UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

|ý                                                             | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|------------------------------------------------------------- | ----------------------------------------------------------------------------------------
|For the Quarterly Period Ended September 30, 2007            
|Or                                                           
|o                                                             | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|For the Transition Period
from                             to

Mirant North America, LLC(Exact name of registrant as specified in its charter)

|Delaware(State or other jurisdiction of Incorporation or Organization) | N/A(Commission File Number) | 20-4514609(I.R.S. Employer Identification No.)
|---------------------------------------------------------------------- | --------------------------- | ----------------------------------------------
|                                                                       |                             |                                               

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

30338(Zip Code)(678) 579-5000(Registrant's Telephone Number, Including Area Code)


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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.

o Large Accelerated Filer
o Accelerated Filer
ý Non-accelerated Filer


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
o Yes ý No

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ý Yes
o No

All of our outstanding membership interests are held by our parent, Mirant Americas Generation, LLC, so we have no membership interests held by
nonaffiliates.



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TABLE OF CONTENTS

|                             |                                                                                       |  | Page   
|---------------------------- | ------------------------------------------------------------------------------------- |  | -------
|                             | Glossary of Certain Defined Terms                                                     |  | i - iii
|                             | Cautionary Statement Regarding Forward-Looking Information                            |  | 3      
|PART IFINANCIAL INFORMATION
|Item 1.                      | Interim Financial Statements (unaudited):                                             |  |        
|                             | Condensed Consolidated Statements of Operations                                       |  | 5      
|                             | Condensed Consolidated Balance Sheets                                                 |  | 6      
|                             | Condensed Consolidated Statements of Member's Equity                                  |  | 7      
|                             | Condensed Consolidated Statements of Cash Flows                                       |  | 8      
|                             | Notes to Condensed Consolidated Financial Statements                                  |  | 9      
|Item 2.                      | Management's Discussion and Analysis of Results of Operations and Financial Condition |  | 39     
|Item 3.                      | Quantitative and Qualitative Disclosures about Market Risk                            |  | 62     
|Item 4.                      | Controls and Procedures                                                               |  | 62     
|PART IIOTHER INFORMATION   
|Item 1.                      | Legal Proceedings                                                                     |  | 64     
|Item 1A.                     | Risk Factors                                                                          |  | 64     
|Item 6.                      | Exhibits                                                                              |  | 64     

2

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Glossary of Certain Defined Terms

APBAccounting Principles Board.

APB No. 22APB Opinion No. 22,Disclosure of Accounting Policies.

APSAAsset Purchase and Sale Agreement dated June 7, 2000, between the Company and Pepco.

Bankruptcy CodeUnited States Bankruptcy Code.

Bankruptcy CourtUnited States Bankruptcy Court for the Northern District of Texas, Fort Worth Division.

Baseload Generating UnitsUnits that satisfy minimum baseload requirements of the system and produce electricity at an essentially constant
rate and run continuously.

CAIRClean Air Interstate Rule.

CAISOCalifornia Independent System Operator.

Cal PXCalifornia Power Exchange.

Clean Air ActFederal Clean Air Act.

Clean Water ActFederal Water Pollution Control Act.

CO2Carbon dioxide.

CompanyMirant North America, LLC and its subsidiaries.

CPUCCalifornia Public Utilities Commission.

DWRCalifornia Department of Water Resources.

EBITDAEarnings before interest, taxes, depreciation and amortization.

EITFThe Emerging Issues Task Force formed by the Financial Accounting Standards Board.

EITF 02-3EITF Issue No. 02-3,Issues Involved in Accounting for Derivative
Contracts Held for Trading Purposes and Contracts Involved in Energy Trading and Risk Management Activities.

EITF 06-3EITF Issue No. 06-3,How Taxes Collected
from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation).

EOBCalifornia Electricity Oversight Board.

EPAEnvironmental Protection Agency.

FASBFinancial Accounting Standards Board.

