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 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        Registrant, State of Incorporation,           I.R.S. Employer
File Number          Address, and Telephone Number            Identification No.


001-14786                   CMP GROUP, INC.                     01-0519429
                83 Edison Drive, Augusta, Maine  04336
                            (207) 623-3521

   1-5139             CENTRAL MAINE POWER COMPANY               01-0042740
                83 Edison Drive, Augusta, Maine  04336
                            (207) 623-3521

Indicate  by check mark  whether  the  registrants  (1) have  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
registrants  were required to file such  reports),  and (2) have been subject to
the filing requirements for at least the past 90 days.

         CMP Group, Inc.:                   Yes   X    No
         Central Maine Power Company:       Yes   X    No

This  combined  Form 10-Q is separately  filed by CMP Group,  Inc.,  and Central
Maine Power Company.  Information contained herein relating to either individual
registrant is filed by such registrant on its own behalf.  Each registrant makes
no representation as to information relating to the other registrant.

As of August 6, 1999, the number of shares of Common Stock  outstanding for each
registrant was as follows:

                            Registrant                          Shares

CMP Group, Inc., Common Stock, $5 Par Value                     32,442,552
Central Maine Power Company, Common Stock, $5 Par Value (All
   held by CMP Group, Inc.)                                     31,211,471


<PAGE>


                                Table of Contents

                                                                        Page
                                                                       Number

Glossary                                                                   1

Part I.  Financial Information

Item 1 - Consolidated Financial Statements

CMP Group, Inc.
   Consolidated Statement of Earnings for the Three Months
   Ended June 30, 1999 and 1998                                            5

   Consolidated Statement of Earnings for the Six Months
   Ended June 30, 1999 and 1998                                            6

   Consolidated Balance Sheet - June 30, 1999 and December 31, 1998:
     Assets                                                                7
     Stockholders' Equity and Liabilities                                  8

   Consolidated Statement of Cash Flows for the Six Months
   Ended June 30, 1999 and 1998                                            9

Central Maine Power Company
   Consolidated Statement of Earnings for the Three Months
   Ended June 30, 1999 and 1998                                           10

   Consolidated Statement of Earnings for the Six Months
   Ended June 30, 1999 and 1998                                           11

   Consolidated Balance Sheet - June 30, 1999 and December 31, 1998:
     Assets                                                               12
     Stockholders' Equity and Liabilities                                 13

   Consolidated Statement of Cash Flows for the Six Months
   Ended June 30, 1999 and 1998                                           14

Notes to Consolidated Financial Statements                                15

Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations                                       28

Item 3 - Quantitative and Qualitative Disclosures About Market Risk       46

Part II.  Other Information                                               48

Signatures                                                                51


                                    GLOSSARY

The following  abbreviations  or acronyms are used in the text of this Form 10-Q
as defined below:

   Term                                         Definition

Form 10-K                       Annual Report on Form 10-K

ARP                             Alternative Rate Plan

APB                             Accounting Principles Board

Assigned Agreements             Maine  Yankee's  Power   Contracts,
                                Additional  Power  Contracts  and Capital  Funds
                                Agreements, as amended, with its Sponsors.

Central Maine                   Central Maine Power Company, a regulated
                                electric utility and subsidiary of CMP Group.

Central Securities              Central Securities  Corporation,  a wholly owned
                                subsidiary  of Central Maine which owns and
                                manages real estate.

CERCLA                          Comprehensive Environmental Response,
                                Compensation, and Liability Act.

CMP Group                       CMP Group,  Inc.,  is the holding  company
                                organized  effective  September  1, 1998,  which
                                owns all of the common  stock of  Central  Maine
                                Power   Company,   Union  Water  Power  Company,
                                MaineCom Services,  CNEX, MainePower,  TeleSmart
                                and New England Gas Development.

CMP Group System                CMP Group and its  wholly-owned  and  directly
                                and  indirectly controlled subsidiaries.

CMP Natural  Gas                CMP   Natural   Gas,   L.L.C.,   a limited-
                                liability  company owned by subsidiaries of CMP
                                Group  and  Energy  East  to  distribute
                                natural gas in Maine.

CNEX                            A  wholly   owned   subsidiary   of  CMP  Group,
                                (previously     called     CMP     International
                                Consultants),  which provides utility consulting
                                (domestic and international) and research.

Connecticut DPUC                Connecticut Department of Public Utility Control

Cumberland Securities           Cumberland Securities Corporation,  a
                                wholly owned  subsidiary  of Central Maine which
                                owns and manages real estate.

Connecticut Yankee              Connecticut Yankee Atomic Power Company

D&P                             Duff & Phelps Credit Rating Co.

DOE                             United States Department of Energy

DOJ                             United States Department of Justice

EE Merger Corp.                 A Maine corporation that is a wholly-owned
                                subsidiary of Energy East

EITF                            Emerging Issues Task Force of FASB

Energy East                     Energy East Corporation, a New York holding
                                company  which is an energy  delivery,  products
                                and services company doing business in New York,
                                Massachusetts,   Maine  and  New  Hampshire,  in
                                addition  to being the  parent  company of NYSEG
                                effective May 1, 1998, and which entered into an
                                Agreement  and Plan of  Merger  dated as of June
                                14, 1999, with CMP Group and EE Merger Corp.

EPA                             United States Environmental Protection Agency.

EPS                             Earnings per share

ERAM                            Electric Revenue Adjustment Mechanism

FASB                            Financial Accounting Standards Board

FCC                             Federal Communications Commission

FERC                            Federal Energy Regulatory Commission

FEV                             Fairfield Energy Venture

FPL                             FPL Group, Inc.

Indenture                       General and Refunding Mortgage Indenture between
                                Central Maine and State Street Bank and Trust
                                Company, Trustee, dated as of April 15, 1976, as
                                amended and supplemented.

IPO                             Initial Public Offering

IRC                             Internal Revenue Code

IRS                             United States Internal Revenue Service

ISO                             Independent System Operator

Kwh                             Kilowatt-hour

MaineCom                        MaineCom Services,  a CMP Group subsidiary which
                                arranges   fiber-optic  data  service  for  bulk
                                carriers.

Maine Yankee                    Maine Yankee Atomic Power Company, a 38-percent
                                owned subsidiary of Central Maine.

MEPCO                           Maine Electric Power Company, Inc., a 78-percent
                                owned  subsidiary  of Central Maine which owns a
                                345-KV transmission line from Wiscasset,  Maine,
                                to New Brunswick, Canada.

Merger Agreement                The Agreement and Plan of Merger dated as of
                                June 14, 1999, by and among CMP Group, Energy
                                East and EE Merger Corp.

MRS                             Monitored Retrievable Storage

Moody's                         Moody's Investors Service

MPUC                            Maine Public Utilities Commission

NB Power                        New Brunswick Power Corporation.

NEON                            NorthEast Optic Network,  Inc., a corporation of
                                which MaineCom owns  38.5-percent  of the common
                                stock,  which is building a fiber optic  network
                                in New England and New York.

NEPOOL                          New England Power Pool

NERC                            North American Electric Reliability Council

NORVARCO                        A  wholly-owned  subsidiary  of  Central  Maine.
                                NORVARCO is one of two general partners with 50%
                                interests in Chester SVC Partnership, which owns
                                a static  var  compensator  facility  located in
                                Chester, Maine.

NPCC                            Northeast Power Coordinating Council

NRC                             United States Nuclear Regulatory Commission

NYSEG                           New York State Electric & Gas Corporation, a
                                utility subsidiary of Energy East.

NUG                             Non-utility generator

New England Gas Development     New England Gas Development Corporation, a
                                wholly-owned subsidiary of CMP Group created in
                                September 1998 to hold up to a 50-percent
                                ownership interest in CMP Natural Gas.

OASIS                           Open Access Same-time Information System.

OPA                             Maine Office of the Public Advocate

Plant                           Maine Yankee nuclear generating plant at
                                Wiscasset, Maine

PURPA                           Public Utility Regulatory Policies Act of 1978.

RCRA                            Resource Conservation and Recovery Act.

SAB                             Securities and Exchange Commission's Staff
                                Accounting Bulletins.

S&P                             Standard & Poor's Corp.

SEC                             Securities and Exchange Commission

Secondary Purchasers            28 municipal and cooperative utilities that had
                                purchased  Maine Yankee power under  identical
                                contracts with Maine Yankee sponsors.

SFAS                            Statement of Financial Accounting Standards

TeleSmart                       A wholly  owned  subsidiary  of CMP Group  which
                                provides accounts receivable management.

Union Water                     The Union Water Power Company, a wholly owned
                                subsidiary of CMP Group.

Vermont Yankee                  Vermont Yankee Nuclear Power Corporation.

Waste Act                       Federal Low-level Radioactive Waste Policy
                                Amendments Act.

Yankee Atomic                   Yankee Atomic Electric Company





                         PART 1 - FINANCIAL INFORMATION
Item 1.  Financial Statements

In the opinion of CMP Group, the unaudited financial  statements included herein
reflect all  adjustments  necessary to present fairly the  Consolidated  Balance
Sheet  as of June  30,  1999,  and the  Consolidated  Statement  of  Income  and
Consolidated  Cash Flows for the periods ended June 30, 1999 and 1998. CMP Group
is the parent holding company of Central Maine, Union Water, MaineCom,  CNEX and
New England Gas Development.  Central Maine constitutes substantially all of CMP
Group's assets, revenues and expenses. All nonutility operating transactions are
included in other  non-utility  revenues and  operating  expenses in CMP Group's
Consolidated Statement of Income.
<TABLE>
<S>                                                          <C>             <C>

                        CMP Group, Inc. and Subsidiaries
                       Consolidated Statement Of Earnings
                                   (Unaudited)
                (Dollars in thousands, except per-share amounts)
                                                                   For the Three Months
                                                                       Ended June 30,
                                                                    1999           1998
Revenues
     Electric operating revenues                             $    214,686    $    208,216
     Other non-utility revenues                                    10,482           1,113
        Total Revenues                                            225,168         209,329

Operating Expenses
     Fuel used for company generation                               1,260           7,909
     Purchased power
        Energy                                                     88,842          85,469
        Other (capacity)                                           31,214          21,086
     Other operation                                               64,747          52,180
     Maintenance                                                    8,025           8,564
     Depreciation and amortization                                 12,005          13,808
     Taxes other than income taxes                                  4,748           5,987
        Total Operating Expenses                                  210,841         195,003

Operating Income                                                   14,327          14,326

Other Income (Expense)
     Equity in earnings of associated companies                       320             157
     Allowance for equity funds used during construction              115             115
     Other, net                                                     6,961             975
     Minority interest in consolidated net income                     (69)            (66)
     Gain on sale of investments and properties                     6,022              12
         Total Other Income (Expense)                              13,349           1,193

Interest Charges
     Long-term debt                                                 7,579          10,649
     Other interest                                                11,950           2,351
     Allowance for borrowed funds used during construction            (77)            (72)
        Total Interest Charges                                     19,452          12,928

Income Before Income Taxes and Preferred Dividends                  8,224           2,591
     Income taxes                                                   3,264             945
     Dividends on Preferred Stock of Subsidiary                       919           1,074

Net Income                                                   $      4,041    $        572

Weighted Average Number Of Shares Of Common
     Stock Outstanding                                         32,442,552      32,442,752

Earnings Per Share Of Common Stock - Basic                   $       0.12          $ 0.02
Earnings Per Share Of Common Stock - Diluted                 $       0.12          $ 0.02

Dividends Declared Per Share Of Common  Stock                $      0.225          $0.225

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

                        CMP Group, Inc. and Subsidiaries
                       Consolidated Statement Of Earnings
                                   (Unaudited)
                (Dollars in thousands, except per-share amounts)

                                                               For the Six Months
                                                                   Ended June 30,
                                                              1999            1998
Revenue
     Electric operating revenues                              $485,380        $456,961
     Other non-utility revenues                                 16,421           1,810

        Total Revenues                                         501,801         458,771

Operating Expenses
     Fuel used for company generation                           10,207          11,981
     Purchased power
        Energy                                                 183,317         189,764
        Other (capacity)                                        53,988          45,462
     Other operation                                           117,951          97,954
     Maintenance                                                16,299          18,679
     Depreciation and amortization                              26,677          27,630
     Taxes other than income taxes                              12,153          13,041

        Total Operating Expenses                               420,592         404,511


Operating Income                                                81,209          54,260


Other Income (Expense)
     Equity in earnings of associated companies                 (2,659)          1,748
     Allowance for equity funds used during construction           307             289
     Other, net                                                  8,196           1,611
     Minority interest in consolidated net income                 (694)           (114)
     Gain on sale of investments and properties                 13,033              11

        Total Other Income (Expense)                            18,183           3,545


Interest Charges
     Long-term debt                                             18,132          21,499
     Other interest                                             13,330           4,027
     Allowance for borrowed funds used during construction        (214)           (199)

        Total Interest Charges                                  31,248          25,327


Income Before Income Taxes                                      68,144          32,478
     Income taxes                                               29,008          12,537
     Dividends on Preferred Stock of Subsidiary                  1,838           2,971

Net Income                                                   $  37,298        $ 16,970


Weighted Average Number Of Shares Of Common
     Stock Outstanding                                      32,442,552      32,442,752

Earnings Per Share Of Common Stock - Basic                       $1.15           $0.52
Earnings Per Share Of Common Stock - Diluted                     $1.14           $0.52

Dividends Declared Per Share Of Common Stock                     $0.45           $0.45

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

<TABLE>
<S>                                                                     <C>          <C>

                        CMP Group, Inc. and Subsidiaries
                           Consolidated Balance Sheet
                             (Dollars in thousands)

                                   ASSETS                                June 30,     December 31,
                                                                           1999          1998
                                                                                (Unaudited)
Current Assets
    Cash and cash equivalents                                           $  335,094   $   30,540
    Accounts receivable, less allowance for uncollectible accounts of
    $2,953 in 1999 and $3,136 in 1998
       Service   - billed                                                   69,277       81,169
                 - unbilled                                                 44,918       53,296
       Other accounts receivable                                            11,559       13,753
    Inventories, at average cost
       Fuel oil                                                                100        5,879
       Materials and supplies                                                8,899       13,126
    Funds on deposit with trustee                                                1            1
    Prepayments and other current assets                                     4,230       10,268

          Total Current Assets                                             474,078      208,032


Electric Property, at original cost                                      1,321,053    1,750,837
    Less: Accumulated depreciation                                         540,591      694,410

          Net electric property in service                                 780,462    1,056,427


Property, non utility                                                       19,464       23,244
    Less: Accumulated Depreciation                                           5,592        6,802

          Net Non-Utility property                                          13,872       16,442

    Construction work in progress                                           14,823       19,538
    Nuclear fuel                                                             1,830        1,147

          Total net property                                               810,987    1,093,554

Investments In Associated Companies, at equity                              58,209       71,880

    Total Net Property and Investments in Associated Companies             869,196    1,165,434


Deferred Charges And Other Assets
    Recoverable costs of Seabrook 1 and abandoned projects, net             75,795       78,539
    Yankee Atomic purchased-power contract                                   5,466        7,761
    Connecticut Yankee purchased-power contract                             27,927       29,913
    Maine Yankee purchased-power contract                                  256,410      273,895
    Regulatory assets-nuclear impairment                                    82,982           --
    Regulatory assets - deferred taxes                                     212,045      235,451
    Other deferred charges and other assets                                253,691      263,859

          Deferred Charges and Other Assets, Net                           914,316      889,418


          Total Assets                                                  $2,257,590   $2,262,884


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




                        CMP Group, Inc. and Subsidiaries
                           Consolidated Balance Sheet
                             (Dollars in thousands)

                   STOCKHOLDERS' EQUITY AND LIABILITIES
                                                          June 30,  December 31,
                                                            1999        1998
                                                        (Unaudited)
Current Liabilities and Interim Financing
    Interim financing                                   $    101,628 $  298,356
    Sinking-fund requirements                                 18,716     11,455
    Accounts payable                                          63,931     90,960
    Dividends payable                                          8,243      7,304
    Accrued interest                                           3,604      7,524
    Accrued income taxes                                     154,386     19,911
    Miscellaneous current liabilities                         18,402     15,909

       Total Current Liabilities and Interim Financing       368,910    451,419


Commitments and Contingencies (Note 4)

Other Liabilities and Deferred Credits
    Accumulated deferred income taxes                         68,744    376,043
    Unamortized investment tax credits                        14,347     29,064
    Yankee Atomic purchased-power contract                     5,466      7,761
    Connecticut Yankee purchased-power contract               27,927     29,913
    Maine Yankee purchased-power contract                    256,410    273,895
    Regulatory assets-nuclear impairment                      16,642        -
    Regulatory liabilities - deferred taxes                   60,504     58,376
    Deferred gain on generation asset sale                   520,861        -
    Other reserves and deferred credits                      197,658    116,805

       Total Other Liabilities and Deferred Credits        1,168,559    891,857


Long-Term Debt
    Mortgage debt                                                  -    117,683
    Other long-term obligations                              124,205    228,598

       Total Long-Term Obligations                           124,205    346,281


Redeemable Preferred Stock                                    18,910     18,910


Stockholders' Equity
    Common-stock                                             162,213    162,213
    Other paid in capital                                    286,035    285,835
    Reacquired common stock                                     (987)      (827)
    Retained earnings                                         94,217     71,668
    Preferred stock                                           35,528     35,528

