<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549


                                   Form 10-Q


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

     For the quarterly period ended      June 30, 1999
                                    -----------------------

                                      or

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

     For the transition period from __________ to __________


                        Commission File Number 1-13434


                             Edison Mission Energy
            (Exact name of registrant as specified in its charter)


              California                                 95-4031807
    (State or other jurisdiction of         (I.R.S. Employer Identification No.)
     incorporation or organization)


        18101 Von Karman Avenue
        Irvine, California                                  92612
(Address of principal executive offices)                  (Zip Code)


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


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

     Number of shares outstanding of the registrant's Common Stock as of August
     13, 1999: 100 shares (all shares held by an affiliate of the registrant).
<PAGE>

                               TABLE OF CONTENTS



Item                                                                      Page
----                                                                      ----

                         PART I - Financial Information

1.  Financial Statements.................................................    1

2.  Management's Discussion and Analysis of Financial Condition and
    Results of Operations................................................   14


                          PART II - Other Information

5.  Other Information....................................................   25

6.  Exhibits and Reports on Form 8-K.....................................   25


                                   PART III


    Signatures...........................................................   26
<PAGE>

PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

                    EDISON MISSION ENERGY AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF INCOME
                                 (In thousands)

<TABLE>
<CAPTION>
                                                    (Unaudited)             (Unaudited)
                                                Three Months Ended        Six Months Ended
                                                      June 30,                June 30,
                                               ---------------------   -----------------------
                                                  1999        1998        1999         1998
                                               ----------   --------   ----------   ----------
<S>                                            <C>          <C>        <C>          <C>
Operating Revenues
   Electric revenues                            $218,672    $144,402    $ 415,525    $343,199
   Equity in income from energy projects          35,254      48,225       95,999      65,792
   Equity in income from oil and gas               6,118       4,962        9,760      10,427
   Operation and maintenance services              9,328       9,725       17,844      19,802
                                                --------    --------    ---------    --------
       Total operating revenues                  269,372     207,314      539,128     439,220
                                                --------    --------    ---------    --------
Operating Expenses
   Fuel                                           73,572      41,075      127,647      89,712
   Plant operations                               47,018      32,871       81,389      62,469
   Operation and maintenance services              7,543       6,888       14,013      14,279
   Depreciation and amortization                  35,597      22,378       59,743      45,160
   Administrative and general                     32,567      32,990       69,064      57,162
                                                --------    --------    ---------    --------
       Total operating expenses                  196,297     136,202      351,856     268,782
                                                --------    --------    ---------    --------
   Income from operations                         73,075      71,112      187,272     170,438
                                                --------    --------    ---------    --------
Other Income (Expense)
   Interest and other income                      12,792       8,995       20,584      22,771
   Interest expense                              (78,873)    (45,160)    (123,392)    (90,885)
   Dividends on preferred securities              (4,145)     (3,304)      (7,378)     (6,601)
                                                --------    --------    ---------    --------
       Total other income (expense)              (70,226)    (39,469)    (110,186)    (74,715)
                                                --------    --------    ---------    --------
   Income before income taxes                      2,849      31,643       77,086      95,723
   Provision (benefit) for income taxes           (2,626)     13,055       13,675      39,435
                                                --------    --------    ---------    --------
Income before change in accounting principle    $  5,475    $ 18,588    $  63,411    $ 56,288
Cumulative effect on prior years of change in
accounting for start-up costs                         --          --      (13,840)         --
                                                --------    --------    ---------    --------
Net Income                                      $  5,475    $ 18,588    $  49,571    $ 56,288
                                                ========    ========    =========    ========
</TABLE>

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

                                       1
<PAGE>

                    EDISON MISSION ENERGY AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                (In thousands)

<TABLE>
<CAPTION>
                                                  (Unaudited)             (Unaudited)
                                               Three Months Ended       Six Months Ended
                                                    June 30,                June 30,
                                             ----------------------   --------------------
                                                1999        1998        1999        1998
                                             ----------   ---------   ---------   --------

<S>                                          <C>          <C>         <C>         <C>
Net Income                                    $  5,475     $18,588    $ 49,571     $56,288
Other comprehensive income (expense), net
of tax:
   Foreign currency translation
   adjustments, net of income tax
   benefit (expense) of $1,416 and $199
   for the three months and $2,794 and
   $(900) for the six months ended
   June 30, 1999 and 1998, respectively        (29,032)     (7,577)    (41,657)        738
                                              --------     -------    --------     -------
Comprehensive Income (Loss)                   $(23,557)    $11,011    $  7,914     $57,026
                                              ========     =======    ========     =======
</TABLE>

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

                                       2
<PAGE>

                     EDISON MISSION ENERGY AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                    (Unaudited)
                                                      June 30,     December 31,
                                                        1999           1998
                                                    -----------    ------------
<S>                                                 <C>            <C>
Assets

Current Assets
   Cash and cash equivalents                         $  808,280     $  459,178
   Accounts receivable - trade                           98,770         74,403
   Accounts receivable - affiliates                      29,193         13,871
   Inventory                                             61,395         13,000
   Prepaid expenses and other                            41,656         46,864
                                                     ----------     ----------
       Total current assets                           1,039,294        607,316
                                                     ----------     ----------
Investments
 Energy projects                                      1,887,859      1,163,597
 Oil and gas                                             68,987         62,949
                                                     ----------     ----------
       Total investments                              1,956,846      1,226,546
                                                     ----------     ----------
Property, Plant and Equipment                         5,016,679      3,125,747
   Less accumulated depreciation and amortization       300,609        250,934
                                                     ----------     ----------
       Net property, plant and equipment              4,716,070      2,874,813
                                                     ----------     ----------
Other Assets
   Goodwill                                             288,090        308,051
   Restricted cash and other                            157,891        141,390
                                                     ----------     ----------
       Total other assets                               445,981        449,441
                                                     ----------     ----------
Total Assets                                         $8,158,191     $5,158,116
                                                     ==========     ==========
</TABLE>

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

                                       3
<PAGE>

                    EDISON MISSION ENERGY AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                                (In thousands)

<TABLE>
<CAPTION>
                                                           (Unaudited)
                                                             June 30,     December 31,
                                                               1999           1998
                                                           -----------    ------------
<S>                                                        <C>            <C>
Liabilities and Shareholder's Equity

Current Liabilities
   Accounts payable - affiliates                            $    8,489     $    8,339
   Accounts payable and accrued liabilities                    140,994         99,062
   Accrued incentive compensation                              135,852        112,652
   Interest payable                                             62,995         56,708
   Short-term obligations                                      701,899             --
   Current maturities of long-term obligations                 101,552        194,586
                                                            ----------     ----------
       Total current liabilities                             1,151,781        471,347
                                                            ----------     ----------
Long-Term Obligations Net of Current Maturities              4,161,114      2,396,360
                                                            ----------     ----------
Long-Term Deferred Liabilities
   Deferred taxes and tax credits                              612,630        613,009
   Deferred revenue                                            525,418        490,471
   Other                                                        89,717         79,369
                                                            ----------     ----------
       Total long-term deferred liabilities                  1,227,765      1,182,849
                                                            ----------     ----------
Total Liabilities                                            6,540,660      4,050,556
                                                            ----------     ----------
Preferred Securities of Subsidiaries:
   Company-obligated mandatorily redeemable security
     of partnership holding solely parent debentures           150,000        150,000
                                                            ----------     ----------
   Subject to mandatory redemption                              84,032             --
                                                            ----------     ----------
   Not subject to mandatory redemption                         118,103             --
                                                            ----------     ----------
Commitments and Contingencies (Note 5)

