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

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

                                    FORM 10-Q
              (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                       For the Quarter Ended June 30, 2001
                                       OR
              ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                   For the Transition Period from _____to_____

                        Mirant Americas Generation, Inc.
             (Exact name of registrant as specified in its charter)

       Delaware                                        51-0390520
--------------------------------------------------------------------------------
(State or other Jurisdiction of             (I.R.S. Employer Identification No.)
 Incorporation or Organization)

1403 Foulk Road, Suite 102, Wilmington, Delaware              19803
--------------------------------------------------------------------------------
  (Address of Principal Executive Offices)                 (Zip Code)

                                 (302) 478-8147
--------------------------------------------------------------------------------
              (Registrant's Telephone Number, Including Area Code)

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

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

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





<PAGE>


                        Mirant Americas Generation, Inc.

                                      INDEX
<TABLE>
<CAPTION>

                  For the Quarterly Period Ended June 30, 2001

                                                                                    Page
                                                                                    Number
                                                                                   ---------
<S>                                                                                   <C>
DEFINITIONS                                                                           3
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION                            4

                         PART I - FINANCIAL INFORMATION
Item 1. Interim Financial Statements (Unaudited):
         Condensed Consolidated Statements of Income                                  5
         Condensed Consolidated Balance Sheets                                        6
         Condensed Consolidated Statements of Stockholder's Equity                    8
         Condensed Consolidated Statements of Cash Flows                              9
         Notes to the Condensed Consolidated Financial Statements                    10
Item 2. Management's Discussion and Analysis of Results of Operations
        and Financial Condition                                                      25
Item 3. Quantitative and Qualitative Disclosures about Market Risk                   30

                           PART II - OTHER INFORMATION
Item 1. Legal Proceedings                                                            32
Item 2. Changes in Securities and Use of Proceeds                                Inapplicable
Item 3. Defaults Upon Senior Securities                                          Inapplicable
Item 4. Submission of Matters to a Vote of Security Holders                      Inapplicable
Item 5. Other Information                                                        Inapplicable
Item 6. Exhibits and Reports on Form 8-K                                         Inapplicable
Signatures
</TABLE>

                                       2

<PAGE>

<TABLE>
<CAPTION>

                                   DEFINITIONS
TERM                                           MEANING
<S>                                            <C>
CAISO                                          California Independent System Operator
Clean Air Act                                  Clean Air Act Amendments of 1990
CPUC                                           California Public Utilities Commission
CSFB                                           Credit Suisse First Boston
DWR                                            California Department of Water Resources
Energy Act                                     Energy Policy Act of 1992
EPA                                            U. S. Environmental Protection Agency
FASB                                           Financial Accounting Standards Board
FERC                                           Federal Energy Regulatory Commission
LIBOR                                          London Interbank Offering Rate
Mirant                                         Mirant Corporation and its subsidiaries
Mirant Americas                                Mirant Americas Inc.
Mirant Americas Energy Marketing               Mirant Americas Energy Marketing, L. P.
Mirant Americas Generation or the Company      Mirant Americas Generation, Inc. and its subsidiaries
Mirant California                              Mirant California, LLC
Mirant Delta                                   Mirant Delta, LLC
Mirant Potrero                                 Mirant Potrero, LLC
MW                                             Megawatt
NYISO                                          New York Independent System Operator
PEPCO                                          Potomac Electric Power Company
PJM                                            PJM Interconnection Market
PX                                             California Power Exchange Corporation
RMR                                            Reliability-Must-Run
S & P                                          Standard and Poors
SEC                                            Securities and Exchange Commission
SFAS                                           Statement of Financial Accounting Standards
Southern                                       Southern Company
</TABLE>



                                       3


<PAGE>




           CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

     The  information  presented  in this  Form  10-Q  includes  forward-looking
statements,  in addition to historical  information.  These  statements  involve
known  and  unknown  risks  and  relate  to  future  events,   Mirant   Americas
Generation's future financial performance or projected business results. In some
cases, forward-looking statements by terminology may be identified by statements
such as "may," "will," "should," "expects," "plans," "anticipates,"  "believes,"
"estimates," "predicts," "targets," "potential" or "continue" or the negative of
these terms or other comparable terminology.

     Forward-looking  statements are only predictions.  Actual events or results
may differ materially from any forward-looking  statement as a result of various
factors,  which include:  (i) legislative and regulatory  initiatives  regarding
deregulation, regulation or restructuring of the electric utility industry; (ii)
the extent and timing of the entry of additional  competition  in the markets of
Mirant Americas Generation's subsidiaries and affiliates;  (iii) Mirant Americas
Generation's pursuit of potential business strategies, including acquisitions or
dispositions of assets or internal restructuring;  (iv) state, federal and other
rate  regulations  in the  United  States;  (v)  changes  in or  application  of
environmental and other laws and regulations to which Mirant Americas Generation
and its subsidiaries and affiliates are subject;  (vi) political,  legal, market
and economic  conditions and developments in the United States;  (vii) financial
market  conditions  and the results of Mirant  Americas  Generation's  financing
efforts;  changes in market  conditions,  commodity  prices and interest  rates;
weather and other  natural  phenomena;  (viii)  performance  of Mirant  Americas
Generation's  projects  undertaken  and the  success of efforts to invest in and
develop new  opportunities;  (ix)  developments in the California power markets,
including, but not limited to, governmental  intervention,  deterioration in the
financial  condition of  counterparties,  default on  receivables  due,  adverse
results in current or future  litigation  and adverse  changes in the tariffs of
the California  Power  Exchange  Corporation  or California  Independent  System
Operator Corporation,  and (x) other factors,  discussed elsewhere herein and in
other reports  (including  matters  discussed in the "Risk Factors"  section and
elsewhere in Mirant  Americas  Generation's  Registration  Statement on Form S-4
filed August 8, 2001) filed from time to time by Mirant Americas Generation with
the SEC.

     Although  Mirant  Americas   Generation   believes  that  the  expectations
reflected in the  forward-looking  statements are  reasonable,  Mirant  Americas
Generation  cannot  guarantee  future  results,   events,  levels  of  activity,
performance or  achievements.  Mirant  Americas  Generation does not undertake a
duty to update any of the forward-looking statements.

                                       4
<PAGE>
                       MIRANT AMERICAS GENERATION, INC.
             CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
                                  (In Millions)

<TABLE>
<CAPTION>


                                               For the Three Months     For the Six Months
                                                  Ended June 30,          Ended June 30,
                                                  2001       2000        2001         2000
<S>                                               <C>        <C>         <C>         <C>
                                              ----------- ---------  ------------  ----------


Operating Revenues:                             $  1,352   $   333     $   2,857     $   541
                                              ----------- ---------  ------------  ----------

Operating Expenses:
Cost of fuel, electricity and other products         926       157         2,009         274
Maintenance                                           32        19            53          31
Depreciation and amortization                         44        19            85          37
Selling, general and administrative                  209        32           358          52
Taxes other than income taxes                         31        13            52          26
Other                                                 33        14            70          27
                                              ----------- ---------  ------------  ----------
  Total operating expenses                         1,275       254         2,627         447
                                              ----------- ---------  ------------  ----------
Operating Income                                      77        79           230          94
                                              ----------- ---------  ------------  ----------
Other Income (Expense):
Interest income                                       10         1            19           2
Interest expense                                     (46)      (22)          (89)        (42)
Gain from insurance proceeds                           -         -             8           -
Other, net                                            (3)        6            (1)          6
                                              ----------- ---------  ------------  ----------
  Total other income (expense)                       (39)      (15)          (63)        (34)
                                              ----------- ---------  ------------  ----------
Income Before Income Taxes                            38        64           167          60
Provision for Income Taxes                            22        25            74          23
                                              ----------- ---------  ------------  ----------
Net Income                                      $     16   $    39     $      93     $    37
                                              =========== =========  ============  ==========








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

                                        5
</TABLE>


<PAGE>
                        MIRANT AMERICAS GENERATION, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (In Millions)

<TABLE>
<CAPTION>

                                                                                  At June 30,          At December 31,
ASSETS                                                                              2001                 2000
                                                                                 (Unaudited)
                                                                              ------------------  --------------------
<S>                                                                                 <C>                   <C>

Current Assets:
Cash and cash equivalents                                                       $   216              $     83
Receivables:
  Customer accounts                                                                  16                    24
  Affiliates, net of provision for uncollectibles of $122
    and $50 for 2001 and 2000, respectively                                         383                   599
Assets from risk management activities (Notes A and D)                              145                     -
Derivative hedging instruments (Notes A, B and D)                                   593                     -
Notes receivable from affiliates                                                    113                    48
Fuel stock                                                                           93                    50
Materials and supplies                                                               78                    79
Deferred income taxes                                                               111                    78
Prepayments                                                                          23                    70
Other                                                                                20                     6
                                                                              ------------------  --------------------
  Total current assets                                                            1,791                 1,037
                                                                              ------------------  --------------------

Property, Plant and Equipment:
Property, plant and equipment                                                     2,712                 2,572
Less accumulated provision for depreciation                                        (145)                  (92)
                                                                              ------------------  --------------------
                                                                                  2,567                 2,480
Construction work in progress                                                       200                   218
                                                                              ------------------  --------------------
  Total property, plant and equipment, net                                        2,767                 2,698
                                                                              ------------------  --------------------

Noncurrent Assets:
Notes receivables from affiliates                                                   223                   223
Goodwill, net of accumulated amortization of $37
    and $17 for 2001 and 2000, respectively                                       1,571                 1,555
Other intangible assets, net of accumulated amortization of $51
    and $34 for 2001 and 2000, respectively                                         630                   635
Assets from risk management activities (Notes A and D)                               59                     -
Derivative hedging instruments (Notes A, B and D)                                   286                     -
Other                                                                                33                    23
                                                                              ------------------  --------------------
  Total noncurrent assets                                                         2,802                 2,436
                                                                              ------------------  --------------------
  Total assets                                                                  $ 7,360              $  6,171
                                                                              ==================  ====================







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

                                        6
</TABLE>

<PAGE>

                        MIRANT AMERICAS GENERATION, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (In Millions)

<TABLE>
<CAPTION>

                                                                                   At June 30,           At December 31,
LIABILITIES AND STOCKHOLDER'S EQUITY                                                  2001                 2000
                                                                                   (Unaudited)
                                                                                ------------------  --------------------
<S>                                                                                     <C>                 <C>

Current Liabilities:
Accounts payable                                                                    $     145          $     89
Payable to affiliates                                                                     216               496
Notes payable                                                                             750               945
Accrued taxes                                                                             114                49
Liabilities from risk management activities (Notes A and D )                              248                 -
Derivative hedging instruments (Notes A, B and D)                                         405                 -
Revenues subject to refund                                                                192               150
Other                                                                                      43                10
                                                                                ------------------  --------------------
  Total current liabilities                                                             2,113             1,739
                                                                                ------------------  --------------------

Noncurrent Liabilities:
Notes payable                                                                           1,745             1,450
Notes payable to affiliates                                                                49                 -
Deferred income taxes                                                                     248               175
Liabilities from risk management activities (Notes A and D)                                59                 -
Derivative hedging instruments (Notes A, B and D)                                         204                 -
Other                                                                                      22                 5
                                                                                ------------------  --------------------
  Total noncurrent liabilities                                                          2,327             1,630
                                                                                ------------------  --------------------

Commitments and Contingent Matters (Notes F and G)

Stockholder's Equity:
Common stock, $1 par value, per share                                                       -                 -
   1,000 shares authorized, issued and outstanding
Additional paid-in capital                                                              2,952             2,820
Accumulated deficit                                                                      (146)              (18)
Accumulated other comprehensive income                                                    114                 -
                                                                                ------------------  --------------------
  Total stockholder's equity                                                            2,920             2,802
                                                                                ------------------  --------------------

  Total liabilities and stockholder's equity                                        $   7,360          $  6,171
                                                                                ==================  ====================



The  accompanying  notes are an integral  part of these  condensed  consolidated
statements.
</TABLE>

                                        7
<PAGE>
                        MIRANT AMERICAS GENERATION, INC.
      CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (UNAUDITED)
                                  (In Millions)

<TABLE>
<CAPTION>


                                                                                        Accumulated
                                                      Additional                           Other
                                          Common        Paid-In       Accumulated      Comprehensive     Comprehensive
                                           Stock        Capital         Deficit           Income             Income
                                       ----------- ---------------- ---------------- ------------------ -----------------
<S>                                        <C>           <C>               <C>              <C>               <C>

Balance, December 31, 2000              $   -         $  2,820          $  (18)           $    -
   Net income                               -                -              93                 -             $   93
   Other comprehensive incoe                -                -               -               114                114
                                                                                                        -----------------
   Comprehensive income                                                                                      $  207
                                                                                                        =================
   Dividends and return of capital          -                -            (221)                -
   Capital contributions                    -              132               -                 -
                                       ----------- ---------------- ---------------- ------------------
Balance, June 30, 2001                  $   -         $  2,952          $ (146)           $  114
                                       =========== ================ ================ ==================








The  accompanying  notes are an integral  part of these  condensed  consolidated
statements.
</TABLE>

                                        8
<PAGE>
                        MIRANT AMERICAS GENERATION, INC.
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                  (In Millions)
<TABLE>
<CAPTION>

                                                                                         For the Six Months
                                                                                           Ended June 30,
                                                                                      2001              2000
                                                                                ----------------- -----------------
<S>                                                                                   <C>                <C>

Cash Flows From Operating Activities:
Net income                                                                        $    93             $   37
                                                                                ----------------- -----------------
Adjustments   to  reconcile  net  income  to  net  cash  provided  by
  (used in) operating activities:
  Depreciation and amortization                                                        85                 37
  Deferred income taxes                                                               (47)               (20)
  Changes in certain assets and liabilities, excluding effects from acquisitions
    Accounts receivable and receivables from affiliates, net                          224               (174)
    Risk management activities, net                                                   103                  -
    Prepayments                                                                        47                 28
    Accounts payable and accrued liabilities                                          (84)                25
    Accrued taxes                                                                      65                 37
    Other, net                                                                          4                 32
                                                                                ----------------- -----------------
      Total adjustments                                                               397                (35)
                                                                                ----------------- -----------------
      Net cash provided by operating activities                                       490                  2
                                                                                ----------------- -----------------

Cash Flow From Investing Activities:
Capital expenditures                                                                 (168)              (119)
Issuance of notes receivables from affiliates                                         (65)                 -
Insurance proceeds received                                                             8                 27
                                                                                ----------------- -----------------
      Net cash used in investing activities                                          (225)               (92)
                                                                                ----------------- -----------------

Cash Flow From Financing Activities:
Capital contributions                                                                  27                  2
Payment of dividends                                                                 (221)                (2)
Proceeds from issuance of debt                                                      1,708                108
Repayment of debt                                                                  (1,646)                 -
                                                                                ----------------- -----------------
      Net cash provided by (used in) financing activities                            (132)               108
                                                                                ----------------- -----------------
Net Increase in Cash and Cash Equivalents                                             133                 18
Cash and Cash Equivalents, beginning of period                                         83                 31
                                                                                ----------------- -----------------
Cash and Cash Equivalents, end of period                                          $   216             $   49
                                                                                ================= =================

Supplemental Cash Flow Disclosures:
Cash paid for interest, net of amounts capitalized                                $    60             $   50
                                                                                ================= =================
Cash paid for income taxes                                                        $    32             $    9
                                                                                ================= =================
Noncash Financing Activity:
Capital contributions                                                             $   105             $    -
                                                                                ================= =================


The  accompanying  notes are an integral  part of these  condensed  consolidated
statements.
</TABLE>

                                        9

<PAGE>

                        MIRANT AMERICAS GENERATION, INC.
       NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A.       Accounting and Reporting Policies

Basis of Accounting. These condensed consolidated financial statements should be
read in  conjunction  with the  Company's  audited 2000  consolidated  financial
statements and the  accompanying  footnotes which are contained in the Company's
prospectus  filed with the SEC on August 8, 2001  pursuant to Rule 424 (b) under
the Securities Act of 1933, with respect to the Company's registration statement
on  Form  S-4  (Registration  No.  333-63240).   Management  believes  that  the
accompanying  unaudited condensed  consolidated financial statements reflect all
adjustments,  consisting  of  normal  recurring  items,  necessary  for  a  fair
statement of results for the interim periods presented.  The results for interim
periods are not necessarily indicative of the results for the entire year.