       Total Stockholders' Equity                            577,006    554,417


       Total Stockholders' Equity and Liabilities         $2,257,590 $2,262,884


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

<TABLE>
<S>                                                            <C>          <C>




                                 CMP Group, Inc. and Subsidiaries
                               CONSOLIDATED STATEMENT OF CASH FLOWS
                                           (Unaudited)
                                      (Dollars in thousands)
                                                                 For the Six Months
                                                                   ended June 30,
                                                                   1999         1998
CASH FROM OPERATIONS
    Net income                                                 $  37,298    $  16,970
    Items not requiring (not providing) cash:
       Depreciation                                               21,627       22,566
       Amortization                                               19,269       19,062
       Deferred income taxes and investment tax credits, net     (14,739)      24,676
       Allowance for equity funds used during construction          (307)        (289)
    Preferred stock dividends of subsidiary                        1,838        2,971
    Gain on sale of investments and properties                   (13,033)          --
    Incremental power supply                                     (13,903)          --
    Changes in certain assets and liabilities:
       Accounts receivable                                        22,464       27,262
       Other current assets                                        4,302        2,827
       Inventories                                                 1,455       (2,523)
       Accounts payable                                          (22,246)     (25,424)
       Accrued taxes and interest                                  4,103      (12,528)
       Miscellaneous current liabilities                           2,220        7,767
    Deferred ice storm cost                                           --      (51,323)
    Deferred energy-management costs                                (631)      (1,428)
    Restructuring of purchased power contract                         --      (22,500)
    Carrying cost                                                  4,631           --
    Other, net                                                     1,323        5,954

          Net Cash Provided  by Operating Activities              55,671       14,040


INVESTING ACTIVITIES
       Construction expenditures                                 (21,470)     (21,059)
       Investments in and loans to affiliates                         --      (18,120)
       Central Maine sale of assets                              850,629           --
       Tax payments related to sale of assets                   (153,650)          --
       Selling expense for sale of generation assets             (11,697)          --
       Proceeds from sale of investments and properties           18,119           --
       Changes in accounts payable - investing activities         (4,783)      (2,090)

          Net Cash Provided (Used) by Investing Activities       677,148      (41,269)


FINANCING ACTIVITIES
    Issuances:
       Revolving credit agreement                                     --       18,500
       Medium-term notes                                              --      117,000
    Redemptions:
       Mortgage bonds                                           (118,717)    (117,283)
       Preferred stock                                                --      (41,618)
       Medium-term note                                         (217,000)     (10,000)
       Revolving credit agreement                                (50,000)          --
       Other long-term obligations                               (11,860)        (575)
       Short-term obligations, net                               (15,000)          --
    Funds on deposit with trustee                                     --       61,694
    Purchase of treasury stock                                      (160)          --
    Dividends:
       Common stock                                              (14,609)     (14,609)
       Preferred stock of subsidiary                                (919)      (3,794)

          Net Cash Provided (Used) by Financing Activities      (428,265)       9,315

          Net Increase (Decrease) in Cash                        304,554      (17,914)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                      30,540       20,841

CASH AND CASH EQUIVALENTS, END OF YEAR                         $ 335,094    $   2,927

</TABLE>

For purposes of the  statement of cash flows,  the Company  considers all highly
liquid  instruments  purchased  having a maturity of three  months or less to be
cash equivalents.

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





                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

In the opinion of Central Maine,  the unaudited  financial  statements  included
herein  reflect all  adjustments  necessary to present  fairly the  Consolidated
Balance Sheet as of June 30, 1999, and the Consolidated  Statement of Income and
Consolidated  Cash Flows for the periods  ended June 30, 1999 and 1998.  Central
Maine's consolidated  financial statements include the accounts of Central Maine
and its wholly  owned and  controlled  subsidiaries.  All  nonutility  operating
transactions are included in other non-utility  revenues and operating  expenses
in Central Maine's Consolidated Statement of Income.

                  Central Maine Power Company and Subsidiaries
                       Consolidated Statement Of Earnings
                                   (Unaudited)
                (Dollars in thousands, except per-share amounts)

<TABLE>
<S>                                                               <C>             <C>
                                                                  For the Three Months
                                                                       Ended June 30,
                                                                  1999            1998
Revenues
     Electric operating revenues                                  $214,737        $208,216
     Other non-utility revenues                                        631           1,113

        Total Revenues                                             215,368         209,329


Operating Expenses
     Fuel used for company generation                                1,260           7,909
     Purchased power
        Energy                                                      88,842          85,469
        Other (capacity)                                            31,214          21,086
     Other operation                                                55,518          52,180
     Maintenance                                                     7,978           8,564
     Depreciation and amortization                                  11,757          13,808
     Taxes other than income taxes                                   4,735           5,987

        Total Operating Expenses                                   201,304         195,003


Operating Income                                                    14,064          14,326


Other Income (Expense)
     Equity in earnings of associated companies                      2,712             157
     Allowance for equity funds used during construction               115             115
     Other, net                                                      6,225             975
     Minority interest in consolidated net income                      (69)            (66)
     Gain on sale of investments and properties                         24              12

        Total Other Income (Expense)                                 9,007           1,193


Interest Charges
     Long-term debt                                                  7,534          10,649
     Other interest                                                 11,793           2,351
     Allowance for borrowed funds used during construction             (77)            (72)

        Total Interest Charges                                      19,250          12,928


Income Before Income Taxes                                           3,821           2,591
     Income taxes                                                      567             945

Net Income                                                           3,254           1,646
     Dividends on Preferred Stock                                      919           1,074

Earnings Applicable to Common  Stock                             $   2,335      $      572


Weighted Average Number Of Shares Of Common
     Stock Outstanding                                          31,211,471      32,442,752

Earnings Per Share Of Common Stock - Basic and Diluted               $0.07           $0.02

Dividends Declared Per Share Of Common Stock                         $0.36          $0.225

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

<TABLE>
<S>                                                           <C>             <C>

                  Central Maine Power Company and Subsidiaries
                       Consolidated Statement Of Earnings
                                   (Unaudited)
                (Dollars in thousands, except per-share amounts)

                                                               For the Six Months
                                                                   Ended June 30,
                                                               1999            1998
Revenues
     Electric operating revenues                              $485,307        $456,961
     Other non-utility revenues                                  1,110           1,810

        Total Revenues                                         486,417         458,771

Operating Expenses
     Fuel used for company generation                           10,207          11,981
     Purchased power
        Energy                                                 183,317         189,764
        Other (capacity)                                        53,988          45,462
     Other operation                                           103,367          97,954
     Maintenance                                                16,039          18,679
     Depreciation and amortization                              26,206          27,630
     Taxes other than income taxes                              12,096          13,041

        Total Operating Expenses                               405,220         404,511


Operating Income                                                81,197          54,260


Other Income (Expense)
     Equity in earnings of associated companies                  3,683           1,748
     Allowance for equity funds used during construction           307             289
     Other, net                                                  6,799           1,611
     Minority interest in consolidated net income                 (694)           (114)
     Gain on sale of investments and properties                  7,034              11

        Total Other Income (Expense)                            17,129           3,545


Interest Charges
     Long-term debt                                             18,038          21,499
     Other interest                                             13,166           4,027
     Allowance for borrowed funds used during construction        (214)           (199)

        Total Interest Charges                                  30,990          25,327


Income Before Income Taxes                                      67,336          32,478
     Income taxes                                               26,435          12,537

Net Income                                                      40,901          19,941
     Dividends on Preferred Stock                                1,838           2,971

Earnings Applicable to Common Stock                          $  39,063        $ 16,970


Weighted Average Number Of Shares Of Common
     Stock Outstanding                                      31,211,471      32,442,752

Earnings Per Share Of Common Stock (Basic and Diluted)           $1.25           $0.52

Dividends Declared Per Share Of Common Stock                   $0.585           $0.450

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



                  Central Maine Power Company and Subsidiaries
                           Consolidated Balance Sheet
                             (Dollars in thousands)

                                   ASSETS             June 30,      December 31,
                                                       1999            1998
                                                    (Unaudited)
Current Assets
    Cash and cash equivalents                       $    314,097   $    22,628
    Accounts receivable, less allowance for
    uncollectible accounts of
    $2,953 in 1999 and $3,136 in 1998
       Service   - billed                                 68,676        81,082
                 - unbilled                               44,918        53,110
       Other accounts receivable                          19,504        12,698
    Inventories, at average cost
       Fuel oil                                              100         5,879
       Materials and supplies                              8,431        12,755
    Funds on deposit with trustee                              1             1
    Prepayments and other current assets                   4,136        10,161

          Total Current Assets                           459,863       198,314


Electric Property, at original cost                    1,321,024     1,750,777
    Less: Accumulated depreciation                       540,565       694,463
          Net electric property in service               780,459     1,056,314


Property, Non-Utility                                     12,838        15,895
    Less: Accumulated Depreciation                         3,603         4,150
          Non-Utility Property                             9,235        11,745

    Construction work in progress                         14,092        19,483
    Nuclear fuel                                           1,830         1,147

          Total net property                             805,616     1,088,689

Investments In Associated Companies, at equity            40,472        48,406

    Total Net Property and Investments in
     Associated Companies                                846,088     1,137,095

Deferred Charges And Other Assets
    Recoverable costs of Seabrook 1 and abandoned
     projects, net                                        75,795        78,539
    Yankee Atomic purchased-power contract                 5,466         7,761
    Connecticut Yankee purchased-power contract           27,927        29,913
    Maine Yankee purchased-power contract                256,410       273,895
    Regulatory assets-nuclear impairment                  82,982             -
    Regulatory assets - deferred taxes                   212,045       235,451
    Other deferred charges and other assets              249,081       262,512

          Deferred Charges and Other Assets, Net         909,706       888,071


          Total Assets                                $2,215,657    $2,223,480


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

<TABLE>
<S>                                                            <C>                  <C>

                  Central Maine Power Company and Subsidiaries
                           Consolidated Balance Sheet
                             (Dollars in thousands)

                   STOCKHOLDERS' EQUITY AND LIABILITIES         June 30,           December 31,
                                                                   1999                1998
                                                              (Unaudited)
Current Liabilities and Interim Financing
    Interim financing                                          $    101,383         $  298,183
    Sinking-fund requirements                                        18,716             11,455
    Accounts payable                                                 69,230             93,012
    Dividends payable                                                   943                  5
    Accrued interest                                                  3,579              7,491
    Income taxes payable to parent company                          154,502             20,822
    Miscellaneous current liabilities                                17,423             15,455

       Total Current Liabilities and Interim Financing              365,776            446,423


Commitments and Contingencies (Note 4)

Other Liabilities and Deferred Credits
    Accumulated deferred income taxes                                65,281            372,243
    Unamortized investment tax credits                               14,347             29,064
    Yankee Atomic purchased-power contract                            5,466              7,761
    Connecticut Yankee purchased-power contract                      27,927             29,913
    Maine Yankee purchased-power contract                           256,410            273,895
    Regulatory liabilities-nuclear impairment                        16,642                  -
    Regulatory liabilities - deferred taxes                          60,504             58,376
    Deferred gain on generation asset sale                          520,861                  -
    Other reserves and deferred credits                             189,370            111,506

       Total Other Liabilities and Deferred Credits               1,156,808            882,758


Long-Term Debt
    Mortgage debt                                                         -            117,683
    Other long-term obligations                                     121,803            226,151

       Total Long-Term Obligations                                  121,803            343,834


Redeemable Preferred Stock                                           18,910             18,910


Stockholders' Equity
    Common-stock                                                    162,213            162,213
    Other paid in capital                                           276,572            276,422
    Reacquired common stock                                         (19,000)           (19,000)
    Retained earnings                                                97,004             76,349
    Preferred stock                                                  35,571             35,571

       Total Stockholders' Equity                                   552,360            531,555


       Total Stockholders' Equity and Liabilities                $2,215,657         $2,223,480

</TABLE>

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


<TABLE>
<S>                                                                      <C>            <C>

                           Central Maine Power Company and Subsidiaries
                               CONSOLIDATED STATEMENT OF CASH FLOWS
                                           (Unaudited)
                                      (Dollars in thousands)
                                                                            For the Six Months
                                                                               Ended June 30,
                                                                             1999          1998
CASH FROM OPERATIONS
    Net income                                                           $   40,901     $  19,941
    Items not requiring (not providing) cash:
       Depreciation                                                          21,161        22,566
       Amortization                                                          19,262        19,062
       Deferred income taxes and investment tax credits, net                (14,407)       24,676
       Allowance for equity funds used during construction                     (307)         (289)
    Gain on Sale of Investments and Properties                               (7,034)            -
    Incremental power supply                                                (13,903)            -
    Changes in certain assets and liabilities:
       Accounts receivable                                                   13,792        27,262
       Other current assets                                                   4,669         2,827
       Inventories                                                            1,552        (2,523)
       Accounts payable                                                     (18,989)      (25,424)
       Accrued taxes and interest                                             3,316       (12,528)
       Miscellaneous current liabilities                                      1,695         7,767
    Deferred Ice storm costs                                                      -       (51,323)
    Deferred energy-management costs                                           (631)       (1,428)
    Restructuring of purchased power contract                                     -       (22,500)
    Carrying cost                                                             4,631             -
    Other, net                                                                   36         5,954

          Net Cash Provided by Operating Activities                          55,744        14,040

INVESTING ACTIVITIES
       Construction expenditures                                            (20,786)      (21,059)
       Investments in and loans to affiliates                                     -       (18,120)
       Central Maine sale of assets                                         850,629             -
       Tax payments related to sale of assets                              (153,650)            -
       Selling expense for sale of generation assets                        (11,697)            -
       Proceeds from sale of investments and properties                       7,813             -
       Changes in accounts payable - investing activities                    (4,793)       (2,090)

          Net Cash Provided (Used) by Investing Activities                  667,516       (41,269)


FINANCING ACTIVITIES
    Issuances:
       Revolving credit agreement                                                 -        18,500
       Medium-term notes                                                          -       117,000
    Redemptions:
       Mortgage bonds                                                      (118,717)     (117,283)
       Preferred stock                                                            -       (41,618)
       Medium term notes                                                   (217,000)      (10,000)
       Revolving Credit Agreement                                           (50,000)            -
       Other long-term obligations                                          (11,887)         (575)
       Short-term obligations                                               (15,000)            -
    Funds on deposit with trustee                                                 -        61,694
    Dividends:
       Common stock                                                         (18,268)      (14,609)
       Preferred stock                                                         (919)       (3,794)

          Net Cash Provided (Used) by Financing Activities                 (431,791)        9,315

          Net Increase (Decrease) in Cash                                   291,469       (17,914)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                               22,628        20,841

CASH AND CASH EQUIVALENTS, END OF PERIOD                                   $314,097    $    2,927

</TABLE>


For purposes of the  statement of cash flows,  the Company  considers all highly
liquid  instruments  purchased  having a maturity of three  months or less to be
cash equivalents.

The accompanying notes are an integral part of these financial statements


                                  CMP Group and
                           Central Maine Power Company

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   Summary of Significant Accounting Policies

     General  Description - CMP Group was organized effective September 1, 1998,
     at which  time all of the  shares of common  stock of  Central  Maine  were
     converted into an equal number of shares of common stock of CMP Group.  CMP
     Group  owns all of the  shares of  common  stock of  Central  Maine and the
     former non-utility subsidiaries of Central Maine (TeleSmart, MaineCom, CNEX
     and Union Water Power  Company) in addition to New England Gas  Development
     Corporation, a subsidiary organized in 1998.

     Central  Maine  is  a  public  utility   primarily  engaged  in  the  sale,
     transmission,  and  distribution  of electric  energy at the  wholesale and
     retail levels to residential,  commercial, industrial, and other classes of
     customers in the State of Maine.

     Basis of  Presentation - This  Quarterly  Report on Form 10-Q is a combined
     report  of CMP  Group  and  Central  Maine,  a  regulated  electric-utility
     subsidiary of CMP Group.  The Notes to  Consolidated  Financial  Statements
     apply to both  CMP  Group  and  Central  Maine.  CMP  Group's  consolidated
     financial statements include the accounts of CMP Group and its wholly owned
     and  controlled  subsidiaries,  including  Central Maine.  Central  Maine's
     consolidated  financial statements include its accounts as well as those of
     its wholly owned and controlled  subsidiaries.  Certain immaterial majority
     owned  subsidiaries,  which  were  previously  accounted  for on the equity
     method,  were  consolidated  in September  1998.  For all periods  prior to
     September  1,  1998,  the  historic   financial  position  and  results  of
     operations of CMP Group reflect the activity of Central Maine.

     Central Maine's  financial  position and results of operations  account for
     substantially  all of  CMP  Group's  consolidated  financial  position  and
     results of operations.  This quarterly report should be read in conjunction
     with CMP  Group's and Central  Maine's  Annual  Report on Form 10-K for the
     year ended December 31, 1998.

     CMP  Group and  Central  Maine  believe  that the  accompanying  statements
     reflect  all  adjustments  necessary  to  present a fair  statement  of the
     consolidated  financial  position and results of operations for the interim
     periods.  All material  adjustments are of a normal recurring nature unless
     otherwise  disclosed  in  this  Form  10-Q.  All  significant  intercompany
     transactions   have  been  eliminated  from  the   consolidated   financial
     statements.

     Results shown for the respective  interim periods being reported herein are
     not  necessarily  indicative of results to be expected for the fiscal years
     due to seasonal  factors  which are  inherent in electric  utilities in New
     England. A greater  proportionate amount of revenues is earned in the first
     and fourth quarters  (winter season) of most years because more electricity
     is sold due to weather  conditions,  fewer  day-light  hours,  and  related
     factors.

     For purposes of the  statement of cash flows,  CMP Group and Central  Maine
     consider all highly liquid instruments purchased having maturities of three
     months or less to be cash equivalents.

