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

                                    FORM 10-Q

(Mark One)

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

For the quarter ended September 30, 2004
                                       OR
         [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
               SECURITIES EXCHANGE ACT OF 1934

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

0001276518   MSW Energy Holdings II LLC        Delaware          13-3213489
0001276517   MSW Energy Finance Co. II, Inc.   Delaware          20-0400947

Commission      (Exact name of each        (State or other    (I.R.S. Employer
File Number  registrant as specified in    jurisdiction of     Identification
                    its charter)           incorporation or        Number)
                                             organization)


                        c/o American Ref-Fuel Company LLC
                             155 Chestnut Ridge Road
                           Montvale , New Jersey 07645
                             Phone No. 800-727-3835

  (Address, including zip code, and telephone number, including area code, of
                 the registrants' principal executive offices)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act):

MSW Energy Holdings II LLC:         yes  [  ]   no  [X]
MSW Energy Finance Co. II, Inc:     yes  [  ]   no  [X]

Indicate the number of shares outstanding of each of the registrants' classes
of common stock, as of the latest practicable date.

MSW Energy Holdings II LLC:      None
MSW Energy Finance Co. II, Inc:  100 shares of Common Stock

Documents Incorporated by Reference:  None

MSW Energy Finance Co. II, Inc. meets the conditions set forth in General
Instruction H 1(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q
with the reduced disclosure format.

                                       1

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<TABLE>
<CAPTION>
                                Table of Contents




<S>                                                                                                  <C>
Part I   FINANCIAL INFORMATION........................................................................3
Item 1.  Consolidated Financial Statements............................................................3
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations.......24
Item 3.  Quantitative and Qualitative Disclosures about Market Risk..................................36
Item 4.  Controls and Procedures.....................................................................38
PART II  OTHER INFORMATION...........................................................................38
Item 1.  Legal Proceedings...........................................................................38
Item 2.  Unregistered Sale of Equity Securities and Use of Proceeds..................................39
Item 3.  Defaults Upon Senior Securities.............................................................39
Item 4.  Submission of Matters to a Vote of Security Holders.........................................39
Item 5.  Other Information...........................................................................39
Item 6.  Exhibits and Reports on Form 8-K............................................................39
</TABLE>

SIGNATURES


SAFE HARBOR STATEMENT
This Form 10-Q contains "forward-looking statements" intended to qualify for
safe harbor from liability established by the Private Securities Litigation
Reform Act of 1995. Forward-looking statements should be read with the
cautionary statements and important factors included in this Form 10-Q at Part
I, Item 2- "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Risk Factors." Forward-looking statements are all
statements other than statements of historical fact, including without
limitation those that are identified by the use of the words "anticipates,"
"estimates," "expects," "intends," "plans," "predicts" and similar expressions.

                                       2

<PAGE>

Part I  FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements













                                       3



<PAGE>

<TABLE>
<CAPTION>
                   MSW ENERGY HOLDINGS II LLC AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                 (In thousands)

                              Assets
                                                             September 30, 2004           December 31, 2003
                                                             ------------------            ----------------
Current assets                                                     (unaudited)
<S>                                                          <C>                           <C>
   Cash and cash equivalents                                 $         73,162              $              2
   Restricted cash and short-term investments                          91,617                             -
   Accounts receivable, net of allowance for doubtful
      accounts of $1,672 and $0, respectively                          74,591                             -
   Prepaid expenses and other current assets                           10,040                             8
                                                             ----------------              ----------------
Total current assets                                                  249,410                            10
                                                             ----------------              ----------------

Long-term assets
   Property, plant and equipment, net                               1,202,412                             -
   Intangible assets, net                                             545,131                         9,078
   Goodwill                                                           121,945                             -
   Investment in Ref-Fuel Holdings                                          -                       488,447
   Restricted cash and long-term investments                           89,375                             -
   Other long-term assets                                               7,437                             -
                                                             ----------------              ----------------
Total long-term assets                                              1,966,300                       497,525
                                                             ----------------              ----------------
Total assets                                                 $      2,215,710              $        497,535
                                                             ================              ================

                  Liabilities and Member's Equity

Current liabilities
   Accounts payable and other current liabilities            $         42,612              $            263
   Current portion of long-term debt                                   83,159                             -
   Accrued interest payable                                            21,682                         1,705
   Taxes Payable                                                        5,643                         1,044
                                                             ----------------              ----------------
Total current liabilities                                             153,096                         3,012
                                                             ----------------              ----------------

Long-term liabilities
   Long-term debt                                                   1,238,569                       225,000
   Deferred taxes                                                     123,685                       119,543
   Other long-term liabilities                                        196,937                             -
                                                             ----------------              ----------------
Total long-term liabilities                                         1,559,191                       344,543
                                                             ----------------              ----------------
Total liabilities                                                   1,712,287                       347,555
                                                             ----------------              ----------------

Commitments and contingencies (Notes 12 and 13)

Minority interest in Consolidated Subsidiary                          365,962                             -
                                                             ----------------              ----------------

Member's equity
     Total member's equity                                            137,461                       149,980
                                                             ----------------              ----------------
     Total liabilities and member's equity                   $      2,215,710              $        497,535
                                                             ================              ================

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

</TABLE>

                                       4

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<TABLE>
<CAPTION>
                   MSW ENERGY HOLDINGS II LLC AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

                            (Unaudited, in thousands)

                                                                For the Three          For the Nine
                                                                Months Ended          Months Ended
                                                             September 30, 2004   September 30, 2004
                                                            -------------------   ------------------
Revenues
<S>                                                         <C>                   <C>
  Waste disposal and related services                       $         73,004      $         122,124
  Energy                                                              36,208                 58,527
  Other                                                                3,746                  5,759
                                                            -----------------     ------------------
       Total net revenues                                            112,958                186,410

Expenses
  Operating                                                           44,430                 75,139
  Depreciation and amortization                                       16,820                 27,993
  General and administrative                                           9,229                 17,119
  (Gain) loss on asset retirements                                      (218)                   618
                                                            -----------------     ------------------

       Operating income                                               42,697                 65,541

Interest income                                                          886                  1,403

Interest expense                                                     (16,710)               (33,868)

Equity in net earnings of unconsolidated
  affiliate - Ref-Fuel Holdings                                            -                  6,148

Minority interests in net income of subsidiaries                     (15,693)               (23,826)

Other, net                                                                 3                    105
                                                            -----------------     ------------------

    Income before income taxes                                        11,183                 15,503

Income tax provision                                                   4,744                  6,528
                                                            -----------------     ------------------

Net income                                                             6,439                  8,975

Other comprehensive loss                                                   -                  (211)
                                                            -----------------     ------------------

Comprehensive income                                        $          6,439      $          8,764
                                                            =================     ==================


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

                                       5

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                   MSW ENERGY HOLDINGS II LLC AND SUBSIDIARIES
                    CONSOLIDATED STATEMENT OF MEMBER'S EQUITY

                            (Unaudited, in thousands)




                                   Member's     Accumulated Other
                                   Interest    Comprehensive Income     Total
                                   ---------  --------------------- ------------

Balance, January 1, 2004            $149,980  $                -      $149,980
 Distribution to members             (21,494)                  -       (21,494)
 Unrealized gain on investments
  from the consolidation of Ref-
  Fuel Holdings                            -                 211           211
 Comprehensive income                  8,975                (211)        8,764
                                   ---------  --------------------- ------------
Balance, September 30, 2004         $137,461  $                -      $137,461
                                   =========  ===================== ============


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



                                       6

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<TABLE>
<CAPTION>
                   MSW ENERGY HOLDINGS II LLC AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS

                            (Unaudited, in thousands)

                                                                                  For the Nine
                                                                                  Months Ended
                                                                               September 30, 2004
                                                                     ---------------------------------------

Cash flows from operating activities
<S>                                                                  <C>
  Net income                                                         $                                8,975
  Adjustments to reconcile net income to net cash provided by
        operating activities:
    Depreciation and amortization                                                                    42,522
    Deferred taxes                                                                                    4,142
    Revenue contract levelization                                                                     9,002
    Equity earnings in unconsolidated affiliate - Ref-Fuel Holdings                                  (6,148)
    Distributions from unconsolidated affiliate - Ref-Fuel Holdings                                  31,500
    Minority interest in consolidated subsidiaries, net of Distributions                             18,826
      Loss on asset retirements                                                                         618
  Changes in assets and liabilities
    Accounts receivable, net                                                                         (3,277)
    Prepaid expenses and other current assets                                                         1,565
    Other long-term assets                                                                              292
    Accounts payable and other current  liabilities                                                    (262)
    Taxes payable                                                                                     4,599
    Accrued interest payable                                                                         (1,612)
    Other long-term liabilities                                                                        (131)
                                                                     ---------------------------------------
Net cash provided by operating activities                                                           110,611
                                                                     ---------------------------------------
Cash flows from investing activities
    Change in restricted cash and investments, net                                                  (41,850)
    Additions of property, plant and equipment                                                       (8,534)
    Proceeds from sale of assets                                                                         20
    Additional investment in unconsolidated affiliate -
    Ref-Fuel Holdings                                                                                   (75)
    Cash from consolidation of unconsolidated subsidiary (Note 1)                                    40,238
                                                                     ---------------------------------------
Net cash used in investing activities                                                               (10,201)
                                                                     ---------------------------------------
Cash flows from financing activities
    Payments for financing costs                                                                        (25)
    Payments on long-term debt                                                                       (5,731)
    Distributions paid to member                                                                    (21,494)
                                                                     ---------------------------------------
Net cash used in financing activities                                                               (27,250)
                                                                     ---------------------------------------
Net increase in cash and cash equivalents                                                            73,160
Cash and cash equivalents, beginning of period                                                            2
                                                                     ---------------------------------------
    Cash and cash equivalents, end of period                         $                               73,162
                                                                     =======================================

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

</TABLE>

                                       7

<PAGE>

MSW Energy Holdings II LLC and Subsidiaries

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------


1. Organization and Basis of Presentation

MSW Energy Holdings II LLC (MSW Energy Holdings II and collectively hereinafter
with its subsidiaries, referred to as the Company), a Delaware limited liability
company formed in August 2003 and its wholly-owned subsidiary, MSW Energy
Finance Co. II, Inc. (MSW Finance II), a Delaware corporation, were formed for
the purpose of issuing debt, the proceeds of which, along with capital
contributions, were used to fund the merger of MSW Merger LLC (MSW Merger), the
Company's indirect parent, with and into United American Energy Holdings Corp.
(UAE Holdings Corp.) (known as the UAE Merger). After the UAE Merger, UAE
Ref-Fuel II Corp. (UAE Ref-Fuel II), a Delaware corporation, an indirect
subsidiary of UAE Holdings Corp., became a subsidiary of MSW Energy Holdings II.
The UAE Merger was completed on December 12, 2003 (see Note 3). After completion
of the UAE Merger, MSW Energy Holdings II held a direct 49.9% capital interest
in Ref-Fuel Holdings LLC (Ref-Fuel Holdings) and wholly owns UAE Ref-Fuel II,
which owned a 0.1% capital interest in Ref-Fuel Holdings. Both interests were
contributed to MSW Energy Holdings II by UAE Holdings Corp. Ref-Fuel Holdings is
a holding company whose sole source of operating cash flow relates to its 100%
membership interest in American Ref-Fuel Company LLC (ARC, American Ref-Fuel or
ARC LLC). American Ref-Fuel, which through subsidiaries, owns and operates six
waste-to-energy facilities in the United States of America. From inception
(August 20, 2003) through December 12, 2003, MSW Energy Holdings II did not have
any operations, other than incurring interest on its debt.

MSW Finance II was organized in November 2003, for the sole purpose of acting as
co-issuer with MSW Energy Holdings II of $225.0 million aggregate principal
amount of 7 3/8% senior secured notes due September 1, 2010 (Senior Notes).
Other than serving as co-issuer, MSW Finance II does not conduct operations of
its own and has no assets.