 Accounting  Changes.  In July 2001,  the FASB issued  SFAS No.  141,  "Business
Combinations,"  and SFAS No. 142,  "Goodwill and Other Intangible  Assets." SFAS
No. 141 establishes that all business  combinations  will be accounted for using
the  purchase  method.  Use  of the  pooling-of-interests  method  is no  longer
allowed.  The  provisions  of SFAS  No.  141  are  effective  for  all  business
combinations  initiated  after  June  30,  2001  and all  business  combinations
accounted  for using the purchase  method for which the date of  acquisition  is
July 1, 2001 or later. SFAS No. 142 addresses financial accounting and reporting
for  acquired  goodwill and other  intangible  assets and,  generally,  adopts a
non-amortization  and  periodic  impairment  analysis  approach to goodwill  and
indefinitely-lived  intangibles.  SFAS No. 142 is effective for Mirant  Americas
Generation's 2002 fiscal year or for business combinations  initiated after July
1, 2001.  Mirant  Americas  Generation  is  currently  assessing  the  financial
statement impact of both statements and has not yet determined the final impact.

     Effective January 1, 2001, Mirant Americas Generation adopted SFAS No. 133,
"Accounting   for  Derivative   Instruments  and  Hedging   Activities,"   which
establishes  accounting and reporting  standards for derivative  instruments and
hedging activities.  The statement requires that certain derivative  instruments
be recorded in the balance  sheet as either  assets or  liabilities  measured at
fair  value,  and that  changes in the fair  value be  recognized  currently  in
earnings,  unless specific hedge accounting  criteria are met. If the derivative
is  designated  as a fair  value  hedge,  the  changes  in the fair value of the
derivative and of the hedged item attributable to the hedged risk are recognized
currently in earnings. If the derivative is designated as a cash flow hedge, the
changes in the fair value of the derivative are recorded in other  comprehensive
income  ("OCI"),  and the gains and  losses  related  to these  derivatives  are
recognized in earnings in the same period as the  settlement  of the  underlying
hedged  transaction.  If the derivative is designated as a net investment hedge,
the changes in the fair value of the  derivative  are also  recorded in OCI. Any
ineffectiveness  relating to these hedges is  recognized  currently in earnings.
The assets and  liabilities  related to derivative  instruments  for which hedge
accounting  criteria are met are reflected as derivative hedging  instruments in
the  accompanying  condensed  consolidated  balance sheet at June 30, 2001.  The
derivative  instruments  for which  hedge  accounting  criteria  are not met are
reflected  as  risk  management  assets  and  liabilities  in  the  accompanying
condensed consolidated balance sheet as of June 30, 2001.

Concentration  of Revenues.  Under its agreements  with Mirant  Americas  Energy
Marketing,  an indirectly wholly owned subsidiary of Mirant, the Company retains
the ultimate credit risk from the sales that Mirant  Americas  Energy  Marketing
engages in on its behalf.  During the three and six months  ended June 30, 2001,
approximately  74%  and  68%,  respectively,  of  the  Company's  revenues  were
attributable to sales to the California market.  During the three and six months
ended June 30, 2000,  approximately 59% and 50%, respectively,  of the Company's
revenues were attributable to sales to the California market.

                                       10
<PAGE>


                        MIRANT AMERICAS GENERATION, INC.
       NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

B.       Comprehensive Income

     Comprehensive  income  includes  unrealized  gains and  losses  on  certain
derivatives that qualify as cash flow hedges. The following table sets forth the
comprehensive  income for the three and six months  ended June 30, 2001 and 2000
(in millions):

                                     Three Months Ended       Six Months Ended
                                           June 30,                June 30,
                                  ----------------------------------------------
                                     2001       2000          2001        2000
                                     ----       ----          ----        ----
  Net income                       $  16       $ 39         $  93        $ 37
  Other comprehensive income         481          -           114           -
                                   ------      ------        ------      -----
  Comprehensive income             $ 497       $ 39         $ 207        $ 37
                                   ======      ======        ======      =====

     Accumulated OCI at June 30, 2001 consisted of the following, net of tax (in
millions):

        Balance, December 31, 2000                                   $     -

        Other comprehensive income for the period:
          Transitional adjustment from adoption of SFAS No. 133         (298)
          Change in fair value of derivative instruments                 285
          Reclassification from OCI to earnings                          127
                                                                       ------
        Other comprehensive income                                       114
                                                                       ------

        Balance, June 30, 2001                                       $   114
                                                                       ======

     The adoption of SFAS No. 133 resulted in a cumulative  after-tax  reduction
to OCI of $298 million,  and is mostly  attributable  to deferred losses on cash
flow  hedges.  Mirant  Americas  Generation  estimates  that $107 million of net
derivative  after-tax  gains  included  in OCI  as of  June  30,  2001  will  be
reclassified  from OCI into earnings or otherwise settled within the next twelve
months as certain forecasted  transactions  relating to commodity  contracts and
interest payments are realized. Included in this net $107 million amount is $115
million of  derivative  after-tax  gains  related to physical  forward sales and
purchases  of power  that the  Company  has  entered  into in order to hedge its
forecasted  power  sales.  The  fair  value of these  contracts  represents  the
difference  between  the  prices at which the  Company  has  contracted  to sell
electricity and the forward market prices as of June 30, 2001.

     The Company  anticipates  that SFAS No. 133 will increase the volatility of
other comprehensive  income and net income as derivative  instruments are valued
based on market prices.  Therefore,  as the prices change, the fair value of the
derivatives will change.

C.       Debt

     In May 2001,  the Company  issued $1.75 billion in senior  unsecured  notes
under Rule 144A of the Securities Act. The notes issued included $500 million of
7.625%  senior notes due 2006,  $850 million of 8.3% senior notes due 2011,  and
$400 million of 9.125% senior notes due 2031.  The net proceeds from these notes
were used to repay  existing  credit  facilities  as discussed in the  following
paragraph.  Interest on the notes is payable semiannually  beginning November 1,
2001.  The Company may redeem the notes,  in whole or in part,  at any time at a
redemption  price equal to 100% of the principal  amount plus accrued  interest,
plus a make-whole

                                       11
<PAGE>


                        MIRANT AMERICAS GENERATION, INC.
       NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

premium,  as  defined in the note  agreements.  The  Company  has  initiated  an
exchange offer under an effective  registration  statement  pursuant to which it
will exchange the notes for notes registered under the Securities Act.

     In  May  2001,  the  Company  repaid  amounts  under  its  existing  credit
facilities with the proceeds of the issuance of the notes. The Company repaid in
full its $1.15 billion credit facility, which was scheduled to mature in October
2002. In addition, the Company repaid amounts outstanding under its $250 million
and $50 million  revolving  credit  facilities.  The commitments  under its $250
million and $50 million revolving credit  facilities,  with an annual commitment
fee of 17.5 basis points per annum, remain available through October 2004. Under
the revolving credit facilities,  the Company may elect to borrow at a base rate
or at LIBOR plus an applicable  margin based on its credit rating on the date of
borrowing.  Interest is payable on the maturity of the chosen  interest  period.
There were no outstanding  borrowings under the revolving  credit  facilities at
June 30, 2001.

     In  addition,  in May 2001,  the Company  repaid  $175  million on its $870
million  acquisition  facility.  The  Company's  $150  million  working  capital
facility was also fully repaid  although  amounts have  subsequently  been drawn
thereunder.  Under these  facilities,  the Company may elect to borrow at a base
rate or at LIBOR plus an  applicable  margin  based on its credit  rating on the
date of borrowing.  The  outstanding  borrowings  under the  acquisition  credit
facility and the working capital facility were $695 million and $55 million,  at
interest  rates of 5.03% and 4.80%,  respectively,  at June 30,  2001.  Both the
acquisition  credit facility and the working capital facility  featured original
maturity dates in September 2001. However, in August 2001, the Company exercised
its right to extend the maturity of these facilities to September 2002.

D.       Financial Instruments

Derivative Hedging Instruments

     The Company is exposed to market risk  including  changes in interest rates
and  certain  commodity  prices.  To manage  the  volatility  relating  to those
exposures,  the Company enters into various derivative  transactions pursuant to
the  Company's  policies  in areas such as  counterparty  exposure  and  hedging
practices.

     Derivative gains and losses arising from cash flow hedges that are included
in OCI are  reclassified  into earnings in the same period as the  settlement of
the  underlying  transaction.  During the six months ended June 30,  2001,  $215
million of pre-tax  derivative losses were reclassified to operating income. The
derivative  gains  and  losses  reclassified  to  earnings,  combined  with  the
settlement  of the  underlying  physical  transactions  together  represent  the
Company's  net  commodity  revenues  and costs.  The maximum term over which the
Company is hedging exposures to the variability of cash flows is through 2011.

Commodity Price Management

     The Company enters into commodity  financial  instruments in order to hedge
market risk and exposure to electricity and to natural gas, coal and other fuels
utilized by its generation assets. These financial instruments primarily include
forwards, futures and swaps. Where these derivatives are designated as cash flow
hedges,  the gains and losses are  recognized  in earnings in the same period as
the settlement of the underlying physical transaction.

     At June  30,  2001,  the  Company  had a net  derivative  hedging  asset of
approximately  $288 million  related to these  financial  instruments.  The fair
value of its non-trading  commodity  financial  instruments is determined  using
various factors,  including  closing exchange or  over-the-counter  market price
quotations, time value and volatility factors underlying options and contractual
commitments. At June 30, 2001, the Company had

                                       12
<PAGE>


                        MIRANT AMERICAS GENERATION, INC.
       NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

contracts that related to periods  through 2003. The net notional  amount of the
commodity  price  management  assets and  liabilities  at June 30,  2001 was 2.6
million equivalent megawatt-hours. The notional amount is indicative only of the
volume  of  activity  and not of the  amount  exchanged  by the  parties  to the
financial instruments.  Consequently,  these amounts are not a measure of market
risk.

Interest Rate Hedging

     The Company's  policy is to manage interest  expense using a combination of
fixed- and  variable-rate  debt. To manage this mix in a cost-efficient  manner,
the Company  enters into interest rate swaps in which it agrees to exchange,  at
specified intervals,  the difference between fixed and variable interest amounts
calculated  by  reference  to  agreed-upon  notional  amounts.  These  swaps are
designated to hedge  underlying debt  obligations.  For qualifying  hedges,  the
changes in the fair value of gains and losses of the swaps are  deferred in OCI,
net of tax, and the  interest  rate  differential  is  reclassified  from OCI to
interest  expense as an adjustment over the life of the swaps.  Gains and losses
resulting  from the  termination  of  qualifying  hedges  prior to their  stated
maturities  are  recognized  ratably  over  the  remaining  life  of the  hedged
instruments.

Risk Management Activities

     Certain  financial  instruments used by the Company to manage risk exposure
to energy  prices do not meet the  hedge  criteria  under  SFAS No.  133.  These
financial  instruments are recorded at fair value as risk management  assets and
risk management  liabilities in the accompanying  consolidated  balance sheet at
June 30, 2001.

     At June 30, 2001, the Company had contracts that related to periods through
2003. The net notional amount of the risk  management  assets and liabilities at
June 30, 2001 was approximately 3.5 million equivalent  megawatt-hours.  The net
notional  amount is  indicative  only of the volume of  activity  and not of the
amount  exchanged  by the parties to the  financial  instruments.  Consequently,
these amounts are not a measure of market risk.

     The fair values of the risk management  assets and liabilities  recorded on
the consolidated balance sheet as of June 30, 2001 are included in the following
table (in millions):

                                       Risk Management
                                    Assets      Liabilities
                                 -----------------------------

     Natural gas                    $  96         $ 225
     Oil                               22            23
     Electricity                       83            55
     Other                              3             4
                                 -----------------------------
                                    $ 204         $ 307
                                 =============================


E.       Business Developments

     Effective May 1, 2001, net revenue sharing  arrangements in California were
amended.  Mirant Americas Energy Marketing is now entitled to 75%, as opposed to
50%, of net revenues in excess of $512  million.  However,  the  additional  25%
increase  in the net  revenue  sharing  arrangement  is  subordinate  to  Mirant
Americas  Generation's  debt service  payments.  During the three and six months
ended June 30, 2001, the Company  incurred  approximately  $141 million in costs
under all  revenue  sharing  arrangements  is has with  Mirant  Americas  Energy
Marketing.

                                       13
<PAGE>


                        MIRANT AMERICAS GENERATION, INC.
       NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

     On May 16, 2001,  Mirant  Americas  Generation's  Lovett Unit 5 in New York
experienced  a  boiler  explosion,   which  rendered  the  unit  inoperable.  An
investigation is ongoing to determine the cause and extent of the damage as well
as an assessment of how long it will take to repair or replace the unit.

     On June 13,  2001,  the Company  completed  the second  phase of its Bosque
County, Texas power plant when it began commercial operation of a 248-MW natural
gas-fired, combined-cycle unit. The first phase of the plant, which includes two
simple-cycle  peaking  units  that  produce  approximately  154 MW  each,  began
commercial  operation in June 2000.  Mirant Americas  Generation will market the
electricity  through Mirant  Americas  Energy  Marketing's  risk  management and
marketing operation.