     Supplemental Cash Flow Disclosure - Cash paid for the six months ended June
     30, 1999 and 1998:

                                                          (In Millions)
                                                        1999        1998

     CMP Group
              Interest, net of amounts capitalized    $  26.9        $24.0
              Income taxes                              195.6          2.6

     Central Maine
              Interest, net of amounts capitalized       26.8         24.0
              Income Taxes                              193.4          2.6


     Stock-Based  Compensation  - Under CMP Group's  Long-Term  Incentive  Plan,
     options on CMP Group  common  stock  were  granted in 1998 and 1999 with an
     exercise  price equal to the fair  market  value on the date of the grants.
     The term of all  options  granted  is seven  (7)  years.  One  third of the
     options vest  annually,  commencing on the first  anniversary of the option
     grant date,  except for 1998 options  which were  entirely  vested in 1999.
     Upon vesting,  the stock options are  exercisable  during periods of active
     employment  or within  thirty (30) days after  termination  of  employment,
     provided  termination did not occur due to cause. Upon the effectiveness of
     the  proposed  merger of CMP Group with Energy East all such stock  options
     will be  cancelled  and the  holders of the  options  will be  entitled  to
     payment by CMP Group of the  excess of $29.50  per share over the  exercise
     price per share of the options.

     Performance  shares are granted at the  beginning  of a 3-year  performance
     cycle.  Performance  shares were granted in 1997,  1998 and 1999. All three
     grants have a three-year  cycle and are being accrued  accordingly;  in the
     event performance goals for a performance cycle are achieved,  common stock
     is awarded at the end of that performance  cycle. If performance  goals are
     not achieved,  the  performance  shares are forfeited.  As of the effective
     date of the proposed  merger,  it is intended that  performance  shares for
     cycles that are not  completed  will vest and grantees  will be entitled to
     payment of $29.50 for each performance share that vests.

                                            1997         1998          1999
                                            ----         ----          ----

     Options granted                         -         233,359       254,304
     Performance Shares*                    59,125      64,518        67,150

     *Accrue over a 3-year cycle.

     Earnings per Share - Stock options and  performance  shares granted to date
     under CMP Group's Long-Term  Incentive Plan resulted in incremental  shares
     of common  stock  outstanding  for  purposes  of  computing  both basic and
     diluted  earnings per share for the three and six month  periods ended June
     30, 1999. The incremental number of shares for the three months ending June
     30, 1999 is 216,524 and 173,487 for the six months ending June 30, 1999.

     Reclassification  - Certain amounts from prior years  financial  statements
     have been reclassified to conform to the current year presentation.

     Impact of New Accounting Standards - In June 1998, the FASB issued SFAS No.
     133,  Accounting  for  Derivatives  and  Hedging  Activities.  It  requires
     companies to record  derivatives  on the balance  sheet at their fair value
     depending on the intended use of the derivative.  The new standard  applies
     to all entities and the original  effective  date was June 15, 1999. On May
     19, 1999 the FASB determined  that the statement  should be delayed for one
     year. Based on CMP Group and Central Maine's current business practices the
     adoption of this standard is not  anticipated to have a significant  impact
     on their financial statements.

2.       Merger Agreement With Energy East

     On  June  14,  1999,  CMP  Group,  Energy  East  and  EE  Merger  Corp.,  a
     wholly-owned  subsidiary of Energy East, entered into an Agreement and Plan
     of Merger ("Merger Agreement"). Pursuant to the Merger Agreement, EE Merger
     Corp.  will merge into CMP Group,  with CMP Group  becoming  the  surviving
     company and becoming a  wholly-owned  subsidiary of Energy East.  CMP Group
     shareholders  will  receive  $29.50  per  share  in cash if the  merger  is
     consummated.

     The merger is subject to certain  customary closing  conditions,  including
     without  limitation  the receipt of the  required  approvals of CMP Group's
     shareholders  and a number of  governmental  agencies,  including the MPUC,
     Connecticut  DPUC,  SEC, FERC, NRC and the FCC, and the making of all other
     necessary governmental filings. It is anticipated that the shareholder vote
     will take place in the fall of 1999 and that all  regulatory  approvals can
     be obtained by June of 2000.

3.   Accounting for the Effects of Certain Types of Regulation

     Central Maine prepares its financial statements in accordance with SFAS No.
     71  "Accounting  for the  Effects of Certain  Types of  Regulation,"  which
     requires  rate  regulated  companies  to reflect the effects of  regulatory
     decisions in their financial statements. Central Maine has deferred certain
     costs pursuant to rate actions of the MPUC and FERC and is  recovering,  or
     expects to recover,  such costs in electric,  transmission and distribution
     rates charged to customers.

     The FASB's EITF has addressed the appropriateness of continued  application
     of SFAS No. 71 by  entities  in  states  that  have  enacted  restructuring
     legislation  similar to  Maine's.  The EITF issued its  statement  No. 97-4
     "Deregulation of Pricing  Electricity  Issues Related to the Application of
     FASB Statements 71 and 101", which concluded that an entity should cease to
     apply SFAS 71 when a deregulation plan is in place and its terms are known.
     With respect to the generation  portion of Central Maine's  business,  this
     occurred  during the second quarter of 1999 with the completion of the sale
     of most of its generation assets to FPL and the subsequent development of a
     compliance  filing with the MPUC in Phase II of the ongoing MPUC proceeding
     on stranded costs,  revenue  requirements  and rate design.  Effective June
     30,1999,  Central Maine adopted SFAS 101 for the generation  segment of its
     business.  SFAS  No.  101  "Regulated  Enterprises  -  Accounting  for  the
     Discontinuation  of  Application  of FASB  Statement  No.  71,"  requires a
     determination  of impairment of plant assets under SFAS No. 121 "Accounting
     for the  Impairment of Long-Lived  Assets and for  Long-Lived  Assets to Be
     Disposed Of," and the  elimination of all effects of rate  regulation  that
     have been recognized as assets and liabilities under SFAS 71.

     Central  Maine  performed  impairment  tests on its two  operating  nuclear
     generation facilities,  Millstone 3 and Vermont Yankee, on a plant specific
     basis and  determined  that $82.9  million was impaired as of June 30,1999.
     Impaired plant is the excess of net plant  investment at June 30, 1999 over
     the value of net cash flows during the remaining lives of the  investments.
     Annual net cash flows were determined by subtracting  estimated  generation
     sustenance  costs from the estimated market value of power from the plants.
     The MPUC in its Phase I order dated March 19,1999 in the ongoing proceeding
     provided for future  recovery of nuclear  generation  and other  generation
     related stranded costs. Central Maine has established a regulatory asset as
     of June 30, 1999 for $82.9 million  consistent  with that order  associated
     with the two operating nuclear investments.  As a result there is no income
     impact from these impairment tests but rather recognition of the impairment
     and a corresponding regulatory asset.

     Central  Maine has long  term  power  purchase  contracts  with NUGs  which
     require   payments  above   anticipated   market  rates.  The  estimate  of
     above-market  payment is approximately  $800 million.  The costs associated
     with these NUG contracts remain a regulated  obligation of the transmission
     and distribution company as a statutory  requirement and have been provided
     for by the MPUC in its revenue requirement  determination in Phase I of the
     above mentioned proceeding.

     Central Maine  believes  that its electric  transmission  and  distribution
     operations continue to meet the requirements of SFAS 71 and that regulatory
     assets  associated with those operations as well as any  generation-related
     costs that the MPUC has determined to be recoverable  from  ratepayers also
     meet the criteria.  At June 30,1999,  $958.7  million of regulatory  assets
     remain on Central  Maine's  books.  Approximately  $214.4  million  will be
     charged against the estimated  deferred gain and associated  carrying costs
     through March 1, 2000 of $548.6 million resulting from the generation asset
     sale while the remainder will be amortized over periods to be determined by
     the MPUC in Phase II of the above mentioned proceeding.

4.   Commitments and Contingencies

     Permanent  Shutdown  of Maine  Yankee  Plant - In August  1997 the board of
     directors of Maine Yankee voted to  permanently  cease power  operations at
     the  Maine  Yankee  plant  at   Wiscasset,   Maine  (the  "Plant")  and  to
     decommission  the Plant.  In November  1997 Maine Yankee  submitted to FERC
     revised  rates  reflecting  the decision to shut down the Plant,  including
     amendments to its Power  Contracts.  On January 14, 1998, FERC accepted the
     new rates for filing,  subject to refund,  and set the new rates, the Power
     Contract   amendments,   and  issues   concerning   the   prudence  of  the
     Plant-shutdown decision for hearing.

     Since  the  filing  of the  rate  request,  Maine  Yankee  and  the  active
     intervenors, including among others the MPUC Staff, the Maine Office of the
     Public  Advocate  ("OPA"),  Central Maine and other  owners,  municipal and
     cooperative purchasers of Maine Yankee Power (the "Secondary  Purchasers"),
     and a Maine  environmental  group  (the  "Settling  Parties"),  engaged  in
     extensive  discovery  and  negotiations  which  resulted  in  a  settlement
     agreement  filed by those  parties  with the FERC on January  19,  1999.  A
     separately  negotiated  settlement filed with the FERC on February 5, 1999,
     resolved  the issues  raised by the  Secondary  Purchasers  by limiting the
     amounts they will pay for  decommissioning  the Plant and by settling other
     points  of  contention  affecting  individual  Secondary  Purchasers.  Both
     settlements  were found to be in the public  interest  and  approved by the
     FERC on June 1, 1999. The settlement  constitutes a full  settlement of all
     issues   raised   in   the   consolidated   FERC   proceeding,    including
     decommissioning-cost  issues and issues  pertaining  to the prudence of the
     management,  operation,  and decision to permanently cease operation of the
     Plant.

     The primary  settlement  provides for Maine Yankee to collect $33.1 million
     in the  aggregate  annually,  effective  August  1,  1999,  including  both
     decommissioning  costs and  ISFSI-related  costs.  The original filing with
     FERC on November 6, 1997, called for an aggregate annual collection rate of
     $36.4 million for  decommissioning and the ISFSI, based on a 1997 estimate.
     Under the  approved  settlement  the  amount  collected  annually  is to be
     reduced to approximately $24.4 million as a result of legislation  allowing
     Maine Yankee to (1) use for  construction  of the ISFSI funds held in trust
     under Maine law for spent-fuel disposal,  and (2) access approximately $6.8
     million  held by the State of Maine for  eventual  payment  to the State of
     Texas  pursuant to a compact for  low-level  nuclear  waste  disposal,  the
     future of which is in question  after  rejection of the  selected  disposal
     site in west Texas by a Texas regulatory agency. Both required  authorizing
     legislation in Maine, which was adopted on May 13, 1999.

     The  settlement  also provides for recovery of the  unamortized  investment
     (including  fuel) in the  Plant,  together  with a return on equity of 6.50
     percent,  effective  January  15,  1998,  on equity  balances up to maximum
     allowed equity amounts, which resulted in a pro-rata refund of $9.3 million
     (including  tax  impacts) to the  sponsors on July 15,  1999.  The Settling
     Parties also agreed in the settlement not to contest the  effectiveness  of
     the Amendatory Agreements submitted to FERC as part of the original filing,
     subject  to  certain  limitations  including  the  right to  challenge  any
     accelerated  recovery  of  unamortized  investment  under  the terms of the
     Amendatory  Agreements after a required  informational filing with the FERC
     by Maine Yankee. In addition,  the settlement contains incentives for Maine
     Yankee to achieve further savings in its  decommissioning and ISFSI-related
     costs and  resolves  issues  concerning  restoration  and future use of the
     Plant  site  and  environmental  matters  of  concern  to  certain  of  the
     intervenors in the proceeding.

     As a separate part of the  settlement,  Central Maine,  the other two Maine
     utilities which own interests in Maine Yankee,  the MPUC Staff, and the OPA
     entered  into a further  agreement  resolving  retail rate issues and other
     issues specific to the Maine parties,  including those that had been raised
     concerning  the  prudence of the  operation  and shutdown of the Plant (the
     "Maine  Agreement").  Under the Maine Agreement Central Maine will continue
     to recover its Maine  Yankee costs in  accordance  with its most recent ARP
     order from the MPUC without any  adjustment  reflecting  the outcome of the
     FERC  proceeding.  To the extent that Central Maine has collected  from its
     retail  customers  a  return  on  equity  in  excess  of the  6.50  percent
     contemplated  by the  settlement,  no refunds  would be required,  but such
     excess amounts would be credited to the customers to the extent required by
     the ARP.

     Finally,  a major  provision  of the  Maine  Agreement  requires  the Maine
     owners,  for the period from March 1, 2000,  through  December 1, 2004,  to
     hold their Maine retail  ratepayers  harmless from the amounts by which the
     replacement power costs for Maine Yankee exceed the replacement power costs
     assumed in the report to the Maine Yankee Board of Directors that served as
     a basis for the Plant shutdown decision,  up to a maximum cumulative amount
     of $41.0  million.  Central  Maine's  share of that amount  would be $31.16
     million for the period. The Maine Agreement, which was approved by the MPUC
     on December 22, 1998, also sets forth the methodology for calculating  such
     replacement power costs.

     CMP Group and Central Maine believe that the approved settlement, including
     the Maine  Agreement,  constitutes  a reasonable  resolution  of the issues
     raised  in  the  Maine  Yankee  FERC   proceeding,   and  should  eliminate
     significant uncertainties concerning CMP Group's and Central Maine's future
     financial performance.

     Legal  and  Environmental  Matters  -  Central  Maine  and  certain  of its
     affiliates are subject to regulation by federal and state  authorities with
     respect  to air and water  quality,  the  handling  and  disposal  of toxic
     substances  and  hazardous  and solid  wastes,  and the handling and use of
     chemical products.  Electric utility companies generally use or generate in
     their operations a range of potentially  hazardous products and by-products
     that are the focus of such  regulation.  Central  Maine  believes  that its
     current  practices  and  operations  are in  compliance  with all  existing
     environmental  laws  except  for such  non-compliance  as would  not have a
     material  adverse effect on Central  Maine's  financial  position.  Central
     Maine reviews its overall  compliance and measures the liability  quarterly
     by assessing a range of reasonably  likely costs for each  identified  site
     using  currently  available  information,  including  existing  technology,
     presently enacted laws and regulations, experience gained at similar sites,
     and the probable  level of  involvement  and  financial  condition of other
     potentially  responsible  parties.  These estimates  include costs for site
     investigations, remediation, operation and maintenance, monitoring and site
     closure.

     New and changing  environmental  requirements could hinder the construction
     and/or modification of transmission and distribution lines, substations and
     other  facilities,  and could raise  operating  costs  significantly.  As a
     result, Central Maine may incur significant additional environmental costs,
     greater  than amounts  reserved,  in  connection  with the  generation  and
     transmission of electricity and the storage, transportation and disposal of
     by-products  and wastes.  Central  Maine may also  encounter  significantly
     increased costs to remedy the environmental effects of prior waste handling
     activities.  The cumulative long-term cost impact of increasingly stringent
     environmental requirements cannot accurately be estimated.

     Central  Maine has recorded a  liability,  based upon  currently  available
     information,   for  what  it  believes  are  the  estimated   environmental
     remediation  costs that it expects to incur for  identified  waste disposal
     sites. In most cases, additional future environmental cleanup costs are not
     reasonably  estimable  due to a number of  factors,  including  the unknown
     magnitude of possible  contamination,  the appropriate remediation methods,
     the possible  effects of future  legislation or regulation and the possible
     effects of technological changes. Central Maine cannot predict the schedule
     or scope of remediation  due to the regulatory  process and  involvement of
     non-governmental  parties.  At June 30,  1999,  the  liability  recorded by
     Central Maine for its estimated environmental remediation costs amounted to
     $3.0  million,  which  management  has  determined  to be the most probable
     amount within the range of $3.0 million to $10.3 million. Such costs may be
     higher if Central  Maine is found to be  responsible  for cleanup  costs at
     additional sites or identifiable possible outcomes change.

     Wyman No. 4  Arbitration  - By notice of claim  dated  June 24,  1999,  the
     non-operator  owners  of the  Wyman  No.  4  oil-fired  generating  unit in
     Yarmouth, Maine, which was approximately 60-percent owned by Central Maine,
     served  notice on Central  Maine that they  believe  they are entitled to a
     portion of the proceeds of the sale of Central Maine's interest in the unit
     as part of the April 1999 sale of its non-nuclear  generation assets to FPL
     Energy.  The claimants contend that certain sections of the joint ownership
     agreement  under  which  they  share in the  output  of the unit  require a
     pro-rata  distribution  to them of part of those  proceeds  as a result  of
     Central  Maine's  sale of its  interest  in the unit.  The joint  ownership
     agreement provides for arbitration of claims arising under the agreement.

     Central Maine believes that although the amount of the claim is substantial
     ($62 million),  the claimants have suffered no loss and are not entitled to
     any part of the  generation-asset  sale proceeds.  Central Maine intends to
     contest  any such claim  vigorously,  but cannot  predict the result of any
     arbitration proceeding that the non-operator owners may initiate.

     Millstone Unit No. 3 Litigation - On August 7, 1997,  Central Maine and the
     other minority  owners of Millstone Unit No. 3 filed suit in  Massachusetts
     Superior Court against Northeast Utilities and its trustees,  and initiated
     an   arbitration   claim   against  two  of  its   subsidiaries,   alleging
     mismanagement  of the  unit by the  defendants.  The  minority  owners  are
     seeking  to   recover   their   additional   costs   resulting   from  such
     mismanagement,  including their  replacement  power costs. The parties have
     been engaged in resolving  preliminary issues and in extensive  pre-hearing
     discovery on a schedule  calling for an arbitration  hearing in November of
     1999.  Central  Maine  cannot  predict  the outcome of the  litigation  and
     arbitration or whether the current schedule will be maintained.

