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

                       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 September 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, LLC
             (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)

 1155 Perimeter Center West, Suite 100, Atlanta, Georgia        30338
--------------------------------------------------------   -----------------
         (Address of Principal Executive Offices)             (Zip Code)

                                 (678) 579-5000
--------------------------------------------------------------------------------
              (Registrant's Telephone Number, Including Area Code)

                                   ----------

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

                                   ----------


<PAGE>

                Mirant Americas Generation, LLC and Subsidiaries

                                      INDEX

                For the Quarterly Period Ended September 30, 2001

                                                                          Page
                                                                         Number
                                                                         ------
DEFINITIONS                                                                   1
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION                    2

                         PART I - FINANCIAL INFORMATION

Item 1. Interim Financial Statements (Unaudited):
         Condensed Consolidated Statements of Income                          3
         Condensed Consolidated Balance Sheets                                4
         Condensed Consolidated Statements of Cash Flows                      6
         Condensed Consolidated Statements of Stockholder's Equity            7
         Notes to the Condensed Consolidated Financial Statements             8

Item 2. Management's Discussion and Analysis of Results of
         Operations and Financial Condition                                  23

Item 3. Quantitative and Qualitative Disclosures about Market Risk           28

                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings                                                    30
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                                     32
Signatures

                                       i
<PAGE>


                                   DEFINITIONS
TERM                                                  MEANING
---------------------------        ---------------------------------------------
CAISO                              California Independent System Operator
Clean Air Act                      Clean Air Act Amendments of 1990
Company                            Mirant Americas Generation, LLC and
                                    its subsidiaries
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 Development        Mirant Americas Development, Inc.
Mirant Americas Energy Marketing   Mirant Americas Energy Marketing, L. P.
Mirant Americas Generation         Mirant Americas Generation, LLC and
                                    its subsidiaries
Mirant California                  Mirant California, LLC
Mirant Delta                       Mirant Delta, LLC
Mirant Mid-Atlantic                Mirant Mid-Atlantic, LLC
Mirant New England                 Mirant New England, Inc.
Mirant New York                    Mirant New York, Inc and Mirant New York
                                    Investments, Inc., collectively
Mirant Peaker                      Mirant Peaker, LLC
Mirant Potomac River               Mirant Potomac River, LLC
Mirant Potrero                     Mirant Potrero, LLC
Mirant Texas                       Mirant Texas Investments, Inc. and Mirant
                                    Texas Management, Inc., collectively
Mirant Wisconsin                   Mirant Wisconsin Investments, Inc
MW                                 Megawatt
NYISO                              New York Independent System Operator
OCI                                Other Comprehensive Income
PEPCO                              Potomac Electric Power Company
PJM                                PJM Interconnection Market
PX                                 California Power Exchange Corporation
RMR                                Reliability-Must-Run
S & P                              Standard and Poors
SCE                                Southern California Edison
SEC                                Securities and Exchange Commission
SFAS                               Statement of Financial Accounting Standards
Southern                           Southern Company
State Line                         State Line Energy, LLC





                                       1
<PAGE>

           CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

     The  information  presented in this quarterly  report on Form 10-Q includes
forward-looking   statements  in  addition  to  historical  information.   These
statements  involve  known and unknown  risks and relate to future  events,  our
future  financial  performance  or projected  business  results.  In some cases,
forward-looking  statements may be identified by the terminology  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:

     o    legislative  and  regulatory   initiatives   regarding   deregulation,
          regulation or restructuring of the electric utility industry;

     o    the extent and timing of the entry of  additional  competition  in the
          markets of our subsidiaries and affiliates;

     o    our pursuit of potential business strategies,  including  acquisitions
          or dispositions of assets or internal restructuring;

     o    state, federal and other rate regulations in the United States;

     o    changes  in  or  application  of  environmental  and  other  laws  and
          regulations  to  which  we and our  subsidiaries  and  affiliates  are
          subject;

     o    political,  legal,  market (including,  but not limited to, energy and
          commodity supply and pricing developments) and economic conditions and
          developments in the United States;

     o    financial market conditions and the results of our financing efforts;

     o    changes in commodity prices and interest rates;

     o    weather and other natural phenomena;

     o    performance  of our projects  undertaken and the success of efforts to
          invest in and develop new opportunities;

     o    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;

     o    the  direct  and  indirect  effects  on our  business,  including  the
          availability  of insurance,  resulting  from the terrorist  attacks on
          September 11, 2001 or any other terrorist actions or responses to such
          actions;

     o    the direct and  indirect  effects on our business  resulting  from the
          inability of  significant  energy  market  participants  to perform on
          their delivery or payment obligations to us, or to a third party; and

     o    other  factors  discussed   elsewhere  herein  and  in  other  reports
          (including our quarterly  report on Form 10-Q filed  September 5, 2001
          and our  Registration  Statement  on Form S-4 filed  August  8,  2001)
          described from time to time in our filings with the SEC.

     Although we believe that the expectations  reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, events, levels of
activity,  performance or achievements. We do not undertake a duty to update any
of the forward-looking statements.

                                       2
<PAGE>
                MIRANT AMERICAS GENERATION, LLC AND SUBSIDIARIES
             CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
                                  (In Millions)

<TABLE>
<CAPTION>


                                                             For the Three Months     For the Nine Months
                                                             Ended September 30,      Ended September 30,
                                                                2001       2000        2001         2000
                                                             ----------- ---------  ------------  ----------
<S>                                                               <C>       <C>         <C>          <C>

Operating Revenues:                                              $1,400     $ 680      $  4,257     $ 1,221
                                                             ---------- ---------  ------------  ----------

Operating Expenses:
Cost of fuel, electricity and other products                        870       295         2,879         569
Maintenance                                                          19        17            72          48
Depreciation and amortization                                        42        20           127          57
Selling, general and administrative                                 211       108           569         160
Taxes other than income taxes                                        29        25            81          51
Other                                                                37        14           107          41
                                                             ---------- ---------  ------------  ----------
  Total operating expenses                                        1,208       479         3,835         926
                                                             ---------- ---------  ------------  ----------
Operating Income                                                    192       201           422         295
                                                             ---------- ---------  ------------  ----------
Other Income (Expense), net:
Interest income                                                      10         1            29           3
Interest expense                                                    (48)      (27)         (137)        (69)
Gain from sale of property                                            -         -             -           5
Gain from insurance proceeds                                          -         -             8           -
Other, net                                                            -        (4)           (1)          2
                                                             ---------- ---------  ------------  ----------
  Total other income (expense), net                                 (38)      (30)         (101)        (59)
                                                             ---------- ---------  ------------  ----------
Income Before Income Taxes                                          154       171           321         236
Provision for Income Taxes                                           65        72           139          95
                                                             ---------- ---------  ------------  ----------
Net Income                                                       $   89     $  99      $    182     $   141
                                                             ========== =========  ============  ==========







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

                                        3
<PAGE>
                MIRANT AMERICAS GENERATION, LLC AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (In Millions)


<TABLE>
<CAPTION>

ASSETS:                                                          September 30,         December 31,
                                                                     2001                 2000
<S>                                                                   <C>                 <C>
                                                               ------------------  ----------------
                                                                   (Unaudited)
Current Assets:
Cash and cash equivalents                                           $    146          $    83
Receivables:
  Customer accounts                                                       16               24
  Affiliates, net of allowance for doubtful accounts of $123
    and $50 for 2001 and 2000, respectively                              314              599
Assets from risk management activities (Notes A and D)                    99                -
Derivative hedging instruments (Notes A and D)                           467                -
Notes receivable from affiliates                                         241               48
Fuel stock                                                                89               50
Materials and supplies                                                    80               79
Deferred income taxes                                                     71               78
Prepayments                                                              147               70
Other                                                                     19                6
                                                               -------------      -----------
  Total current assets                                                 1,689            1,037
                                                               -------------      -----------

Property, Plant and Equipment:
Property, plant and equipment                                          2,733            2,572
Less accumulated provision for depreciation                             (173)             (92)
                                                               -------------      -----------
                                                                       2,560            2,480
Construction work in progress                                            301              218
                                                               -------------      -----------
  Total property, plant and equipment, net                             2,861            2,698
                                                               -------------      -----------