Shareholder's Equity
   Common stock, no par value; 10,000 shares
     authorized; 100 shares issued and outstanding              64,130         64,130
   Additional paid-in capital                                  929,406        629,406
   Retained earnings                                           283,838        234,345
   Accumulated other comprehensive income (loss)               (11,978)        29,679
                                                            ----------     ----------
Total Shareholder's Equity                                   1,265,396        957,560
                                                            ----------     ----------
Total Liabilities and Shareholder's Equity                  $8,158,191     $5,158,116
                                                            ==========     ==========
</TABLE>

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

                                       4
<PAGE>

                    EDISON MISSION ENERGY AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (In thousands)
<TABLE>
<CAPTION>
                                                              (Unaudited)
                                                            Six Months Ended
                                                                June 30,
                                                       -------------------------
                                                           1999          1998
                                                       -----------    ----------
<S>                                                    <C>            <C>
Cash Flows From Operating Activities
   Net income                                          $    49,571     $ 56,288
   Adjustments to reconcile net income to net cash
     provided by operating activities
       Equity in income from energy projects               (95,999)     (65,792)
       Equity in income from oil and gas                    (9,760)     (10,427)
       Distributions from energy projects                   55,861       51,222
       Distributions from oil and gas                          400       19,112
       Depreciation and amortization                        59,743       45,160
       Deferred taxes and tax credits                       16,937       37,194
       Cumulative effect on prior years of change
         in accounting for start-up costs                   13,840           --
   (Increase) decrease in accounts receivable              (40,189)       5,895
   Decrease in prepaid expenses and other                      393        4,236
   Increase (decrease) in accounts payable and
     accrued liabilities                                     6,287      (17,076)
   Increase in interest payable                             51,961        9,739
   Other, net                                              (10,760)     (11,915)
                                                       -----------     --------
       Net cash provided by operating activities            98,285      123,636
                                                       -----------     --------
Cash Flows From Financing Activities
   Borrowings on long-term obligations                   1,810,518       57,541
   Payments on long-term obligations                      (154,658)     (45,424)
   Short-term financing, net                               703,499           --
   Capital contribution from parent                        300,000           --
   Issuance of preferred securities                        202,212           --
                                                       -----------     --------
       Net cash provided by financing activities         2,861,571       12,117
                                                       -----------     --------
Cash Flows From Investing Activities
   Investments in energy projects                          (20,153)      (5,381)
   Loans to energy projects                                (26,101)     (22,937)
   Purchase of generating station                       (1,800,355)          --
   Purchase of common stock of acquired companies         (648,246)      (4,109)
   Capital expenditures                                    (70,113)     (53,342)
   (Increase) decrease in restricted cash                   (6,163)      32,093
   Other, net                                              (30,254)         133
                                                       -----------     --------
       Net cash used in investing activities            (2,601,385)     (53,543)
                                                       -----------     --------
Effect of exchange rate changes on cash                     (9,369)      (1,498)
                                                       -----------     --------
Net increase in cash and cash equivalents                  349,102       80,712
Cash and cash equivalents at beginning of period           459,178      585,883
                                                       -----------     --------
Cash and cash equivalents at end of period             $   808,280     $666,595
                                                       ===========     ========
</TABLE>

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

                                       5
<PAGE>

                    EDISON MISSION ENERGY AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 1999


NOTE 1. GENERAL

     All adjustments, including recurring accruals, have been made that are
necessary to present fairly the consolidated financial position and results of
operations for the periods covered by this report. The results of operations for
the six months ended June 30, 1999, are not necessarily indicative of the
operating results for the full year.

     Edison Mission Energy's (EME) significant accounting policies are described
in Note 2 to EME's Consolidated Financial Statements as of December 31, 1998 and
1997, included in its 1998 Annual Report on Form 10-K filed with the Securities
and Exchange Commission on March 31, 1999. EME follows the same accounting
policies for interim reporting purposes, with the exception of the American
Institute of Certified Public Accountants Statement of Position (SOP) 98-5,
"Reporting on the Costs of Start-Up Activities", which became effective in
January 1999. SOP 98-5 requires that certain costs related to start-up
activities be expensed as incurred and that certain previously capitalized costs
be expensed and reported as a cumulative change in accounting principle. This
quarterly report should be read in connection with such financial statements.

     Certain prior period amounts have been reclassified to conform to the
current period financial statement presentation.

NOTE 2. INVESTMENTS

     The following table presents summarized financial information of the
investments in energy projects and oil and gas accounted for by the equity
method:

<TABLE>
<CAPTION>
                                                     (In thousands)
                                             (Unaudited)           (Unaudited)
                                         Three Months Ended      Six Months Ended
                                               June 30,              June 30,
                                         -------------------   -------------------
                                           1999       1998       1999       1998
                                         --------   --------   --------   --------
<S>                                      <C>        <C>        <C>        <C>
Energy Projects
Operating Revenues                       $319,747   $379,045   $762,591   $722,102
Income from Operations                     69,855     94,844    242,101    154,775
Net Income                                 57,552     66,693    198,503    103,014

Oil and Gas
Operating Revenues                       $ 50,370   $ 48,483   $ 93,537   $105,948
Income from Operations                     15,115     12,994     23,287     28,682
Net Income                                 11,970      8,626     19,244     21,106
</TABLE>

                                       6
<PAGE>

NOTE 3.  ACQUISITIONS

     In March 1999, EME Homer City Generation L.P. (EME Homer City), an
indirect, wholly owned affiliate of EME, completed a transaction with GPU, Inc.,
New York State Electric & Gas Corporation and their respective affiliates to
acquire the 1,884-megawatt (MW) Homer City Electric Generating Station and
certain facilities and other assets associated therewith (collectively, Homer
City).

     Consideration for Homer City consisted of a cash payment of approximately
$1.8 billion, which was partially financed by $1.5 billion of new loans (see
Note 4).

     In May 1999, Edison Mission Energy Taupo Ltd. (EME Taupo), an indirect,
wholly owned affiliate of EME, completed a transaction with the New Zealand
government to acquire 40% of the shares of Contact Energy Ltd. (Contact).
Contact owns and operates hydroelectric, geothermal and natural gas-fired power
generating plants in New Zealand with a total generating capacity of 2,371 MW.
Contact also supplies gas and electricity to customers in New Zealand and has
minority interests in two power projects in Australia.

     Consideration for Contact consisted of a cash payment of approximately $648
million (1.2 billion New Zealand dollars). Financing of the acquisition is
discussed in Note 4.

     Both acquisitions were accounted for utilizing the purchase method. EME's
consolidated statement of income for the three and six months ended June 30,
1999 reflects the operations of Homer City beginning on March 18, 1999 and
Contact beginning May 1, 1999.