On April 30, 2004, MSW Energy Holdings II's indirect owner, UAE Holdings Corp.,
entered into a series of transactions (Equalization Transactions) which changed
its ownership structure. As a result, UAE Holdings Corp. is owned 60% by
affiliates of Credit Suisse First Boston Private Equity, Inc. (CSFB Private
Equity), and 40% by entities managed by AIG Global Investment Corp. (AIGGIC).

Also as a result of the Equalization Transactions, MSW Energy Holdings LLC (MSW
Energy Holdings), which holds a 49.8% membership interest in Ref-Fuel Holdings,
was owned (i) 60% by MSW Acquisition LLC, an affiliate of CSFB Private Equity,
(ii) 39.99% collectively by entities managed by AIGGIC, and (iii) 0.01% by UAE
Holdings Corp., who was named the managing member.

The Equalization Transactions resulted in CSFB Private Equity affiliates
collectively owning an approximate 60% indirect interest in Ref-Fuel Holdings
and AIGGIC affiliates collectively owning an approximate 40% indirect interest
in Ref-Fuel Holdings.

On August 31, 2004, UAE Holdings Corp. and certain investment funds affiliated
with CSFB Private Equity and certain funds managed by AIGGIC effected a series
of transactions that resulted in UAE Holdings Corp. becoming the indirect parent
of MSW Energy Holdings (August 31 Transactions).

After the Equalization Transactions, UAE Holdings Corp. controls the operations
of Ref-Fuel Holdings as 99.8% of the interests in Ref-Fuel Holdings are owned by
the Company and MSW Energy Holdings (effective as of April 30, 2004). As a
result, the Company has effective control of Ref-Fuel Holdings, and is therefore
consolidating its results of operations and cash flows for the period from May
1, 2004, and the balance sheet as of April 30, 2004.

                                       8

<PAGE>

The Company's sole source of operating cash flow relates to its indirect 50%
membership interest in Ref-Fuel Holdings. Ref-Fuel Holdings is a holding company
whose sole source of operating cash flow relates to its 100% membership interest
in American Ref-Fuel.

American Ref-Fuel owns partnerships that develop, own and operate
waste-to-energy facilities, which combust municipal solid waste and produce
energy in the form of electricity and steam. Through such partnerships, American
Ref-Fuel owns or controls six waste-to-energy facilities located in the
northeastern United States (the ARC operating facilities). The subsidiaries of
American Ref-Fuel that operate the ARC operating facilities (the ARC operating
companies) derive revenues principally from disposal or tipping fees received
for accepting waste and from the sale of electricity and steam produced by those
facilities. ARC subsidiaries include: (a) American Ref-Fuel Company (Ref-Fuel
Management); (b) TransRiver Marketing Company, L.P. (TransRiver); (c) American
Ref-Fuel Company of Hempstead (Hempstead); (d) American Ref-Fuel Company of
Essex County (Essex); (e) American Ref-Fuel Company of Southeastern Connecticut
(Seconn); (f) American Ref-Fuel Company of Niagara, L.P. (Niagara); (g) American
Ref-Fuel Company of Semass, L.P. (Ref-Fuel Semass); (h) American Ref-Fuel
Operations of Semass, L.P. (Semass Operator); (i) American Ref-Fuel Company of
Delaware Valley, L.P. (Delaware Valley) (collectively referred to as the
American Ref-Fuel Partnerships).

The accompanying consolidated financial statements are unaudited. In the opinion
of management, such statements include all adjustments, including normal
recurring accruals and adjustments, necessary for a fair presentation of the
results for the periods presented. The accounting policies followed during
interim periods reported are in conformity with accounting principles generally
accepted in the United States of America; however, certain information and
footnote disclosures normally included in financial statements have been
condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission. These consolidated financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2003. The
Company believes that the disclosures included are adequate and provide
sufficient information. The results of operations for the interim periods are
not necessarily indicative of the results that might be expected for future
interim periods or for a full year.


2. Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include accounts of MSW
Energy Holdings II, its wholly-owned subsidiaries and Ref-Fuel Holdings. Prior
to the Equalization Transactions, the Company's investment in Ref-Fuel Holdings
was accounted for using the equity method. As a result of the Equalization
Transactions, the Company has effective control of Ref-Fuel Holdings and, as of
April 30, 2004, is consolidating its results of operations, cash flows and
balance sheet. All significant intercompany transactions and accounts have been
eliminated.

Reclassifications

Certain reclassifications have been made to the prior year to conform to the
current year's presentation.


                                       9

<PAGE>

Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the (a) reported amounts of assets and
liabilities at the date of the financial statements; (b) disclosures of
contingent assets and liabilities at the date of the financial statements; and
(c) the reported amounts of revenues and expenses recognized during the
reporting period. Significant management estimates include the estimated lives
of long-lived assets, allowances for doubtful accounts receivable, estimated
useful lives and fair value adjustments of net tangible and intangible assets,
liabilities for self-insurance and certain landfill liabilities. Such estimates
are revised as necessary when additional information becomes available. Actual
results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include cash balances and unrestricted short-term
investments with original maturities of three months or less.

Restricted Cash and Investments

The Company is required to maintain cash and investment balances that are
restricted by provisions of its debt, operational or lease agreements. These
amounts are held by financial institutions in order to comply with contractual
provisions requiring such reserves.

Restricted cash and investments are invested in accounts earning market rates;
therefore, the carrying value approximates fair value. Restricted cash and
investments are excluded from cash and cash equivalents in the accompanying
financial statements, and changes in these assets are characterized as investing
activities in the consolidated statements of cash flows. Restricted cash and
investments include certain investments stated at amortized cost, which
approximates market, including debt securities that are classified as
"held-to-maturity" because the Company has the intent and ability to hold the
securities to maturity. The Company accounts for marketable securities in
accordance with SFAS Statement No. 115, "Accounting for Certain Investments in
Debt and Equity Securities". Under the provisions of this statement, investments
that are classified as available-for-sale are marked to market with unrealized
gains and losses reported as a component of other comprehensive income.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. The Company provides for
depreciation of its assets using the straight-line method over the estimated
useful lives.

Routine repairs and maintenance are charged against current operations.
Expenditures that increase value, increase capacity or extend useful lives are
capitalized.

When property and equipment are retired, sold, or otherwise disposed of, the
cost, net of accumulated depreciation, is removed from the accounts and any
resulting gain or loss is included in operating income for the period.

The Company maintains a supply of various spare parts integral to its
operations. Certain spare parts that are not expected to be used within the
upcoming year have been classified as long-term spare parts inventory within
property, plant and equipment.

                                       10

<PAGE>

Landfill costs, including original acquisition cost and incurred construction
costs, are amortized over the estimated capacity of the landfill based on a
per-unit basis as landfill space is consumed.

In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets", management periodically reviews long-lived assets and
intangibles whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. If factors indicate that an
asset should be evaluated for possible impairment, management compares estimated
undiscounted future operating cash flows associated with the asset to its
carrying amount. If the carrying amount of the asset is greater than
undiscounted future operating cash flows, an impairment loss is calculated and
recognized. The effect of any impairment would be to expense the difference
between the fair value of such asset and its carrying value.

Goodwill

Goodwill represents the total consideration paid in excess of the fair value of
the net tangible and identifiable intangible assets acquired and the liabilities
assumed. In accordance with the provisions of Financial Accounting Standard (FAS
No. 142), "Goodwill and Other Intangible Assets", the Company performs an annual
fair value test of its recorded goodwill for its reporting units using a
discounted cash flows approach.

Intangible Assets

Energy contract intangibles represent the amount by which the contract rates in
long-term energy sales contracts held by certain subsidiaries of the Company
exceeded fair value on the dates that these subsidiaries were acquired. These
contract related intangibles are amortized into income as a reduction of energy
revenues on a straight-line basis over the remaining terms of the applicable
contracts, which range from six to sixteen years.

Waste contract intangibles represent the amount by which the contract rates in
long-term waste sales contracts held by Hempstead exceeded fair value on the
dates that the partnership was acquired. These contract related intangibles are
being amortized into income as a reduction of waste revenues on a straight-line
basis through 2009, the term of the applicable contracts.

The Company has intangible assets relating to Nitrous Oxide (NOx) emission
allowances. These assets have indefinite lives and, as such, are not amortized.
Consistent with all the Company's intangible assets, these are reviewed under
the provisions of FAS 142 for potential impairment on an annual basis.

Deferred financing costs represent certain capitalizable costs incurred by the
Company to finance its long-term debt obligations. These costs are amortized to
interest expense over the life of the related debt using the effective interest
rate method.

Equity Method Investment

The Company's investment in Ref-Fuel Holdings was accounted for using the equity
method of accounting prior to the Equalization Transactions. As a result, the
accompanying consolidated results of operations include the Company's share of
net earnings in "Equity in net earnings of Ref-Fuel Holdings" for the period up
to April 30, 2004.

                                       11

<PAGE>

Other Liabilities

Other current and other long-term liabilities primarily consist of (a) fair
value adjustments related to certain operating leases and long-term waste
contracts acquired by the Company; (b) deferred revenue; (c) accruals for
certain long-term incentive plans; and (d) energy contract levelization (see
Note 10).

The fair value adjustment related to the operating lease represents the amount
by which future rent payments on the Delaware Valley facility lease exceeded the
fair market value of that facility as of the acquisition dates. This amount is
being amortized as a decrease in facility rent expense on a straight-line basis
through 2019, the end of the associated lease.

The fair value adjustment related to the acquired long-term waste contracts
represents the amount by which costs of disposal and processing of waste
delivered pursuant to certain long-term waste contracts held by Semass
Partnership and Essex exceeded estimated contract revenues at their respective
acquisition dates. These costs are being amortized as an increase to waste
disposal revenues using the straight-line method over the term of the applicable
contracts.

Landfill closure and postclosure costs are also included in other long-term
liabilities. The Company accrues landfill closure and postclosure costs as the
remaining permitted space of the landfill is consumed over the expected life
cycle of the landfill.

The Company is accounting for the long-term power contracts at the Semass
Partnership in accordance with EITF Issues 91-6 "Revenue Recognition of
Long-Term Power Sales Contracts" and EITF 96-17 "Revenue Recognition under
Long-Term Power Sales Contracts That Contain both Fixed and Variable Pricing
Terms", which require the Company to recognize power revenues under these
contracts as the lesser of (a) amounts billable under the respective contracts;
or (b) an amount determinable by the kilowatt hours made available during the
period multiplied by the estimated average revenue per kilowatt hour over the
term of the contract. The determination of the lesser amount is to be made
annually based on the cumulative amounts that would have been recognized had
each method been applied consistently from the beginning of the contract. The
difference between the amount billed and the amount recognized is included in
other long-term liabilities.

Revenue Recognition

The Company recognizes revenue from two major sources: waste disposal services
and energy production. Revenue from waste disposal services is recognized as
waste is received, and revenue from energy production is recognized as the
energy is delivered.

Concentration of Credit Risk

The Company invests excess cash and funds held in trust in bank deposit
accounts, commercial paper, certificates of deposit and money market investments
with a limited number of financial institutions.

The Company has exposure to credit risk in accounts receivable as the Company
disposes of waste for and sells power to a limited number of customers. The
Company believes adequate reserves are maintained for potential credit losses.
Furthermore, these and other customers are primarily located in the northeastern
region of the United States of America.

                                       12

<PAGE>

Unamortized Debt Premium

Unamortized debt premium represents the increase in the fair value of the
Company's debt recorded as a result of the UAE Merger. These costs are amortized
to interest expense over the life of the related debt using the effective
interest method.

Income Taxes

As the Company is a limited liability company, it is not directly subject to
Federal and State income taxes; rather its income or loss is required to be
included in the income tax returns of its member. The Company's member, UAE
Holdings Corp., is a C corporation for tax purposes. For the period ended
September 30, 2004, the Company's provision reflects the C corporation taxes
that its member is responsible for on the income of the Company.

The Company accounts for income taxes under the asset and liability method. The
provision for income taxes includes deferred income taxes resulting from items
reported in different periods for income tax and financial statement purposes.
Deferred income tax assets and liabilities represent the expected future tax
consequences of the differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases. The effects
of changes in tax rates on deferred income tax assets and liabilities are
recognized in the period that includes the enactment date.