     Tax Settlement - On September 12, 1997,  Central Maine received a notice of
     deficiency  from the Internal  Revenue  Service  ("IRS") as a result of its
     audit of Central  Maine's  federal  income tax  returns  for the years 1992
     through 1994. There were two significant  adjustments  among those proposed
     by the IRS. The first was a disallowance  of Central  Maine's  write-off of
     the  under-collected  balance  of fuel and  purchased-power  costs  and the
     unrecovered  balance of its unbilled Electric Revenue Adjustment  Mechanism
     ("ERAM") revenues,  both as of December 31, 1994, which had been charged to
     income in 1994 in connection with the adoption of the ARP effective January
     1, 1995.  The second  major  adjustment  disallowed  Central  Maine's  1994
     deduction of the cost of the buyout of the Fairfield Energy Venture ("FEV")
     purchased-power contract.

     On December  10, 1997 Central  Maine filed a petition in the United  States
     Tax Court contesting the entire amount of the  deficiencies.  Subsequently,
     Central Maine sought review of the asserted  deficiencies by an IRS Appeals
     Officer to determine  whether all or part of the dispute  could be resolved
     in advance of a court determination.

     In June 1999, the IRS Appeals  Officer and Central Maine reached  agreement
     resolving all issues.  Under the proposed  agreement the ERAM component was
     allowed  as fully  deductible  in 1994,  while $24  million of the fuel and
     purchased-power  costs  were  deemed  to be  deductible  in  1994  and  the
     remaining  $30  million  deductible  in 1995.  The  parties  also agreed to
     increase the tax basis of the FEV plant from $2 million to $11 million,  to
     be depreciated  over 20 years,  and that the remaining FEV contract  buyout
     costs would be fully deductible in 1994.

     As a result of the  settlement,  Central Maine made payments to the IRS and
     the  State  of  Maine  totaling  $11.8  million  for the  1992 to 1994  tax
     deficiencies, as well as $6.0 million in associated interest. Substantially
     all of the tax impacts were normalized,  as Central Maine will be deducting
     any  disallowed  costs for tax purposes in future years.  The net impact of
     the tax and interest true-up for all the years under consideration  reduced
     net income in the second  quarter of 1999 by $0.6 million due  primarily to
     interest expense. Of the $6.0 million interest payment,  approximately $1.0
     million  was  previously  accrued,  $1.8  million  associated  with the FEV
     facility was deferred consistent with regulatory practice, and $2.0 million
     of interest income was accrued for the years 1995 through June 1999.

     Due to the materiality of the amounts involved,  approval of the settlement
     from the  Congress's  Joint  Committee on Taxation is required and is being
     sought by the IRS.

     Natural Gas Distribution.  CMP Group and Energy East, through subsidiaries,
     have entered into a  joint-venture  agreement  to pursue  opportunities  to
     distribute  natural  gas at retail in many  Maine  communities.  They would
     offer natural-gas service in several areas of Maine, primarily the Augusta,
     Bangor, Bath-Brunswick, Bethel, Windham and Waterville areas, none of which
     had a natural-gas distribution system in place. The gas is to be drawn from
     two new  gas-pipeline  projects that will carry  Canadian gas through Maine
     and into the regional energy market using substantial  portions of electric
     transmission-line  corridors  owned by Central Maine and MEPCO. On July 24,
     1998,  the MPUC  authorized  the  joint  venture  to serve the areas it had
     applied to serve.  The new company,  CMP Natural Gas could face competition
     from new or existing gas utilities in some of the areas it has targeted.

     CMP Natural Gas began construction of its first local  distribution  system
     in Windham,  Maine,  in early 1999 and began serving its first  customer in
     May.  On  July  8,  1999,  CMP  Natural  Gas  and  Calpine  Corporation,  a
     California-based  independent  power  company,  announced  the signing of a
     20-year  contract  for CMP  Natural  Gas to provide  natural  gas  delivery
     service to Calpine's  proposed  540-megawatt  natural gas-fired power plant
     under construction in Westbrook, Maine. CMP Natural Gas expects to commence
     service to the plant by June 1, 2000,  after MPUC approval and construction
     of a two-mile lateral pipeline along an existing Central Maine right of way
     that would interconnect with the new interstate pipeline  facilities.  Upon
     completion of the proposed merger of Energy East and CMP Group, Energy East
     will hold all of the interests in CMP Natural Gas.

5.   Regulatory Matters and Electric-Utility Industry Restructuring

     Alternative Rate Plan - On March 15, 1999, Central Maine submitted its 1999
     ARP compliance  filing to the MPUC. In the filing Central Maine recommended
     that rates  remain  unchanged  for the period July 1, 1999 to February  29,
     2000.  On July 13,  1999,  the MPUC issued an order which  provided  for no
     increase in rates effective July 1, 1999. In a related matter, on August 2,
     1999, the MPUC issued an order regarding the treatment of gains on the sale
     of  easements  by  Central  Maine in late  1998 and early  1999.  The order
     allocated  90  percent  of the  proceeds  from  the  sale of  easements  to
     ratepayers and 10 percent to  shareholders.  Further the ratepayer  portion
     must be amortized  over a 5 year period.  Central Maine  believes that both
     under Maine Law Court  precedent and under the terms of the ARP these gains
     should be  recognized  when the property was sold and accrue to the benefit
     of  shareholders;  accordingly,  Central  Maine  will  vigorously  work  to
     overturn the decision  through  reconsideration  by the  Commission  and/or
     appeal to  Maine's  Law  Court.  As of June 30,  1999,  approximately  $9.9
     million of the gain would be deferred and net income  reduced  accordingly,
     if the MPUC  position  prevails.  The design and levels of Central  Maine's
     rates as a transmission-and-distribution  company, effective March 1, 2000,
     will be determined in Phase II of the MPUC  proceeding  discussed  below in
     this note under "MPUC Proceeding on Stranded Costs,  Revenue  Requirements,
     and Rate Design."

     Stranded Costs - The enactment by Congress of the Energy Policy Act of 1992
     accelerated planning by electric utilities,  including Central Maine, for a
     transition to a more competitive industry. In Maine,  legislation that will
     restructure the electric-utility  industry on March 1, 2000, was enacted by
     the Maine Legislature in May 1997, and is discussed in detail below. Such a
     departure from traditional  regulation,  however,  could have a substantial
     impact  on the value of  utility  assets  and on the  ability  of  electric
     utilities  to recover  their costs  through  rates.  In the absence of full
     recovery,  utilities would find their  above-market costs to be "stranded",
     or unrecoverable, in the new competitive setting.

     Central Maine has  substantial  exposure to cost stranding  relative to its
     size.  In general,  its stranded  costs reflect the excess costs of Central
     Maine's purchased-power obligations over the market value of the power, and
     the costs of  deferred  charges  and  other  regulatory  assets.  The major
     portion of Central Maine's stranded costs is related to above-market  costs
     of  purchased-power  obligations  arising from Central  Maine's  long-term,
     noncancelable  contracts  for the purchase of capacity and energy from NUGs
     estimated at $800 million, with lesser estimated amounts related to Central
     Maine's deferred regulatory assets.

     Maine Restructuring  Legislation.  The 1997 Maine restructuring legislation
     requires  the MPUC,  when retail  access to  generation  begins on March 1,
     2000,  to provide a  "reasonable  opportunity"  to recover  stranded  costs
     through the rates of the transmission-and-distribution  company, comparable
     to  the  utility's   opportunity  to  recover  stranded  costs  before  the
     implementation  of retail access under the legislation.  Stranded costs are
     defined  as  the  legitimate,   verifiable  and   unmitigable   costs  made
     unrecoverable as a result of the restructuring required by the legislation.
     Central  Maine's   recoverable  amount  and  timing  of  recovery  will  be
     determined  by the  MPUC in the  second  phase  of the  ongoing  proceeding
     discussed  under the heading "MPUC  Proceeding on Stranded  Costs,  Revenue
     Requirements, and Rate Design," below.

     The  principal  restructuring  provisions  of the  legislation  provide for
     customers  to have direct  retail  access to  generation  services  and for
     deregulation of competitive  electric providers,  commencing March 1, 2000,
     with transmission-and-distribution  companies continuing to be regulated by
     the MPUC. By that date,  subject to possible  extensions of time granted by
     the MPUC to improve  the sale value of  generation  assets,  investor-owned
     utilities   are   required   to   divest   all   generation    assets   and
     generation-related  business  activities,  with two major  exceptions:  (1)
     non-utility  generator  contracts with qualifying  facilities and contracts
     with demand-side  management or conservation  providers,  brokers or hosts,
     and (2) ownership  interests in nuclear power  plants.  As discussed  below
     under "Sale of Generation  Assets," Central Maine completed the sale of its
     non-nuclear generating assets on April 7, 1999.

     The legislation also requires investor-owned utilities,  after February 29,
     2000,  to sell their rights to the capacity and energy from all  generation
     assets,  including the  purchased-power  contracts  that had not previously
     been  divested  pursuant  to  the  legislation,   with  certain  immaterial
     exceptions.  On July 30,  1998,  Central  Maine  offered  its rights to the
     capacity  and  energy  from  its  nuclear  generation  assets  and  its NUG
     contracts to prospective bidders.

     Upon the commencement of retail access on March 1, 2000,  Central Maine, as
     a  transmission-and-distribution  utility,  will be prohibited from selling
     electric energy to retail customers.  Any competitive  electricity provider
     that is affiliated with Central Maine would be allowed to sell  electricity
     outside Central Maine's service territory without  limitation as to amount,
     but within Central Maine's service territory the affiliate would be limited
     to  providing  not more than 33  percent of the total  kilowatt-hours  sold
     within Central  Maine's service  territory,  as determined by the MPUC. CMP
     Group does not now intend to engage in the sale of  electric  energy  after
     March 1, 2000.

     For a summary of other provisions of the 1997  legislation,  see the Annual
     Report on Form 10-K of CMP Group and  Central  Maine for the twelve  months
     ended December 31, 1998.

     MPUC Proceeding on Stranded Costs, Revenue  Requirements,  and Rate Design.
     By order dated March 19, 1999,  the MPUC  completed  the first phase of the
     proceeding  contemplated  by Maine's  restructuring  legislation  that will
     ultimately  determine the recovery of Central Maine's  stranded costs,  its
     revenue  requirements,  and the  design of its rates to be  effective  when
     Central Maine becomes a  transmission-and-distribution  utility at the time
     retail  access to  generation  begins in Maine on March 1,  2000.  The MPUC
     stressed  in its Phase I order that it was  deciding  the  "principles"  by
     which it would set  Central  Maine's  transmission-and-distribution  rates,
     effective March 1, 2000, but was deferring calculating the rates themselves
     until Phase II of the  proceeding  because such  calculations  at that time
     would rely excessively on estimates.

     With respect to stranded  costs,  the MPUC  indicated that it would set the
     amount of  recoverable  stranded costs for Central Maine in Phase II of the
     proceeding  pursuant  to its  mandate  under the  restructuring  statute to
     provide transmission-and-distribution utilities a reasonable opportunity to
     recover  such costs that is  equivalent  to the  utility's  opportunity  to
     recover those costs prior to the  commencement  of retail access.  The MPUC
     also reviewed the prescribed  methodology  for  determining the amount of a
     utility's stranded costs,  including among other factors the application of
     excess  value from Central  Maine's  divested  generation  assets to offset
     stranded costs.

     In the area of  revenue  requirements,  the Phase I order  did not  include
     definitive  amounts,  but did  contain  the  MPUC's  conclusions  as to the
     appropriate    cost   of   common   equity   for   Central   Maine   as   a
     transmission-and-distribution  company  beginning  March 1,  2000.  Central
     Maine had  recommended a 12-percent cost of common equity with a 55-percent
     common  equity  component  in the capital  structure.  The MPUC  approved a
     common-equity  cost of 10.50 percent with a  common-equity  component of 47
     percent, and an overall  weighted-average  cost of capital of 8.68 percent.
     In dealing with rate design,  the MPUC limited itself in the first phase of
     the proceeding primarily to establishing  principles that would guide it in
     designing Central Maine's rates to be effective March 1, 2000.

     Central  Maine  submitted  its Phase II filing to the MPUC on July 1, 1999.
     The filing is organized  into sections  covering  revenue  requirements,  a
     sales forecast,  stranded costs, and rate design,  with updated information
     provided in each area. As with Phase I, some of the calculations  submitted
     in the Phase II filing are still  estimates,  since some of the information
     that will provide the basis for the MPUC's  decisions in the  proceeding is
     not yet  available.  This  information  will  include  the  results  of the
     auctioning   of  Central   Maine's   energy  and  capacity  of   undivested
     generation-related  assets  and NUG  contracts  and the  market  prices for
     electricity, including the standard-offer price, all of which Central Maine
     expects to be able to provide  the MPUC in an  updated  filing in  December
     1999.

     Central Maine's requested  revenue  requirement  amount,  together with its
     interim  assumption  for  market  electricity  prices,  would  result in an
     average  10.4-percent price decrease for its core rate customers  effective
     March  1,  2000.  This  amount  will  change,  however,  depending  on  the
     information to be submitted in the December  filing and the MPUC's decision
     on Central Maine's revenue requirements.

     Sale of Generation Assets

     On April 7, 1999,  Central  Maine  completed  the sale of all of its hydro,
     fossil and  biomass  power  plants with a combined  generating  capacity of
     1,185  megawatts  for $846  million in cash,  including  approximately  $18
     million for assets of Union  Water,  to  affiliates  of  Florida-based  FPL
     Group.  The related  book value for these assets was  approximately  $217.8
     million.  In addition,  as part of its  agreement  with FPL Group,  Central
     Maine entered into energy  buy-back  agreements to assist in fulfilling its
     obligation  to  supply  its  customers  with  power  until  March 1,  2000.
     Subsequently,  an agreement was reached to sell related storage  facilities
     to FPL Group for an  additional  $4.6 million  ($1.5 million for the assets
     and $3.1 million estimated for lease revenue associated with the properties
     that CMP will retain),  including $2.0 million for Union Water assets.  The
     related book value of these assets was approximately $11.9 million.

     Central Maine  recorded a pre-tax  deferred  gain of $515.7  million net of
     selling costs and certain  non-normalized  income tax impacts from the sale
     of generation  assets by establishing a regulatory  liability in the second
     quarter of 1999  eliminating  any income  recognition.  Central  Maine also
     recorded  curtailment  and  special  termination  deferred  charges of $8.1
     million  associated  with  pension  and  postretirement  benefit  costs  of
     employees  leaving  the company as a result of the  generation  asset sale.
     These deferred charges will be amortized over a three year period beginning
     March 1, 2000 as required by the MPUC.  In Phase II of the above  described
     "MPUC Proceeding on Stranded Costs,  Revenue Requirements and Rate Design,"
     the MPUC will determine the amount of the regulatory liability that will be
     used to  reduce  stranded  costs  and the  utilization  and  timing  of the
     recognition of any remaining regulatory liability.

     Central  Maine also  recorded a pre-tax  deferred  gain  amounting to $30.8
     million to offset  the income  impact of the  flow-through  of  unamortized
     investment tax credits and excess deferred taxes associated with the assets
     sold.  Central  Maine has  requested a private  letter  ruling from the IRS
     regarding the appropriate treatment of these items based on directives from
     the MPUC. Central Maine is of the opinion, based on its review of the rules
     and regulation and IRS rulings in similar situations,  that any unamortized
     investment  tax credits and excess  deferred taxes relating to the property
     sold  become  nonregulated  property  at the point of sale.  Central  Maine
     believes  that   regulatory   agencies,   therefore,   are  precluded  from
     considering  these  unamortized  investment tax credits and excess deferred
     tax reserves in establishing  regulated rates because they would constitute
     a violation of the normalization  requirement of the Internal Revenue Code.
     The MPUC has  directed  Central  Maine to seek  the  private  ruling  to be
     absolutely clear in this particular case whether ratepayers can continue to
     benefit from these excess  reserves.  Central  Maine does not know when the
     IRS will rule on its requests, but expects a ruling before the end of 1999.

     Union Water's net income reflects a $3.7 million increase during the second
     quarter  of  1999  due to  its  portion  of the  proceeds  of the  sale  of
     generation assets as determined by the MPUC.  Central Maine is appealing to
     the Maine Supreme  Judicial  Court the imputation of $13.2 million of value
     of the Union Water assets to Central Maine. The $13.2 million imputation is
     included in the Central Maine deferred gain of $515.7 million.

     With the cash  proceeds of the sale Central  Maine  redeemed the  remaining
     $118.7 million of its outstanding  General and Refunding  Mortgage Bonds on
     May 10, 1999, and paid at maturity $47 million of its medium-term  notes on
     May 4, 1999. On June 1, 1999,  Central  Maine  redeemed $180 million of its
     medium-term  notes,  as well as all of the  outstanding $10 million Town of
     Yarmouth Pollution Control Revenue Bonds, which had been issued in 1977 and
     1978.  Approximately  $294.5  million of the proceeds  will be required for
     federal and state income taxes resulting from the sale and, after providing
     for closing  costs and energy  purchases to meet  power-supply  obligations
     until the start of  retail  competition  on March 1,  2000,  Central  Maine
     expects to transfer  the balance to its parent,  CMP Group.  Proceeds  that
     have not been applied have been invested in accordance with Central Maine's
     cash  investment  policy.  Uses of the  balance of the  proceeds  are under
     consideration by CMP Group.