NOTE 4.  FINANCIAL INSTRUMENTS

     In March 1999, Edison Mission Holdings Co. (EM Holdings), parent company of
EME Homer City, closed a $1.1 billion financing and EME closed a $700 million
financing. The EM Holdings financing consists of (1) an $800 million, 364-day
interest only term loan, (2) a $250 million, five-year interest only
construction term loan and (3) a $50 million, five-year interest only revolving
loan. These loans are structured on a limited-recourse basis, in which the
lenders look primarily to the cash generated by EM Holdings and its subsidiaries
to repay the debt and have taken a security interest in the assets of EM
Holdings and its subsidiaries. The EME financing consists of a $700 million,
364-day interest only revolving credit facility, structured on a recourse,
unsecured basis. The proceeds of EM Holdings' $800 million loan and EME's $700
million loan, combined with cash and corporate revolver borrowings totaling
approximately $300 million were used to finance the acquisition of Homer City.

     In May 1999, EM Holdings completed an $830 million bond financing. The
financing consists of (1) $300 million, 8.137% Senior Secured Bonds due 2019 and
(2) $530 million, 8.734% Senior Secured Bonds due 2026. These bonds are non-
recourse to

                                       7
<PAGE>

EME. The proceeds of the $830 million bonds were used primarily to repay EM
Holdings' $800 million, 364-day interest only term loan.

  In May 1999, Edison Mission Energy Global Management, Inc. issued $120 million
of Flexible Money Market Cumulative Preferred Stock.  The stock issuance
consists of (1) 600 Series A Shares and (2) 600 Series B Shares, both with
liquidation preference of $100,000 per share and a dividend rate of 5.74% until
May 2004. In May 1999 EME Taupo issued a $214 million (400 million New Zealand
dollars) credit facility. The proceeds from the $120 million stock and $214
million credit facility, combined with an equity contribution from Edison
International of $300 million and cash were used to finance the acquisition of
Contact.  In June 1999, EME Taupo issued $84 million (160 million New Zealand
dollars) of Retail Redeemable Preference Shares, the proceeds of which were used
to repay a portion of the EME Taupo $214 million credit facility.

  In June 1999, EME issued $600 million, 7.73% Senior Notes due 2009.  The Notes
are senior unsecured obligations of EME, which will be used for general
corporate purposes.

NOTE 5. COMMITMENTS AND CONTINGENCIES

Firm Commitments for Asset Purchases

<TABLE>
<CAPTION>
Projects                                                   U.S. ($ in millions)
--------                                                   --------------------
<S>                                                        <C>
Commonwealth Edison Co. (i)                                      $ 5,000
</TABLE>

(i)   A wholly owned subsidiary of EME executed an Asset Sale Agreement to
      purchase the fossil-fuel generating assets of Commonwealth Edison Co.,
      totaling 9,621 MW located in the midwestern United States. The closing of
      the transaction is subject to receipt of various state and federal
      regulatory approvals and is expected to be completed by year end 1999.

Firm Commitments to Contribute Project Equity

<TABLE>
<CAPTION>
Projects                 Local Currency                    U.S. ($ in millions)
--------                 --------------                    --------------------
<S>                      <C>                               <C>
ISAB (i)                 244 billion Italian Lira                 $130
EcoElectrica (ii)                                                   34
Tri Energy (iii)                                                    25
Paiton (iv)                                                         17
</TABLE>

(i)   ISAB is a 512-MW integrated gasification combined cycle power plant under
      construction near Siracusa in Sicily, Italy. A wholly owned subsidiary of
      EME owns a 49% interest. Equity will be contributed at commercial
      operation, which is currently scheduled for late 1999.

                                       8
<PAGE>

(ii)  EcoElectrica is a 540-MW liquefied natural gas combined-cycle cogeneration
      facility under construction in Penuelas, Puerto Rico. A wholly owned
      subsidiary of EME owns a 50% interest. Equity will be contributed at
      commercial operation, which is currently scheduled for late 1999.

(iii) Tri Energy is a 700-MW gas-fired power plant under construction in the
      Ratchaburi Province, Thailand. A wholly owned subsidiary of EME owns a 25%
      interest. Equity will be contributed at commercial operation, which is
      currently scheduled for mid-2000.

(iv)  Paiton is a 1,230-MW coal-fired power plant in operation in East Java,
      Indonesia. A wholly owned subsidiary of EME owns a 40% interest. Equity
      contributions continue to be made.

  Firm commitments to contribute project equity could be accelerated due to
certain events of default as defined in the non-recourse project financing
facilities.  Management has no reason to believe that these events of default
will occur to require acceleration of the firm commitments.

Contingent Obligations to Contribute Project Equity

<TABLE>
<CAPTION>
Projects                                                   U.S. ($ in millions)
--------                                                   --------------------
<S>                                                        <C>
Paiton (i)                                                        $141
Tri Energy (ii)                                                     20
Doga (ii)                                                           14
All Other                                                           19
</TABLE>

(i)   Contingent obligations to contribute additional project equity (Contingent
      Equity) would be based on events principally related to capital cost
      overruns during the plant construction, certain partner obligations or
      events of default. These contingent obligations are to be cancelled (if
      unused) as of the date of term financing by the Export-Import Bank of the
      United States. Term financing by the Export-Import Bank of the United
      States is the subject of a comprehensive set of conditions. Based on
      present projections, the Project does not expect to complete these
      conditions at the time contemplated in the loan documentation (October 15,
      1999), and is seeking an extension of the time to achieve term completion.
      The Project is also negotiating an understanding with its Lenders with
      regard to the amounts and uses of the Contingent Equity during the time of
      this extension. As of the date hereof, the Project does not have any
      commitment from the Lenders as to the extension. In addition, a dispute
      involving a slope adjacent to the Paiton site will require Contingent
      Equity to be contributed for amounts not otherwise covered by insurance.
      The Contractor has initiated a Phase II arbitration on the amount of
      compensation due as a result of the slope failure, and Paiton Energy is in
      discussions with its insurance companies on payment under its policies.
      EME's share of the total costs related to the slope failure are currently
      estimated to be between $16 and $44 million. Further, because of some
      delays in the completion of the construction, the Project expects certain
      other cost

                                       9
<PAGE>

      overruns. The EME share of these overruns is estimated to be between $10-
      15 million.

(ii)  Contingent obligations to contribute additional equity to the project
      would be based on events principally related to capital cost overruns
      during plant construction, certain EME or partner obligations or events of
      default.

  Other than as noted above, management is not aware, at this time, of any other
contingent obligations or obligations to contribute project equity.

Other Commitments and Contingencies

  Certain of EME's subsidiaries entered into indemnification agreements whereby
the subsidiaries agreed to repay capacity payments to the projects' power
purchasers, in the event the projects unilaterally terminate their performance
or reduce their electric power producing capability during the term of the power
contract.  Obligations under these indemnification agreements as of June 30,
1999, if payment were required, would be $243 million.  Management has no reason
to believe that the projects will either terminate their performance or reduce
their electric power producing capability during the term of the power
contracts.

