<Page>

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


                                    FORM 10-Q


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

      For the quarterly period ended September 30, 2001


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

      For the transition period from ______to______


                      Commission file number: 333-64842-02

                          DYNEGY DANSKAMMER, L.L.C.
            (Exact name of registrant as specified in its charter)


               DELAWARE                                          76-065670
      (State or other jurisdiction of                        (I.R.S. Employer
      incorporation or organization)                         Identification No.)



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

                                (845) 561-2468
             (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 [ ]

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

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


<Table>
<Caption>

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



                                                                                                                         Page
<S>                                                                                                                      <C>
PART I. FINANCIAL INFORMATION

       Item 1.  CONDENSED FINANCIAL STATEMENTS:

       Condensed Balance Sheets:
            September 30, 2001 and December 31, 2000.......................................................................3
       Condensed Statements of Operations:
            For the three months ended September 30, 2001 and from inception to September 30, 2000.........................4
       Condensed Statements of Operations:
            For the nine months ended September 30, 2001 and from inception to September 30, 2000..........................5
       Condensed Statements of Cash Flows:
            For the nine months ended September 30, 2001 and from inception to September 30, 2000..........................6
       Notes to Condensed Financial Statements  ...........................................................................7


       Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                CONDITION AND RESULTS OF OPERATIONS ......................................................................12

       Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK................................................16


PART II. OTHER INFORMATION

       Item 1.  Legal Proceedings ........................................................................................17

       Item 6.  Exhibits and Reports on Form 8-K..........................................................................17

</Table>

<Page>

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


<Table>
<Caption>

                                                        SEPTEMBER 30,    DECEMBER 31,
                                                             2001            2000
                                                        -------------    ------------
<S>                                                     <C>              <C>
                                         ASSETS
CURRENT ASSETS
Cash and cash equivalents                               $           3    $        ---
Accounts receivable, net                                           82             ---
Inventory                                                      11,602             ---
Other current assets                                            4,764             ---
                                                        -------------    ------------
      TOTAL CURRENT ASSETS                                     16,451             ---
                                                        -------------    ------------

PROPERTY, PLANT AND EQUIPMENT                                 375,464             ---
Accumulated depreciation and amortization                      (6,941)            ---
                                                        -------------    ------------
      PROPERTY, PLANT AND EQUIPMENT, NET                      368,523             ---
                                                        -------------    ------------

Other long-term assets                                          5,161             ---
                                                        -------------    ------------
      TOTAL ASSETS                                      $     390,135    $        ---
                                                        =============    ============


                             LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES
Accounts payable                                        $         910    $        ---
Accounts payable - affiliates (Note 5)                         85,381             ---
Accrued liabilities and other                                  14,945             ---
Current portion of long-term debt                                 201             ---
                                                        -------------    ------------
      TOTAL CURRENT LIABILITIES                               101,437             ---

Long-term debt - third party                                  299,799             ---
Long-term debt - affiliate (Note 3)                             8,477             ---
                                                        -------------    ------------
      TOTAL LONG-TERM DEBT                                    308,276             ---

Other long-term liabilities                                     8,000             ---
                                                        -------------    ------------
      TOTAL LIABILITIES                                       417,713             ---
                                                        -------------    ------------

COMMITMENTS AND CONTINGENCIES (NOTE 6)

MEMBER'S EQUITY
Membership interest                                                 1               1
Due from member                                                    (1)             (1)
Accumulated other comprehensive income                          2,338             ---
Retained deficit                                              (29,916)            ---
                                                        -------------    ------------
      TOTAL MEMBER'S EQUITY                                   (27,578)            ---
                                                        -------------    ------------
      TOTAL LIABILITIES AND MEMBER'S EQUITY             $     390,135    $        ---
                                                        =============    ============

</Table>

                    See notes to condensed financial statements.