Fair Value of Financial Instruments

Unless disclosed otherwise, all other financial instruments of the Company are
stated at cost, which management believes approximates fair market value.

Push-down Accounting

Upon consummation of the UAE Merger and taking into account the MSW Energy
Holdings' June 30, 2003 acquisition of membership interests in Ref-Fuel
Holdings, affiliates of CSFB Private Equity and AIGGIC (the Control Group) owns,
directly and indirectly, 99.8% of the membership interests in Ref-Fuel Holdings
(and exercise voting power with respect to the remaining 0.2% interest).
Emerging Issues Task Force (EITF) Topic D-97, "Push-Down Accounting", requires
that Ref-Fuel Holdings' financial statements reflect this change in ownership.
Accordingly, the aggregate excess of purchase price over the net assets acquired
by the Company was pushed-down to Ref-Fuel Holdings and its subsidiaries on
December 12, 2003.

Prior to push-down on December 12, 2003, identifiable intangible assets were
included in "Investment in Ref-Fuel Holdings" on the Company's consolidated
balance sheet and were amortized on a straight-line basis over their estimated
useful lives. As a result of push-down accounting, the excess of the purchase
price paid by the Company over the Company's share of members' equity of
Ref-Fuel Holdings on the acquisition date has been allocated to the Company's
proportionate share of the fair value of the assets acquired and liabilities
assumed, based on an independent valuation of Ref-Fuel Holdings (see Note 3).

                                       13

<PAGE>

3. Acquisition of Membership Interests in Ref-Fuel Holdings

On December 12, 2003, MSW Merger, the Company's indirect parent prior to the
merger, effected the merger with and into UAE Holdings Corp. contemplated by an
agreement and plan of merger dated as of August 22, 2003 (the UAE Merger)
pursuant to which the members of MSW Merger became the sole stockholders of UAE
Holdings Corp., a company whose primary asset is its direct wholly-owned
subsidiary, UAE Corp. At the same time the Company's direct parent prior to the
merger, MSW Intermediate Merger LLC, merged with and into UAE Ref-Fuel LLC, an
indirect wholly-owned subsidiary of UAE Corp., and UAE Ref-Fuel contributed to
the Company its direct 49.9% capital interest in Ref-Fuel Holdings and all of
its interest in UAE Ref-Fuel II, which owns a 0.1% capital interest in Ref-Fuel
Holdings, which resulted in an allocated purchase price attributable to Ref-Fuel
Holdings of $364.7 million recorded as a contribution to member's equity. As a
result of the UAE Merger, the Company is wholly owned indirectly by UAE Holdings
Corp.

On December 12, 2003, immediately following these transactions, the Company
transferred to its new indirect owner, UAE Corp., the net proceeds of $220.5
million of the Senior Notes. These funds, along with additional capital
contributions to MSW Merger, were used to fund the UAE Merger. At closing, UAE
Corp. assumed an obligation under the ARC equity contribution agreement.

The Company's share of members' equity of Ref-Fuel Holdings acquired as of
December 12, 2003 was $162.5 million. As required by push-down accounting, the
excess purchase price of approximately $202.2 million has been allocated to the
Company's proportionate share of the fair values of the assets acquired and
liabilities assumed based on an independent valuation of Ref-Fuel Holdings
tangible assets, property, plant and equipment, identifiable intangible assets
and debt. The amounts allocated to tangible and intangible assets are amortized
using the straight-line method over the estimated useful lives of the underlying
assets or obligations ranging from ten to twenty years. Debt is being amortized
based on the effective interest rate method over the life of the obligations.

A summary of the allocation of purchase price to the fair value of the assets
acquired assumed by the Company and the Company's underlying investment in
Ref-Fuel Holdings' members' equity December 12, 2003 is as follows (in
thousands):

      Ref-Fuel Holdings' members' equity acquired           $   162,488
      Fixed assets and other adjustments                         74,395
      Identifiable intangible assets, net                       140,433
      Goodwill and other assets                                 (14,225)
      Other long-term assets                                     (2,891)
      Long-term debt                                            (20,341)
      Other long-term liabilities                                24,852
                                                            -----------
        Allocated purchase price contributed                $   364,711
                                                            ===========

                                       14

<PAGE>


As described in Note 1, the Equalization Transactions were consummated on April
30, 2004 and, as a result of these transactions, the Company's interest in
Ref-Fuel Holdings is a controlling interest, which requires consolidation.

Pro Forma Information

The following results represent the unaudited pro forma results as if MSW Energy
Holdings II acquisition of its interests in Ref-Fuel Holdings and Equalization
Transactions had occurred on January 1, 2003. These results are presented for
informational purposes only, and are not necessarily indicative of the actual
results that would have resulted had the acquisition, the Equalization
Transactions and the August 31 Transactions actually occurred (in thousands,
unaudited):

<TABLE>
<CAPTION>
                                                      Pro Forma          Pro Forma
                                                     For the Nine       For the Nine
                                                     Months Ended       Months Ended
                                                  September 30, 2004 September 30, 2003
                                                  ------------------ -------------------
Revenues
<S>                                               <C>                <C>
 Waste disposal and related services              $         211,620  $          209,265
 Energy                                                     100,093              98,922
 Other                                                       12,234              10,073
                                                  ------------------ -------------------
Total net revenues                                          323,947             318,260
                                                  ------------------ -------------------
Expenses
 Operating                                                  148,460             145,948
 Depreciation and amortization                               50,836              51,057
 General and administrative                                  31,616              35,144
 Loss on asset retirements                                      960               1,717
                                                  ------------------ -------------------
Operating income                                             92,075              84,394
Interest income                                               2,387               2,384
Interest expense                                            (49,442)            (49,713)
Loss on early extinguishment of debt                              -              (3,292)
Minority interests in net income of subsidiaries            (30,385)            (24,710)
Other income (expenses), net                                    225                (384)
                                                  ------------------ -------------------
Net income before taxes                                      14,860               8,679
Taxes                                                        (5,944)             (3,472)
                                                  ------------------ -------------------
Net income                                        $           8,916  $            5,207
                                                  ================== ===================
</TABLE>

4. Equity Investment in Ref-Fuel Holdings

Prior to the Equalization Transactions, the Company recorded its investment in
Ref-Fuel Holdings as an equity investment. Ref-Fuel Holdings condensed financial
information prior to April 30, 2004 is included for informational purposes.

                                       15

<PAGE>

Summarized condensed balance sheet information of Ref-Fuel Holdings, is as
follows (in thousands):

                                      As of               As of
                                 April 30, 2004     December 31, 2003
                                 --------------     -----------------
                                  (unaudited)

Current assets                   $   177,397         $   233,151
Noncurrent assets                  1,879,198           1,894,757
Current liabilities                  147,068             133,358
Noncurrent liabilities             1,218,780           1,253,250
Members' Equity                      690,747             741,300

Summarized statement of operations information for Ref-Fuel Holdings is as
follows (in thousands):

                                                      For the Four
                                                      Months Ended
                                                     April 30, 2004
                                                   ------------------

Revenues                                           $       137,537
Operating income                                            26,534
Net earnings                                                12,753
Company's equity in net earnings                             6,148

5. Property, Plant and Equipment

Property, plant and equipment consists of the following (in thousands):

<TABLE>
<CAPTION>

                                     Useful Life  September 30, 2004    December 31, 2003
                                    ------------  -----------------------------------------
                                                     (unaudited)
<S>                                  <C>                 <C>          <C>
 Plant and equipment                 2-50 years          $1,163,443   $                  -
 Land                                                         3,813                      -
 Leasehold improvements             Up to 17 years           44,562                      -
 Landfill                             13 years               15,470                      -
 Spare parts                                                 12,253                      -
 Construction in progress                                    12,180                      -
                                                  ------------------  ---------------------
 Total property, plant and
  equipment                                               1,251,721                      -
 Accumulated depreciation                                   (49,309)                     -
                                                  ------------------  ---------------------
 Property, plant and equipment, net                      $1,202,412   $                  -
                                                  ==================  =====================
</TABLE>

                                       16

<PAGE>

6. Intangible Assets

<TABLE>
<CAPTION>
Intangible assets consist of the following (in thousands):


                                                September 30,   December 31,
                                 Useful Life         2004            2003
                               ---------------  --------------  --------------
                                                 (unaudited)

<S>                              <C>                 <C>        <C>
Energy contracts                 6-16 years          $522,430   $           -
Waste contracts                    6 years             23,600               -
Financing costs                    7 years              9,241           9,216
Emissions credits                Indefinite            38,910               -
Other intangibles                Indefinite             3,599               -
                                                --------------  --------------
                                                      597,780           9,216
Accumulated amortization                              (52,649)           (138)
                                                --------------  --------------
Intangible assets, net                               $545,131   $       9,078
                                                ==============  ==============
</TABLE>

7. Goodwill

<TABLE>
<CAPTION>
Goodwill consists of the following (in thousands):

                                                      September 30, 2004  December 31, 2003
                                                      ------------------  -----------------
                                                             (unaudited)
<S>                                                            <C>        <C>
Beginning balance                                              $      -   $              -
Goodwill from the consolidation of Ref-Fuel Holdings            121,945                  -
                                                      ------------------  -----------------
Ending balance                                                 $121,945   $              -
                                                      ==================  =================
</TABLE>


8. Accounts Payable and Other Current Liabilities

Accounts payable and other current liabilities consist of the following (in
thousands):


                                 September 30, 2004  December 31, 2003
                                 ------------------  -----------------
                                    (unaudited)
Accounts payable                           $27,408               $263
Incentive plan accruals                      4,083                  -
Compensation liabilities                     6,624                  -
Other                                        4,497                  -
                                 ------------------  -----------------
                                           $42,612               $263
                                 ==================  =================

                                       17

<PAGE>

9. Financing Arrangements

<TABLE>
<CAPTION>
Long-term debt obligations of the Company consist of the following (in
thousands):


                                                    Interest Rate                   September 30, December 31,
                                                    (average rate)  Final Maturity     2004         2003
                                                    -------------   --------------  ------------  ------------
                                                                                    (unaudited)

<S>                                                        <C>              <C>   <C>           <C>
Senior Notes                                               7.375%           2010  $    225,000  $   225,000
                                                                                  ------------- ------------

 Ref-Fuel Holdings debt
  ARC Senior Notes                                          6.26%           2015       253,300            -
  Niagara Series 2001                               5.45 - 5.625%           2015       165,010            -
  Seconn Corporate Credit Bonds 1992
       Series A                                             6.45%           2022        30,000            -
  Seconn Corporate Credit Bonds ARC-
        I Series A and ARC-II Series A                      5.50%           2015        13,500
  Hempstead Corporate Credit Bonds                          5.00%           2010        42,670            -
  Hempstead project debt                              4.40%-5.00%           2009       133,278            -
  Essex project debt                                  5.32%-7.48%           2020       108,662            -
  Seconn project debt                                5.125%-5.50%           2015        53,499            -
  Semass Series 2001A                                5.50%-5.625%           2016       134,345            -
  Semass Series 2001B                                 5.00%-5.50%           2010       104,385            -
                                                                                  ------------- ------------
     Subtotal                                                                        1,038,649            -
                                                                                  ------------- ------------
                                                                                                          -
  Other obligations                                                                        294            -
                                                                                  ------------- ------------
 Total debt at par value                                                             1,263,943      225,000

  Unamortized debt premium, net                                                         57,785            -
     Current portion                                                                   (83,159)           -
                                                                                  ------------- ------------

 Total long-term debt obligations                                                 $   1,238,569 $   225,000
                                                                                  ============= ============
</TABLE>

In November 2003, the Company, jointly and severally with MSW Finance II, issued
$225.0 million aggregate principal amount of 7 3/8% senior secured notes due
2010 (Senior Notes). Interest on the Senior Notes accrues at 7 3/8% per annum,
beginning from the date of issuance and is payable on March 1st and September
1st of each year, commencing on March 1, 2004. Interest only is payable
throughout the term of the Senior Notes with principal and unpaid interest
payable at maturity on September 1, 2010. Holders of Senior Notes may require
the Company to repurchase the Senior Notes upon a change in control or if the
Company receives any proceeds from certain financings or asset sales by Ref-Fuel
Holdings and its subsidiaries.