     Storm  Damage  to  Company's  System - In  January  1998,  an ice  storm of
     unprecedented   breadth  and  severity   struck  Central   Maine's  service
     territory,  causing  power  outages  for  approximately  280,000 of Central
     Maine's 528,000  customers,  and substantial  widespread  damage to Central
     Maine's  transmission  and distribution  system.  To restore its electrical
     system,   Central  Maine  supplemented  its  own  crews  with  utility  and
     tree-service  crews from throughout the northeastern  United States and the
     Canadian maritime provinces, with assistance from the Maine national guard.

     On January 15, 1998,  the MPUC issued an order  allowing  Central  Maine to
     defer on its  books  the  incremental  non-capital  costs  associated  with
     Central  Maine's  efforts to  restore  service  in  response  to the damage
     resulting  from the  storm.  Based on the MPUC  order,  Central  Maine  has
     deferred  $52.7  million  in  storm  related  costs  as of June  30,  1999,
     including $2.8 million of carrying  costs.  In October 1998, the MPUC staff
     issued  a report  of its  summary  investigation  of the  Maine  utilities'
     response  to  the  ice  storm.   The  report  found  no  basis  for  formal
     adjudicatory  investigation  into the response and supported the utilities'
     actions.

     On May 1, 1998, President Clinton signed a Congressional appropriation bill
     that included $130 million for  Presidentially  declared disasters in 1998,
     including  storm-damage  cost  reimburse- ment for electric  utilities.  On
     November  5,  1998 the  United  States  Department  of  Housing  and  Urban
     Development  ("HUD")  announced that of those funds,  $2.2 million had been
     awarded to Maine,  with none designated for utility  infrastructure,  which
     Central  Maine  and  the  Maine  Congressional   delegation   protested  as
     inadequate and inconsistent with  Congressional  intent. On March 23, 1999,
     HUD announced  that Maine would receive an additional  $2.15  million,  and
     later announced that another $17 million would be available for Maine.  The
     MPUC  has  stated  its  belief  that  Central  Maine's  prudently  incurred
     ice-storm costs should be recovered through rates commencing March 1, 2000,
     but has deferred action pending the  determination of the amount of federal
     reimbursement.  Central  Maine  believes that it will receive a substantial
     portion of the funds now  designated  for Maine,  but cannot  predict  with
     certainty  what  portion  of its ice  storm-related  costs it will  recover
     through  federal  assistance,  or from  its  customers,  or when  any  such
     recovery will take place.

6.   Income Taxes

     The CMP Group  effective tax rate is higher than the statutory rate and the
     prior year's  effective tax rate primarily due to losses  associated with a
     CMP Group equity investment in a subsidiary.

7.   Transactions with Affiliated Companies

     Central Maine provides certain services to CMP Group and its  subsidiaries,
     including  administrative support services and pension and employee benefit
     arrangements.  Charges related to those services have been determined based
     on a  combination  of direct  charges and  allocations  designed to recover
     Central  Maine's  cost.  These  assessments  are  reflected as an offset to
     Central Maine's expenses and totaled approximately $3.1 million for the six
     months ended June 30, 1999.

     CMP Group provides certain managerial services to its subsidiaries. Charges
     related to those  services have been  determined  based on a combination of
     direct  charges and  allocation  in order to recover the  majority of their
     expenses.  These  assessments  are  reflected  as an offset to CMP  Group's
     expenses  and totaled  approximately  $5.0 million for the six months ended
     June 30, 1999.

     In addition,  a  subsidiary  of CMP Group has been  providing  certain real
     estate and river  management  services charged to Central Maine at cost and
     environmental, engineering, utility locator and construction services based
     on a contracted rate.  These expenses  amounted to $3.5 million for the six
     months ended June 30, 1999.

     Central Maine provides  services to CMP Group and its  subsidiaries as well
     as non-affiliated  parties.  As of June 30, 1999,  Central Maine's accounts
     receivable and accounts payable included the following:

                                              (Dollars in thousands)

                                        Accounts                  Accounts
                                       Receivable                  Payable

          CMP Group                  $     373                      $1,681
          CNEX                             275                          10
          MaineCom                          40                           6
          Telesmart                         29                          57
          Union Water                   13,908                         999
                                        ------                      ------
                                       $14,625                      $2,753
                                        ======                       =====




Item 2: Management's  Discussion and Analysis of Financial Condition and Results
        of Operations of CMP Group and Central Maine Power Company

This is a combined Quarterly Report on Form 10-Q of CMP Group and Central Maine.
Therefore,  our Management's  Discussion and Analysis of Financial Condition and
Results of Operations  (MD&A) applies to both CMP Group and Central  Maine.  CMP
Group's consolidated  financial statements include the accounts of CMP Group and
its  wholly  owned  and  controlled   subsidiaries,   including   Central  Maine
(collectively,  the CMP Group System).  Central Maine's  consolidated  financial
statements  include  its  accounts  as well as those  of its  wholly  owned  and
controlled  subsidiaries.  The  MD&A  should  be read in  conjunction  with  the
consolidated financial statements included in this report.

Note re Forward-Looking Statements

This  Report  on  Form  10-Q  contains  forecast   information  items  that  are
"forward-looking  statements"  as defined in the Private  Securities  Litigation
Reform  Act  of  1995.   Such  statements  are  subject  to  certain  risks  and
uncertainties  which could cause actual results to differ  materially from those
projected.   Readers  are  cautioned  not  to  place  undue  reliance  on  these
forward-looking  statements,  which speak only as of the date hereof.  CMP Group
and Central Maine undertake no obligation to republish  revised  forward-looking
statements to reflect events or  circumstances  after the date of this report or
to  reflect  the  occurrence  of  unanticipated  events.  Readers  are  urged to
carefully review and consider the factors in the succeeding paragraph.

Factors  that could cause actual  results to differ  materially  include,  among
other  matters,   the  outcome  of  the  shareholder  vote  and  the  regulatory
proceedings  involving the proposed acquisition of CMP Group by Energy East; the
costs of  decommissioning  the  Maine  Yankee  plant;  failure  to  resolve  any
significant  aspect  of the  "Year  2000  problem";  electric  utility  industry
restructuring,  including  the ongoing  state and federal  activities  that will
determine  Central  Maine's  ability to recover its stranded costs and establish
its  revenue  requirements  and rate  design as a  transmission-and-distribution
utility  commencing March 1, 2000;  Central Maine's ability to recover its costs
resulting  from the January  1998 ice storms that damaged its  transmission  and
distribution  system;   future  economic  conditions;   earnings-retention   and
dividend-payout  policies;  developments  in the  legislative,  regulatory,  and
competitive  environments  in which CMP Group and  Central  Maine  operate;  CMP
Group's  investments in unregulated  businesses;  other circumstances that could
affect anticipated revenues and costs, such as unscheduled maintenance or repair
requirements  at nuclear plants and other  facilities;  and compliance with laws
and regulations.

Corporate Organization

General.  CMP Group is a holding company organized  effective September 1, 1998,
which owns all of the common stock of Central  Maine and the former  non-utility
subsidiaries of Central Maine. As part of the reorganization,  all of the shares
of Central Maine's common stock were converted into an equal number of shares of
CMP Group common stock,  which are listed on the New York Stock  Exchange  under
the symbol CTP. The reorganization was approved by Central Maine's  shareholders
on May 21,  1998,  and on  various  dates in 1998 by the  appropriate  state and
federal regulatory agencies. On June 14, 1999, CMP Group and Energy East entered
into an  Agreement  and Plan of  Merger.  See  "Proposed  Merger"  below,  for a
discussion of this matter.

Operating Results

                       CMP
                      Group                              Central Maine
                      (dollars in millions)
Net income Six months ended:
     June 30, 1999     $37.3     $1.15/share            $40.9
     June 30, 1998      17.0      $.52/share             19.9
                        ----                             ----
     Increase          $20.3                            $21.0

Earnings applicable to common stock Six months ended:
     June 30, 1999       N/A                            $39.1     $1.25/share
     June 30, 1998       N/A                            $17.0      $.52/share

The  increase in net income of $20.3  million for the six months  ended June 30,
1999 versus the same period last year is driven  primarily  by  improvements  in
operations,  particularly  electric service revenues,  while operation  expenses
have remained relatively flat year to year. Revenues increased $43.0 million for
the first six  months of 1999 and when  adjusted  to exclude  approximately  $15
million of subsidiary  operations  revenue not  consolidated  in 1998, the basic
electric business revenues show an increase of $28 million, or 6.1 percent.  The
residential and commercial  sectors have seen the strongest  growth in Kwh sales
year-to-date,  rising 3.3 percent and 2.8 percent, respectively. The improvement
in electric  revenues is due to higher sales volume attributed to colder weather
in the first  quarter of 1999 as compared to the same period in 1998.  Also,  in
1998 Central Maine lost sales due to the unprecedented ice storm. Overall growth
in electric  sales was up 0.5  percent for the period  ended June 1999 over June
1998.

Operating  expenses were $16.1 million higher than 1998 for the six months ended
June 1999.  Similar to the revenues,  subsidiary  operations not consolidated in
1998  account  for  approximately  $15  million of the  increase,  resulting  in
essentially  flat  expense  growth  year  to  year.  While  operation   expenses
associated  with  generation  are expected to decrease year over year due to the
sale of generation assets on April 7, 1999,  purchased-power  costs are expected
to increase due to Central Maine's  interim  purchase power  agreements  entered
into with FPL to provide power until March 1, 2000.  The MPUC has segregated $49
million of sales proceeds to offset these costs.

Service  Area Kwh Sales - Central  Maine's  service  area  sales of  electricity
totaled approximately 2.16 billion kilowatt-hours in the second quarter of 1999,
down 1.3 percent  from the 2.19  billion  kilowatt-hour  level of a year ago, as
follows:



               Service Area Kilowatt-hour Sales (Millions of KWHs)
                              Period Ended June 30,

                              Three Months                Six  Months
                      1999      1998    % Change      1999       1998  % Change

Residential           644.2     648.1      (0.6)%    1,436.9   1,391.3    3.3 %
Commercial            622.9     615.5       1.2      1,270.8   1,236.5    2.8
Industrial            875.0     868.2       0.8      1,708.4   1,714.2   (0.3)
Other                  17.6      57.2     (69.2)        65.0     117.8  (44.8)

                    2,159.7   2,189.0      (1.3)%    4,481.1   4,459.8    0.5%


The changes in service area kilowatt-hour sales reflect the following:

Kilowatt-hour  sales to  residential  customers  decreased by 0.6 percent in the
second  quarter,  but increased 3.3 percent when compared to the same  six-month
period in 1998.  The  decrease  for the quarter  related  primarily to June 1999
having 1.2 fewer  meter-reading  days than June 1998. Most of the overall growth
for the first six months in 1999 is due to the absence of an  ice-storm  in 1999
of the kind that caused  widespread  customer  outages in January 1998.  Another
contributor  was the  return to colder  winter  weather,  with the  temperatures
through April being 6.6 percent colder than the same period last year. There was
also an increase  in the number of new  residential  customers  added to Central
Maine's system.

Commercial  kilowatt-hour  sales  increased by 1.2 percent in the second quarter
and by 2.8 percent for the six months ended June 30, 1999. The increase sales in
the retail trade and service sectors,  which comprise the largest  percentage of
commercial sales,  were due primarily to the absence of widespread  storm-caused
outages in 1999 and the return to colder winter weather conditions in 1999.

Industrial  kilowatt-hour  sales  increased by 0.8 percent in the second quarter
and were  slightly  lower for the six months  ended June 30, 1999 as compared to
the same  period  in 1998.  Decreased  sales of 28.5  million  kwh to the  paper
industry  more  than  offset  the  positive  sales  growth of 22.7  million  kwh
experienced in the other industrial sector. The primary factors  contributing to
the 3.0 percent drop in sales to the paper  industry were 1) the shutdown of two
of the four paper machines at one mill in November of 1998 to balance production
with  demand.  The same  mill had  internal  generation  problems  that  boosted
purchases by about 5 million kwh for that period;  and 2) the closure of another
mill in 1998,  continued  to impact 1999  results.  The absence of sales to that
mill in 1999, compared to the same time period in 1998 amounted to a decrease of
6.1 million kwh. The pulp-and-paper  sector of the industrial class accounts for
approximately 55 percent of the industrial sales category.

Wholesale  kilowatt-hour  sales,  which is included  under  `Other' in the chart
above,  decreased by 52.2 percent  through June 1999 compared to 1998 due to the
expected loss through contract  expirations with three wholesale companies - one
ending in February, and the other two ending in May of 1999.

Operating Expenses

Central Maine's fuel used for company generation decreased by approximately $6.6
million in the second  quarter of 1999  compared  to 1998 due to the sale of its
generation assets.

Central Maine's purchased  power-capacity expense increased $10.1 million in the
second quarter and $8.5 million  year-to-date  compared to 1998. The increase is
due primarily to increased capacity costs associated with the restructuring of a
NUG contract and the FPL contract for increased  power,  partially offset by the
effects of the  permanent  shutdown of the Maine Yankee plant in August 1997 and
the resulting decline in operating costs.

CMP Group's  maintenance expense decreased $2.4 million for the six months ended
June 30, 1999 compared to 1998. This decrease was due primarily to the temporary
increase in costs in 1998 caused by Central Maine's operations personnel working
in a maintenance  capacity and to subsequent  cleanup efforts that resulted from
the 1998 ice storm.

CMP Group's other  operations  expense  increased by $12.6 million in the second
quarter of 1999 and $20 million  year-to-date  as compared to 1998. The increase
is due primarily to the consolidation of its subsidiaries in 1999 which accounts
for approximately $14.6 million of the increase year-to-date.

Federal and state income taxes fluctuate with the level of pre-tax  earnings and
the regulatory  treatment of taxes by the MPUC.  This expense  increased by $2.3
million and $16.5 million,  respectively,  for the second quarter ended June 30,
1999,  and year to date  compared  to the same  period  in 1998,  as a result of
higher pre-tax earnings.

Other Income and Expense

Equity in Earnings  of  Associated  Companies  for CMP Group  decreased  by $4.4
million  in the  first  half of  1999  compared  to  1998.This  decrease  is due
primarily  to losses  associated  with NEON,  which is an equity  investment  of
MaineCom, a CMP Group subsidiary.

The increase in gain on sale of  investments  and properties of $6.0 million and
$13.0  million  for the  three  and six  month  periods  ending  June 30,  1999,
respectively, is due primarily to the sale of Union Water's generation assets to
FPL and the sale of  transmission  line  right-of-way  access to a  gas-pipeline
project.

Long-term debt interest  expense has decreased by $3.0 million and $3.4 million,
respectively,  for the second quarter of 1999 and  year-to-date,  as compared to
1998.  The decrease is due to the  repurchase of mortgage  bonds with asset sale
proceeds.

Other  Interest  Expense  increased by $9.6 million during the second quarter of
1999 and $9.3  million  year-to-date  as compared to 1998.  The increase was due
primarily to interest accruing to ratepayers of $5.1 million associated with the
deferred gain of $515.0 million  relating to Central  Maine's  generation  asset
sale to FPL and $4.5 million due to the interest  expense on the  settlement  of
tax years 1992 - 1994 with the IRS.

Other  income  increased  $6.0  million in the  second  quarter of 1999 and $6.6
million  year-to-date  over the same  period in 1998 due  primarily  to interest
income associated with sales proceeds from the generation asset sale.

For the quarter  ended June 30,  1999,  Central  Maine  reduced  preferred-stock
dividends by $155  thousand as a result of the earlier  redemption of its 8 7/8%
Series  Preferred  Stock at par,  under the mandatory and optional  sinking-fund
provisions of that series.  Year-to-date  preferred stock dividends were reduced
by $1.1  million as compared  to 1998 due to  redemptions  in several  series of
preferred stock.

Liquidity and Capital Resources

Increases in Central  Maine's  retail rates are limited by Central  Maine's ARP.
For a discussion of the ARP, see Note 3, "Regulatory Matters," "Alternative Rate
Plan" of CMP Group and Central Maine's Form 10-K for the year ended December 31,
1998.

Approximately  $63.1  million of cash was  provided  during the six months ended
June 30, 1999, from net income before non-cash  items,  primarily  depreciation,
amortization and deferred income taxes.  During that period  approximately $17.6
million of cash was used for  fluctuations in certain assets and liabilities and
from other operating activities.  In addition $13.9 million of incremental power
costs were incurred due to the sale of  generation  assets and $13.0 million was
provided due to the gain on sale of investments of properties.

Investing  activities provided  approximately  $677.1 million for the six months
ended June 30, 1999. The $677.1 million is comprised of the following;  proceeds
of $850.6  million for  generation  assets sale,  utilization  of $153.7 for tax
payments and $11.7 for selling  expenses  associated  with the generation  asset
sale,  proceeds of $18.1 million for sale of investments and  properties,  along
with  construction  expenditures,  which  utilized  $26.2 million in cash during
second  half of 1999 for  generation,  transmission,  distribution,  and general
construction expenditures.  In order to accommodate existing and future loads on
its  electric  system  Central  Maine is  engaged in a  continuing  construction
program.  Central  Maine's  plans  for  improvements  and  expansions,  its load
forecast and its power-supply  sources are under a process of continuing review.
Actual  construction  expenditures  depend upon the  availability of capital and
other resources, load forecasts, the timing of its divestiture of its generating
assets,  customer growth and general business  conditions.  The ultimate nature,
timing and amount of financing for Central Maine's total construction  programs,
refinancing and  energy-management  capital  requirements  will be determined in
light of market conditions, earnings and other relevant factors.

During the six months  ended June 30, 1999,  CMP Group paid  dividends on common
stock of $14.6 million and preferred-stock dividends of $.9 million.