  Paiton is a 1,230-MW coal-fired power plant in operation in East Java,
Indonesia.  A wholly owned subsidiary of EME owns a 40% interest and has a $370
million investment at June 30, 1999. The tariff is higher in the early years and
steps down over time.  The tariff for the Paiton project includes infrastructure
to be used in common by other units at the Paiton complex. The plant's output is
fully contracted with the state-owned electricity company, PT Perusahaan Listrik
Negara (PLN).  Payments are in Indonesian Rupiah, with the portion of such
payments intended to cover non-Rupiah project costs (including returns to
investors) indexed to the Indonesian Rupiah/U.S. dollar exchange rate
established at the time of the Power Purchase Agreement (PPA) in February 1994.
PLN's payment obligations are supported by the Government of Indonesia.  The
projected rate of growth of the Indonesian economy and the exchange rate of
Indonesian Rupiah into U.S. dollars have deteriorated significantly since the
Paiton project was contracted, approved and financed.  The project received
substantial finance and insurance support from the Export-Import Bank of the
United States, The Export-Import Bank of Japan, the U.S. Overseas Private
Investment Corporation and the Ministry of International Trade and Industry of
Japan.  The Paiton project's senior debt ratings have been reduced from
investment grade to speculative grade based on the rating agencies' perceived
increased risk that PLN might not be able to honor the electricity sales
contract with Paiton.  The Government of Indonesia has arranged to reschedule
sovereign debt owed to foreign governments and has entered into discussions
about rescheduling sovereign debt owed to private lenders.  PLN has announced
its intentions to commence discussions with independent power producers to
renegotiate the power supply contracts, which discussions have commenced on an
initial basis, however it is not yet known what form the renegotiation may take.
Any material modifications of the contract could also require a renegotiation of
the Paiton project's debt agreement.  Certain events (including

                                       10
<PAGE>

the shortfall in payment discussed in the paragraph below) which, with the
passage of time or upon notice, may mature into defaults of the Project's debt
agreement have occurred and may require the grant of waivers or renegotiation of
the relevant agreements. Waivers of potential defaults have been received
previously from the Project's creditors. The impact of any such renegotiations
with PLN, the Government of Indonesia or the project's creditors on EME's
expected return on its investment in Paiton is uncertain at this time, however,
management believes that it will ultimately recover its investment in the
project.

  Paiton notified PLN that Unit 7 of Paiton achieved Commercial Operation under
terms of the PPA on May 1999 and that Unit 8 of Paiton achieved Commercial
Operation under the terms of the PPA on July 1999.  Because of the economic
downturn, PLN is experiencing low electricity demand and PLN has therefore
dispatched the Paiton plant to zero;  however, under the terms of the PPA, PLN
is required to continue to pay for capacity and fixed operating costs once each
unit and the Plant achieve Commercial Operation. An invoice for these charges
for May in the amount of $7.8 million was submitted to PLN.  The project and PLN
met to review the invoice and a partial payment of $2.5 million was subsequently
received.  The primary reason for the payment shortage was the use of an
arbitrary Indonesian Rupiah/U.S. dollar exchange rate of 2,450 Indonesian Rupiah
to one U.S. dollar by PLN.  The use of this exchange rate is not in agreement
with the Power Purchase Agreement, but is the exchange rate on which PLN
payments to other independent power producers in Indonesia have been based.

  Brooklyn Navy Yard is a 286-MW gas-fired cogeneration power plant in Brooklyn,
New York.  A wholly owned subsidiary of EME owns 50% of the project.  In
February 1997, the construction contractor asserted general monetary claims
under the turnkey agreement against Brooklyn Navy Yard Cogeneration Partners,
L.P. (BNY) for damages in the amount of $136.8 million.  BNY has asserted
general monetary claims against the contractor.  In connection with a $407
million non-recourse project refinancing in 1997, EME agreed to indemnify BNY
and its partner from all claims and costs arising from or in connection with the
contractor litigation, which indemnity has been assigned to the lenders.  EME
believes that the outcome of this litigation will not have a material adverse
effect on its financial position or results of operations.

Litigation

  EME is routinely involved in litigation arising in the normal course of
business.  While the results of such litigation cannot be predicted with
certainty, management, based on advice of counsel, does not believe that the
final outcome of any pending litigation will have a material adverse effect on
EME's financial position or results of operations.

                                       11
<PAGE>

Environmental Matters

     EME is subject to environmental regulation by federal, state and local
authorities in the U.S. and foreign regulatory authorities with jurisdiction
over projects located outside the U.S. EME believes that it is in substantial
compliance with environmental regulatory requirements and that maintaining
compliance with current requirements will not materially affect its financial
position or results of operations.

     EME completed a partial review of its sites in 1995 and does not believe
that a material liability exists as of June 30, 1999. The implementation of
Clean Air Act Amendments is expected to result in increased operating expenses;
however, these expenses are not expected to have a material impact on EME's
financial position or results of operations.

NOTE 6. BUSINESS SEGMENTS

     EME operates predominately in one line of business, electric power
generation, with reportable segments organized by geographic region: Americas,
Asia Pacific and Europe, Central Asia, Middle East and Africa. EME's plants are
located in different geographic areas, which mitigates the effects of regional
markets, economic downturns or unusual weather conditions. These regions take
advantage of the increasing globalization of the independent power market.
Intercompany transactions have been eliminated in the following segment
information.

<TABLE>
<CAPTION>
                                                                       Europe,
         (In millions)                                              Central Asia,
      Three Months Ended                               Asia          Middle East       Corporate/
         June 30, 1999                Americas        Pacific         and Africa       Other(/i/)           Total
         -------------                --------        -------       -------------      ----------          --------
<S>                                   <C>             <C>           <C>                <C>                 <C>
Operating revenues                    $  122.6        $   56.1           $   90.7         $    --          $  269.4
Net income (loss)                         21.0            (4.4)               1.7           (12.8)              5.5
Total assets                           3,504.6         2,486.8            2,166.8              --           8,158.2

         June 30, 1998
         -------------
Operating revenues                    $   58.9        $   53.2           $   95.2         $    --          $  207.3
Net income (loss)                         22.1            (3.4)               6.0            (6.1)             18.6
Total assets                             913.8         1,686.6            2,428.9              --           5,029.3
</TABLE>

                                       12
<PAGE>

<TABLE>
<CAPTION>
                                                                       Europe,
         (In millions)                                              Central Asia,
      Six  Months Ended                               Asia          Middle East       Corporate/
         June 30, 1999                Americas        Pacific        and Africa        Other(/i/)           Total
         -------------                --------        -------       -------------      ----------          --------
<S>                                   <C>             <C>           <C>                <C>                 <C>
Operating revenues                    $  207.2        $  106.3           $  225.6         $    --          $  539.1
Net income (loss)                         51.0           (14.4)              28.9           (15.9)             49.6
Total assets                           3,504.6         2,486.8            2,166.8              --           8,158.2

         June 30, 1998
         -------------
Operating revenues                    $   88.3        $  107.3           $  243.6         $    --          $  439.2
Net income (loss)                         32.3            (3.6)              39.0           (11.4)             56.3
Total assets                             913.8         1,686.6            2,428.9              --           5,029.3
</TABLE>

(i) Includes corporate net interest expense

NOTE 7. SUBSEQUENT EVENTS

  In July 1999, Edison First Power Limited, a wholly owned subsidiary of EME, a
wholly owned, non-utility subsidiary of Edison International, completed a
transaction with PowerGen UK plc, to acquire the Ferrybridge and Fiddler's Ferry
coal-fired electric generating plants located in the United Kingdom.
Ferrybridge, located in West Yorkshire, and Fiddler's Ferry, located in
Warrington, each have a generating capacity of approximately 2,000 megawatts.