                                            3

<Page>

<Table>
<Caption>

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

                                                                 THREE MONTHS ENDED SEPTEMBER 30,
                                                                 --------------------------------
                                                                     2001                2000
                                                                 ------------        ------------
<S>                                                              <C>                 <C>
Revenues - affiliate (Note 5)                                    $     16,936        $        ---

Cost of sales -  third party                                           16,355                 ---
Cost of sales - affiliate (Note 5)                                      3,746                 ---
                                                                 ------------        ------------
     Total cost of sales                                               20,101                 ---
                                                                 ------------        ------------

Operating margin                                                       (3,165)                ---

Depreciation and amortization                                           2,632                 ---
General and administrative expenses - affiliate (Note 5)                  405                 ---
                                                                 ------------        ------------
Operating loss                                                         (6,202)                ---

Interest expense -  third party                                        (4,741)                ---
Interest expense - affiliate (Note 3)                                    (388)                ---
                                                                 ------------        ------------
     Total interest expense                                            (5,129)                ---
                                                                 ------------        ------------

NET LOSS                                                         $    (11,331)       $        ---
                                                                 ============        ============
</Table>

                 See notes to condensed financial statements.

                                       4
<Page>

<Table>
<Caption>

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

                                                                 NINE MONTHS ENDED SEPTEMBER 30,
                                                                     2001               2000
                                                                 ------------       ------------
<S>                                                              <C>                <C>
Revenues - affiliate (Note 5)                                    $     42,242       $        ---

Cost of sales - third party                                            42,003                ---
Cost of sales - affiliate (Note 5)                                      8,026                ---
                                                                 ------------       ------------
     Total cost of sales                                               50,029                ---
                                                                 ------------        ------------

Operating margin                                                       (7,787)               ---

Depreciation and amortization                                           6,941                ---
General and administrative expenses - affiliate (Note 5)                1,025                ---
                                                                 ------------       ------------

Operating loss                                                        (15,753)               ---

Interest expense -  third party                                        (7,501)               ---
Interest expense - affiliate (Note 3)                                  (6,662)               ---
                                                                 ------------       ------------
     Total interest expense                                           (14,163)               ---
                                                                 ------------       ------------

NET LOSS                                                         $    (29,916)       $       ---
                                                                 ============        ===========
</Table>

                 See notes to condensed financial statements.

                                       5
<Page>

<Table>
<Caption>

DYNEGY DANSKAMMER, L.L.C.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED) (IN THOUSANDS)
==========================================================================================================

                                                                         NINE MONTHS ENDED SEPTEMBER 30,
                                                                         -------------------------------
                                                                              2001              2000
                                                                         ------------       ------------
<S>                                                                      <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES

Net loss                                                                 $    (29,916)      $        ---
Items not affecting cash flows from operating activities:
   Depreciation and amortization                                                6,941                ---
   Amortization of prepaid property taxes                                       4,433                ---
   Other                                                                        2,772                ---

Change in assets and liabilities resulting from operating activities:
   Accounts receivable                                                            (82)               ---
   Accounts payable                                                               910                ---
   Accrued liabilities                                                         14,945                ---
                                                                         ------------       ------------

Net cash provided by operating activities                                           3                ---
                                                                         ------------       ------------
CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of generation assets                                             (308,477)               ---
                                                                         ------------       ------------
Net cash used in investing activities                                        (308,477)               ---
                                                                         ------------       ------------
CASH FLOWS FROM FINANCING ACTIVITIES

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

Net cash provided by financing activities                                     308,477                ---
                                                                         ------------       ------------
Net increase in cash and cash equivalents                                           3                ---
Cash and cash equivalents, beginning of period                                    ---                ---
                                                                         ------------       ------------
Cash and cash equivalents, end of period                                 $          3       $        ---
                                                                         ============       ============
</Table>

                 See notes to condensed financial statements.

                                       6

<Page>


                            DYNEGY DANSKAMMER, L.L.C.
                   NOTES TO CONDENSED FINANCIAL STATEMENTS
          FOR THE INTERIM PERIODS ENDED SEPTEMBER 30, 2001 AND 2000


NOTE 1 - ORGANIZATION AND OPERATIONS OF THE COMPANY

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

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

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

NOTE 2 - ACCOUNTING POLICIES

      The accounting policies of the Company conform to generally accepted
accounting principles in the United States. The more significant of such
accounting policies are described below. The financial statements include all
material adjustments, which, in the opinion of management, are necessary for a
fair presentation of the results for the interim periods. Interim period results
are not necessarily indicative of the results for the full year. The preparation
of the condensed financial statements in conformity with generally accepted
accounting principles requires management to develop estimates and make
assumptions that affect reported financial position and results of operations
and that impact the nature and extent of disclosure, if any, of contingent
assets and liabilities. Actual results could differ materially from those
estimates. Certain reclassifications have been made to prior period amounts in
order to conform to the current period presentation.