At the annual meeting of the  stockholders of Central Maine on May 15, 1997, the
holders of Central Maine's outstanding preferred stock consented to the issuance
of $350  million in principal  amount of Central  Maine's  medium-term  notes in
addition to the $150  million in principal  amount to which they had  previously
consented.  This expansion of the  medium-term  note program was  implemented to
increase Central Maine's financing  flexibility in anticipation of restructuring
and increased  competition.  On June 30, 1999, Central Maine had $110 million of
its medium-term notes outstanding.

To support its short-term capital  requirements,  in October 1996, Central Maine
entered  into  a  $125  million  Credit  Agreement  with  several  banks,   with
BankBoston, N.A., and The Bank of New York acting as agents for the lenders. The
arrangement  originally  had  two  credit  facilities:  a $75  million,  364-day
revolving  credit facility and a $50-million,  3-year revolving credit facility.
Effective  December 15, 1998, the banks'  commitments under the 364-day facility
were reduced  from $75 million to $25 million by  agreement of the parties,  and
other  provisions  were amended to reflect the  reorganization  of Central Maine
into a holding-company structure and recognize other changed circumstances. Both
credit  facilities  require annual fees on the total credit lines.  The fees are
based on Central Maine's credit ratings and allow for various  borrowing options
including LIBOR-priced,  base-rate-priced and competitive-bid-priced  loans. The
amount of  outstanding  short-term  borrowing  will  fluctuate  with  day-to-day
operational  needs, the timing of long-term  financing,  and market  conditions.
Central  Maine had no  outstanding  notes as of June 30,  1999  under the credit
facilities.

On May 10,  1999,  Central  Maine  redeemed  its last two series of General  and
Refunding Mortgage Bonds. On July 27, 1999, Central Maine discharged its General
and Refunding Mortgage Indenture, leaving no class of secured debt outstanding.

On August 5, 1998, the MPUC approved Central Maine's  application to purchase up
to 11 million shares of its outstanding  common stock over a three-year  period.
The amount of any stock purchases and their timing by Central Maine or CMP Group
would  depend  on the  need  for  equity  in the  respective  company's  capital
structure, investment opportunities and other considerations and, in the case of
CMP Group,  would require the consent of Energy East under the Merger Agreement.
Neither Central Maine nor CMP Group has adopted a formal stock-purchase plan.

On February 12, 1999, Central Maine restructured a power-purchase  contract with
a NUG in  Livermore,  Maine,  which  it  expects  will  save its  customers  the
equivalent of $21 million in net present value..

Securities Ratings

The current  ratings  assigned  Central  Maine's  securities  by the three major
securities-rating  agencies on April 7, 1999,  coincident with the completion of
the sale of its  non-nuclear  generation  assets to FPL Energy,  Inc., are shown
below:

             Mortgage       Unsecured      Commercial      Preferred
               Bonds          Notes           Paper          Stock


S&P             A              A-              A-2           BBB
Moody's         A3             Baa1            P2            Baa2
D&P             A-             A-              D1            BBB+

Proposed Merger

On June 14, 1999, CMP Group and Energy East, a New York holding company which is
an energy  delivery,  products and services  company doing business in New York,
Massachusetts,  Maine and New Hampshire and EE Merger Corp., a Maine corporation
that is a wholly-owned  subsidiary of Energy East, entered into an Agreement and
Plan of Merger,  dated as of June 14, 1999 (the "Merger  Agreement"),  providing
for a merger transaction among CMP Group, Energy East and EE Merger Corp.

Pursuant to the Merger  Agreement,  EE Merger Corp. will merge with and into CMP
Group  (the  "Merger"),  with CMP Group  being  the  surviving  corporation  and
becoming  a  wholly-owned  subsidiary  of Energy  East.  The  Merger,  which was
unanimously  approved by the respective boards of directors of CMP Group, Energy
East and EE  Merger  Corp.,  is  expected  to  occur  shortly  after  all of the
conditions to the consummation of the Merger,  including the receipt of required
regulatory and  shareholder  approvals,  are  satisfied.  CMP Group expects that
decisions of  regulatory  agencies can be obtained  within 12 months.  CMP Group
filed its petition for approval of the merger with the MPUC on July 1, 1999, and
requested  expedited  consideration  to assure  receipt of approval on or before
December 31, 1999.

Under the terms of the Merger  Agreement,  each  outstanding  share of CMP Group
common stock,  $5.00 par value per share (the "CMP Group Common  Stock"),  other
than any treasury shares or shares owned by Energy East or any subsidiary of CMP
Group or Energy East, will be converted into the right to receive $29.50 in cash
(the "Merger  Consideration").  Pursuant to the Merger Agreement,  approximately
$957  million  in cash will be paid to  holders  of  shares of CMP Group  Common
Stock,  with  additional  payments  being made to holders of stock  options  and
performance shares awarded under CMP Group's performance incentive plans.

The Board of  Directors  of CMP Group  received  an opinion  from its  financial
advisor,  Warburg  Dillon  Read LLC,  to the  effect  that as of the date of the
Merger  Agreement,  the  Merger  Consideration  to be  received  was fair from a
financial point of view to the holders of CMP Group Common Stock.

The Merger is subject to certain customary closing conditions, including without
limitation, the receipt of the required approval of CMP Group's shareholders and
of all  necessary  governmental  approvals  and  the  making  of  all  necessary
governmental filings. Approvals of the MPUC, the Connecticut DPUC, the SEC under
the Public Utility  Holding  Company Act of 1935, as amended,  FERC, the NRC and
the FCC are necessary.  Filings of the requisite  notifications with the Federal
Trade  Commission  and the  Department  of Justice  under the  Hart-Scott-Rodino
Antitrust  Improvements  Act of 1976,  as  amended,  and the  expiration  of the
associated  waiting  period  are  also  required.   A  meeting  of  CMP  Group's
shareholders  to vote on the Merger will be convened as soon as practicable  and
is expected to be held in the fall of 1999.

The Merger  Agreement  contains  certain  covenants  of the parties  pending the
consummation of the Merger. Generally,  unless the parties have otherwise agreed
with respect to specified  business  activities,  CMP Group and its subsidiaries
must carry on their respective businesses in the ordinary course consistent with
past practice and use all  commercially  reasonable  efforts to preserve  intact
their present  business  organizations  and goodwill.  CMP Group is permitted to
declare and pay its regular quarterly dividends,  but may not increase dividends
or issue or repurchase any capital stock.  The Merger  Agreement  contains other
restrictions or limitations on CMP Group's activities,  including  amendments of
its  Articles of  Incorporation  or bylaws,  acquisitions  and  dispositions  of
assets,  capital  expenditures,  incurrence  of  indebtedness,  modification  of
employee compensation and benefits,  changes in accounting methods, discharge of
liabilities, and matters relating to CMP Group's investment in NEON.

The Merger Agreement  prevents CMP Group and its  subsidiaries  from initiating,
soliciting  or  encouraging  any  inquiry  or  offer  that  constitutes  or  may
reasonably be expected to lead to any alternative business combination proposal,
or engaging in discussions or  negotiations  with or providing any  confidential
information to any third party relating to an  alternative  proposal.  CMP Group
must notify  Energy East of any such  inquiry,  offer or proposal.  Prior to the
time of any approval by CMP Group's  shareholders of the Merger  Agreement,  CMP
Group may enter into  discussions or  negotiations  with a third party that were
not  initiated,  solicited or encouraged  by CMP Group and furnish  confidential
business  information  to such third party if (i) CMP Group gives Energy East at
least  two  business  days'  prior  notice,  (ii) the  third  party  has made an
alternative proposal that is financially superior to the terms of the Merger and
the proposal can be financed,  (iii) CMP Group's  Board of Directors  concludes,
based  on the  advice  of  outside  counsel,  that  failure  to  engage  in such
discussions  or  negotiations  or provide such  information  could  constitute a
breach of  fiduciary  duty,  (iv) CMP Group  provides  Energy East a  reasonable
opportunity to respond to the alternative proposal, and (v) CMP Group executes a
confidentiality  agreement with the third party. Upon five days' prior notice to
Energy East,  CMP Group may terminate the Merger  Agreement to accept a superior
alternative  proposal  upon  paying  a  termination  fee of $33.5  million  plus
expenses,  except that prior to any such  termination,  CMP Group must negotiate
with Energy East to attempt to make  adjustments  in the terms and conditions of
the Merger Agreement that would enable the transactions  contemplated therein to
proceed.

On the  consummation  of the Merger,  CMP Group's  President and Chief Executive
Officer,  David T.  Flanagan,  and two  current  directors  of CMP Group will be
elected as members of the Board of Directors of Energy East.  At that time,  Mr.
Flanagan  will become  President of Energy  East,  and Arthur W.  Adelberg,  who
serves as  Executive  Vice  President  of CMP Group,  will  become  Senior  Vice
President and Chief Financial Officer of Energy East.

Sara J. Burns, who currently serves as President of Central Maine, will continue
serving as  President  of Central  Maine after  consummation  of the Merger.  F.
Michael McClain, CMP Group's Vice President,  Corporate Development,  will serve
as the President of one or more subsidiaries after the Merger becomes effective.

In addition to the  circumstances  described  above, the Merger Agreement may be
terminated  by mutual  consent of the parties;  by either party if the Merger is
not consummated by June 14, 2000, with an automatic  six-month  extension if all
required  statutory  approvals  have not been  obtained by June 14, 2000 but all
other conditions to closing have been satisfied; by either party if the approval
of CMP  Group's  shareholders  is  not  obtained  at a  special  meeting  of the
shareholders;  by either party if any state or federal law,  regulation or order
that is  adopted or issued has the effect of  prohibiting  the  Merger,  or by a
non-breaching  party  for an  uncured  material  breach  of any  representation,
warranty,  covenant  or  agreement  contained  in  the  Merger  Agreement.  Upon
termination  of the Merger  Agreement by a party for a non-willful  breach,  the
breaching  party must  reimburse  the  non-breaching  party up to $10 million of
out-of-pocket fees and expenses incurred in connection with the Merger Agreement
or the Merger. In addition to recovery of such  out-of-pocket fees and expenses,
a non-breaching  party may pursue all available legal remedies in the event of a
willful breach of the Merger Agreement by the other party.

"Year 2000" Computer Issues

The "Year 2000 problem" arose because many computer  programs have used only the
last two digits to refer to a year.  Therefore  those  computer  programs do not
properly recognize a year that begins with "20" instead of the familiar "19". If
not  corrected,  many  computer  applications  could  fail or  create  erroneous
results, with potentially serious and widespread adverse consequences.

CMP  Group,  through  Central  Maine,  began its Year 2000  problem  remediation
efforts  in  1996,  and  since  that  time  has  developed  a  broad-based   and
comprehensive  project plan for addressing  Year 2000 issues.  The plan includes
both  Information   Technology   ("IT")  and  non-IT  systems,   addresses  both
centralized and distributed  systems,  and encompasses  systems  critical to the
transmission  and  distribution  of electric  energy as well as the  traditional
business systems necessary to the CMP Group System.

CMP Group has met the  target  date for  systems  critical  to the  delivery  of
electric power.  CMP Group reported to the North American  Electric  Reliability
Council  (NERC)  at the end of June  1999 that all  "mission  critical"  systems
(those  systems  essential to the delivery of power to customers)  had been made
Year 2000  ready.  This  target had been  established  at the  direction  of the
Department of Energy.  Utility  progress in achieving this goal has been tracked
by NERC.  CMP Group has been  reporting to NERC on a monthly  basis since August
1998.

CMP  Group  has also  completed  remediation  efforts  for most of its  internal
technology  infrastructure  systems.  All  components  and  systems  required to
support telephone,  radio,  microwave and fiber optics  communications have been
readied for Year 2000.  In  addition,  Year 2000  readiness  is complete for all
hardware in the  company's  mainframe,  client  server,  and local and wide area
network environments.  Additional work on non-critical systems and components is
scheduled for completion during the third quarter of 1999.

In addition to the internal Year 2000 readiness  activities discussed above, CMP
Group is actively  participating  in a joint ISO/NEPOOL  initiative  designed to
assess,  and assure,  power reliability  within the NEPOOL area. This initiative
encompasses all participants,  including  Central Maine,  within the New England
area.

CMP Group also has an active  program in place to identify  and  address  issues
associated  with  third-party   providers.   The  program   addresses   business
relationships  with all  third-party  providers,  but focuses on those suppliers
deemed  critical  to CMP  Group's  business.  At  this  time  CMP  Group  has no
indication that any third-party with which CMP Group has a material relationship
is expecting a Year 2000-related  business  interruption,  although some vendors
are reporting  increased lead time as a result of inventory  build up within the
industry.  CMP Group  will  continue  to  monitor  and  assess  its  third-party
relationships.

CMP Group estimates it will incur approximately $4.1 million of costs associated
with  making  the  necessary  modifications  identified  to  date  to  both  the
centralized and non-centralized systems. As of June 30, 1999, approximately $3.7
million of such costs has been incurred. Some of these costs are associated with
the generation facilities sold to FPL Energy on April 7, 1999.

CMP Group recognizes that failure to correct problems  associated with Year 2000
issues has the potential to result in material  operational  and financial risks
if the affected systems either cease to function or produce  erroneous  results.
Such risks  could  include  disruptions  in the  operation  of  Central  Maine's
transmission and distribution  systems, an inability to access  interconnections
with other utilities,  and disruptions to Central Maine's major business systems
(customer information and service, administrative, financial).

Central  Maine  believes,  however,  that the most  likely  worst-case  scenario
resulting from these risks would be a temporary,  and short-term,  disruption of
electric  service.  This could occur  either as a failure on the part of Central
Maine to successfully address all critical Year 2000 issues, as a failure on the
part of a critical  third-party  provider,  or as a failure on the part of other
entities,  including  ISO-New England,  to successfully  maintain the short-term
reliability of power supply and delivery on a regional basis. Central Maine does
not expect that any such  short-term  service  disruption  would have a material
impact on its operations, liquidity, or financial condition.

In order to minimize these risks,  and the potential  recovery  time,  from Year
2000 problems, CMP Group is actively involved in contingency planning.  Although
CMP Group has extensive knowledge and specific  experience in  disaster/recovery
planning  and  execution,  CMP  Group  recognizes  the  importance  of Year 2000
specific contingency  planning.  Accordingly,  Central Maine is participating in
the  integrated  contingency  planning  effort  headed by NERC and the Northeast
Power Coordinating Council. Further, Central Maine has completed a comprehensive
Year 2000 specific  contingency  plan for its own independent  operations.  This
plan  includes  provisions  for  additional  staffing  during the date change at
critical substations, operations centers, and other key locations throughout the
company.  Central Maine will be  positioned to respond  rapidly to any situation
that might  occur,  and will have staff  prepared  to confirm  functionality  of
systems after the date has changed.

CMP Group  believes  its plans are adequate to attain Year 2000  readiness,  and
that the contingency  plans currently under development both internally and at a
regional level should substantially mitigate the risks discussed above.

Storm  Damage  to  Company's   System  -  In  January  1998,  an  ice  storm  of
unprecedented  breadth and severity struck Central  Maine's  service  territory,
causing  power  outages for  approximately  280,000 of Central  Maine's  528,000
customers, and substantial widespread damage to Central Maine's transmission and
distribution   system.   To  restore  its  electrical   system,   Central  Maine
supplemented its own crews with utility and  tree-service  crews from throughout
the  northeastern  United  States  and the  Canadian  maritime  provinces,  with
assistance from the Maine national guard.

On January 15, 1998, the MPUC issued an order allowing Central Maine to defer on
its books the  incremental  non-capital  costs  associated  with Central Maine's
efforts to restore  service in response to the damage  resulting from the storm.
Based on the MPUC  order,  Central  Maine has  deferred  $52.7  million in storm
related costs as of June 30, 1999,  including $2.8 million of carrying costs. In
October 1998, the MPUC staff issued a report of its summary investigation of the
Maine utilities' response to the ice storm. The report found no basis for formal
adjudicatory  investigation  into the  response  and  supported  the  utilities'
actions.

 On May 1, 1998,  President  Clinton signed a Congressional  appropriation  bill
that  included  $130  million for  Presidentially  declared  disasters  in 1998,
including storm-damage cost reimbursement for electric utilities. On November 5,
1998 the United  States  Department  of Housing  and Urban  Development  ("HUD")
announced that of those funds, $2.2 million had been awarded to Maine, with none
designated  for  utility  infrastructure,  which  Central  Maine  and the  Maine
Congressional   delegation   protested  as  inadequate  and  inconsistent   with
Congressional  intent. On March 23, 1999, HUD announced that Maine would receive
an additional $2.15 million,  and later announced that another $17 million would
be  available  for Maine.  The MPUC has stated its belief that  Central  Maine's
prudently  incurred ice-storm costs should be recovered through rates commencing
March 1, 2000, but has deferred action pending the  determination  of the amount
of  federal  reimbursement.  Central  Maine  believes  that  it will  receive  a
substantial  portion of the funds now designated  for Maine,  but cannot predict
with  certainty  what  portion of its ice  storm-related  costs it will  recover
through  federal  assistance,  or from its customers,  or when any such recovery
will take place.

Permanent Shutdown of Maine Yankee Plant

On August 6, 1997,  the Board of Directors of Maine Yankee voted to  permanently
cease power operations at its nuclear generating plant at Wiscasset,  Maine (the
"Plant")  and to begin  decommissioning  the  Plant.  As  reported  in detail in
Central Maine's Annual Report on Form 10-K for the year ended December 31, 1998,
the Plant had  experienced a number of operational  and regulatory  problems and
did not  operate  after  December  6,  1996.  The  decision  to close  the Plant
permanently  was  based  on  an  economic  analysis  of  the  costs,  risks  and
uncertainties  associated with operating the Plant compared to those  associated
with closing and  decommissioning it. The Plant's operating license from the NRC
was scheduled to expire on October 21, 2008.