FERCFederal Energy Regulatory Commission.

FINFASB Interpretation.

FIN 39FIN No. 39,Offsetting of Amounts Related to Certain Contracts.

FIN 48FIN No. 48,Accounting for Uncertainty in Income Taxesan
interpretation of FASB Statement No. 109.

FSPFASB Staff Position.

FSP FIN 39-1FSP FIN No. 39-1,Amendment of FASB Interpretation No. 39
(FIN 39).

FSP FIN 48-1FSP FIN No. 48-1,Definition of Settlement in FASB Interpretation
No. 48 (FIN 48).

GAAPGenerally accepted accounting principles in the United States.

i

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Gross MarginOperating revenue less cost of fuel, electricity and other products.

Hudson Valley GasHudson Valley Gas Corporation.

Intermediate Generating UnitsUnits that meet system requirements that are greater than baseload and less than peaking.

ISOIndependent System Operator.

LIBORLondon InterBank Offered Rate.

MirantOld Mirant prior to January 3, 2006, and New Mirant on or after January 3, 2006.

Mirant AmericasMirant Americas, Inc.

Mirant Americas Energy MarketingMirant Americas Energy Marketing, LP.

Mirant Americas GenerationMirant Americas Generation, LLC.

Mirant BowlineMirant Bowline, LLC.

Mirant Chalk PointMirant Chalk Point, LLC.

Mirant DeltaMirant Delta, LLC.

Mirant Energy TradingMirant Energy Trading, LLC.

Mirant KendallMirant Kendall, LLC.

Mirant Las VegasMirant Las Vegas, LLC.

Mirant LovettMirant Lovett, LLC.

Mirant Mid-AtlanticMirant Mid-Atlantic, LLC.

Mirant New YorkMirant New York, LLC (formerly, Mirant New York, Inc.).

Mirant North AmericaMirant North America, LLC and its subsidiaries.

Mirant NY-GenMirant NY-Gen, LLC.

Mirant Potomac RiverMirant Potomac River, LLC.

Mirant Power PurchaseMirant Power Purchase, LLC.

Mirant ServicesMirant Services, LLC.

Mirant Sugar CreekMirant Sugar Creek, LLC.

Mirant Wichita FallsMirant Wichita Falls, LLC.

MWMegawatt.

MWhMegawatt hour.

NAAQSNational ambient air quality standards.

New MirantMirant Corporation on or after January 3, 2006.

NOLNet operating loss.

NOxNitrogen oxides.

NSRNew source review.

NYISOIndependent System Operator of New York.

ii

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NYSDECNew York State Department of Environmental Conservation.

Old MirantMC 2005, LLC, known as Mirant Corporation prior to January 3, 2006.

Orange and RocklandOrange and Rockland Utilities, Inc.

PandaPanda-Brandywine, LP.

Peaking Generating UnitsUnits used to meet demand requirements during the periods of greatest or peak load on the system.

PepcoPotomac Electric Power Company.

PG&EPacific Gas & Electric Company.

PJMPennsylvania-New Jersey-Maryland Interconnection, LLC.

PlanPlan of Reorganization effective on January 3, 2006, for Mirant and most of its subsidiaries that were debtors in the bankruptcy
proceedings.

PM2.5Particulate matter that is 2.5 microns or less in size.

PM10Particulate matter that is 10 microns or less in size.

PPAPower purchase agreement.

Reserve MarginExcess capacity over peak demand.

RMRReliability-must-run.

RTORegional transmission organization.

SECU.S. Securities and Exchange Commission.

Securities ActSecurities Act of 1933, as amended.

SFASStatement of Financial Accounting Standards.

SFAS No. 5SFAS No. 5,Accounting for Contingencies.

SFAS No. 109SFAS No. 109,Accounting for Income Taxes.

SFAS No. 144SFAS No. 144,Accounting for the Impairment or Disposal of
Long-Lived Assets.

