develop facilities that are
not subject to the constraints of the Public Utility Holding Company Act. The
Energy Policy Act also expanded Federal Energy Regulatory Commission authority
to order utilities to grant transmission access to qualifying facilities and
exempt wholesale generators and lifted restrictions on ownership of foreign
utilities by U.S. companies. Under the Energy Policy Act, foreign utility
companies are also not electric utility companies under the Public Utility
Holding Company Act.

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<PAGE>
    THE FEDERAL POWER ACT.  The Federal Power Act grants the Federal Energy
Regulatory Commission exclusive ratemaking jurisdiction over wholesale sales of
electricity in Interstate commerce, including ongoing as well as initial rate
jurisdiction. This jurisdiction allows the Federal Energy Regulatory Commission
to revoke or modify previously approved rates. These rates may be based on a
cost-of-service approach or, in geographic and product markets determined by the
Federal Energy Regulatory Commission to be workably competitive, may be market
based. As noted, most qualifying facilities are exempt from the ratemaking and
several other provisions of the Federal Power Act. Exempt wholesale generators
and other non-qualifying facility independent power projects are subject to the
Federal Power Act and to Federal Energy Regulatory Commission's ratemaking
jurisdiction thereunder, but the Federal Energy Regulatory Commission typically
grants exempt wholesale generators the authority to charge market-based rates as
long as the absence of market power is shown. In addition, the Federal Power Act
grants the Federal Energy Regulatory Commission jurisdiction over the sale or
transfer of jurisdictional facilities, including wholesale power sales
contracts, and in some cases jurisdiction over the issuance of securities or the
assumption of specified liabilities and some interlocking directorates.

    In addition, the Federal Energy Regulatory Commission's order, as is
customary with market-based rate schedules, reserved the right to revoke EME
Homer City's market-based rate authority on a prospective basis if it is
subsequently determined that EME Homer City or any of its Affiliates possesses
excessive market power. If the Federal Energy Regulatory Commission were to
revoke EME Homer City's market-based rate authority, it would be necessary for
EME Homer City to file, and obtain Federal Energy Regulatory Commission
acceptance of, its rate schedule as a cost-of-service rate schedule. In
addition, the loss of market-based rate authority would subject EME Homer City
to the accounting, record keeping and reporting requirements that are imposed on
utilities with cost-based rate schedules.

    THE PUBLIC UTILITY HOLDING COMPANY ACT.  Unless exempt or found not to be a
holding company by the Securities and Exchange Commission, a company that falls
within the definition of a holding company must register with the Securities and
Exchange Commission and become subject to Securities and Exchange Commission
regulation as a registered holding company under the Public Utility Holding
Company Act. "HOLDING COMPANY" is defined in Section 2(a)(7) of the Public
Utility Holding Company Act to include, among other things, any company that
owns 10% or more of the voting securities of an electric utility company.
"ELECTRIC UTILITY COMPANY" is defined in Section 2(a)(3) of the Public Utility
Holding Company Act to include any company that owns facilities used for
generation, transmission or distribution of electric energy for resale. Exempt
wholesale generators, foreign utility companies, and qualifying facilities are
not deemed to be electric utility companies under the Public Utility Holding
Company Act. Securities and Exchange Commission precedent also indicates that is
does not consider "paper facilities," such a contracts and tariffs used to make
power sales, to be facilities used for the generation, transmission or
distribution of electric energy for resale, and power marketing activities will
not, therefore, result in an entity's being deemed to be an electric utility
company.

    A registered holding company is required to limit its utility operations to
a single integrated utility system and to divest any other operations not
functionally related to the operation of that utility system. In addition, a
registered holding company will require Securities and Exchange Commission
approval for the issuance of securities, other major financial or business
transactions (such as mergers) and transactions between and among the holding
company and holding company subsidiaries.

    Because it owns Southern California Edison Company, an electric utility
company, Edison International, our indirect parent company, is a holding
company. Edison International is, however, exempt from registration pursuant to
Section 3(a)(1) of the Public Utility Holding Company Act because the public
utility operations of the holding company system are predominantly intrastate in
character. Consequently, we are not a subsidiary of a registered holding company
so long as Edison International continues to be exempt from registration
pursuant to Section 3(a)(1) or another of the

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<PAGE>
exemptions enumerated in Section 3(a). Nor are we a holding company under the
Public Utility Holding Company Act because our interests in power generation
facilities are exclusively in exempt wholesale generators. Loss of exempt
wholesale generator status for one or more projects could result in our becoming
a holding company subject to registration and regulation under the Public
Utility Holding Company Act and could trigger defaults under the covenants in
project agreements. Becoming a holding company could, on a retroactive basis,
lead to, among other things, fines and penalties and could cause certain
projects and other contracts to be voidable.

    Under the Energy Policy Act, a company engaged exclusively in the business
of owning and/or operating a facility used for the generation of electric energy
exclusively for sale at wholesale may be exempted from regulation under the
Public Utility Holding Company Act as an exempt wholesale generator. On
March 12, 1999, the General Counsel of the Federal Energy Regulatory Commission
issued a letter determining that, based on the facts stated in its application,
EME Homer City is an exempt wholesale generator.

    If there occurs a "material change" in facts that might affect EME Homer
City's continued eligibility for exempt wholesale generator status, within
60 days of this material change EME Homer City must:

    - file a written explanation of why the material change does not affect its
      exempt wholesale generator status,

    - file a new application for exempt wholesale generator status, or

    - notify the Federal Energy Regulatory Commission that it no longer wishes
      to maintain exempt wholesale generator status.

    If EME Homer City were to lose its exempt wholesale generator status, it and
its affiliates would be subject to regulation under the Public Utility Holding
Company Act that would be difficult to comply with absent a restructuring.

TRANSMISSION OF WHOLESALE POWER

    Generally, projects that sell power to wholesale purchasers other than the
local utility to which the project is interconnected require the transmission of
electricity over power lines owned by others, also known as wheeling. The prices
and other terms and conditions of transmission contracts are regulated by the
Federal Energy Regulatory Commission when the entity providing the wheeling
service is a jurisdictional public utility under the Federal Power Act. Until
1992, the Federal Energy Regulatory Commission's ability to compel wheeling was
very limited, and the availability of voluntary wheeling service could be a
significant factor in determining whether a site was viable for project
development.

    The Federal Energy Regulatory Commission's authority under the Federal Power
Act to require electric utilities to provide transmission service on a
case-by-case basis to qualifying facilities, exempt wholesale generators, and
other power generators was expanded substantially by the Energy Policy Act.
Furthermore, in 1996 the Federal Energy Regulatory Commission issued a
rulemaking order, Order 888, in which the Federal Energy Regulatory Commission
asserted the power, under its authority to eliminate undue discrimination in
transmission, to compel all jurisdictional public utilities under the Federal
Power Act to file open access transmission tariffs consistent with a pro forma
tariff drafted by the Federal Energy Regulatory Commission. The Federal Energy
Regulatory Commission subsequently issued Orders 888-A, 888-B and 888-C to
clarify the terms that jurisdictional transmitting utilities are required to
include in their open access transmission tariffs. The Federal Energy Regulatory
Commission also issued Order 889, which required those transmitting utilities to
abide by specified standards of conduct when using their own transmission
systems to make wholesale sales of power, and to post specified transmission
information, including information about transmission requests and availability,
on a publicly available computer bulletin board. Although the pro forma tariff
does not

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<PAGE>
cover the pricing of transmission service, Order 888 and the subsequently issued
regional transmission organization rulemaking are expected to improve
transmission access for independent power producers such as Edison Mission
Energy. A 1999 decision by the United States Court of Appeals for the Eighth
Circuit has cast doubt on the extent of the Federal Energy Regulatory
Commission's authority to require specified curtailment policies in the pro
forma tariff. The United States Court of Appeals for the D.C. Circuit issued an
opinion on June 30, 2000 that affirmed the Federal Energy Regulatory
Commission's Order 888 et seq. in all material respects.

ITEM 2.  PROPERTIES

    EME Homer City owns a fee interest in the 2,413-acre site on which the Homer
City units, Two Lick Dam and the other facilities are located. The site is
approximately 45 miles northeast of Pittsburgh, Pennsylvania in Indiana County.
EME Homer City leases portions of the site to third parties. The leases are
described below.

    EME Homer City leases the surface of an approximately 14-acre parcel to
Tanoma Coal Sales upon which the coal blending facility is located. In lieu of
rental payments, Tanoma blends the first 30,000 tons of coal per month in the
coal blending facility at no charge. EME Homer City also leases an office
building located on the site to Tanoma, which Tanoma uses for administrative
activities associated with the coal blending facility. Each of the Tanoma leases
expires on December 31, 2002.

    EME Homer City has granted Mountain V Oil & Gas Inc. the right to operate
and produce gas from existing wells located on the site, provided that gas is
found in paying quantities. EME Homer City receives 16% of the market value of
the gas at the wellhead as royalties and also receives gas of 250,000 cubic feet
at no charge from each well per annum. Mountain V currently purchases such gas
from EME Homer City at the market value at the wellhead.

    Homer City Property Holdings, Inc. leases a 34.15-acre parcel upon which the
greenhouse complex was constructed to Green Leaf Enterprises, Inc. The
greenhouse complex produces wholesale perennials, bedding and starter plants in
addition to special holiday crops for sale to other greenhouses in the eastern
United States.

ITEM 3.  LEGAL PROCEEDINGS

    No material legal proceedings are presently pending against Edison Mission
Holdings Co. or any of its subsidiary guarantors.

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

    Not applicable.

                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

    All the outstanding Common Stock of Edison Mission Holdings Co. is, as of
the date hereof, owned by Edison Mission Energy, which is an indirect
wholly-owned subsidiary of Edison International. There is no market for the
Common Stock.

    Dividends on the Common Stock will be paid when declared by our Board of
Directors. We paid cash dividends to Edison Mission Energy of $68.9 million and
$106.4 million in 2000 and 1999, respectively.

                                       17
<PAGE>
ITEM 6.  SELECTED FINANCIAL DATA

    The following table includes a summary of our consolidated financial data
for the years ended December 31, 2000 and 1999, respectively. Edison Mission
Holdings Co. was incorporated on October 7, 1998 and had no significant activity
during 1998. On March 18, 1999, an indirect subsidiary of Edison Mission
Holdings Co., EME Homer City, acquired the Homer City facilities for a purchase
price of approximately $1.8 billion. Accordingly, the 1999 summary financial
data pertain primarily to the activities from March 18, 1999 through
December 31, 1999. The summary financial data were derived from the audited
financial statements of Edison Mission Holdings Co. and are qualified in their
entirety by the more detailed information and financial statements, including
notes to these financial statements, included or incorporated by reference in
this annual report.

<TABLE>
<CAPTION>
                                                              YEARS ENDED
                                                             DECEMBER 31,
                                                          -------------------
                                                            2000       1999
                                                          --------   --------
                                                            (IN THOUSANDS)
<S>                                                       <C>        <C>
INCOME STATEMENT DATA
Operating revenues......................................  $421,820   $325,752
Operating expenses......................................   290,671    219,684
                                                          --------   --------
Operating income........................................   131,149    106,068
Interest and other income...............................     2,464      1,321
Interest expense........................................   (74,791)   (53,654)
                                                          --------   --------
Income before income taxes and extraordinary loss.......    58,822     53,735
Provision for income taxes before extraordinary loss....    26,264     23,242
                                                          --------   --------
Income before extraordinary loss........................    32,558     30,493
Extraordinary loss on early extinguishment of debt, net
  of income tax benefit.................................        --     (2,865)
                                                          --------   --------
Net income..............................................  $ 32,558   $ 27,628
                                                          ========   ========
</TABLE>

<TABLE>
<CAPTION>
                                                            DECEMBER 31,
                                                       -----------------------
                                                          2000         1999
                                                       ----------   ----------
                                                           (IN THOUSANDS)
<S>                                                    <C>          <C>
BALANCE SHEET DATA
Assets...............................................  $2,112,199   $2,000,102
Current liabilities..................................      68,607       58,486
Long-term obligations................................   1,091,699      953,549
Shareholder's equity.................................     951,893      988,067
</TABLE>

<TABLE>
<CAPTION>
                                                       YEARS ENDED DECEMBER 31,
                                                       -------------------------
                                                          2000          1999
                                                       ----------   ------------
                                                            (IN THOUSANDS)
<S>                                                    <C>          <C>
CASH FLOW DATA
Cash provided by operating activities................  $  81,031    $   119,236
Cash used in investing activities....................   (141,579)    (1,924,016)
Cash provided by financing activities................     35,162      1,849,291
</TABLE>

                                       18
<PAGE>
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
         FINANCIAL CONDITION

    The following discussion contains forward-looking statements that reflect
Edison Mission Holdings Co.'s current expectations and projections about future
events based on our knowledge of present facts and circumstances and our
assumptions about future events. In this annual report, the words "expects,"
"believes," "anticipates," "estimates," "intends," "plans" and variations of
these words and similar expressions are intended to identify forward-looking
statements. These statements necessarily involve risks and uncertainties that
could cause actual results to differ materially from those anticipated. The
information contained in this discussion is subject to change without notice.
Unless otherwise indicated, the information presented in this section is with
respect to Edison Mission Holdings Co. and its consolidated subsidiaries.

GENERAL

    Edison Mission Holdings Co. is a special-purpose California corporation
formed on October 7, 1998 for the purpose of facilitating the financing of the
acquisition and, through its wholly-owned subsidiaries, acquiring, making
improvements to and operating its three coal-fired electric generating units and
related facilities. EME Homer City, an indirect subsidiary of Edison Mission
Holdings Co., acquired the Homer City facilities on March 18, 1999 for a
purchase price of approximately $1.8 billion. Although Edison Mission Holdings
Co. was incorporated in 1998, it had no significant activity prior to the
acquisition of the Homer City facilities.

    Edison Mission Energy is our parent company. Edison Mission Energy's
ultimate parent company is Edison International, which also owns Southern
California Edison, one of the largest electric utilities in the United States.
Each of these companies is registered with the Securities and Exchange
Commission (SEC) and has financial statements that are filed in accordance with
rules enacted by the SEC. For more information regarding each of these
companies, see their respective Forms 10-K for the year ended December 31, 2000.

    We derive revenue from the sale of energy and capacity into PJM and NYISO
and from bilateral contracts with power marketers and load serving entities
within PJM, NYISO and the surrounding markets. We have entered into a contract
with a marketing affiliate for the sale of energy and capacity produced by the
Homer City facilities, which enables this marketing affiliate to engage in
forward sales and hedging. We pay the marketing affiliate fees of $0.02/MWh plus
emission allowance fees. The net fees earned by the marketing affiliate were
$1.5 million and $0.2 million for the years ended December 31, 2000 and 1999,
respectively.

    EME Homer City believes there may also be opportunities to derive revenue
from the sale of installed capacity and ancillary services. Under the terms of
the Pennsylvania Electric Company and New York State Electric & Gas Transition
Contracts, we have elected to exercise several options to sell capacity. These
contracts expire by December 31, 2001. We also have the option to sell
non-contracted capacity in PJM and NYISO. It is believed the Homer City units
should be capable of producing revenues from the sale of voltage support based
on previous utilization of the Homer City units.

RESULTS OF OPERATIONS

    As indicated above, we acquired the Homer City facilities on March 18, 1999
and, accordingly, the 1999 results of operations included only nine-and-a-half
months of activity from the Homer City facilities compared to a full twelve
months in 2000.

                                       19
<PAGE>
OPERATING REVENUES

    Operating revenues increased $96.1 million in 2000 compared to 1999
primarily as a result of having nine-and-a-half months of activity in 1999.
Energy and capacity sales were made through a contract with a marketing
affiliate. We generated 12,468 and 9,823 GWhr of electricity during 2000 and
1999, respectively, and had an availability factor of 80.2% and 86.8% during
these periods. The availability factor decreased in 2000 from 1999 due to higher
planned outages that were needed to complete our environmental improvements. The
weighted average price for energy was $30/MWh during 2000 and 1999.

    Due to higher electric demand resulting from warmer weather during the
summer months, electric revenues generated from the Homer City facilities are
substantially higher during the third quarter.

OPERATING EXPENSES

    Operating expenses consisted of expenses for fuel, plant operations,
depreciation and amortization, and administrative and general expenses. Fuel
costs increased to $164.1 million in 2000 from $124.8 million in 1999, primarily
as a result of only having nine-and-a-half months of activity in 1999. The
average price of coal per ton was $28.95 and $31.12 during 2000 and 1999,
respectively. The Homer City facilities benefit from access by truck to
significant native coal reserves located within the western Pennsylvania portion
of the North Appalachian region. Up to 95% of the coal used by Units 1 and 2 is
supplied under existing contracts with regional mines that are located within 50
miles of the facility, while the remainder is purchased on the spot market. The
coal for these units is cleaned by the coal-cleaning facility to reduce sulfur
content. Unit 3 utilizes lower sulfur coal that is blended at an on-site coal
blending facility.

    Plant operations costs increased to $79.1 million during 2000 from
$56.8 million during 1999. Plant operations costs include labor and overhead,
contract services, parts and supplies, and other administrative costs. Plant
operations costs in 2000 were higher than 1999 costs due to a full year of
operations of the Homer City facilities in 2000 and higher maintenance expenses
during planned outages.

    Depreciation and amortization increased to $47.3 million during 2000 from
$37.2 million during 1999. Depreciation expense primarily relates to the
acquisition of the Homer City facilities, which are being depreciated over
39 years from the date of acquisition.

    Administrative and general expenses were $0.2 million and $1.0 million
during 2000 and 1999, respectively. Administrative and general expenses include
an allocation of Edison Mission Energy corporate overhead costs that decreased
during 2000.

OTHER INCOME (EXPENSE)

    Interest expense was $74.8 million during 2000 compared to $53.7 million
during 1999. The average interest rate on outstanding indebtedness was
approximately 8.4% during both 2000 and 1999.

    Interest and other income was $2.5 million and $1.3 million during 2000 and
1999, respectively. Interest and other income primarily relates to interest
earned on cash and cash equivalents.

PROVISION FOR INCOME TAXES

    Edison Mission Holdings Co. had an effective tax rate before extraordinary
item of 44.6% during 2000 compared to a rate of 43.3% during 1999. The effective
tax rates are higher than the federal statutory rate of 35% due to state income
taxes.

                                       20
<PAGE>
EXTRAORDINARY LOSS

    The early repayment of the $800 million term loan in May 1999 resulted in an
extraordinary loss of $2.9 million, net of income tax benefit of $2.1 million,
attributable to the write-off of unamortized debt issue costs.

LIQUIDITY AND CAPITAL EXPENDITURES

    Net cash flow provided by Operating Activities was $81.0 million and
$119.2 million for the years ended December 31, 2000 and 1999, respectively. Net
cash flow provided by Operating Activities decreased $38.2 million from 1999 as
a result of timing of working capital requirements. Net working capital was
$76.0 million and $67.1 million at December 31, 2000 and 1999, respectively.

    In March 1999, EME Homer City completed the acquisition of the 1,884 MW
Homer City Electric Generating Station and related facilities from GPU, Inc.,
New York State Electric & Gas Corporation and their respective affiliates.
Consideration for the purchase was a cash payment of approximately
$1.8 billion.

    The acquisition was financed through a capital contribution by Edison
Mission Energy of approximately $1.1 billion and a short-term loan of
approximately $800 million. The short-term loan was subsequently replaced by
$830 million of senior secured bonds.

    On May 27, 1999, we completed a private offering of $300 million aggregate
principal amount of Series A Senior Secured Bonds and $530 million aggregate
principal amount of Series B Senior Secured Bonds. The net proceeds of the sale
of the bonds were used to repay the outstanding principal of, and to permanently
reduce the bank commitments associated with the term loans, and to repay a
portion of Edison Mission Energy's equity investment in us in the form of a
distribution. We intend to use amounts available under our $250 million
five-year term loan facility to fund the environmental capital improvements to
the Homer City units; we had drawn $182 million under the facility at
December 31, 2000. We may use amounts available under our $50 million five-year
revolving credit facility for general working capital purposes. All outstanding
amounts under the $50 million five-year revolving credit facility will be repaid
each year on the anniversary of the issuance of the bonds. As of December 31,
2000, there were no outstanding amounts under the $50 million five-year
revolving credit facility. Under specified conditions, we may have access to
additional liquidity in a debt service reserve account.

    We intend to invest approximately $281 million for the environmental capital
improvements to the Homer City units, including a selective catalytic reduction
system on all three units and a flue gas desulfurization system on Unit 3, under
a fixed price, turnkey engineering, procurement and construction contract. These
improvements are scheduled to be installed during 2001. Capital expenditures for
the year ended December 31, 2000 were $141.6 million, primarily related to the
flue gas desulfurization system on Unit 3 and the selective catalytic reduction
systems. The environmental improvements will enhance the economics of the Homer
City units by reducing fuel costs, nitrogen oxide allowance purchases and sulfur
dioxide allowance purchases. We expect to spend approximately $67 million during
2001 on capital expenditures for environmental capital improvements to the Homer
City facility. These capital expenditures are being financed through our
$250 million five-year term loan facility.

OTHER COMMITMENTS AND CONTINGENCIES

    Our parent, Edison Mission Energy, has issued a Credit Support Guarantee,
under which it must make up to $42 million in payments under specified
conditions. The Credit Support Guarantee is available until December 31, 2001 as
additional cash flow to supplement any shortfalls in cash from operations that
may be used to pay our debt service obligations on the bonds and our other
senior

                                       21
<PAGE>
secured debt. In addition, we have an obligation under our bond financing to
maintain a debt service reserve equal to six months the projected amount of debt
service following the payment of a distribution which can be satisfied through
cash, a letter of credit or a parent company guaranty. At December 31, 2000,
Edison Mission Energy provided a $35 million guaranty of our debt service
reserve obligation. We are in the process of finalizing a letter of credit of
approximately $35 million to replace the guaranty provided by Edison Mission
Energy.

    We have entered into several fuel purchase agreements with various
third-party suppliers for the purchase of bituminous steam coal. These contracts
call for the purchase of a minimum quantity of coal over the term of the
contracts, which extend from one to seven years from December 31, 2000, with an
option at our discretion to purchase additional amounts of coal as stated in the
agreements. Our contractual commitments for the purchase of coal, subject to
adjustment, are currently estimated to aggregate $533 million during the next
five years, summarized as follows: $142 million in 2001; $141 million in 2002;
$103 million in 2003; $106 million in 2004; and $41 million in 2005.

MARKET RISK EXPOSURES

    Prior to March 18, 1999, we had engaged in no operations since our formation
in October 1998. There are no separate financial statements available with
regard to the operations of the Homer City facilities prior to our taking
ownership because their operations were fully integrated with, and their results
of operations were consolidated into, the former owners of the Homer City
facilities. In addition, the electric output of the Homer City units was sold
based on rates set by regulatory authorities. As a result of the above factors
and because electricity rates are now set by the operation of market forces, the
historical financial data with respect to the Homer City facilities is not
meaningful or indicative of our future results. Our results of operations in the
future will depend primarily on revenues from the sale of energy, capacity and
other related products, and the level of our operating expenses.