FERC Rate Case. On November 6, 1997,  Maine Yankee  submitted to FERC for filing
certain  amendments to the Power  Contracts (the  "Amendatory  Agreements")  and
revised  rates to  reflect  the  decision  to shut down the Plant and to request
approval of an increase in the  decommissioning  component of its formula rates.
Maine Yankee's  submittal also requested  certain other rate changes,  including
recovery of unamortized  investment  (including fuel) and certain changes to its
billing formula, consistent with the non-operating status of the Plant. By Order
dated January 14, 1998,  the FERC accepted  Maine Yankee's new rates for filing,
subject to refund  after a minimum  suspension  period,  and set Maine  Yankee's
Amendatory  Agreements,   rates  and  issues  concerning  the  prudence  of  the
Plant-shutdown decision for hearing.

Since the filing of the rate request,  Maine Yankee and the active  intervenors,
including  among others the MPUC Staff,  the Maine Office of the Public Advocate
("OPA"), Central Maine and other owners, municipal and cooperative purchasers of
Maine Yankee Power (the "Secondary Purchasers"), and a Maine environmental group
(the "Settling Parties"),  engaged in extensive discovery and negotiations which
resulted  in a  settlement  agreement  filed by those  parties  with the FERC on
January 19,  1999.  A separately  negotiated  settlement  filed with the FERC on
February 5, 1999,  resolved the issues  raised by the  Secondary  Purchasers  by
limiting the amounts they will pay for decommissioning the Plant and by settling
other points of  contention  affecting  individual  Secondary  Purchasers.  Both
settlements  were found to be in the public interest and approved by the FERC on
June 1, 1999. The settlement  constitutes a full settlement of all issues raised
in the consolidated FERC proceeding,  including  decommissioning-cost issues and
issues pertaining to the prudence of the management,  operation, and decision to
permanently cease operation of the Plant.

The primary settlement provides for Maine Yankee to collect $33.1 million in the
aggregate  annually,  effective August 1, 1999,  including both  decommissioning
costs and  ISFSI-related  costs.  The  original  filing with FERC on November 6,
1997,  called for an  aggregate  annual  collection  rate of $36.4  million  for
decommissioning  and the ISFSI,  based on a 1997  estimate.  Under the  approved
settlement the amount collected annually is to be reduced to approximately $24.4
million  as a  result  of  legislation  allowing  Maine  Yankee  to (1)  use for
construction  of the ISFSI funds held in trust  under  Maine law for  spent-fuel
disposal,  and (2) access  approximately $6.8 million held by the State of Maine
for eventual  payment to the State of Texas  pursuant to a compact for low-level
nuclear waste  disposal,  the future of which is in question after  rejection of
the selected  disposal  site in west Texas by a Texas  regulatory  agency.  Both
required authorizing legislation in Maine, which was adopted on May 13, 1999.

The  settlement  also  provides  for  recovery  of  the  unamortized  investment
(including fuel) in the Plant, together with a return on equity of 6.50 percent,
effective  January 15, 1998,  on equity  balances up to maximum  allowed  equity
amounts,  which  resulted in a pro-rata  refund of $9.3 million  (including  tax
impacts) to the sponsors on July 15, 1999.  The Settling  Parties also agreed in
the settlement  not to contest the  effectiveness  of the Amendatory  Agreements
submitted to FERC as part of the original filing, subject to certain limitations
including  the  right to  challenge  any  accelerated  recovery  of  unamortized
investment  under  the  terms  of the  Amendatory  Agreements  after a  required
informational filing with the FERC by Maine Yankee. In addition,  the settlement
contains  incentives  for  Maine  Yankee  to  achieve  further  savings  in  its
decommissioning   and   ISFSI-related   costs  and  resolves  issues  concerning
restoration  and  future  use of the Plant  site and  environmental  matters  of
concern to certain of the intervenors in the proceeding.

As a  separate  part of the  settlement,  Central  Maine,  the  other  two Maine
utilities  which own  interests  in Maine  Yankee,  the MPUC Staff,  and the OPA
entered into a further  agreement  resolving retail rate issues and other issues
specific to the Maine parties,  including those that had been raised  concerning
the prudence of the operation and shutdown of the Plant (the "Maine Agreement").
Under the Maine  Agreement  Central  Maine will  continue  to recover  its Maine
Yankee costs in accordance  with its most recent ARP order from the MPUC without
any adjustment reflecting the outcome of the FERC proceeding. To the extent that
Central  Maine has  collected  from its retail  customers  a return on equity in
excess of the 6.50 percent  contemplated by the settlement,  no refunds would be
required,  but such excess  amounts  would be credited to the  customers  to the
extent required by the ARP.

Finally, a major provision of the Maine Agreement requires the Maine owners, for
the period from March 1, 2000,  through  December  1, 2004,  to hold their Maine
retail ratepayers harmless from the amounts by which the replacement power costs
for Maine Yankee exceed the replacement power costs assumed in the report to the
Maine Yankee Board of  Directors  that served as a basis for the Plant  shutdown
decision,  up to a maximum  cumulative  amount of $41 million.  Central  Maine's
share  of that  amount  would  be  $31.16  million  for the  period.  The  Maine
Agreement,  which was approved by the MPUC on December 22, 1998, also sets forth
the methodology for calculating such replacement power costs.

CMP Group and Central Maine believe that the approved settlement,  including the
Maine Agreement, constitutes a reasonable resolution of the issues raised in the
Maine Yankee FERC  proceeding,  and should eliminate  significant  uncertainties
concerning CMP Group's and Central Maine's future financial performance.

Other Maine Yankee Shareholders.  Periodically-higher nuclear-related costs have
affected  the  financial  condition  of other  stockholders  of Maine  Yankee in
varying  degrees.  A default by a Maine Yankee  stockholder  in making  payments
under its Power  Contract  or  Capital  Funds  Agreement  could  have a material
adverse effect on Maine Yankee,  depending on the magnitude of the default.  CMP
Group and Central  Maine  cannot  predict,  however,  what  effect,  if any, the
financial  and  regulatory   difficulties   experienced  by  some  Maine  Yankee
stockholders might have on Maine Yankee or Central Maine.

Regulatory Matters and Electric-Utility Industry Restructuring

Alternative Rate Plan - On March 15, 1999,  Central Maine submitted its 1999 ARP
compliance  filing to the MPUC.  In the filing  Central Maine  recommended  that
rates remain unchanged for the period July 1, 1999 to February 29, 2000. On July
13,  1999,  the MPUC  issued an order  which  provided  for no increase in rates
effective July 1, 1999. In a related matter,  on August 2, 1999, the MPUC issued
an order  regarding  the  treatment of gains on the sale of easements by Central
Maine in late 1998 and  early  1999.  The  order  allocated  90  percent  of the
proceeds  from  the  sale  of  easements  to   ratepayers   and  10  percent  to
shareholders.  Further the  ratepayer  portion must be  amortized  over a 5 year
period.  Central Maine  believes  that both under Maine Law Court  precedent and
under the terms of the ARP these gains  should be  recognized  when the property
was sold and accrue to the benefit of shareholders;  accordingly,  Central Maine
will vigorously  work to overturn the decision  through  reconsideration  by the
Commission   and/or  appeal  to  Maine's  Law  Court.   As  of  June  30,  1999,
approximately  $9.9 million of the gain would be deferred and net income reduced
accordingly,  if the MPUC  position  prevails.  The design and levels of Central
Maine's rates as a  transmission-and-distribution  company,  effective  March 1,
2000, will be determined in Phase II of the MPUC  proceeding  discussed below in
this note under "MPUC Proceeding on Stranded Costs,  Revenue  Requirements,  and
Rate Design."

Stranded  Costs.  The  enactment  by Congress  of the Energy  Policy Act of 1992
accelerated  planning by electric  utilities,  including  Central  Maine,  for a
transition  to a more  competitive  industry.  In Maine,  legislation  that will
restructure the  electric-utility  industry on March 1, 2000, was enacted by the
Maine  Legislature  in May 1997,  and is  discussed in detail under this heading
below.  Such a departure  from  traditional  regulation,  however,  could have a
substantial impact on the value of utility assets and on the ability of electric
utilities to recover their costs through rates. In the absence of full recovery,
utilities   would  find  their   above-market   costs  to  be   "stranded",   or
unrecoverable, in the new competitive setting.

Central Maine has substantial  exposure to cost stranding  relative to its size.
In general,  its  stranded  costs  reflect the excess  costs of Central  Maine's
purchased-power obligations over the market value of the power, and the costs of
deferred  charges  and other  regulatory  assets.  The major  portion of Central
Maine's  stranded  costs is related  to  above-market  costs of  purchased-power
obligations arising from Central Maine's long-term,  noncancelable contracts for
the purchase of capacity  and energy from NUGs,  with lesser  estimated  amounts
related to Central Maine's deferred regulatory assets.

Maine  Restructuring  Legislation.  The  1997  Maine  restructuring  legislation
requires the MPUC, when retail access to generation  begins on March 1, 2000, to
provide a "reasonable  opportunity" to recover  stranded costs through the rates
of  the  transmission-and-distribution  company,  comparable  to  the  utility's
opportunity to recover stranded costs before the implementation of retail access
under the legislation.  Stranded costs are defined as the legitimate, verifiable
and  unmitigable  costs  made  unrecoverable  as a result  of the  restructuring
required by the legislation.  Central Maine's  recoverable  amount and timing of
recovery  will be  determined  by the MPUC in the  second  phase of the  ongoing
proceeding  discussed  under the heading  "MPUC  Proceeding  on Stranded  Costs,
Revenue Requirements, and Rate Design," below.

The principal restructuring  provisions of the legislation provide for customers
to have direct  retail  access to generation  services and for  deregulation  of
competitive    electric    providers,    commencing    March   1,   2000,   with
transmission-and-distribution  companies continuing to be regulated by the MPUC.
By that date,  subject to  possible  extensions  of time  granted by the MPUC to
improve  the sale  value of  generation  assets,  investor-owned  utilities  are
required  to  divest  all  generation  assets  and  generation-related  business
activities,  with two major exceptions: (1) non-utility generator contracts with
qualifying facilities and contracts with demand-side  management or conservation
providers,  brokers or hosts,  and (2)  ownership  interests  in  nuclear  power
plants.  As discussed  below under "Sale of  Generation  Assets,"  Central Maine
completed the sale of its non-nuclear generating assets on April 7, 1999.

The legislation also requires investor-owned utilities, after February 29, 2000,
to sell their  rights to the  capacity  and energy from all  generation  assets,
including the  purchased-power  contracts that had not previously  been divested
pursuant to the legislation,  with certain  immaterial  exceptions.  On July 30,
1999,  Central  Maine  offered  its rights to the  capacity  and energy from its
nuclear generation assets and its NUG to prospective bidders.

Upon the  commencement  of retail access on March 1, 2000,  Central Maine,  as a
transmission-and-distribution  utility, will be prohibited from selling electric
energy  to  retail  customers.  Any  competitive  electricity  provider  that is
affiliated  with  Central  Maine  would be allowed to sell  electricity  outside
Central Maine's service  territory without  limitation as to amount,  but within
Central  Maine's  service  territory the affiliate would be limited to providing
not more than 33 percent of the total kilowatt-hours sold within Central Maine's
service  territory,  as determined by the MPUC. CMP Group does not now intend to
engage in the sale of electric energy after March 1, 2000.

For a summary of other provisions of the 1997 legislation, see the Annual Report
on Form 10-K of CMP Group and Central Maine for the twelve months ended December
31, 1998.

MPUC Proceeding on Stranded Costs,  Revenue  Requirements,  and Rate Design.  By
order dated March 19, 1999, the MPUC completed the first phase of the proceeding
contemplated by Maine's restructuring legislation that will ultimately determine
the recovery of Central Maine's  stranded costs, its revenue  requirements,  and
the  design  of  its  rates  to  be  effective  when  Central  Maine  becomes  a
transmission-and-distribution  utility at the time retail  access to  generation
begins in Maine on March 1, 2000. The MPUC stressed in its Phase I order that it
was  deciding  the   "principles"   by  which  it  would  set  Central   Maine's
transmission-and-distribution  rates, effective March 1, 2000, but was deferring
calculating the rates themselves  until Phase II of the proceeding  because such
calculations at that time would rely excessively on estimates.

With respect to stranded costs,  the MPUC indicated that it would set the amount
of  recoverable  stranded  costs for Central Maine in Phase II of the proceeding
pursuant   to  its   mandate   under  the   restructuring   statute  to  provide
transmission-and-distribution utilities a reasonable opportunity to recover such
costs that is  equivalent to the  utility's  opportunity  to recover those costs
prior  to the  commencement  of  retail  access.  The  MPUC  also  reviewed  the
prescribed methodology for determining the amount of a utility's stranded costs,
including  among other  factors the  application  of excess  value from  Central
Maine's divested generation assets to offset stranded costs.

In the  area  of  revenue  requirements,  the  Phase I  order  did  not  include
definitive amounts, but did contain the MPUC's conclusions as to the appropriate
cost of  common  equity  for  Central  Maine as a  transmission-and-distribution
company beginning March 1, 2000. Central Maine had recommended a 12-percent cost
of common  equity  with a  55-percent  common  equity  component  in the capital
structure.  The MPUC  approved  a  common-equity  cost of 10.50  percent  with a
common-equity  component of 47 percent, and an overall  weighted-average cost of
capital of 8.68 percent. In dealing with rate design, the MPUC limited itself in
the first phase of the  proceeding  primarily to  establishing  principles  that
would guide it in designing Central Maine's rates to be effective March 1, 2000.

Central  Maine  submitted  its Phase II filing to the MPUC on July 1, 1999.  The
filing  is  organized  into  sections  covering  revenue  requirements,  a sales
forecast,  stranded costs, and rate design, with updated information provided in
each area. As with Phase I, some of the  calculations  submitted in the Phase II
filing are still estimates,  since some of the information that will provide the
basis for the MPUC's  decisions in the  proceeding  is not yet  available.  This
information will include the results of the auctioning of Central Maine's energy
and capacity of undivested  generation-related  assets and NUG contracts and the
market prices for electricity,  including the standard-offer price, all of which
Central  Maine  expects to be able to provide  the MPUC in an updated  filing in
December 1999.

Central Maine's requested revenue requirement amount,  together with its interim
assumption  for  market   electricity   prices,   would  result  in  an  average
10.4-percent price decrease for its core rate customers effective March 1, 2000.
This amount will change,  however,  depending on the information to be submitted
in the  December  filing and the MPUC's  decision  on  Central  Maine's  revenue
requirements.

Sale of Generation Assets

On April 7, 1999,  Central Maine completed the sale of all of its hydro,  fossil
and biomass power plants with a combined  generating capacity of 1,185 megawatts
for $846  million in cash,  including  approximately  $18  million for assets of
Union Water, to affiliates of  Florida-based  FPL Group.  The related book value
for these assets was approximately  $217.8 million. In addition,  as part of its
agreement with FPL Group,  Central Maine entered into energy buy-back agreements
to assist in fulfilling  its obligation to supply its customers with power until
March 1, 2000.  Subsequently,  an agreement was reached to sell related  storage
facilities  to FPL Group for an  additional  $4.6 million  ($1.5 million for the
assets  and  $3.1  million  estimated  for  lease  revenue  associated  with the
properties that CMP will retain), including $2.0 million for Union Water assets.
The related book value of these assets was approximately $11.9 million.

Central Maine recorded a pre-tax  deferred gain of $515.7 million net of selling
costs and certain  non-normalized income tax impacts from the sale of generation
assets by  establishing  a regulatory  liability  in the second  quarter of 1999
eliminating any income recognition.  Central Maine also recorded curtailment and
special termination deferred charges of $8.1 million associated with pension and
postretirement benefit costs of employees leaving the company as a result of the
generation  asset sale.  These  deferred  charges will be amortized over a three
year period  beginning March 1, 2000 as required by the MPUC. In Phase II of the
above described "MPUC  Proceeding on Stranded Costs,  Revenue  Requirements  and
Rate  Design," the MPUC will  determine the amount of the  regulatory  liability
that will be used to reduce stranded costs and the utilization and timing of the
recognition of any remaining regulatory liability.

Central Maine also recorded a pre-tax  deferred gain  amounting to $30.8 million
to offset the income impact of the  flow-through  of unamortized  investment tax
credits and excess deferred taxes associated with the assets sold. Central Maine
has requested a private  letter  ruling from the IRS  regarding the  appropriate
treatment of these items based on directives from the MPUC.  Central Maine is of
the opinion,  based on its review of the rules and regulation and IRS rulings in
similar  situations,  that any  unamortized  investment  tax  credits and excess
deferred taxes relating to the property sold become nonregulated property at the
point of sale. Central Maine believes that regulatory agencies,  therefore,  are
precluded from considering these  unamortized  investment tax credits and excess
deferred  tax  reserves  in  establishing  regulated  rates  because  they would
constitute a violation of the normalization  requirement of the Internal Revenue
Code.  The MPUC has  directed  Central  Maine to seek the  private  ruling to be
absolutely  clear in this  particular  case whether  ratepayers  can continue to
benefit from these  excess  reserves.  Central  Maine does not know when the IRS
will rule on its requests, but expects a ruling before the end of 1999.