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

      INVENTORY. Inventory consists primarily of fossil fuel of $5.3 million and
materials and supplies of $6.3 million at September 30, 2001. Inventory is
carried at the lower of market or the weighted-average purchase cost.

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

      As part of the Acquisition, the Company acquired air emissions regulatory
allowances that have already been issued to the Company and allowances that the
Company expects to be allocated during the remaining useful life of the plant.
Although the emission allowances received are freely transferable, the Company
intends to use a significant portion of the


                                       7
<Page>

                            DYNEGY DANSKAMMER, L.L.C.
                   NOTES TO CONDENSED FINANCIAL STATEMENTS
          FOR THE INTERIM PERIODS ENDED SEPTEMBER 30, 2001 AND 2000


emission allowances in the normal course of business to generate electricity.
Accordingly, the Company has classified emission allowances expected to be
utilized to generate electricity as part of property, plant and equipment and
amortizes the amount over the estimated useful life of the plant on a
straight-line basis.

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

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

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

      The nature of the Company's business necessarily involves certain market
and financial risks. The Company may enter into financial instrument contracts
in an attempt to mitigate or eliminate these various risks. After adoption of
the pronouncement, the Company executed two interest rate swaps during the first
six months of 2001 that were designated as cash flow hedges of the benchmark
interest rate component of certain operating lease rentals. Changes in
accumulated other comprehensive income related to these derivatives for the
nine-month period ended September 30, 2001 were as follows (in thousands):

<Table>
         <S>                                                   <C>
         Transition adjustment as of January 1, 2001           $       ---
         Current period increases in fair value                      2,437
         Reclassifications to earnings                                 (99)
                                                               -----------
         Balance at September 30, 2001                         $     2,338
                                                               ===========
</Table>


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

      During the three and nine months ended September 30, 2001, there was no
material ineffectiveness from changes in fair value of hedge positions, and no
amounts were excluded from the assessment of hedge effectiveness related to the
hedge of future cash flows. Additionally, no amounts were reclassified to
earnings in connection with forecasted transactions that were no longer
considered probable of occurring.

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

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


                                       8
<Page>

                            DYNEGY DANSKAMMER, L.L.C.
                   NOTES TO CONDENSED FINANCIAL STATEMENTS
          FOR THE INTERIM PERIODS ENDED SEPTEMBER 30, 2001 AND 2000


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

NOTE 3 - NOTE PAYABLE TO AFFILIATE

      In connection with the Acquisition, the Company entered into an
approximately $324.2 million demand note payable to DHI, bearing interest at 7%
per annum. Both principal and interest are due and payable upon demand by DHI
and, in any event, no later than January 29, 2006. The Company may, at its
option (though it is not obligated to do so), prepay principal or interest prior
to January 29, 2006, without penalty. Interest on all past due amounts, both
principal and accrued interest, shall accrue at a rate of 9% per annum. Failure
to pay interest does not constitute a default, unless such interest is due on
January 29, 2006. DHI has represented that it will not call for payment on this
note before October 1, 2002. In addition, the note was substantially refinanced
on a long-term basis in connection with the sale-leaseback transaction
consummated in May 2001 (see Note 7). As of September 30, 2001, the Company has
repaid $315.7 million under the demand note.

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

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

NOTE 4 - PROPERTY, PLANT AND EQUIPMENT

      At September 30, 2001, property, plant and equipment consisted of the
following (in thousands):

<Table>
         <S>                                               <C>
         Fossil-fired Generating Facility                  $   362,655
         Land                                                    9,450
         Other                                                   3,359
                                                           -----------
                                                               375,464
         Less: Accumulated Depreciation                         (6,941)
                                                           -----------
         Property, Plant and Equipment, net                $   368,523
                                                           ===========
</Table>


NOTE 5 - RELATED PARTY TRANSACTIONS

      Transactions with affiliates result from various purchase and sale
agreements with other subsidiaries of DHI. In addition to the demand note
payable described in Note 3, the Company entered into the following transactions
with affiliates during the nine-month period ended September 30, 2001:

   -  Coal Agency Agreement between the Company and Dynegy Coal Trading and
      Transportation, L.L.C. ("DCTT") pursuant to which DCTT negotiates all
      purchases and deliveries of coal used by the Company in the generation of
      electricity. A management fee of $0.25 per ton delivered is assessed as
      compensation for this service. Total management fees paid to DCTT for this
      service during the nine-month period ended September 30, 2001 were
      approximately $187,751. There were no coal deliveries in 2000.