COMMODITY PRICE RISK

    With the exception of revenue generated by the Pennsylvania Electric Company
and New York State Electric & Gas Transition Contracts, which expire in
December 2001, and from bilateral contracts for the sale of electricity with
third-party load serving entities and power marketers, our revenues and results
of operations are dependent upon prevailing market prices for energy, capacity
and ancillary services in the PJM, NYISO and other competitive markets. Among
the factors that influence the market prices for energy, capacity and ancillary
services in PJM and NYISO are:

    - prevailing market prices for fuel oil, coal and natural gas and associated
      transportation costs;

    - the extent of additional supplies of capacity, energy and ancillary
      services from current competitors or new market entrants, including the
      development of new generation facilities that may be able to produce
      electricity at a lower cost;

    - transmission congestion in PJM and/or NYISO;

    - the extended operation of nuclear generating plants in PJM and NYISO
      beyond their presently expected dates of decommissioning;

    - weather conditions prevailing in PJM and NYISO from time to time; and

    - the possibility of a reduction in the projected rate of growth in
      electricity usage as a result of factors such as regional economic
      conditions and the implementation of conservation programs.

                                       22
<PAGE>
    Our risk management policy allows for the use of derivative financial
instruments through our marketing affiliate to limit financial exposure to
energy prices for non-trading purposes. Our marketing affiliate's risk
management activities give rise to commodity price risk, which represents the
potential loss that can be caused by a change in the market value of a
particular commodity. Commodity price risks are actively monitored to ensure
compliance with our risk management policies. Policies are in place which limit
the amount of total net exposure we may enter into at any point in time.
Procedures exist which allow for monitoring of all commitments and positions
with daily reporting to senior management. Our marketing affiliate performs a
"value at risk" analysis in our daily business to measure, monitor and control
our overall market risk exposure. The use of value at risk allows management to
aggregate overall risk, compare risk on a consistent basis and identify the
drivers of the risk. Value at risk measures the worst expected loss over a given
time interval, under normal market conditions, at a given confidence level.
Given the inherent limitations of value at risk and relying on a single risk
measurement tool, our marketing affiliate supplements this approach with
industry "best practice" techniques, including the use of stress testing and
worst-case scenario analysis, as well as stop limits and counterparty credit
exposure limits.

    Our marketing affiliate has the following energy price hedges outstanding on
the dates presented:

<TABLE>
<CAPTION>
                                                        DECEMBER 31,
                                          -----------------------------------------
                                                 2000                  1999
                                          -------------------   -------------------
                                          NOTIONAL   CONTRACT   NOTIONAL   CONTRACT
                                           AMOUNT    EXPIRES     AMOUNT    EXPIRES
                                          --------   --------   --------   --------
                                                       (IN THOUSANDS)
<S>                                       <C>        <C>        <C>        <C>
Energy contracts:
Forwards................................  $456,564     2002          --        --
Options.................................     3,456     2001     $47,328      2001
Swaps...................................       800     2001          --        --
</TABLE>

    The following table summarizes the fair values for outstanding financial
instruments used for price risk management activities by instrument type:

<TABLE>
<CAPTION>
                                                        DECEMBER 31,
                                        ---------------------------------------------
                                                2000                    1999
                                        ---------------------   ---------------------
                                        CARRYING                CARRYING
                                         AMOUNT    FAIR VALUE    AMOUNT    FAIR VALUE
                                        --------   ----------   --------   ----------
                                                       (IN THOUSANDS)
<S>                                     <C>        <C>          <C>        <C>
Commodity price:
Forwards..............................      --     $(117,803)        --          --
Options...............................    $594         1,811     $3,533      $3,533
Swaps.................................      --          (892)        --          --
</TABLE>

    A 10% increase in electricity forward prices would result in an
$11.7 million decrease in the fair market value of energy contracts at
December 31, 2000 entered into by our marketing affiliate. A 10% decrease in
electricity forward prices would result in an $11.7 million increase in the fair
market value of energy contracts at December 31, 2000 entered into by our
marketing affiliate.

    We provide credit support for an affiliate that enters into various electric
energy transactions, including futures and swap agreements. These credit support
guarantees are not subordinate to the Senior Secured Bonds and are senior
unsecured obligations of Edison Mission Holdings Co. At December 31, 2000, we
provided guarantees totaling $178.4 million as credit support for financial and
energy contracts entered into by affiliates. This guarantee provides that we
will perform the obligations of affiliates in the event of non-performance by
them. We could be exposed to the risk of higher electric energy prices in the
event of non-performance by a counterparty. However, we do not anticipate
non-performance by a counterparty and the marketing affiliate.

                                       23
<PAGE>
INTEREST RATE RISK

    We have mitigated the risk of interest rate fluctuations by arranging for
fixed rate financing for the majority of our project financings. Interest rate
changes affect the borrowings under our working capital and capital improvement
credit facilities that are utilized to fund cash needs of the Homer City
facilities. We do not believe that interest rate fluctuations will have a
materially adverse effect on our financial position or results of operations.

ENVIRONMENTAL MATTERS OR REGULATIONS

    We are subject to environmental regulation by federal, state and local
authorities in the United States. We believe that as of the filing date of this
report, we are in substantial compliance with environmental regulatory
requirements and that maintaining compliance with current requirements will not
materially affect our financial position or results of operations.

    We expect that the implementation of the Clean Air Act Amendments of 1990
will result in increased capital expenditures and operating expenses. We expect
to spend approximately $67 million during 2001 to install upgrades to the
environmental controls at the Homer City plant to control sulfur dioxide and
nitrogen oxide emissions.

    On November 3, 1999, the United States Department of Justice filed suit
against a number of electric utilities for alleged violations of the Clean Air
Act's "new source review" requirements related to modifications of air emissions
sources at electric generating stations located in the southern and midwestern
regions of the United States. Several states have joined these lawsuits. In
addition, the United States Environmental Protection Agency has also issued
administrative notices of violation alleging similar violations at additional
power plants owned by some of the same utilities named as defendants in the
Department of Justice lawsuit, as well as other utilities, and also issued an
administrative order to the Tennessee Valley Authority for similar violations at
certain of its power plants. The Environmental Protection Agency has also issued
requests for information pursuant to the Clean Air Act to numerous other
electric utilities, including the prior owners of the Homer City plant, seeking
to determine whether these utilities also engaged in activities that may have
been in violation of the Clean Air Act's new source review requirements.

    To date, one utility, the Tampa Electric Company, has reached a formal
agreement with the United States to resolve alleged new source review
violations. Two other utilities, the Virginia Electric & Power Company and
Cinergy Corp., have reached agreements in principle with the Environmental
Protection Agency. In each case, the settling party has agreed to incur over
$1 billion in expenditures over several years for the installation of additional
pollution control, the retirement or repowering of coal-fired generating units,
supplemental environmental projects and civil penalties. These agreements
provide for a phased approach to achieving required emission reductions over the
next 10 to 15 years. The settling utilities have also agreed to pay civil
penalties ranging from $3.5 million to $8.5 million.

    Prior to our purchase of the Homer City plant, the Environmental Protection
Agency requested information from the prior owners of the plant concerning
physical changes at the plant. We have been in informal voluntary discussion
with the Environmental Protection Agency relating to these facilities, which may
also include payment of civil fines. We cannot assure you that we will reach a
satisfactory agreement or that these facilities will not be subject to
proceedings in the future. Depending on the outcome of the proceedings, we could
be required to invest in additional pollution control requirements, over and
above the upgrades we are planning to install, and could be subject to fines and
penalties.

    A new ambient air quality standard was adopted by the Environmental
Protection Agency in July 1997 to address emissions of fine particulate matter.
It is widely understood that attainment of the fine particulate matter standard
may require reductions in nitrogen oxides and sulfur dioxides, although

                                       24
<PAGE>
under the time schedule announced by the Environmental Protection Agency when
the new standard was adopted, non-attainment areas were not to have been
designated until 2002 and control measures to meet the standard were not to have
been identified until 2005. In May 1999, the United States Court of Appeals for
the District of Columbia Circuit held that Section 109(b)(l) of the Clean Air
Act, the section of the Clean Air Act requiring the promulgation of national
ambient air quality standards, as interpreted by the Environmental Protection
Agency, was an unconstitutional delegation of legislative power. The Court of
Appeals remanded both the fine particulate matter standard and the revised ozone
standard to allow the EPA to determine whether it could articulate a
constitutional application of Section 109(b)(l). On February 27, 2001, the
Supreme Court, in WHITMAN V. AMERICAN TRUCKING ASSOCIATIONS, INC., reversed the
Circuit Court's judgment on this issue and remanded the case back to the Court
of Appeals to dispose of any other preserved challenges to the particulate
matter and ozone standards. Accordingly, as the final application of the revised
particulate matter ambient air quality standard is potentially subject to
further judicial proceedings, the impact of this standard on our facilities is
uncertain at this time.

    On December 20, 2000, the Environmental Protection Agency issued a
regulatory finding that it is "necessary and appropriate" to regulate emissions
of mercury (and other hazardous air pollutants) from coal-fired power plants.
The agency has added coal-fired power plants to the list of source categories
under Section 112(c) of the Clean Air Act for which "maximum available control
technology" standards will be developed. Eventually, unless overturned or
reconsidered, the Environmental Protection Agency will issue technology-based
standards that will apply to every coal-fired unit owned by us or our affiliates
in the United States. This section of the Clean Air Act provides only for
technology-based standards, and does not permit market-trading options (although
emissions may be traded within a particular source). Until the standards are
actually promulgated, the potential cost of these control technologies cannot be
estimated, and we cannot evaluate the potential impact on the operations of our
facilities.

    Since the adoption of the United Nations Framework on Climate Change in
1992, there has been worldwide attention with respect to greenhouse gas
emissions. In December 1997, the Clinton Administration participated in the
Kyoto, Japan negotiations, where the basis of a Climate Change treaty was
formulated. Under the treaty, known as the Kyoto Protocol, the United States
would be required, by 2008-2012, to reduce its greenhouse gas emissions by 7%
from 1990 levels. However, because of opposition to the treaty in the United
States Senate, the Kyoto Protocol has not been submitted to the Senate for
ratification. Although legislative developments on the federal and state level
related to controlling greenhouse gas emissions are beginning, we are not aware
of any state legislative developments in the states in which we operate. If the
United States ratifies the Kyoto Protocol or we otherwise become subject to
limitations on emissions of carbon dioxide from our plants, these requirements
could have a significant impact on our operations.

    The Comprehensive Environmental Response, Compensation, and Liability Act,
which is also known as CERCLA, and similar state statutes, require the cleanup
of sites from which there has been a release or threatened release of hazardous
substances. As of the date of this report, we are unaware of any material
liabilities under CERCLA or similar state statutes; however, we cannot assure
you that we will not incur such liability in the future.

    In connection with our purchase of the Homer City facilities on March 18,
1999, we acquired the Two Lick Creek Dam and Reservoir. Acid mine drainage
discharges from the Penn Hill No. 2 and Dixon Run No. 3 inactive deep mines were
being collected and partially treated on the reservoir property by Stanford
Mining Company before being pumped off the property for additional treatment at
the nearby Chestnut Ridge Treatment Plant. The mining company filed for
bankruptcy and operated the collection and treatment system until May 1999 when
its assets were allegedly depleted.

                                       25
<PAGE>
    The Pennsylvania Department of Environmental Protection (PADEP) initially
advised us that we were potentially liable for treating the two discharges
solely because of our ownership of the property on which the discharges
emanated. Without any admission of our liability, we voluntarily entered into a
Letter Agreement to fund the operation of the collection and treatment system
for an interim period until the agency completed its investigation of
potentially liable parties and alternatives for permanent treatment of the
discharges were evaluated. After examining property records, PADEP concluded
that we are only responsible for treating the Dixon Run No. 3 discharge. The
agency has not completed its investigation of other potentially responsible
parties, particularly mining companies that previously operated the two mines.

    A draft consent agreement that addresses remedial responsibilities for the
two discharges has been prepared by PADEP. Under its terms, we are responsible
for designing and implementing a permanent system to collect and treat the Dixon
Run No. 3 discharge and the state will provide funding to a local watershed
association to develop and operate a collection and treatment system for the
other discharge. When the Dixon Run No. 3 treatment system becomes operational,
we will discontinue our funding of the existing collection and treatment system.
We will also be reimbursed a portion of the operational costs of that system.

    The cost of operating the collection and treatment system is approximately
$15,000 per month. We are evaluating options for permanent treatment of the
Dixon Run No. 3 discharge, including a passive system involving wetlands
treatment. The cost of a passive treatment system is estimated to be
$1 million, but its operational costs are considerably less than those of a
conventional chemical treatment system.

STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 133

    Effective January 1, 2001, Edison Mission Energy adopted Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." The Statement establishes accounting and reporting
standards requiring that every derivative instrument be recorded in the balance
sheet as either an asset or liability measured at its fair value. The Statement
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. For derivatives that
qualify for hedge accounting, depending on the nature of the hedge, changes in
fair value are either offset by changes in the fair value of the hedged assets,
liabilities or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value is immediately
recognized in earnings.

    Upon adoption of SFAS No. 133, we will record all derivatives associated
with our risk management activities at fair value unless the derivatives qualify
for the normal sales and purchases exception. We expect that a portion of our
risk management activities related to forward physical purchases or sales will
qualify for this exception. For derivatives associated with our risk management
activities that do not qualify as normal sales and purchases, we expect our
financial instruments will qualify as a cash flow hedge with appropriate
adjustments made to other comprehensive income. The cumulative effect on prior
years' net income resulting from the change in accounting for derivatives in
accordance with SFAS No. 133 is not expected to be material.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    Information responding to Item 7A is filed with this report under Item 7.
"Management's Discussion and Analysis of Results of Operations and Financial
Condition."

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

    The financial information required by Item 8 is set forth on pages 35
through 93.

                                       26
<PAGE>
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

    None.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    The members of our current board of directors are elected by, and serve
until their successors are elected by, our sole stockholder, Edison Mission
Energy. All officers are elected from time to time by our board of directors and
hold office at its discretion. Our board of directors currently contains six
members. The board of directors or our sole stockholder may elect to appoint
additional directors from time to time.

    Listed below are our current directors and executive officers and their ages
and positions with us as of March 20, 2001.

<TABLE>
<CAPTION>
NAME                                          AGE                           POSITION
----                                        --------   ---------------------------------------------------
<S>                                         <C>        <C>
Georgia R. Nelson.........................     51      Director, President
John K. Deshong...........................     46      Director, Vice President
Ronald L. Litzinger.......................     41      Director
Kevin M. Smith............................     43      Director, Vice President, Principal Accounting
                                                       Officer
Martha A. Spikes..........................     45      Director, Vice President and Secretary
Raymond W. Vickers........................     58      Director
</TABLE>

    Described below are the principal occupations and business activities of our
directors and executive officers for the past five years, in addition to their
positions indicated above.

    MS. NELSON has been director and president of Edison Mission Holdings Co.
since August 2000. Ms. Nelson has been senior vice president of Edison Mission
Energy since January 1996 and has been president of Midwest Generation EME, LLC
since May 1999. From January 1996 until June 1999, Ms. Nelson was senior vice
president of Edison Mission Energy's Worldwide Operations. Ms. Nelson was
division president of Edison Mission Energy's Americas region from January 1996
to January 1998. Prior to joining Edison Mission Energy, Ms. Nelson served as
senior vice president of Southern California Edison from June 1995 until
December 1995 and vice president of Southern California Edison from June 1993
until May 1995.

    MR. DESHONG has been a director and vice president of Edison Mission
Holdings Co. since August 2000. Mr. Deshong has been vice president of Tax for
Edison Mission Energy since June 2000. Mr. Deshong served as regional vice
president of Tax of Edison Mission Energy's Americas region from November 1998
to June 2000. Mr. Deshong has served as director, Tax Planning & Special
Projects to Edison Mission Energy from April 1997 to November 1998. Prior to
joining Edison Mission Energy, Mr. Deshong was director of Tax at United States
Enrichment Corporation from December 1995 to April 1997. Prior to that,
Mr. Deshong was senior tax advisor at Mobil Corporation from April 1993 to
December 1995.

    MR. LITZINGER has been a director of Edison Mission Holdings Co. since
August 2000. Mr. Litzinger has been senior vice president of Edison Mission
Energy's Worldwide Operations since June 1999. Mr. Litzinger served as vice
president of Edison Mission Energy's O&M Business Development from
December 1998 to May 1999. Mr. Litzinger has been with Edison Mission Energy
since November 1995 serving as both regional vice president of O&M Business
Development and manager of O&M Business Development until December 1998. Prior
to joining Edison Mission Energy, Mr. Litzinger was a

                                       27
<PAGE>
reliability supervisor with Texaco Refining and Marketing, Inc. from March 1995
to October 1995 and prior to that held numerous management positions with
Southern California Edison since June 1986.

    MR. SMITH has been a director of Edison Mission Holdings Co. since
October 1998. Since February 2000, Mr. Smith has been a vice president and the
principal accounting officer of Edison Mission Holdings Co. Mr. Smith has been
senior vice president and chief financial officer of Edison Mission Energy since
May 1999. Mr. Smith served as treasurer of Edison Mission Energy from
September 1992 until February 2000 and was elected a vice president in 1994.
Mr. Smith served as regional vice president of Edison Mission Energy's Americas
region from March 1998 until September 1999.

    MS. SPIKES has been a director, vice president and secretary of Edison
Mission Holdings Co. since October 1998. Ms. Spikes has been corporate secretary
of Edison Mission Energy since July 1996. Ms. Spikes has served as corporate and
project counsel to Edison Mission Energy since 1991.

    MR. VICKERS has been a director of Edison Mission Holdings Co. since
March 1999. Mr. Vickers has been senior vice president and general counsel of
Edison Mission Energy since March 1999. Prior to joining Edison Mission Energy,
Mr. Vickers was a partner with the law firm of Skadden, Arps, Slate, Meagher &
Flom LLP since 1989.

ITEM 11.  EXECUTIVE COMPENSATION

    Our officers receive compensation from Edison Mission Energy and receive no
compensation from us. For information concerning the compensation of the chief
executive officer and four most highly paid executive officers, other than the
chief executive officer, of Edison Mission Energy, see Edison Mission Energy's
Form 10-K for the year ended December 31, 2000, which is incorporated by
reference. For information concerning the benefit plans maintained by Edison
Mission Energy for our officers and employees, see Edison Mission Energy's
Form 10-K for the year ended December 31, 2000, which is incorporated by
reference.

    Our directors receive no compensation for their service as directors.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

CERTAIN BENEFICIAL OWNERS

    Set forth below is certain information regarding each person who is known by
us to be the beneficial owner of more than five percent of our common stock.

<TABLE>
<CAPTION>
                              NAME AND ADDRESS OF        AMOUNT AND NATURE OF
TITLE OF CLASS                 BENEFICIAL OWNER            BENEFICIAL OWNER       PERCENT OF CLASS
--------------             -------------------------   -------------------------  ----------------
<S>                        <C>                         <C>                        <C>
Common Stock, no par       Edison Mission Energy       100 shares held directly          100%
  value..................  18101 Von Karman Avenue     and with exclusive voting
                           Suite 1700                  and investment power
                           Irvine, CA 92612
</TABLE>

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    The following is a summary of the intercompany relationships and related
transactions. The terms of these transactions with affiliated entities are no
more favorable than those that would have been agreed upon by third parties on
an arm's length basis.

                                       28
<PAGE>
ENERGY SALES AND EMISSION ALLOWANCE AGREEMENTS

    EME Homer City has entered into contracts with a marketing affiliate for the
sale of energy and capacity produced by the Homer City units and the purchase or
sale of emission allowances, which enables this marketing affiliate to engage in
forward sales and hedging transactions. EME Homer City pays the marketing
affiliate a fee currently set at $0.02/MWh plus emission allowance fees, which
resulted in net fees earned of approximately $1.5 million and $0.2 million
during 2000 and 1999, respectively. All revenue from physical sales transactions
executed by the marketing affiliate is being deposited into a revenue account.
Edison Mission Holdings Co. provides credit support for its marketing affiliate
related to various electric energy transactions, including futures and swap
agreements. These credit support guarantees are not subordinate to the Senior
Secured Bonds and are senior unsecured obligations of Edison Mission Holdings
Co. At December 31, 2000, Edison Mission Holdings Co. provided guarantees
totaling $178.4 million in support of contracts entered into by affiliates.

RELATIONSHIP OF EDISON MISSION HOLDINGS CO. AND THE GUARANTORS TO EDISON MISSION
  ENERGY

    Edison Mission Holdings Co. and each subsidiary guarantor has been organized
and operated as a legal entity separate and apart from Edison Mission Energy,
Edison International and any other affiliates of Edison Mission Energy or Edison
International, and, accordingly, our assets and the assets of our subsidiary
guarantors will not be generally available to satisfy the obligations of Edison
Mission Energy, Edison International or any other affiliates of Edison Mission
Energy or Edison International. However, our unrestricted cash and that of our
subsidiary guarantors or other assets which are available for distribution may,
subject to applicable law and the terms of financing arrangements of these
parties, be advanced, loaned, paid as dividends or otherwise distributed or
contributed to Edison International, Edison Mission Energy or any of their
affiliates. Edison Mission Energy and Edison International are not obligated to
make any payments under the bonds, except for the Credit Support Guarantee.

SERVICES AGREEMENTS

    Administrative services such as payroll, employee benefit programs and
information technology, all performed by Edison International or Edison Mission
Energy, are shared among all affiliates of Edison International, and the costs
of these corporate support services are allocated to all affiliates, including
us. Costs are allocated based on one of the following formulas: percentage of
time worked, equity in investment and advances, number of employees, or
multi-factor, including operating revenues, operating expenses, total assets and
number of employees. In addition, services of Edison International or Edison
Mission Energy are sometimes directly requested by us, and those services are
performed for our benefit. Labor and expenses of these directly requested
services are specifically identified and billed at cost. We believe the
allocation methodologies utilized are reasonable. We made reimbursements for the
cost of these programs and other services, which amounted to $30.3 million and
$19.0 million during 2000 and 1999, respectively.

LOAN TO OUR PRESIDENT

    In July 1999, Edison Mission Energy, our parent, made an interest-free loan
to Georgia R. Nelson, Director and President of Edison Mission Holdings Co., in
the amount of $179,800 in exchange for a note executed by Ms. Nelson and payable
365 days following the conclusion of her assignment in Chicago, Illinois.

                                       29
<PAGE>
                                    PART IV

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

<TABLE>
<S> <C>  <C>
(a) (1)  LIST OF FINANCIAL STATEMENTS

         See Index to Financial Statements on page 35 of this report.

    (2)  LIST OF FINANCIAL STATEMENT SCHEDULES

         Schedules have been omitted since the required information
         is not present in amounts sufficient to require submission
         of the schedule, or because the required information is
         included in the financial statements or notes thereto
         referenced in (a)(1) above.

(b)      REPORTS ON FORM 8-K

         None.