The indenture for the Senior Notes provides for certain restrictive covenants
including, among other things, restrictions on incurrence of indebtedness,
certain payments to related and unrelated parties, acquisitions and asset sales.

Certain of the debt agreements held by the Company contain restrictions on cash
distributions and new borrowings. Substantially all of the assets and revenues
of the facilities owned or controlled and operated by subsidiaries of the
Company are pledged to trustees under the terms of the debt agreements. In
addition, the terms of the documents governing these obligations limit the
business activities and the circumstances and timing of making partnership
distributions. In the event of any bankruptcy or liquidation the Ref-Fuel
Holdings debt would be repaid prior to the repayment of the Senior Notes.

                                       18

<PAGE>

10. Other Long-Term Liabilities

<TABLE>
<CAPTION>
Other long-term liabilities consist of the following (in thousands):


                                        Amortization        September 30,         December 31,
                                        Period (years)            2004                 2003
                                      ------------------   -----------------     ----------------

<S>                                                <C>             <C>                        <C>
Waste contracts acquired                           9-17            $120,243                   $-
Operating lease acquired                             14              42,094                    -
Energy contract levelization                         12              17,961                    -
Landfill liabilities                                 13              10,575                    -
Deferred revenue                                   8-20               3,780                    -
Incentive plan accruals                                               2,284                    -
                                                           -----------------     ----------------
                                                                   $196,937                   $-
                                                           =================     ================
</TABLE>

See Note 15 for amortization of certain other long-term liabilities.


11. Income Taxes

The components of the provision for income taxes, for the three and nine months
ended September 30, 2004 consist of the following (in thousands):

                               For the Three                  For the Nine
                                Months Ended                  Months Ended
                             September 30, 2004            September 30, 2004
                         ---------------------------     -----------------------

Current provision               $             3,506            $     5,189
Deferred provision                            1,238                  1,339
                         ---------------------------     -----------------------

                                $             4,744            $     6,528
                         ===========================     =======================


A reconciliation of the statutory federal income tax expense with the
corporation's actual effective combined federal and state income tax expense for
the three and nine months ended September 30, 2004 is as follows (unaudited):

                                          For the Three         For the Nine
                                           Months Ended        Months Ended
                                        September 30, 2004  September 30, 2004
                                        ------------------ -------------------

Statutory federal income tax rate                    35.0%             35.0%
State tax rate, net of federal benefit                5.6%              5.6%
Other                                                 1.8%              1.5%
                                        ------------------ ------------------

Total combined effective federal and
     state income tax rate                           42.4%             42.1%
                                        ================== ==================

                                       19

<PAGE>

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amount used for income tax purposes. The deferred income tax
liability included in the consolidated financial statements as of September 30,
2004 is comprised of $116.0 million attributable to the Company's investment in
Ref-Fuel Holdings and $2.7 million attributable to the subsidiaries of Ref-Fuel
Holdings investments in the ARC operating companies.


12. Operational and Other Agreements

The ARC operating facilities at Hempstead, Essex, Seconn, Semass and Delaware
Valley operate under various long-term service agreements, the terms of which
extend from 2009 through 2020. These service agreements require the projects to
provide disposal services for waste delivered by counterparties to these
agreements at prices determined by various formulas contained in such
agreements.

Duke Energy Corporation (Duke) and Allied Waste Industries, Inc. (Allied) are
each obligated to fund one-half of certain cash shortfalls and other liabilities
of Essex arising out of operating the project, including certain environmental
claims. Essex and ARC LLC entered into agreements with Duke and Allied requiring
Essex and ARC LLC to reimburse, indemnify and defend Duke and Allied from any
liability in respect to these obligations.

In order to provide ARC LLC with an additional source of funds to meet calls on
its project support obligations, MSW Energy Holdings and UAE Holdings Corp.
entered into the Equity Contribution Agreement pursuant to which each of them
have agreed to provide up to $50 million in equity capital to ARC LLC.

13. Commitments and Contingencies

Environmental and Regulatory Risk

The Company operates in an environmentally sensitive industry and is subject to
extensive federal, state and local laws and regulations adopted for the
protection of the environment. The laws and regulations primarily applicable to
the Company are those related to discharge of emissions into the air and
management of solid waste but can also include those related to water use,
discharges to water, wetlands preservation and hazardous waste management.
Certain of these laws have extensive and complex requirements relating to
obtaining construction and operating permits, monitoring, record keeping and
reporting. While management believes that it is in substantial compliance with
permits and other applicable environmental laws relating to the Company, its
facilities, from time to time, may not be in full compliance with all such laws.

Noncompliance with environmental laws and regulations can result in the
imposition of civil or criminal fines or penalties. In some instances,
environmental laws also may impose clean-up or other remedial obligations in the
event of a release of pollutants or contaminants into the environment. The
Company incurs operating costs and capital expenditures related to various
environmental protection and monitoring programs. Such expenditures have not had
a material adverse effect on the Company's consolidated financial position or
results of operations. However, federal, state and local regulatory authorities
may consider proposals to restrict or tax certain emissions, which proposals, if
adopted, could impose additional costs on the operation of the Company.

                                       20

<PAGE>

In August 2004, USEPA notified American Ref-Fuel Company of Essex County that it
was potentially liable under CERCLA Section 107(a) for response actions in the
Lower Passaic River Study Area (LPRSA), a 17 mile stretch of river in northern
New Jersey. Ref-Fuel is one of at least 52 Potentially Responsible Parties
(PRPs) named thus far. USEPA alleges that hazardous substances found in the
LPRSA were being released from Ref-Fuel's Essex County facility site, which
abuts the river. USEPA's notice letter states that Ref-Fuel may be liable for
costs related to a proposed $10 million study of the Lower Passaic River and for
unspecified natural resource damages. Considering the history of industrial and
other discharges into the LPRSA from other sources, including named PRPs,
Ref-Fuel believes that its contribution will be determined to be de minimus;
however, it is not possible at this time to predict that outcome with certainty
or to estimate Ref-Fuel Holdings' liability for the study or any eventual
natural resource damage.

Landfill Agreements

Semass Partnership, a subsidiary of Ref-Fuel Semass, has a waste management
agreement (the WMA) dated May 25, 1982, as amended, with the Carver, Marion,
Wareham Regional Refuse Disposal District (CMW). The WMA allows Semass
Partnership to utilize a portion of a landfill (the CMW Landfill), which CMW
leases from Wankinco River, Inc. (Wankinco).

Beginning in May 1997 Wankinco provided several notices purportedly terminating
the lease on the CMW Landfill based upon an allegation that the lease term
automatically expired due to alleged failures to strictly comply with the terms
of the lease. In June 1997, Semass Partnership and CMW filed suit against
Wankinco and A. D. Makepeace Company, Inc., Wankinco's parent company, seeking a
declaratory judgment that Semass Partnership and CMW may continue to operate the
CMW Landfill. Trial of the matter before the court was completed in 2001 and a
decision was received by the Company in December 2002, which decided virtually
all issues in favor of the Semass Partnership. The Semass Partnership avoided
both forfeiture of possession and any liability for damages due to landfill
operations. Wankinco appealed in January 2003, and on August 19, 2004, the
Appellate Court upheld the Trial Courts decision in respect of all decisions
related to the alleged lease violations. One ruling unrelated to lease
forfeiture or damages for unlawful possession was remanded because the Judge's
ruling that Semass had not engaged in "an unfair and deceptive act or practice"
applied the law conjunctively rather than disjunctively (as required by the
law). The Appellate Court affirmed the Judge's ruling that there was no
unfairness but remanded the question of deception for further findings since the
Appellate Court, due to the use of the conjunctive rather than the disjunctive,
was unable to infer that the Judge did not find a compensable deceptive act.
Management believes that the Judge's ruling on remand will clarify this issue in
favor of the Company. In addition, Wankinco appealed the Appellate Court's
decision on the lease issues to the Supreme Judicial Court of Massachusetts and,
on September 30, 2004, the Supreme Judicial Court denied Wankinco's Application
for Further Appellate Review. Accordingly, except for the remand discussed
above, the favorable decisions received by Semass have become final and
nonappealable. Apart from this decision, the Semass Partnership and Wankinco
continue litigating several other actions involving regulatory issues at the
landfill.

Management believes that the ultimate resolution of these matters will not have
a material adverse impact on the results of operations, future cash flows or
financial position of the Company.

In March 1990, the Semass Partnership, CMW and Wankinco entered into an
agreement related to the CMW Landfill, as amended (the Settlement Agreement),
which requires, among other things, the Semass Partnership to make annual
deposits into an environmental protection trust fund (the Fund) in lieu of
obtaining environmental impairment liability insurance for the CMW Landfill. The
Semass Partnership is required under the Settlement Agreement to deposit
$500,000 annually into the Fund, payable in equal quarterly installments.

                                       21

<PAGE>

Certain additional deposits are required subject to the availability of cash in
accordance with the Loan Agreement. The Semass Partnership's obligation to make
deposits into the Fund ceases when the Fund reaches a balance of $20.0 million.
Proceeds from the Fund are to be used primarily for remediation of the CMW
Landfill in the event of environmental damage. The Semass Partnership and
Wankinco are each entitled to receive one-half of the balance of the Fund upon
final closure of the CMW Landfill and receipt of required governmental
approvals. During the years ended December 31, 2003 and 2002, the Semass
Partnership made the required quarterly deposits into the Fund and charged
operations for one-half of the deposits into the Fund, representing one-half of
the balance of the Fund which will be disbursed to Wankinco upon final closure
of the CMW Landfill. Additional charges to operations may be required in future
years if any disbursements are required from the Fund to remediate any
environmental damages. To date, management is not aware of any such
environmental damages.

Future Minimum Payments Under Operating Leases

Delaware Valley leases the Delaware Valley Project pursuant to an operating
lease that expires in July 2019. In certain default circumstances under such
lease, Delaware Valley (and ARC LLC by virtue of a guaranty) become obligated to
pay a contractually specified "stipulated loss" value that declines over time
and was approximately $171.4 million as of September 30, 2004.

The Company also leases office space for its Montvale, New Jersey headquarters
pursuant to an operating lease expiring in August 2007.

Other Matters

The Company is involved in various claims or litigation in the ordinary course
of business. Management believes that the ultimate resolution of these matters,
either individually or in the aggregate, will not have a material adverse impact
on the future results of operations, cash flows or financial position of the
Company.

The Company is required to provide financial assurance to government agencies
under applicable environmental and procurement regulations relating to the
landfill operations and waste disposal contract.



                                       22

<PAGE>
14. Related Party Transactions

In the ordinary course of business, the Company's subsidiaries hold insurance
policies with affiliates of AIGGIC, for which the AIGGIC affiliated insurance
companies receive customary annual premiums.


15. Supplemental Disclosure of Cash Flow Information

<TABLE>
<CAPTION>
Depreciation and amortization expense included in the Statements of Cash Flows
for the six months ended September 30, 2004 consists of the following expenses
(revenues) (in thousands):

                                                                              September 30,
     Asset / liability                   Statement of operations                   2004
---------------------------     ----------------------------------------   -----------------

<S>                                                           <C>                   <C>
Property, plant and equipment   Depreciation and amortization (1)                   $27,993
Energy contracts                Energy revenues                                      24,008
Long-term waste contracts       Waste disposal and related services                  (4,029)
Lease                           Operating expenses (rent expense)                      (275)
Debt                            Interest expense                                     (5,159)
                                Waste disposal and related services and
Deferred revenue                 energy revenues                                        (16)
                                                                           -----------------
 Total                                                                              $42,522
                                                                           =================
(1) Includes amortization of intangible assets.

Noncash investing and financing activities:
Cash from the consolidation of Ref-Fuel Holdings at April 30, 2004                  $40,238
Cash paid for interest                                                              $40,630
</TABLE>

16. Subsequent Event - Name Change

Effective October 15, 2004, UAE Holdings Corp. changed its name to American
Ref-Fuel Holdings Corp. and UAE Ref-Fuel II Corp. changed its name to ARC II
Corp and United American Energy Corp. changed its name to Ref-Fuel Corp.
Effective October 18, 2004, UAE Ref-Fuel LLC changed its name to Ref-Fuel LLC.