F.       Commitments and Contingent Matters

Litigation and Other Contingencies

Western United States Power Markets:

California   Reliability-Must-Run   Agreements.   Mirant  Americas  Generation's
subsidiaries acquired generation assets from Pacific Gas and Electric Company in
April 1999, subject to reliability-must-run  agreements.  These agreements allow
the  CAISO,  under  certain  conditions,  to  require  certain  Mirant  Americas
Generation  subsidiaries  to run the  acquired  generation  assets  in  order to
support the reliability of the California electric  transmission system.  Mirant
Americas  Generation  assumed  these  agreements  from  Pacific Gas and Electric
Company prior to the outcome of a FERC proceeding initiated in October 1997 that
will  determine  the  percentage  of  a  $158.8  million  annual  fixed  revenue
requirement  to be paid to Mirant  Americas  Generation  by the CAISO  under the
reliability-must-run agreements. This revenue requirement was negotiated as part
of a prior  settlement of a FERC rate  proceeding.  Mirant  Americas  Generation
contends that the amount paid by the CAISO should reflect an allocation based on
the CAISO's  right to call on the units (as defined by the  reliability-must-run
agreements)  and the CAISO's actual calls.  This approach would result in annual
payments by the CAISO of approximately $120 million, or 75% of the settled fixed
revenue requirement.  The decision in this case will affect the amount the CAISO
will pay to Mirant Americas  Generation for the period from June 1, 1999 through
December 31,  2001.  On June 7, 2000,  the  presiding  administrative  law judge
issued an initial decision in which  responsibility for payment of approximately
3% of the  revenue  requirement  was  allocated  to the CAISO.  On July 7, 2000,
Mirant Americas  Generation  appealed the administrative law judge's decision to
the FERC. The outcome of this appeal cannot be determined. A final FERC order in
this proceeding may be appealed to the U.S. Court of Appeals.

     If  Mirant  Americas  Generation  is  unsuccessful  in  its  appeal  of the
administrative  law judge's  decision,  it will be  required  to refund  certain
amounts of the revenue requirement paid by the CAISO for the period from June 1,
1999 until the final disposition of the appeal.  The amount of this refund as of
June 30, 2001 would have been approximately $ 173 million,  however, there would
have been no effect on net  income  for the  periods  under  review as  adequate
reserves have been recorded.  This amount does not include  interest that may be
payable in the event of a refund. If Mirant Americas  Generation is unsuccessful
in  its  appeal,   it  plans  to  pursue  other  options   available  under  the
reliability-must-run agreements to mitigate the impact of the administrative law
judge's  decision  upon its future  operations.  The  outcome of this  appeal is
uncertain,  and Mirant Americas Generation cannot provide assurance that it will
be successful.

Defaults  by the CAISO.  During the six months  ended June 30,  2001,  the CAISO
failed  to pay a  total  of  approximately  $19.6  million  to  Mirant  Americas
Generation under the reliability-must-run  agreements assumed by Mirant Americas
Generation from Pacific Gas & Electric Company.  Mirant Americas  Generation has
submitted notices of default to the CAISO.

                                       14
<PAGE>


                        MIRANT AMERICAS GENERATION, INC.
       NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

Payments have been received for amounts that became due following  Pacific Gas &
Electric Company's April 6, 2001 petition for bankruptcy.

CAISO and California Power Exchange Price Caps. Beginning in May 2000, wholesale
energy  prices in the  California  markets  increased  to levels well above 1999
levels. In response,  on June 28, 2000, the CAISO Board of Governors reduced the
price cap  applicable to the CAISO's  wholesale  energy and  ancillary  services
markets from $750/MWh to $500/MWh.  The CAISO subsequently reduced the price cap
to $250/MWh on August 1, 2000. During this period, however, the California Power
Exchange  maintained a separate price cap set at a much higher level  applicable
to the "day-ahead"  and "day-of"  markets  administered by the California  Power
Exchange.  On August 23, 2000, the FERC denied a complaint  filed August 2, 2000
by San Diego Gas & Electric Company that sought to extend the CAISO's $250 price
cap to all California energy and ancillary service markets, not just the markets
administered  by the CAISO.  However,  in its order denying the relief sought by
San Diego Gas & Electric  Company,  the FERC instructed its staff to initiate an
investigation  of the California power markets and to report its findings to the
FERC and held further hearing procedures in abeyance pending the outcome of this
investigation.

     On November 1, 2000, the FERC released a Staff Report detailing the results
of the Staff  investigation,  together  with an "Order  Proposing  Remedies  for
California Wholesale Markets".  In the November 1 order, the FERC found that the
California  power market structure and market rules were seriously  flawed,  and
that these flaws,  together  with short supply  relative to demand,  resulted in
unusually high energy prices. The November 1 order proposed specific remedies to
the identified  market flaws,  including:  (a) imposition of a so-called  "soft"
price cap at $150/MWh to the California Power Exchange and CAISO markets,  which
would allow bids above  $150/MWh to be  accepted,  subject to certain  reporting
obligations  requiring  sellers to provide cost data and/or identify  applicable
opportunity  costs and that such bids may not set the  overall  market  clearing
price;  (b)  elimination of the requirement  that the California  utilities sell
into  and  buy  from  the  California  Power  Exchange;   (c)  establishment  of
independent,  non-stakeholder  governing boards for the CAISO and the California
Power  Exchange;  and  (d)  establishment  of  penalty  charges  for  scheduling
deviations  outside of a prescribed  range.  In the  November 1 order,  the FERC
established  October 2, 2000, the date 60 days after the filing of the San Diego
Gas & Electric Company complaint,  as the "refund effective date." Rates charged
for service  after that date through  December  31, 2002 will remain  subject to
refund if determined by the FERC not to be just and  reasonable.  While the FERC
concluded that the Federal Power Act and prior court decisions interpreting that
act strongly  suggested that refunds would not be permissible for charges in the
period  prior to  October  2,  2000,  it noted  that it was  willing  to explore
proposals for equitable relief with respect to charges made in that period.

     On December 15, 2000,  the FERC issued a subsequent  order that affirmed in
large  measure  the  November  1 order.  The  December  15 order  also  required
generators  to provide  weekly  reports of sales  above the "soft"  price cap of
$150/MWh.  Various parties filed requests for  administrative  rehearing and for
judicial review of aspects of the FERC's December 15 order.

     On March 9, March 16, April 16, May 16 and June 15, 2001,  the FERC ordered
that certain  transactions  into the CAISO and California Power Exchange markets
have  not been  shown  to be just and  reasonable.  The  order  determined  that
potential refunds would be appropriate for certain transactions in these markets
above  a  "proxy  market  price"  specified  during  a  CAISO-declared  Stage  3
Emergency,  absent  additional  price or cost  justification  by  jurisdictional
sellers.  These sellers,  including Mirant  California,  Mirant Delta and Mirant
Potrero were required to determine whether to provide refunds of costs above the
proxy market price or to provide  justification  of prices to the FERC.  Various
parties have  requested an  administrative  rehearing of the FERC March 9 order.
The Company cannot predict whether the FERC will grant a rehearing.

                                       15
<PAGE>


                        MIRANT AMERICAS GENERATION, INC.
       NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

     The FERC has issued  proxy  market  price orders for the months of January,
February,  March,  April and May 2001. The potential  refund exposure for Mirant
Americas  Generation for January,  February,  March and May was approximately $3
million.  The proxy market price for April was not  applicable to any sales made
by the  Company.  Mirant  Americas  Generation  has  provided  additional  price
justification  for the  transactions  in January,  February  and March that were
subject to refund.  The Company  cannot give any  assurances  that the FERC will
accept the  justification  and decline to order  refunds of some or all of these
amounts.

     In March 2001,  the FERC staff issued its  recommendation,  regarding a new
market mitigation plan, which included continued price mitigation during Stage 3
emergencies.  On April 6, 2001, the CAISO filed a proposed market  stabilization
plan at the FERC. On April 26, 2001,  the FERC issued an order adopting a market
monitoring and price mitigation plan modeled closely on the recommendation  made
by its staff.  The April 26 order provides for price  mitigation in all hours in
which power  reserves fall below 7.5 percent,  a level that  corresponds  to the
ISO's Stage 1 emergency.  In these hours,  the FERC will use a formula  based on
the marginal costs of the  highest-cost  generator called on to run to determine
the overall  market-clearing price. In the event that a generator sells power at
prices higher than the formula  price set by FERC,  the generator is required to
submit data to FERC within seven days to justify the higher price.  The April 26
order also provides for: (a)  increased  coordination  and control of generation
plant outages by the CAISO, (b) all in-state  generation,  including  generation
owned by sellers not subject to FERC jurisdiction,  to offer all available power
for sale in real time, (c) load-serving  public utilities to establish,  by June
1, 2001, demand response mechanisms identifying the price at which load would be
curtailed,  (d) the FERC to  continue  to  monitor  closely  behavior  of market
participants,  including  bidding  behavior and plant  outages,  (e)  interested
parties to file comments  within 30 days on whether the CAISO should be required
to  institute,  on a  prospective  basis,  a  surcharge  on power sales to cover
payments due to  generators  by the  California  utilities,  and (f) the FERC to
institute an  investigation  under Section 206 of the Federal Power Act into the
rates, terms and conditions of certain  short-term  wholesale power sales in the
Western markets outside of California.  This mitigation program became effective
May 29,  2001,  and will  terminate  after  one  year.  In  addition,  the order
identified  certain  prohibited bidding practices by entities having market rate
authority   (which  would  include  certain  of  Mirant  Americas   Generation's
subsidiaries)  and stated that it would impose sanctions on entities that engage
in the prohibited practices. The effects of this FERC order are not yet known by
the Company.

 Proposed CAISO and California Power Exchange Tariff  Amendments.  On January 4,
2001,  the  CAISO  filed  for  approval  of  a  tariff  amendment   whereby  its
creditworthiness  requirements  for  certain  electricity  purchasers  would  be
reduced.  The action was taken in response to reports  that Moody's and S&P were
on the verge of reducing the credit  ratings of Southern  California  Edison and
Pacific  Gas &  Electric  Company  to  ratings  that  would not  allow  Southern
California  Edison and  Pacific Gas & Electric  Company to purchase  electricity
from the CAISO unless they posted collateral for their purchases. In its filing,
the CAISO  announced its intention to implement the reduced credit  requirements
immediately in order to ensure the reliability of the California  power grid. On
January 5, 2001,  the California  Power  Exchange  filed a similar  request with
respect to the California Power Exchange's tariffs as the CAISO had requested on
January 4, 2001. On February 14, 2001, the FERC ruled that the tariff  amendment
requested by the  California  Power Exchange  should be rejected  because it had
ceased to operate its day-ahead and day-of markets.  With respect to the CAISO's
request,  the  FERC  allowed  the  CAISO to  amend  its  tariff  to  remove  the
creditworthiness  requirements  only with respect to the scheduling by a utility
purchaser from the CAISO of power from generation  owned by that purchaser.  The
FERC rejected the proposed amendment with respect to purchases by the CAISO from
third-party  suppliers.  On April 6, 2001,  the FERC  confirmed  its February 14
decision.  On June 13, 2001,  the FERC issued an order denying  rehearing on the
April 6, 2001  order on  creditworthiness,  which  provides  that the CAISO must
provide a creditworthy counterparty for all power transactions.

                                       16
<PAGE>


                        MIRANT AMERICAS GENERATION, INC.
       NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

Defaults by Southern  California Edison and Pacific Gas & Electric  Company.  On
January 16 and 17, 2001, Southern California Edison's and Pacific Gas & Electric
Company's   credit  and  debt  ratings  were  lowered  by  Moody's  and  S&P  to
"non-investment  grade" status. On January 16, 2001,  Southern California Edison
indicated that it would suspend  indefinitely  certain  obligations  including a
$215 million  payment due to the  California  Power  Exchange and a $151 million
payment due to a qualifying facility.

 DWR Power Purchases.  On January 17, 2001, the Governor of California issued an
emergency  proclamation  giving the  California  Department  of Water  Resources
authority to enter into  arrangements to purchase power in order to mitigate the
effects of electricity  shortages in the state.  The DWR began  purchasing power
under that  authority  the next day.  On  February  1,  2001,  the  Governor  of
California  signed Assembly Bill No. 1X authorizing the DWR to purchase power in
the wholesale  markets to supply  retail  consumers in California on a long-term
basis. The Bill became effective immediately upon its execution by the Governor.
The Bill did not,  however,  address  the  payment  of  amounts  owed for  power
previously  supplied to the CAISO or California  Power  Exchange for purchase by
Southern  California  Edison and Pacific Gas & Electric  Company.  The CAISO and
California Power Exchange have not paid the full amounts owed to Mirant Americas
Energy  Marketing for power delivered to the CAISO and California Power Exchange
in prior  months  and are  expected  to pay less  than the full  amount  owed on
further  obligations  coming  due  in  the  future  for  power  provided  to the
California  Power  Exchange or the CAISO for sales that were not arranged by the
DWR. The ability of the DWR to make future payments is subject to the DWR having
a continued  source of funding,  whether  from  legislative  or other  emergency
appropriations,  from a bond  issuance or from amounts  collected  from Southern
California  Edison and Pacific Gas & Electric  Company for  deliveries  to their
customers.  Mirant  Americas  Generation  bears the risk of  non-payment  by the
CAISO,  the California  Power Exchange and the DWR for their power  purchased by
the CAISO, the California Power Exchange or the DWR.

     Mirant  Americas  Generation  has  approximately  3,000  MW  of  generating
capacity in California. This includes facilities which operate during periods of
higher-than-average  (intermediate  load) and very high  (peak)  demand  levels.
Mirant  Americas  Generation  generated an amount  equivalent to about 4% of the
total  California  energy  consumption  in 2000.  The total  amounts owed to the
Company from  affiliates  that related to the California  Power Exchange and the
CAISO as of June 30, 2001 was approximately $304 million, net of settlements due
to the  California  Power  Exchange.  There are other sources of collateral  and
revenues which could potentially provide additional offset to these amounts. The
Company has taken  additional  provisions  such that the  cumulative  provisions
taken by the Company  against these  amounts is $228 million.  The CAISO and the
California Power Exchange are owed past due payments from California  utilities,
including  Pacific Gas and Electric,  which filed for  bankruptcy  protection on
April 6, 2001.

 California Rate Payer Litigation.  Six lawsuits have been filed in the superior
courts  of  California  alleging  that  certain  owners of  electric  generation
facilities in California and energy  marketers,  including  Mirant  Corporation,
Mirant Americas  Energy  Marketing,  L.P.,  Mirant Delta,  Mirant  Potrero,  and
Southern  Company,  engaged in various unlawful and  anti-competitive  acts that
served to manipulate  wholesale power markets and inflate wholesale  electricity
prices in California.  Four of the suits seek class action  status.  One lawsuit
alleges  that,  as  a  result  of  the  defendants'   conduct,   customers  paid
approximately $4 billion more for electricity than they otherwise would have and
seeks an award of treble  damages,  as well as other  injunctive  and  equitable
relief.  One lawsuit also names  certain of Mirant's  officers  individually  as
defendants  and  alleges  that the state has had to spend  more than $6  billion
purchasing  electricity,  a material  portion of which was at  inflated  prices.
Additionally,  the complaint  alleges that if an injunction is not issued,  that
the state will be  required to spend more than $150  million per day  purchasing
electricity.  The other suits likewise seek treble damages and equitable relief.
While two of the suits name Southern Company as a defendant, it appears that the
allegations,

                                       17
<PAGE>


                        MIRANT AMERICAS GENERATION, INC.
       NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

as they may relate to Southern  Company and its  subsidiaries,  are  directed to
activities of  subsidiaries  of Mirant  Corporation.  One such suit names Mirant
Corporation  itself as a defendant.  Southern Company has notified Mirant of its
claim for  indemnification  for costs  associated  with these  actions under the
terms of the Master  Separation  Agreement that governs the separation of Mirant
from Southern  Company,  and Mirant California has undertaken the defense of all
of the claims. The final outcome of the lawsuits cannot now be determined.