Noncurrent Assets:
Notes receivable from affiliates                                         223              223
Goodwill, net of accumulated amortization of $46 and $17
  for 2001 and 2000, respectively                                      1,457            1,555
Other intangible assets, net of accumulated amortization
  of $51 and $34 for 2001 and 2000, respectively                         623              635
Assets from risk management activities (Notes A and D)                    87                -
Derivative hedging instruments (Notes A and D)                           351                -
Other                                                                     34               23
                                                               -------------      -----------
  Total noncurrent assets                                              2,775            2,436
                                                               -------------      -----------

  Total assets                                                      $  7,325          $ 6,171
                                                               =============      ===========







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

                                        4

<PAGE>

                MIRANT AMERICAS GENERATION, LLC AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (In Millions)

<TABLE>
<CAPTION>


LIABILITIES AND STOCKHOLDER'S EQUITY:                                             September 30,         December 31,
                                                                                      2001                 2000
<S>                                                                                   <C>                    <C>
                                                                                 ------------------  --------------------
                                                                                   (Unaudited)
Current Liabilities:
Accounts payable                                                                    $   189               $    89
Payable to affiliates                                                                   155                   496
Notes payable                                                                           750                   945
Accrued taxes                                                                            73                    49
Liabilities from risk management activities (Notes A and D )                            118                     -
Derivative hedging instruments (Notes A and D)                                          446                     -
Revenues subject to refund                                                              218                   150
Other                                                                                    77                    10
                                                                                -----------          ------------
  Total current liabilities                                                           2,026                 1,739
                                                                                -----------          ------------

Noncurrent Liabilities:
Notes payable                                                                         1,745                 1,450
Notes payable to affiliates                                                             201                     -
Deferred income taxes                                                                   225                   175
Liabilities from risk management activities (Notes A and D)                              94                     -
Derivative hedging instruments (Notes A and D)                                          260                     -
Other                                                                                     -                     5
                                                                                -----------          ------------
  Total noncurrent liabilities                                                        2,525                 1,630
                                                                                -----------          ------------

Commitments and Contingent Matters (Notes F and G)

Stockholder's Equity:
Common stock, $1 par value; 1,000 shares authorized, issued and outstanding               -                     -
Additional paid-in capital                                                            2,920                 2,820
Deferred contract with affiliate (Note E)                                              (110)                    -
Accumulated deficit                                                                     (57)                  (18)
Accumulated other comprehensive income                                                   21                     -
                                                                                -----------          ------------
  Total stockholder's equity                                                          2,774                 2,802
                                                                                -----------          ------------

  Total liabilities and stockholder's equity                                        $ 7,325               $ 6,171
                                                                                ===========          ============






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


                                        5


<PAGE>
                MIRANT AMERICAS GENERATION, LLC AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                  (In Millions)

<TABLE>
<CAPTION>
                                                                                                For the Nine Months
                                                                                                Ended September 30,
                                                                                             2001              2000
<S>                                                                                          <C>               <C>
                                                                                       ----------------- -----------------

Cash Flows From Operating Activities:
Net income                                                                                  $ 182             $ 141
                                                                                       ----------        ----------
Adjustments   to  reconcile  net  income  to  net  cash  provided  by  operating
  activities:
  Depreciation and amortization                                                               127                57
  Deferred income taxes                                                                       (17)               (1)
  Deferred contract with affiliate                                                             10                 -
  Changes in certain assets and liabilities, excluding effects from acquisitions:
    Accounts receivable and receivables from affiliates, net                                  281              (380)
    Risk management activities, net                                                            26                 -
    Accounts payable and accrued liabilities                                                  (72)              298
    Accrued taxes                                                                              24                80
    Other, net                                                                                (45)              129
                                                                                       ----------        ----------
      Total adjustments                                                                       334               183
                                                                                       ----------        ----------
      Net cash provided by operating activities                                               516               324
                                                                                       ----------        ----------

Cash Flows From Investing Activities:
Capital expenditures                                                                         (291)             (166)
Issuance of notes receivable to affiliates                                                   (199)              (33)
Repayment on notes receivable to affiliates                                                     7                 -
Property insurance proceeds                                                                    13                27
                                                                                       ----------        ----------
      Net cash used in investing activities                                                  (470)             (172)
                                                                                       ----------        ----------

Cash Flows From Financing Activities:
Capital contributions                                                                          27                 -
Payment of dividends                                                                         (221)              (11)
Proceeds from issuance of notes payable                                                     1,712               108
Repayment of notes payable                                                                 (1,702)             (248)
Proceeds from issuance of notes payable to affiliates                                         221                 -
Repayment of note payable to affiliates                                                       (20)                -
                                                                                       ----------        ----------
      Net cash provided by (used in) financing activities                                      17              (151)
                                                                                       ----------        ----------
Net increase in Cash and Cash Equivalents                                                      63                 1
Cash and Cash Equivalents, beginning of period                                                 83                31
                                                                                       ----------        ----------
Cash and Cash Equivalents, end of period                                                    $ 146             $  32
                                                                                       ==========        ==========

Supplemental Cash Flow Disclosures:
Cash paid for interest, net of amounts capitalized                                          $  60             $  50
                                                                                       ==========        ==========
Cash paid for income taxes                                                                  $ 118             $   9
                                                                                       ==========        ==========
Noncash Financing Activities:
Capital contributions                                                                       $ 105             $   -
                                                                                       ==========        ==========
Capital contribution under deferred contract with affiliate                                 $ 120             $   -
                                                                                       ==========        ==========
Purchase price adjustment                                                                   $ 105             $   -
                                                                                       ==========        ==========
Deferred tax liability related to deferred contract with affiliate                          $  47             $   -
                                                                                       ==========        ==========


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

                                       6


<PAGE>
                MIRANT AMERICAS GENERATION, LLC AND SUBSIDIARIES
      CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (UNAUDITED)
                                  (In Millions)

<TABLE>
<CAPTION>


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

Balance, December 31, 2000                $ -      $ 2,820     $    -          $ (18)           $  -
   Net income                               -            -          -            182               -              $ 182
   Other comprehensive income               -            -          -              -              21                 21
                                                                                                             ----------
   Comprehensive income                                                                                           $ 203
                                                                                                             ==========
   Dividends                                -            -          -           (221)              -
   Capital contributions                    -          132          -              -               -
   Capital contribution under
       deferred contract with affiliate     -          120       (120)             -               -
   Purchase price adjustment                -         (105)         -              -               -
   Deferred tax liability related to
       deferred contract with affiliate     -          (47)         -              -               -
   Amortization of deferred contract
       with affiliate                       -            -         10              -               -
                                      -------     --------   --------        -------        --------
Balance, September 30, 2001               $ -      $ 2,920     $ (110)         $ (57)           $ 21
                                      =======     ========   ========        =======        ========








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

                                        7


<PAGE>



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

A.       Accounting and Reporting Policies

     Conversion to a Limited Liability Company

     Effective  November 1, 2001, the Company  changed its form of  organization
from a corporation  to a limited  liability  company.  Therefore,  the Company's
legal name changed to Mirant  Americas  Generation,  LLC,  from Mirant  Americas
Generation, Inc. (Note G).

     Basis of Accounting

     These unaudited 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

    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 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  unaudited
condensed  consolidated  balance  sheet at September  30, 2001.  The  derivative
instruments  for which hedge  accounting  criteria are not met are  reflected as
risk management assets and liabilities in the accompanying  unaudited  condensed
consolidated balance sheet as of September 30, 2001.

     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 the  Company'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  pronouncements but
has not yet determined their final impact.

                                       8
<PAGE>

                         MIRANT AMERICAS GENERATION, LLC
       NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

     In  August  2001,  the FASB  issued  SFAS No.  143,  "Accounting  for Asset
Retirement  Obligations."  SFAS  No.  143  addresses  financial  accounting  and
reporting  obligations  associated  with the  retirement of tangible  long-lived
assets and the associated asset retirement costs. The provisions of SFAS No. 143
are effective for the Company's 2003 fiscal year. Mirant Americas  Generation is
currently assessing the financial statement impact of this pronouncement.