                                       9
<Page>

                            DYNEGY DANSKAMMER, L.L.C.
                   NOTES TO CONDENSED FINANCIAL STATEMENTS
          FOR THE INTERIM PERIODS ENDED SEPTEMBER 30, 2001 AND 2000


   -  Gas Purchase and Sales Agreement between the Company and Dynegy Marketing
      and Trade ("DMT") pursuant to which the Company purchases at prevailing
      market rates and receives from DMT all of the gas used by the Company to
      generate electricity. Total gas purchases with affiliates for the
      nine-month period ended September 30, 2001 were approximately $1.0
      million. There were no such purchases in 2000.

   -  Power Purchase and Sale Agreement between the Company and Dynegy Power
      Marketing, Inc. ("DYPM") pursuant to which DYPM purchases electric energy
      and related products from the Company. Electrical energy is purchased from
      the Company at contractually stipulated fixed prices until termination of
      the contract by either party, while related products are purchased at
      market rates. Sales to DYPM during the nine-month period ended September
      30, 2001 were approximately $42.2 million. There were no such sales in
      2000.

      As part of the Acquisition, the Company was required to enter into a
      Transition Power Agreement with Central Hudson. The terms of the agreement
      require that the Company supply power and ancillary services to Central
      Hudson at prices significantly below market levels. Since the contract was
      below market and the impairment was both estimable and reasonably
      probable, the Company recorded an accrued liability for the agreement.
      Subsequently, the agreement was assigned to DYPM, and an affiliated
      payable of approximately $70 million was established by the Company to
      compensate DYPM for assuming the rights and duties under the agreement.
      This obligation can be called by DYPM at any time and is therefore
      classified as current in the accompanying financial statements. However,
      the Company has obtained representation from DHI that, through September
      30, 2002, payments to affiliates will not be required beyond the Company's
      currently available funds.

   -  Certain administrative services such as payroll, employee benefits
      programs, insurance, accounting and information technology are shared
      among the affiliates of DHI, and the costs of these corporate support
      services are allocated to all affiliates. The total costs allocated to the
      Company for the nine-month period ended September 30, 2001 were
      approximately $1.0 million, which is reflected in the "General and
      Administrative" caption on the income statement. There were no such costs
      allocated in 2000.

   -  As the Company does not have employees, Dynegy Northeast Generation, Inc.
      ("DNE") administers the operation of the Company's facilities. Costs
      incurred by DNE are charged to the Company at cost. These costs include
      on-site technical, supervisory, engineering and clerical support necessary
      for the day-to-day operations of a power generation facility. The costs
      incurred by the Company during the nine-month period ended September 30,
      2001 were approximately $6.8 million. There were no such costs incurred in
      2000.

NOTE 6 - COMMITMENTS AND CONTINGENCIES

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

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

      ENVIRONMENTAL. Dynegy's operations are subject to extensive federal, state
and local statutes, rules and regulations governing the discharge of materials
into the environment or otherwise relating to environmental protection.
Compliance with these statutes, rules and regulations requires capital and
operating expenditures including those related to monitoring, pollution control
equipment, emission fees and permitting at various operating facilities and
remediation obligations. Failure to comply with these statutes, rules and
regulations may result in the assessment of civil and even criminal penalties.
The


                                      10
<Page>

                            DYNEGY DANSKAMMER, L.L.C.
                   NOTES TO CONDENSED FINANCIAL STATEMENTS
          FOR THE INTERIM PERIODS ENDED SEPTEMBER 30, 2001 AND 2000


Company's environmental expenditures are anticipated to increase in the
future with the trend toward stricter standards, greater regulation, more
extensive permitting requirements and an increase in the number and types of
assets subject to environmental regulation operated by the Company. No
assurance can be given that future compliance with these environmental
statutes, rules and regulations will not have a material adverse effect on
the Company's operations or its financial condition.