     On June 8, 2001, the Judicial Panel on Multidistrict  Litigation ruled that
People of the State of  California v. Dynegy,  et al, Gordon v. Reliant  Energy,
Inc.,  et al,  Hendricks  v. Dynegy  Power  Marketing,  Inc.  et al,  Sweetwater
Authority,  et al v. Dynegy, Inc., et al; Bustamante,  et al v. Dynegy, Inc., et
al and Pier 23 Restaurant v. PG&E Energy  Trading,  et al should be consolidated
for purposes of pretrial  proceedings.  The final outcome of the lawsuits cannot
now be determined.

California  Power Exchange  Bankruptcy.  On March 9, 2001, the California  Power
Exchange filed for bankruptcy.  Mirant Americas Energy  Marketing has been named
to the participants'  committee.  The Power Exchange's ability to repay its debt
is directly  dependent on the extent that it receives  payments from Pacific Gas
and Electric Company and Southern  California  Edison, and on the outcome of its
litigation with the California state government.  At this point, it is uncertain
what  effect  the  California  Power  Exchange's  bankruptcy  will  have  on the
receivables owed to the Company.

 Pacific Gas & Electric Company  Bankruptcy.  On April 6, 2001,  Pacific Gas and
Electric  Company filed a voluntary  petition under Chapter 11 of the Bankruptcy
Code in the U.S. Bankruptcy Court for the Northern District of California in San
Francisco.  It is not known at this time what effect the bankruptcy  filing will
have on the  ultimate  recovery  of  amounts  owed by Pacific  Gas and  Electric
Company.

CAISO Claim  Before  FERC.  The CAISO has asserted in a March 22, 2001 filing at
FERC that sellers in the  California  wholesale  electricity  market have,  as a
group,  charged  amounts in the period from May 2000 through  February 2001 that
exceeded just and reasonable  charges by an amount in excess of $6 billion.  The
CAISO has also  asserted that during that period  generators  in California  bid
prices  into the CAISO  real time  markets  that  exceeded  just and  reasonable
amounts  by  approximately  $505  million  in the  aggregate,  of which a single
generator  (subsequently  identified  in a news report as Mirant) was alleged by
the CAISO to have overcharged by approximately $97 million.

     On June 7,  2001,  the CAISO  filed a motion  with the FERC to  revoke  the
market-based  rate  authority  issued  by the  FERC  to  three  Mirant  Americas
Generation  subsidiaries  engaged  in the  California  market.  The  CAISO  also
requested that FERC order refunds for sales dating back to May 1, 2000, and that
FERC investigate whether these subsidiaries  exercised market power prior to May
1, 2000. If this motion were to be fully  approved by the FERC, it would subject
the applicable Mirant Americas Generation entities to cost-based rates under the
FERC's jurisdiction. While the Company does not believe that the CAISO will gain
full approval of its motion,  the Company cannot  currently  predict what action
the FERC, if any,  will take or what impact the CAISO's  motion will have on the
Company's California operations.  The Company cannot predict the outcome of this
proceeding at this time.

Consumers  Union  Complaint.  On June 15, 2001, the Consumers Union of the U.S.,
Inc.  filed a  petition  at the FERC  requesting  immediate  action  to  protect
consumers against unjust and unreasonable charges for electricity in the western
United  States,  including (1) the immediate  suspension  of  market-based  rate
authority for all sellers subject to FERC  jurisdiction,  (2) the requirement of
sellers to make cost of service filings with the FERC, (3) the  determination of
just and reasonable rates for sellers based on the seller's cost of service, and
(4) the ordering of refunds for any unjust or unreasonable rates and charges. On
July 16, 2001, the Company

                                       18
<PAGE>


                        MIRANT AMERICAS GENERATION, INC.
       NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

filed a response to the petition  arguing that the petition should be dismissed.
Mirant  Americas  Generation  cannot predict what action,  if any, the FERC will
take with respect to this complaint.

 Clean Air Act Citizen  Suit. On June 19, 2001, a Clean Air Act citizen suit was
filed  in the  United  States  District  Court  for  the  Northern  District  of
California  by Bayview  Hunters Point  Community  Advocates,  Communities  for a
Better Environment and Our Children's Earth Foundation,  against the Company and
the Bay Area Air Quality  Management  District,  alleging  violations of federal
permitting  requirements  resulting  from the Potrero  peaking  units  exceeding
permit limits on total annual hours of operation.  The lawsuit also alleges that
the District's agreement with the Company  implementing  Executive Orders of the
Governor of  California  and  allowing  operation of the Potrero  peaking  units
beyond their permitted  operating hours (under limited  conditions  specified in
the agreement) violates the California  Environmental Quality Act ("CEQA"). Also
on June 19, 2001,  the City and County of San Francisco  filed a similar suit in
the same court against the Company only, and excluding the CEQA allegations. EPA
Region 9 has issued an  Administrative  Order of Consent in  recognition  of the
Company's agreement with the District and specifying a compliance schedule.  The
suits  seek an  injunction  preventing  operation  of the units,  federal  civil
penalties  of up to $27,500  per day per  violation,  state civil  penalties  of
$2,500 for each act of unfair competition,  disgorgement of any profits obtained
through unfair business  practices and invalidation of the agreement between the
Company and the District.  On June 26, 2001,  the Company filed with the FERC an
Emergency  Request for clarification  seeking  confirmation by the FERC that the
Potrero  jets are exempt from the FERC's "must  offer"  requirements,  once they
exceed their permitted operating limits.

     On June 19, 2001,  Bayview Hunters Point Community  Advocates,  Communities
for a Better Environment and Our Children's Earth Foundation,  collectively, and
the City and County of San Francisco,  each delivered to the Company a Notice of
Intent to File Suit Under the Clean Air Act. These notices state that on 60 days
from June 19, the  parties  will file Clean Air Act  citizen  suits  against the
Company  alleging  violations of the California State  Implementation  Plan, the
Title V  operating  permit for the  Potrero  facility,  and  federal  permitting
requirements  for modified  facilities.  These  violations are alleged to result
from operation of the Potrero  peaking units beyond their permit limits on total
annual hours of operation.  The parties state that they seek injunctive  relief,
penalties  and costs of  litigation  if the matters are not resolved  within the
60-day period. On July 25, 2001, the FERC issued an order granting the Company's
Emergency  Request and concluded  that the Potrero jets would be exempt from the
"must offer" requirement to the extent that compliance would require the Company
to operate the Potrero jets in excess of the current air permit limitations.

California  Refund  Proceeding.  On June 19,  2001,  the FERC issued an order on
rehearing  of the April 26  order.  The June 19 order  affirmed  many of the key
provisions of the April 26 order,  but also broadened the scope of that order to
include  all  spot  market  sales  in  markets  throughout  the  Western  System
Coordinating  Council  ("WSCC").  The price  mitigation  plan to be  implemented
pursuant to the June 19 order became  effective  June 20, 2001,  and will extend
until September 30, 2002.  Under to the June 19 order, the FERC retained the use
of a single  market  clearing  price for sales in the  CAISO's  spot  markets in
reserve   deficiency  hours  (i.e.,   when  reserves  are  below  7  percent  in
California), as well as the requirement that all public and non-public utilities
which own or control non-hydroelectric generation in California must offer power
in the  CAISO's  spot  markets,  to the extent the output is not  scheduled  for
delivery in the hour.  However,  the FERC revised the method for calculating the
market clearing price,  specifying  that: (a) generation unit owners must submit
bids during reserve  deficiencies  that are no higher than the seller's marginal
gas costs plus variable  operating and maintenance  costs set at $6 per MWh; (b)
generation unit owners may not reflect  start-up fuel and emissions costs in the
energy price, but must invoice the CAISO  separately for these costs,  which the
CAISO will recover through a newly-imposed  system-wide  charge; (c) the ability
to cost-justify a higher price is available only to generation owners; marketers
may not bid above the market clearing price; and (d) the CAISO must add

                                       19
<PAGE>


                        MIRANT AMERICAS GENERATION, INC.
       NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

10 percent to the market  clearing price paid to generators for all  prospective
sales in its markets to reflect  credit  uncertainty.  The additional 10 percent
will not be reflected in the market price for the rest of the WSCC.

     The June 19 order also extended the FERC's price  mitigation  regime to the
rest of the WSCC and to  non-reserve  deficiency  hours.  For spot market  sales
outside the CAISO single price auction (i.e.,  bilateral sales in California and
sales in the balance of the WSCC),  the June 19 order provides that sellers will
receive the price they  negotiate,  up to the CAISO spot market price,  and that
all public and  non-public  utilities in the remainder of the WSCC must offer in
the spot market of their choosing any  non-hydroelectric  resource whether owned
or under  contract to the extent the output is not scheduled for delivery in the
hour. In all non-reserve deficiency hours (i.e. when reserve levels in the CAISO
exceed 7 percent),  the June 19 order  provides that the market  clearing  price
within  California  and  throughout  the WSCC will be set at 85  percent  of the
highest CAISO hourly market  clearing price  established  during the most recent
reserve deficiency  period.  This price will remain in place until reserves fall
below 7 percent and a new price is set.

     In  addition,  the June 19 order  called  for a  settlement  conference  to
address any and all issues concerning the California markets,  including payment
for past due amounts,  refunds related to past periods and creditworthiness.  In
accordance  with the June 19 order,  the FERC's Chief  Administrative  Law Judge
convened a 15-day settlement conference on June 25. Parties in the San Diego Gas
&  Electric  Co.  complaint  proceeding,  the  State  of  California  and  other
interested parties participated in the settlement  conference.  The parties were
unable to reach a settlement on the issues at the conference.  On July 12, 2001,
the Chief Judge issued a  recommendation  to the FERC, which included a proposed
methodology for the FERC to adopt and issue refunds for sales into the CAISO and
Power  Exchange  markets.  The  recommendation  also  included a 60 day  hearing
procedure to determine the appropriate amount of refunds for each jurisdictional
seller.   On  July  12,  the  Company  filed   comments  on  the  Chief  Judge's
recommendation,  and on July 19, also filed a request for  rehearing of the June
19 order.

CARE  Compliant.  On April 16, 2001,  Californians  for Renewable  Energy,  Inc.
("CARE") filed a complaint at the FERC against Mirant and three other  suppliers
alleging that those suppliers  withheld power to contrive an energy shortage and
to test their market power in  violation of the Federal  Power Act,  federal and
state  anti-trust  laws,  Title VI of the Civil Rights Act of 1964 and the North
American Free Trade  Agreement.  The complaint  seeks refunds of overcharges and
unspecified damages. The Company cannot predict at this time the outcome of this
proceeding.

 Proposed Tax  Initiatives.  Proposals for windfall  profits tax bills have been
introduced in the California  Assembly and Senate. The Senate passed its version
of a windfall tax bill on May 1, 2001. The Senate's  legislation  would impose a
tax rate of 100% on revenues from prices  received after the effective date that
are greater than $80 per MWh. The Assembly's legislation would impose a tax rate
that  varies,  depending  on the  degree to which  the  price  exceeds a base of
$60/MWh.  The tax rates range from 50% to 90%.  Enactment of a windfall  profits
tax bill could cause the Company to reevaluate its business plans in California.

     The  Company  cannot yet  determine  whether the  imposition  of a windfall
profits tax will have a material  adverse effect on its results of operations or
cash flow.

 State Purchase of Southern California Edison Transmission Facilities.  On April
9, 2001, Southern California Edison, Edison  International,  Southern California
Edison's parent  corporation,  and the Department of Water  Resources  announced
that they had entered into a Memorandum of  Understanding  pursuant to which (a)
Southern  California Edison agreed to sell the output of its retained generation
on a  cost-of-service  basis and to retain such  generation  facilities  through
2010,  (b) the  Department of Water  Resources or another agency of the State of
California agreed to purchase Southern California  Edison's  transmission system
(or other assets if

                                       20
<PAGE>


                        MIRANT AMERICAS GENERATION, INC.
       NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

the sale of these  facilities is not consummated  under certain  circumstances),
(c)  Edison  International  agreed  to  provide  service  from a new  generation
facility at cost-based rates for 10 years, (d) Southern California Edison agreed
to provide conservation easements for certain land to a trust for the benefit of
the State of California, (e) Southern California Edison agreed to settle certain
pending  litigation  brought by Southern  California Edison against the State of
California and certain of its agencies,  (f) the  Department of Water  Resources
agreed to make certain power  purchases on Southern  California  Edison's behalf
through 2002, (g) Edison International will refund to Southern California Edison
not  less  than  $400  million  and  Southern   California   Edison  and  Edison
International agreed to make capital investments in Southern California Edison's
regulated  business of at least $3 billion through 2006, and (h) new legislation
will set a 11.6%  floor  for  Southern  California  Edison's  rate of  return on
equity, which floor shall remain in effect through 2010. The Department of Water
Resources will pay $2.76 billion, or approximately 2.3 times Southern California
Edison's  book  value,  for  the  transmission  assets,  and the  Memorandum  of
Understanding  specifies that the amounts up to Southern California Edison's net
book value of the assets will be used to reduce debt and equity while amounts in
excess of net book value will be applied to recover Southern California Edison's
net unrecovered  purchased power costs.  Indebtedness not recovered  through the
proceeds of the asset sale will be securitized  and recovered  through  Southern
California  Edison's  retail rates.  While the major terms in the  Memorandum of
Understanding  have  been  agreed  upon by the  parties,  it is  uncertain  what
portions,  if any, of the  Memorandum  of  Understanding  will be enacted by the
California state legislature.

Western  Power  Market  Investigations.  The  CPUC and the  California  Attorney
General's office have each launched  investigations  into the California  energy
markets  that have  resulted in the  issuance  of  subpoenas  to several  Mirant
Americas Generation's  entities. The CPUC issued one subpoena to Mirant Americas
Generation  entities in mid-August  2000 and one in September 2000. In addition,
the CPUC has had  personnel  onsite  on a  periodic  basis  at  Mirant  Americas
Generation's   California   generating   facilities  since  December  2000.  The
California  Attorney General issued its subpoena to the Company in February 2001
under the following  caption:  "In the Matter of the  Investigation  of Possibly
Unlawful,  Unfair, or Anti-Competitive  Behavior Affecting Electricity Prices in
California." Each of these subpoenas,  as well as the plant visits, could impose
significant compliance costs on the Company or its subsidiaries. Despite various
measures taken to protect the confidentiality of sensitive  information provided
to these  agencies,  there  remains  a risk of  governmental  disclosure  of the
confidential,  proprietary and trade secret information obtained by the CPUC and
the Attorney General throughout this process.

     On March 14, 2001,  the  California  Senate  announced  the  formation of a
committee to  investigate  alleged  manipulation  in the state  electricity  and
natural  gas  markets.  The  Company  has  received  document  requests  in this
investigation and has been asked to make a presentation to the committee.