     In  October  2001,  the FASB  issued  SFAS  No.  144,  "Accounting  for the
Impairment  or Disposal of Long-Lived  Assets,"  which  supersedes  SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of" and APB Opinion No. 30  "Reporting  the Results of  Operations -
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions." SFAS No. 144 amends
accounting  and  reporting  standards for the disposal of segments of a business
and addresses  various  issues  related to the  accounting  for  impairments  or
disposals of long-lived assets. The provisions of SFAS No. 144 are effective for
the  Company's  2002  fiscal  year.  Mirant  Americas  Generation  is  currently
assessing the financial statement impact of this pronouncement.

     Concentration of Revenues and Credit Risk

     Under its agreements  with Mirant Americas  Energy  Marketing,  an indirect
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 nine months ended September 30, 2001, approximately 62% and
66%,  respectively,  of the Company's revenues were attributable to sales in the
California market, as compared to approximately 69% and 61% for the same periods
in 2000. As of September 30, 2001, Mirant Americas  Generation's exposure to one
counterparty,  the California  Department of Water  Resources,  represented more
than 10% of its total credit  exposure.  Mirant  Americas  Generation's  overall
exposure  to credit  risk may be  impacted,  either  positively  or  negatively,
because its  counterparties  may be  similarly  affected by changes in economic,
regulatory  or other  conditions.  Mirant  Americas  Generation's  total  credit
exposure is computed as total accounts and notes  receivable,  adjusted for risk
management and derivative hedging activities, netted where appropriate.


B.       Comprehensive (Loss) Income

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


                                         Three Months Ended    Nine Months Ended
                                            September 30,         September 30,
                                        -------------------  -------------------
                                          2001       2000     2001         2000
                                        ------      -----    ------       -----
     Net income                         $   89     $   99    $  182      $  141
     Other comprehensive (loss) income     (93)         -        21           -
                                        ------     ------    ------      ------
     Comprehensive (loss) income         $ (4)      $ 99     $  203      $  141
                                         =====     ======    ======      ======



                                       9
<PAGE>


                         MIRANT AMERICAS GENERATION, LLC
       NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

Accumulated OCI at September 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               368
          Reclassification from OCI to earnings                        (49)
                                                                   -------
        Other comprehensive income                                      21
                                                                   -------
        Balance, September 30, 2001                                $    21
                                                                   =======

     The adoption of SFAS No. 133 resulted in a cumulative  after-tax  reduction
to OCI of $298 million, and is primarily attributable to deferred losses on cash
flow  hedges.  Mirant  Americas  Generation  estimates  that $8  million  of net
derivative  after-tax  gains  included in OCI as of  September  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.

     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,  Mirant Americas  Generation  issued $1,750 million in senior
unsecured  notes  under  Rule  144A  of  the  Securities  Act.  Mirant  Americas
Generation  has  completed  an exchange  offer under an  effective  registration
statement  pursuant to which it exchanged the notes for notes  registered  under
the Securities Act.

     In August 2001,  the Company  exercised its right to extend the maturity of
its $695  million  acquisition  facility and its $150  million  working  capital
facility and converted the drawn  balances of $750 million into a term loan with
maturity  in  September  2002.  Under this  facility,  the  Company may elect to
rollover the borrowings at a base rate or at the LIBOR plus an applicable margin
based  on its  credit  rating  on the  date  of the  rollover.  The  outstanding
borrowings under the term loan were $750 million at an interest rate of 4.68% at
September 30, 2001.

     As of September 30, 2001, the Company also had revolving credit  facilities
of $250 million and $50 million.  The commitments under the $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 the
LIBOR plus an  applicable  margin based on its credit  rating on the date of the
borrowing. Interest is payable on the maturity of the chosen interest period. No
amounts were outstanding on the $250 and $50 million revolving credit facilities
at September 30, 2001.


                                       10
<PAGE>

                         MIRANT AMERICAS GENERATION, LLC
       NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

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 three months ended  September 30, 2001,
$276 million of pre-tax  derivative gains were  reclassified to operating income
and $2  million  of pretax  derivative  losses  were  reclassified  to  interest
expense. During the nine months ended September 30, 2001, $88 million of pre-tax
derivative gains were  reclassified to operating income and $4 million of pretax
losses were  reclassified to interest  expense.  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.  At September  30,  2001,  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 September 30, 2001,  the Company had a net  derivative  hedging asset of
approximately  $171 million  related to these  financial  instruments.  The fair
value  of its  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 September 30, 2001,  the Company had  contracts  that related to periods
through 2006. The net notional amount of the commodity price  management  assets
and liabilities at September 30, 2001 was 3.0 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.

                                       11
<PAGE>

                         MIRANT AMERICAS GENERATION, LLC
       NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

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 unaudited condensed consolidated
balance sheet at September 30, 2001.

     At September 30, 2001,  the Company had  contracts  that related to periods
through  2010.  The net  notional  amount  of the  risk  management  assets  and
liabilities  at  September  30, 2001 was  approximately  2.9 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.

E.       Business Developments and Related Party Transactions

Revenue Sharing Arrangements

     During the three and nine months  ended  September  30,  2001,  the Company
incurred  approximately  $156 million and $297 million,  respectively,  in costs
under all  revenue  sharing  arrangements  it has with  Mirant  Americas  Energy
Marketing as compared to $74 million and $85 million, respectively, for the same
periods in 2000. These costs are included in selling, general and administrative
expenses in the  accompanying  unaudited  condensed  consolidated  statements of
income.

Mirant Mid-Atlantic Sales Agreement

     In August 2001,  Mirant Americas Energy Marketing entered into a fixed rate
power purchase  agreement for Mirant  Mid-Atlantic's  (an indirect  wholly owned
subsidiary  of Mirant  Americas  Generation)  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 the  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.  Our affiliated  companies,  Mirant Potomac River and
Mirant  Peaker,  entered into fixed rate power purchase  agreements  with Mirant
Americas Energy Marketing,  on the same terms and effective over the same period
as the agreements  outlined above.  Through the capital  contribution  agreement
between Mirant Mid-Atlantic and Mirant, the cash available from these affiliated
companies is paid as a dividend to Mirant, who in turn makes an indirect capital
contribution to Mirant Mid-Atlantic for the same amount.

   At the inception  date,  the pricing of Mirant  Americas  Energy  Marketing's
minimum committed  capacity and energy purchases over the term of the agreements
was  favorable  to the Company and its  affiliates  when  compared to  projected
market rates in the PJM. The total value to the Company and its  affiliates  was
approximately  $167  million.  The  amount  related  specifically  to the Mirant
Mid-Atlantic  owned  or  leased  facilities  amounted  to  $120  million  and is
reflected as both an addition to  additional  paid in capital and an  offsetting
contra equity account on the Company's unaudited condensed  consolidated balance
sheet and statement of stockholder's  equity at the inception of the agreements.
The Company will reduce the operating revenue  recognized under these agreements
by the  favorable  variance  noted above,  over the  contract  term based on the
proportion  of  volume  delivered  to the  expected  minimum  delivery  over the
remaining  contract term. The total amount of operating  revenue  reductions for
the three months ended September 30, 2001 was $18 million.

                                       12


<PAGE>

                        MIRANT AMERICAS GENERATION, LLC
       NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

The contra  equity  amount is reduced as cash is received  from Mirant  Americas
Energy  Marketing over the contract term,  with cash being received in the month
following the reduction to operating revenue. The total amount of cash received,
attributable to the favorable variance,  during the three months ended September
30, 2001  amounted to $10  million.  In addition,  the Company has  recognized a
deferred tax  liability  of  approximately  $47 million  related to the deferred
contract  value at the  inception  of the  agreement.  This  recognition  of the
deferred tax liability is offset by a corresponding  decrease in additional paid
in capital.