(c)      EXHIBITS
</TABLE>

<TABLE>
<CAPTION>
EXHIBIT NO.                                     DESCRIPTION
-----------             ------------------------------------------------------------
<S>                     <C>
  3.1                   Articles of Incorporation of Edison Mission Holdings Co.
                        Originally filed with Edison Mission Holdings Co.'s
                        Registration Statement on Form S-4 to the Securities and
                        Exchange Commission on December 3, 1999.

  3.2                   Certificate of Amendment of Articles of Incorporation of
                        Edison Mission Holdings Co. Originally filed with Edison
                        Mission Holdings Co.'s Registration Statement on Form S-4 to
                        the Securities and Exchange Commission on December 3, 1999.

  3.3                   By-Laws of Edison Mission Holdings Co. Originally filed with
                        Edison Mission Holdings Co.'s Registration Statement on
                        Form S-4 to the Securities and Exchange Commission on
                        December 3, 1999.

  3.4                   Articles of Incorporation of Edison Mission Finance Co.
                        Originally filed with Edison Mission Holdings Co.'s
                        Registration Statement on Form S-4 to the Securities and
                        Exchange Commission on December 3, 1999.

  3.5                   By-Laws of Edison Mission Finance Co. Originally filed with
                        Edison Mission Holdings Co.'s Registration Statement on
                        Form S-4 to the Securities and Exchange Commission on
                        December 3, 1999.

  3.6                   Articles of Incorporation of Homer City Property
                        Holdings, Inc. Originally filed with Edison Mission Holdings
                        Co.'s Registration Statement on Form S-4 to the Securities
                        and Exchange Commission on December 3, 1999.

  3.7                   By-Laws of Homer City Property Holdings, Inc. Originally
                        filed with Edison Mission Holdings Co.'s Registration
                        Statement on Form S-4 to the Securities and Exchange
                        Commission on December 3, 1999.

  3.8                   Articles of Incorporation of Mission Energy Westside, Inc.
                        Originally filed with Edison Mission Holdings Co.'s
                        Registration Statement on Form S-4 to the Securities and
                        Exchange Commission on December 3, 1999.

  3.9                   Certificate of Amendment to Articles of Incorporation of
                        Mission Energy Westside, Inc. Originally filed with Edison
                        Mission Holdings Co.'s Registration Statement on Form S-4 to
                        the Securities and Exchange Commission on December 3, 1999.
</TABLE>

                                       30
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO.                                     DESCRIPTION
-----------             ------------------------------------------------------------
<S>                     <C>
  3.10                  By-Laws of Mission Energy Westside, Inc. Originally filed
                        with Edison Mission Holdings Co.'s Registration Statement on
                        Form S-4 to the Securities and Exchange Commission on
                        December 3, 1999.

  3.11                  Articles of Incorporation of Chestnut Ridge Energy Company.
                        Originally filed with Edison Mission Holdings Co.'s
                        Registration Statement on Form S-4 to the Securities and
                        Exchange Commission on December 3, 1999.

  3.12                  By-Laws of Chestnut Ridge Energy Company. Originally filed
                        with Edison Mission Holdings Co.'s Registration Statement on
                        Form S-4 to the Securities and Exchange Commission on
                        December 3, 1999.

  3.13                  EME Homer City Generation L.P. Agreement of Limited
                        Partnership. Originally filed with Edison Mission Holdings
                        Co.'s Registration Statement on Form S-4 to the Securities
                        and Exchange Commission on December 3, 1999.

  4.1                   Indenture, dated as of May 27, 1999, between Edison Mission
                        Holdings Co. and United States Trust Company of New York, as
                        Trustee, incorporated by reference to Exhibit 4.1 to Edison
                        Mission Holdings Co.'s Registration Statement on Form S-4 to
                        the Securities and Exchange Commission on December 3, 1999.

 10.1                   Exchange and Registration Rights Agreement, dated as of
                        May 27, 1999, by and among the Initial Purchasers named
                        therein, the Guarantors named therein and Edison Mission
                        Holdings Co., incorporated by reference to Exhibit 10.1 to
                        Edison Mission Holdings Co.'s Registration Statement on
                        Form S-4 to the Securities and Exchange Commission on
                        December 3, 1999.

 10.2                   Executive Supplemental Benefit Program, incorporated by
                        reference to Exhibits to Forms 10-K filed by SCEcorp (File
                        No. 1-2313).

 10.3                   1981 Deferred Compensation Agreement, incorporated by
                        reference to Exhibits to Forms 10-K filed by SCEcorp (File
                        No. 1-2313).

 10.4                   1985 Deferred Compensation Agreement for Executives,
                        incorporated by reference to Exhibits to Forms 10-K filed by
                        SCEcorp (File No. 1-2313).

 10.5                   1987 Deferred Compensation Plan for Executives, incorporated
                        by reference to Exhibits to Forms 10-K filed by SCEcorp
                        (File No. 1-2313).

 10.6                   1988 Deferred Compensation Plan for Executives, incorporated
                        by reference to Exhibits to Forms 10-K filed by SCEcorp
                        (File No. 1-2313).

 10.7                   1989 Deferred Compensation Plan for Executives, incorporated
                        by reference to Exhibits to Forms 10-K filed by SCEcorp
                        (File No. 1-9936).

 10.8                   1990 Deferred Compensation Plan for Executives, incorporated
                        by reference to Exhibits to Forms 10-K filed by SCEcorp
                        (File No. 1-9936).

 10.9                   Annual Deferred Compensation Plan for Executives,
                        incorporated by reference to Exhibits to Forms 10-K filed by
                        SCEcorp (File No. 1-9936).

 10.10                  Executive Retirement Plan for Executives, incorporated by
                        reference to Exhibits to Forms 10-K filed by SCEcorp (File
                        No. 1-2313).
</TABLE>

                                       31
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO.                                     DESCRIPTION
-----------             ------------------------------------------------------------
<S>                     <C>
 10.11                  Estate and Financial Planning Program for Executive
                        Officers, incorporated by reference to Exhibits to
                        Forms 10-K filed by SCEcorp (File No. 1-9936).

 10.12                  Transition Power Purchase Agreement, dated August 1, 1998,
                        between New York State Electric & Gas Corporation and
                        Mission Energy Westside, Inc, incorporated by reference to
                        Exhibit 10.52 to Edison Mission Energy's Form 10-K for the
                        year ended December 31, 1998.

 10.13                  Transition Power Purchase Agreement, dated August 1, 1998,
                        between Pennsylvania Electric Company and Mission Energy
                        Westside, Inc., incorporated by reference to Exhibit 10.53
                        to Edison Mission Energy's Form 10-K for the year ended
                        December 31, 1998.

 10.14                  Guarantee, dated August 1, 1998, between Edison Mission
                        Energy, Pennsylvania Electric Company, NGE Generation, Inc.
                        and New York State Electric & Gas Corporation, incorporated
                        by reference to Exhibit 10.54 to Edison Mission Energy's
                        Form 10-K for the year ended December 31, 1998.

 10.15                  Credit Agreement, dated March 18, 1999, among Edison Mission
                        Holdings Co. and Certain Commercial Lending Institutions,
                        and Citicorp USA, Inc., incorporated by reference to
                        Exhibit 10.55 to Edison Mission Energy's Form 8-K dated
                        March 18, 1999.

 10.16                  Guarantee and Collateral Agreement made by Edison Mission
                        Holdings Co., Edison Mission Finance Co., Homer City
                        Property Holdings, Inc., Chestnut Ridge Energy Co., Mission
                        Energy Westside, Inc., EME Homer City Generation L.P. and
                        Edison Mission Energy in favor of United States Trust
                        Company of New York, dated as of March 18, 1999,
                        incorporated by reference to Exhibit 10.56 to Edison Mission
                        Energy's Form 8-K dated March 18, 1999.

 10.16.1                Amendment No. 1 to the Guarantee and Collateral Agreement,
                        dated May 27, 1999, between Edison Mission Holdings Co.,
                        Edison Mission Finance Co., Homer City Property
                        Holdings, Inc., Chestnut Ridge Energy Company, Mission
                        Energy Westside, Inc., EME Homer City Generation L.P. and
                        Edison Mission Energy in favor of United States Trust
                        Company of New York, incorporated by reference to
                        Exhibit 10.56.1 to Amendment No. 1 of Edison Mission
                        Holdings Co.'s Registration Statement on Form S-4 to the
                        Securities and Exchange Commission on February 8, 2000.

 10.16.2                Open-End Mortgage, Security Agreement and Assignment of
                        Leases and Rents, dated March 18, 1999, from EME Homer City
                        Generation L.P. to United States Trust Company of New York,
                        incorporated by reference to Exhibit 10.56.2 to Amendment
                        No. 1 of Edison Mission Holdings Co.'s Registration
                        Statement on Form S-4 to the Securities and Exchange
                        Commission on February 8, 2000.

 10.16.3                Amendment No. 1 to the Open-End Mortgage, Security Agreement
                        and Assignment of Leases and Rents, dated May 27, 1999, from
                        EME Homer City Generation L.P. to United States Trust
                        Company of New York, incorporated by reference to
                        Exhibit 10.56.3 to Amendment No. 1 of Edison Mission
                        Holdings Co.'s Registration Statement on Form S-4 to the
                        Securities and Exchange Commission on February 8, 2000.

 10.17                  Collateral Agency and Intercreditor Agreement among Edison
                        Mission Holdings Co., Edison Mission Finance Co., Homer City
                        Property Holdings, Inc., Chestnut Ridge Energy Co., Mission
                        Energy Westside, Inc., EME Homer City Generation L.P., The
                        Secured Parties' Representatives, Citicorp USA, Inc. as
                        Administrative Agent and United States Trust Company of
                        New York, as Collateral Agent, dated as of March 18, 1999,
                        incorporated by reference to Exhibit 10.57 to Edison Mission
                        Energy's Form 8-K dated March 18, 1999.
</TABLE>

                                       32
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO.                                     DESCRIPTION
-----------             ------------------------------------------------------------
<S>                     <C>
 10.18                  Security Deposit Agreement among Edison Mission Holdings
                        Co., Edison Mission Finance Co., Homer City Property
                        Holdings, Inc., Chestnut Ridge Energy Co., Mission Energy
                        Westside, Inc., EME Homer City Generation L.P. and United
                        States Trust Company of New York, as Collateral Agent, dated
                        as of March 18, 1999, incorporated by reference to
                        Exhibit 10.58 to Edison Mission Energy's Form 8-K dated
                        March 18, 1999.

 10.18.1                Amendment No. 1 to the Security Deposit Agreement, dated
                        May 27, 1999, between Edison Mission Holdings Co., Edison
                        Mission Finance Co., Homer City Property Holdings, Inc.,
                        Chestnut Ridge Energy Company, Mission Energy
                        Westside, Inc., EME Homer City Generation L.P. and United
                        States Trust Company of New York, as Collateral Agent,
                        incorporated by reference to Exhibit 10.58.1 to Amendment
                        No. 1 of Edison Mission Holdings Co.'s Registration
                        Statement on Form S-4 to the Securities and Exchange
                        Commission on February 8, 2000.

 10.19                  Credit Support Guarantee, dated as of March 18, 1999, made
                        by Edison Mission Energy in favor of United States Trust
                        Company of New York, incorporated by reference to
                        Exhibit 10.59 to Edison Mission Energy's Form 8-K dated
                        March 18, 1999.

 10.19.1                Amendment No. 1 to the Credit Support Guarantee, dated
                        May 27, 1999, made by Edison Mission Energy in favor of
                        United States Trust Company of New York, incorporated by
                        reference to Exhibit 10.59.1 to Amendment No. 1 of Edison
                        Mission Holdings Co.'s Registration Statement on Form S-4 to
                        the Securities and Exchange Commission on February 8, 2000.

 10.20                  Debt Service Reserve Guarantee, dated as of March 18, 1999,
                        made by Edison Mission Energy in favor of United States
                        Trust Company of New York on behalf of the various financial
                        institutions (Lenders) as are or may become parities to the
                        Credit Agreement, dated as of March 18, 1999, among Edison
                        Mission Holdings Co., the Lenders and Citicorp USA, Inc.,
                        incorporated by reference to Exhibit 10.60 to Edison Mission
                        Energy's Form 8-K dated March 18, 1999.

 10.20.1                Amendment No. 1 to the Debt Service Reserve Guarantee, dated
                        May 27, 1999, made by Edison Mission Energy in favor of
                        United States Trust Company of New York, incorporated by
                        reference to Exhibit 10.60.1 to Amendment No. 1 of Edison
                        Mission Holdings Co.'s Registration Statement on Form S-4 to
                        the Securities and Exchange Commission on February 8, 2000.

 10.20.2                Bond Debt Service Reserve Guarantee, dated May 27, 1999,
                        made by Edison Mission Energy in favor of United States
                        Trust Company of New York, incorporated by reference to
                        Exhibit 10.60.2 to Amendment No. 1 of Edison Mission
                        Holdings Co.'s Registration Statement on Form S-4 to the
                        Securities and Exchange Commission on February 8, 2000.

 10.20.3                Intercompany Loan Subordination Agreement, dated March 18,
                        1999, among Edison Mission Holdings Co., Edison Mission
                        Finance Co., Homer City Property Holdings, Inc., Chestnut
                        Ridge Energy Co., Mission Energy Westside, Inc., EME Homer
                        City Generation L.P. and United States Trust Company of
                        New York, incorporated by reference to Exhibit 10.60.3 to
                        Amendment No. 2 of Edison Mission Holdings Co.'s
                        Registration Statement on Form S-4 to the Securities and
                        Exchange Commission on February 29, 2000.
</TABLE>

                                       33
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO.                                     DESCRIPTION
-----------             ------------------------------------------------------------
<S>                     <C>
 10.21                  Credit Agreement, dated March 18, 1999, among Edison Mission
                        Energy and Certain Commercial Lending Institutions, and
                        Citicorp USA, Inc., incorporated by reference to
                        Exhibit 10.61 to Edison Mission Energy's Form 8-K dated
                        March 18, 1999.

 10.21.1                Amendment One to Credit Agreement, dated as of August 17,
                        2000, by and among Edison Mission Energy, Certain Commercial
                        Lending Institutions, and Citicorp USA, Inc., as
                        Administrative Agent, incorporated by reference to
                        Exhibit 10.61.1 to Edison Mission Energy's Form 10-K for the
                        year ended December 31, 2000.

 10.22                  Asset Purchase Agreement, dated August 1, 1998, between
                        Pennsylvania Electric Company, NGE Generation, Inc.,
                        New York State Electric & Gas Corporation and Mission Energy
                        Westside, Inc, incorporated by reference to Exhibit 2.4 to
                        Edison Mission Energy's 10-K for the year ended
                        December 31, 1998.

 10.23                  Form of Agreement for 2000 Employee Awards under the Equity
                        Compensation Plan, incorporated by reference to
                        Exhibit 10.78 to Edison Mission Energy's Form 10-Q for the
                        quarter ended March 31, 2000.

 10.24                  Edison International 2000 Equity Plan, incorporated by
                        reference to Exhibit 10.1 to Edison International's
                        Form 10-Q for the quarter ended June 30, 2000. (File
                        No. 1-9936).

 10.25                  Form of Agreement for 2000 Employee Awards under the 2000
                        Equity Plan, incorporated by reference to Exhibit 10.2 to
                        Edison International's Form 10-Q for the quarter ended
                        June 30, 2000. (File No. 1-9936).

 10.26                  Amendment No. 1 to the Edison International Equity
                        Compensation Plan (as restated January 1, 1998),
                        incorporated by reference to Exhibit 10.4 to Edison
                        International's Form 10-Q for the quarter ended June 30,
                        2000. (File No. 1-9936).

 21                     List of Subsidiaries.*
</TABLE>

------------------------

  * Filed herewith

                                       34
<PAGE>
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                PAGE
                                                              --------
<S>                                                           <C>
                     EDISON MISSION HOLDINGS CO.

Report of Independent Public Accountants....................     36
Consolidated Balance Sheets--December 31, 2000 and 1999.....     37
Consolidated Statements of Operations--Years Ended December
  31, 2000 and 1999.........................................     38
Consolidated Statements of Shareholder's Equity--Years Ended
  December 31, 2000 and 1999................................     39
Consolidated Statements of Cash Flows--Years Ended December
  31, 2000 and 1999.........................................     40
Notes to Consolidated Financial Statements..................     41

                      CHESTNUT RIDGE ENERGY CO.

Chestnut Ridge Energy Co. Financial Statements--Note........     56
Report of Independent Public Accountants....................     57
Balance Sheets--December 31, 2000 and 1999..................     58
Statements of Operations--Years Ended December 31, 2000 and
  1999......................................................     59
Statements of Shareholder's Equity--Years Ended December 31,
  2000 and 1999.............................................     60
Statements of Cash Flows--Years Ended December 31, 2000 and
  1999......................................................     61
Notes to Financial Statements...............................     62

                    EME HOMER CITY GENERATION L.P.

EME Homer City Generation L.P. Financial Statements--Note...     66
Report of Independent Public Accountants....................     67
Balance Sheets--December 31, 2000 and 1999..................     68
Statements of Operations--Years Ended December 31, 2000 and
  1999......................................................     69
Statements of Partners' Equity--Years Ended December 31,
  2000 and 1999.............................................     70
Statements of Cash Flows--Years Ended December 31, 2000 and
  1999......................................................     71
Notes to Financial Statements...............................     72

                      EDISON MISSION FINANCE CO.

Edison Mission Finance Co.--Note............................     85
Report of Independent Public Accountants....................     86
Balance Sheets--December 31, 2000 and 1999..................     87
Statements of Operations--Years Ended December 31, 2000 and
  1999......................................................     88
Statements of Shareholder's Equity--Years Ended December 31,
  2000 and 1999.............................................     89
Statements of Cash Flows--Years Ended December 31, 2000 and
  1999......................................................     90
Notes to Financial Statements...............................     91
</TABLE>

                                       35
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of Edison Mission Holdings Co.:

    We have audited the accompanying consolidated balance sheets of Edison
Mission Holdings Co. (a California corporation) and subsidiaries, a wholly-owned
subsidiary of Edison Mission Energy, as of December 31, 2000 and 1999, and the
related consolidated statements of operations, shareholder's equity and cash
flows for the years then ended. 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 Edison Mission Holdings Co.
and subsidiaries as of December 31, 2000 and 1999, and the results of their
operations and their cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States.

ARTHUR ANDERSEN LLP

Orange County, California
March 28, 2001

                                       36
<PAGE>
                  EDISON MISSION HOLDINGS CO. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                              -----------------------
                                                                 2000         1999
                                                              ----------   ----------
<S>                                                           <C>          <C>
                                       ASSETS

CURRENT ASSETS
  Cash and cash equivalents.................................  $   19,125   $   44,511
  Due from affiliates.......................................      84,166       35,082
  Fuel inventory............................................      14,993       21,336
  Spare parts inventory.....................................      23,582       23,349
  Other current assets......................................       2,758        1,301
                                                              ----------   ----------
    Total current assets....................................     144,624      125,579
                                                              ----------   ----------

PROPERTY, PLANT AND EQUIPMENT...............................   2,040,564    1,899,955
  Less accumulated depreciation.............................      84,280       37,198
                                                              ----------   ----------
    Net property, plant and equipment.......................   1,956,284    1,862,757
                                                              ----------   ----------

OTHER ASSETS
  Deferred financing charges, net...........................      11,291       11,766
                                                              ----------   ----------

TOTAL ASSETS................................................  $2,112,199   $2,000,102
                                                              ==========   ==========

                        LIABILITIES AND SHAREHOLDER'S EQUITY

CURRENT LIABILITIES
  Accounts payable..........................................  $   16,479   $    1,789
  Accrued liabilities.......................................      32,200       38,264
  Interest payable..........................................      19,459       18,433
  Other current liabilities.................................         469           --
                                                              ----------   ----------
    Total current liabilities...............................      68,607       58,486
                                                              ----------   ----------

LONG-TERM DEBT..............................................   1,012,000      907,000
DEFERRED TAXES..............................................      62,074       28,924
BENEFIT PLANS...............................................      17,625       17,625
                                                              ----------   ----------

TOTAL LIABILITIES...........................................   1,160,306    1,012,035
                                                              ----------   ----------

COMMITMENTS AND CONTINGENCIES (NOTE 8)

SHAREHOLDER'S EQUITY
  Common stock, no par value; 10,000 shares authorized; 100
    shares issued and outstanding...........................          --           --
  Additional paid-in-capital................................     925,609      960,442
  Retained earnings.........................................      26,284       27,625
                                                              ----------   ----------

TOTAL SHAREHOLDER'S EQUITY..................................     951,893      988,067
                                                              ----------   ----------

TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY..................  $2,112,199   $2,000,102
                                                              ==========   ==========
</TABLE>

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

                                       37
<PAGE>
                  EDISON MISSION HOLDINGS CO. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                  YEARS ENDED
                                                                 DECEMBER 31,
                                                              -------------------
                                                                2000       1999
                                                              --------   --------
<S>                                                           <C>        <C>
OPERATING REVENUES FROM MARKETING AFFILIATE
  Capacity revenues.........................................  $ 48,736   $ 32,841
  Energy revenues...........................................   373,084    292,911
                                                              --------   --------
    Total operating revenues................................   421,820    325,752
                                                              --------   --------
OPERATING EXPENSES
  Fuel......................................................   164,112    124,763
  Plant operations..........................................    79,077     56,764
  Depreciation and amortization.............................    47,292     37,198
  Administrative and general................................       190        959
                                                              --------   --------
    Total operating expenses................................   290,671    219,684
                                                              --------   --------

Income from operations......................................   131,149    106,068
                                                              --------   --------

OTHER INCOME (EXPENSE)
  Interest and other income.................................     2,464      1,321
  Interest expense..........................................   (74,791)   (53,654)
                                                              --------   --------
    Total other expense.....................................   (72,327)   (52,333)
                                                              --------   --------

Income before income taxes and extraordinary loss...........    58,822     53,735
Provision for income taxes before extraordinary loss........    26,264     23,242
                                                              --------   --------

INCOME BEFORE EXTRAORDINARY LOSS............................    32,558     30,493
                                                              --------   --------

Extraordinary loss on early extinguishment of debt, net of
  income tax benefit of $2,082..............................        --     (2,865)
                                                              --------   --------

NET INCOME..................................................  $ 32,558   $ 27,628
                                                              ========   ========
</TABLE>

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

                                       38
<PAGE>
                  EDISON MISSION HOLDINGS CO. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                               ADDITIONAL
                                                     COMMON     PAID-IN-    RETAINED   SHAREHOLDER'S
                                                     STOCK      CAPITAL     EARNINGS      EQUITY
                                                    --------   ----------   --------   -------------
<S>                                                 <C>        <C>          <C>        <C>
BALANCE AT JANUARY 1, 1999........................  $    --    $        3   $     (3)   $       --
  Net income......................................       --            --     27,628        27,628
  Cash contribution...............................       --     1,066,890         --     1,066,890
  Cash dividends..................................       --      (106,451)        --      (106,451)
                                                    -------    ----------   --------    ----------
BALANCE AT DECEMBER 31, 1999......................       --       960,442     27,625       988,067
                                                    -------    ----------   --------    ----------
  Net income......................................       --            --     32,558        32,558
  Cash contribution...............................       --           203         --           203
  Cash dividends..................................       --       (35,036)   (33,899)      (68,935)
                                                    -------    ----------   --------    ----------
BALANCE AT DECEMBER 31, 2000......................  $    --    $  925,609   $ 26,284    $  951,893
                                                    =======    ==========   ========    ==========
</TABLE>

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

                                       39
<PAGE>
                  EDISON MISSION HOLDINGS CO. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                    YEARS ENDED
                                                                   DECEMBER 31,
                                                              -----------------------
                                                                2000         1999
                                                              ---------   -----------
<S>                                                           <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income................................................  $  32,558   $    27,628
  Adjustments to reconcile net income to net cash provided
    by operating activities:
    Extraordinary loss on early extinguishment of debt, net
      of tax................................................         --         2,865
    Depreciation and amortization...........................     48,873        38,633
    Deferred tax provision..................................     33,150        28,924
    Loss on asset disposal..................................        760            --
    Increase in due from affiliates.........................    (49,084)      (32,999)
    Decrease (increase) in inventory........................      6,110        (3,264)
    Increase in other assets................................     (1,457)       (1,301)
    Increase in accounts payable............................     14,690         1,789
    (Decrease) increase in accrued liabilities..............     (6,064)       37,488
    Increase in interest payable............................      1,026        18,433
    Increase in other liabilities...........................        469         1,040
                                                              ---------   -----------
  Net cash provided by operating activities.................     81,031       119,236
                                                              ---------   -----------
CASH FLOWS FROM INVESTING ACTIVITIES
    Purchase of Homer City facility.........................         --    (1,818,631)
    Capital expenditures....................................   (141,579)     (105,385)
                                                              ---------   -----------
  Net cash used in investing activities.....................   (141,579)   (1,924,016)
                                                              ---------   -----------
CASH FLOWS FROM FINANCING ACTIVITIES
    Capital contribution from parent........................        203     1,066,890
    Borrowings on long-term obligations.....................    105,000       907,000
    Borrowings under Acquisition Facility...................         --       800,000
    Repayments on debt obligations..........................         --      (800,000)
    Financing costs.........................................     (1,106)      (18,148)
    Cash dividends to parent................................    (68,935)     (106,451)
                                                              ---------   -----------
  Net cash provided by financing activities.................     35,162     1,849,291
                                                              ---------   -----------
NET (DECREASE) INCREASE IN CASH.............................    (25,386)       44,511
CASH AND CASH EQUIVALENTS, beginning of year................     44,511            --
                                                              ---------   -----------
CASH AND CASH EQUIVALENTS, end of year......................  $  19,125   $    44,511
                                                              =========   ===========
</TABLE>

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

                                       40
<PAGE>
                  EDISON MISSION HOLDINGS CO. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (DOLLARS IN THOUSANDS)

NOTE 1.  GENERAL

    Edison Mission Holdings Co. (the "Company"), a wholly-owned subsidiary of
Edison Mission Energy ("EME"), an indirect wholly-owned subsidiary of Edison
International ("EIX"), is a California corporation formed for the purpose of
issuing 8.137% Senior Secured Bonds due 2019 and 8.734% Senior Secured Bonds due
2026 and, through its subsidiaries, acquiring, owning and operating three
coal-fired electric generating units and related facilities (the "Homer City
facilities") located in Indiana County, Pennsylvania for the purpose of
producing electric energy.