     On April 13,  2001,  Reliant  Energy,  Inc.  filed suit in the Los  Angeles
Superior Court against the Attorney General regarding the confidentiality of the
sensitive information requested. The Company joined that suit on April 18, 2001.
Also on April 18, 2001,  the Attorney  General filed suit against the Company in
the San Francisco  Superior  Court seeking to compel it to produce  documents in
the  investigation.  Investigations  have also  been  launched  by the  Attorney
General's  office  for the State of  Washington  and the  Oregon  Department  of
Justice.  These offices issued  subpoenas  requesting  information in connection
with their  investigations  on June 4 and 8, 2001,  respectively.  Each of these
subpoenas   imposes   additional   compliance   costs  on  the  Company  or  its
subsidiaries.

     With  regard  to the  California  Senate  investigation,  Senator  Dunn,  a
California  State  Senator,  announced  on May 3, 2001 that he had  invited  the
California  Attorney General,  as well as the District Attorneys from across the
state to "collaborate" with the Senate Select Committee's investigation.  To the
Company's  knowledge,  only the San Joaquin  District  Attorney has accepted the
invitation, and the San Joaquin District Attorney's

                                       21
<PAGE>


                        MIRANT AMERICAS GENERATION, INC.
       NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

office used Dunn's  announcement  as a venue to disclose  that it had opened its
own criminal  investigation into the wholesale energy markets on April 11, 2001.
On June 12, 2001,  the Company  received a subpoena from the  California  Senate
formalizing its earlier information  request.  Despite various measures taken to
protect the  confidentiality  of sensitive  information  produced to the various
agencies  involved in western United States power market  investigations,  there
remains a risk of governmental disclosure of confidential, proprietary and trade
secret  information  obtained by these  agencies  throughout  the  investigative
process.

     While the Company will  vigorously  defend  against any claims of potential
civil liability or criminal  wrongdoing asserted against it or its subsidiaries,
the results of such investigations cannot now be determined.

DWR Power Purchases. On May 10, 2001, Governor Davis signed Bill SB31x into law.
This  legislation  permits  the  Department  of Water  Resources  to issue up to
approximately  $13 billion in revenue  bonds to finance the purchase of electric
energy. The Bill became effective on August 8, 2001.

     On May 24, 2001,  Mirant Americas Energy Marketing  entered into a 19 month
agreement  with the  Department  of Water  Resources  to  provide  the  State of
California with approximately 500 MW of electricity. The contract runs from June
1, 2001 to December 31, 2002.

Mirant New York:

     Along with several other  electric  generators  that own  facilities in New
York, in October 1999 Mirant New York received an  information  request from the
State of New York  concerning the air quality  control  implications  of various
repairs and  maintenance  activities of Mirant New York at its Lovett  facility.
The State  issued a notice of  violation  to the  previous  owner of the  Lovett
facility,  alleging  violations  associated  with the  operation  of the  Lovett
facility prior to the acquisition of the plant by Mirant New York. The notice of
violation  does not specify  corrective  actions  that the State of New York may
require. Under the sales agreement,  the previous owner is responsible for fines
and penalties  arising from  historical  operations,  but Mirant New York may be
responsible  for  the  cost  of  purchasing  and  installing   emission  control
equipment,  the cost of which may be  material.  Mirant  New York is  engaged in
discussions with the State to explore a resolution of this matter.

New York ISO Developments. Recent public reports of studies of the power markets
in New York have suggested that, under certain  circumstances,  supply shortages
could occur as early as summer 2001 and that an  imbalance  of supply and demand
could  result in  higher  energy  prices,  a  decrease  in  reliability  and the
potential  for  blackouts  or other  system  disruptions.  In  response to these
predictions,  the New York ISO  ("NYISO")  proposed to implement  an  "Automatic
Mitigation  Procedure",  which would mitigate  market prices at levels below the
$1,000 MWh bid cap. The proposed Automatic Mitigation Procedure compares bids in
the day-ahead  energy market that exceed $150 MWh to "reference bids" reflecting
historical  bids over the  previous 90 days or a shorter  time  period.  If bids
exceed  the  reference  bids by  more  than a  stated  margin,  the bid  will be
automatically  mitigated  down to the  reference  bid level.  The  actual  price
received in the  day-ahead  market will be  determined  by the highest daily bid
accepted  among all  suppliers.  The NYISO has filed its intent to implement the
Automatic  Mitigation  Procedure  with the FERC and  requested  a June 15,  2001
implementation  date. On June 28, 2001,  the FERC issued an order  accepting the
Automatic  Mitigation  Procedure as proposed by the NYISO effective  immediately
and expiring on October 31, 2001.  The nature and extent of the possible  impact
on the Company is not currently known.

New York  Property  Tax  Agreement.  Mirant New York is  currently  involved  in
litigation  to enforce a property tax  settlement  agreement in which it seeks a
refund of certain real estate taxes and a reduction of future assessments on its
property in New York.  The outcome of these  proceedings  and the amount of such
refund, if any, cannot presently be determined.
                                       22
<PAGE>

                        MIRANT AMERICAS GENERATION, INC.
       NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

     In addition to the matters  discussed  above, the Company is party to legal
proceedings  arising  in the  ordinary  course of  business.  In the  opinion of
management,  the  disposition of these matters will not have a material  adverse
impact on the results of  operations  or financial  position of Mirant  Americas
Generation.

Mirant Mid-Atlantic, LLC ("Mirant Mid-Atlantic"):

     In January  2001,  the EPA,  Region 3 issued a request for  information  to
Mirant  Mid-Atlantic  concerning the air permitting  implications of past repair
and maintenance activities at the Chalk Point, Dickerson, Morgantown and Potomac
River plants.  Mirant Mid-Atlantic is in the process of responding fully to this
request.

State Line Energy, LLC ("State Line"):

     On July 28, 1998,  an  explosion  occurred at State Line causing a fire and
substantial damage to the plant. The precise cause of the explosion and fire has
not been  determined.  Thus far, seven personal  injury lawsuits have been filed
against Mirant, five of which were filed in Cook County,  Illinois.  The Company
filed a motion to dismiss  these  five  cases in 1998 for lack of "in  personam"
jurisdiction.  The motion  was  denied in August  1999.  In  October  1999,  the
Appellate Court of Illinois granted the Company's  petition for leave to appeal.
The outcome of these proceedings cannot now be determined and an estimated range
of loss cannot be made.

Long-Term Service Agreements

     The Company,  through two of its  subsidiaries,  has entered into long-term
service agreements for the maintenance and repair of its  combustion-turbine  or
combined-cycle  generating  plants.  As of June 30, 2001,  the estimated  annual
minimum commitment under these agreements was less than $1 million.

Operating Leases

     The Company has commitments  under operating  leases with various terms and
expiration   dates.   Expenses   associated  with  these   commitments   totaled
approximately  $25 million and $49 million during the  three-month and six-month
periods ended June 30, 2001 and were  insignificant  during both the three-month
and  six-month  periods  ended June 30,  2000.  As of June 30,  2001,  estimated
minimum  rental  commitments  for  non-cancelable  operating  leases  were  $3.1
billion.

G. Subsequent Events

Western United States Power Markets

      On  July  12,  2001,  the  California  Attorney  General,  the  California
Electricity  Oversight Board, the county of Los Angeles,  the California  Public
Utilities  Commission,  and San Diego Gas & Electric Company filed a "Motion for
Refunds" at the FERC,  requesting the FERC to order refunds for the CAISO, Power
Exchange, and bilateral markets retroactive to May 1, 2000.

     On July 20, 2001, the California  Senate passed SB 78xx,  which is intended
to restore the  creditworthiness  of Southern  California Edison Company through
various  mechanisms,  including  the  issuance  of bonds  and a  dedicated  rate
component  for  repayment.  However,  the bill does not provide for repayment of
amounts owed to power suppliers in California other than qualifying  facilities.
SB 78xx and similar  other  forms of  legislation  currently  are pending at the
California Assembly. The Company cannot predict whether, or in what form,

                                       23
<PAGE>


                        MIRANT AMERICAS GENERATION, INC.
       NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

legislation   will  be   passed   to   affect   Southern   California   Edison's
creditworthiness,  or whether such legislation  would provide for the payment of
amounts owed to power suppliers such as itself.

     On July 25, 2001, the FERC ordered a hearing to be held to determine refund
amounts (and offsets) for certain sales to the CAISO and the Power Exchange from
October 2, 2000  through June 20, 2001,  based upon a  methodology  that follows
closely the methodology  recommended by the presiding  Administrative Law Judge.
The  Company  expects  that  any  refunds  determined  in this  proceeding  will
supersede any refunds ordered pursuant to the proxy price  methodology  employed
by the FERC from January through May 2001.

     In the July 25, 2001 order issued in the California refund proceeding,  the
FERC also ordered that a preliminary evidentiary proceeding be held to develop a
factual  record on whether there have been unjust and  unreasonable  charges for
spot market  bilateral  sales in the Pacific  Northwest  from  December 25, 2000
through June 20, 2001. In this proceeding,  the DWR has filed to recover certain
refunds from parties,  including Mirant Americas Energy Marketing, for bilateral
sales of electricity to the DWR at the California/Oregon  border,  claiming that
such sales took place in the Pacific  Northwest.  The Company  cannot predict at
this time the outcome of this proceeding.

     On July 30,  2001,  the  United  States  District  Court  for the  Southern
District  of San Diego  remanded  the  California  electricity  cases  currently
assigned to it (all of the cases except Bustamante,  which is pending assignment
to the same judge) to the superior courts of the State of California  based upon
an absence of federal  jurisdiction.  Mirant Americas  Generation cannot predict
the outcome of these cases.

Mirant Mid-Atlantic Power Sales Agreement

     In August 2001,  Mirant Americas Energy Marketing entered into a fixed rate
power purchase agreement for Mirant  Mid-Atlantic's  capacity and energy for the
period from August 1, 2001 through June 30, 2004,  extendable  through  December
31, 2004 at Mirant Americas Energy  Marketing's  option.  The agreement includes
all of the output of Mirant  Mid-Atlantic's  facilities over the agreement term.
However, Mirant Americas Energy Marketing has the option to reduce the committed
capacity  and  energy  purchases  for fiscal  2002,  limited to 75% of the total
output of the Company's facilities,  and after December 31, 2002, may reduce the
committed  capacity  and energy  purchases  to zero.  At the  inception  of this
agreement,  the pricing  through  December  31, 2002,  based on Mirant  Americas
Energy  Marketing's  minimum  committed  capacity  and  energy  purchases,   was
favorable to Mirant  Mid-Atlantic by approximately $167 million when compared to
forecasted  market rates in the PJM.  The amount  resulting  from the  favorable
pricing  terms will be  amortized  to income as an offset to revenues  under the
power purchase agreement through December 31, 2002, based on volumes delivered.

Mirant Corporation Litigation

     On August 2, 2001,  PEPCO filed a civil action  against  Mirant in the U.S.
District Court for the District of Columbia,  alleging that Mirant  breached the
Asset Purchase and Sale Agreement  ("APSA")  between PEPCO and Mirant  governing
Mirant's purchase of most of PEPCO's electric  generation assets.  Specifically,
PEPCO alleges that  Mirant's  withholding  of $11.7 million from a  post-closing
payment for fuel  inventory is in breach of the APSA. Due to the early stages of
this litigation and the  uncertainties  in the litigation  process,  the Company
cannot predict the outcome of this proceeding at this time.



                                       24
<PAGE>


                        MIRANT AMERICAS GENERATION, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Overview

     We are an indirect  wholly owned  subsidiary  of Mirant,  formed on May 12,
1999, for the purpose of financing, acquiring, owning, operating and maintaining
our facilities  and any others that we may acquire.  We currently own or control
approximately  12,500 MW of  electricity  generation  capacity,  all of which is
located in the United States.

     Our  generating  facilities  were either  recently  acquired in competitive
auctions  or  were   developed  as   greenfield   construction   projects.   Our
geographically  diversified portfolio of generating assets utilizes a variety of
technologies,  fuel types and fuel  sources  and sells its  output,  directly or
through Mirant Americas Energy Marketing,  in diverse markets. Our customers are
strategically located near key metropolitan load centers of the United States.

     Our operating  revenues and expenses are primarily driven by the operations
of our controlled subsidiaries,  which are consolidated for accounting purposes.
The  following  table   summarizes  some   characteristics   of  our  generating
facilities:
                                                 Net
                                              Dependable
                      Date Acquired/           Capacity
Facilities            Construction Completed     MW       Fuels
----------            ----------------------  ---------   ------------
Mirant Mid-Atlantic    December 2000            5,154     Coal/ Gas/Oil
Mirant California      April 1999               2,938     Gas/Oil
Mirant New York        June 1999                1,668     Coal/Gas/Oil/Hydro
Mirant New England     December 1998            1,238     Gas/Oil
Mirant Texas           June 2000                  556     Gas
                       and June 2001
State Line Energy      December 1997              515     Coal
Mirant Wisconsin       May 2000                   302     Gas/Oil
                                           -------------
         Total                                 12,371
                                           =============

     We expect  substantially  all of our  revenues to be derived  from sales of
capacity, energy and ancillary services from our generating facilities into spot
and forward markets and through  bilateral  contracts.  The market for wholesale
electric energy and energy services in the United States is largely deregulated.
Our  revenues  and  results of  operations  will  depend,  in large  part,  upon
prevailing  market prices for energy,  capacity and ancillary  services in these
competitive markets.

     Most of our operating  subsidiaries  have entered into fuel supply,  energy
services,  risk  management and power  marketing  agreements  with our affiliate
Mirant  Americas Energy  Marketing.  As part of the services and risk management
agreements,  Mirant Americas Energy Marketing will provide fuel and will procure
emissions credits necessary for the operation of our generating facilities,  the
cost of which will be  charged  to our  subsidiaries  based  upon  actual  costs
incurred by Mirant Americas Energy Marketing.

     We expect that our future growth will come primarily from  acquisitions  of
assets,  third-party  transactions and acquisition or retention, as appropriate,
of facilities  developed and brought to commercial  completion by our affiliate,
Mirant  Development.  We expect to have the option,  but not the obligation,  to
purchase  most of the  assets  developed  by Mirant  Development  once they have
reached commercial completion.

                                       25
<PAGE>


                        MIRANT AMERICAS GENERATION, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION

     Our expenses  will be primarily  derived from the ongoing  maintenance  and
operations of our generating  facilities,  capital expenditures needed to ensure
their  continued  safe and  environmentally  compliant  operation  and financing
costs.

     Prior to their acquisition, most of our facilities were operated as part of
integrated  utilities  with other assets and  operations of their former owners.
Therefore,  no historical financial information for periods prior to the time we
acquired our  facilities is available  that would be meaningful or indicative of
the future results that may be achieved through the operation of such facilities
in light of the manner and regulatory and market environments in which they will
be operated by us.

Results of Operations

     Operating  Revenues.  Our  operating  revenues for the three and six months
ended June 30, 2001 were $1,352 and $2,857 million,  respectively. For the three
months ended June 30, 2001, this  represents an increase of $1,019  million,  or
306%,  from the same period in 2000 and for the six months  ended June 30, 2001,
this represents an increase of $2,316 million,  or 428%, from the same period in
2000.  These  increases were primarily due to the  contribution of the plants we
acquired from PEPCO in December  2000 and to increased  prices and market demand
for power in the  western  United  States.  In  addition,  our Mirant  Wisconsin
facility commenced operations in May 2000, and units 1 and 2 of our Mirant Texas
facility commenced operations in June 2000. Operating revenues for the three and
six months ended June 30, 2001 reflect net pre-tax  unrealized losses related to
decreases in the fair value of financial  instruments  used to manage price risk
exposure. Because these financial instruments do not meet the criteria for hedge
accounting  under  SFAS No.  133,  the net  decrease  in the fair value of these
financial instruments has been recognized in earnings.