SFAS No. 155SFAS No. 155,Accounting for Certain Hybrid Financial
Instrumentsan amendment of FASB Statements No. 133 and 140.

SFAS No. 157SFAS No. 157,Fair Value Measurements.

SFAS No. 159SFAS No. 159,The Fair Value Option for Financial Assets and
Financial LiabilitiesIncluding an amendment of FASB Statement No. 115.

Shady HillsShady Hills Power Company, L.L.C.

SO2Sulfur dioxide.

SWMAACSouthwestern Mid-Atlantic Area Council.

Virginia DEQVirginia Department of Environmental Quality.

West GeorgiaWest Georgia Generating Company, L.L.C.

iii

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

The information presented in this Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934, in addition to historical information. These statements involve known and unknown risks and uncertainties and relate to future
events, our future financial performance or our projected business results. In some cases, one can identify forward-looking statements by terminology such as "may," "will," "should," "expect," "plan,"
"anticipate," "estimate," "predict," "target," "potential" or "continue" or the negative of these terms or other comparable terminology.

Forward-looking
statements are only predictions. Actual events or results may differ materially from any forward-looking statement as a result of various factors, which include:



3

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Many
of these risks are beyond our ability to control or predict. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their
entirety by cautionary statements contained throughout this report. Because of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements.
Furthermore, forward-looking statements speak only as of the date they are made.

Factors that Could Affect Future Performance

We undertake no obligation to update publicly or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this
report.

In
addition to the discussion of certain risks in Management's Discussion and Analysis of Results of Operations and Financial Condition and the accompanying Notes to Mirant North
America, LLC's unaudited condensed consolidated financial statements, other factors that could affect the Company's future performance (business, financial condition or results of operations
and cash flows) are set forth in our Annual Report on Form 10-K for the year ended December 31, 2006.

Certain Terms

As used in this report, "we," "us," "our," the "Company" and "Mirant North America" refer to Mirant North America, LLC and its subsidiaries, unless the
context requires otherwise.

4

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MIRANT NORTH AMERICA, LLC AND SUBSIDIARIES  (Wholly-Owned Indirect Subsidiary of Mirant Corporation)        CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

|                                                                               |                                                    | Three Months Ended September 30, |     | Nine Months Ended September 30, |  
|------------------------------------------------------------------------------ | -------------------------------------------------- | -------------------------------- | --- | ------------------------------- | -
|
|
|Operating revenuesaffiliate                                                   |                                                    | $                                | (2  | )                               | $
|Operating revenuesnonaffiliate                                                |                                                    |                                  | 779 |                                 |  
|                                                                               |                                                    |                                  |     |                                 |  
|                                                                               | Total operating revenues                           |                                  |     | 777                             |  
|                                                                               |                                                    |                                  |     |                                 |  
|Cost of fuel, electricity and other productsaffiliate                         |                                                    |                                  | 1   |                                 |  
|Cost of fuel, electricity and other productsnonaffiliate                      |                                                    |                                  | 284 |                                 |  
|                                                                               |                                                    |                                  |     |                                 |  
|                                                                               | Total cost of fuel, electricity and other products |                                  |     | 285                             |  
|                                                                               |                                                    |                                  |     |                                 |  
|Gross Margin                                                                   |                                                    |                                  | 492 |                                 |  
|                                                                               |                                                    |                                  |     |                                 |  
|Operating Expenses:                                                            |                                                    |                                  |     |                                 |  
|Operations and maintenanceaffiliate                                           |                                                    |                                  | 76  |                                 |  
|Operations and maintenancenonaffiliate                                        |                                                    |                                  | 83  |                                 |  
|Depreciation and amortization                                                  |                                                    |                                  | 30  |                                 |  
|Impairment losses                                                              |                                                    |                                  |    |                                 |  
|Gain on sales of assets, net                                                   |                                                    |                                  |    |                                 |  
|                                                                               |                                                    |                                  |     |                                 |  
|                                                                               | Total operating expenses, net                      |                                  |     | 189                             |  
|                                                                               |                                                    |                                  |     |                                 |  
|Operating Income                                                               |                                                    |                                  | 303 |                                 |  
|                                                                               |                                                    |                                  |     |                                 |  
|Other Expense (Income), net:                                                   |                                                    |                                  |     |                                 |  
|Interest expenseaffiliate                                                     |                                                    |                                  |    |                                 |  
|Interest expensenonaffiliate                                                  |                                                    |                                  | 24  |                                 |  
|Interest incomeaffiliate                                                      |                                                    |                                  | (1  | )                               |  
|Interest incomenonaffiliate                                                   |                                                    |                                  | (18 | )                               |  
|Gain on sales of investments, net                                              |                                                    |                                  |    |                                 |  
|                                                                               |                                                    |                                  |     |                                 |  
|                                                                               | Total other expense, net                           |                                  |     | 5                               |  
|                                                                               |                                                    |                                  |     |                                 |  
|Income From Continuing Operations Before Reorganization Items and Income Taxes |                                                    |                                  | 298 |                                 |  
|Reorganization items, net                                                      |                                                    |                                  |    |                                 |  
|Provision for income taxes                                                     |                                                    |                                  |    |                                 |  
|                                                                               |                                                    |                                  |     |                                 |  
|Income From Continuing Operations                                              |                                                    |                                  | 298 |                                 |  
|Loss From Discontinued Operations, net                                         |                                                    |                                  |    |                                 |  
|                                                                               |                                                    |                                  |     |                                 |  
|Net Income                                                                     |                                                    | $                                | 298 |                                 | $
|                                                                               |                                                    |                                  |     |                                 |  