                                       23

<PAGE>

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

OVERVIEW

The following discussion contains forward-looking statements. These statements
are based on current plans and expectations and involve risks and uncertainties
that could cause actual future activities and results of operations to be
materially different from those set forth in the forward-looking statements.
Important factors that could cause actual results to differ include risks set
forth in "Risk Factors," below. The following should be read in conjunction with
the financial statements and related notes included elsewhere in this report. As
of April 30, 2004, we hold a 50% indirect controlling membership interest in
Ref-Fuel Holdings and the results of operations have been consolidated from that
period.

The following is a discussion of the financial condition and results of
operations for the three and nine months ended September 30, 2004. This
discussion should be read in connection with our historical consolidated
financial statements and notes thereto included in the Annual Report on Form
10-K for the year ended December 31, 2003, as well as the historical financial
statements of Ref-Fuel Holdings and the supplemental pro forma information that
follows.

General

We were formed in August 2003 and acquired our interest in Ref-Fuel Holdings in
December 2003. Because we were not yet in existence, there are no financial
results for the third quarter of 2003 comparable to the data for the third
quarter of 2004. For comparative results, see Supplemental Pro Forma Information
which follows.

                                       24

<PAGE>

<TABLE>
<CAPTION>
The following summarizes the historical financial information for MSW Energy
Holdings II as of and for the three and nine months ended September 30, 2004
(unaudited, in thousands):


                                                  For the Three        For the Nine
                                                   Months Ended        Months Ended
                                                 September 30, 2004 September 30, 2004
                                                ------------------- -------------------

Statement of Operations Data:
<S>                                             <C>                 <C>
Net revenues                                    $          112,958  $          186,410
Equity in net earnings of Ref-Fuel Holdings                      -               6,148
Operating expenses                                         (44,430)            (75,139)
Depreciation and amortization expense                      (16,820)            (27,993)
Administrative and general expense                          (9,229)            (17,119)
Gain (Loss) on asset retirement                                218                (618)
Interest income                                                886               1,403
Interest expense                                           (16,710)            (33,868)
Minority interest in net income of subsidiaries            (15,693)            (23,826)
Other income, net                                                3                 105
Income taxes                                                (4,744)             (6,528)
                                                ------------------- -------------------
Net income                                      $            6,439  $            8,975
                                                =================== ===================
Cash Flow Data:
Cash provided by operating activities                               $          110,611
Cash used in investing activities                                              (10,201)
Cash used in financing activities                                              (27,250)

Balance Sheet Data (at Sept. 30, 2004):
Total assets                                                        $        2,215,710
Total debt                                                                   1,321,728
Minority interest in consolidated subsidiaries                                 365,962
Total member's equity                                                          137,461
</TABLE>

Results of Operations

For the Three Months Ended September 30, 2004

     Net revenues. Net revenues of $113.0 million for the three months ended
September 30, 2004 represent Ref-Fuel Holdings three month results. Of that
amount, $73.0 million is attributable to waste disposal and related services
revenue, $36.2 million is attributable to energy revenue and $3.7 million is
attributable to other revenue. There were no revenues during the same period in
2003 because results from Ref-Fuel Holdings were accounted for under the equity
method of accounting.

     Equity in earnings of Ref-Fuel Holdings. Prior to the Equalization
Transactions, which were consummated on April 30, 2004, we accounted for our
investment in Ref-Fuel Holdings under the equity method of accounting. As a
result of the Equalization Transactions, we are consolidating these results
after April 30, 2004 and therefore no equity in earnings of Ref-Fuel Holdings is
shown on our financial statements for the three months ended September 30, 2004.

     Operating expenses. Operating expenses of $44.4 million for the three
months ended September 30, 2004 represents Ref-Fuel Holdings' operational
expenses.

                                       25

<PAGE>

     Depreciation and amortization expense. Depreciation and amortization
expense of $16.8 million for the three months ended September 30, 2004
represents Ref-Fuel Holdings' depreciation and amortization expenses.

     Administrative and general expense. The administrative and general expense
of $9.2 million for the three months ended September 30, 2004 represents
Ref-Fuel Holdings' general and administrative expenses.

     Loss on asset retirement. The loss on asset retirement of $(0.2) million
for the three months ended September 30, 2004 represents Ref-Fuel Holdings'
loss.

     Interest income. The majority of the interest income of $0.9 million for
the three months ended September 30, 2004 represents Ref-Fuel Holdings' interest
income.

     Interest expense. Interest expense of $16.7 million for the three months
ended September 30, 2004 represents Ref-Fuel Holdings' interest expense in the
amount of $12.2 million and the interest expense for the three months ended
September 30, 2004 attributable to the 2010 Senior Notes of $4.5 million.

     Income taxes. Income taxes expense of $4.7 million for the three months
ended September 30, 2004, represents the tax liability using the effective tax
rate of 42.4% for the quarter.

For the Nine Months Ended September 30, 2004

     Net revenues. Net revenues of $186.4 million for the nine months ended
September 30, 2004 represent the consolidated results of operations of Ref-Fuel
Holdings for the five-month period ended September 30, 2004. As indicated above,
as a result of the Equalization Transactions, Ref-Fuel Holdings' results of
operations are consolidated as of April 30, 2004. These revenues represent
$122.1 million of waste disposal and related services revenue, $58.5 million of
energy revenue and $5.8 million of other revenue.

     Equity in earnings of Ref-Fuel Holdings. Equity in net earnings of
unconsolidated subsidiaries represents our share in the net earnings of Ref-Fuel
Holdings for the four months ended April 30, 2004, of $6.1 million. Prior to the
Equalization Transaction, which were consummated on April 30, 2004, we accounted
for our investment under the equity method of accounting. As a result of these
transactions, we are consolidating these results after April 30, 2004.

     Operating expenses. As a result of the Equalization Transactions, Ref-Fuel
Holdings' results of operations are consolidated as of April 30, 2004.
Therefore, the operating expenses of $75.1 million for the nine months ended
September 30, 2004 represents Ref-Fuel Holdings' operational expenses for the
five months ended September 30, 2004.

     Depreciation and amortization expense. As a result of the Equalization
Transactions, Ref-Fuel Holdings' results of operations are consolidated as of
April 30, 2004. Therefore, the depreciation and amortization expense of $28.0
million for the nine months ended September 30, 2004 represents Ref-Fuel
Holdings' depreciation and amortization expenses for the five months ended
September 30, 2004.

                                       26

<PAGE>

     Administrative and general expense. As a result of the Equalization
Transactions, Ref-Fuel Holdings' results of operations are consolidated as of
April 30, 2004. Therefore, the administrative and general expense of $17.1
million for the nine months ended September 30, 2004 represents Ref-Fuel
Holdings' general and administrative expenses of $16.0 million for the five
months ended June 30, 2004, and $1.1 million attributable to MSW Energy Holdings
II's other activities.

     Loss on asset retirement. As a result of the Equalization Transactions,
Ref-Fuel Holdings' results of operations are consolidated as of April 30, 2004.
Therefore, the loss on asset retirement of $0.6 million for the nine months
ended September 30, 2004 represents Ref-Fuel Holdings' loss for the five months
ended June 30, 2004.

     Interest income. As as a result of the Equalization Transactions, Ref-Fuel
Holdings' results of operations are consolidated as of April 30, 2004.
Therefore, the majority of the interest income of $1.4 million for the nine
months ended September 30, 2004 represents Ref-Fuel Holdings' interest income
for the five months ended June 30, 2004.

     Interest expense. As a result of the Equalization Transactions, Ref-Fuel
Holdings' results of operations are consolidated as of April 30, 2004.
Therefore, the interest expense of $33.9 million for the nine months ended
September 30, 2004 represents Ref-Fuel Holdings' interest expense in the amount
of $20.4 million for the five months ended September 30, 2004, and the interest
expense for nine months ended September 30, 2004 attributable to the 2010 Senior
Notes of $13.5 million, which represents 7 3/8 % interest.

     Income taxes. Income taxes expense of $6.5 million for the nine months
ended September 30, 2004, represents the tax liability using the effective tax
rate of 42.1% for the nine month period.

Cash Flow Activities

After the Equalization Transactions, UAE Holdings Corp. controls the operations
of Ref-Fuel Holdings as 99.8% of the interests in Ref-Fuel Holdings are owned by
the Company as of April 30, 2004 and MSW Energy Holdings. As a result, the
Company has effective control of Ref-Fuel Holdings, and is therefore
consolidating its results of operations and cash flows for the five months, and
the balance sheet as of September 30, 2004. The Company is required to maintain
cash and investment balances that are restricted by provisions of its debt,
operational or lease agreements. These amounts are held by financial
institutions in order to comply with contractual provisions requiring such
reserves.

We were formed in August 2003 and acquired our interest in Ref-Fuel Holdings in
December 2003. Because we were not yet in existence, there are no financial
results for the third quarter of 2003 comparable to the data for the third
quarter of 2004.

Operating Activities

Our net cash provided by operating activities of $110.6 million for the period
for the nine months ended September 30, 2004 relates primarily to cash earnings,
the distributions received from Ref-Fuel Holdings of $31.5 million in 2004,
offset by the payment of $4.5 million of interest on our Senior Notes.

Investing Activities

Our net cash used in investing activities of $10.2 million for the nine months
ended September 30, 2004 relates to cash from consolidation of Ref-Fuel Holdings
which represented its April 30, 2004 balance of $40.2 million offset by the
change in our restricted cash balance of $41.9 million and capital additions of
$8.5 million during the five months ended September 30, 2004.

                                       27

<PAGE>

Financing Activities

Our net cash used in financing activities of $27.2 million for the nine months
ended September 30, 2004 relates to distributions paid to members of $21.5
million and payments on long-term debt of $5.7 million during the five months
ended September 30, 2004.

Supplemental Pro Forma Information

<TABLE>
<CAPTION>
The following results represent the pro forma results as if MSW Energy Holdings
II acquisition of its interests in Ref-Fuel Holdings and Equalization
Transactions had occurred on January 1, 2003. These results are presented for
informational purposes only, and are not necessarily indicative of the actual
results that would have resulted had the acquisition and the Equalization
Transactions actually occurred on January 1, 2003. (In thousands):

                                                      Pro Forma          Pro Forma
                                                     For the Nine       For the Nine
                                                     Months Ended       Months Ended
                                                  September 30, 2004 September 30, 2003
                                                  ------------------ -------------------
Revenues
<S>                                               <C>                <C>
 Waste disposal and related services              $         211,620  $          209,265
 Energy                                                     100,093              98,922
 Other                                                       12,234              10,073
                                                  ------------------ -------------------
Total net revenues                                          323,947             318,260
                                                  ------------------ -------------------
Expenses
 Operating                                                  148,460             145,948
 Depreciation and amortization                               50,836              51,057
 General and administrative                                  31,616              35,144
    Loss on asset retirements                                   960               1,717
                                                  ------------------ -------------------
Operating income                                             92,075              84,394
Interest income                                               2,387               2,384
Interest expense                                            (49,442)            (49,713)
Loss on early extinguishment of debt                              -              (3,292)
Minority interests in net income of subsidiaries            (30,385)            (24,710)
Other income (expenses), net                                    225                (384)
                                                  ------------------ -------------------
Net income before taxes                                      14,860               8,679
Income taxes                                                 (5,944)             (3,472)
                                                  ------------------ -------------------
Net income                                        $           8,916  $            5,207
                                                  ================== ===================

</TABLE>

Comparison of the Pro Forma Nine Months ended September 30, 2004 and 2003

Total Net Revenues. Total pro forma net revenues were $323.9 million for the
nine months ended September 30, 2004, an increase of $5.7 million, or 1.8%, from
the same period for the prior year. Increases in waste revenues of $2.3 million
were attributable to an increase in waste processed at the facilities One of the
Ref-Fuel Holdings facilities performed a planned major turbine overhaul in the
second quarter of 2004, which contributed to the decrease in power revenues of
$1.4 million, which was offset by increased steam sales of $2.3 million for the
period ended September 30, 2004, as compared to the period ended September 30,
2003. Metals pricing increased over the prior year, resulting in an increase of
$5.7 million in other revenues, which was partially offset by the expiration of
an ash reuse marketing arrangement during the first quarter of 2004, decreasing
revenues by $4.1 million, as compared to the prior year period.