Purchase Price Adjustment

     During the three  months  ended  September  30,  2001,  the Company made an
adjustment to the purchase price  allocation  related to the purchase of certain
assets from PEPCO in December 2000. This purchase price adjustment  reflects the
recognition  of certain  tax  benefits  that are  expected to be realized by the
Company's stockholder related to the purchase.  The purchase price adjustment of
approximately  $105 million is  reflected  as a reduction  of both  goodwill and
additional paid in capital in the accompanying  unaudited condensed consolidated
financial statements at September 30, 2001.

F.       Commitments and Contingent Matters

Litigation and Other Contingencies

Western United States Power Markets:

Reliability-Must-Run   Agreements:  Mirant  Americas  Generation's  subsidiaries
acquired  generation assets from Pacific Gas and Electric in April 1999, subject
to  reliability-must-run  agreements.  These agreements  allow the CAISO,  under
certain  conditions,   to  require  certain  of  Mirant  Americas   Generation's
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 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  administrative  law judge  presiding  over the
proceeding  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.

     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
September 30, 2001 would have been  approximately $198 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,  Mirant  Americas  Generation  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.

                                       13

<PAGE>

                         MIRANT AMERICAS GENERATION, LLC
       NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

     In 2001, the CAISO failed to pay a total of approximately  $19.6 million to
Mirant  Americas  Generation's   subsidiaries  under  the   reliability-must-run
agreements assumed by Mirant Americas  Generation from Pacific Gas and Electric.
Mirant  Americas  Generation  has  submitted  notices  of  default to the CAISO.
Payments have been  received for amounts that became due  following  Pacific Gas
and Electric's April 6, 2001 petition for bankruptcy.

Defaults by SCE and Pacific Gas and Electric and  Bankruptcy  of Pacific Gas and
Electric:  On January 16 and 17, 2001, SCE and Pacific Gas and Electric's credit
and debt  ratings  were  lowered by Moody's  and S&P to  "non-investment  grade"
status.  On January 16, 2001, SCE indicated  that it would suspend  indefinitely
certain  obligations  including a $215 million  payment due to the PX and a $151
million payment due to a qualifying facility.  On April 6, 2001, Pacific Gas and
Electric 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 will have on
the ultimate recovery of amounts owed by Pacific Gas and Electric.

DWR Power Purchases:  On January 17, 2001, the Governor of California  issued an
emergency  proclamation  giving the DWR authority to enter into  arrangements to
purchase  power in order to mitigate the effects of electrical  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 PX for  purchase by SCE and Pacific Gas and  Electric.  The CAISO and PX have
not paid the full amounts owed to Mirant Americas Generation's  subsidiaries for
power delivered to the CAISO and PX 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 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 SCE and
Pacific Gas and Electric for deliveries to their customers.

     On  May  10,  2001,  Governor  Davis  signed  Bill  SB31x  into  law.  This
legislation  permits the DWR 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  Generation  entered into a
19-month  agreement  with  the DWR to  provide  the  State  of  California  with
approximately  500 MW of  electricity.  The  contract  runs from June 1, 2001 to
December 31, 2002.

California  Price  Mitigation and Refund  Proceeding:  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. These refunds are being addressed in
the   California   Refund   Proceeding   currently   pending   before  the  FERC
Administrative Law Judge.  Mirant Americas Generation 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 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 CAISO'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

                                       14

<PAGE>

                         MIRANT AMERICAS GENERATION, LLC
       NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

price.  In the event that a  generator  sells  power at prices  higher  than the
formula  price set by the FERC,  the generator is required to submit data to the
FERC  within  seven days to justify  the higher  price.  The April 26 order also
provides for: (a) increased  coordination and control of generation plan outages
by the CAISO, (b) all in-state generation, including generation owned by sellers
not subject to the FERC's 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 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 on 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 has stated that it
would impose sanctions on entities that engage in the prohibited practices.

     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 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% 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 house. 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
new-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% to the market clearing price paid
to  generators  for all  prospective  sales in its  markets  to  reflect  credit
uncertainty.  The  additional  10% will not be reflected in the market price for
the rest of the WSCC.  For the months of June and July 2001, the FERC denied the
requests of generators  to charge a higher price than the mitigated  price based
on claimed  justifications for such higher prices. Mirant cannot predict how the
FERC will rule on any future  requests/justifications for prices higher than the
mitigated price during future months.

     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
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%), the June 10 order  provides  that the market  clearing  price
within  California  and  throughout  the WSCC will be set at 85% 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%
and a new price is set.

                                       15

<PAGE>

                         MIRANT AMERICAS GENERATION, LLC
       NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

     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
PX markets.  The  recommendation  also included a hearing procedure to determine
the appropriate  amount of refunds for each  jurisdictional  seller. On July 25,
2001, the FERC issued an order requiring hearings to determine the amount of any
refunds and amounts  owed for sales made to the  CAISO/PX  from  October 1, 2000
through June 20, 2001.  Hearings are  scheduled to be held in December  2001 and
February 2002.

     In the July 25 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 the  proceeding,  the DWR filed to recover certain refunds from parties,
including a 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.  A FERC  administrative  law judge  ("ALJ")  recently
concluded a  preliminary  evidentiary  hearing  related to possible  refunds for
power sales in the Pacific  Northwest.  In a preliminary ruling issued September
24,  2001,  the ALJ  indicated  that he  would  order  no  refunds  because  the
complainants had failed to prove any exercise of market power or that any prices
were  unjust or  unreasonable.  The FERC may accept or reject  this  preliminary
ruling and the FERC's  decision  may itself be  appealed.  At this time,  Mirant
Americas  Generation  cannot predict the outcome of this  proceeding.  If Mirant
Americas  Energy  Marketing is required to refund such amounts,  Mirant Americas
Generation  subsidiaries would be required to refund amounts previously received
pursuant to sales made on their behalf in the Pacific Northwest.

Western Power Market  Investigations:  The CPUC, the California  Senate, the San
Joaquin  District  Attorney and the Attorney  General's  offices of  Washington,
Oregon and California have each launched civil and criminal  investigations into
the California energy markets that have resulted in the issuance of subpoenas to
several of Mirant Americas Generation's  entities. 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 Mirant or its  subsidiaries.  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.  With
respect to both the CPUC and the California Attorney General's office,  there is
ongoing litigation between the Company and these agencies regarding the scope of
the  subpoenas  and the  confidentiality  of the  Company's  documents.  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 these
agencies throughout this process.

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

                                       16

<PAGE>

                         MIRANT AMERICAS GENERATION, LLC
       NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

California Rate Payer Litigation:  Six lawsuits have been filed and consolidated
in the superior  courts of California  alleging that certain  owners of electric
generation  facilities in California  and energy  marketers,  including  Mirant,
Mirant Americas Energy Marketing,  Mirant Delta,  Mirant Potrero,  and Southern,
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 had to spend more than $6 billion  purchasing  electricity and that if
an injunction is not issued,  the state will be required to spend more that $150
million per day  purchasing  electricity.  The other suits  likewise seek treble
damages  and  equitable  relief.  While  two of the  suits  name  Southern  as a
defendant,  it appears that the allegations,  as they may relate to Southern and
its subsidiaries,  are directed to activities of Mirant's subsidiaries. One such
suit names  Mirant  Corporation  itself as a  defendant.  Southern  has notified
Mirant of its claim for  indemnification for costs associated with these actions
under  the  terms of the  Master  Separation  Agreement  that  governs  Mirant's
separation  from  Southern,  and Mirant has undertaken the defense of all of the
claims.