    On March 18, 1999, the Company's subsidiary, EME Homer City Generation L.P.,
completed its acquisition (the "Acquisition") of 100% of the ownership interests
in the Homer City facilities and assumed certain liabilities of the former
owners. The accompanying financial statements reflect the operations of the
Homer City facilities commencing from the date of acquisition. The Homer City
facilities were part of the former owner's regulated operations and were not
operated as a separate business. Effective with the date of acquisition, the
Homer City facilities were no longer operated as part of a regulated utility,
but rather as a merchant plant selling power into a pool. Accordingly, no prior
period financial results of the predecessor operations are presented. The
acquisition has been accounted for utilizing the purchase method. The purchase
price was allocated to the assets acquired and liabilities assumed based upon
their respective fair market values.

    The acquisition was financed through a capital contribution by EME of
approximately $1.1 billion and a short-term loan of approximately $800 million.
The short-term loan was subsequently replaced by $830 million of senior secured
bonds.

    The Homer City facilities consist of three coal-fired steam turbine units,
one coal preparation facility, an 1,800-acre dam site and associated support
facilities. Units 1 and 2 are essentially identical steam turbine generators
with net summer capacities of 620 MW and 614 MW, respectively. Units 1 and 2
began commercial operation in 1969. Unit 3 is also a steam turbine generator
with a net summer capacity of 650 MW. Unit 3 began commercial operations in
1977. The Company benefits from direct transmission access into both the
Pennsylvania-New Jersey-Maryland power market and the New York power market.

    The Company has entered into contracts with a marketing affiliate for the
sale of energy and capacity produced by the Homer City facilities and the
purchase or sale of emission allowances, which enables the marketing affiliate
to engage in forward sales and hedging transactions to manage electricity price
exposure. The marketing affiliate has systems in place that monitor real-time
spot and forward pricing and perform options valuations. The Company pays the
marketing affiliate fees for marketing power. All revenues from transactions
executed by the marketing affiliate are deposited into a revenue account
established for the benefit of the holders of the Company's senior secured debt.

NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CONSOLIDATIONS

    The consolidated financial statements include Edison Mission Holdings Co.
and its wholly-owned subsidiaries. All significant intercompany transactions
have been eliminated.

USE OF ESTIMATES IN FINANCIAL STATEMENTS

    The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect reported

                                       41
<PAGE>
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ
from those estimates.

CASH AND CASH EQUIVALENTS

    The Company considers cash and cash equivalents to include cash and
short-term investments with original maturities of three months or less.

INVENTORY

    Inventory consists of spare parts, coal and fuel oil and is stated at the
lower of weighted average cost or market.

PROPERTY, PLANT AND EQUIPMENT

    Property, plant and equipment are stated at cost. Depreciation is computed
on a straight-line basis over the following estimated useful lives:

<TABLE>
<S>                                                    <C>
Power plant facilities and equipment.................  10 to 39 years
Emission allowances..................................  39 years
Equipment, furniture and fixtures....................  4 to 7 years
</TABLE>

    As part of the acquisition of the Homer City facilities, the Company
acquired emission allowances under the Environmental Protection Agency's Acid
Rain Program. Although the emission allowances granted under this program are
freely transferable, the Company intends to use substantially all of the
emission allowances in the normal course of its business to generate
electricity. Accordingly, the Company has classified emission allowances
expected to be used to generate power as part of property, plant and equipment.
Acquired emission allowances will be amortized over the estimated lives of the
Homer City units on a straight-line basis.

    At December 31, 2000 and 1999, property, plant and equipment consisted of
the following:

<TABLE>
<CAPTION>
                                                          2000         1999
                                                       ----------   ----------
<S>                                                    <C>          <C>
Land.................................................  $    4,500   $    4,500
Power plant facilities and equipment.................   1,368,703    1,355,067
Emission allowances..................................     438,068      438,068
Construction in progress.............................     223,207       99,370
Equipment, furniture and fixtures....................       6,086        2,950
                                                       ----------   ----------
                                                        2,040,564    1,899,955

Accumulated depreciation.............................     (84,280)     (37,198)
                                                       ----------   ----------

Property, plant and equipment, net...................  $1,956,284   $1,862,757
                                                       ==========   ==========
</TABLE>

MAINTENANCE ACCRUALS

    Certain major pieces of our equipment require major maintenance on a
periodic basis. These costs are expensed as incurred.

                                       42
<PAGE>
DEFERRED COSTS

    Deferred costs at December 31, 2000 and 1999 consisted of the following:

<TABLE>
<CAPTION>
                                                              2000       1999
                                                            --------   --------
<S>                                                         <C>        <C>
Deferred financing costs..................................  $13,672    $12,566
Accumulated amortization..................................   (2,381)      (800)
                                                            -------    -------
Net deferred financing costs..............................  $11,291    $11,766
                                                            =======    =======
</TABLE>

    Deferred financing costs consist of legal and other costs incurred by the
Company to obtain long-term financing (Note 3). These costs are being amortized
as interest expense over the life of the related long-term debt using the
effective interest method.

CAPITALIZED INTEREST

    Interest incurred on funds borrowed by us to finance project construction is
capitalized. Capitalization of interest is discontinued when the projects are
completed and deemed operational. Such capitalized interest is included in
property, plant and equipment.

    Capitalized interest is amortized on a straight-line basis over the
estimated useful life of the power plant facility.

<TABLE>
<CAPTION>
                                                               YEARS ENDED
                                                              DECEMBER 31,
                                                           -------------------
                                                             2000       1999
                                                           --------   --------
<S>                                                        <C>        <C>
Interest incurred........................................  $ 85,073   $55,433
Interest capitalized.....................................   (10,282)   (1,779)
                                                           --------   -------
                                                           $ 74,791   $53,654
                                                           ========   =======
</TABLE>

REVENUE RECOGNITION

    Revenue and related costs are recorded as electricity is generated or
services are provided.

PRICE RISK MANAGEMENT ACTIVITIES

    The Company has entered into a contract with a marketing affiliate for the
sale of energy and capacity produced by the Company, which enables such
marketing affiliate to engage in forward sales and hedging transactions to
manage the Company's electricity price exposure. Net gains or losses on hedges
by the marketing affiliate, which are physically settled, are recognized in the
same manner as the hedged item. The Company receives the net transaction price
on all contracts entered into on its behalf by its marketing affiliate.

INCOME TAXES

    The Company is included in the consolidated federal income tax and combined
state franchise tax returns of EIX. The Company calculates its income tax
provision on a separate company basis under a tax sharing arrangement with an
affiliate of EIX, which in turn has an agreement with EIX. Tax benefits
generated by the Company and used in the EIX consolidated tax return are
recognized by the Company without regard to separate company limitations.

    The Company accounts for income taxes using the asset-and-liabilities
method, wherein deferred tax assets and liabilities are recognized for future
tax consequences of temporary differences between the carrying amounts and the
tax bases of assets and liabilities using enacted rates.

                                       43
<PAGE>
NEW ACCOUNTING STANDARD

    Effective January 1, 2001, Edison Mission Energy adopted Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." The Statement establishes accounting and reporting
standards requiring that every derivative instrument be recorded in the balance
sheet as either an asset or liability measured at its fair value. The Statement
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. For derivatives that
qualify for hedge accounting, depending on the nature of the hedge, changes in
fair value are either offset by changes in the fair value of the hedged assets,
liabilities or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value is immediately
recognized in earnings.

    Upon adoption of SFAS No. 133, we will record all derivatives associated
with our risk management activities at fair value unless the derivatives qualify
for the normal sales and purchases exception. We expect that a portion of our
risk management activities related to forward physical purchases or sales will
qualify for this exception. For derivatives associated with our risk management
activities that do not qualify as normal sales and purchases, we expect our
financial instruments will qualify as a cash flow hedge with appropriate
adjustments made to other comprehensive income. The cumulative effect on prior
years' net income resulting from the change in accounting for derivatives in
accordance with SFAS No. 133 is not expected to be material.

RECLASSIFICATIONS

    Certain amounts in the prior years have been reclassified to conform to the
current year's presentation.

NOTE 3.  LONG-TERM DEBT

    On March 18, 1999, the Company entered into a debt agreement (the "Initial
Financing") with a bank for a combination of loan and line of credit agreements
aggregating $1.1 billion. The Initial Financing consisted of a short-term loan
for $800 million for the initial financing of the acquisition (the "Acquisition
Facility"), a $250 million construction loan (the "Environmental Capital
Improvements Facility") that would be drawn on when needed, and a $50 million
line of credit (the "Working Capital Facility"). At December 31, 2000, the
Company had drawn $182 million on the Environmental Capital Improvements
Facility and had not drawn on the Working Capital Facility. Amounts outstanding
under the Initial Financing bear interest at variable Eurodollar rates or Base
rates at the option of the Company. If the Company elects to pay Eurodollar
rates, interest costs include a margin of 0.85% to 2.25% depending on the
Company's current debt rating. Additionally, the Company pays a facility fee of
0.15% to 0.50%, depending on the Company's current debt rating, on the total
outstanding commitment irrespective of usage. At December 31, 2000 the facility
fee was 0.25%. The Company also pays an annual agent bank fee of $50,000. The
weighted average interest rate related to the Environmental Capital Improvements
Facility was 7.70% and 7.13% (LIBOR + 1.00%) at December 31, 2000 and 1999,
respectively.

    On May 27, 1999, the Company completed a private offering of $300 million
aggregate principal amount of 8.137% Senior Secured Bonds due 2019 and
$530 million aggregate principal amount of 8.734% Senior Secured Bonds due 2026
(collectively, the "Senior Secured Bonds"). The net proceeds from the Senior
Secured Bonds were used to repay the outstanding principal of, and to
permanently reduce the bank commitments associated with the Acquisition
Facility, and to repay a portion of EME's equity investment in the form of a
dividend. As a result of the early extinguishment of the Acquisition Facility,
the Company wrote off unamortized deferred financing costs that were reported as
an extraordinary loss of $4.9 million ($2.9 million after tax).

                                       44
<PAGE>
    At December 31, 2000, the future maturities of the debt are as follows:

<TABLE>
<S>                                                       <C>
2001....................................................  $       --
2002....................................................          --
2003....................................................          --
2004....................................................     185,292
2005....................................................      11,835
  Thereafter............................................     814,873
                                                          ----------
  Total.................................................  $1,012,000
                                                          ==========
</TABLE>

    Each of the subsidiaries of Edison Mission Holdings Co. has executed full
and unconditional guarantees in support of the Senior Secured Bonds and
borrowings under the Credit Agreement on a joint and several basis. Edison
Mission Holdings Co. has no material assets apart from investments in its
subsidiaries. Financial statements of these subsidiaries have been omitted in
accordance with Rule 3-10 of Regulation S-X ("Rule 3-10") since Edison Mission
Holdings Co. has no material assets apart from its investment in subsidiaries.
Financial statements of Edison Mission Finance Co., Chestnut Ridge Energy
Company and EME Homer City Generation L.P. have been included as the securities
of these entities have been pledged as collateral for the Senior Secured Bonds
and the book value of these entities constitutes greater than 20% of the value
of the Senior Secured Bonds. Financial statements of Mission Energy
Westside, Inc. and Homer City Property Holdings Co., the securities of which are
also collateral for the Senior Secured Bonds, have been omitted under Rule 3-10
as the book value for these securities is less than 20% of the value of the
Senior Secured Bonds.

    The Company has certain financial and non-financial debt covenants
associated with its debt that may limit distributions. With the exception of the
initial $30 million distribution from the net proceeds of the Senior Secured
Bonds, the Company, in order to make distributions, must maintain a specified
debt service coverage ratio, net cash flows over the aggregate principal,
interest, and fixed charges for a period, ranging from 1.0 to 2.5 over the life
of the debt. The Company is also limited in obtaining new debt including capital
lease obligations in excess of $10 million, working capital loans in excess of
$50 million (with such amount to be escalated annually in accordance with the
consumer price index), and other senior indebtedness in excess of $20 million.
In addition, we have an obligation under our bond financing to maintain a debt
service reserve equal to six months the projected amount of debt service
following the payment of a distribution which can be satisfied through cash, a
letter of credit or a parent company guaranty. At December 31, 2000, Edison
Mission Energy provided a $35 million guaranty of our debt service reserve
obligation. We are in the process of finalizing a letter of credit of
approximately $35 million to replace the guaranty provided by Edison Mission
Energy.

    The collateral for the Senior Secured Bonds and any borrowings under the
Credit Agreement are secured by all of the assets of the Company; including its
ownership interests in subsidiaries, a mortgage on real property; and, a
security interest in all bank accounts, insurance policies and other intangible
assets whether now owned or thereafter acquired.

    The Company's parent, EME, has also issued a Credit Support Guarantee under
which it guaranteed our payments on the Senior Secured Bonds and other senior
secured debt up to the aggregate amount of $42 million. The Credit Support
Guarantee is available until December 31, 2001. EME has also provided a
guarantee to satisfy the Company's debt service reserve requirement with respect
to its obligations under the Credit Agreement.

    Based on market interest rates, the fair value of the Company's fixed rate
long-term debt with a carrying amount of $830 million was $886.2 million and
$793.2 million at December 31, 2000 and 1999, respectively.

                                       45
<PAGE>
NOTE 4.  PRICE RISK MANAGEMENT ACTIVITIES

    Our risk management policy allows for the use of derivative financial
instruments through our marketing affiliate to limit financial exposure to
energy prices for non-trading purposes. Our marketing affiliate's risk
management activities give rise to commodity price risk, which represents the
potential loss that can be caused by a change in the market value of a
particular commodity. Commodity price risks are actively monitored to ensure
compliance with our risk management policies. Policies are in place which limit
the amount of total net exposure we may enter into at any point in time.
Procedures exist which allow for monitoring of all commitments and positions
with daily reporting to senior management. Our marketing affiliate performs a
"value at risk" analysis in our daily business to measure, monitor and control
our overall market risk exposure. The use of value at risk allows management to
aggregate overall risk, compare risk on a consistent basis and identify the
drivers of the risk. Value at risk measures the worst expected loss over a given
time interval, under normal market conditions, at a given confidence level.
Given the inherent limitations of value at risk and relying on a single risk
measurement tool, our marketing affiliate supplements this approach with
industry "best practice" techniques including the use of stress testing and
worst-case scenario analysis, as well as stop limits and counterparty credit
exposure limits.

    Our marketing affiliate has the following energy price hedges outstanding on
the dates presented:

<TABLE>
<CAPTION>
                                                        DECEMBER 31,
                                          -----------------------------------------
                                                 2000                  1999
                                          -------------------   -------------------
                                          NOTIONAL   CONTRACT   NOTIONAL   CONTRACT
                                           AMOUNT    EXPIRES     AMOUNT    EXPIRES
                                          --------   --------   --------   --------
<S>                                       <C>        <C>        <C>        <C>
Energy contracts:
Forwards................................  $456,564     2002          --        --
Options.................................     3,456     2001     $47,328      2001
Swaps...................................       800     2001          --        --
</TABLE>

    The following table summarizes the fair values for outstanding financial
instruments used for price risk management activities by instrument type:

<TABLE>
<CAPTION>
                                                        DECEMBER 31,
                                        ---------------------------------------------
                                                2000                    1999
                                        ---------------------   ---------------------
                                        CARRYING                CARRYING
                                         AMOUNT    FAIR VALUE    AMOUNT    FAIR VALUE
                                        --------   ----------   --------   ----------
<S>                                     <C>        <C>          <C>        <C>
Commodity price:
Forwards..............................      --     $(117,803)        --          --
Options...............................    $594         1,811     $3,533      $3,533
Swaps.................................      --          (892)        --          --
</TABLE>

NOTE 5.  RELATED-PARTY TRANSACTIONS

    The Company has entered into energy and emission allowance sales agreements
with a marketing affiliate for the sale of energy and capacity at a price equal
to (i) the price which a third-party purchaser of the capacity or energy has
agreed to pay less (ii) $.02 per MWh of capacity and energy plus an emission
allowance fee. Payment is due and payable within thirty days from billing which
is rendered on a monthly basis. At December 31, 2000 and 1999, the amount due
from the marketing affiliate was $69.7 million and $28.7 million, respectively.
The net fees earned by the marketing affiliate were $1.5 million and
$0.2 million for the years ended December 31, 2000 and 1999, respectively. The
Company provides credit support for its marketing affiliate related to various
electric energy transactions, including futures and swap agreements. As of
December 31, 2000 and 1999, the Company

                                       46
<PAGE>
provided guarantees totaling $178.4 million and $94 million, respectively, in
support of contracts entered into by affiliates.

    Certain administrative services such as payroll, employee benefit plans,
insurance and information technology are shared among all affiliates of EIX, and
the costs of these corporate support services are allocated to all affiliates.
The cost of services provided by EIX, including those related to the Company,
are allocated to EME based on one of the following formulas; percentage of time
worked, equity in investment and advances, number of employees, or multi-factor
(operating revenues, operating expenses, total assets and total employees). The
Company participates in a common payroll and benefit program with all EIX
employees. In addition, EIX bills EME for any direct labor and out-of-pocket
expenses for services directly requested for the benefit of the Company. All
charges from EIX related to the Company are billed to EME.

    The Company receives administrative services under an agreement with EME
which provides for: (1) reimbursement of any charges from EIX directly for the
benefit of the Company, (2) reimbursement of any payments made to third parties
for goods and services for the sole benefit of the Company, (3) labor and
expenses of EME personnel providing services requested by the Company, and
(4) a corporate allocation. Certain of the officers of the Company are also
officers of EME. Compensation of common officers is paid for by EME and is
considered part of the corporate allocation under (4) above. Management believes
the allocation methodologies utilized are reasonable. The Company made
reimbursements for the cost of these programs and other services totaling
$30.3 million and $19.0 million for the years ended December 31, 2000 and 1999,
respectively.

    The Company has also recorded a receivable from EME of $14.7 million and
$7.8 million at December 31, 2000 and 1999, respectively, related to tax due
under the tax sharing agreement. See Note 2 for the further discussion of the
tax sharing agreement.

NOTE 6.  INCOME TAXES

    Income tax expense includes the current tax benefit from the operating loss
and the change in deferred income taxes during the year. The components of the
net accumulated deferred income tax liability were:

<TABLE>
<CAPTION>
                                                                YEARS ENDED
                                                               DECEMBER 31,
                                                            -------------------
                                                              2000       1999
                                                            --------   --------
<S>                                                         <C>        <C>
Deferred tax assets
  Loss carryforwards......................................  $ 6,697    $ 2,235
    State tax deduction...................................    4,944      2,199
    Valuation allowance...................................   (6,697)    (2,235)
                                                            -------    -------
                                                            $ 4,944    $ 2,199
                                                            -------    -------
Deferred tax liabilities
  Accumulated depreciation difference.....................  $66,774    $30,879
  Other...................................................      244        244
                                                            -------    -------
                                                             67,018     31,123
                                                            -------    -------
Deferred tax liability, net...............................  $62,074    $28,924
                                                            =======    =======
</TABLE>

    Loss carryforwards represent Pennsylvania state tax losses totaling
$67.2 million and $22.6 million at December 31, 2000 and 1999, respectively,
which are scheduled to expire, if not used, beginning in 2009 and are limited in
use to $2.0 million per year.