                                       28

<PAGE>

Expenses. Operating expenses were $148.5 million for the nine months ended
September 30, 2004, an increase of $2.5 million, or 2% from the prior year
period. The most significant factors contributing to the increase were increased
facility maintenance expenses performed during scheduled outages, which
accounted for a $1.7 million increase and the cost of materials which increased
by $1.8 million. Host fees increased by $1.1 million because the Company began
operations in a new cell of its landfill and external engineering consulting
increased by $0.4 million. These increases were partially offset by a $2.5
million decrease in ash disposal expense due to the expiration of an ash reuse
deal in the first quarter of 2004 and a $0.6 million decrease in landfill
expense on decreased landfill volumes.

General and administrative. General and administrative expenses were $31.6
million for the nine months ended September 30, 2004, a decrease of $3.5
million, or 10%, from the prior year's period due a decrease of $1.8 million in
severance costs, a decrease of $1.5 million in a long-term compensation plan, a
$0.3 million decrease in bad debt expense and $0.3 million decrease in office
rental expense. These decreases were partially offset by a $0.4 million increase
in miscellaneous general and employee expenses.

Debt Covenant

The indenture under which our Senior Notes were issued requires, among other
things, but subject to certain exceptions, that we not permit any restricted
payment unless certain ratio covenants based on our proportionate ownership of
Ref-Fuel Holdings have been met. We are presenting pro forma proportionate
adjusted data, including proportionate total cash and cash equivalents and
reserves, proportionate total debt, proportionate interest expense and
proportionate adjusted earnings before interest, taxes, depreciation and
amortization (Adjusted EBITDA) because these twelve months results are used in
the calculation of the restrictive covenants contained in the indenture
governing our Senior Notes.

The unaudited summary pro forma condensed consolidated statements of operations
data, pro forma MSW Energy Holdings II other data and pro forma proportionate
other data for the twelve months ended September 30, 2004, have been prepared as
if the UAE Merger and issuance of the Senior Notes had occurred on October 1,
2003. Accordingly, the following table includes the effects of push-down
accounting on Ref-Fuel Holdings as if the UAE Merger had occurred on October 1,
2003.

The following table includes certain items that are not measures under generally
accepted accounting principles and are not intended to supplant the information
provided in accordance with generally accepted accounting principles.
Furthermore, these measures may not be comparable to those used by other
companies. The following tables should be read in conjunction with our
historical financial statements and related notes.

                                       29

<PAGE>

Additionally, as required under the indenture agreement, the activity of
Ref-Fuel Holdings is separate from MSW Energy Holdings II incremental activity
in the following calculations (in thousands).

                                                                Pro Forma
                                                           Twelve Months Ended
                                                              September 30,
                                                                   2004
                                                           ---------------------

Pro Forma Proportionate other data
Proportionate Adjusted EBITDA (1)                                       137,757
Proportionate interest expense (2)                                       41,776
                                                           ---------------------
Ratio of proportionate Adjusted EBITDA to proportionate
   interest expense (3)                                                    3.3x
                                                                           ====

(1)  Proportionate Adjusted EBITDA is defined as 50% of the pro forma Adjusted
     EBITDA of Ref-Fuel Holdings. Adjusted EBITDA (as calculated below) is not a
     measurement of financial performance under generally accepted accounting
     principles and should not be considered as an alternative to cash flow from
     operating activities or as a measure of liquidity or an alternative to net
     income as indicators of our operating performance or any other measures of
     performance derived in accordance with generally accepted accounting
     principles.

<TABLE>
<CAPTION>
Proportionate Adjusted EBITDA for the last twelve months ended September 30,
2004 is calculated by subtracting the results for the nine months ended
September 30, 2003 from the twelve months ended December 31, 2003, and then
adding the nine months ended September 30, 2004, as follows (in thousands):

                                                                                       Pro Forma
                                          Pro Forma    Pro Forma Nine  Actual Nine  Twelve Months
                                         Year Ended     Months Ended   Months Ended      Ended
                                         December 31,   September 30,  September 30, September 30,
                                             2003            2003          2004           2004
                                       --------------- -------------- -------------- --------------
Ref-Fuel Holdings:
<S>                                           <C>             <C>           <C>           <C>
     Operating income                         $127,737        $85,482       $93,163       $135,418
     Depreciation and amortization              68,094         51,057        50,836         67,873
     Loss on retirements                         2,207          1,717           960          1,450
                                       --------------- -------------- -------------- --------------
     EBITDA                                    198,038        138,256       144,959        204,741
     Fair value adjustment amortization
       and revenue levelization
        adjustments                             69,608         52,326        53,491         70,773
                                       --------------- -------------- -------------- --------------
     Adjusted EBITDA                          $267,646       $190,582      $198,450        275,514
                                       =============== ============== ==============

MSW Energy Holdings II ownership
 percentage                                                                                     50%
                                                                                    ---------------
MSW Energy Holdings II Proportionate
 Adjusted EBITDA                                                                          $137,757
                                                                                    ===============
</TABLE>

(2)  Proportionate interest expense is defined as 50% of the pro forma interest
     expense for Ref-Fuel Holdings plus 100% of our pro forma interest expense.

                                       30

<PAGE>

<TABLE>
<CAPTION>
The following table reconciles MSW Energy Holdings II Proportionate Interest
Expense (in thousands):


                                                                           Pro Forma
                                                                      Twelve Months Ended
                                                                       September 30, 2004
                                                                    ---------------------
                                                                         (in thousands)
<S>                                                                 <C>
Pro Forma Ref-Fuel Holdings interest expense                        $              49,676
   MSW Energy Holdings II ownership percentage                                        50%
                                                                    ---------------------
Ref-Fuel Holdings proportionate interest expense                                   24,838
   MSW Energy Holdings II pro forma incremental interest expense                   16,938
                                                                    ---------------------
MSW Energy Holdings II proportionate interest expense               $              41,776
                                                                    =====================
</TABLE>

(3)  Proportionate Adjusted EBITDA to proportionate interest expense is defined
     as the quotient of proportionate Adjusted EBITDA divided by proportionate
     interest expense.

Critical Accounting Policies

Our management is responsible for our financial statements and has evaluated the
accounting policies to be used in their preparation. Our management believes
these policies to be reasonable and appropriate. The following discussion
identifies those accounting policies that we believe will be critical in the
preparation of our financial statements, the judgments and uncertainties
affecting the application of those policies, and the possibility that materially
different amounts will be reported under different conditions or using different
assumptions.

Principles of Consolidation. The accompanying consolidated financial statements
include accounts of MSW Energy Holdings II, its wholly-owned subsidiaries and
Ref-Fuel Holdings. Prior to the Equalization Transactions, the Company's
investment in Ref-Fuel Holdings was accounted for using the equity method. As a
result of the Equalization Transactions, the Company has effective control of
Ref-Fuel Holdings and, as of April 30, 2004, is consolidating its results. All
significant intercompany transactions and accounts have been eliminated.

Use of Estimates in Preparing Financial Statements. The preparation of financial
statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions
that affect: (a) the reported amounts of assets and liabilities at the date of
the financial statements; (b) the disclosures of contingent assets and
liabilities at the date of the financial statements; and (c) the reported
amounts of revenues and expenses recognized during the reporting period. Such
estimates may be subsequently revised as necessary when additional information
becomes available. Actual results could differ from those estimates.

Goodwill. Goodwill represents the total consideration paid in excess of the fair
value of the net tangible and identifiable intangible assets acquired and the
liabilities assumed. In accordance with the provisions of Financial Accounting
Standard (FAS No. 142), "Goodwill and Other Intangible Assets", the Company
performs an annual fair value test of its recorded goodwill for its reporting
units using a discounted cash flows approach.

                                       31

<PAGE>

Intangible Assets. Energy contract intangibles represent the amount by which the
contract rates in long-term energy sales contracts held by certain subsidiaries
of the Company exceeded fair value on the dates that these subsidiaries were
acquired. These contract related intangibles are amortized into income as a
reduction of energy revenues on a straight-line basis over the remaining terms
of the applicable contracts, which range from six to sixteen years.

Waste contract intangibles represent the amount by which the contract rates in
long-term waste sales contracts held by Hempstead exceeded fair value on the
dates that the partnership was acquired. These contract related intangibles are
being amortized into income as a reduction of waste revenues on a straight-line
basis through 2009, the term of the applicable contracts.

The Company has intangible assets relating to Nitrous Oxide (NOx) emission
allowances. These assets have indefinite lives and, as such, are not amortized.
Consistent with all the Company's intangible assets, these are reviewed under
the provisions of FAS 142 for potential impairment on an annual basis.

Deferred financing costs represent certain capitalizable costs incurred by the
Company to finance its long-term debt obligations. These costs are amortized to
interest expense over the life of the related debt.

Equity Method Investment. The Company's investment in Ref-Fuel Holdings was
accounted for using the equity method of accounting prior to the Equalization
Transactions. As a result, the accompanying consolidated results of operations
include the Company's share of net earnings in "Equity in net earnings of
Ref-Fuel Holdings" for the period up to April 30, 2004.

Other Liabilities. Landfill closure and postclosure costs are included in other
long-term liabilities. The Company accrues landfill closure and postclosure
costs as the remaining permitted space of the landfill is consumed over the
expected life cycle of the landfill.

Revenue Recognition. The Company recognizes revenue from two major sources:
waste disposal services and energy production. Revenue from waste disposal
services is recognized as waste is received, and revenue from energy production
is recognized as the energy is delivered.

The Company is accounting for the long-term power contracts at the Semass
Partnership in accordance with EITF Issues 91-6 "Revenue Recognition of
Long-Term Power Sales Contracts" and EITF 96-17 "Revenue Recognition under
Long-Term Power Sales Contracts That Contain both Fixed and Variable Pricing
Terms", which require the Company to recognize power revenues under these
contracts as the lesser of (a) amounts billable under the respective contracts;
or (b) an amount determinable by the kilowatt hours made available during the
period multiplied by the estimated average revenue per kilowatt hour over the
term of the contract. The determination of the lesser amount is to be made
annually based on the cumulative amounts that would have been recognized had
each method been applied consistently from the beginning of the contract. The
difference between the amount billed and the amount recognized is included in
other long-term liabilities.

Concentration of Credit Risk. The Company invests excess cash and funds held in
trust in bank deposit accounts, commercial paper, certificates of deposit and
money market investments with a limited number of financial institutions.

The Company has exposure to credit risk in accounts receivable as the Company
disposes of waste for and sells power to a limited number of customers. The
Company believes adequate reserves are maintained for potential credit losses.
Furthermore, these and other customers are primarily located in the northeastern
region of the United States of America.

                                       32

<PAGE>

Income Taxes. As the Company is a limited liability company, it is not directly
subject to Federal and State income taxes; rather its income or loss is required
to be included in the income tax returns of its member. The Company's member,
UAE Holdings Corp., is a C corporation for tax purposes. For the period ended
September 30, 2004, the Company's provision reflects the C corporation taxes
that its member is responsible for on the income of the Company.

The Company accounts for income taxes under the asset and liability method. The
provision for income taxes includes deferred income taxes resulting from items
reported in different periods for income tax and financial statement purposes.
Deferred income tax assets and liabilities represent the expected future tax
consequences of the differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases. The effects
of changes in tax rates on deferred income tax assets and liabilities are
recognized in the period that includes the enactment date.

The operating results of the Company will be included on the income tax return
of the Company's member. Accordingly, the income tax payable on the accompanying
consolidated balance sheet at September 30, 2004 will not be paid by the
Company; however, it will be included along with the results of the member
itself and other subsidiaries of the Company's member in determining the income
tax liability, if any, of its member.