     In September 2001, the defendants in the California  rate payer  litigation
served upon the  plaintiffs  in each case a Joint  Demurrer,  a Joint  Motion to
Strike  and a Joint  Motion  to  Stay.  The  Joint  Demurrer  asserts  that  the
defendants  should be granted judgment as a matter of law on the claims asserted
by the plaintiffs. The Joint Motion to Strike asserts that if the court does not
conclude that plaintiffs'  claims are barred  entirely,  then all claims seeking
monetary recovery should be stricken based on the filed rate doctrine. The Joint
Motion to Stay  asserts  that any claims not  dismissed in response to the Joint
Demurrer or stricken in response to the Motion to Strike  should be stayed until
the FERC has entered a final order in the ongoing  proceedings before it related
to the investigations of the California wholesale markets.  These pleadings have
been  served  on the  plaintiffs  in each of the six cases but will not be filed
with the court  until a  determination  is made  regarding  whether  the actions
should be coordinated  and, if so, before which court.  The  plaintiffs  seek to
have the cases coordinated before a court in San Francisco, while the defendants
have  asked for the cases to be  coordinated  before a court in San  Diego.  The
California  Judicial Council has sent the coordination  motions to the presiding
judge for the  Superior  Court for the County of San Diego,  who has  assigned a
judge to hear the  coordination  petitions.  The judge will  decide  whether the
cases  should be  coordinated  and,  if so,  will  recommend  to the  California
Judicial  Council which court should hear the coordinated  actions.  The Company
cannot predict the outcome of these cases.

CAISO Claim  before the FERC:  The CAISO  asserted in a March 22, 2001 filing at
the 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 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 Corporation) was alleged by
the CAISO to have  overcharged by  approximately  $97 million.  These claims are
being addressed in the FERC California Refund proceeding  scheduled for December
2001 and February 2002.

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

                                       17

<PAGE>

                         MIRANT AMERICAS GENERATION, LLC
       NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

CAISO's motion will have on its operations.  Mirant Americas  Generation  cannot
predict the outcome of these proceedings at this time.

Consumers Union  Complaint:  On June 15, 2001, the Consumers Union of 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) immediate  suspension of market-based  rate authority for
all sellers subject to the FERC's jurisdiction, (2) the requirement of seller to
make cost of service  filings with the FERC, (3) the  determination  of just and
reasonable rates for sellers based on their 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. The Company cannot determine at this time what action, if any, the
FERC will take with respect to this complaint.

Environmental  Suit and Notice of Intent to File 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  Mirant  and the Bay  Area Air  Quality  Management  District,  alleging
violations of federal  permitting  requirements  resulting from Mirant's Potrero
peaking units  exceeding  permit limits on total annual hours of operation.  The
lawsuit also  alleges that the  District's  agreement  with Mirant  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  Mirant  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 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 Mirant 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  Mirant
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
June 26,  2001,  Mirant  Americas  Generation  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 run"  requirements,  once they  exceed  their
permitted operating limits.

Pacific Gas and Electric Bankruptcy:  On April 6, 2001, Pacific Gas and Electric
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 to Mirant Americas  Generation by Pacific Gas
and Electric.  On September 20, 2001,  Pacific Gas and Electric filed a proposed
plan  of  reorganization.  Under  the  terms  of the  proposed  plan,  unsecured
creditors such as Mirant  Americas  Generation  would receive 60% of the amounts
owed upon  approval of the plan.  The  remaining 40% would be paid in negotiable
debt with terms from ten to thirty years.

                                       18

<PAGE>

                         MIRANT AMERICAS GENERATION, LLC
       NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

CARE  Complaint:  On April 16, 2001,  Californians  for Renewable  Energy,  Inc.
("CARE")  filed a complaint at the FERC against Mirant  Americas  Generation 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.  Mirant  Americas  Generation  cannot
predict at this time the outcome of this proceeding.

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 and SCE, 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.

     As of  September  30,  2001,  the  total  amount  owed to  Mirant  Americas
Generation  by the  CAISO  and the PX was $323  million.  The  total  amount  of
provisions  made  during  2000  and 2001 in  relation  to  uncertainties  in the
California power market was $228 million pre-tax.

                                       19
<PAGE>


                         MIRANT AMERICAS GENERATION, LLC
       NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


NYISO Automatic Mitigation Plan:

     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 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 is automatically
mitigated  down to the  reference  bid level.  The actual price  received in the
day-ahead  market is  determined  by the highest  daily bid  accepted  among all
suppliers.  As the unmitigated clearing price information is not made available,
the nature and extent of the  possible  impact on the  Company is not  currently
known.

State Line:

     On July 28, 1998,  an  explosion  occurred at the 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 the Company,  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 and subsequently  filed appeals  regarding the denial of
these motions.  The outcome of these proceedings cannot now be determined and an
estimated range of loss cannot be made.

Long-Term Service Agreements

     The  Company,  has  entered  into  long-term  service  agreements  for  the
maintenance and repairs of its  combustion-turbine or combined-cycle  generating
plants. As of September 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 $74 million during the three and nine months ended
September 30, 2001 and were insignificant  during both the three and nine months
ended  September 30, 2000. As of September 30, 2001,  estimated  minimum  rental
commitments for non-cancelable operating leases were approximately $3 billion.

G. Subsequent Events

Western United States Power Markets

DWR Power  Purchases.  On October 2, 2001,  the CPUC  refused to approve a rate
agreement  with the DWR. The  California  Treasurer has indicated that this rate
agreement  is closely  related to the issuance of  approximately  $13 billion in
revenue  bonds to finance  the  purchase  of electric  energy.  Mirant  Americas
Generation  bears the risk of  nonpayment  by the CAISO,  the PX and the DWR for
power purchased by the CAISO, the PX or the DWR.

Defaults by SCE and Pacific Gas and Electric and  Bankruptcy  of Pacific Gas and
Electric.  On October 2, 2001, the California  Governor  rescinded the executive
order calling for a third special session of the state legislature.  The purpose
of the third  special  session  was to  consider  legislation  to restore SCE to
solvency.  In view  of the announced  settlement  between the  California Public

                                       20

<PAGE>

                         MIRANT AMERICAS GENERATION, LLC
       NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

Utilities Commission and SCE,  California's  Governor declared the third special
session unnecessary.

     On October 2, 2001,  the CPUC and SCE announced a settlement of SCE's filed
rate  doctrine  lawsuit,  which is  pending  in  federal  district  court in Los
Angeles.  The terms of the proposed settlement provide that SCE will fully repay
what the settlement agreement calls "Procurement Related Liabilities" by the end
of 2005. Although the proposed settlement  agreement purports to provide for the
payment of all Procurement Related Liabilities, which includes $920 million owed
to the PX and  the  CAISO  (a  portion  of  which  is owed  to  Mirant  Americas
Generation), there is no specific information about when any particular creditor
or class of creditors can expect repayment. Further, SCE has agreed to work with
the CPUC and the  California  Attorney  General in pursuing  litigation  against
energy  sellers  and to meet and  confer  with  the  CPUC as to all  significant
strategic  and tactical  decisions in existing or future  litigation,  including
administrative  proceedings.  Effective March 1, 2002, CPUC approval is required
of any settlement of existing or future  litigation,  and, if the CPUC rejects a
proposed settlement, SCE is required to continue with such litigation.

     The impact of the  proposed  settlement  agreement  on the Company  remains
uncertain  but  could  include  delayed   payment,   extended   litigation,   or
discriminatory  treatment  in the  repayment  process.  The Company is currently
analyzing the proposed  settlement  agreement and its analysis may indicate that
other  available  remedies are  preferable  to this  settlement  proposal.  Such
remedies  may  include  participation  in  an  effort  to  file  an  involuntary
bankruptcy petition against SCE.

     On October 5, 2001,  the U.S.  District  Court for the Central  District of
California  approved the proposed  settlement  agreement.  The District  Court's
judgement was temporarily stayed on October 30, 2001 by the 9th Circuit Court of
Appeals for a 14-day period while a motion is addressed by the District Court.

     On October  24,  2001,  CARE filed a  complaint  with the FERC  against the
Independent  Energy  Producers  Association  ("IEPA"),   which  includes  Mirant
Americas Generation,  and other parties, claiming that they had violated various
California and federal laws to unlawfully  manipulate  the California  wholesale
energy market. CARE requests that the FERC (1) order refunds of approximately $2
billion from  sellers of  electricity  in the  California  market,  (2) void any
long-term  energy  contracts with such sellers and DWR/CERS,  and (3) revoke any
licenses,  certificates or permits for any siting,  construction or operation of
power plants in  California.  Mirant  Americas  Generation  is in the process of
responding to this complaint.