  Consideration for Ferrybridge and Fiddler's Ferry consisted of a cash payment
of approximately $2.0 billion (1.3 billion pounds Sterling) for the two plants.
The acquisition was funded primarily with a combination of net proceeds from the
Edison First Power Limited Guaranteed Secured Variable Rate Bonds issued on July
19, 1999 and due 2019, and equity from Edison International.

                                       13
<PAGE>

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

  This Quarterly Report on Form 10-Q includes certain forward-looking
statements, the realization of which may be affected by certain important
factors discussed in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" thereunder and elsewhere herein.

GENERAL
-------

  Edison Mission Energy (EME) is a leading global power producer.  Through its
subsidiaries, EME is engaged in the business of developing, acquiring, owning
and operating electric power generation facilities worldwide.  EME's current
investments include 65 projects totaling 19,397 megawatts (MW) of generation
capacity, of which 16,922 are in operation and 2,475 are under construction.  In
addition, 12 operating projects totaling 9,621 MW of generating capacity are
pending acquisition.

  EME's operating revenues are derived primarily from electric revenues and
equity in income from energy projects.  Operating revenues also include equity
in income from oil and gas investments and revenue attributable to operation and
maintenance services.

  Electric revenues are derived from consolidated results of operations of one
domestic and several international entities.  Equity in income from energy
projects relates to EME's ownership interest of 50% or less voting stock in
projects.  The equity method of accounting is generally used to account for the
operating results of entities over which EME has a significant influence but in
which it does not have a controlling interest.  With respect to entities
accounted for under the equity method, EME recognizes its proportional share of
the income or loss of such entities.

ACQUISITIONS
------------

  In March 1999, EME Homer City Generation L.P. (EME Homer City), an indirect,
wholly owned affiliate of EME, completed a transaction with GPU, Inc., New York
State Electric & Gas Corporation and their respective affiliates to acquire the
1,884-MW Homer City Electric Generating Station and certain facilities and other
assets associated therewith (collectively, Homer City).

  Consideration for Homer City consisted of a cash payment of approximately $1.8
billion, which was partially financed by $1.5 billion of new loans, combined
with corporate revolver borrowings and cash.

  In May 1999, Edison Mission Energy Taupo Ltd. (EME Taupo), an indirect, wholly
owned affiliate of EME, completed a transaction with the New Zealand government
to acquire 40% of the shares of Contact Energy Ltd. (Contact).  Contact owns and
operates hydroelectric, geothermal and natural gas-fired power generating plants
in New Zealand with a total generating capacity of 2,371 MW.  Contact also
supplies gas and electricity

                                       14
<PAGE>

to customers in New Zealand and has minority interests in two power projects in
Australia.

  Consideration for Contact consisted of a cash payment of approximately $648
million (1.2 billion New Zealand dollars), which was financed by $120 million of
preferred stock issued by Edison Mission Energy Global Management, Inc., a $214
million (400 million New Zealand dollars) credit facility issued by EME Taupo, a
$300 million equity contribution from Edison International and cash.

  In July 1999, Edison First Power Limited, a wholly owned subsidiary of EME, a
wholly owned, non-utility subsidiary of Edison International, completed a
transaction with PowerGen UK plc, to acquire the Ferrybridge and Fiddler's Ferry
coal-fired electric generating plants located in the United Kingdom.
Ferrybridge, located in West Yorkshire, and Fiddler's Ferry, located in
Warrington, each have a generating capacity of approximately 2,000 megawatts.

  Consideration for Ferrybridge and Fiddler's Ferry consisted of a cash payment
of approximately $2.0 billion (1.3 billion pounds Sterling) for the two plants.
The acquisition was funded primarily with a combination of net proceeds from the
Edison First Power Limited Guaranteed Secured Variable Rate Bonds issued on July
19, 1999 and due 2019, and equity from Edison International.

  These acquisitions were accounted for utilizing the purchase method.  EME's
consolidated statement of income for the three and six months ended June 30,
1999 reflects the operations of Homer City beginning on March 18, 1999 and
Contact beginning May 1, 1999.  The consolidated statements of income, balance
sheets and cash flows do not reflect the Ferrybridge and Fiddler's Ferry
generating plants acquired in July 1999.

RESULTS OF OPERATIONS
---------------------

OPERATING REVENUES  Operating revenues increased $62.1 million and $99.9 million
for the second quarter and six months ended June 30, 1999, respectively,
compared with the corresponding periods of 1998, resulting primarily from
increases in electric revenues and equity in income from energy projects.
Electric revenues increased $74.3 million and $72.3 million for the second
quarter and six months ended June 30, 1999, respectively, compared with the
corresponding periods of 1998, primarily due to revenues from Homer City
acquired in March 1999.    Equity in income from energy projects decreased $13
million and increased $30.2 million during the second quarter and six months
ended June 30, 1999, respectively, compared with the corresponding periods of
1998.  The second quarter decrease was principally due to a geothermal project
that was sold in 1998 which recorded earnings in 1998 that had been deferred in
previous years.  The increase for the six month period was primarily the result
of higher revenues from several cogeneration projects due to a final settlement
on energy pricing for prior years.

                                       15
<PAGE>

OPERATING EXPENSES  Operating expenses increased $60.1 million and $83.1 million
for the second quarter and six months ended June 30, 1999, respectively,
compared with the same prior year periods. These increases are due to higher
fuel, plant operations, depreciation and amortization and administrative and
general expenses. The increases in fuel expense, plant operations and
depreciation and amortization are primarily the result of expenses at Homer City
acquired in March 1999.  The administrative and general expense increase is
primarily related to increased project development/acquisition costs.

OTHER INCOME (EXPENSE)  Interest expense increased $33.7 million and $32.5
million for the second quarter and six months ended June 30, 1999, respectively,
compared with the same prior year periods.  The increase was primarily the
result of additional debt financing of the Homer City acquisition.

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE In April 1998, the American
Institute of Certified Public Accountants issued Statement of Position (SOP) 98-
5, "Reporting on the Costs of Start-Up Activities", which became effective in
January 1999.  The Statement requires that certain costs related to start-up
activities be expensed as incurred and that certain previously capitalized costs
be expensed and reported as a cumulative change in accounting principle.  The
impact of adopting SOP 98-5 on EME's net income was $13.8 million, after-tax.

PROVISION FOR INCOME TAXES  EME recorded an effective tax provision rate of 18%
for the six months ended June 30, 1999, compared with a 41% rate for the same
prior year period.  The decrease in the 1999 effective tax rate was primarily
due to lower foreign income taxes that result from the permanent reinvestment of
earnings from foreign affiliates located in different foreign tax jurisdictions.

LIQUIDITY AND CAPITAL RESOURCES  For the six months ended June 30, 1999, net
cash provided by operating activities decreased to $98.3 million from $123.6
million for the same period in 1998.  The 1999 decrease primarily reflects lower
distributions from oil and gas projects and increased working capital
requirements associated with the acquisition of Homer City.

  Net cash provided by financing activities totaled $2,861.6 million during the
first six months of 1999, compared to $12.1 million in 1998 for the same prior
year period. The 1999 increase is primarily due to the Edison Mission Holding
Co., parent company of EME Homer City, $830 million senior secured bonds, EME
financing of $700 million, EME Senior Notes of $600 million, Edison Mission
Energy Taupo Limited (EME Taupo) $214 million credit facility, Edison Mission
Energy Global Management, Inc. $120 million Flexible Money Market Cumulative
Preferred Stock, EME Taupo $84 million Retail Redeemable Preference Shares and
borrowing on the corporate revolver of $335 million, the proceeds of which were
used to purchase Homer City and Contact.