Push-Down Accounting. Upon consummation of the UAE Merger between MSW Merger LLC
and UAE Holdings Corp. on December 12, 2003 and taking into account the June 30,
2003 acquisition by MSW Energy Holdings LLC of Duke's membership interest in
Ref-Fuel Holdings, affiliates of Credit Suisse First Boston Private Equity, Inc.
and AIGGIC own, directly and indirectly, 99.8% of the membership interests in
Ref-Fuel Holdings (and will exercise voting power with respect to the remaining
0.2% interest). Emerging Issues Task Force (EITF) Topic D-97, Push-Down
Accounting, requires that Ref-Fuel Holdings financial statements reflect this
change in ownership. See Notes 2 and 4 to "MSW Energy Holdings II LLC and
Subsidiaries--Notes to Consolidated Financial Statements (Unaudited)" included
herein.


Effect of New Accounting Standard

In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest
Entities, and a revised interpretation of FIN 46 (FIN 46R) in December 2003
(collectively "FIN 46"). FIN 46 addresses consolidation of variable interest
entities. FIN 46 provides guidance for determining when a primary beneficiary
should consolidate a variable interest entity or equivalent structure that
functions to support the activities of the primary beneficiary. The provisions
of FIN 46 are effective immediately for all variable interest entities created
after January 31, 2003. It applies in the first year or interim period ending
after December 15, 2003 to variable interest entities in which an enterprise
holds a variable interest that it acquired before February 1, 2003. Management
has evaluated FIN 46 and its related guidance and determined that it does not
have any impact on our consolidated financial statements.

                                       33

<PAGE>

Contractual Obligations and Commercial Commitments

<TABLE>
<CAPTION>
The following table sets forth our contractual obligations outstanding as of
September 30, 2004 (in thousands):

                                              Less than 1                      More than
     Contractual Obligations        Total         Year    1-3 Years 3-5 Years    5 Years
     -----------------------     -----------  ----------- --------- ---------  ----------

<S>                              <C>             <C>      <C>       <C>         <C>
Long-Term Debt Obligations       $1,321,728      $83,159  $157,052  $185,243    $896,274

Operating Lease Obligations         147,596       14,178    27,681    41,074      64,663

Other Long-Term Obligations          19,485        6,781     2,130         -      10,574
                                 -----------  ----------- --------- ---------  ----------
                         Total   $1,488,809     $104,118  $186,863  $226,317    $971,511
                                 ===========  =========== ========= =========  ==========
</TABLE>

RISK FACTORS

Any of the following risks could materially adversely affect our business,
financial condition or results of operations.

Our indenture imposes significant operating and financial restrictions on us.

The indenture governing our outstanding debt contains restrictive covenants that
limit our ability to engage in activities that may be in our long-term best
interests. These restrictions limit our ability and the ability of any
restricted subsidiaries to do the following, among other things:

     --   incur additional indebtedness;

     --   create liens;

     --   pay dividends or make other equity distributions;

     --   purchase or redeem capital stock;

     --   make investments;

     --   sell assets or consolidate or merge with or into other companies; and

     --   engage in transactions with affiliates.

Our failure to comply with those covenants could result in an event of default
which, if not cured or waived, could result in the acceleration of all of our
debt. Moreover, it is possible that in the future the owners of MSW Energy
Holdings and MSW Energy Holdings II could determine to merge those companies
with each other or into Ref-Fuel Holdings. While such a merger would be required
to comply with the terms of the indenture, a result would be an increase in the
amount of indebtedness of the successor.

Risk Relating to Ref-Fuel Holdings' and American Ref-Fuel's Business

American Ref-Fuel's revenues depend on the operation of the ARC operating
facilities.

                                       34

<PAGE>

American Ref-Fuel's receipt of distributions from the ARC operating companies
and TransRiver are dependent on the successful operation of the ARC operating
facilities. The operation of the ARC operating facilities involves many risks,
including:

     --   the breakdown or failure of equipment or processes;

     --   the difficulty or inability to find suitable replacement parts for
          equipment;

     --   the performance of the ARC operating facilities below expected levels
          of waste throughput, electric or steam generation or efficiency;

     --   the unavailability of sufficient quantities of waste;

     --   decreases in the fees for solid waste disposal;

     --   decreases in the demand or market prices for recovered ferrous and
          nonferrous metal;

     --   disruption in the transmission of electricity generated;

     --   labor disputes;

     --   operator error;

     --   catastrophic events such as hurricanes, earthquakes, floods and acts
          of terrorism that damage or destroy the facilities or the area in
          which the facilities are located;

     --   changes in law or application of law (including any applicable
          environmental laws or permit requirements); and

     --   the exercise of the power of eminent domain.

While American Ref-Fuel will maintain insurance to protect against certain of
these risks, the insurance may not cover all of these risks and the proceeds of
the insurance may not fully compensate for damages to the ARC operating
facilities and the ARC operating facilities' lost revenues or increased
expenses. A decrease or elimination of revenues generated by the ARC operating
facilities or an increase in the costs of operating the ARC operating facilities
could decrease or eliminate funds available to American Ref-Fuel to make
distributions to Ref-Fuel Holdings which, in turn, would decrease or eliminate
the funds available to Ref-Fuel Holdings to make distributions to us, which
would adversely affect our financial condition.

American Ref-Fuel depends on performance by third parties under contractual
arrangements.

American Ref-Fuel depends on third parties to, among other things, purchase the
electric and steam energy produced by the ARC operating facilities, and supply
and deliver the waste and other goods and services necessary for the operation
of the ARC operating facilities. The viability of the ARC operating facilities
and the ability of American Ref-Fuel to make distributions to Ref-Fuel Holdings
depend significantly upon the performance by third parties in accordance with
the long-term contracts entered into by the ARC operating companies and the
third parties in connection with the ARC operating facilities.

                                       35

<PAGE>

If the third parties to those contracts do not perform their obligations, or are
excused from performing their obligations because of nonperformance by the ARC
operating companies or other parties to the documents, or due to force majeure
events or changes in laws or regulations, the ARC operating companies may not be
able to secure alternate arrangements on substantially the same terms, if at
all, for the services provided under the contracts. Furthermore, the ability of
the ARC operating companies and TransRiver to make distributions to American
Ref-Fuel may be adversely affected, which may adversely affect our financial
condition. In addition, the bankruptcy or insolvency of a participant or third
party in the ARC operating facilities could result in nonpayment or
nonperformance of that party's obligations to the ARC operating companies and
could adversely affect the ability of American Ref-Fuel to make distributions to
Ref-Fuel Holdings which, in turn would decrease or eliminate the funds available
to Ref-Fuel Holdings to make distributions to us, which would decrease or
eliminate the funds available to us.


Item 3.  Quantitative and Qualitative Disclosures about Market Risk

American Ref-Fuel's operations are concentrated in one region.

All of the ARC operating facilities are located in the northeastern United
States. The entrance of new competitors into the market or the expansion of
existing competitors could have a material adverse effect on distributions
available to American Ref-Fuel from the ARC operating companies and, ultimately,
on our financial condition.

American Ref-Fuel depends on a significant supply of solid waste.

If the ARC operating facilities do not obtain a supply of solid waste at prices
and quantities that are sufficient to operate the ARC operating facilities at
their expected operating levels, it will adversely affect the operations of
American Ref-Fuel and its ability to make distributions to Ref-Fuel Holdings,
which would adversely affect our financial condition. One or more of the
following factors could impact the price and supply of waste:

     --   defaults by waste suppliers under their contracts;

     --   a decline in solid waste supply due to increased recycling;

     --   composting of municipal solid waste;

     --   legal prohibitions against disposal of certain types of solid waste in
          WTE facilities; or

     --   increased competition from landfills, recycling facilities and
          transfer stations.

In addition, state and local governments mandate recycling and waste reduction
at the source and the scope of these recycling and waste reduction mandates may
be enlarged in the future. The ARC operating companies may not be successful in
obtaining sufficient quantities of waste at adequate prices for the successful
operation of the ARC operating facilities. Failure to obtain sufficient waste
could have a material adverse effect on distributions available to American
Ref-Fuel from the ARC operating companies and, ultimately, on our financial
condition.

Failure to comply with environmental permitting and governmental regulations
would adversely affect American Ref-Fuel's operations.

                                       36

<PAGE>

The ARC operating facilities are subject to extensive federal, state and local
laws and regulations related to the environment, health and safety and
associated compliance and permitting obligations (including those related to the
use, storage, handling, discharge, emission and disposal of municipal solid
waste and other waste, pollutants or hazardous substances or wastes, or
discharges and air and other emissions) as well as land use and development.
Environmental laws also impose obligations to clean up contaminated properties
or to pay for the cost of such remediation, often upon parties that did not
actually cause the contamination. While we believe that we, Ref-Fuel Holdings
and ARC are currently in compliance with applicable environmental laws in all
material respects, it is possible that such conditions impacting the ARC
operating facilities could be discovered in the future or that such conditions
could be created by future spills or releases. Compliance with these laws,
regulations and obligations could require substantial capital expenditures.
Failure to comply could result in the imposition of penalties, fines or
restrictions on operations and/or remedial liabilities. The costs and
liabilities of any of these results could adversely affect the operations of one
or more of the ARC operating facilities. Environmental laws and regulations may
also limit American Ref-Fuel's ability to operate the ARC operating facilities
at maximum capacity or at all. These laws, regulations and obligations could
change with the promulgation of new laws and regulations or a change in the
interpretation of existing laws and regulations, which could result in
substantially similar risks. Stricter environmental regulations could materially
affect American Ref-Fuel's cash flow and its ability to make distributions to
Ref-Fuel Holdings, which would have an adverse effect on our financial
condition.

The costs of addressing future environmental requirements at the ARC operating
facilities or at disposal facilities where ARC operating facilities have
disposed of waste are difficult to estimate. Although American Ref-Fuel reports
that it believes that all of its operations are compliant in all material
respects with the requirements of environmental laws and regulations, the ARC
operating facilities may not at all times be in compliance with all applicable
environmental laws and regulations and steps to bring American Ref-Fuel's
facilities into compliance may limit American Ref-Fuel's ability to make
distributions to Ref-Fuel Holdings.

Certain environmental permits for the ARC operating facilities are subject to
periodic renewal or reissuance. Regulatory authorities may not renew or reissue
the permits. In addition, any renewed or reissued environmental permit may
contain new, more stringent requirements resulting in the need for additional
capital and operating expenditures due to additions to or modifications of the
ARC operating facilities in order to bring the ARC operating facilities into
compliance with the renewed or reissued permits' terms. Certain environmental
permits contain terms that can result in periodic adjustment of operating
limits, which can result in reduced revenue. Any of the following events could
adversely affect the amount of distributions available to American Ref-Fuel and
the ability of American Ref-Fuel to make distributions to Ref-Fuel Holdings:

     --   loss of environmental permits;

     --   reduction in allowed operations;

     --   failure or delay in the renewal or reissuance of environmental
          permits;

     --   any increase in operating costs resulting from any renewed or reissued
          environmental permit; and

     --   any expenditures, penalties, restrictions and/or liabilities resulting
          from any other non-compliance.

Changes in electricity regulation could have an adverse impact on American
Ref-Fuel.

                                       37

<PAGE>

The ARC operating companies derive a significant amount of revenue from the sale
of electric power. The electric power generation business is subject to
substantial regulation and the ARC operating companies are required to comply
with numerous laws and regulations in order to sell the power generated from the
ARC operating facilities. These laws and regulations could be revised and new
laws and regulations could be adopted. The power purchase agreements with
respect to each ARC operating facility could be adversely affected if amendments
to, or a repeal of, existing regulations with respect to the production of
energy were enacted that reduce the benefits currently afforded under the power
purchase agreements. A reduction in benefits could adversely affect the amount
of distributions available to American Ref-Fuel and its ability to make payment
of the principal of and premium, if any, and interest on its debt and to make
cash distributions to Ref-Fuel Holdings. American Ref-Fuel's business could be
materially and adversely affected by statutory or regulatory changes or
administrative or judicial interpretations of existing statutes, regulations or
licenses that impose more comprehensive or stricter energy regulation on
American Ref-Fuel.