     In October  2001,  Mirant  agreed to a consent  decree with all  plaintiffs
resolving all issues related to the  environmental  suit and notice of intent to
file suit in connection  with Mirant's  Potrero  peaking units.  The agreed-upon
settlements are subject to final  approvals and notices by various  governmental
agencies.

State Line

     On October 3, 2001,  the  Illinois  Supreme  Court denied  Mirant  Americas
Generation's  appeal regarding the proper  jurisdiction of the lawsuits.  Mirant
Americas  Generation is  considering  whether to appeal this issue to the United
States Supreme Court.

Issuance of Senior Notes

     In October 2001,  Mirant Americas  Generation issued $750 million in senior
unsecured notes under Rule 144A of the Securities Act. The notes issued included
$300 million of 7.2% senior notes due 2008 and $450 million of 8.5% senior notes
due 2021.  The net  proceeds  from  these  notes as well as  borrowings  from an
affiliate were used to repay the $750 million term loan,  which was subsequently
terminated, and to pay breakage  costs on interest rate  swaps  entered  into in

                                       21

<PAGE>

                         MIRANT AMERICAS GENERATION, LLC
       NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

2000 in  anticipation  of this debt  offering.  Interest on the notes is payable
semiannually beginning April 1, 2002. 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 premium, as defined in the note
agreements.  Furthermore,  Mirant Americas Generation is obligated to consummate
an exchange offer under an effective  registration statement or cause re-sale of
the notes to be  registered  under the  Securities  Act  within  270 days of the
issuance of these notes or the annual  interest  rate will  increase by 0.5% per
annum.

Conversion to a Limited Liability Company

     Effective  November 1, 2001, the Company  changed its form of  organization
from a corporation to a limited liability company.  The effect of this change of
organization  is that taxes will no longer be paid  directly by Mirant  Americas
Generation's  holding  company,  but rather,  will  accrue  directly to its sole
owner,  Mirant  Americas.  Furthermore,  the  Company  also  changed the form of
organization  of one of its wholly owned  subsidiaries  from a corporation  to a
limited liability company. The Company's  consolidated financial statements will
continue to reflect the  accounting  and  reporting  for income  taxes for those
subsidiaries  of Mirant  Americas  Generation  that  continue  to  retain  their
corporate organization  structure.  As a result of these changes in organization
structure,  Mirant Americas Generation expects to recognize income in the fourth
quarter of 2001  related to the reversal of deferred  tax  expenses,  which have
previously  been  recognized,  for which the Company  will no longer be directly
obligated.  Management is currently  assessing the financial statement impact of
these changes in organization  structure but has not yet determined  their final
impact.

Mirant Corporation Litigation

     On October 25, 2001, the Company entered into a settlement with PEPCO which
finalized  a  number  of  closing  adjustments  in  connection  with  the  asset
acquisition  completed in December 2000. The settlement  included  resolution of
the civil  action  filed by PEPCO  against  Mirant on August 2, 2001 in the U.S.
District  Court for the District of Columbia.  As a result of the settlement the
Company made a net cash  payment to PEPCO of $26  million.  The accrual for this
payment is reflected in the September 30, 2001 unaudited condensed  consolidated
balance sheet.

Insurance Coverage

     The worldwide  commercial  insurance industry has steadily contracted since
mid-year 2000 making insurance  coverage less available and more expensive.  The
September  11,  2001  attacks  on the  World  Trade  Center  and  Pentagon  have
exacerbated the markets' condition. Mirant Americas Generation's deductibles for
property  insurance  will increase from an average of $750,000 per occurrence to
$5 million per occurrence,  and business interruption  deductibles has increased
from an average of 45 days per occurrence to 60 days per  occurrence.  While the
threshold is not yet final,  Mirant Americas  Generation's  maximum exposure for
catastrophic  events will increase from $10 million to a minimum of $20 million.
The limits available for such insurance have also reduced, except in the case of
terrorism  and  sabotage,  still  exceed  several  hundred  million  dollars per
occurrence. This change took effect at the November 1, 2001 renewal date.

     The availability of terrorism and sabotage  insurance is also significantly
reduced due to the September 11 attacks.  In response,  Mirant has a new program
for  physical  damage and  business  interruption  arising  from  terrorism  and
sabotage  events.  The program  provides for worldwide  coverage limited to $100
million  with  deductibles  of $5 million  for  physical  damage and 60 days for
business interruption.


                                       22
<PAGE>


                         MIRANT AMERICAS GENERATION, LLC
                     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 electric power generating facilities and any others that we may acquire. Our
generating  facilities were either recently acquired in competitive  auctions or
were  developed as  greenfield  (new power  plant)  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                 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  Americas  Development.  We  expect  to  have  the  option,  but  not the
obligation,  to  purchase  most  of the  assets  developed  by  Mirant  Americas
Development once they have reached commercial completion.

                                       23

<PAGE>

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

   Our  expenses  will be  primarily  derived  from the ongoing  operations  and
maintenance 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, as well as, regulatory and market  environments in which
they are being operated by us.

Results of Operations

Significant  income  statement  items  appropriate  for  discussion  include the
following:

     Operating  Revenues.  Our operating  revenues for the three and nine months
ended  September  30,  2001 were  $1,400 and $4,257  million,  respectively,  an
increase of $720 million and $3,036 million from the same periods in 2000. These
increases were primarily due to the  contributions  of the plants we acquired in
Maryland from PEPCO in December  2000 and to increased  prices and market demand
for power in the western  United  States.  In addition,  our Wisconsin  facility
commenced  operations in May 2000,  and the first and second phases of our Texas
facility  commenced  operations in June 2000 and 2001,  respectively.  Operating
revenues  for the nine months  ended  September  30, 2001  reflected  net losses
related to decreases in the fair value of financial  instruments  used to manage
price risk exposure.

     Total  Operating  Expenses.  Our operating  expenses for the three and nine
months  ended  September  30,  2001 were  $1,208  million  and  $3,835  million,
respectively,  an increase  of $729  million  and $2,909  million  from the same
periods in 2000.  These  increases  were  primarily  due to  operating  expenses
associated  with the plants we acquired in Maryland from PEPCO in December 2000,
the  commencement  of  operations of the newly  constructed  Wisconsin and 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 nine months ended September 30, 2001,
costs incurred under revenue  sharing  arrangements  with Mirant Americas Energy
Marketing  increased $82 million and $212 million,  respectively,  from the same
periods in 2000.

     Total Other Income (Expense).  Other expenses for the three and nine months
ended  September 30, 2001, were $38 million and $101 million,  respectively,  an
increase  of $8 million  and $42 million  from the same  periods in 2000.  These
increases  were  primarily  due to an increase in  interest  expense  related to
borrowings to finance  acquisitions but were partially offset by interest income
on notes  receivable  from  affiliates and a  non-recurring  gain from insurance
proceeds  in the first  quarter of 2001 of $8 million  related to our State Line
facility.

     Provision  for  Income  Taxes.  Income tax  expense  for the three and nine
months ended September 30, 2001 was $65 million and $139 million,  respectively,
a decrease of $7 million and an increase of $44 million from the same periods in
2000.  These  changes in income tax expense are  consistent  with the changes in
income adjusted for  non-deductible  goodwill  related to the acquisition of the
PEPCO assets.

                                       24
<PAGE>


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

Financial Condition

     During the nine months ended September 30, 2001, we generated net cash from
operations of  approximately  $516 million compared to $324 million for the same
period in 2000.  This increase is primarily due to growth in earnings as well as
changes in working capital totaling $214 million.

     During the nine months ended  September  30, 2001, we used $470 million for
investment  activities  compared  to $172  million  for the same period in 2000.
During both periods,  our investment  activities were primarily  attributable to
capital  expenditures.  During the nine months ended September 30, 2001, we made
$199 million in loans to affiliates  compared to $33 million for the same period
in 2000. Also,  during the nine months ended September 30, 2001, we received $13
million in insurance proceeds related to our State Line facility compared to $27
million in the same period in 2000.