                                       16
<PAGE>

  Net cash used in investing activities increased to $2,601.4 million for the
six months ended June 30, 1999 from $53.5 million for the six months ended June
30, 1998.  The increase is primarily due to the purchase of Homer City and
Contact.

  At June 30, 1999, EME had cash and cash equivalents of $808.3 million and had
available $107 million of borrowing capacity under a $500 million revolving
credit facility that expires in 2001 and $125 million of borrowing capacity
under a $700 million commercial paper facility that expires in 2000.  This
borrowing capacity under the revolving credit facility may be reduced by
borrowings for firm commitments to contribute project equity and to fund capital
expenditures and construction costs of its project facilities.

  In July 1999, Edison First Power Limited, completed a transaction with
PowerGen UK plc, to acquire the Ferrybridge and Fiddler's Ferry coal-fired
electric generating plants located in the United Kingdom. Consideration for
Ferrybridge and Fiddler's Ferry consisted of a cash payment of approximately
$2.0 billion (1.3 billion pounds Sterling) for the two plants.  The acquisition
was funded primarily with a combination of net proceeds from the Edison First
Power Limited Guaranteed Secured Variable Rate Bonds issued on July 19, 1999 and
due 2019, and equity from Edison International.

Firm Commitments for Asset Purchases

<TABLE>
<CAPTION>
Projects                                                   U.S. ($ in millions)
--------                                                   --------------------
<S>                                                        <C>
Commonwealth Edison Co. (i)                                      $ 5,000
</TABLE>

(i) A wholly owned subsidiary of EME executed an Asset Sale Agreement to
    purchase the fossil-fuel generating assets of Commonwealth Edison Co.,
    totaling 9,621 MW located in the midwestern United States.  The closing of
    the transaction is subject to receipt of various state and federal
    regulatory approvals and is expected to be completed by year end 1999.

Firm Commitments to Contribute Project Equity

<TABLE>
<CAPTION>
Projects                  Local Currency                   U.S. ($ in millions)
--------                  --------------                   --------------------
<S>                       <C>                              <C>
ISAB (i)                  244 billion Italian Lira               $130
EcoElectrica (ii)                                                  34
Tri Energy (iii)                                                   25
Paiton (iv)                                                        17
</TABLE>

(i)  ISAB is a 512-MW integrated gasification combined cycle power plant under
     construction near Siracusa in Sicily, Italy.  A wholly owned subsidiary of
     EME owns a 49% interest.  Equity will be contributed at commercial
     operation, which is currently scheduled for late 1999.

(ii) EcoElectrica is a 540-MW liquefied natural gas combined-cycle cogeneration
     facility under construction in Penuelas, Puerto Rico.  A wholly owned
     subsidiary of

                                       17
<PAGE>

      EME owns a 50% interest.  Equity will be contributed at
      commercial operation, which is currently scheduled for late 1999.

(iii) Tri Energy is a 700-MW gas-fired power plant under construction in the
      Ratchaburi Province, Thailand. A wholly owned subsidiary of EME owns a 25%
      interest. Equity will be contributed at commercial operation, which is
      currently scheduled for mid-2000.

(iv)  Paiton is a 1,230-MW coal-fired power plant in operation in East Java,
      Indonesia.  A wholly owned subsidiary of EME owns a 40% interest.  Equity
      contributions continue to be made.

  Firm commitments to contribute project equity could be accelerated due to
certain events of default as defined in the non-recourse project financing
facilities.  Management has no reason to believe that these events of default
will occur to require acceleration of the firm commitments.

Contingent Obligations to Contribute Project Equity

<TABLE>
<CAPTION>
Projects                                                   U.S. ($ in millions)
--------                                                   --------------------
<S>                                                        <C>
Paiton (i)                                                        $141
Tri Energy (ii)                                                     20
Doga (ii)                                                           14
All Other                                                           19
</TABLE>

(i) Contingent obligations to contribute additional project equity (Contingent
    Equity) would be based on events principally related to capital cost
    overruns during the plant construction, certain partner obligations or
    events of default.  These contingent obligations are to be cancelled (if
    unused) as of the date of term financing by the Export-Import Bank of the
    United States.  Term financing by the Export-Import Bank of the United
    States is the subject of a comprehensive set of conditions. Based on present
    projections, the Project does not expect to complete these conditions at the
    time contemplated in the loan documentation (October 15, 1999), and is
    seeking an extension of the time to achieve term completion.  The Project is
    also negotiating an understanding with its Lenders with regard to the
    amounts and uses of the Contingent Equity during the time of this extension.
    As of the date hereof, the Project does not have any commitment from the
    Lenders as to the extension.  In addition, a dispute involving a slope
    adjacent to the Paiton site will require Contingent Equity to be contributed
    for amounts not otherwise covered by insurance. The Contractor has initiated
    a Phase II arbitration on the amount of compensation due as a result of the
    slope failure, and Paiton Energy is in discussions with its insurance
    companies on payment under its policies.  EME's share of the total costs
    related to the slope failure are currently estimated to be between $16 and
    $44 million. Further, because of some delays in the completion of the
    construction, the Project expects certain other cost overruns.  The EME
    share of these overruns is estimated to be between $10-15 million.

                                       18
<PAGE>

(ii) Contingent obligations to contribute additional equity to the project would
     be based on events principally related to capital cost overruns during
     plant construction, certain EME or partner obligations or events of
     default.

  Other than as noted above, management is not aware, at this time, of any other
contingent obligations or obligations to contribute project equity.


Other Commitments and Contingencies

  Certain of EME's subsidiaries entered into indemnification agreements whereby
the subsidiaries agreed to repay capacity payments to the projects' power
purchasers, in the event the projects unilaterally terminate their performance
or reduce their electric power producing capability during the term of the power
contract. Obligations under these indemnification agreements as of June 30,
1999, if payment were required, would be $243 million. Management has no reason
to believe that the projects will either terminate their performance or reduce
their electric power producing capability during the term of the power
contracts.

  Paiton is a 1,230-MW coal-fired power plant in operation in East Java,
Indonesia.  A wholly owned subsidiary of EME owns a 40% interest and has a $370
million investment at June 30, 1999. The tariff is higher in the early years and
steps down over time.  The tariff for the Paiton project includes infrastructure
to be used in common by other units at the Paiton complex. The plant's output is
fully contracted with the state-owned electricity company, PT Perusahaan Listrik
Negara (PLN).  Payments are in Indonesian Rupiah, with the portion of such
payments intended to cover non-Rupiah project costs (including returns to
investors) indexed to the Indonesian Rupiah/U.S. dollar exchange rate
established at the time of the Power Purchase Agreement (PPA) in February 1994.
PLN's payment obligations are supported by the Government of Indonesia.  The
projected rate of growth of the Indonesian economy and the exchange rate of
Indonesian Rupiah into U.S. dollars have deteriorated significantly since the
Paiton project was contracted, approved and financed.  The project received
substantial finance and insurance support from the Export-Import Bank of the
United States, The Export-Import Bank of Japan, the U.S. Overseas Private
Investment Corporation and the Ministry of International Trade and Industry of
Japan.  The Paiton project's senior debt ratings have been reduced from
investment grade to speculative grade based on the rating agencies' perceived
increased risk that PLN might not be able to honor the electricity sales
contract with Paiton.  The Government of Indonesia has arranged to reschedule
sovereign debt owed to foreign governments and has entered into discussions
about rescheduling sovereign debt owed to private lenders.  PLN has announced
its intentions to commence discussions with independent power producers to
renegotiate the power supply contracts, which discussions have commenced on an
initial basis, however it is not yet known what form the renegotiation may take.
Any material modifications of the contract could also require a renegotiation of
the Paiton project's debt agreement.  Certain events (including the shortfall in
payment discussed in the paragraph below) which, with the passage of time or
upon notice, may mature into defaults of the Project's debt agreement have