     Operating  Expenses.  Our  operating  expenses for the three and six months
ended June 30, 2001 were $1,275 million and $2,627  million,  respectively.  For
the three  months  ended June 30, 2001,  this  represents  an increase of $1,021
million, or 402%, from the same period in 2000 and for the six months ended June
30, 2001, this represents an increase of $2,180 million,  or 488%, from the same
period  in 2000.  These  increases  were  primarily  due to  operating  expenses
associated  with the  plants  we  acquired  from  PEPCO in  December  2000,  the
commencement of operations of the newly constructed  Mirant Wisconsin and Mirant
Texas  facilities,  higher natural gas prices and increased fuel consumption due
to increased market demand for power in the western United States,  as well as a
provision  taken in the first  quarter of 2001 in  relation  to amounts due from
sales in California. During the three and six month periods ended June 30, 2001,
the Company incurred  approximately  $141 million in costs under its net revenue
sharing arrangements with Mirant Americas Energy Marketing.

      Other  Expense.  Other  expense was $39 million for the three months ended
June 30, 2001  compared  to other  expense of $15 million for the same period in
2000.  Other  expense  was $63  million  for the six months  ended June 30, 2001
compared to other  expense of $34  million  for the same  period in 2000.  These
increases  were  primarily  due to an increase in  interest  expense  related to
borrowings to finance  acquisitions but were partially offset by a non-recurring
gain from insurance  proceeds in the first quarter of 2001 of $8 million related
to our State Line facility.

     Income  Taxes.  Income tax expense for the three months ended June 30, 2001
was $22 million compared to $25 million for the same period in 2000.  Income tax
expense for the six months  ended June 30, 2001 was $74 million  compared to $23
million for the same period in 2000. These changes in the income tax expense are
consistent  with the  changes in income  adjusted  for  non-deductible  goodwill
related to the acquisition of the PEPCO assets.

                                       26
<PAGE>


                        MIRANT AMERICAS GENERATION, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Financial Condition

     During  the six months  ended June 30,  2001,  we  generated  net cash from
operations  of  approximately  $490 million  compared to $2 million for the same
period in 2000.  This increase is primarily due to growth in earnings as well as
changes in working capital totaling $359 million,  partially offset by increased
income tax payments.

     During  the six  months  ended  June 30,  2001,  we used $225  million  for
investment  activities  compared  to $92  million  for the same  period in 2000.
During both periods,  our investment  activities were primarily  attributable to
capital  expenditures.  During the six months ended June 30,  2001,  we made $65
million in loans to an affiliate.

     During the six months ended June 30, 2001,  our financing  activities  used
$132  million in cash as compared to  providing  $108 million in cash during the
same period in 2000.  During the six months  ended June 30,  2001 our  financing
activities  included  repayment  of debt of $1,646  million and $221  million in
dividends to Mirant  Americas.  These outflows were  partially  offset by $1,708
million of proceeds from the issuance of debt and capital  contributions  of $27
million from Mirant  Americas.  During the six months  ended June 30, 2000,  our
financing  activities  primarily  included  $108  million of  proceeds  from the
issuance of debt.

     Historically,  we have  obtained  cash from  operations,  borrowings  under
credit facilities and borrowings and capital  contributions  from Mirant.  These
funds have been used to finance operations,  service debt obligations,  fund the
acquisition,  development  and  construction  of generating  facilities  finance
capital  expenditures and meet other cash and liquidity needs.  Some of the cash
flows  associated with our businesses have been  distributed to Mirant from time
to time, and Mirant has provided funds to cover our  disbursements  from time to
time.

     We expect our cash and  financing  needs over the next several  years to be
met through a combination of cash flows from operations and debt financings. Our
current  facilities  along with  operating  cash flows are  expected  to provide
sufficient   liquidity  for  new   investments,   working  capital  and  capital
expenditure needs for the next 12 months.

     In May 2001,  Mirant  Americas  Generation  issued $1.75  billion in senior
unsecured notes under Rule 144A of the Securities Act. The notes issued included
$500 million of 7.625% senior notes due 2006,  $850 million of 8.3% senior notes
due 2011,  and $400 million of 9.125%  senior  notes due 2031.  The net proceeds
from these notes were used to repay existing  credit  facilities as discussed in
the following paragraph. Interest on the notes is payable semiannually beginning
November 1, 2001.  Mirant Americas  Generation may redeem the notes, in whole or
in part, at any time at a redemption price equal to 100% of the principal amount
plus accrued interest,  plus a make-whole  premium, as defined in the indentures
for the notes.  Mirant Americas Generation has initiated an exchange offer under
an effective registration statement pursuant to which it will exchange the notes
for notes registered under the Securities Act.

     In May 2001,  Mirant Americas  Generation repaid amounts under its existing
credit  facilities  with the  proceeds  of the  issuance  of the  notes.  Mirant
Americas Generation repaid in full its $1.15 billion credit facility,  which was
scheduled to mature in October 2002.  In addition,  Mirant  Americas  Generation
repaid  amounts  outstanding  under it's $250 million and $50 million  revolving
credit  facilities.  The  commitments  under its $250  million  and $50  million
revolving credit  facilities,  with an annual commitment fee of 17.5 basis point
per annum,  remain  available  through October 2004.  Under the revolving credit
facilities,  Mirant Americas Generation may elect to borrow at a base rate or at
LIBOR plus an applicable margin based on its credit rating

                                       27
<PAGE>


                        MIRANT AMERICAS GENERATION, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION

 at the date of  borrowing.  Interest  is payable on the  maturity of the chosen
interest period. There were no outstanding borrowings under the revolving credit
facilities at June 30, 2001.

     In addition, in May 2001, Mirant Americas Generation repaid $175 million of
a $870 million acquisition  facility.  The $150 million working capital facility
was also fully repaid in May 2001, although amounts have subsequently been drawn
thereunder.  Under these  facilities,  Mirant  Americas  Generation may elect to
borrow at a base rate or at LIBOR plus an applicable  margin based on its credit
rating  at  the  date  of  borrowing.   The  outstanding  borrowings  under  the
acquisition  credit facility and the working capital  facility were $695 million
and $55 million, at interest rates of 5.03% and 4.80%, respectively, at June 30,
2001.  Both the acquisition  credit  facility and the working  capital  facility
featured original maturity dates in September 2001.  However, in August 2001, we
exercised  our right to extend the  maturity of these  facilities  to  September
2002.

     For all derivative financial  instruments,  we are exposed to losses in the
event  of  nonperformance  by  counterparties  to  these  derivative   financial
instruments.  Through Mirant  Americas  Energy  Marketing,  we have  established
controls to determine  and monitor the  creditworthiness  of  counterparties  to
mitigate our exposure to counterparty credit risk. Concentrations of credit risk
from financial instruments, including contractual commitments, exist when groups
of counterparties  have similar business  characteristics or are engaged in like
activities that would cause their ability to meet their contractual  commitments
to be  adversely  affected,  in a similar  manner,  by changes in the economy or
other market  conditions.  Mirant Americas Energy Marketing monitors credit risk
for us on both an individual basis and a group  counterparty  basis. Our overall
exposure  to credit  risk may be  impacted,  either  positively  or  negatively,
because our  counterparties  may be  similarly  affected by changes in economic,
regulatory or other conditions.

New Accounting Pronouncements

     In July 2001, the FASB issued SFAS No. 141,  "Business  Combinations,"  and
SFAS No. 142,  "Goodwill and Other Intangible  Assets." SFAS No. 141 establishes
that all business  combinations will be accounted for using the purchase method.
Use of the  pooling-of-interests  method is no longer allowed. The provisions of
SFAS No. 141 are effective for all business  combinations  initiated  after June
30, 2001 and all business  combinations  accounted for using the purchase method
for  which  the date of  acquisition  is July 1,  2001 or  later.  SFAS No.  142
addresses  financial  accounting  and reporting for acquired  goodwill and other
intangible  assets  and,  generally,  adopts  a  non-amortization  and  periodic
impairment  analysis  approach to goodwill and  indefinitely-lived  intangibles.
SFAS No. 142 is effective for our 2002 fiscal year or for business  combinations
initiated after July 1, 2001. We are currently assessing the financial statement
impact of both statements and have not yet determined the final impact.

     Effective  January 1, 2001,  Mirant adopted SFAS No. 133,  "Accounting  for
Derivative Instruments and Hedging Activities," which establishes accounting and
reporting  standards for  derivative  instruments  and hedging  activities.  The
statement  requires  that  certain  derivative  instruments  be  recorded in the
balance sheet as either assets or liabilities  measured at fair value,  and that
changes in the fair value be recognized  currently in earnings,  unless specific
hedge  accounting  criteria are met. If the  derivative  is designated as a fair
value hedge,  the changes in the fair value of the  derivative and of the hedged
item  attributable to the hedged risk are recognized  currently in earnings.  If
the derivative is designated as a cash flow hedge, the changes in the fair value
of the derivative are recorded in OCI, and the gains and losses related to these
derivatives  are  recognized in earnings in the same period as the settlement of
the  underlying  hedged  transaction.  If the  derivative is designated as a net
investment  hedge,  the  changes  in the fair value of the  derivative  are also
recorded in OCI.  Any  ineffectiveness  relating to these  hedges is  recognized
currently  in  earnings.  The  assets  and  liabilities  related  to  derivative
instruments  for  which  hedge  accounting  criteria  is met  are  reflected  as
derivative  hedging  instruments  in  the  accompanying  condensed  consolidated
balance sheet at June 30, 2001.
                                       28
<PAGE>

                        MIRANT AMERICAS GENERATION, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Litigation and Other Contingencies

     Reference is made to Note F to the  financial  statements  filed as part of
this quarterly report on Form 10-Q relating to the following  litigation matters
and other contingencies:

o  California Reliability-Must-Run Agreements
o  Defaults by the CAISO
o  CAISO and California Power Exchange Price Caps
o  Proposed CAISO and California Power Exchange Tariff Amendments
o  Defaults by Southern California Edison and Pacific Gas &Electric Company
o  DWR Power Purchases
o  California Rate Payer Litigation
o  California Power Exchange Bankruptcy
o  Pacific Gas & Electric Company Bankruptcy
o  CAISO Claim Before the FERC
o  Consumers Union Complaint
o  Clean Air Act Citizen Suit
o  California Refund Proceeding
o  CARE Complaint
o  Proposed Tax Initiatives
o  State Purchase of Southern California Edison Transmission Facilities
o  Western Power Market Investigations
o  DWR Power Purchases
o  Mirant New York
o  Mirant Mid-Atlantic
o  State Line Energy, LLC

     Additionally,  for recent events occurring after June 30, 2001 reference is
made to  Note G to the  financial  statements  filed  as part of this  quarterly
report on Form 10-Q.

     In addition to the  proceedings  described  above,  we  experience  routine
litigation from time to time in the normal course of our business,  which is not
expected to have a material adverse effect on our financial condition or results
of operations.

                                       29
<PAGE>




           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

     Market risk is the potential  loss that we may incur as a result of changes
in the fair value of a particular  instrument  or  commodity.  All financial and
commodities-related  instruments,  including derivatives,  are subject to market
risk.  We are exposed to market  risks,  including  changes in  interest  rates.
Through various hedging  mechanisms,  including  contractual  arrangements  with
Mirant Americas Energy  Marketing,  we attempt to mitigate some of the impact of
changes  in energy  prices,  fuel  costs and  interest  rates on our  results of
operations.

     We use interest  rate swaps to hedge  underlying  debt  obligations.  These
swaps hedge specific debt issuances and currently  qualify for hedge accounting.
Consequently, the interest rate differential associated with a swap is reflected
as an adjustment  to interest  expense over the life of the  instruments.  If we
sustained a 100 basis point change in interest rates for all variable rate debt,
the change  would  affect  net  income by  approximately  $5  million,  based on
variable rate debt and derivatives and other interest rate sensitive instruments
outstanding at June 30, 2001.

     We  engage  in  commodity-related   marketing  and  price  risk  management
activities,  through Mirant Americas Energy Marketing,  in order to hedge market
risk and  exposure  to  electricity  and to natural  gas,  coal and other  fuels
utilized by our generation assets. These financial instruments primarily include
forwards,  futures and swaps. Prior to January 1, 2001, when we adopted SFAS No.
133, the gains and losses related to these  derivatives  were  recognized in the
same  period  as the  settlement  of  underlying  physical  transactions.  These
realized  gains and losses are  included in  operating  revenues  and  operating
expenses in the accompanying consolidated statement of income. Subsequent to the
adoption of SFAS No. 133 on January 1, 2001,  these  derivative  instruments are
recorded  in the  consolidated  balance  sheet as either  assets or  liabilities
measured at fair value,  and changes in the fair value are recognized  currently
in earnings,  unless specific hedge accounting criteria are met. If the criteria
for hedge  accounting are met, changes in the fair value are recognized in other
comprehensive  income until such time as the underlying physical  transaction is
settled and the gains and losses related to these  derivatives are recognized in
earnings.

     We maintain clear policies for undertaking risk-mitigating actions that may
become  necessary when measured risks  temporarily  exceed limits as a result of
market conditions. To the extent an open position exists,  fluctuating commodity
prices can impact financial results and financial position,  either favorably or
unfavorably.  As a result,  we cannot predict with precision the impact that our
risk  management  decisions  may have on our  businesses,  operating  results or
financial  position.  Mirant Americas Energy Marketing manages market price risk
for us  through  formal  oversight  groups,  which  include  senior  management,
mechanisms that independently  verify  transactions and measure risk and the use
of a Value-at-Risk  ("VaR")  methodology on a daily basis. We bear all gains and
losses of the  market  price  risk  mitigation  activities  conducted  by Mirant
Americas Energy Marketing on our behalf.

     For those commodity  contracts in which hedge accounting  criteria are met,
any changes in the fair value of these contracts reflect  essentially offsets to
changes in the value of the underlying physical transactions. Therefore, we have
minimal  exposure to market risk on the portion of our  portfolio  of  commodity
contracts  in which we are  effectively  hedging the  exposure  of our  physical
assets to changes in market prices.

     For those  derivative  instruments  in which hedge criteria are not met, we
employ a systematic approach to the evaluation and management of risk associated
with these  commodity  contracts,  including  VaR. VaR is defined as the maximum
loss that is not expected to be exceeded with a given degree of  confidence  and
over a specified  holding period.  We use a 95% confidence  interval and holding
periods that vary by commodity and tenor to
                                       30
<PAGE>

           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

evaluate our VaR exposure.  Based on a 95%  confidence  interval and employing a
one-day  holding period for all positions,  our portfolio of positions had a VaR
of $27 million at June 30, 2001.  During the six months ended June 30, 2001, the
actual  daily  change in fair value did not exceed the  corresponding  daily VaR
calculation.  We  also  utilize  additional  risk  control  mechanisms  such  as
commodity  position  limits and stress  testing of the total  portfolio  and its
components.