Union  Water's net income  reflects a $3.7  million  increase  during the second
quarter of 1999 due to its  portion of the  proceeds  of the sale of  generation
assets  as  determined  by the MPUC.  Central  Maine is  appealing  to the Maine
Supreme  Judicial  Court the  imputation  of $13.2 million of value of the Union
Water assets to Central Maine.  The $13.2 million  imputation is included in the
Central Maine deferred gain of $515.7 million.

With the cash proceeds of the sale Central Maine  redeemed the remaining  $118.7
million of its outstanding General and Refunding Mortgage Bonds on May 10, 1999,
and paid at maturity  $47 million of its  medium-term  notes on May 4, 1999.  On
June 1, 1999,  Central Maine redeemed $180 million of its medium-term  notes, as
well as all of the  outstanding $10 million Town of Yarmouth  Pollution  Control
Revenue  Bonds,  which had been  issued in 1977 and 1978.  Approximately  $294.5
million of the  proceeds  will be required  for federal and state  income  taxes
resulting  from the sale and,  after  providing  for  closing  costs and  energy
purchases to meet power-supply obligations until the start of retail competition
on March 1, 2000,  Central  Maine expects to transfer the balance to its parent,
CMP Group.  Proceeds that have not been applied have been invested in accordance
with Central Maine's cash investment policy. Uses of the balance of the proceeds
are under consideration by CMP Group.

Accounting for the Effects of Certain Types of Regulation

Central Maine prepares its financial  statements in accordance with SFAS No. 71,
which  requires  rate  regulated  companies to reflect the effects of regulatory
decisions in their  financial  statements.  Central  Maine has deferred  certain
costs  pursuant  to rate  actions  of the MPUC and  FERC and is  recovering,  or
expects to recover, such costs in electric,  transmission and distribution rates
charged to customers.

The FASB's EITF has addressed the  appropriateness  of continued  application of
SFAS No. 71 by entities in states that have  enacted  restructuring  legislation
similar to Maine's.  The EITF issued its  statement  No. 97-4  "Deregulation  of
Pricing  Electricity - Issues Related to the  Application of FASB  Statements 71
and 101",  which  concluded  that an entity should cease to apply SFAS 71 when a
deregulation  plan is in place and its  terms are  known.  With  respect  to the
generation portion of Central Maine's business,  this occurred during the second
quarter of 1999 with the completion of the sale of most of its generation assets
to FPL and the subsequent  development  of a compliance  filing with the MPUC in
Phase II of the ongoing MPUC proceeding on stranded costs,  revenue requirements
and rate design.  Effective June 30,1999, Central Maine adopted SFAS 101 for the
generation  segment  of its  business.  SFAS 101  requires  a  determination  of
impairment of plant assets under SFAS 121, and the elimination of all effects of
rate regulation  that have been recognized as assets and liabilities  under SFAS
71.

Central Maine performed impairment tests on its two operating nuclear generation
facilities,  Millstone  3 and  Vermont  Yankee,  on a plant  specific  basis and
determined that $82.9 million was impaired as of June 30,1999. Impaired plant is
the excess of net plant  investment  at June  30,1999 over the value of net cash
flows during the remaining lives of the investments.  Annual net cash flows were
determined  by  subtracting  estimated  generation  sustenance  costs  from  the
estimated  market  value of power from the plants.  The MPUC in its  decision in
Phase I order  dated  March  19,1999 of the  "Investigation  of  Stranded  Cost,
Transmission  and  Distribution  Utility Revenue  Requirements  and Rate Design"
provided for future recovery of nuclear  generation and other generation related
stranded costs.  Central Maine has established a regulatory asset as of June 30,
1999 for $82.9  million  consistent  with  that  order  associated  with the two
operating nuclear investments.  As a result there is no income impact from these
impairment test but rather  recognition of the future  obligation and regulatory
asset on the balance sheet.

Central Maine has long term power purchase contracts  requiring payment of above
anticipated  market  rates from NUGs.  The estimate of  above-market  payment is
approximately $800 million. The costs associated with these NUG contracts remain
a  regulated  obligation  of the  transmission  and  distribution  company  as a
statutory  requirement  and have been  provided  for by the MPUC in its  revenue
requirement determination in Phase I of the above mentioned proceeding.

Central  Maine  believes  that  its  electric   transmission   and  distribution
operations  continue  to meet the  requirements  of SFAS 71 and that  regulatory
assets associated with those operations as well as any generation-related  costs
that the MPUC has determined to be  recoverable  from  ratepayers  also meet the
criteria.  At June 30,1999 $958.7 million of regulatory assets remain on Central
Maine's  books.  Approximately  $214.4  million  will  be  charged  against  the
estimated  deferred gain and associated  carrying costs through March 1, 2000 of
$548.6 million resulting from the generation asset sale while the remainder will
be amortized  over periods to be determined by the MPUC in Phase II of the above
mentioned proceeding.

Tax Settlement

On September 12, 1997,  Central Maine  received a notice of deficiency  from the
Internal  Revenue  Service  ("IRS") as a result of its audit of Central  Maine's
federal  income tax  returns  for the years 1992  through  1994.  There were two
significant  adjustments  among  those  proposed  by the IRS.  The  first  was a
disallowance of Central Maine's write-off of the under-collected balance of fuel
and  purchased-power  costs and the unrecovered balance of its unbilled Electric
Revenue Adjustment  Mechanism  ("ERAM") revenues,  both as of December 31, 1994,
which had been charged to income in 1994 in connection  with the adoption of the
ARP effective  January 1, 1995. The second major adjustment  disallowed  Central
Maine's 1994 deduction of the cost of the buyout of the Fairfield Energy Venture
("FEV") purchased-power contract.

On December  10, 1997  Central  Maine filed a petition in the United  States Tax
Court contesting the entire amount of the  deficiencies.  Subsequently,  Central
Maine sought review of the asserted  deficiencies  by an IRS Appeals  Officer to
determine  whether all or part of the dispute  could be resolved in advance of a
court determination.

In June 1999,  the IRS  Appeals  Officer  and Central  Maine  reached  agreement
resolving  all issues.  Under the  proposed  agreement  the ERAM  component  was
allowed  as  fully  deductible  in  1994,  while  $24  million  of the  fuel and
purchased-power costs were deemed to be deductible in 1994 and the remaining $30
million deductible in 1995. The parties also agreed to increase the tax basis of
the FEV plant from $2 million to $11 million,  to be depreciated  over 20 years,
and that the  remaining FEV contract  buyout costs would be fully  deductible in
1994.

As a result of the  settlement,  Central  Maine made payments to the IRS and the
State of Maine totaling $11.8 million for the 1992 to 1994 tax deficiencies,  as
well  as $6.0  million  in  associated  interest.  Substantially  all of the tax
impacts were normalized, as Central Maine will be deducting any disallowed costs
for tax purposes in future years. The net impact of the tax and interest true-up
for all the years under  consideration  reduced net income in the second quarter
of 1999 by $0.6 million due primarily to interest  expense.  Of the $6.0 million
interest payment,  approximately $1 million was previously accrued, $1.8 million
associated  with  the FEV  facility  was  deferred  consistent  with  regulatory
practice,  and $2.0  million of  interest  income was accrued for the years 1995
through June 1999.

Due to the materiality of the amounts involved,  approval of the settlement from
the  Congress's  Joint  Committee on Taxation is required and is being sought by
the IRS.

Expansion of Lines of Business

General.  CMP Group is also preparing for  competition by expanding its business
opportunities through investments that capitalize on core competencies. MaineCom
Services is a subsidiary that arranges,  through other  investments  fiber-optic
data  service  for bulk  carriers,  offering  support  for cable  television  or
"super-cellular"   personal   communication   vendors,   and   providing   other
telecommunications  consulting  services.  TeleSmart is a wholly-owned  accounts
receivable  management  subsidiary.   Another  wholly-owned  subsidiary,   CNEX,
formerly CMP International  Consultants,  provides utility consulting  (domestic
and  international)  and research.  The  wholly-owned  Union Water Power Company
provides locating of underground utility facilities and thermovision  (infrared)
detection  services,  real estate  brokerage and  management,  modular  housing,
energy-efficiency  contracting, and utility construction services. Union Water's
operating  divisions  include On Target Utility  Services,  UnionLand  Services,
Maine HomeCrafters, and Combined Energies(TM).  These subsidiaries often utilize
skills of former Central Maine employees and regularly compete for business with
other companies.

Natural Gas Distribution. CMP Group and Energy East, through subsidiaries,  have
entered into a  joint-venture  agreement to pursue  opportunities  to distribute
natural gas at retail in many Maine  communities.  They would offer  natural-gas
service  in   several   areas  of  Maine,   primarily   the   Augusta,   Bangor,
Bath-Brunswick,  Bethel,  Windham  and  Waterville  areas,  none of which  had a
natural-gas  distribution  system in place.  The gas is to be drawn from two new
gas-pipeline  projects  that will carry  Canadian gas through Maine and into the
regional energy market using substantial portions of electric  transmission-line
corridors  owned  by  Central  Maine  and  MEPCO.  On July  24,  1998,  the MPUC
authorized the joint venture to serve the areas it had applied to serve. The new
company,  CMP  Natural  Gas could  face  competition  from new or  existing  gas
utilities in some of the areas it has targeted.

CMP Natural Gas began  construction  of its first local  distribution  system in
Windham,  Maine,  in early 1999 and began serving its first  customer in May. On
July 8, 1999,  CMP  Natural  Gas and  Calpine  Corporation,  a  California-based
independent  power company,  announced the signing of a 20-year contract for CMP
Natural  Gas to provide  natural  gas  delivery  service to  Calpine's  proposed
540-megawatt  natural  gas-fired  power plant under  construction  in Westbrook,
Maine. CMP Natural Gas expects to commence service to the plant by June 1, 2000,
after MPUC approval and  construction  of a two-mile  lateral  pipeline along an
existing  Central  Maine  right  of way  that  would  interconnect  with the new
interstate pipeline facilities. Upon completion of the proposed merger of Energy
East and CMP Group,  Energy East will hold all of the  interests  in CMP Natural
Gas.

Fiber Optic Network.  CMP Group,  through its wholly-owned  subsidiary  MaineCom
Services, owns 38.5 percent of the common stock of Northeast Optic Network, Inc.
("NEON"),  which is a  facilities-based  provider of  technologically  advanced,
high-bandwidth, fiber optic transmission capacity for communications carriers on
local loop,  inter-city and interstate  facilities.  NEON is currently expanding
its  fiber  optic  network  in New  England  and New York,  utilizing  primarily
electric-utility  rights-of-way,  including some of Central Maine's in Maine and
some owned by other electric utilities  including Northeast  Utilities,  another
substantial minority stockholder. NEON is creating a continuous fiber optic link
between New York City and  Portland,  Maine,  with access into and around Boston
and numerous other major service areas in the Northeast.  On July 13, 1999, NEON
announced that it had activated its first high-capacity carrier circuit into the
borough of Manhattan,  which NEON said  fulfilled its goal of providing  carrier
customers  with such  high-capacity  facilities  into the New York  City  market
before the end of 1999.

On August 5, 1998, NEON completed  initial public  offerings of $48.0 million of
common stock and $180.0 million of senior notes,  and Central Maine,  as part of
the  common-stock  offering,  sold some of the  shares in NEON it then owned for
proceeds of approximately $3.1 million.  In addition,  with some of the proceeds
of the offering NEON repaid approximately $18 million Central Maine had advanced
under an earlier  construction  loan  agreement.  CMP Group  believes there is a
growing  need for such a fiber optic  network in the  Northeast  and that NEON's
outside financing will provide substantial assistance in completing construction
of the network, but cannot predict the results of this venture.

Environmental Matters

CMP Group  and its  subsidiaries  assess  compliance  with laws and  regulations
related to hazardous  substance  remediation  on an ongoing  basis.  At June 30,
1999,  Central  Maine had an accrued  liability of $3.0 million for  remediation
costs at  various  sites.  The costs at  identified  sites may be  significantly
higher if, among other things,  other  potentially  responsible  parties are not
financially  able to contribute to these costs or identified  possible  outcomes
change. See Note 2, "Commitments and  Contingencies." - "Legal and Environmental
Matters" for further discussion of this subject.

Item 3: Quantitative and Qualitative Disclosures About Market Risk

Central Maine is exposed to interest rate risk through the use of fixed-rate and
variable-rate  debt and  preferred  stock as sources of capital.  As of June 30,
1999,  Central  Maine had $110 million of  medium-term  notes  outstanding,  $10
million of which bear floating, LIBOR-based rates.






                          Variable Long Term                 Fixed Long Term
                                       (dollars in thousands)

Weighted Average Rates             9.12%                            6.82%

Balance at June 30, 1999            34,593                          236,224

Maturity Period                 1999 - 2019                      1999 - 2021





                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings
Claim  Against  Central  Maine - By notice of claim  dated  June 24,  1999,  the
non-operator  owners of the Wyman No. 4 oil-fired  generating  unit in Yarmouth,
Maine, which was approximately  60-percent owned by Central Maine, served notice
on  Central  Maine  that they  believe  they are  entitled  to a portion  of the
proceeds  of the sale of  Central  Maine's  interest  in the unit as part of the
April  1999  sale  of its  non-nuclear  generation  assets  to FPL  Energy.  The
claimants  contend that certain sections of the joint ownership  agreement under
which they share in the output of the unit  require a pro-rata  distribution  to
them of part of  those  proceeds  as a result  of  Central  Maine's  sale of its
interest in the unit. The joint ownership  agreement provides for arbitration of
claims arising under the agreement.

Central  Maine  believes  that  although the amount that may be claimed could be
substantial,  the  claimants  have  suffered no loss and are not entitled to any
part of the generation-asset sale proceeds. Central Maine intends to contest any
such  claim  vigorously,  but  cannot  predict  the  result  of any  arbitration
proceeding that the non-operator owners may initiate.

Regulatory Matters - For a discussion of certain significant  regulatory matters
affecting CMP Group and Central Maine,  including those related to the permanent
shutdown of the Maine Yankee Plant, the proposed merger with Energy East, and an
MPUC proceeding that will determine  Central Maine's  stranded costs and related
matters,  see  Item 2 of  Part  I,  "Management's  Discussion  and  Analysis  of
Financial  Condition  and Results of  Operation" - "Permanent  Shutdown of Maine
Yankee  Plant",  "Proposed  Merger,"  and "MPUC  Proceeding  on Stranded  Costs,
Revenue  Requirements  and  Rate  Design,"  which  are  incorporated  herein  by
reference.

Tax Settlement - For a discussion of Central  Maine's  settlement of significant
federal income tax adjustments see Note 4,  "Commitments  and  Contingencies"  -
"Tax Settlement."

Environmental  Matters  -  For  a  discussion  of  administrative  and  judicial
proceedings   concerning   cleanup  of  hazardous  waste  sites,   see  Note  2,
"Commitments and  Contingencies,"  "Legal and  Environmental  Matters," which is
incorporated herein by reference.

Item 2. and Item 3. Not applicable

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

The annual meetings of the stockholders of CMP Group and Central Maine were held
concurrently on May 20, 1999. Proxies for the meeting were solicited pursuant to
Regulation  14  under  the  Securities  Exchange  Act  of  1934.  There  was  no
solicitation in opposition to the  managements'  nominees as listed in the proxy
statement, and all of such nominees were elected.

Two  matters  were voted on at the CMP Group  annual  meeting and one matter was
voted on at the  Central  Maine  meeting.  The  first was the  election  of four
directors  to Class I of the Board of  Directors  of CMP Group for a  three-year
term. The following are the vote tabulations for the four nominees:


Charleen M. Chase
         Votes for -26,606,143
         Votes withheld -754,431

David T. Flanagan
         Votes for -26,619,205
         Votes withheld -741,369

Robert H. Gardiner
         Votes for -26,605,923
         Votes withheld -754,651

Peter J. Moynihan
         Votes for -26,615,468
         Votes withheld -745,106

The  second  matter  voted  on at the CMP  Group  meeting  was  approval  of the
appointment  of  PricewaterhouseCoopers  LLP as auditors for CMP Group for 1999.
The appointment was approved, with the following vote tabulations:

         Votes for -27,151,514
         Votes against -65,814
         Abstentions -143,246

The only matter voted on at the Central  Maine  meeting was the election of four
directors  to Class  III of the  Board  of  Directors  of  Central  Maine  for a
three-year  term.  The four  nominees  were  elected,  with the  following  vote
tabulations:

Charleen M. Chase
         Votes for -3,125,192
         Votes withheld -96

David T. Flanagan
         Votes for -3,125,192
         Votes withheld -96

Robert H. Gardiner
         Votes for -3,125,192
         Votes withheld -96

Peter J. Moynihan
         Votes for -3,125,192
         Votes withheld -96

Item 5. Not Applicable.

Item 6. Exhibits and Reports on Form 8-K

(a)      Exhibits. None.
(b)      Reports on Form 8-K.  CMP Group and Central Maine filed one report on
         Form 8-K during the second quarter of 1999 and thereafter to date:

Date of Report                                          Items Reported

June 14, 1999                                               Item 5

The  registrants  reported  that CMP Group and Energy East had  entered  into an
Agreement and Plan of Merger.




                                   Signatures
Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrants  have duly  caused  this  report  to be  signed on their  respective
behalfs by the undersigned thereunto duly authorized.

                                               CMP GROUP, INC.



Date:  August 10, 1999    By    _____________________________________
      -----------------
                                David E. Marsh, Chief Financial Officer
                                (Principal Financial Officer and duly
                                authorized officer)



                                              CENTRAL MAINE POWER COMPANY



Date:  August 10, 1999    By    _____________________________________
      -----------------
                                Michael W. Caron, Comptroller (Chief Accounting
                                Officer and duly authorized officer)