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

5

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MIRANT NORTH AMERICA, LLC AND SUBSIDIARIES  (Wholly-Owned Indirect Subsidiary of Mirant Corporation)        CONDENSED CONSOLIDATED BALANCE SHEETS

|                                               |                                                                         | At September 30, 2007 |       | At December 31, 2006 |  
|---------------------------------------------- | ----------------------------------------------------------------------- | --------------------- | ----- | -------------------- | -
|
|
|ASSETS                                         |                                                                         |                       |       |                      |  
|Current Assets:                                |                                                                         |                       |       |                      |  
|Cash and cash equivalents                      |                                                                         | $                     | 946   |                      | $
|Funds on deposit                               |                                                                         |                       | 323   |                      |  
|Receivables:                                   |                                                                         |                       |       |                      |  
|                                               | Affiliate                                                               |                       |       | 7                    |  
|                                               | Nonaffiliate, less allowance for uncollectibles of $2 for 2007 and 2006 |                       |       | 237                  |  
|Notes receivableaffiliate                     |                                                                         |                       | 93    |                      |  
|Price risk management assetsaffiliate         |                                                                         |                       |      |                      |  
|Price risk management assetsnonaffiliate      |                                                                         |                       | 323   |                      |  
|Prepaid rent and other payments                |                                                                         |                       | 138   |                      |  
|Inventories                                    |                                                                         |                       | 299   |                      |  
|Assets held for sale                           |                                                                         |                       |      |                      |  
|                                               |                                                                         |                       |       |                      |  
|                                               | Total current assets                                                    |                       |       | 2,366                |  
|                                               |                                                                         |                       |       |                      |  
|Property, Plant and Equipment, net             |                                                                         |                       | 2,397 |                      |  
|                                               |                                                                         |                       |       |                      |  
|Noncurrent Assets:                             |                                                                         |                       |       |                      |  
|Intangible assets, net                         |                                                                         |                       | 206   |                      |  
|Price risk management assetsaffiliate         |                                                                         |                       |      |                      |  
|Price risk management assetsnonaffiliate      |                                                                         |                       | 51    |                      |  
|Prepaid rent                                   |                                                                         |                       | 213   |                      |  
|Debt issuance costs, net                       |                                                                         |                       | 42    |                      |  
|Other                                          |                                                                         |                       | 7     |                      |  
|                                               |                                                                         |                       |       |                      |  
|                                               | Total noncurrent assets                                                 |                       |       | 519                  |  
|                                               |                                                                         |                       |       |                      |  
|                                               | Total assets                                                            |                       | $     | 5,282                |  
|                                               |                                                                         |                       |       |                      |  
|LIABILITIES AND EQUITY                         |                                                                         |                       |       |                      |  
|Current Liabilities:                           |                                                                         |                       |       |                      |  
|Notes payableaffiliate                        |                                                                         | $                     | 19    |                      | $
|Current portion of long-term debt              |                                                                         |                       | 109   |                      |  
|Accounts payable and accrued liabilities       |                                                                         |                       | 251   |                      |  
|Payable to affiliate                           |                                                                         |                       | 27    |                      |  