                                       19
<PAGE>

occurred and may require the grant of waivers or renegotiation of the relevant
agreements.  Waivers of potential defaults have been received previously from
the Project's creditors.  The impact of any such renegotiations with PLN, the
Government of Indonesia or the project's creditors on EME's expected return on
its investment in Paiton is uncertain at this time, however, management believes
that it will ultimately recover its investment in the project.

  Paiton notified PLN that Unit 7 of Paiton achieved Commercial Operation under
terms of the PPA on May 1999 and that Unit 8 of Paiton achieved Commercial
Operation under the terms of the PPA on July 1999.  Because of the economic
downturn, PLN is experiencing low electricity demand and PLN has therefore
dispatched the Paiton plant to zero;  however, under the terms of the PPA, PLN
is required to continue to pay for capacity and fixed operating costs once each
unit and the Plant achieve Commercial Operation. An invoice for these charges
for May in the amount of $7.8 million was submitted to PLN.  The project and PLN
met to review the invoice and a partial payment of $2.5 million was subsequently
received.  The primary reason for the payment shortage was the use of an
arbitrary Indonesian Rupiah/U.S. dollar exchange rate of 2,450 Indonesian Rupiah
to one U.S. dollar by PLN.  The use of this exchange rate is not in agreement
with the Power Purchase Agreement, but is the exchange rate on which PLN
payments to other independent power producers in Indonesia have been based.

  Brooklyn Navy Yard is a 286-MW gas-fired cogeneration power plant in Brooklyn,
New York.  A wholly owned subsidiary of EME owns 50% of the project.  In
February 1997, the construction contractor asserted general monetary claims
under the turnkey agreement against Brooklyn Navy Yard Cogeneration Partners,
L.P. (BNY) for damages in the amount of $136.8 million.  BNY has asserted
general monetary claims against the contractor.  In connection with a $407
million non-recourse project refinancing in 1997, EME agreed to indemnify BNY
and its partner from all claims and costs arising from or in connection with the
contractor litigation, which indemnity has been assigned to the lenders.  EME
believes that the outcome of this litigation will not have a material adverse
effect on its financial position or results of operations.

  EME and its subsidiaries may incur additional obligations to make equity and
other contributions to projects in the future.  EME believes that it will have
sufficient liquidity on both a short- and long-term basis to fund pre-financing
project development costs, make equity contributions to partnerships, pay
corporate debt obligations and pay other administrative and general expenses as
they are incurred from (1) distributions from energy projects and dividends from
investments in oil and gas, (2) proceeds from the repayment of loans to energy
projects and (3) funds available from EME's revolving credit facility.

CHANGES IN INTEREST RATES, CHANGES IN ELECTRICITY POOL PRICING, FOREIGN CURRENCY
FLUCTUATIONS AND OTHER CONTRACTUAL OBLIGATIONS    Changes in interest rates,
changes in electricity pool pricing and fluctuations in foreign currency
exchange rates can have a significant impact on EME's

                                       20
<PAGE>

results of operations. Interest rate changes affect the cost of capital needed
to construct and finance projects. EME has mitigated a portion of the risk of
interest rate fluctuations by arranging for fixed rate financing or variable
rate financing with interest rate swaps or other hedging mechanisms for the
majority of its project financing. Interest expense included $12.5 million and
$11.9 million for the six months ended June 30, 1999, and 1998, respectively, as
a result of interest rate swap and collar agreements. EME has entered into
several interest rate swap and collar agreements whereby the maturity date of
the swaps and collars occurs prior to the final maturity of the underlying debt.
EME does not believe that interest rate fluctuations will have a material
adverse effect on its financial position or results of operations.

     Projects in the U.K. sell their electric energy and capacity through a
centralized electricity pool, which establishes a half-hourly clearing price
(also referred to as the "pool price") for electric energy.  The pool price is
extremely volatile and can vary by as much as a factor of ten or more over the
course of a few hours, due to the large differentials in demand according to the
time of day.  First Hydro mitigates a portion of the market risk of the pool by
entering into contracts for differences (electricity rate swap agreements),
related to either the selling or purchasing price of power, whereby a contract
specifies a price at which the electricity will be traded, and the parties to
the agreement make payments, calculated based on the difference between the
price in the contract and the pool price for the element of power under
contract.  These contracts are sold in various structures.  These contracts act
as a means of stabilizing production revenues or purchasing costs by removing an
element of First Hydro's net exposure to pool price volatility.  On July 29,
1998, the Director General of Electricity Supply proposed to the Minister for
Science, Energy and Industry that the current structure of contracts-for-
differences and compulsory trading via the pool at half-hourly clearing prices
bid a day ahead be abolished.  He proposed in its place, among other things, the
establishment of voluntary forwards and futures markets, organized by
independent market operators and evolving in response to demand; a short-term
bilateral market operating from 24 to 4-hours before a trading period; a
balancing market to enable the system operator to balance generation and demand
and resolve any transmission constraints; a settlement process for recovering
imbalances between contracted and metered volumes with stronger incentives for
being in balance; and a Balancing and Settlement Code Panel to oversee
governance of the short-term bilateral and balancing markets.  The Minister for
Science, Energy and Industry has recommended that the proposal be implemented by
April 2000.  Further definition of the proposal will be required before the
effects of the changes can be evaluated.  Implementation of the proposal may
also require legislation.

     Loy Yang B sells its electric energy through a centralized electricity
pool (the National Electricity Market) which provides for a system of generator
bidding, central dispatch and a settlements system based on a clearing market
for each half-hour of every day.  The Victorian Power Exchange, operator and
administrator of the pool, determines a system marginal price each half-hour.
To mitigate exposure to price volatility of the electricity traded into the
pool, Loy Yang B has entered into a number of financial hedges.  From May 8,
1997 to December 31, 2000, approximately 53% to 64% of the plant output sold is
hedged under "Vesting Contracts" with the remainder of the plant

                                       21
<PAGE>

capacity hedged under the "State Hedge" described below. Vesting Contracts were
put into place by the State Government of Victoria, Australia (State), between
each generator and each distributor, prior to the privatization of electric
power distributors in order to provide more predictable pricing for those
electricity customers that were unable to choose their electricity retailer.
Vesting Contracts set base strike prices at which the electricity will be
traded, and the parties to the agreement make payments, calculated based on the
difference between the price in the contract and the half-hourly pool clearing
price for the element of power under contract. These contracts are sold in
various structures. These contracts are accounted for as electricity rate swap
agreements. The State Hedge is a long-term contractual arrangement based upon a
fixed price commencing May 8, 1997, and terminating October 31, 2016. The State
guarantees SECV's obligations under the State Hedge.