     During the nine months ended  September 30, 2001, our financing  activities
provided $17 million in cash as compared to using $151  million  during the same
period in 2000.  During the nine months ended  September  30, 2001 our financing
activities  included  receipt of $1,712 million in proceeds from the issuance of
debt,  $221 million in proceeds from the  repayment of debt due from  affiliates
and capital  contributions  of $27 million from Mirant  Americas.  These inflows
were partially offset by repayment of debt of $1,702 million,  repayment of debt
to  affiliates of $20 million and payment of $221 million in dividends to Mirant
Americas.  During the nine  months  ended  September  30,  2000,  our  financing
activities  primarily  included repayment of debt of $248 million and payment of
$11 million in dividends, which was partially offset by $108 million in 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,  debt  financings and
potential asset sales.  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, we issued $1,750 million in senior  unsecured notes under Rule
144A of the  Securities  Act.  We have  completed  an  exchange  offer  under an
effective  registration  statement  pursuant to which we exchanged the notes for
notes registered under the Securities Act.

     In August 2001,  we exercised  our right to extend the maturity of our $695
million  acquisition  facility and our $150 million working capital facility and
converted  the drawn  balances of $750 million into a term loan with maturity in
September 2002. Under this facility,  we may elect to rollover the borrowings at
a base rate or at the LIBOR plus an applicable margin based on its credit rating
on the date of the rollover. The outstanding borrowings under the term loan were
$750 million at an interest rate of 4.68% at September 30, 2001.

     As of September 30, 2001, we also had separate $250 million and $50 million
revolving  credit  facilities.  The  commitments  under the $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, we may elect to borrow at a base rate or at the LIBOR plus an
applicable  margin  based  on  our credit  rating on the date of the  borrowing.

                                       25
<PAGE>

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

Interest is payable on the maturity of the chosen  interest  period.  No amounts
were  outstanding  on the $250 and $50 million  revolving  credit  facilities at
September 30, 2001.

   On October 9, 2001,  we issued $750 million in senior  unsecured  notes under
Rule 144A of the Securities  Act. The notes issued included $300 million of 7.2%
senior notes due 2008 and $450  million of 8.5% senior  notes due 2021.  The net
proceeds from these notes as well as borrowings  from an affiliate  were used to
repay the $750 million term loan, which was subsequently terminated,  and to pay
breakage  costs on interest rate swaps entered into in 2000 in  anticipation  of
this debt  offering.  Interest  on the notes is payable  semiannually  beginning
April 1, 2002.  We 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 note agreements.  Furthermore,  we
are obligated to consummate  an exchange  offer under an effective  registration
statement or cause  re-sale of the notes to be registered  under the  Securities
Act within 270 days of the issuance of these notes or the annual  interest  rate
will increase by 0.5% per annum.

  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 the 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 Mirant
Mid-Atlantic's facilities, and after December 31, 2002, may reduce the committed
capacity and energy purchases to zero. Our affiliated companies,  Mirant Potomac
River and Mirant Peaker,  have entered into fixed rate power purchase agreements
with Mirant Americas Energy Marketing,  on the same terms and effective over the
same period as the agreements outlined above.  Through the capital  contribution
agreement between Mirant  Mid-Atlantic and Mirant, the cash available from these
affiliated  companies  is paid as a dividend  to  Mirant,  which in turn makes a
capital contribution to Mirant Mid-Atlantic for the same amount.

      At the inception date, the pricing of Mirant  Americas Energy  Marketing's
minimum committed  capacity and energy purchases over the term of the agreements
was favorable to us and our affiliates  when compared to projected  market rates
in the PJM.  The total value to our  affiliates  and us was  approximately  $167
million.  The amount related  specifically to the Mirant  Mid-Atlantic  owned or
leased facilities  amounted to $120 million and is reflected as both an addition
to  additional  paid in capital and an offsetting  contra equity  account on our
unaudited  condensed  consolidated  balance sheet and statement of stockholder's
equity at the inception of the agreements.  We will reduce the operating revenue
recognized  under these agreements by the favorable  variance noted above,  over
the contract term based on the  proportion  of volume  delivered to the expected
minimum delivery over the remaining contract term. The total amount of operating
revenue  reductions  for the  three  months  ended  September  30,  2001 was $18
million.  The contra  equity  amount is reduced as cash is received  from Mirant
Americas  Energy  Marketing over the contract term,  with cash being received in
the month following the reduction to operating revenue. The total amount of cash
received,  attributable to the favorable variance, during the three months ended
September 30, 2001 amounted to $10 million.  In addition,  we have  recognized a
deferred tax  liability  of  approximately  $47 million  related to the deferred
contract  value at the  inception  of the  agreement.  This  recognition  of the
deferred tax liability is offset by a corresponding  decrease in additional paid
in capital.

     Effective  November  1, 2001,  we changed our form of  organization  from a
corporation  to a  limited  liability  company.  The  effect  of this  change of
organization  is that taxes will no longer be paid  directly by our parent,  but
rather, will accrue directly to our sole owner, Mirant Americas. Furthermore, we
also changed the form of  organization  of one of our wholly owned  subsidiaries
from a corporation to a limited liability  company.  Our consolidated  financial
statements  will  continue to reflect the  accounting  and  reporting for income
taxes for our subsidiaries that continue to retain their corporate  organization

                                       26
<PAGE>

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

structure.  As a result of these changes in organization structure, we expect to
recognize  income in the fourth  quarter  of 2001  related  to the  reversal  of
deferred tax expenses, which have previously been recognized,  for which we will
no longer be  directly  obligated.  We are  currently  assessing  the  financial
statement  impact of these  changes in  organization  structure but have not yet
determined their final impact.

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:

Litigation:

o        Reliability-Must-Run Agreements
o        Defaults by SCE and Pacific Gas and Electric Bankruptcy of Pacific Gas
         and Electric
o        DWR Power Purchases
o        California Price Mitigation and Refund Proceeding
o        Western Power Market Investigations
o        California Rate Payer Litigation
o        CAISO Claim before the FERC
o        Consumers Union Complaint
o        Environmental Suit and Notice of Intent to File Suit
o        Pacific Gas and Electric Bankruptcy
o        CARE Complaint
o        California Power Exchange Bankruptcy
o        NYISO Automatic Mitigation Plan
o        State Line
o        Mirant Corporation Litigation

Other Contingencies:

o        Long-term Service Agreements
o        Operating Leases

     Additionally,   for  recent  events  occurring  after  September  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  consolidated  financial
condition, cash flows or results of operations.

                                       27
<PAGE>

           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT 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,  on an annualized basis, by approximately $5
million,  based on variable rate debt and  derivatives  and other  interest rate
sensitive instruments outstanding at September 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
fixed rate power sale agreements,  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   unaudited  condensed
consolidated statement of income.  Subsequent to the adoption of SFAS No. 133 on
January 1, 2001,  these  derivative  instruments  are recorded in the  unaudited
condensed 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 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 $3 million at September 30,
2001. During the nine months ended September  30, 2001,  the actual daily change

                                       28

<PAGE>

           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

in fair value exceeded the  corresponding  daily VaR calculation one time, which
falls  within our 95%  confidence  interval.  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.


                                       29
<PAGE>


PART II     OTHER INFORMATION

Item 1.       Legal Proceedings

     The  following  information  updates  previously  reported  litigation.   A
background  for  these  updates  can be found in Notes F and G to the  financial
statements  herein  or the  Company's  Form  S-4/A  filed  August 9, 2001 or our
quarterly report on Form 10-Q filed September 5, 2001.

State  Line.  On October 3, 2001,  the  Illinois  Supreme  Court  denied  Mirant
Americas  Generation's appeal regarding the proper jurisdiction of the lawsuits.
Mirant  Americas  Generation is considering  whether to appeal this issue to the
United States Supreme Court.