      PURCHASE OBLIGATIONS. The Company has entered into two separate long-term
contracts to purchase coal through 2002. The contracts require approximately
507,000 and 627,000 metric tons of coal to be purchased in 2001 and 2002,
respectively. Annual volume purchase requirements may be reduced by up to 10%
without penalty. In addition, the coal is purchased at a fixed rate that can be
adjusted based on certain market conditions.

NOTE 7 - SALE-LEASEBACK TRANSACTION

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

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


                                      11

<Page>

                            DYNEGY DANSKAMMER, L.L.C.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
             FOR THE INTERIM PERIODS ENDED JUNE 30, 2001 AND 2000



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


                                     GENERAL

      COMPANY PROFILE. Dynegy Danskammer was formed as an indirect wholly owned
subsidiary of Dynegy Holdings Inc. ("DHI") on September 14, 2000 for the purpose
of owning or leasing, making improvements to and operating the Danskammer
facility. Dynegy Danskammer acquired the Danskammer facility from Central Hudson
on January 30, 2001. The Danskammer facility was purchased for approximately
$324.0 million, including adjustments for inventories and pro-rations related to
specific items such as taxes, rents and fees.

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

      BUSINESS SEGMENTS. Dynegy Danskammer's operations are reported in one
segment.


                         LIQUIDITY AND CAPITAL RESOURCES

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

      In January 2001, Dynegy Danskammer completed the acquisition of the
Danskammer facility for approximately $308.0 million. In order to finance the
acquisition, Dynegy Danskammer entered into a subordinated loan agreement with
DHI. As of September 30, 2001, the loan from DHI was substantially repaid with
proceeds from the third-party financing described below.

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

                                  OTHER MATTERS

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

      NEW YORK ELECTRIC GENERATION MARKET. The New York Independent System
Operator, Inc. ("NYISO"), the FERC-approved operator of electric transmission
facilities and centralized electric markets in New York, filed an "Automated
Mitigation Procedure" ("AMP") proposal with the FERC. The AMP caps bid prices
based on the cost characteristics of generating facilities in New York, such as
those owned or operated by the Company. In an order issued on June 28, 2001, the
FERC accepted the AMP proposal for this past summer. As of September 28, 2001,
the NYISO has filed an application at the FERC to extend the AMP until October
31, 2002. Management cannot predict the outcome of this proceeding. If such
extension was to be granted, there can be no assurance that the AMP would not
have a material adverse effect on the results of operations or financial
condition of Dynegy Danskammer.

      CONCLUSION. The Company believes it will meet all foreseeable cash
requirements, including working capital, capital expenditures and debt service,
from operating cash flow, supplemented as necessary by borrowings.


                                      12

<Page>

                            DYNEGY DANSKAMMER, L.L.C.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
             FOR THE INTERIM PERIODS ENDED JUNE 30, 2001 AND 2000


                              RESULTS OF OPERATIONS

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

THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2001

      Revenues for the three months ended September 30, 2001 were approximately
$16.9 million. The revenues were derived from sales to an affiliate.

      Operating costs for the three months ended September 30, 2001 were
approximately $20.1 million. Operating costs consist mainly of expenses for
fuel, plant operations and maintenance and property taxes. Fuel expenses are
principally the costs of coal, natural gas and fuel oil used in operating the
generating facility.

      Depreciation and amortization expense for the three months ended September
30, 2001 of approximately $2.6 million primarily relates to the Danskammer
facility, which is being depreciated over periods ranging from five to 35 years.

      General and administrative costs for the three-month period ended
September 30, 2001 were approximately $405 thousand, which relate to support
services provided by affiliates for operations and maintenance management,
construction management and technical services, environmental health and safety,
computer services and other related support activities.

      Interest expense for the three-month period ended September 30, 2001 was
approximately $5.1 million. Interest expense primarily relates to borrowings
from a third party beginning in early May 2001.

NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2001

      Revenues for the nine months ended September 30, 2001 were approximately
$42.2 million. The revenues were derived from sales to an affiliate.

      Operating costs for the nine months ended September 30, 2001 were
approximately $50.0 million. Operating costs consist mainly of expenses for
fuel, plant operations and maintenance and property taxes.

      Depreciation and amortization expense for the nine months ended September
30, 2001 of approximately $6.9 million primarily relates to the Danskammer
facility.