     Electric power generated at Homer City is sold under bilateral arrangements
with domestic utilities and power marketers under short-term contracts (two
years or less) or to the Pennsylvania-New Jersey-Maryland Power Interconnection
(PJM) or the New York Power Pool (NYPP).  The PJM pool has a market which
establishes an hourly clearing price.  Homer City is situated in the PJM Control
Area and is physically connected to high-voltage transmission lines serving both
the PJM and NYPP markets.  Power can also be transmitted to the midwestern
United States.  EME has developed risk management policies and procedures which,
among other matters, address credit risk.  It is EME's policy to sell to
investment grade counterparties or counterparties that have an investment grade
guarantor.  EME intends on hedging a portion of the electric output of the plant
in order to lock in desirable outcomes.  It plans to manage the "spark spread"
or margin, that is the spread between electric prices and fuel prices when
deemed appropriate.  It plans to use forward contracts, swaps, futures, or
options contracts to achieve those objectives.

     EME's electric revenues were increased by $20.1 million and $70.1 million
for the six-month periods ended June 30, 1999, and 1998, respectively, as a
result of electricity rate swap agreements and other hedging activities.

     The electric power generated by EME's domestic operating projects,
excluding Homer City, is generally sold to electric utilities pursuant to long-
term (typically, 15 to 30-year) power sales contracts and is expected to result
in consistent cash flow under a wide range of economic and operating
circumstances. To accomplish this, EME structured its power sales contracts so
that fluctuations in fuel costs would produce similar fluctuations in electric
and/or steam revenues and entered into long-term fuel supply and transportation
agreements.

     Fluctuations in foreign currency exchange rates can affect, on a U.S.
dollar equivalent basis, the amount of EME's equity contributions to, and
distributions from, its foreign projects. As EME continues to expand into
foreign markets, fluctuations in foreign currency exchange rates can be expected
to have a greater impact on EME's results of operations in the future. At times,
EME has hedged a portion of its current exposure to fluctuations in foreign
exchange rates where it deems appropriate through financial

                                       22
<PAGE>

derivatives, offsetting obligations denominated in foreign currencies and
indexing underlying project agreements to U.S. dollars or other indices
reasonably expected to correlate with foreign exchange movements. In addition,
EME has used statistical forecasting techniques to help assess foreign exchange
risk and the probabilities of various outcomes. There can be no assurance,
however, that fluctuations in exchange rates will be fully offset by hedges or
that currency movements and the relationship between certain macro economic
variables will behave in a manner consistent with historical or forecasted
relationships.

ENVIRONMENTAL MATTERS  EME is subject to environmental regulation by federal,
state and local authorities in the U.S. and foreign regulatory authorities with
jurisdiction over projects located outside the U.S.  EME believes that it is in
substantial compliance with environmental regulatory requirements and that
maintaining compliance with current requirements will not materially affect its
financial position or results of operations.

     EME completed a partial review of its sites in 1995 and does not believe
that a material liability exists as of June 30, 1999. The implementation of
Clean Air Act Amendments is expected to result in increased operating expenses;
however, these expenses are not expected to have a material impact on EME's
financial position or results of operations.

YEAR 2000 ISSUE  EME has a comprehensive program in place to remediate potential
Year 2000 impacts from critical systems.  EME divided its Year 2000 Issue
activities into five phases:  inventory, impact assessment, remediation,
documentation and certification. A critical system was defined as those
applications and systems, including embedded processor technology, which if not
appropriately remediated might have had a significant impact on customers, the
revenue stream, regulatory compliance, or the health and safety of personnel.
With respect to critical systems, EME has achieved Year 2000 readiness as of
July 1999.

     Assurances from third party operated plants have been received indicating
aggressive Year 2000 remediation programs.  Monitoring of these efforts is
ongoing.  Plants under construction have obtained assurances from new
construction and development contractors, who have been requested to ensure this
is part of their goals.  General warranty of plants would likely include any
equipment issues that may arise regarding Year 2000 in the current year.

     The other essential component of the EME Year 2000 readiness program was to
identify and assess vendor products and business partners for Year 2000
readiness.  EME put a process in place to identify and contact vendors and
business partners to determine their Year 2000 status, and has evaluated the
responses.  EME's general policy requires that all newly purchased products be
Year 2000 ready or otherwise designed to allow EME to determine whether such
products present Year 2000 issues.

                                       23
<PAGE>

     Plant contingency plans have been developed and reviewed for any
significant issues and to schedule appropriate testing and/or training. Such
contingency plans include developing strategies for dealing with Year 2000-
related processing failures or malfunctions due to EME's internal systems or
from external parties. EME's contingency plans evaluate reasonably likely worst
case scenarios or conditions. EME does not expect the Year 2000 issue to have a
material adverse effect on its results of operations or financial position.
However, if not effectively remediated, negative effects from Year 2000 issues,
including those related to external systems, vendors, business partners, the
independent system operator, the power exchange or customers, could cause
results to differ.

STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 133  In June 1998, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities", which,
as amended, will be effective in January 2001.  The Statement establishes
accounting and reporting standards requiring that every derivative instrument be
recorded in the balance sheet as either an asset or liability measured at its
fair value.  The Statement requires that changes in the derivative's fair value
be recognized currently in earnings unless specific hedge accounting criteria
are met.  A derivative's gains and losses for qualifying hedges offset related
results on the hedged item in the income statement and a company must formally
document, designate and assess the effectiveness of transactions that receive
hedge accounting.  The impact of adopting Statement 133 on EME's financial
statements has not been quantified at this time.

ACQUISITIONS PENDING  In March 1999, EME entered into agreements to acquire the
fossil-fuel generating assets of Commonwealth Edison Co. (ComEd), totaling 9,621
MW.  EME will operate the plants, which are located in the midwestern United
States.  The closing of the transaction is subject to various state and federal
regulatory approvals and is expected to be completed by year end 1999.  EME
plans to finance the approximately $5 billion acquisition with a combination of
debt secured by the project, corporate debt, cash and funding from Edison
International.  The acquisition is expected to have an immaterial effect on
earnings in 1999, 2000 and 2001 as a result of transition contracts whereby
ComEd will retain power purchase agreements with EME, enabling ComEd access to
certain amounts of plant output for the next five years to serve its customers.



                                       24
<PAGE>

PART II - OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

    Exhibit No.    Description
    -----------    -----------

       10.63    Indenture and the First Supplemental Indenture dated as of June
                28, 1999, between EME and The Bank of New York, as Trustee,
                7.73% Senior Notes Due June 15, 2009.

       27       Financial Data Schedule


(b) Reports on Form 8-K

    The registrant filed the following reports on Form 8-K during the quarter
    ended June 30, 1999.
<TABLE>
<CAPTION>

    Date of Report          Date Filed     Item Reported
    --------------          ----------     -------------
    <S>                     <C>            <C>
    March 18, 1999          April 2, 1999        2
    July 19, 1999           August 2, 1999       2
</TABLE>

                                       25
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                    Edison Mission Energy
                                    ---------------------
                                         (Registrant)

Date: August 12, 1999               /s/ THOMAS E. LEGRO
---------------------               -------------------
                                        THOMAS E. LEGRO
                                        Vice President and
                                           Controller

                                       26