Western United States Power Markets:

California Rate Payer  Litigation.  On September 21, 2001, the defendants in the
California rate payer litigation served upon the plaintiffs in each case a Joint
Demurrer,  a Joint  Motion  to  Strike  and a Joint  Motion  to Stay.  The Joint
Demurrer  asserts that the defendants  should be granted judgment as a matter of
law on the claims asserted by the plaintiffs. The Joint Motion to Strike asserts
that if the court does not conclude that plaintiffs' claims are barred entirely,
then all claims seeking monetary  recovery should be stricken based on the filed
rate doctrine. The Joint Motion to Stay asserts that any claims not dismissed in
response  to the Joint  Demurrer or stricken in response to the Motion to Strike
should  be  stayed  until  the FERC has  entered  a final  order in the  ongoing
proceedings before it related to the investigations of the California  wholesale
markets.  These  pleadings have been served on the plaintiffs in each of the six
cases  but will  not be  filed  with the  court  until a  determination  is made
regarding  whether the actions  should be  coordinated  and, if so, before which
court. The plaintiffs seek to have the cases  coordinated  before a court in San
Francisco,  while the  defendants  have  asked  for the cases to be  coordinated
before  a court in San  Diego.  The  California  Judicial  Council  has sent the
coordination  motions  to the  presiding  judge for the  Superior  Court for the
County  of San  Diego,  who has  assigned  a  judge  to  hear  the  coordination
petitions. The judge will decide whether the cases should be coordinated and, if
so, will  recommend to the California  Judicial  Council which court should hear
the coordinated actions. The Company cannot predict the outcome of these cases.

Other California-Related Litigation. On October 24, 2001, CARE filed a complaint
with the FERC against the Independent  Energy  Producers  Association  ("IEPA"),
which includes Mirant Americas Generation,  and the other parties, claiming that
they had violated various  California and federal laws to unlawfully  manipulate
the California  wholesale  energy market.  CARE requests that the FERC (1) order
refunds  of  approximately  $2  billion  from  sellers  of  electricity  in  the
California market, (2) void any long-term energy contracts with such sellers and
DWR/CERS,  and (3) revoke any licenses,  certificates or permits for any siting,
construction  or  operation  of power  plants  in  California.  Mirant  Americas
Generation is in the process of responding to this complaint.

CAISO  and  PX  Price  Caps.  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 PX  markets.  The
recommendation  also included a hearing  procedure to determine the  appropriate
amount of refunds for each  jurisdictional  seller.  On July 25, 2001,  the FERC
issued an order  requiring  hearings to determine  the amount of any refunds and
amounts  owed for sales made to the  CAISO/PX  from October 1, 2000 through June
20, 2001. Hearings are scheduled to be held in December 2001 and February 2002.

     In the July 25 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 the  proceeding,  the DWR filed to recover  certain
refunds from parties,  including a Mirant  subsidiary,  for  bilateral  sales of
electricity to the DWR at the California/Oregon border, claiming that such sales
took place in the Pacific  Northwest.  A FERC  administrative  law judge ("ALJ")

                                       30
<PAGE>

recently concluded a preliminary evidentiary hearing related to possible refunds
for  power  sales in the  Pacific  Northwest.  In a  preliminary  ruling  issued
September 24, 2001, the ALJ indicated that he would order no refunds because the
complainants had failed to prove any exercise of market power or that any prices
were unjust or unreasonable.  FERC may accept or reject this preliminary  ruling
and FERC's  decision may itself be appealed.  At this time,  the Company  cannot
predict  the  outcome of this  proceeding.  If the Company is required to refund
such amounts,  our subsidiaries  would be required to refund amounts  previously
received pursuant to sales made on its behalf.

Consumers Union Complaint. On July 16, 2001, several of our subsidiaries filed a
response to the  petition,  arguing that the petition  should be  dismissed.  We
cannot  determine  at this time  what  action,  if any,  the FERC will take with
respect to this complaint.

Environmental Suit and Notice of Intent to File Suit. In October 2001, we agreed
to a consent  decree with all  plaintiffs  resolving  all issues  related to the
environmental suit and notice of intent to file suit in connection with Mirant's
Potrero  peaking  units.  The  agreed-upon  settlements  are  subject  to  final
approvals and notices by various governmental agencies.

Pacific Gas and  Electric  Bankruptcy.  On September  20, 2001,  Pacific Gas and
Electric  filed a  proposed  plan of  reorganization.  Under  the  terms  of the
proposed plan,  unsecured  creditors such as Mirant  Americas  Generation  would
receive 60% of the amounts owed upon  approval of the plan.  The  remaining  40%
would be paid in negotiable debt with terms from ten to thirty years.

DWR Purchases.  On October 2, 2001, the CPUC refused to approve a rate agreement
with the DWR. The Treasurer of California has indicated that this rate agreement
is closely related to the issuance of approximately $13 billion in revenue bonds
to finance the purchase of electric  energy.  We bear the risk of  nonpayment by
the CAISO,  the PX and the DWR for power  purchased by the CAISO,  the PX or the
DWR.

Defaults by SCE and Pacific Gas and Electric and  Bankruptcy  of Pacific Gas and
Electric.  On October 2, 2001, the California  Governor  rescinded the executive
order calling for a third special session of the state legislature.  The purpose
of the third  special  session  was to  consider  legislation  to restore SCE to
solvency.  In view of the announced  settlement  between the  California  Public
Utilities Commission and SCE,  California's  Governor declared the third special
session unnecessary.

     On October 2, 2001,  the CPUC and SCE announced a settlement of SCE's filed
rate  doctrine  lawsuit,  which is  pending  in  federal  district  court in Los
Angeles.  The terms of the proposed settlement provide that SCE will fully repay
what the settlement agreement calls "Procurement Related Liabilities" by the end
of 2005. Although the proposed settlement  agreement purports to provide for the
payment of all Procurement Related Liabilities, which includes $920 million owed
to the PX and the CAISO (a portion of which is owed to the Company), there is no
specific  information  about when any particular  creditor or class of creditors
can  expect  repayment.  Further,  SCE has  agreed to work with the CPUC and the
California Attorney General in pursuing litigation against energy sellers and to
meet and  confer  with the CPUC as to all  significant  strategic  and  tactical
decisions   in  existing   or  future   litigation,   including   administrative
proceedings.  Effective  March  1,  2002,  CPUC  approval  is  required  of  any
settlement of existing or future litigation, and, if the CPUC rejects a proposed
settlement, SCE is required to continue with such litigation.

     The impact of the proposed  settlement  agreement on us remains  uncertain,
but could  include  delayed  payment,  extended  litigation,  or  discriminatory
treatment in the  repayment  process.  We are  currently  analyzing the proposed
settlement agreement and our analysis may indicate that other available remedies
are  preferable  to  this  settlement   proposal.   Such  remedies  may  include
participation  in an effort to file an involuntary  bankruptcy  petition against
SCE. On October 5, 2001,  the U.S.  District  Court for the Central  District of
California  approved the proposed  settlement  agreement.  The District  Court's
judgement was temporarily stayed on October 30, 2001 by the 9th Circuit Court of
Appeals for a 14-day period while a motion is addressed by the District Court.

                                       31
<PAGE>

Mirant Corporation Litigation:

      On October 25, 2001,  the Company  entered  into a  settlement  with PEPCO
which  finalized a number of closing  adjustments  in connection  with the asset
acquisition  completed in December 2000. The settlement  included  resolution of
the civil  action  filed by PEPCO  against  Mirant on August 2, 2001 in the U.S.
District  Court for the District of Columbia.  As a result of the settlement the
Company made a net cash  payment to PEPCO of $26  million.  The accrual for this
payment is reflected in the September 30, 2001 unaudited condensed  consolidated
balance sheet.

     In addition to the proceedings  described  above,  the Company  experiences
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.

Item 6.       Exhibits and Reports on Form 8-K

(a)      Exhibits.
-----------------

     3.1  Certificate of Formation for Mirant  Americas  Generation,  LLC, filed
          with the Delaware Secretary of State on November 1, 2001.

     3.2  Limited Liability Company Agreement of Mirant Americas Generation, LLC
          dated October 31, 2001.

     99.1 Certificate of Conversion of Mirant Americas  Generation,  Inc., filed
          with the Delaware Secretary of State on November 1, 2001.



                                       32
<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, LLC




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

                                                          Date: November 9, 2001