                                       47
<PAGE>
    The provision for income taxes is comprised of the following:

<TABLE>
<CAPTION>
                                                                YEARS ENDED
                                                               DECEMBER 31,
                                                            -------------------
                                                              2000       1999
                                                            --------   --------
<S>                                                         <C>        <C>
Current
  Federal.................................................  $(6,994)   $(8,654)
  State...................................................      108        890
                                                            -------    -------
    Total current.........................................   (6,886)    (7,764)
                                                            -------    -------
Deferred
  Federal.................................................   24,526     23,530
  State...................................................    8,624      5,394
                                                            -------    -------
    Total deferred........................................   33,150     28,924
                                                            -------    -------

Provision for income taxes................................  $26,264    $21,160
                                                            =======    =======
</TABLE>

    Income tax provision is included in the statement of operations as follows:

<TABLE>
<CAPTION>
                                                                YEARS ENDED
                                                               DECEMBER 31,
                                                            -------------------
                                                              2000       1999
                                                            --------   --------
<S>                                                         <C>        <C>
Income before extraordinary loss..........................  $26,264    $23,242
Extraordinary loss........................................       --     (2,082)
                                                            -------    -------

  Total...................................................  $26,264    $21,160
                                                            =======    =======
</TABLE>

    The components of the deferred tax provision, which arise from timing
differences between financial and tax reporting, are presented below:

<TABLE>
<CAPTION>
                                                                YEARS ENDED
                                                               DECEMBER 31,
                                                            -------------------
                                                              2000       1999
                                                            --------   --------
<S>                                                         <C>        <C>
Accumulated depreciation difference.......................  $35,895    $30,879
Loss carryforwards........................................   (4,462)    (2,235)
State tax deduction.......................................   (2,745)    (2,199)
Other.....................................................       --        244
Valuation allowance.......................................    4,462      2,235
                                                            -------    -------

  Total deferred provision................................  $33,150    $28,924
                                                            =======    =======
</TABLE>

                                       48
<PAGE>
    Variations from the 35% federal statutory rate are as follows:

<TABLE>
<CAPTION>
                                                                YEARS ENDED
                                                               DECEMBER 31,
                                                            -------------------
                                                              2000       1999
                                                            --------   --------
<S>                                                         <C>        <C>
Expected provision for federal income taxes...............  $20,588    $18,808
Increase in taxes from:
  State tax--net of federal benefit.......................    5,676      4,434
                                                            -------    -------

    Total provision for income taxes......................  $26,264    $23,242
                                                            =======    =======

Effective tax rate........................................    44.65%     43.25%
                                                            =======    =======
</TABLE>

NOTE 7.  EMPLOYEE BENEFIT PLANS

    Employees of the Company are eligible for various benefit plans of EIX.

PENSION PLANS

    The Company maintains a pension plan specifically for the benefit of its
union employees. The Company's non-union employees participate in the EIX
pension plan. Both plans are noncontributory, defined benefit pension plans and
cover employees who fulfill minimum service requirements. There are no prior
service costs for the plans.

    Information on plan assets and benefit obligations is shown below:

<TABLE>
<CAPTION>
                                                     YEARS ENDED DECEMBER 31,
                                             -----------------------------------------
                                               2000       1999       2000       1999
                                             --------   --------   --------   --------
                                                 UNION PLAN          NON-UNION PLAN
                                             -------------------   -------------------
<S>                                          <C>        <C>        <C>        <C>
Change in Benefit Obligation
  Benefit obligation at beginning of
    year...................................  $ 6,783    $    --    $   865     $  --
  Benefit obligation acquired..............       --      6,000         --       800
  Service cost.............................      719        459        291       135
  Interest cost............................      578        321         78        40
  Actuarial gain (loss)....................    1,457          3        182      (110)
                                             -------    -------    -------     -----
    Benefit obligation at end of year......  $ 9,537    $ 6,783    $ 1,416     $ 865
                                             =======    =======    =======     =====
Change in Plan Assets
  Fair value of plan assets at beginning of
    year...................................  $   104    $    --    $    --     $  --
  Actual return on plan assets.............     (126)         4         --        --
  Employer contributions...................    2,120        100         --        --
                                             -------    -------    -------     -----
    Fair value of plan assets at end of
      year.................................  $ 2,098    $   104    $    --     $  --
                                             =======    =======    =======     =====

Funded status..............................  $(7,439)   $(6,679)   $(1,416)    $(865)
Unrecognized net loss (gain)...............    1,652          5         78      (110)
                                             -------    -------    -------     -----
Pension liability..........................  $(5,787)   $(6,674)   $(1,338)    $(975)
                                             =======    =======    =======     =====

Discount rate..............................     7.25%      7.75%      7.25%     7.75%
Rate of compensation increase..............     5.00%      5.00%      5.00%     5.00%
Expected return on plan assets.............     7.50%      7.50%      8.50%     7.50%
</TABLE>

                                       49
<PAGE>
    Components of pension expense were:

<TABLE>
<CAPTION>
                                                            YEARS ENDED DECEMBER 31,
                                               --------------------------------------------------
                                                 2000          1999          2000          1999
                                               --------      --------      --------      --------
                                                     UNION PLAN                NON-UNION PLAN
                                               ----------------------      ----------------------
<S>                                            <C>           <C>           <C>           <C>
Service cost.................................   $  719         $459          $291          $135
Interest cost obligation.....................      578          321            78            40
Expected return on plan assets...............      (64)          (6)           --            --
                                                ------         ----          ----          ----

Net pension expense..........................   $1,233         $774          $369          $175
                                                ======         ====          ====          ====
</TABLE>

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

    The Company's employees retiring at or after age 55 with at least 10 years
of service are eligible for postretirement health care, dental, life insurance
and other benefits.

    Information on plan assets and benefit obligations is shown below:

<TABLE>
<CAPTION>
                                                   YEARS ENDED DECEMBER 31,
                                           -----------------------------------------
                                             2000       1999       2000       1999
                                           --------   --------   --------   --------
                                               UNION PLAN          NON-UNION PLAN
                                           -------------------   -------------------
<S>                                        <C>        <C>        <C>        <C>
Change in Benefit Obligation
  Benefit obligation at beginning of
    year.................................  $ 7,518    $    --    $ 1,376    $    --
  Benefit obligation acquired............       --      7,500         --      1,600
  Service cost...........................      358        310         77         70
  Interest cost..........................      555        401        115         95
  Actuarial gain (loss)..................      188       (693)       235       (389)
  Benefits paid..........................       --         --         --         --
                                           -------    -------    -------    -------
    Benefit obligation at end of year....  $ 8,619    $ 7,518    $ 1,803    $ 1,376
                                           =======    =======    =======    =======

Change in Plan Assets
  Fair value of plan assets at beginning
    of year..............................  $    --    $    --    $    --    $    --
  Employer contributions.................       --         --         --         --
  Benefits paid..........................       --         --         --         --
                                           -------    -------    -------    -------
    Fair value of plan assets at end of
      year...............................  $    --    $    --    $    --    $    --
                                           =======    =======    =======    =======

Funded status............................  $(8,619)   $(7,518)   $(1,803)   $(1,376)
Unrecognized net gain....................     (457)      (693)      (139)      (389)
                                           -------    -------    -------    -------
Recorded liability.......................  $(9,076)   $(8,211)   $(1,942)   $(1,765)
                                           =======    =======    =======    =======

Discount rate............................     7.50%      8.00%      7.50%      8.00%
</TABLE>

                                       50
<PAGE>
    The components of postretirement benefits other than pension expense were:

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                         -----------------------------------------
                                                           2000       1999       2000       1999
                                                         --------   --------   --------   --------
                                                             UNION PLAN          NON-UNION PLAN
                                                         -------------------   -------------------
<S>                                                      <C>        <C>        <C>        <C>
Service cost...........................................    $358       $310      $   77     $   70
Interest cost..........................................     555        401         115         95
Net amortization.......................................     (48)        --         (15)        --
                                                           ----       ----      ------     ------

Total expense..........................................    $865       $711      $  177     $  165
                                                           ====       ====      ======     ======
</TABLE>

    For the non-union plan, the assumed rate of future increases in the
per-capita cost of health care benefits is 11% for 2001, gradually decreasing to
5% for 2008 and beyond. Increasing the health care cost trend rate by one
percentage point would increase the accumulated obligation as of December 31,
2000 by $451,000 and annual aggregate service and interest costs by $48,000.
Decreasing the health care cost trend rate by one percentage point would
decrease the accumulated obligation as of December 31, 2000 by $361,000 and
annual aggregate service and interest costs by $38,000.

    For the union plan, the assumed rate of future increases in the per-capita
cost of health care benefits is 11% for 2001, gradually decreasing to 5% for
2008 and beyond. Increasing the health care cost trend rate by one percentage
point would increase the accumulated obligation as of December 31, 2000 by
$1,706,000 and annual aggregate service and interest costs by $200,000.
Decreasing the health care cost trend rate by one percentage point would
decrease the accumulated obligation as of December 31, 2000 by $1,347,000 and
annual aggregate service and interest costs by $158,000.

EMPLOYEE STOCK PLANS

    A 401(k) plan is maintained to supplement eligible employees' retirement
income. The Company matches 100 percent of non-union employee contributions up
to 6 percent of such employees' annual compensation. The Company also matches
65 percent of contributions made by union employees, up to 2.6 percent of annual
compensation. Employer contributions vest 20 percent per year. Contribution
expense for the years ended December 31, 2000 and 1999 was $406,000 and
$352,000, respectively.

NOTE 8.  COMMITMENTS AND CONTINGENCIES

TRANSITION CONTRACTS

    EME Homer City has entered into separate transition contracts (the
"Transition Contracts") with Pennsylvania Electric Company ("Penelec") and New
York State Electric & Gas Corporation ("NYSEG"), pursuant to which EME Homer
City may exercise a put option to sell certain quantities of capacity to Penelec
and NYSEG, and Penelec and NYSEG may exercise call options to purchase certain
quantities of capacity. The terms of the NYSEG Transition Contract and the
Penelec Transition Contract continue until December 31, 2001 and May 31, 2001,
respectively. EME Homer City exercised its put options to sell 942 MW of
capacity to Penelec for the full period from March 18, 1999 through May 31, 2001
under the Penelec Transition Contract for a price of $49.90/MW-day from
March 18, 1999 through May 31, 1999, $59.90/MW-day through May 31, 2000, and
$77.40/MW-day through May 31, 2001. EME Homer City has amended the NYSEG
Transition Contract and sold 500 MW of capacity to NYSEG through May 31, 2000
for a price of $60.00/MW-day, 370 MW of capacity through September 30, 2000 for
$72.17/MW-day, and 430 MW of capacity through December 31, 2001 for
$72.17/MW-day.

                                       51
<PAGE>
CREDIT SUPPORT TO AFFILIATES

    The Company has entered into a contract with a marketing affiliate for the
sale of energy and capacity produced by the Homer City facilities, which enables
such marketing affiliate to engage in forward sales and hedging transactions to
manage the Company's electricity price exposure. Net gains or losses on hedges
by the marketing affiliate that are settled are recognized in the same manner as
the hedged item. The Company receives the net transaction price on all contracts
that are settled. In connection with these agreements, the Company has agreed to
provide credit support in the form of guarantees. At December 31, 2000, the
Company had executed guarantees totaling $178.4 million.

ASH DISPOSAL SITE

    Pennsylvania Department of Environmental Protection ("PADEP") regulations
governing ash disposal sites require, among other things, groundwater
assessments of landfills if existing groundwater monitoring indicates the
possibility of degradation. The assessments could lead to the installation of
additional monitoring wells and if degradation of the groundwater were
discovered, the Company would be required to develop abatement plans, which may
include the lining of unlined sites. To date, the Homer City facilities' ash
disposal site has not shown any signs that would require abatement. Management
does not believe that the costs of maintaining and abandoning the ash disposal
site will have a material impact on the Company's results of operations or
financial position.

                                       52
<PAGE>
ENVIRONMENTAL MATTERS

    Prior to our purchase of the Homer City plant, the Environmental Protection
Agency requested information from the prior owners of the plant concerning
physical changes at the plant. We have been in informal voluntary discussion
with the Environmental Protection Agency relating to these facilities, which may
also include payment of civil fines. We cannot assure that we will reach a
satisfactory agreement or that these facilities will not be subject to
proceedings in the future. Depending on the outcome of the proceedings, we could
be required to invest in additional pollution control requirements, over and
above the upgrades we are planning to install, and could be subject to fines and
penalties.

TWO LICK CREEK RESERVOIR DEEP MINE DISCHARGES

    In connection with our purchase of the Homer City facilities on March 18,
1999, we acquired the Two Lick Creek Dam and Reservoir. Acid mine drainage
discharges from the Penn Hill No. 2 and Dixon Run No. 3 inactive deep mines were
being collected and partially treated on the reservoir property by Stanford
Mining Company before being pumped off the property for additional treatment at
the nearby Chestnut Ridge Treatment Plant. The mining company filed for
bankruptcy and operated the collection and treatment system until May 1999 when
its assets were allegedly depleted.

    The Pennsylvania Department of Environmental Protection (PADEP) initially
advised us that we were potentially liable for treating the two discharges
solely because of our ownership of the property on which the discharges
emanated. Without any admission of our liability, we voluntarily entered into a
letter agreement to fund the operation of the collection and treatment system
for an interim period until the agency completed its investigation of
potentially liable parties and alternatives for permanent treatment of the
discharges were evaluated. After examining property records, PADEP concluded
that we are only responsible for treating the Dixon Run No. 3 discharge. The
agency has not completed its investigation of other potentially responsible
parties, particularly mining companies that previously operated the two mines.

    A draft consent agreement that addresses remedial responsibilities for the
two discharges has been prepared by PADEP. Under its terms, we are responsible
for designing and implementing a permanent system to collect and treat the Dixon
Run No. 3 discharge and the state will provide funding to a local watershed
association to develop and operate a collection and treatment system for the
other discharge. When the Dixon Run No. 3 treatment system becomes operational,
we will discontinue our funding of the existing collection and treatment system.
We will also be reimbursed a portion of the operational costs of that system.

    The cost of operating the collection and treatment system is approximately
$15,000 per month. We are evaluating options for permanent treatment of the
Dixon Run No. 3 discharge, including a passive system involving wetlands
treatment. The cost of a passive treatment system is estimated to be
$1 million, but its operational costs are considerably less than those of a
conventional chemical treatment system.

FUEL COMMITMENTS

    The Company has entered into several fuel purchase agreements with various
third-party suppliers for the purchase of bituminous steam coal. These contracts
call for the purchase of a minimum quantity of coal over the term of the
contracts, which extend from one to seven years from December 31, 2000, with an
option at the Company's discretion to purchase additional amounts of coal as
stated in the agreements. The minimum quantity of coal to be purchased through
these contracts is 16.5 million tons over the terms of the respective contracts.

                                       53
<PAGE>
    At December 31, 2000, the Company had contractual commitments to purchase
and/or transport coal and fuel oil. Based on the contract provisions that
consist of fixed prices, subject to adjustment clauses in certain cases, these
minimum commitments are currently estimated to aggregate $533 million in the
next five years summarized as follows: 2001--$142 million; 2002--$141 million;
2003--$103 million; 2004--$106 million; 2005--$41 million.

PLANT IMPROVEMENTS

    Upon acquisition, the Company began major plant improvements consisting
primarily of a turnkey pollution control retrofit project. The estimated cost of
this project is $281 million, of which $214.1 million was incurred prior to
December 31, 2000.

LEASES

    At December 31, 2000, the Company had no capital leases; however, the
Company did have several operating leases in place relating mainly to flue gas
conditioning equipment and trucks. At December 31, 2000, the future operating
lease commitments were as follows:

<TABLE>
<CAPTION>

<S>                                                           <C>
2001........................................................    $  426
2002........................................................       409
2003........................................................       360
2004........................................................       294
2005........................................................       117
                                                                ------
  Total.....................................................    $1,606
                                                                ======
</TABLE>

    Operating lease expense amounted to $711,000 and $891,000 in 2000 and 1999,
respectively.

COAL CLEANING AGREEMENT

    The Company has entered into a Coal Cleaning Agreement with Homer City Coal
Processing Corp. to operate and maintain a coal cleaning plant owned by the
Company. Under the terms of the agreement, which is scheduled to expire on
August 31, 2002, the Company is obligated to reimburse Homer City Coal
Processing Corp. for the actual costs incurred in the operations and maintenance
of the coal cleaning plant, a fixed general and administrative service fee of
$260,000 per year, and an operating fee that ranges from $.20 to $.35 per ton
depending on the level of tonnage.

INTERCONNECTION AGREEMENT

    Subsidiaries of the Company have entered into Interconnection Agreements
with NYSEG and Penelec to provide interconnection services necessary to
interconnect the Homer City Station with NYSEG and Penelec's transmission
systems. Unless terminated earlier in accordance with its terms, the
Interconnection Agreement will terminate on a date mutually agreed to by EME
Homer City, NYSEG and Penelec. This date will not exceed the retirement date of
the Homer City Units. NYSEG and Penelec have agreed to extend such
interconnection services to modifications, additions, upgrades or repowering of
the Homer City Units. EME Homer City is required to compensate NYSEG and Penelec
for all reasonable costs associated with any modifications, additions or
replacements made to NYSEG or Penelec's interconnection facilities or
transmission systems in connection with any modification, addition, upgrade to
the Homer City Units.

                                       54
<PAGE>
NOTE 9.  SUPPLEMENTAL STATEMENTS OF CASH FLOWS INFORMATION

<TABLE>
<CAPTION>
                                                        YEARS ENDED DECEMBER 31,
                                                        ------------------------
                                                          2000           1999
                                                        --------      ----------
<S>                                                     <C>           <C>
Cash paid:
Interest..............................................  $82,467       $   36,220
Income taxes (receipts)...............................       --               --

Details of facility acquisition:
Fair value of assets acquired.........................       --        1,835,207
Liabilities assumed...................................       --          (16,576)
                                                        -------       ----------
Net cash paid for acquisition.........................  $    --       $1,818,631
                                                        =======       ==========
</TABLE>

NOTE 10.  QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
2000                                                 FIRST      SECOND    THIRD(I)    FOURTH     TOTAL
----                                                --------   --------   --------   --------   --------
<S>                                                 <C>        <C>        <C>        <C>        <C>
Operating revenues................................  $97,616    $103,358   $126,328   $94,518    $421,820
Operating income..................................   28,190      26,672     52,548    23,739     131,149
Net income........................................    4,780       4,085     22,528     1,165      32,558
</TABLE>

<TABLE>
<CAPTION>
1999                                                 FIRST(II)    SECOND    THIRD(I)    FOURTH     TOTAL
----                                                 ---------   --------   --------   --------   --------
<S>                                                  <C>         <C>        <C>        <C>        <C>
Operating revenues.................................   $13,140    $75,352    $157,312   $79,948    $325,752
Operating income...................................     1,241     10,796      82,768    11,263     106,068
Income (loss) before extraordinary item............      (490)    (5,470)     41,761    (5,308)     30,493
Net income (loss)..................................      (490)    (5,470)     38,896    (5,308)     27,628
</TABLE>

------------------------

(i) Reflects our seasonal pattern, in which the majority of earnings are
    recorded in the third quarter of each year.

(ii) Reflects operations of the Homer City plant from acquisition on March 18,
     1999 through March 31, 1999.

                                       55
<PAGE>
                           CHESTNUT RIDGE ENERGY CO.
                           2000 FINANCIAL STATEMENTS
                                      NOTE

    The financial statements of Chestnut Ridge Energy Co. are provided under
Rule 3-10 of Regulation S-X as such securities represent a substantial portion
of the collateral for the Senior Secured Bonds.

                                       56
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of Chestnut Ridge Energy Co.:

    We have audited the accompanying balance sheets of Chestnut Ridge Energy Co.
(a California corporation), a wholly-owned subsidiary of Edison Mission Holdings
Co., as of December 31, 2000 and 1999, and the related statements of operations,
shareholder's equity and cash flows for the years then ended. 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 Chestnut Ridge Energy Co. as
of December 31, 2000 and 1999, and the results of its operations and its cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States.

ARTHUR ANDERSEN LLP

Orange County, California
March 28, 2001

                                       57
<PAGE>
                           CHESTNUT RIDGE ENERGY CO.

                                 BALANCE SHEETS

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                2000       1999
                                                              --------   --------
<S>                                                           <C>        <C>
                                     ASSETS

CURRENT ASSETS
  Due from affiliate under tax sharing agreement............  $    563   $    416
                                                              --------   --------
    Total current assets....................................       563        416
                                                              --------   --------
INVESTMENT IN EME HOMER CITY GENERATION L.P.................   194,846    197,987
                                                              --------   --------
TOTAL ASSETS................................................  $195,409   $198,403
                                                              ========   ========

                      LIABILITIES AND SHAREHOLDER'S EQUITY

CURRENT LIABILITIES
  Due to affiliate..........................................  $     --   $    184
                                                              --------   --------
    Total current liabilities...............................        --        184
                                                              --------   --------
DEFERRED TAXES..............................................     4,074      2,168
                                                              --------   --------
TOTAL LIABILITIES...........................................     4,074      2,352
                                                              --------   --------
SHAREHOLDER'S EQUITY
  Common stock, $1 par value; 10,000 shares authorized; 100
    shares issued and outstanding...........................        --         --
  Additional paid-in-capital................................   200,194    198,794
  Retained deficit..........................................    (8,859)    (2,743)
                                                              --------   --------
TOTAL SHAREHOLDER'S EQUITY..................................   191,335    196,051
                                                              --------   --------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY..................  $195,409   $198,403
                                                              ========   ========
</TABLE>

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

                                       58
<PAGE>
                           CHESTNUT RIDGE ENERGY CO.

                            STATEMENTS OF OPERATIONS

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                  YEARS ENDED
                                                                 DECEMBER 31,
                                                              -------------------
                                                                2000       1999
                                                              --------   --------
<S>                                                           <C>        <C>
Equity in loss from EME Homer City Generation L.P...........   $3,141     $  807
Administrative and general expense..........................    1,216        184
                                                               ------     ------

Loss before income taxes....................................    4,357        991
Provision for income taxes..................................    1,759      1,752
                                                               ------     ------

NET LOSS....................................................   $6,116     $2,743
                                                               ======     ======
</TABLE>

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

                                       59
<PAGE>
                           CHESTNUT RIDGE ENERGY CO.

                       STATEMENTS OF SHAREHOLDER'S EQUITY

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                 ADDITIONAL
                                                       COMMON     PAID-IN-    RETAINED   SHAREHOLDER'S
                                                       STOCK      CAPITAL     EARNINGS      EQUITY
                                                      --------   ----------   --------   -------------
<S>                                                   <C>        <C>          <C>        <C>
BALANCE AT JANUARY 1, 1999..........................    $ --      $     --    $    --      $     --

  Net loss..........................................      --            --     (2,743)       (2,743)
  Cash contribution.................................      --       270,576         --       270,576
  Cash dividends....................................      --       (71,782)        --       (71,782)
                                                        ----      --------    -------      --------

BALANCE AT DECEMBER 31, 1999........................      --       198,794     (2,743)      196,051
                                                        ----      --------    -------      --------

  Net loss..........................................      --            --     (6,116)       (6,116)
  Cash contribution.................................      --         1,325         --         1,325
  Cash dividends....................................      --            75         --            75
                                                        ----      --------    -------      --------

BALANCE AT DECEMBER 31, 2000........................    $ --      $200,194    $(8,859)     $191,335
                                                        ====      ========    =======      ========
</TABLE>

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

                                       60
<PAGE>
                           CHESTNUT RIDGE ENERGY CO.