|Price risk management liabilitiesaffiliate    |                                                                         |                       |      |                      |  
|Price risk management liabilitiesnonaffiliate |                                                                         |                       | 272   |                      |  
|Accrued property taxes                         |                                                                         |                       | 5     |                      |  
|Other                                          |                                                                         |                       | 1     |                      |  
|                                               |                                                                         |                       |       |                      |  
|                                               | Total current liabilities                                               |                       |       | 684                  |  
|                                               |                                                                         |                       |       |                      |  
|Noncurrent Liabilities:                        |                                                                         |                       |       |                      |  
|Long-term debt                                 |                                                                         |                       | 1,329 |                      |  
|Price risk management liabilitiesaffiliate    |                                                                         |                       |      |                      |  
|Price risk management liabilitiesnonaffiliate |                                                                         |                       | 79    |                      |  
|Asset retirement obligations                   |                                                                         |                       | 44    |                      |  
|Other                                          |                                                                         |                       | 25    |                      |  
|                                               |                                                                         |                       |       |                      |  
|                                               | Total noncurrent liabilities                                            |                       |       | 1,477                |  
|                                               |                                                                         |                       |       |                      |  
|Liabilities Subject to Compromise              |                                                                         |                       |      |                      |  
|                                               |                                                                         |                       |       |                      |  
|Commitments and Contingencies                  |                                                                         |                       |       |                      |  
|Equity:                                        |                                                                         |                       |       |                      |  
|Member's interest                              |                                                                         |                       | 3,347 |                      |  
|Preferred stock in affiliate                   |                                                                         |                       | (226  | )                    |  
|                                               |                                                                         |                       |       |                      |  
|                                               | Total equity                                                            |                       |       | 3,121                |  
|                                               |                                                                         |                       |       |                      |  
|                                               | Total liabilities and equity                                            |                       | $     | 5,282                |  
|                                               |                                                                         |                       |       |                      |  

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

6

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MIRANT NORTH AMERICA, LLC AND SUBSIDIARIES  (Wholly-Owned Indirect Subsidiary of Mirant Corporation)        CONDENSED CONSOLIDATED STATEMENTS OF MEMBER'S EQUITY (UNAUDITED)        (in
millions)

|                            |                                                          | Member's Interest |       | Preferred Stock in Affiliate |  
|--------------------------- | -------------------------------------------------------- | ----------------- | ----- | ---------------------------- | -
|Balance, December 31, 2006  |                                                          | $                 | 3,685 |                              | $
|                            | Net income                                               |                   |       | 61                           |  
|                            | Amortization of discount on preferred stock in affiliate |                   |       | 10                           |  
|                            | Redemption of preferred stock in affiliate               |                   |       |                             |  
|                            | Distribution to member                                   |                   |       | (475                         | )
|                            | Settlement of member's obligations pursuant to the Plan  |                   |       | (18                          | )
|                            | Capital contribution pursuant to the Plan                |                   |       | 19                           |  
|                            | Adoption of FIN 48                                       |                   |       | 51                           |  
|                            | Effect of the Supplemental Plan                          |                   |       | 14                           |  
|                            |                                                          |                   |       |                              |  
|Balance, September 30, 2007 |                                                          | $                 | 3,347 |                              | $
|                            |                                                          |                   |       |                              |  