Item 4.  Controls and Procedures

MSW Energy Holdings II

As of September 30, 2004, the Chief Executive Officer and Chief Financial
Officer of MSW Energy Holdings II evaluated the effectiveness of its disclosure
controls and procedures pursuant to applicable Exchange Act Rules. Based upon
that evaluation, the Chief Executive Officer and Chief Financial Officer have
each concluded that these disclosure controls and procedures are effective in
timely alerting them to material information relating to the Company (including
its consolidated subsidiaries) that is required to be included in MSW Energy
Holdings II's periodic SEC filings.

There were no significant changes in internal controls or in other factors that
could significantly affect these controls for the quarter ended September 30,
2004.

MSW Energy Finance II

As of September 30, 2004, the Chief Executive Officer and Chief Financial
Officer of MSW Energy Finance II evaluated the effectiveness of its disclosure
controls and procedures pursuant to applicable Exchange Act Rules. Based upon
that evaluation, the Chief Executive Officer and Chief Financial Officer have
each concluded that these disclosure controls and procedures are effective in
timely alerting them to material information relating to the Company (including
its consolidated subsidiaries) that is required to be included in MSW Energy
Finance II's periodic SEC filings.

There were no significant changes in internal controls or in other factors that
could significantly affect these controls for the quarter ended September 30,
2004.

PART II  OTHER INFORMATION

Item 1.  Legal Proceedings

Neither MSW Energy Holdings II nor MSW Energy Finance II is currently involved
in any litigation. The Company is not involved in any legal proceedings other
than ordinary routine litigation incidental to the business, the outcome of
which, if determined against the Company, would not have a material adverse
effect on the financial condition or results of operations of the Company.

                                       38

<PAGE>

Item 2.  Unregistered Sale of Equity Securities and Use of Proceeds.

None.

Item 3.  Defaults Upon Senior Securities.

None.

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

Not applicable.

Item 5.  Other Information.

None.

<TABLE>
<CAPTION>
Item 6.  Exhibits and Reports on Form 8-K

     (a) Exhibits

<S>     <C>         <C>
        3.1         Amended and Restated Certificate of Formation of MSW Finance LLC. *

        3.2         Amended and Restated Limited Liability Company Agreement of
                    MSW Energy Holdings II LLC, dated as of November 5, 2004, by
                    MSW Intermediate Merger LLC, as the sole member. *

        3.3         Certificate of Incorporation of MSW Energy Finance Co. II, Inc.*

        3.4         Bylaws of MSW Energy Finance Co. II, Inc.*

        3.5         Amended and Restated Certificate of Incorporation of UAE Ref-Fuel II Corp. *

        4.1         Indenture dated November 24, 2003, by and among MSW Energy Holdings II LLC, MSW Energy Finance
                    Co. II, Inc. and Wells Fargo Bank Minnesota, National Association as Trustee.*

        4.2         Supplemental Indenture dated December 12, 2003, by and among MSW Energy Holdings II LLC, MSW
                    Energy Finance Co. II, Inc., UAE Ref-Fuel II Corp. and Wells Fargo Bank Minnesota, National
                    Association as Trustee.*

        4.3         Form of 7 3/8% Senior Secured Note Due 2010 (included in Exhibit 4.1).*

        4.4         Registration Rights Agreement dated as of November 24, 2003, by and among MSW Energy Holdings
                    II LLC, MSW Energy Finance Co. II,  Inc., UAE Ref-Fuel II Corp. and Credit Suisse First Boston
                    LLC.*
</TABLE>

                                       39

<PAGE>

<TABLE>

<S>     <C>         <C>
        4.5         Pledge and Security Agreement dated as of November 24, 2003, by and among MSW Energy Holdings
                    II LLC, MSW Energy Finance Co. II, Inc. and Wells Fargo Bank Minnesota, National Association as
                    Collateral Agent.*

        4.6         Pledge Supplement dated as of November 24, 2003 by UAE Ref-Fuel II Corp. *

        4.7         Deposit Agreement, dated as of November 24, 2003, by and among MSW Energy Holdings II LLC, MSW
                    Energy Finance Co. II, Inc. and Wells Fargo Bank Minnesota, National Association as Collateral
                    Agent and Depositary Agent.*

        4.8         Purchase Agreement, dated as of November 7, 2003, by and among MSW Energy Holdings II LLC, MSW
                    Energy Finance Co. II, Inc., UAE Ref-Fuel II Corp. and Credit Suisse First Boston LLC.*

        10.1        Second Amended and Restated Limited Liability Company Agreement of Ref-Fuel Holdings LLC, dated
                    as of April 30, 2004, by and between MSW Energy Holdings II LLC, UAE Ref-Fuel II Corp., MSW
                    Hudson LLC and Duke Energy Erie LLC, as amended. *

        10.2        Equity Contribution Agreement, dated as of April 30, 2001, by and among Duke Capital
                    Corporation, United American Energy Corp., Ref-Fuel Holdings LLC (formerly known as
                    Duke/UAE Ref-Fuel LLC) and Duke/UAE Holdings LLC.*

        10.3        Substitution, Assumption, Amendment and Release Agreement, dated as of June 30, 2003, by and
                    among Duke Capital Corporation, United American Energy Corp., Ref-Fuel Holdings LLC (formerly
                    known as Duke/UAE Ref-Fuel LLC), American Ref-Fuel Company LLC, and MSW Energy Holdings LLC.*

        12          Statement re Computation of Ratio of Earnings to Fixed Charges.

        21.1        Subsidiaries of MSW Energy Holdings II LLC. *

        31(a)       15d-14(a) Certification of John T. Miller for MSW Energy Holdings II LLC.

        31(b)       15d-14(a) Certification of Michael J. Gruppuso for MSW Energy Holdings II LLC.

        31(c)       15d-14(a) Certification of John T. Miller for MSW Energy Finance Co. II, Inc.

        31(d)       15d-14(a) Certification of Michael J. Gruppuso for MSW Energy Finance Co.II, Inc.

        32(a)       Section 1350 Certification of John T. Miller and Michael J. Gruppuso for MSW Energy Holdings II
                    LLC.

        32(b)       Section 1350 Certification of John T. Miller and Michael J. Gruppuso for MSW Energy Finance Co.
                    II, Inc.
</TABLE>

*    Incorporated by Reference to Registration  Statement No. 333-109049.

     (b)  Reports on Form 8-K

     Current Reports on Form 8-K dated August 12, 19 and 31, 2004.

                                       40

<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, MSW Energy Holdings II LLC has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.

                                                 MSW ENERGY HOLDINGS II LLC

                                                 By: /s/ John T. Miller
                                                     -----------------------
                                                     John T. Miller
                                                     Chief Executive Officer

                                                 Date:  November 12, 2004
                                                      ----------------------

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


       Signature                        Title                         Date
-----------------------     ----------------------------       -----------------
                            Chief Executive Officer            November 12, 2004
/s/ John T. Miller          (Principal Executive Officer)
------------------
   John T. Miller

                            Chief Financial Officer            November 12, 2004
/s/ Michael J. Gruppuso     (Principal Financial and
-----------------------     Accounting Officer)
    Michael J. Gruppuso

                                       41

<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, MSW Energy Finance Co. II, Inc. has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.

                                     MSW ENERGY FINANCE CO. II, INC.

                                     By: /s/ John T. Miller
                                         -------------------------------------
                                         John T. Miller
                                         President and Chief Executive Officer

                                     Date:  November 12, 2004
                                          ------------------------------------

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


    Signature                        Title                           Date
-----------------------  -----------------------------        ------------------

                         President and Chief Executive        November 12, 2004
/s/ John T. Miller       Officer (Principal Executive
-----------------------  Officer)
John T. Miller

                         Chief Financial Officer              November 11, 2004
/s/ Michael J. Gruppuso  (Principal Financial and
-----------------------  Accounting Officer)
Michael J. Gruppuso


                                       42

<PAGE>

<TABLE>
<CAPTION>
                                  EXHIBIT INDEX

<S>     <C>         <C>
        3.1         Amended and Restated Certificate of Formation of MSW Finance LLC. *

        3.2         Amended and Restated Limited Liability Company Agreement of
                    MSW Energy Holdings II LLC, dated as of November 5, 2004, by
                    MSW Intermediate Merger LLC, as the sole member. *

        3.3         Certificate of Incorporation of MSW Energy Finance Co. II, Inc.*

        3.4         Bylaws of MSW Energy Finance Co. II, Inc.*

        3.5         Amended and Restated Certificate of Incorporation of UAE Ref-Fuel II Corp. *

        4.1         Indenture dated November 24, 2003, by and among MSW Energy Holdings II LLC, MSW Energy Finance
                    Co. II, Inc. and Wells Fargo Bank Minnesota, National Association as Trustee.*

        4.2         Supplemental Indenture dated December 12, 2003, by and among MSW Energy Holdings II LLC, MSW
                    Energy Finance Co. II, Inc., UAE Ref-Fuel II Corp. and Wells Fargo Bank Minnesota, National
                    Association as Trustee.*

        4.3         Form of 7 3/8% Senior Secured Note Due 2010 (included in Exhibit 4.1).*

        4.4         Registration Rights Agreement dated as of November 24, 2003, by and among MSW Energy Holdings
                    II LLC, MSW Energy Finance Co. II,  Inc., UAE Ref-Fuel II Corp. and Credit Suisse First Boston
                    LLC.*

        4.5         Pledge and Security Agreement dated as of November 24, 2003, by and among MSW Energy Holdings
                    II LLC, MSW Energy Finance Co. II, Inc. and Wells Fargo Bank Minnesota, National Association as
                    Collateral Agent.*

        4.6         Pledge Supplement dated as of November 24, 2003 by UAE Ref-Fuel II Corp. *

        4.7         Deposit Agreement, dated as of November 24, 2003, by and among MSW Energy Holdings II LLC, MSW
                    Energy Finance Co. II, Inc. and Wells Fargo Bank Minnesota, National Association as Collateral
                    Agent and Depositary Agent.*

        4.8         Purchase Agreement, dated as of November 7, 2003, by and among MSW Energy Holdings II LLC, MSW
                    Energy Finance Co. II, Inc., UAE Ref-Fuel II Corp. and Credit Suisse First Boston LLC.*

        10.1        Second Amended and Restated Limited Liability Company Agreement of Ref-Fuel Holdings LLC, dated
                    as of April 30, 2004, by and between MSW Energy Holdings II LLC, UAE Ref-Fuel II Corp., MSW
                    Hudson LLC and Duke Energy Erie LLC, as amended. *

        10.2        Equity Contribution Agreement, dated as of April 30, 2001,
                    by and among Duke Capital Corporation, United American
                    Energy Corp., Ref-Fuel Holdings LLC (formerly known as
                    Duke/UAE Ref-Fuel LLC) and Duke/UAE Holdings LLC.*

</TABLE>

                                       43

<PAGE>

<TABLE>
<S>     <C>         <C>
        10.3        Substitution, Assumption, Amendment and Release Agreement, dated as of June 30, 2003, by and
                    among Duke Capital Corporation, United American Energy Corp., Ref-Fuel Holdings LLC (formerly
                    known as Duke/UAE Ref-Fuel LLC), American Ref-Fuel Company LLC, and MSW Energy Holdings LLC.*

        12          Statement re Computation of Ratio of Earnings to Fixed Charges.

        21.1        Subsidiaries of MSW Energy Holdings II LLC. *

        31(a)       15d-14(a) Certification of John T. Miller for MSW Energy Holdings II LLC.

        31(b)       15d-14(a) Certification of Michael J. Gruppuso for MSW Energy Holdings II LLC.

        31(c)       15d-14(a) Certification of John T. Miller for MSW Energy Finance Co. II, Inc.

        31(d)       15d-14(a) Certification of Michael J. Gruppuso for MSW Energy Finance Co.II, Inc.

        32(a)       Section 1350 Certification of John T. Miller and Michael J. Gruppuso for MSW Energy Holdings II
                    LLC.

        32(b)       Section 1350 Certification of John T. Miller and Michael J. Gruppuso for MSW Energy Finance Co.
                    II, Inc.
</TABLE>

*        Incorporated by Reference to Registration Statement No. 333-112640.


                                       44