      General and administrative costs for the nine-month period ended September
30, 2001 were approximately $1.0 million, which relate to the same items
described in the three-month period.

      Interest expense for the nine-month period ended September 30, 2001 was
approximately $14.1 million. Interest expense primarily relates to borrowings
from DHI under the subordinated loan agreements and to the term financing
obtained in May 2001.


                                      13

<Page>

                            DYNEGY DANSKAMMER, L.L.C.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
             FOR THE INTERIM PERIODS ENDED JUNE 30, 2001 AND 2000


CASH FLOW DISCLOSURES

      OPERATING CASH FLOW. Cash flow from operating activities totaled a source
of cash of approximately $3 thousand for the nine-month period ended September
30, 2001. Operating cash flow reflects the net loss, offset by non-cash
adjustments and changes in working capital. Other non-cash adjustments relate to
expenses charged by affiliates, partially offset by revenues charged to an
affiliate. Fluctuations in accounts receivable, accounts payable and accrued
liabilities reflect changes in the timing of payments or recognition of
liabilities and are not directly impacted by seasonal factors.

      CAPITAL EXPENDITURES AND INVESTING ACTIVITIES. Cash used from investing
activities includes the acquisition of the Danskammer facility. The Company had
additional capital expenditures of approximately $3.6 million in the nine-month
period ended September 30, 2001, but such transactions were funded by an
affiliate, and thus are not reflected on the statement of cash flows.

      FINANCING ACTIVITIES. In January 2001, Dynegy Danskammer completed the
acquisition of the Danskammer facility for approximately $308.0 million. In
order to finance the acquisition, Dynegy Danskammer entered into a subordinated
loan agreement with DHI. As of September 30, 2001, the loan from DHI was
substantially repaid with proceeds from the third-party financing described
below.

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











                                      14

<Page>

                            DYNEGY DANSKAMMER, L.L.C.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
             FOR THE INTERIM PERIODS ENDED JUNE 30, 2001 AND 2000


          UNCERTAINTY OF FORWARD-LOOKING STATEMENTS AND INFORMATION

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

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

-  The timing and extent of changes in commodity prices for energy, particularly
   electricity, coal and fuel oil;
-  Demand for electric capacity, energy and ancillary services in the markets
   served by Dynegy Danskammer's generation facility;
-  Competition from other power plants, including new plants that may be
   developed in the future;
-  The condition of the capital markets generally, which will be affected by
   interest rates and general economic conditions;
-  Operational factors affecting the commercial operations of Dynegy
   Danskammer's power generation facility, including catastrophic weather
   related damage, unscheduled outages or repairs, unanticipated changes in
   costs or availability of fuel or emission credits, the unavailability of gas
   transportation, the unavailability of electric transmission service or
   workforce issues;
-  Cost and other effects of legal and administrative proceedings, settlements,
   investigations and claims, including environmental liabilities, that may not
   be covered by indemnity or insurance; and
-  Other U.S. or New York regulatory or legislative developments that affect
   Dynegy Danskammer's electricity markets or the demand for energy generally,
   increase the environmental compliance cost for Dynegy Danskammer's power
   generation facility or impose liabilities on the owners of such facility.

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

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







                                      15

<Page>

                            DYNEGY DANSKAMMER, L.L.C.
          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
              FOR THE INTERIM PERIODS ENDED JUNE 30, 2001 AND 2000





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

























                                      16

<Page>

                            DYNEGY DANSKAMMER, L.L.C.

                           PART II. OTHER INFORMATION


ITEM 1 - LEGAL PROCEEDINGS

See Part I, Item 1, Condensed Consolidated Financial Statements, Note 6, which
is incorporated herein by reference.

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

(a)   There are no documents required to be included as exhibits to this
      Form 10-Q.

(b)   During the quarter ended September 30, 2001, the Company filed a Current
      Report on Form 8-K dated September 14, 2001. Item 5 was reported and no
      financial statements were filed.



                                      17
<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.


<Table>

<S>                                         <C>
                                            DYNEGY DANSKAMMER, L.L.C.



Date: November 14, 2001                     By:   /s/ Michael R. Mott
      -----------------                           ----------------------------------------
                                                  Michael R. Mott,
                                                  Senior Vice President and Controller
                                                  (Duly Authorized Officer and Principal
                                                  Accounting Officer)

</Table>


















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