Credit Risk

     For all derivative financial  instruments,  we are exposed to losses in the
event  of  nonperformance  by  counterparties  to  these  derivative   financial
instruments.  Through Mirant  Americas  Energy  Marketing,  we have  established
controls to determine  and monitor the  creditworthiness  of  counterparties  to
mitigate our exposure to counterparty credit risk. Concentrations of credit risk
from financial instruments, including contractual commitments, exist when groups
of counterparties  have similar business  characteristics or are engaged in like
activities that would cause their ability to meet their contractual  commitments
to be  adversely  affected,  in a similar  manner,  by changes in the economy or
other market  conditions.  Mirant Americas Energy Marketing monitors credit risk
for us on both an individual basis and a group  counterparty  basis. Our overall
exposure  to credit  risk may be  impacted,  either  positively  or  negatively,
because our  counterparties  may be  similarly  affected by changes in economic,
regulatory or other conditions.

     As of June 30,  2001,  our  exposure to one  counterparty,  the  California
Department  of Water  Resources,  represented  more than 10% of our total credit
exposure. Our overall exposure to credit risk may be impacted, either positively
or negatively,  because our  counterparties may be similarly affected by changes
in economic, regulatory or other conditions.


                                       31
<PAGE>


PART II     OTHER INFORMATION

Item 1.       Legal Proceedings

 Western United States Power Markets:

California   Reliability-Must-Run   Agreements.   Mirant   Americas   Generation
subsidiaries acquired generation assets from Pacific Gas and Electric Company in
April 1999, subject to reliability-must-run  agreements.  These agreements allow
the  CAISO,  under  certain  conditions,  to  require  certain  Mirant  Americas
Generation  subsidiaries  to run the  acquired  generation  assets  in  order to
support the reliability of the California electric  transmission system.  Mirant
Americas  Generation  assumed  these  agreements  from  Pacific Gas and Electric
Company prior to the outcome of a FERC proceeding initiated in October 1997 that
will  determine  the  percentage  of  a  $158.8  million  annual  fixed  revenue
requirement  to be paid to Mirant  Americas  Generation  by the CAISO  under the
reliability-must-run agreements. This revenue requirement was negotiated as part
of a prior  settlement of a FERC rate  proceeding.  Mirant  Americas  Generation
contends that the amount paid by the CAISO should reflect an allocation based on
the CAISO's  right to call on the units (as defined by the  reliability-must-run
agreements)  and the CAISO's actual calls.  This approach would result in annual
payments by the CAISO of approximately $120 million, or 75% of the settled fixed
revenue requirement.  The decision in this case will affect the amount the CAISO
will pay to Mirant Americas  Generation for the period from June 1, 1999 through
December 31,  2001.  On June 7, 2000,  the  presiding  administrative  law judge
issued an initial decision in which  responsibility for payment of approximately
3% of the  revenue  requirement  was  allocated  to the CAISO.  On July 7, 2000,
Mirant Americas  Generation  appealed the administrative law judge's decision to
the FERC. The outcome of this appeal cannot be determined. A final FERC order in
this proceeding may be appealed to the U.S. Court of Appeals.

     If  Mirant  Americas  Generation  is  unsuccessful  in  its  appeal  of the
administrative  law judge's  decision,  it will be  required  to refund  certain
amounts of the revenue requirement paid by the CAISO for the period from June 1,
1999 until the final disposition of the appeal.  The amount of this refund as of
June 30, 2001 would have been approximately $ 173 million,  however, there would
have been no effect on net  income  for the  periods  under  review as  adequate
reserves have been recorded.  This amount does not include  interest that may be
payable in the event of a refund. If Mirant Americas  Generation is unsuccessful
in  its  appeal,   it  plans  to  pursue  other  options   available  under  the
reliability-must-run agreements to mitigate the impact of the administrative law
judge's  decision  upon its future  operations.  The  outcome of this  appeal is
uncertain,  and Mirant Americas Generation cannot provide assurance that it will
be successful.

 CAISO  and  California  Power  Exchange  Price  Caps.  Beginning  in May  2000,
wholesale energy prices in the California markets increased to levels well above
1999 levels. In response, on June 28, 2000, the CAISO Board of Governors reduced
the price cap applicable to the CAISO's wholesale energy and ancillary  services
markets from $750/MWh to $500/MWh.  The CAISO subsequently reduced the price cap
to $250/MWh on August 1, 2000. During this period, however, the California Power
Exchange  maintained a separate price cap set at a much higher level  applicable
to the "day-ahead"  and "day-of"  markets  administered by the California  Power
Exchange.  On August 23, 2000, the FERC denied a complaint  filed August 2, 2000
by San Diego Gas & Electric Company that sought to extend the CAISO's $250 price
cap to all California energy and ancillary service markets, not just the markets
administered  by the CAISO.  However,  in its order denying the relief sought by
San Diego Gas & Electric  Company,  the FERC instructed its staff to initiate an
investigation  of the California power markets and to report its findings to the
FERC and held further hearing procedures in abeyance pending the outcome of this
investigation.

     On November 1, 2000, the FERC released a Staff Report detailing the results
of the Staff  investigation,  together  with an "Order  Proposing  Remedies  for
California Wholesale Markets".  In the November 1 order, the FERC found that the
California  power market structure and market rules were seriously  flawed,  and
that these flaws,  together  with short supply  relative to demand,  resulted in
unusually high energy prices. The November 1 order proposed specific remedies to
the identified  market flaws,  including:  (a) imposition of a so-called  "soft"
                                       32
<PAGE>

price cap at $150/MWh to the California Power Exchange and CAISO markets,  which
would allow bids above  $150/MWh to be  accepted,  subject to certain  reporting
obligations  requiring  sellers to provide cost data and/or identify  applicable
opportunity  costs and that such bids may not set the  overall  market  clearing
price;  (b)  elimination of the requirement  that the California  utilities sell
into  and  buy  from  the  California  Power  Exchange;   (c)  establishment  of
independent  non-stakeholder  governing  boards for the CAISO and the California
Power  Exchange;  and  (d)  establishment  of  penalty  charges  for  scheduling
deviations  outside of a prescribed  range.  In the  November 1 Order,  the FERC
established  October 2, 2000, the date 60 days after the filing of the San Diego
Gas & Electric Company complaint,  as the "refund effective date." Rates charged
for service  after that date through  December  31, 2002 will remain  subject to
refund if determined by the FERC not to be just and  reasonable.  While the FERC
concluded that the Federal Power Act and prior court decisions interpreting that
act strongly  suggested that refunds would not be permissible for charges in the
period  prior to  October  2,  2000,  it noted  that it was  willing  to explore
proposals for equitable relief with respect to charges made in that period.

     On December 15, 2000,  the FERC issued a subsequent  order that affirmed in
large  measure  the  November  1 order.  The  December  15 order  also  required
generators  to provide  weekly  reports of sales  above the "soft"  price cap of
$150/MWh.  Various parties filed requests for  administrative  rehearing and for
judicial review of aspects of the FERC's December 15 order.

     On March 9, March 16, April 16, May 16 and June 15, 2001,  the FERC ordered
that certain  transactions  into the CAISO and California Power Exchange markets
have  not been  shown  to be just and  reasonable.  The  order  determined  that
potential refunds would be appropriate for certain transactions in these markets
above  a  "proxy  market  price"  specified  during  a  CAISO-declared  Stage  3
Emergency,  absent  additional  price or cost  justification  by  jurisdictional
sellers.  These sellers,  including Mirant  California,  Mirant Delta and Mirant
Potrero were required to determine whether to provide refunds of costs above the
proxy market price or to provide  justification  of prices to the FERC.  Various
parties have  requested an  administrative  rehearing of the FERC March 9 order.
The Company cannot predict whether the FERC will grant a rehearing.

     The FERC has issued  proxy  market  price orders for the months of January,
February,  March,  April and May 2001. The potential  refund exposure for Mirant
California, Mirant Delta and Mirant Potrero for January, February, March and May
was  approximately  $3  million.  The  proxy  market  price  for  April  was not
applicable to any sales made by those entities. Mirant California,  Mirant Delta
and  Mirant  Potrero  have  provided  additional  price  justification  for  the
transactions  in January,  February and March that were  subject to refund.  The
Company cannot give any assurances  that the FERC will accept the  justification
and decline to order refunds of some or all of these amounts.

     In March 2001,  the FERC staff issued its  recommendation,  regarding a new
market mitigation plan, which included continued price mitigation during Stage 3
emergencies.  On April 6, 2001, the CAISO filed a proposed market  stabilization
plan at the FERC. On April 26, 2001,  the FERC issued an order adopting a market
monitoring and price mitigation plan modeled closely on the recommendation  made
by its staff.  The April 26 order provides for price  mitigation in all hours in
which power  reserves fall below 7.5 percent,  a level that  corresponds  to the
ISO's Stage 1 emergency.  In these hours,  the FERC will use a formula  based on
the marginal costs of the  highest-cost  generator called on to run to determine
the overall  market-clearing price. In the event that a generator sells power at
prices higher than the formula  price set by FERC,  the generator is required to
submit data to FERC within seven days to justify the higher price.  The April 26
order also provides for: (a)  increased  coordination  and control of generation
plant outages by the CAISO, (b) all in-state  generation,  including  generation
owned by sellers not subject to FERC jurisdiction,  to offer all available power
for sale in real time, (c) load-serving public utilities to establish by June 1,
2001 demand  response  mechanisms  identifying  the price at which load would be
curtailed,  (d) the FERC to  continue  to  monitor  closely  behavior  of market
participants,  including  bidding  behavior and plant  outages,  (e)  interested
parties to file comments  within 30 days on whether the CAISO should be required
to  institute,  on a  prospective  basis,  a  surcharge  on power sales to cover
payments due to  generators  by the  California  utilities,  and (f) the FERC to
institute an  investigation  under Section 206 of the Federal Power Act into the
                                       33
<PAGE>

rates, terms and conditions of certain  short-term  wholesale power sales in the
Western markets outside of California.  This mitigation program became effective
May 29,  2001,  and will  terminate  after  one  year.  In  addition,  the order
identified  certain  prohibited  biding practices by entities having market rate
authority (which would include certain of Mirant's subsidiaries) and stated that
it would impose  sanctions on entities that engage in the prohibited  practices.
The effects of this FERC order are not yet known by Mirant.

 Proposed CAISO and California Power Exchange Tariff  Amendments.  On January 4,
2001,  the  CAISO  filed  for  approval  of  a  tariff  amendment   whereby  its
creditworthiness  requirements  for  certain  electricity  purchasers  would  be
reduced.  The action was taken in response to reports  that Moody's and S&P were
on the verge of reducing the credit  ratings of Southern  California  Edison and
Pacific  Gas &  Electric  Company  to  ratings  that  would not  allow  Southern
California  Edison and  Pacific Gas & Electric  Company to purchase  electricity
from the CAISO unless they posted collateral for their purchases. In its filing,
the CAISO  announced its intention to implement the reduced credit  requirements
immediately in order to ensure the reliability of the California  power grid. On
January 5, 2001,  the California  Power  Exchange  filed a similar  request with
respect to the California Power Exchange's tariffs as the CAISO had requested on
January 4, 2001. On February 14, 2001, the FERC ruled that the tariff  amendment
requested by the  California  Power Exchange  should be rejected  because it had
ceased to operate its day-ahead and day-of markets.  With respect to the CAISO's
request,  the  FERC  allowed  the  CAISO to  amend  its  tariff  to  remove  the
creditworthiness  requirements  only with respect to the scheduling by a utility
purchaser from the CAISO of power from generation  owned by that purchaser.  The
FERC rejected the proposed amendment with respect to purchases by the CAISO from
third-party  suppliers.  On April 6, 2001,  the FERC  confirmed  its February 14
decision.  On June 13, 2001,  the FERC issued an order denying  rehearing on the
April 6, 2001  order on  creditworthiness,  which  provides  that the CAISO must
provide a creditworthy counterparty for all power transactions.

 California Rate Payer Litigation.  Six lawsuits have been filed in the superior
courts  of  California  alleging  that  certain  owners of  electric  generation
facilities in California and energy  marketers,  including  Mirant  Corporation,
Mirant Americas  Energy  Marketing,  L.P.,  Mirant Delta,  Mirant  Potrero,  and
Southern  Company,  engaged in various unlawful and  anti-competitive  acts that
served to manipulate  wholesale power markets and inflate wholesale  electricity
prices in California.  Four of the suits seek class action  status.  One lawsuit
alleges  that,  as  a  result  of  the  defendants'   conduct,   customers  paid
approximately $4 billion more for electricity than they otherwise would have and
seeks an award of treble  damages,  as well as other  injunctive  and  equitable
relief.  One lawsuit also names  certain of Mirant's  officers  individually  as
defendants  and  alleges  that the state has had to spend  more than $6  billion
purchasing  electricity,  a material  portion of which was at  inflated  prices.
Additionally,  the complaint  alleges that if an injunction is not issued,  that
the state will be  required to spend more than $150  million per day  purchasing
electricity.  The other suits likewise seek treble damages and equitable relief.
While two of the suits name Southern Company as a defendant, it appears that the
allegations,  as they may relate to Southern Company and its  subsidiaries,  are
directed to  activities of  subsidiaries  of Mirant  Corporation.  One such suit
names Mirant  Corporation  itself as a defendant.  Southern Company has notified
Mirant of its claim for  indemnification for costs associated with these actions
under the terms of the Master  Separation  Agreement that governs the separation
of Mirant from  Southern  Company,  and Mirant  California  has  undertaken  the
defense of all of the claims.  The final  outcome of the lawsuits  cannot now be
determined.

     A listing of the cases  follows:  (1) People of the State of  California v.
Dynegy,  et al., filed January 18, 2001 in the Superior Court of  California-San
Francisco County; (2) Gordon v. Reliant Energy,  Inc. et al., filed November 27,
2000 in the Superior  Court of  California-San  Diego  County;  (3) Hendricks v.
Dynegy Power  Marketing,  Inc. et al.,  filed  November 29, 2000 in the Superior
Court of California-San Diego County; (4) Sweetwater Authority et al. V. Dynegy,
Inc.,  et al.,  filed January 16, 2001 in the Superior  Court of  California-San
Diego  County;  (5) Pier 23  Restaurant v. PG&E Energy  Trading,  et al.,  filed
January 24, 2001 in the Superior Court of California-San  Francisco County;  and
(6) Bustamante et al. V. Dynegy,  Inc. et al., filed May 2, 2001 in the Superior
Court of  California-Los  Angeles County. On June 8, 2001, the Judicial Panel on
Multidistrict  Litigation  ruled that the six cases should be  consolidated  for
purposes of pretrial  proceedings.  On July 30, 2001, the United States District
Court for the Southern District of San Diego remanded the California electricity
cases  currently  assigned to it (all of the cases except  Bustamante,  which is
                                       34
<PAGE>

pending  assignment  to the same judge) to the  superior  courts of the State of
California  based  upon an  absence of  federal  jurisdiction.  Mirant  Americas
Generation cannot predict the outcome of these cases.