                            STATEMENTS OF CASH FLOWS

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                  YEARS ENDED
                                                                 DECEMBER 31,
                                                              -------------------
                                                                2000       1999
                                                              --------   --------
<S>                                                           <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss..................................................  $(6,116)   $ (2,743)
  Adjustments to reconcile net loss to net cash used in
    operating activities:
    Deferred tax provision..................................    1,906       2,168
    Equity in loss from EME Homer City Generation L.P.......    3,141         807
    Increase in due from affiliate under tax sharing
      agreement.............................................     (147)       (416)
    (Decrease) increase in due to affiliate.................     (184)        184
                                                              -------    --------
  Net cash used in operating activities.....................   (1,400)         --
                                                              -------    --------

CASH FLOWS FROM INVESTING ACTIVITIES
    Investment in EME Homer City Generation L.P.............       --    (270,576)
    Cash dividends from EME Homer City Generation L.P.......       --      71,782
                                                              -------    --------
  Net cash used in investing activities.....................       --    (198,794)
                                                              -------    --------

CASH FLOWS FROM FINANCING ACTIVITIES
    Cash contribution.......................................    1,325     270,576
    Cash dividends..........................................       75     (71,782)
                                                              -------    --------
  Net cash provided by financing activities.................    1,400     198,794
                                                              -------    --------

NET INCREASE IN CASH........................................       --          --
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR................       --          --
                                                              -------    --------

CASH AND CASH EQUIVALENTS, end of year......................  $    --    $     --
                                                              =======    ========
</TABLE>

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

                                       61
<PAGE>
                           CHESTNUT RIDGE ENERGY CO.
                         NOTES TO FINANCIAL STATEMENTS
                             (DOLLARS IN THOUSANDS)

NOTE 1.  GENERAL

    Chestnut Ridge Energy Co. (the "Company"), a wholly-owned subsidiary of
Edison Mission Holdings Co. ("EM Holdings"), a wholly-owned subsidiary of Edison
Mission Energy ("EME"), an indirect wholly-owned subsidiary of Edison
International ("EIX"), is a California corporation formed on October 13, 1998
for the purpose of investing as a limited partner in EME Homer City Generation
L.P. ("HCGLP"), in connection with its acquisition on March 18, 1999, of three
coal-fired electric generating units and related facilities (the "Homer City
facilities") located in Indiana County, Pennsylvania. The Company had no
significant activity prior to 1999 and, accordingly, no 1998 financial
information has been presented.

NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES IN FINANCIAL STATEMENTS

    The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.

INCOME TAXES

    The Company is included in the consolidated federal income tax and combined
state tax returns of EIX. The Company calculates its income tax provision on a
separate company basis under a tax sharing arrangement with an affiliate of EIX,
which in turn has an agreement with EIX. Tax benefits generated by the Company
and used in the EIX consolidated tax return are recognized by the Company
without regard to separate company limitations.

    The Company accounts for income taxes using the asset-and-liabilities
method, wherein deferred tax assets and liabilities are recognized for future
tax consequences of temporary differences between the carrying amounts and the
tax bases of assets and liabilities using enacted rates.

RECLASSIFICATIONS

    Certain amounts in the prior years have been reclassified to conform to the
current year's presentation.

NOTE 3.  INVESTMENT IN HCGLP

    The Company owns a 99 percent limited partnership interest in HCGLP. As a
limited partner, the Company does not have a controlling financial interest in
HCGLP, and, in accordance with the provisions of the Accounting Principles Board
Opinion No. 18, the Company accounts for its investment in HCGLP under the
equity method. Accordingly, the investment in HCGLP was recorded at cost with
adjustments made to the carrying amount of the investment to recognize the
Company's share of the earnings, losses or distributions of HCGLP after the date
of the investment. The following

                                       62
<PAGE>
table presents summarized financial information for HCGLP for the years ended
December 31, 2000 and 1999.

<TABLE>
<CAPTION>
                                                       YEARS ENDED DECEMBER 31,
                                                       -------------------------
                                                          2000          1999
                                                       -----------   -----------
<S>                                                    <C>           <C>
OPERATIONS
Operating revenues...................................  $  421,820    $  325,752
Operating expenses...................................     290,476       218,688
                                                       ----------    ----------
Operating income.....................................     131,344       107,064
Interest expense, net of other income................    (134,907)     (102,774)
                                                       ----------    ----------
Income (loss) before taxes and extraordinary loss....      (3,563)        4,290
Provision (benefit) for income taxes.................        (391)        2,239
Extraordinary loss on early extinguishment of debt,
  net of income tax benefit of $2,082................          --         2,865
                                                       ----------    ----------
    Net loss.........................................  $   (3,172)   $     (814)
                                                       ==========    ==========
BALANCE SHEET
Current assets.......................................  $  189,376    $  147,732
Noncurrent assets....................................   1,967,183     1,874,126
                                                       ----------    ----------
    Total assets.....................................  $2,156,559    $2,021,858
                                                       ==========    ==========
Current liabilities..................................  $   81,811    $   74,701
Long term debt to affiliate..........................   1,801,167     1,700,819
Deferred income taxes and other liabilities..........      76,766        46,351
Equity...............................................     196,815       199,987
                                                       ----------    ----------
    Total liabilities and equity.....................  $2,156,559    $2,021,858
                                                       ==========    ==========
</TABLE>

NOTE 4.  RELATED-PARTY TRANSACTIONS

    Certain administrative services such as payroll, employee benefit programs,
insurance and information technology are shared among all affiliates of EIX, and
the costs of these corporate support services are allocated to all affiliates.
The cost of services provided by EIX, including those related to the Company,
are allocated to EME based on one of the following formulas: percentage of the
time worked, equity in investment and advances, number of employees, or
multi-factor (operating revenues, operating expenses, total assets and total
employees). In addition, EIX bills EME for any direct labor and out-of-pocket
expenses for services directly requested for the benefit of the Company. All
charges from EIX related to the Company are billed to EME.

    The Company receives administrative services under an agreement with EME
which provides for: (1) reimbursement of any charges from EIX directly for the
benefit of the Company, (2) reimbursement of any payments made to third parties
for goods and services for the sole benefit of the Company, (3) labor and
expenses of EIX and EME personnel providing services requested by the Company,
and (4) a corporate allocation. Certain of the officers of the Company are also
officers of EME. Compensation of common officers is paid for by EME and is
considered part of the corporate allocation under (4) above. Management believes
the allocation methodologies utilized are reasonable. The Company made no
reimbursements in 2000 and $184,000 in reimbursements in 1999 to EME for the
cost of these programs and other services. The amount due to affiliates
associated with these administrative services totaled $0 and $184,000 at
December 31, 2000 and 1999, respectively.

                                       63
<PAGE>
NOTE 5.  INCOME TAXES

    HCGLP made an election to be taxed as a corporation for federal and
California state tax purposes, and therefore such taxes are reflected in the
Company's equity in loss from HCGLP in the accompanying income statements. In
Pennsylvania, however, HCGLP is treated as a partnership, and the Company's
share of HCGLP's associated Pennsylvania state income tax effects are included
in the Company's tax provision and deferred tax liability.

<TABLE>
<CAPTION>
                                                                YEARS ENDED
                                                               DECEMBER 31,
                                                            -------------------
                                                              2000       1999
                                                            --------   --------
<S>                                                         <C>        <C>
Deferred tax assets
  Loss carryforwards......................................  $ 4,418    $ 2,213
  State tax deduction.....................................   (2,159)        --
  Valuation allowance.....................................   (4,418)    (2,213)
                                                            -------    -------
                                                            $(2,159)   $    --
                                                            -------    -------
Deferred tax liabilities
  Accumulated depreciation difference.....................  $ 6,188    $ 2,123
  Other...................................................       45         45
                                                            -------    -------
                                                              6,233      2,168
                                                            -------    -------
Deferred tax liability, net...............................  $ 4,074    $ 2,168
                                                            =======    =======
</TABLE>

    Loss carryforwards represent the Company's share of HCGLP's Pennsylvania
state tax losses totaling $66.6 million and $22.3 million at December 31, 2000
and 1999, respectively, which are scheduled to expire, if not used, beginning in
2009 and are limited in use to $2.0 million per year.

    The provision for income taxes is comprised of the following:

<TABLE>
<CAPTION>
                                                                 YEARS ENDED
                                                                DECEMBER 31,
                                                             -------------------
                                                               2000       1999
                                                             --------   --------
<S>                                                          <C>        <C>
Current
  Federal..................................................  $  (139)    $ (347)
  State....................................................       (8)       (69)
                                                             -------     ------
Total current..............................................     (147)      (416)
                                                             -------     ------
Deferred
  Federal..................................................   (2,159)        --
  State....................................................    4,065      2,168
                                                             -------     ------
Total deferred.............................................    1,906      2,168
                                                             -------     ------
Provision for income taxes.................................  $ 1,759     $1,752
                                                             =======     ======
</TABLE>

                                       64
<PAGE>
    The components of the deferred tax provision, which arise from timing
differences between financial and tax reporting, are presented below:

<TABLE>
<CAPTION>
                                                                YEARS ENDED
                                                               DECEMBER 31,
                                                            -------------------
                                                              2000       1999
                                                            --------   --------
<S>                                                         <C>        <C>
Accumulated depreciation difference.......................  $ 4,065    $ 2,123
Loss carryforwards........................................   (2,205)    (2,213)
State tax deduction.......................................   (2,159)        --
Other.....................................................       --         45
Valuation allowance.......................................    2,205      2,213
                                                            -------    -------
    Total deferred provision..............................  $ 1,906    $ 2,168
                                                            =======    =======
</TABLE>

    Variations from the 35% federal statutory rate are as follows:

<TABLE>
<CAPTION>
                                                                 YEARS ENDED
                                                                 DECEMBER 31,
                                                            ----------------------
                                                              2000          1999
                                                            --------      --------
<S>                                                         <C>           <C>
Expected benefit for federal income taxes.................  $(1,525)       $ (347)
Increase in taxes from:
  State tax, net of federal benefit and other.............    3,284         2,099
                                                            -------        ------
    Total provision for income taxes......................  $ 1,759        $1,752
                                                            =======        ======
Effective tax rate........................................    40.37%       176.79%
                                                            =======        ======
</TABLE>

NOTE 6.  SUPPLEMENTAL STATEMENTS OF CASH FLOWS INFORMATION

<TABLE>
<CAPTION>
                                                                    YEARS ENDED
                                                                   DECEMBER 31,
                                                              -----------------------
                                                                2000           1999
                                                              --------       --------
<S>                                                           <C>            <C>
Cash paid:
Interest....................................................    $ --           $ --
Income taxes (receipts).....................................    $ --           $ --
</TABLE>

                                       65
<PAGE>
                         EME HOMER CITY GENERATION L.P.
                           2000 FINANCIAL STATEMENTS
                                      NOTE

    The financial statements of EME Homer City Generation L.P. are provided
under Rule 3-10 of Regulation S-X as such securities represent a substantial
portion of the collateral for the Senior Secured Bonds.

                                       66
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the General Partner of EME Homer City Generation L.P.:

    We have audited the accompanying balance sheets of EME Homer City Generation
L.P. (a Pennsylvania limited partnership) as of December 31, 2000 and 1999, and
the related statements of operations, partners' equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Partnership'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 EME Homer City Generation
L.P. as of December 31, 2000 and 1999, and the results of its operations and its
cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States.

ARTHUR ANDERSEN LLP

Orange County, California
March 28, 2001

                                       67
<PAGE>
                         EME HOMER CITY GENERATION L.P.

                                 BALANCE SHEETS

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                              -----------------------
                                                                 2000         1999
                                                              ----------   ----------
<S>                                                           <C>          <C>
                                       ASSETS

CURRENT ASSETS
  Cash and cash equivalents.................................  $   19,116   $   44,454
  Due from affiliates.......................................     128,927       57,292
  Fuel inventory............................................      14,993       21,336
  Spare parts inventory.....................................      23,582       23,349
  Other current assets......................................       2,758        1,301
                                                              ----------   ----------
    Total current assets....................................     189,376      147,732
                                                              ----------   ----------

PROPERTY, PLANT AND EQUIPMENT...............................   2,040,165    1,899,555
  Less accumulated depreciation.............................      84,273       37,195
                                                              ----------   ----------
    Net property, plant and equipment.......................   1,955,892    1,862,360
                                                              ----------   ----------
DEFERRED FINANCING CHARGES, NET.............................      11,291       11,766
                                                              ----------   ----------
TOTAL ASSETS................................................  $2,156,559   $2,021,858
                                                              ==========   ==========

                          LIABILITIES AND PARTNERS' EQUITY

CURRENT LIABILITIES
  Accounts payable..........................................  $   16,479   $    1,789
  Accrued liabilities.......................................      32,195       38,264
  Interest payable..........................................      32,668       34,648
  Other current liabilities.................................         469           --
                                                              ----------   ----------
    Total current liabilities...............................      81,811       74,701
                                                              ----------   ----------

LONG-TERM DEBT TO AFFILIATE.................................   1,801,167    1,700,819
DEFERRED TAXES..............................................      59,141       28,726
BENEFIT PLANS...............................................      17,625       17,625
                                                              ----------   ----------
TOTAL LIABILITIES...........................................   1,959,744    1,821,871
                                                              ----------   ----------

COMMITMENTS AND CONTINGENCIES (NOTE 8)

PARTNERS' EQUITY............................................     196,815      199,987
                                                              ----------   ----------

TOTAL LIABILITIES AND PARTNERS' EQUITY......................  $2,156,559   $2,021,858
                                                              ==========   ==========
</TABLE>

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

                                       68
<PAGE>
                         EME HOMER CITY GENERATION L.P.

                            STATEMENTS OF OPERATIONS

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                   YEARS ENDED
                                                                  DECEMBER 31,
                                                              ---------------------
                                                                2000        1999
                                                              ---------   ---------
<S>                                                           <C>         <C>
OPERATING REVENUES FROM MARKETING AFFILIATE
  Capacity revenues.........................................  $  48,736   $  32,841
  Energy revenues...........................................    373,084     292,911
                                                              ---------   ---------
    Total operating revenues................................    421,820     325,752
                                                              ---------   ---------

OPERATING EXPENSES
  Fuel......................................................    164,112     124,763
  Plant operations..........................................     79,077      56,730
  Depreciation..............................................     47,287      37,195
                                                              ---------   ---------
    Total operating expenses................................    290,476     218,688
                                                              ---------   ---------

Income from operations......................................    131,344     107,064
                                                              ---------   ---------

OTHER INCOME (EXPENSE)
  Interest and other income.................................      3,747       1,040
  Interest expense from affiliate...........................   (138,654)   (103,814)
                                                              ---------   ---------
    Total other expense.....................................   (134,907)   (102,774)
                                                              ---------   ---------

Income (loss) before income taxes and extraordinary loss....     (3,563)      4,290
Provision (benefit) for income taxes before extraordinary
  loss......................................................       (391)      2,239
                                                              ---------   ---------

INCOME (LOSS) BEFORE EXTRAORDINARY LOSS.....................     (3,172)      2,051
                                                              ---------   ---------

Extraordinary loss on early extinguishment of debt, net of
  income tax benefit of $2,082..............................         --      (2,865)
                                                              ---------   ---------

NET LOSS....................................................  $  (3,172)  $    (814)
                                                              =========   =========
</TABLE>

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

                                       69
<PAGE>
                         EME HOMER CITY GENERATION L.P.

                         STATEMENTS OF PARTNERS' EQUITY

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                    CHESTNUT RIDGE   MISSION ENERGY        TOTAL
                                                    ENERGY COMPANY   WESTSIDE INC.    PARTNERS' EQUITY
                                                    --------------   --------------   ----------------
<S>                                                 <C>              <C>              <C>
BALANCE AT JANUARY 1, 1999........................     $     --          $   --           $     --

  Net loss........................................         (807)             (7)              (814)
  Cash contribution...............................      270,576           2,733            273,309
  Cash distributions..............................      (71,782)           (726)           (72,508)
                                                       --------          ------           --------

BALANCE AT DECEMBER 31, 1999......................      197,987           2,000            199,987
                                                       --------          ------           --------

  Net loss........................................       (3,141)            (31)            (3,172)
  Cash contribution...............................           --              --                 --
  Cash distributions..............................           --              --                 --
                                                       --------          ------           --------

BALANCE AT DECEMBER 31, 2000......................     $194,846          $1,969           $196,815
                                                       ========          ======           ========
</TABLE>

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

                                       70
<PAGE>
                         EME HOMER CITY GENERATION L.P.

                            STATEMENTS OF CASH FLOWS

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                    YEARS ENDED
                                                                   DECEMBER 31,
                                                              -----------------------
                                                                2000         1999
                                                              ---------   -----------
<S>                                                           <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss..................................................  $  (3,172)  $      (814)
  Adjustments to reconcile net loss to net cash provided by
    operating activities:
    Extraordinary loss on early extinguishment of debt, net
      of tax................................................         --         2,865
    Depreciation and amortization...........................     48,869        38,630
    Deferred tax provision..................................     30,415        28,726
    Loss on asset disposal..................................        760            --
    Increase in due from affiliates.........................    (71,635)      (55,211)
    Decrease (increase) in inventory........................      6,110        (3,264)
    Increase in other assets................................     (1,457)       (1,300)
    Increase in accounts payable............................     14,690         1,789
    (Decrease) increase in accrued liabilities..............     (6,069)       37,488
    (Decrease) increase in interest payable.................     (1,980)       34,648
    Increase in other liabilities...........................        469         1,040
                                                              ---------   -----------
  Net cash provided by operating activities.................     17,000        84,597
                                                              ---------   -----------

CASH FLOWS FROM INVESTING ACTIVITIES
    Purchase of Homer City facility.........................         --    (1,818,631)
    Capital expenditures....................................   (141,580)     (104,985)
                                                              ---------   -----------
  Net cash used in investing activities.....................   (141,580)   (1,923,616)
                                                              ---------   -----------

CASH FLOWS FROM FINANCING ACTIVITIES
    Capital contribution from partners......................         --       273,309
    Borrowings on long-term obligations.....................    105,010     2,500,819
    Repayments on debt obligations..........................     (4,662)     (800,000)
    Financing costs.........................................     (1,106)      (18,147)
    Cash dividends to partners..............................         --       (72,508)
                                                              ---------   -----------
  Net cash provided by financing activities.................     99,242     1,883,473
                                                              ---------   -----------

NET INCREASE (DECREASE) IN CASH.............................    (25,338)       44,454
CASH AND CASH EQUIVALENTS, beginning of year................     44,454            --
                                                              ---------   -----------

CASH AND CASH EQUIVALENTS, end of year......................  $  19,116   $    44,454
                                                              =========   ===========
</TABLE>

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

                                       71
<PAGE>
                         EME HOMER CITY GENERATION L.P.
                         NOTES TO FINANCIAL STATEMENTS
                             (DOLLARS IN THOUSANDS)

NOTE 1.  GENERAL

    EME Homer City Generation L.P., a Pennsylvania limited partnership (the
"Partnership"), is a partnership among Chestnut Ridge Energy Company
("Chestnut"), as a limited partner with a 99 percent interest, and Mission
Energy Westside Inc. ("Westside"), as a general partner with a 1 percent
interest. Both Chestnut and Westside are wholly-owned subsidiaries of Edison
Mission Holdings Co. ("EM Holdings"), a wholly-owned subsidiary of Edison
Mission Energy ("EME"), which is an indirect wholly-owned subsidiary of Edison
International ("EIX"). The Partnership was formed on October 31, 1998, for the
purpose of acquiring, owning and operating three coal-fired electric generating
units, and related facilities (the "Homer City facilities") located in Indiana
County, Pennsylvania for the purpose of producing electric energy. Although the
Partnership was formed on October 31, 1998, it had no significant activity prior
to the acquisition of the Homer City facilities.

    On March 18, 1999, the Partnership completed its acquisition (the
"Acquisition") of 100% of the ownership interests in the Homer City facilities
and assumed certain liabilities of the former owners. The accompanying financial
statements reflect the operations of the Homer City facilities commencing from
the date of acquisition. The Acquisition has been accounted for utilizing the
purchase method. The purchase price was allocated to the assets acquired and
liabilities assumed based upon their respective fair market values.

    The Acquisition was financed through a capital contribution by Chestnut and
Westside of approximately $271 million and $3 million, respectively, and a loan
of approximately $1.7 billion from Edison Mission Finance Co. ("Finance"), a
wholly-owned subsidiary of EM Holdings.

    The Homer City facilities consist of three coal-fired steam turbine units,
one coal preparation facility, an 1,800-acre dam site and associated support
facilities. Units 1 and 2 are essentially identical steam turbine generators
with net summer capacities of 620 MW and 614 MW, respectively. Units 1 and 2
began commercial operation in 1969. Unit 3 is also a steam turbine generator
with a net summer capacity of 650 MW. Unit 3 began commercial operations in
1977. The Partnership benefits from direct transmission access into both the
Pennsylvania-New Jersey-Maryland power market and the New York power market.

    The Partnership has entered into a contract with a marketing affiliate for
the sale of energy and capacity produced by the Homer City facilities, which
enables such marketing affiliate to engage in forward sales and hedging
transactions to manage electricity price exposure. The marketing affiliate has
systems in place that monitor real-time spot and forward pricing and perform
options valuations. The Partnership pays the marketing affiliate fees for the
marketing power. All revenues from transactions executed by the marketing
affiliate for the account of the Partnership are deposited into a revenue
account established for the benefit of the holders of EM Holding's senior
secured debt.

NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES IN FINANCIAL STATEMENTS

    The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

                                       72
<PAGE>
CASH AND CASH EQUIVALENTS

    The Partnership considers cash and cash equivalents to include cash and
short-term investments with original maturities of three months or less.

INVENTORY

    Inventory consists of spare parts, coal and fuel oil and is stated at the
lower of weighted average cost or market.

PROPERTY, PLANT AND EQUIPMENT

    Property, plant and equipment are stated at cost. Depreciation is computed
on a straight-line basis over the following estimated useful lives:

<TABLE>
<S>                                                           <C>
Power plant facilities and equipment........................  10 to 39 years
Emission allowances.........................................        39 years
Equipment, furniture and fixtures...........................    4 to 7 years
</TABLE>

    As part of the acquisition of the Homer City facilities, the Partnership
acquired emission allowances under the Environmental Protection Agency's Acid
Rain Program. Although the emission allowances granted under this program are
freely transferable, the Partnership intends to use substantially all of the
emission allowances in the normal course of its business to generate
electricity. Accordingly, the Partnership has classified emission allowances
expected to be used to generate power as part of property, plant and equipment.
Acquired emission allowances will be amortized over the estimated lives of the
Homer City units on a straight-line basis.