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

7

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MIRANT NORTH AMERICA, LLC AND SUBSIDIARIES  (Wholly-Owned Indirect Subsidiary of Mirant Corporation)        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

|                                                                                                             |                                              | Nine Months Ended September 30,          |                                                                               
|------------------------------------------------------------------------------------------------------------ | -------------------------------------------- | ---------------------------------------- | ------------------------------------------------------------------------------
|
|
|Cash Flows from Operating Activities:                                                                        |                                              |                                          |                                                                               
|Net income                                                                                                   |                                              | $                                        | 61                                                                            
|Loss from discontinued operations                                                                            |                                              |                                          | (2                                                                            
|                                                                                                             |                                              |                                          |                                                                               
|Income from continuing operations                                                                            |                                              |                                          | 63                                                                            
|                                                                                                             |                                              |                                          |                                                                               
|Adjustments to reconcile net income from continuing operations to net cash provided by operating activities: |                                              |                                          |                                                                               
|                                                                                                             | Depreciation and amortization                |                                          |                                                                               
|                                                                                                             | Impairment losses                            |                                          |                                                                               
|                                                                                                             | Gain on sales of assets and investments, net |                                          |                                                                               
|                                                                                                             | Price risk management activities, net        |                                          |                                                                               
|                                                                                                             | Other, net                                   |                                          |                                                                               
|                                                                                                             | Changes in operating assets and liabilities: |                                          |                                                                               
|                                                                                                             |                                              | Affiliate accounts receivable, net       |                                                                               
|                                                                                                             |                                              | Customer accounts receivable, net        |                                                                               
|                                                                                                             |                                              | Funds on deposit                         |                                                                               
|                                                                                                             |                                              | Prepaid rent                             |                                                                               
|                                                                                                             |                                              | Inventories                              |                                                                               
|                                                                                                             |                                              | Other assets                             |                                                                               
|                                                                                                             |                                              | Accounts payable and accrued liabilities |                                                                               
|                                                                                                             |                                              | Payable to affiliate                     |                                                                               
|                                                                                                             |                                              | Property taxes accrued                   |                                                                               
|                                                                                                             |                                              | Other liabilities                        |                                                                               
|                                                                                                             |                                              |                                          |                                                                               
|                                                                                                             |                                              |                                          | Total adjustments                                                             
|                                                                                                             |                                              |                                          |                                                                               
|                                                                                                             |                                              |                                          | Net cash provided by operating activities of continuing operations            
|                                                                                                             |                                              |                                          | Net cash provided by (used in) operating activities of discontinued operations
|                                                                                                             |                                              |                                          |                                                                               
|                                                                                                             |                                              |                                          | Net cash provided by operating activities                                     
|                                                                                                             |                                              |                                          |                                                                               
|Cash Flows from Investing Activities:                                                                        |                                              |                                          |                                                                               
|Capital expenditures                                                                                         |                                              |                                          | (380                                                                          
|Repayments (issuance) of notes receivable from affiliate, net                                                |                                              |                                          |                                                                              
|Proceeds from the sales of assets and other investments                                                      |                                              |                                          | 26                                                                            
|Property insurance proceeds                                                                                  |                                              |                                          | 3                                                                             
|                                                                                                             |                                              |                                          |                                                                               
|                                                                                                             |                                              |                                          | Net cash provided by (used in) investing activities of continuing operations  
|                                                                                                             |                                              |                                          | Net cash provided by (used in) investing activities of discontinued operations
|                                                                                                             |                                              |                                          |                                                                               
|                                                                                                             |                                              |                                          | Net cash provided by investing activities                                     
|                                                                                                             |                                              |                                          |                                                                               
|Cash Flows from Financing Activities:                                                                        |                                              |                                          |                                                                               
|Issuance (repayment) of debtaffiliate, net                                                                  |                                              |                                          | 7                                                                             
|Proceeds from issuance of long-term debtnonaffiliate                                                        |                                              |                                          |                                                                              
|Repayment of long-term debtnonaffiliate                                                                     |                                              |                                          | (138                                                                          
|Settlement of debt under the Plan                                                                            |                                              |                                          |                                                                              
|Debt issuance costs                                                                                          |                                              |                                          |                                                                              
|Redemption of preferred stock in affiliate                                                                   |                                              |                                          | 5                                                                             
|Payment to affiliate under the Plan                                                                          |                                              |                                          |                                                                              
|Distribution to member                                                                                       |                                              |                                          | (475                                                                          
|Settlement of member's obligations pursuant to the Plan                                                      |                                              |                                          | (18                                                                           
|                                                                                                             |                                              |                                          |                                                                               
|                                                                                                             |                                              |                                          | Net cash used in financing activities of continuing operations                
|                                                                                                             |                                              |                                          |                                                                               
|Net Increase in Cash and Cash Equivalents                                                                    |                                              |                                          | 193                                                                           
|Cash and Cash Equivalents, beginning of period                                                               |                                              |                                          | 750                                                                           
|Plus: Cash and Cash Equivalents in Assets Held for Sale, beginning of period                                 |                                              |                                          | 3                                                                             
|Less: Cash and Cash Equivalents in Assets Held for Sale, end of period                                       |                                              |                                          |                                                                              
|                                                                                                             |                                              |                                          |                                                                               
|Cash and Cash Equivalents, end of period                                                                     |                                              | $                                        | 946                                                                           
|                                                                                                             |                                              |                                          |                                                                               
|Supplemental Cash Flow Disclosures:                                                                          |                                              |                                          |                                                                               
|Cash paid for interest, net of amounts capitalized                                                           |                                              | $                                        | 89                                                                            
|Financing Activity:                                                                                          |                                              |                                          |                                                                               
|Effect of the Supplemental Plannon-cash                                                                     |                                              | $                                        | 14                                                                            
|Capital contribution pursuant to the Plannon-cash                                                           |                                              | $                                        | 19                                                                            