California  Power Exchange  Bankruptcy.  On March 9, 2001, the California  Power
Exchange filed for bankruptcy.  Mirant Americas Energy  Marketing has been named
to the participants'  committee.  The Power Exchange's ability to repay its debt
is directly  dependent on the extent that it receives  payments from Pacific Gas
and Electric Company and Southern  California  Edison, and on the outcome of its
litigation with the California state government.  At this point, it is uncertain
what  effect  the  California  Power  Exchange's  bankruptcy  will  have  on the
receivables owed to the Company.

CAISO Claim  Before  FERC.  The CAISO has asserted in a March 22, 2001 filing at
FERC that sellers in the  California  wholesale  electricity  market have,  as a
group,  charged  amounts in the period from May 2000 through  February 2001 that
exceeded just and reasonable  charges by an amount in excess of $6 billion.  The
CAISO has also  asserted that during that period  generators  in California  bid
prices  into the CAISO  real time  markets  that  exceeded  just and  reasonable
amounts  by  approximately  $505  million  in the  aggregate,  of which a single
generator  (subsequently  identified  in a news report as Mirant) was alleged by
the CAISO to have overcharged by approximately $97 million.

     On June 7,  2001,  the CAISO  filed a motion  with the FERC to  revoke  the
market-based  rate  authority  issued  by the  FERC  to  three  Mirant  Americas
Generation  subsidiaries  engaged  in the  California  market.  The  CAISO  also
requested that FERC order refunds for sales dating back to May 1, 2000, and that
FERC investigate whether these subsidiaries  exercised market power prior to May
1, 2000. If this motion were to be fully  approved by the FERC, it would subject
the applicable Mirant Americas Generation entities to cost-based rates under the
FERC's jurisdiction. While the Company does not believe that the CAISO will gain
full approval of its motion,  the Company cannot  currently  predict what action
the FERC, if any,  will take or what impact the CAISO's  motion will have on the
Company's California operations.  The Company cannot predict the outcome of this
proceeding at this time.

Consumers  Union  Complaint.  On June 15, 2001, the Consumers Union of the U.S.,
Inc.  filed a  petition  at the FERC  requesting  immediate  action  to  protect
consumers against unjust and unreasonable charges for electricity in the western
United  States,  including (1) the immediate  suspension  of  market-based  rate
authority for all sellers subject to FERC  jurisdiction,  (2) the requirement of
sellers to make cost of service filings with the FERC, (3) the  determination of
just and reasonable rates for sellers based on the seller's cost of service, and
(4) the ordering of refunds for any unjust or unreasonable rates and charges. On
July 16, 2001,  the Company  filed a response to the  petition  arguing that the
petition  should be dismissed.  Mirant Americas  Generation  cannot predict what
action, if any, the FERC will take with respect to this complaint.

 Clean Air Act Citizen  Suit. On June 19, 2001, a Clean Air Act citizen suit was
filed  in the  United  States  District  Court  for  the  Northern  District  of
California  by Bayview  Hunters Point  Community  Advocates,  Communities  for a
Better Environment and Our Children's Earth Foundation,  against the Company and
the Bay Area Air Quality  Management  District,  alleging  violations of federal
permitting  requirements  resulting  from the Potrero  peaking  units  exceeding
permit limits on total annual hours of operation.  The lawsuit also alleges that
the District's agreement with the Company  implementing  Executive Orders of the
Governor of  California  and  allowing  operation of the Potrero  peaking  units
beyond their permitted  operating hours (under limited  conditions  specified in
the agreement) violates the California  Environmental Quality Act ("CEQA"). Also
on June 19, 2001,  the City and County of San Francisco  filed a similar suit in
the same court against the Company only, and excluding the CEQA allegations. EPA
Region 9 has issued an  Administrative  Order on Consent in  recognition  of the
Company's agreement with the District and specifying a compliance schedule.  The
suits  seek an  injunction  preventing  operation  of the units,  federal  civil
penalties  of up to $27,500  per day per  violation,  state civil  penalties  of
$2,500 for each act of unfair competition,  disgorgement of any profits obtained
through unfair business  practices and invalidation of the agreement between the
Company and the District.  On June 26, 2001,  the Company filed with the FERC an
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<PAGE>

Emergency  Request for clarification  seeking  confirmation by the FERC that the
Potrero  jets are exempt from the FERC's "must  offer"  requirements,  once they
exceed their permitted operating limits.

     On June 19, 2001,  Bayview Hunters Point Community  Advocates,  Communities
for a Better Environment and Our Children's Earth Foundation,  collectively, and
the City and County of San Francisco,  each delivered to the Company a Notice of
Intent to File Suit Under the Clean Air Act. These notices state that on 60 days
from June 19, the  parties  will file Clean Air Act  citizen  suits  against the
Company  alleging  violations of the California State  Implementation  Plan, the
Title V  operating  permit for the  Potrero  facility,  and  federal  permitting
requirements  for modified  facilities.  These  violations are alleged to result
from operation of the Potrero  peaking units beyond their permit limits on total
annual hours of operation.  The parties state that they seek injunctive  relief,
penalties  and costs of  litigation  if the matters are not resolved  within the
60-day period. On July 25, 2001, the FERC issued an order granting the Company's
Emergency  Request and concluded  that the Potrero jets would be exempt from the
"must offer" requirement to the extent that compliance would require the Company
to operate the Potrero jets in excess of the current air permit limitations.

California  Refund  Proceeding.  On June 19,  2001,  the FERC issued an order on
rehearing  of the April 26  order.  The June 19 order  affirmed  many of the key
provisions of the April 26 order,  but also broadened the scope of that order to
include  all  spot  market  sales  in  markets  throughout  the  Western  System
Coordinating  Council  ("WSCC").  The price  mitigation  plan to be  implemented
pursuant to the June 19 order became  effective  June 20, 2001,  and will extend
until September 30, 2002.  Under to the June 19 order, the FERC retained the use
of a single  market  clearing  price for sales in the  CAISO's  spot  markets in
reserve   deficiency  hours  (i.e.,   when  reserves  are  below  7  percent  in
California), as well as the requirement that all public and non-public utilities
which own or control non-hydroelectric generation in California must offer power
in the  CAISO's  spot  markets,  to the extent the output is not  scheduled  for
delivery in the hour.  However,  the FERC revised the method for calculating the
market clearing price,  specifying  that: (a) generation unit owners must submit
bids during reserve  deficiencies  that are no higher than the seller's marginal
gas costs plus variable  operating and maintenance  costs set at $6 per MWh; (b)
generation unit owners may not reflect  start-up fuel and emissions costs in the
energy price, but must invoice the CAISO  separately for these costs,  which the
CAISO will recover through a newly-imposed  system-wide  charge; (c) the ability
to cost-justify a higher price is available only to generation owners; marketers
may not bid above  the  market  clearing  price;  and (d) the CAISO  must add 10
percent to the market  clearing  price paid to  generators  for all  prospective
sales in its markets to reflect  credit  uncertainty.  The additional 10 percent
will not be reflected in the market price for the rest of the WSCC.

     The June 19 order also extended the FERC's price  mitigation  regime to the
rest of the WSCC and to  non-reserve  deficiency  hours.  For spot market  sales
outside the CAISO single price auction (i.e.,  bilateral sales in California and
sales in the balance of the WSCC),  the June 19 order provides that sellers will
receive the price they  negotiate,  up to the CAISO spot market price,  and that
all public and  non-public  utilities in the remainder of the WSCC must offer in
the spot market of their choosing any  non-hydroelectric  resource whether owned
or under  contract to the extent the output is not scheduled for delivery in the
hour. In all non-reserve deficiency hours (i.e. when reserve levels in the CAISO
exceed 7 percent),  the June 19 order  provides that the market  clearing  price
within  California  and  throughout  the WSCC will be set at 85  percent  of the
highest CAISO hourly market  clearing price  established  during the most recent
reserve deficiency  period.  This price will remain in place until reserves fall
below 7 percent and a new price is set.

     In  addition,  the June 19 order  called  for a  settlement  conference  to
address any and all issues concerning the California markets,  including payment
for past due amounts,  refunds related to past periods and creditworthiness.  In
accordance  with the June 19 order,  the FERC's Chief  Administrative  Law Judge
convened a 15-day settlement conference on June 25. Parties in the San Diego Gas
&  Electric  Co.  complaint  proceeding,  the  State  of  California  and  other
interested parties participated in the settlement  conference.  The parties were
unable to reach a settlement on the issues at the conference.  On July 12, 2001,
the Chief Judge issued a  recommendation  to the FERC, which included a proposed
methodology for the FERC to adopt and issue refunds for sales into the CAISO and
Power  Exchange  markets.  The  recommendation  also  included a 60 day  hearing
                                       36
<PAGE>

procedure to determine the appropriate amount of refunds for each jurisdictional
seller.   On  July  12,  the  Company  filed   comments  on  the  Chief  Judge's
recommendation,  and on July 19, also filed a request for  rehearing of the June
19 order.

     On  July  12,  2001,  the  California  Attorney  General,   the  California
Electricity  Oversight Board, the county of Los Angeles,  the California  Public
Utilities  Commission,  and San Diego Gas & Electric Company filed a "Motion for
Refunds" at the FERC,  requesting the FERC to order refunds for the CAISO, Power
Exchange, and bilateral markets retroactive to May 1, 2000.

     On July 25, 2001, the FERC ordered a hearing to be held to determine refund
amounts (and offsets) for certain sales to the CAISO and the Power Exchange from
October 2, 2000  through June 20, 2001,  based upon a  methodology  that follows
closely the methodology  recommended by the presiding  Administrative Law Judge.
The  Company  expects  that  any  refunds  determined  in this  proceeding  will
supersede any refunds ordered pursuant to the proxy price  methodology  employed
by the FERC from January through May 2001.

Pacific  Northwest Refund  Proceeding.  In the July 25, 2001 order issued in the
California  refund  proceeding,   the  FERC  also  ordered  that  a  preliminary
evidentiary proceeding be held to develop a factual record on whether there have
been unjust and  unreasonable  charges for spot  market  bilateral  sales in the
Pacific  Northwest  from  December  25,  2000  through  June 20,  2001.  In this
proceeding, the DWR has filed to recover certain refunds from parties, including
Mirant Americas Energy Marketing,  for bilateral sales of electricity to the DWR
at the  California/Oregon  border,  claiming  that such  sales took place in the
Pacific  Northwest.  The Company cannot predict at this time the outcome of this
proceeding.
CARE  Compliant.  On April 16, 2001,  Californians  for Renewable  Energy,  Inc.
("CARE") filed a complaint at the FERC against Mirant and three other  suppliers
alleging that those suppliers  withheld power to contrive an energy shortage and
to test their market power in  violation of the Federal  Power Act,  federal and
state  anti-trust  laws,  Title VI of the Civil Rights Act of 1964 and the North
American Free Trade  Agreement.  The complaint  seeks refunds of overcharges and
unspecified damages. The Company cannot predict at this time the outcome of this
proceeding.

 Western  Power  Market  Investigations.  The CPUC and the  California  Attorney
General's office have each launched  investigations  into the California  energy
markets  that have  resulted in the  issuance  of  subpoenas  to several  Mirant
Americas  Generation  entities.  The CPUC issued one subpoena to Mirant Americas
Generation's entities in mid-August 2000 and one in September 2000. In addition,
the CPUC has had  personnel  onsite  on a  periodic  basis  at  Mirant  Americas
Generation's   California   generating   facilities  since  December  2000.  The
California Attorney General issued its subpoena to Mirant in February 2001 under
the following caption: "In the Matter of the Investigation of Possibly Unlawful,
Unfair,  or   Anti-Competitive   Behavior   Affecting   Electricity   Prices  in
California." Each of these subpoenas,  as well as the plant visits, could impose
significant compliance costs on the Company or its subsidiaries. Despite various
measures taken to protect the confidentiality of sensitive  information provided
to these  agencies,  there  remains  a risk of  governmental  disclosure  of the
confidential,  proprietary and trade secret information obtained by the CPUC and
the Attorney General throughout this process.

     On March 14, 2001,  the  California  Senate  announced  the  formation of a
committee to  investigate  alleged  manipulation  in the state  electricity  and
natural gas markets. Mirant has received document requests in this investigation
and has been asked to make a presentation to the committee.

     On April 13,  2001,  Reliant  Energy,  Inc.  filed suit in the Los  Angeles
Superior Court against the Attorney General regarding the confidentiality of the
sensitive information requested. The Company joined that suit on April 18, 2001.
Also on April 18, 2001,  the Attorney  General filed suit against the Company in
the San Francisco  Superior  Court seeking to compel it to produce  documents in
the  investigation.  Investigations  have also  been  launched  by the  Attorney
General's  office  for the State of  Washington  and the  Oregon  Department  of
Justice.  These offices issued  subpoenas  requesting  information in connection
with their  investigations  on June 4 and 8, 2001,  respectively.  Each of these
subpoenas   imposes   additional   compliance   costs  on  the  Company  or  its
subsidiaries.
                                       37
<PAGE>

     With  regard  to the  California  Senate  investigation,  Senator  Dunn,  a
California  State  Senator,  announced  on May 3, 2001 that he had  invited  the
California  Attorney General,  as well as the District Attorneys from across the
state to "collaborate" with the Senate Select Committee's investigation.  To the
Company's  knowledge,  only the San Joaquin  District  Attorney has accepted the
invitation,   and  the  San  Joaquin  District  Attorney's  office  used  Dunn's
announcement  as a venue  to  disclose  that  it had  opened  its  own  criminal
investigation  into the wholesale  energy markets on April 11, 2001. On June 12,
2001, the Company received a subpoena from the California Senate formalizing its
earlier  information  request.  Despite  various  measures  taken to protect the
confidentiality  of  sensitive  information  produced  to the  various  agencies
involved in western United States power market  investigations,  there remains a
risk of governmental  disclosure of  confidential,  proprietary and trade secret
information obtained by these agencies throughout the investigative process.

     While the Company will  vigorously  defend  against any claims of potential
civil liability or criminal  wrongdoing asserted against it or its subsidiaries,
the results of such investigations cannot now be determined.

State Line Energy, L.L.C. ("State Line"):

     On July 28, 1998,  an  explosion  occurred at State Line causing a fire and
substantial damage to the plant. The precise cause of the explosion and fire has
not been  determined.  Thus far, seven personal  injury lawsuits have been filed
against Mirant, five of which were filed in Cook County,  Illinois.  The Company
filed a motion to dismiss  these  five  cases in 1998 for lack of "in  personam"
jurisdiction.  The motion  was  denied in August  1999.  In  October  1999,  the
Appellate Court of Illinois granted the Company's  petition for leave to appeal.
The outcome of these proceedings cannot now be determined and an estimated range
of loss cannot be



                                       38

<PAGE>



                                   SIGNATURES


     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.  The signature of the undersigned company
shall be deemed to relate only to matters  having  reference to such company and
any subsidiaries thereof.

    MIRANT AMERICAS GENERATION, INC.


    By    /s/ Michael L. Smith
        ------------------------------------------------
          Michael L. Smith
          Senior Vice President, Chief Financial
          Officer And Director
          (Principal Financial and Accounting Officer)

                                                         Date: September 5, 2001