    At December 31, 2000 and 1999, property, plant and equipment consisted of
the following:

<TABLE>
<CAPTION>
                                                          2000         1999
                                                       ----------   ----------
<S>                                                    <C>          <C>
Land.................................................  $    4,250   $    4,250
Power plant facilities and equipment.................   1,368,554    1,354,917
Emission allowances..................................     438,068      438,068
Construction in progress.............................     223,207       99,370
Equipment, furniture and fixtures....................       6,086        2,950
                                                       ----------   ----------
                                                        2,040,165    1,899,555
Accumulated depreciation.............................     (84,273)     (37,195)
                                                       ----------   ----------
Property, plant and equipment, net...................  $1,955,892   $1,862,360
                                                       ==========   ==========
</TABLE>

MAINTENANCE ACCRUALS

    Certain major pieces of our equipment require major maintenance on a
periodic basis. These costs are expensed as incurred.

DEFERRED COSTS

    Deferred costs at December 31, 2000 and 1999 consisted of the following:

<TABLE>
<CAPTION>
                                                              2000       1999
                                                            --------   --------
<S>                                                         <C>        <C>
Deferred financing costs..................................  $13,672    $12,566
Accumulated amortization..................................   (2,381)      (800)
                                                            -------    -------
Net deferred financing costs..............................  $11,291    $11,766
                                                            =======    =======
</TABLE>

                                       73
<PAGE>
    Deferred financing costs consist of legal and other costs incurred by the
Partnership to obtain long-term financing (Note 3). These costs are being
amortized as interest expense over the life of the related long-term debt using
the effective interest method.

CAPITALIZED INTEREST

    Interest incurred on funds borrowed by us to finance project construction is
capitalized. Capitalization of interest is discontinued when the projects are
completed and deemed operational. Such capitalized interest is included in
property, plant and equipment.

    Capitalized interest is amortized on a straight-line basis over the
estimated useful life of the power plant facility. We capitalized $10.3 million
and $1.8 million for the years ended December 31, 2000 and 1999, respectively.

REVENUE RECOGNITION

    Revenue and related costs are recorded as electricity is generated or
services are provided.

PRICE RISK MANAGEMENT ACTIVITIES

    The Partnership has entered into a contract with a marketing affiliate for
the sale of energy and capacity produced by the Partnership, which enables such
marketing affiliate to engage in forward sales and hedging transactions to
manage the Partnership's electricity price exposure. Net gains or losses on
hedges by the marketing affiliate that are physically settled are recognized in
the same manner as the hedged item. The Partnership receives the net transaction
price on all contracts by its marketing affiliate.

INCOME TAXES

    The Partnership has made an election to be taxed as a corporation for
federal and California state tax purposes and, as such, will be included in the
consolidated federal income tax and combined California state franchise tax
returns of EIX. The Partnership calculates its income tax provision on a
separate company basis under a tax sharing arrangement with an affiliate of EIX,
which in turn has an agreement with EIX. Tax benefits generated by the
Partnership for federal and California state tax purposes are recognized by the
Partnership without regard to separate company limitations.

    The Partnership accounts for income taxes using the asset-and-liabilities
method, wherein deferred tax assets and liabilities are recognized for future
tax consequences of temporary differences between the carrying amounts and the
tax bases of assets and liabilities using enacted rates.

    The Partnership is treated as a partnership for Pennsylvania state income
tax purposes, and the income or loss of the Partnership is included in the
Pennsylvania state income tax returns of the individual partners. Accordingly,
no recognition has been given to Pennsylvania state income taxes in the
financial statements.

NEW ACCOUNTING STANDARD

    Effective January 1, 2001, Edison Mission Energy adopted Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." The Statement establishes accounting and reporting
standards requiring that every derivative instrument be recorded in the balance
sheet as either an asset or liability measured at its fair value. The Statement
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. For derivatives that
qualify for hedge accounting, depending on the nature of the hedge, changes in
fair value are either offset by changes in the fair value of the hedged assets,
liabilities or firm commitments through earnings or recognized in other
comprehensive income until the

                                       74
<PAGE>
hedged item is recognized in earnings. The ineffective portion of a derivative's
change in fair value is immediately recognized in earnings.

    Upon adoption of SFAS No. 133, we will record all derivatives associated
with our risk management activities at fair value unless the derivatives qualify
for the normal sales and purchases exception. We expect that a portion of our
risk management activities related to forward physical purchases or sales will
qualify for this exception. For derivatives associated with our risk management
activities that do not qualify as normal sales and purchases, we expect our
financial instruments will qualify as a cash flow hedge with appropriate
adjustments made to other comprehensive income. The cumulative effect on prior
years' net income resulting from the change in accounting for derivatives in
accordance with SFAS No. 133 is not expected to be material.

NOTE 3.  LONG-TERM DEBT

    In order to initially effect the Acquisition, EM Holdings entered into an
$800 million initial financing (the "Acquisition Facility"), a $250 million
construction loan (the "Environmental Capital Improvements Facility") that would
be drawn as needed, and a $50 million line of credit (the "Working Capital
Facility"). Amounts borrowed under the Acquisition Facility, the Environmental
Capital Improvements Facility and the Working Capital Facility bear interest at
variable Eurodollar rates or Base rates, at the option of the Partnership. If EM
Holdings elects to pay Eurodollar rates, interest costs include a margin of
0.85% to 2.25% depending on the EM Holdings' current debt rating. At
December 31, 2000, the margin was 1.00%. Additionally, EM Holdings pays a
facility fee of 0.15% to 0.50%, depending on EM Holdings' current debt rating,
on the total outstanding commitment irrespective of usage. At December 31, 2000
the facility fee was 0.25%. The financing received by EM Holdings under the
Acquisition Facility as well as the Environmental Capital Improvements Facility
due 2004 were loaned to Finance under a subordinated loan agreement (the
"Finance Subordinated Loan"). Finance then loaned the same amounts to the
Partnership under a subordinated loan agreement (the "Subordinated Loan").
Interest rates and other charges as well as maturity dates associated with the
Subordinated Loan mirror the associated debt at EM Holdings. The Acquisition
Facility was replaced on May 27, 1999 with $300 million aggregate principal
amount of 8.137% Senior Secured Bonds due 2019 and $530 million aggregate
principal amount of 8.734% Senior Secured Bonds due 2026 (collectively, the
"Senior Secured Bonds"). Proceeds from the Senior Secured Bonds were loaned by
EM Holdings to Finance and subsequently from Finance to the Partnership, under
the Subordinated Loan. These proceeds were then used by the Partnership to repay
$800 million under the Subordinated Loan and make a $30 million distribution to
Chestnut and Westside. The total amount outstanding under the Subordinated Loan
was $1,012 million and $907 million at December 31, 2000 and 1999, respectively.
The weighted average interest rate under this borrowing was 8.4% at
December 31, 2000 and 1999.

    The remaining cost of the Acquisition as well as initial operating cash,
totaling $1.1 billion, was funded through an equity contribution from EME to EM
Holdings. EM Holdings subsequently contributed approximately the same amount to
Finance, which subsequently loaned the amount to the Partnership under a
subordinated revolving loan agreement (the "Revolver"). The Revolver bears
interest at 8.0% on outstanding amounts and terminates on March 18, 2014. The
Partnership owed approximately $789 million and $794 million under the Revolver
at December 31, 2000 and 1999, respectively.

NOTE 4.  PRICE RISK MANAGEMENT ACTIVITIES

    Our risk management policy allows for the use of derivative financial
instruments through our marketing affiliate to limit financial exposure to
energy prices for non-trading purposes. Our marketing affiliate's risk
management activities give rise to commodity price risk, which represents the
potential loss that can be caused by a change in the market value of a
particular commodity. Commodity price

                                       75
<PAGE>
risks are actively monitored to ensure compliance with our risk management
policies. Policies are in place which limit the amount of total net exposure we
may enter into at any point in time. Procedures exist which allow for monitoring
of all commitments and positions with daily reporting to senior management. Our
marketing affiliate performs a "value at risk" analysis in our daily business to
measure, monitor and control our overall market risk exposure. The use of value
at risk allows management to aggregate overall risk, compare risk on a
consistent basis and identify the drivers of the risk. Value at risk measures
the worst expected loss over a given time interval, under normal market
conditions, at a given confidence level. Given the inherent limitations of value
at risk and relying on a single risk measurement tool, our marketing affiliate
supplements this approach with industry "best practice" techniques including the
use of stress testing and worst-case scenario analysis, as well as stop limits
and counterparty credit exposure limits.

    Our marketing affiliate has the following energy price hedges outstanding on
the dates presented:

<TABLE>
<CAPTION>
                                                        DECEMBER 31,
                                          -----------------------------------------
                                                 2000                  1999
                                          -------------------   -------------------
                                          NOTIONAL   CONTRACT   NOTIONAL   CONTRACT
                                           AMOUNT    EXPIRES     AMOUNT    EXPIRES
                                          --------   --------   --------   --------
<S>                                       <C>        <C>        <C>        <C>
Energy contracts:
Forwards................................  $456,564     2002          --        --
Options.................................     3,456     2001     $47,328      2001
Swaps...................................       800     2001          --        --
</TABLE>

    The following table summarizes the fair values for outstanding financial
instruments used for price risk management activities by instrument type:

<TABLE>
<CAPTION>
                                                        DECEMBER 31,
                                        ---------------------------------------------
                                                2000                    1999
                                        ---------------------   ---------------------
                                        CARRYING                CARRYING
                                         AMOUNT    FAIR VALUE    AMOUNT    FAIR VALUE
                                        --------   ----------   --------   ----------
<S>                                     <C>        <C>          <C>        <C>
Commodity price:
Forwards..............................      --     $(117,803)        --          --
Options...............................    $594         1,811     $3,533      $3,533
Swaps.................................      --          (892)        --          --
</TABLE>

NOTE 5.  RELATED-PARTY TRANSACTIONS

    The Partnership has entered into energy and emission allowance sales
agreements with a marketing affiliate for the sale of energy and capacity at a
price equal to (i) the price which a third-party purchaser of the capacity or
energy has agreed to pay less (ii) $.02 per MWh of capacity and energy plus an
emission allowance fee. Payment is due and payable within thirty days from
billing which is rendered on a monthly basis. For the years ended December 31,
2000 and 1999, the amount due from the marketing affiliate was $69.7 million and
$28.7 million, respectively. The net fees earned by the marketing affiliate were
$1.5 million and $0.2 million for the years ended December 31, 2000 and 1999,
respectively.

                                       76
<PAGE>
    Certain administrative services such as payroll, employee benefit programs,
insurance and information technology are shared among all affiliates of EIX and
the costs of these corporate support services are allocated to all affiliates.
The cost of services provided by EIX, including those related to the
Partnership, are allocated to EME based on one of the following formulas:
percentage of the time worked, equity in investment and advances, number of
employees, or multi-factor (operating revenues, operating expenses, total assets
and total employees). The Partnership participates in a common payroll and
benefit program with all EIX employees. In addition, EIX bills EME for any
direct labor and out-of-pocket expenses for services directly requested for the
benefit of the Partnership. The Partnership made reimbursements for the cost of
these programs and other services totaling $30.0 million and $18.1 million for
the years ended December 31, 2000 and 1999, respectively.

    The Company has also recorded a receivable from EME of $59.4 million and
$28.6 million at December 31, 2000 and 1999, respectively, related to the tax
due under the tax sharing agreement. See Note 2 for further discussion of the
tax sharing agreement.

NOTE 6.  INCOME TAXES

    Income tax expense includes the current tax benefit from the operating loss
and the change in deferred income taxes during the year. The components of the
net accumulated deferred income tax liability were:

<TABLE>
<CAPTION>
                                                                YEARS ENDED
                                                               DECEMBER 31,
                                                            -------------------
                                                              2000       1999
                                                            --------   --------
<S>                                                         <C>        <C>
Deferred tax assets
  State tax deduction.....................................  $ 1,583    $   208
                                                            -------    -------
                                                            $ 1,583    $   208
                                                            -------    -------

Deferred tax liabilities
  Accumulated depreciation difference.....................  $60,525    $28,735
  Other...................................................      199        199
                                                            -------    -------
                                                             60,724     28,934
                                                            -------    -------
Deferred tax liability, net...............................  $59,141    $28,726
                                                            =======    =======
</TABLE>

    The provision (benefit) for income taxes is comprised of the following:

<TABLE>
<CAPTION>
                                                              YEARS ENDED
                                                             DECEMBER 31,
                                                          -------------------
                                                            2000       1999
                                                          --------   --------
<S>                                                       <C>        <C>
Current
  Federal...............................................  $(27,605)  $(24,227)
  State.................................................    (3,201)    (2,260)
                                                          --------   --------
    Total current.......................................   (30,806)   (26,487)
                                                          --------   --------

Deferred
  Federal...............................................    25,897     25,521
  State.................................................     4,518      3,205
                                                          --------   --------
    Total deferred......................................    30,415     28,726
                                                          --------   --------

Provision (benefit) for income taxes....................  $   (391)  $  2,239
                                                          ========   ========
</TABLE>

                                       77
<PAGE>
    Income tax provision (benefit) is included in the statement of operations as
follows:

<TABLE>
<CAPTION>
                                                                  YEARS ENDED
                                                                 DECEMBER 31,
                                                              -------------------
                                                                2000       1999
                                                              --------   --------
<S>                                                           <C>        <C>
Income (loss) before extraordinary loss.....................   $(391)    $ 2,239
Extraordinary loss..........................................      --      (2,082)
                                                               -----     -------
    Total...................................................   $(391)    $   157
                                                               =====     =======
</TABLE>

    The components of the deferred tax provision, which arise from timing
differences between financial and tax reporting, are presented below:

<TABLE>
<CAPTION>
                                                                YEARS ENDED
                                                               DECEMBER 31,
                                                            -------------------
                                                              2000       1999
                                                            --------   --------
<S>                                                         <C>        <C>
Accumulated depreciation difference.......................  $31,790    $28,735
State tax deduction.......................................   (1,375)      (208)
Other.....................................................       --        199
                                                            -------    -------
    Total deferred provision..............................  $30,415    $28,726
                                                            =======    =======
</TABLE>

    Variations from the 35% federal statutory rate are as follows:

<TABLE>
<CAPTION>
                                                                 YEARS ENDED
                                                                DECEMBER 31,
                                                             -------------------
                                                               2000       1999
                                                             --------   --------
<S>                                                          <C>        <C>
Expected provision (benefit) for federal income taxes......  $(1,247)    $1,501
Increase in taxes from:
  State tax--net of federal benefit........................      856        738
                                                             -------     ------
    Total provision (benefit) for income taxes.............  $  (391)    $2,239
                                                             =======     ======
Effective tax rate.........................................    10.97%     52.19%
                                                             =======     ======
</TABLE>

NOTE 7.  EMPLOYEE BENEFIT PLANS

    Employees of the Partnership are eligible for various benefit plans of EIX.

PENSION PLANS

    The Partnership maintains a pension plan specifically for the benefit of its
union employees. The Partnership's non-union employees participate in the EIX
pension plan. Both plans are noncontributory, defined benefit pension plans and
cover employees who fulfill minimum service requirements. There are no prior
service costs for the plans.

                                       78
<PAGE>
    Information on plan assets and benefit obligations is shown below:

<TABLE>
<CAPTION>
                                                                     YEARS ENDED DECEMBER 31,
                                                             -----------------------------------------
                                                               2000       1999       2000       1999
                                                             --------   --------   --------   --------
                                                                 UNION PLAN          NON-UNION PLAN
                                                             -------------------   -------------------
<S>                                                          <C>        <C>        <C>        <C>
Change in Benefit Obligation
  Benefit obligation at beginning of year..................  $ 6,783    $    --    $   865     $  --
  Benefit obligation acquired..............................       --      6,000         --       800
  Service cost.............................................      719        459        291       135
  Interest cost............................................      578        321         78        40
  Actuarial gain...........................................    1,457          3        182      (110)
                                                             -------    -------    -------     -----
    Benefit obligation at end of year......................  $ 9,537    $ 6,783    $ 1,416     $ 865
                                                             =======    =======    =======     =====

Change in Plan Assets
  Fair value of plan assets at beginning of year...........  $   104    $    --    $    --     $  --
  Actual return on plan assets.............................     (126)         4         --        --
  Employer contributions...................................    2,120        100         --        --
                                                             -------    -------    -------     -----
    Fair value of plan assets at end of year...............  $ 2,098    $   104    $    --     $  --
                                                             =======    =======    =======     =====

Funded status..............................................  $(7,439)   $(6,679)   $(1,416)    $(865)
Unrecognized net loss (gain)...............................    1,652          5         78      (110)
                                                             -------    -------    -------     -----
Pension liability..........................................  $(5,787)   $(6,674)   $(1,338)    $(975)
                                                             =======    =======    =======     =====
Discount rate..............................................     7.25%      7.75%      7.25%     7.75%
Rate of compensation increase..............................     5.00%      5.00%      5.00%     5.00%
Expected return on plan assets.............................     7.50%      7.50%      8.50%     7.50%
</TABLE>

    Components of pension expense were:

<TABLE>
<CAPTION>
                                                                           YEARS ENDED DECEMBER 31,
                                                              --------------------------------------------------
                                                                2000          1999          2000          1999
                                                              --------      --------      --------      --------
                                                                    UNION PLAN                NON-UNION PLAN
                                                              ----------------------      ----------------------
<S>                                                           <C>           <C>           <C>           <C>
Service cost................................................   $  719         $459          $291          $135
Interest cost obligation....................................      578          321            78            40
Expected return on plan assets..............................      (64)          (6)           --            --
                                                               ------         ----          ----          ----
Net pension expense.........................................   $1,233         $774          $369          $175
                                                               ======         ====          ====          ====
</TABLE>

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

    The Partnership's employees retiring at or after age 55 with at least
10 years of service are eligible for postretirement health care, dental, life
insurance and other benefits.

                                       79
<PAGE>
    Information on plan assets and benefit obligations is shown below:

<TABLE>
<CAPTION>
                                                                   YEARS ENDED DECEMBER 31,
                                                           -----------------------------------------
                                                             2000       1999       2000       1999
                                                           --------   --------   --------   --------
                                                               UNION PLAN          NON-UNION PLAN
                                                           -------------------   -------------------
<S>                                                        <C>        <C>        <C>        <C>
Change in Benefit Obligation
  Benefit obligation at beginning of year................  $ 7,518    $    --    $ 1,376    $    --
  Benefit obligation acquired............................       --      7,500         --      1,600
  Service cost...........................................      358        310         77         70
  Interest cost..........................................      555        401        115         95
  Actuarial gain.........................................      188       (693)       235       (389)
  Benefits paid..........................................       --         --         --         --
                                                           =======    =======    =======    =======
    Benefit obligation at end of year....................  $ 8,619    $ 7,518    $ 1,803    $ 1,376
                                                           =======    =======    =======    =======
Change in Plan Assets
  Fair value of plan assets at beginning of year.........  $    --    $    --    $    --    $    --
  Employer contributions.................................       --         --         --         --
  Benefits paid..........................................       --         --         --         --
                                                           -------    -------    -------    -------
    Fair value of plan assets at end of year.............  $    --    $    --    $    --    $    --
                                                           =======    =======    =======    =======
  Funded status..........................................  $(8,619)   $(7,518)   $(1,803)   $(1,376)
  Unrecognized net gain..................................     (457)      (693)      (139)      (389)
                                                           -------    -------    -------    -------
  Recorded liability.....................................  $(9,076)   $(8,211)   $(1,942)   $(1,765)
                                                           =======    =======    =======    =======
  Discount rate..........................................     7.50%      8.00%      7.50%      8.00%
</TABLE>

    The components of postretirement benefits other than pension expense were:

<TABLE>
<CAPTION>
                                                             YEARS ENDED DECEMBER 31,
                                                --------------------------------------------------
                                                  2000          1999          2000          1999
                                                --------      --------      --------      --------
                                                      UNION PLAN                NON-UNION PLAN
                                                ----------------------      ----------------------
<S>                                             <C>           <C>           <C>           <C>
Service cost..................................    $358          $310          $ 77          $ 70
Interest cost.................................     555           401           115            95
Net amortization..............................     (48)           --           (15)           --
                                                  ----          ----          ----          ----
Total expense.................................    $865          $711          $177          $165
                                                  ====          ====          ====          ====
</TABLE>

    For the non-union plan, the assumed rate of future increases in the
per-capita cost of health care benefits is 11% for 2001, gradually decreasing to
5% for 2008 and beyond. Increasing the health care cost trend rate by one
percentage point would increase the accumulated obligation as of December 31,
2000, by $451,000 and annual aggregate service and interest costs by $48,000.
Decreasing the health care cost trend rate by one percentage point would
decrease the accumulated obligation as of December 31, 2000, by $361,000 and
annual aggregate service and interest costs by $38,000.

    For the union plan, the assumed rate of future increases in the per-capita
cost of health care benefits is 11% for 2001, gradually decreasing to 5% for
2008 and beyond. Increasing the health care cost trend rate by one percentage
point would increase the accumulated obligation as of December 31, 2000, by
$1,706,000 and annual aggregate service and interest costs by $200,000.
Decreasing the health care cost trend rate by one percentage point would
decrease the accumulated obligation as of December 31, 2000, by $1,347,000 and
annual aggregate service and interest costs by $158,000.

                                       80
<PAGE>
EMPLOYEE STOCK PLANS

    A 401(k) plan is maintained to supplement eligible employees' retirement
income. The Partnership matches 100 percent of non-union employee contributions
up to 6 percent of such employees' annual compensation. The Partnership also
matches 65 percent of contributions made by union employees, up to 2.6 percent
of annual compensation. Employer contributions vest 20 percent per year.
Contribution expense for the years ended December 31, 2000 and 1999 was $406,000
and $352,000, respectively.

NOTE 8.  COMMITMENTS AND CONTINGENCIES

TRANSITION CONTRACTS

    EME Homer City has entered into separate transition contracts (the
"Transition Contracts") with Pennsylvania Electric Company ("Penelec") and New
York State Electric & Gas Corporation ("NYSEG"), pursuant to which EME Homer
City may exercise a put option to sell certain quantities of capacity to Penelec
and NYSEG, and Penelec and NYSEG may exercise call options to purchase certain
quantities of capacity. The terms of the NYSEG Transition Contract and the
Penelec Transition Contract continue until December 31, 2001 and May 31, 2001,
respectively. EME Homer City exercised its put options to sell 942 MW of
capacity to Penelec for the full period from March 18, 1999 through May 31, 2001
under the Penelec Transition Contract for a price of $49.90/MW-day from
March 18, 1999 through May 31, 1999, $59.90/MW-day through May 31, 2000, and
$77.40/MW-day through May 31, 2001. EME Homer City has amended the NYSEG
Transition Contract and sold 500 MW of capacity to NYSEG through May 31, 2000
for a price of $60.00/MW-day, 370 MW of capacity through September 30, 2000 for
$72.17/MW-day, and 430 MW of capacity through December 31, 2001 for
$72.17/MW-day.

ASH DISPOSAL SITE

    Pennsylvania Department of Environmental Protection (PADEP) regulations
governing ash disposal sites require, among other things, groundwater
assessments of landfills if existing groundwater monitoring indicates the
possibility of degradation. The assessments could lead to the installation of
additional monitoring wells and if degradation of the groundwater were
discovered, the Partnership would be required to develop abatement plans, which
may include the lining of unlined sites. To date, the Facilities' ash disposal
site has not shown any signs that would require abatement. Management does not
believe that the costs of maintaining and abandoning the Ash Disposal Site will
have a material impact on the Partnership's results of operations or financial
position.

ENVIRONMENTAL MATTERS

    Prior to our purchase of the Homer City plant, the Environmental Protection
Agency requested information from the prior owners of the plant concerning
physical changes at the plant. We have been in informal voluntary discussion
with the Environmental Protection Agency relating to these facilities, which may
also include payment of civil fines. We cannot assure that we will reach a
satisfactory agreement or that these facilities will not be subject to
proceedings in the future. Depending on the outcome of the proceedings, we could
be required to invest in additional pollution control requirements, over and
above the upgrades we are planning to install, and could be subject to fines and
penalties.

TWO LICK CREEK RESERVOIR DEEP MINE DISCHARGES

    In connection with our purchase of the Homer City facilities on March 18,
1999, we acquired the Two Lick Creek Dam and Reservoir. Acid mine drainage
discharges from the Penn Hill No. 2 and Dixon Run No. 3 inactive deep mines were
being collected and partially treated on the reservoir property by Stanford
Mining Company before being pumped off the property for additional treatment

                                       81
<PAGE>
at the nearby Chestnut Ridge Treatment Plant. The mining company filed for
bankruptcy and operated the collection and treatment system until May 1999 when
its assets were allegedly depleted.

    The Pennsylvania Department of Environmental Protection (PADEP) initially
advised us that we were potentially liable for treating the two discharges
solely because of our ownership of the property on which the discharges
emanated. Without any admission of our liability, we voluntarily entered into a
letter agreement to fund the operation of the collection and treatment system
for an interim period until the agency completed its investigation of
potentially liable parties and alternatives for permanent treatment of the
discharges were evaluated. After examining property records, PADEP concluded
that we are only responsible for treating the Dixon Run No. 3 discharge. The
agency has not completed its investigation of other potentially responsible
parties, particularly mining companies that previously operated the two mines.

    A draft consent agreement that addresses remedial responsibilities for the
two discharges has been prepared by PADEP. Under its terms, we are responsible
for designing and implementing a permanent system to collect and treat the Dixon
Run No. 3 discharge and the state will provide funding to a local watershed
association to develop and operate a collection and treatment system for the
other discharge. When the Dixon Run No. 3 treatment system becomes operational,
we will discontinue our funding of the existing collection and treatment system.
We will also be reimbursed a portion of the operational costs of that system.

    The cost of operating the collection and treatment system is approximately
$15,000 per month. We are evaluating options for permanent treatment of the
Dixon Run No. 3 discharge, including a passive system involving wetlands
treatment. The cost of a passive treatment system is estimated to be
$1 million, but its operational costs are considerably less than those of a
conventional chemical treatment system.

FUEL COMMITMENTS

    The Partnership has entered into several fuel purchase agreements with
various third-party suppliers for the purchase of bituminous steam coal. These
contracts call for the purchase of a minimum quantity of coal over the term of
the contracts, which extend from one to seven years from December 31, 2000, with
an option at the Partnership's discretion to purchase additional amounts of coal
as stated in the agreements. The minimum quantity of coal to be purchased
through these contracts is 16.5 million tons over the terms of the respective
contracts.

    At December 31, 2000, the Partnership had contractual commitments to
purchase coal and fuel oil. Based on the contract provisions that consist of
fixed prices, subject to adjustment clauses in certain cases, these minimum
commitments are currently estimated to aggregate $533 million in the next five
years summarized as follows: 2001--$142 million; 2002--$141 million;
2003--$103 million; 2004--$106 million; 2005--$41 million.

PLANT IMPROVEMENTS

    Upon acquisition, the Partnership began major plant improvements consisting
primarily of a turnkey pollution control retrofit project. The estimated cost of
this project is $281 million, of which $214.1 million was incurred prior to
December 31, 2000.

                                       82
<PAGE>
LEASES

    At December 31, 2000, the Partnership had no capital leases, however, the
Partnership did have several operating leases in place relating mainly to flue
gas conditioning equipment and trucks. At December 31, 2000, the future
operating lease commitments were as follows:

<TABLE>
<CAPTION>

<S>                                                           <C>
2001........................................................    $  426
2002........................................................       409
2003........................................................       360
2004........................................................       294
2005........................................................       117
                                                                ------
    Total...................................................    $1,606
                                                                ======
</TABLE>

    Operating lease expense amounted to $711,000 and $891,000 in 2000 and 1999,
respectively.

COAL CLEANING AGREEMENT

    The Partnership has entered into a Coal Cleaning Agreement with Homer City
Coal Processing Corp. to operate and maintain a coal cleaning plant owned by the
Partnership. Under the terms of the agreement, which is scheduled to expire on
August 31, 2002, the Partnership is obligated to reimburse Homer City Coal
Processing Corp. for the actual costs incurred in the operations and maintenance
of the coal cleaning plant, a fixed general and administrative service fee of
$260,000 per year, and an operating fee that ranges from $.20 to $.35 per ton
depending on the level of tonnage.

INTERCONNECTION AGREEMENT

    The Partnership has entered into an Interconnection Agreements with NYSEG
and Penelec to provide interconnection services necessary to interconnect the
Homer City Station with NYSEG and Penelec's transmission systems. Unless
terminated earlier in accordance with the terms thereof, the Interconnection
Agreement will terminate on a date mutually agreed to by the Partnership, NYSEG
and Penelec. This date will not exceed the retirement date of the Homer City
Units. NYSEG and Penelec have agreed to extend such interconnection services to
modifications, additions, upgrades or repowering of the Homer City Units. The
Partnership is required to compensate NYSEG and Penelec for all reasonable costs
associated with any modifications, additions or replacements made to NYSEG or
Penelec's interconnection facilities or transmission systems in connection with
any modification, addition, upgrade to the Homer City Units.

                                       83
<PAGE>
NOTE 9.  SUPPLEMENTAL STATEMENTS OF CASH FLOWS INFORMATION

<TABLE>
<CAPTION>
                                                             YEARS ENDED
                                                            DECEMBER 31,
                                                        ---------------------
                                                          2000        1999
                                                        --------   ----------
<S>                                                     <C>        <C>
Cash paid:
Interest..............................................  $149,335   $   70,144
Income taxes (receipts)...............................  $     --   $       --
</TABLE>

<TABLE>
<CAPTION>
                                                             YEARS ENDED
                                                            DECEMBER 31,
                                                        ---------------------
                                                          2000        1999
                                                        --------   ----------
<S>                                                     <C>        <C>
Details of facility acquisition:
Fair value of assets acquired.........................  $     --   $1,835,207
Liabilities assumed...................................        --      (16,576)
                                                        --------   ----------
Net cash paid for acquisition.........................  $     --   $1,818,631
                                                        ========   ==========
</TABLE>

                                       84
<PAGE>
                           EDISON MISSION FINANCE CO.
                           2000 FINANCIAL STATEMENTS

                                      NOTE

    The financial statements of Edison Mission Finance Co. are provided under
Rule 3-10 of Regulation S-X as such securities represent a substantial portion
of the collateral for the Senior Secured Bonds.

                                       85
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of Edison Mission Finance Co.:

    We have audited the accompanying balance sheets of Edison Mission Finance
Co. (a California corporation), a wholly-owned subsidiary of Edison Mission
Holdings Co., as of December 31, 2000 and 1999, and the related statements of
operations, shareholder's equity and cash flows for the years then ended. 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 Edison Mission Finance Co.
as of December 31, 2000 and 1999, and the results of its operations and its cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States.

ARTHUR ANDERSEN LLP

Orange County, California
March 28, 2001

                                       86
<PAGE>
                           EDISON MISSION FINANCE CO.

                                 BALANCE SHEETS

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                              -----------------------
                                                                 2000         1999
                                                              ----------   ----------
<S>                                                           <C>          <C>
                                       ASSETS

CURRENT ASSETS
  Interest receivable--EME Homer City Generation L.P........  $   32,668   $   34,648
                                                              ----------   ----------
    Total current assets....................................      32,668       34,648
                                                              ----------   ----------
OTHER ASSETS
  Loan receivable--EME Homer City Generation L.P............   1,801,167    1,700,819
  Deferred taxes............................................       1,184        1,236
                                                              ----------   ----------
TOTAL ASSETS................................................  $1,835,019   $1,736,703
                                                              ==========   ==========

                        LIABILITIES AND SHAREHOLDER'S EQUITY

CURRENT LIABILITIES
  Due to affiliates.........................................  $   45,509   $   21,233
  Interest payable--Edison Mission Holdings Co..............      19,459       18,433
                                                              ----------   ----------
    Total current liabilities...............................      64,968       39,666
                                                              ----------   ----------
OTHER LIABILITIES
  Loan payable--Edison Mission Holdings Co..................   1,012,000      907,000
  Deferred taxes............................................          --           --
                                                              ----------   ----------
TOTAL LIABILITIES...........................................   1,076,968      946,666
                                                              ----------   ----------
SHAREHOLDER'S EQUITY
  Common stock, $1 par value; 10,000 shares authorized; 100
    shares issued and outstanding...........................          --           --
  Additional paid-in-capital................................     748,448      759,874
  Retained earnings.........................................       9,603       30,163
                                                              ----------   ----------
TOTAL SHAREHOLDER'S EQUITY..................................     758,051      790,037
                                                              ----------   ----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY..................  $1,835,019   $1,736,703
                                                              ==========   ==========
</TABLE>

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

                                       87
<PAGE>
                           EDISON MISSION FINANCE CO.

                            STATEMENTS OF OPERATIONS

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                  YEARS ENDED
                                                                 DECEMBER 31,
                                                              -------------------
                                                                2000       1999
                                                              --------   --------
<S>                                                           <C>        <C>
Interest income from affiliate..............................  $146,270   $103,529
Interest expense from affiliate.............................   (82,407)   (53,370)
                                                              --------   --------

Net interest income.........................................    63,863     50,159

Operating expenses..........................................        68        222
                                                              --------   --------

Income before income taxes..................................    63,795     49,937
Provision for income taxes..................................    24,528     19,774
                                                              --------   --------

NET INCOME..................................................  $ 39,267   $ 30,163
                                                              ========   ========
</TABLE>

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

                                       88
<PAGE>
                           EDISON MISSION FINANCE CO.

                       STATEMENTS OF SHAREHOLDER'S EQUITY

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                 ADDITIONAL
                                                      COMMON      PAID-IN-    RETAINED   SHAREHOLDER'S
                                                       STOCK      CAPITAL     EARNINGS      EQUITY
                                                     ---------   ----------   --------   -------------
<S>                                                  <C>         <C>          <C>        <C>
BALANCE AT JANUARY 1, 1999.........................  $     --     $     --    $     --     $     --

  Net income.......................................        --           --      30,163       30,163
  Cash contribution................................        --      793,819          --      793,819
  Cash dividends...................................        --      (33,945)         --      (33,945)
                                                     ---------    --------    --------     --------

BALANCE AT DECEMBER 31, 1999.......................        --      759,874      30,163      790,037
                                                     ---------    --------    --------     --------

  Net income.......................................        --           --      39,267       39,267
  Cash contribution................................        --           10          --           10
  Cash dividends...................................        --      (11,436)    (59,827)     (71,263)
                                                     ---------    --------    --------     --------

BALANCE AT DECEMBER 31, 2000.......................  $     --     $748,448    $  9,603     $758,051
                                                     =========    ========    ========     ========
</TABLE>

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

                                       89
<PAGE>
                           EDISON MISSION FINANCE CO.

                            STATEMENTS OF CASH FLOWS

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                    YEARS ENDED
                                                                   DECEMBER 31,
                                                              -----------------------
                                                                2000         1999
                                                              ---------   -----------
<S>                                                           <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income................................................  $  39,267   $    30,163
  Adjustments to reconcile net income to net cash provided
    by operating activities:
    Deferred tax provision..................................         52        (1,236)
    Decrease (increase) in interest receivable--EME Homer
      City Generation L.P...................................      1,980       (34,648)
    Increase in due to affiliates...........................     24,276        21,233
    Increase in interest payable--Edison Mission
      Holdings Co...........................................      1,026        18,433
                                                              ---------   -----------
  Net cash provided by operating activities.................     66,601        33,945
                                                              ---------   -----------
CASH FLOWS FROM INVESTING ACTIVITIES
    Issuance of subordinated loan--
      EME Homer City Generation L.P.........................         --    (1,707,000)
    Proceeds from repayment of subordinated loan--
      EME Homer City Generation L.P.........................         --       800,000
    Increase in subordinated revolving loan receivable--
      EME Homer City Generation L.P.........................   (100,348)     (793,819)
                                                              ---------   -----------
  Net cash used in investing activities.....................   (100,348)   (1,700,819)
                                                              ---------   -----------
CASH FLOWS FROM FINANCING ACTIVITIES
    Cash contribution.......................................         10       793,819
    Proceeds from subordinated loan--Edison Mission
      Holdings Co...........................................    105,000     1,707,000
    Repayment of subordinated loan--Edison Mission
      Holdings Co...........................................         --      (800,000)
    Cash dividends..........................................    (71,263)      (33,945)
                                                              ---------   -----------
  Net cash provided by financing activities.................     33,747     1,666,874
                                                              ---------   -----------
NET INCREASE IN CASH........................................         --            --
CASH AND CASH EQUIVALENTS, beginning of year................         --            --
                                                              ---------   -----------
CASH AND CASH EQUIVALENTS, end of year......................  $      --   $        --
                                                              =========   ===========
</TABLE>

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

                                       90
<PAGE>
                           EDISON MISSION FINANCE CO.
                         NOTES TO FINANCIAL STATEMENTS
                             (DOLLARS IN THOUSANDS)

NOTE 1.  GENERAL

    Edison Mission Finance Co. (the "Company"), a wholly-owned subsidiary of
Edison Mission Holdings Co. ("EM Holdings"), a wholly-owned subsidiary of Edison
Mission Energy ("EME"), an indirect wholly-owned subsidiary of Edison
International ("EIX"), is a California corporation formed on November 12, 1998
for the purpose of providing financing to EME Homer City Generation L.P.
("HCGLP"), an affiliated entity, to acquire, own and operate three coal-fired
electric generating units and related facilities (the "Homer City facilities")
located in Indiana County, Pennsylvania for the purpose of producing electric
energy. On March 18, 1999, HCGLP completed its acquisition (the "Acquisition")
of 100% of the ownership interests in the Homer City facilities and assumed
certain liabilities of the former owners. The Company had no significant
activity prior to 1999 and, accordingly, no 1998 financial information has been
presented.

NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES IN FINANCIAL STATEMENTS

    The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.

INTEREST INCOME AND EXPENSE

    The Company earns interest income from a subordinated loan and subordinated
revolving loan to HCGLP. The Company incurs interest expense from a subordinated
loan due to EM Holdings. (see Note 3).

INCOME TAXES

    The Company is included in the consolidated federal income tax and combined
state tax returns of EIX. The Company calculates its income tax provision on a
separate company basis under a tax sharing arrangement with an affiliate of EIX,
which in turn has an agreement with EIX. Tax benefits generated by the Company
and used in the EIX consolidated tax return are recognized by the Company
without regard to separate company limitations.

    The Company accounts for income taxes using the asset-and-liabilities
method, wherein deferred tax assets and liabilities are recognized for future
tax consequences of temporary differences between the carrying amounts and the
tax bases of assets and liabilities using enacted rates.

NOTE 3.  RELATED-PARTY TRANSACTIONS

    Certain administrative services such as payroll, employee benefit programs,
insurance and information technology are shared among all affiliates of EIX, and
the costs of these corporate support services are allocated to all affiliates.
The cost of services provided by EIX, including those related to the Company,
are allocated to EME based on one of the following formulas: percentage of the
time worked, equity in investment and advances, number of employees, or
multi-factor (operating revenues, operating expenses, total assets and total
employees). In addition, EIX bills EME for any direct labor

                                       91
<PAGE>
and out-of-pocket expenses for services directly requested for the benefit of
the Company. All charges from EIX related to the Company are billed to EME.

    The Company receives administrative services under an agreement with EME
which provides for: (1) reimbursement of any charges from EIX directly for the
benefit of the Company, (2) reimbursement of any payments made to third parties
for goods and services for the sole benefit of the Company, (3) labor and
expenses of EIX and EME personnel providing services requested by the Company,
and (4) a corporate allocation. Certain of the officers of the Company are also
officers of EME. Compensation of common officers is paid for by EME and is
considered part of the corporate allocation under (4) above. Management believes
the allocation methodologies utilized are reasonable. The Company made
reimbursements of $68,000 in 2000 and $222,000 in 1999 to EME for the cost of
these programs and other services. The amount due to affiliates associated with
these administrative services totaled $23,000 and $222,000 at December 31, 2000
and 1999, respectively.

    In order to initially effect the Acquisition of HCGLP, EM Holdings entered
into an $800 million initial financing (the "Acquisition Facility"), a
$250 million construction loan (the "Environmental Capital Improvements
Facility") that would be drawn as needed, and a $50 million line of credit (the
"Working Capital Facility"). Amounts borrowed under the Acquisition Facility,
the Environmental Capital Improvements Facility and the Working Capital Facility
bear interest at variable Eurodollar rates or Base rates at the option of EM
Holdings. If EM Holdings elects to pay Eurodollar rates, interest costs include
a margin of 0.85% to 2.25% depending on EM Holdings' current debt rating. At
December 31, 2000, the margin was 1.00%. Additionally, EM Holdings pays a
facility fee of 0.15% to 0.50%, depending on EM Holdings' current debt rating,
on the total outstanding commitment irrespective of usage. At December 31, 2000,
the facility fee was 0.25%. The financing received by EM Holdings under the
Acquisition Facility, as well as the Environmental Capital Improvements Facility
due 2004, were loaned to the Company under a subordinated loan agreement (the
"Finance Subordinated Loan"). The Company then loaned the same amounts to HCGLP
under a separate subordinated loan agreement (the "Subordinated Loan"). Interest
rates and other charges as well as maturity dates associated with the Finance
Subordinated Loan and the Subordinated Loan mirror the associated debt at EM
Holdings. The Acquisition Facility was replaced, on May 27, 1999, with
$300 million aggregate principal amount of 8.137% Senior Secured Bonds due 2019
and $530 million aggregate principal amount of 8.734% Senior Secured Bonds due
2026 (collectively, the "Senior Secured Bonds"). Proceeds from the Senior
Secured Bonds were loaned by EM Holdings to the Company, under the Finance
Subordinated Loan and subsequently by the Company to HCGLP, under the
Subordinated Loan. These proceeds were then used by the HCGLP to repay
$800 million under the Subordinated Loan and subsequently by the Company to
repay $800 million under the Finance Subordinated Loan. The total amount
outstanding under both the Finance Subordinated Loan and Subordinated Loan was
$1,012 million and $907 million at December 31, 2000 and 1999, respectively. The
weighted average interest rate under these borrowings was 8.4% at December 31,
2000 and 1999.

    The majority of the remaining cost of the Acquisition, as well as initial
operating cash for HCGLP, was funded through an equity contribution from EME to
EM Holdings. EM Holdings subsequently contributed approximately the same amount
to the Company, who subsequently loaned the amount to HCGLP under a subordinated
revolving loan agreement (the "Revolver"). The Revolver bears interest at 8.0%
on outstanding amounts and terminates on March 18, 2014. The total amount
outstanding under the Revolver at December 31, 2000 and 1999 was $789 million
and $794 million, respectively.

    The Company has recorded a liability to EME of $45.5 million and
$21.0 million at December 31, 2000 and 1999, respectively, related to tax due
under the tax sharing agreement. See Note 2 for the further discussion of the
tax sharing agreement.

                                       92
<PAGE>
NOTE 4.  INCOME TAXES

    Income tax expense includes the current tax benefit from the operating loss
and the change in deferred income taxes during the year. The net accumulated
deferred income tax asset is a result of the federal deduction for state tax
provision of $1,184,000 and $1,236,000 in 2000 and 1999, respectively.

    The provision for income taxes is comprised of the following:

<TABLE>
<CAPTION>
                                                                YEARS ENDED
                                                               DECEMBER 31,
                                                            -------------------
                                                              2000       1999
                                                            --------   --------
<S>                                                         <C>        <C>
Current
  Federal.................................................  $21,092    $17,478
  State...................................................    3,384      3,532
                                                            -------    -------
    Total current.........................................   24,476     21,010
                                                            -------    -------
Deferred
  Federal.................................................       52     (1,236)
  State...................................................       --         --
                                                            -------    -------
    Total deferred........................................       52     (1,236)
                                                            -------    -------
Provision for income taxes................................  $24,528    $19,774
                                                            =======    =======
</TABLE>

    Variations from the 35% federal statutory rate are as follows:

<TABLE>
<CAPTION>
                                                                YEARS ENDED
                                                               DECEMBER 31,
                                                            -------------------
                                                              2000       1999
                                                            --------   --------
<S>                                                         <C>        <C>
Expected provision for federal income taxes...............  $22,328    $17,478
Increase in taxes from:
  State tax--net of federal benefit.......................    2,200      2,296
                                                            -------    -------
    Total provision for income taxes......................  $24,528    $19,774
                                                            =======    =======
Effective tax rate........................................    38.45%     39.60%
                                                            =======    =======
</TABLE>

NOTE 5.  SUPPLEMENTAL STATEMENTS OF CASH FLOWS INFORMATION

<TABLE>
<CAPTION>
                                                                YEARS ENDED
                                                               DECEMBER 31,
                                                            -------------------
                                                              2000       1999
                                                            --------   --------
<S>                                                         <C>        <C>
Cash paid:
Interest..................................................  $81,387    $34,937
Income taxes (receipts)...................................  $    --    $    --
</TABLE>

                                       93
<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.

<TABLE>
<S>                              <C>    <C>
                                 EDISON MISSION HOLDINGS CO.
                                 (Registrant)

                                 By:                          /s/ KEVIN. SMITH
                                                         --------------------------
                                                KEVIN M. SMITH, VICE PRESIDENT and DIRECTOR

                                 Date:
                                                               March 30, 2001
                                        ------------------------------------------------------------
</TABLE>

    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.

<TABLE>
<CAPTION>
                        NAME                                      TITLE                    DATE
                        ----                                      -----                    ----
<S>                                                    <C>                          <C>
PRINCIPAL EXECUTIVE OFFICER:

/s/ GEORGIA R. NELSON
------------------------                               President and Director         March 30, 2001
Georgia R. Nelson

PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:

/s/ KEVIN M. SMITH
------------------------                               Vice President and Director    March 30, 2001
Kevin M. Smith

MAJORITY OF BOARD OF DIRECTORS:

/s/ RONALD L. LITZINGER
------------------------                               Director                       March 30, 2001
Ronald L. Litzinger

/s/ RAYMOND W. VICKERS
------------------------                               Director                       March 30, 2001
Raymond W. Vickers

/s/ JOHN K. DESHONG
------------------------                               Vice President and Director    March 30, 2001
John K. Deshong
</TABLE>

                                       94