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

8

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MIRANT NORTH AMERICA, LLC AND SUBSIDIARIES        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A.    Description of Business

Mirant North America, a Delaware limited liability company, is a national independent power producer, a wholly-owned subsidiary of Mirant Americas Generation and
an indirect wholly-owned subsidiary of Mirant. Mirant North America's continuing operations generate revenues primarily through the production of electricity. Those operations consist of the
ownership, long-term lease and operation of 10,301 MW of power generation facilities located in markets in the Mid-Atlantic and Northeast regions and in California, and
energy trading and marketing operations based in Atlanta, Georgia.

On
May 1, 2007, the Company completed the sale of its Zeeland (903 MW) and Bosque (546 MW) natural gas-fired plants totaling 1,449 MW. In
addition, on May 7, 2007, the Company completed the sale of Mirant NY-Gen (121 MW), an indirect wholly-owned subsidiary. See Note C for additional information
regarding the accounting for these assets as discontinued operations.

On
November 9, 2007, Mirant announced a conclusion to the strategic review process it had announced on April 9, 2007. Mirant plans to return a total of $4.6 billion
of excess cash to its stockholders. The first stage of the return of cash will consist of an accelerated share repurchase program for $1 billion together with open market purchases for an
additional $1 billion. Mirant will determine how best to return additional cash upon completion of the accelerated share repurchase.

The
Company has a number of service agreements for labor and administrative services with Mirant Services. In addition, Mirant Energy Trading provides services to other Mirant affiliates
related to the
sale of electric power and the procurement of fuel and emissions allowances. See Note H to the unaudited condensed consolidated financial statements for further discussion of arrangements with
these related parties.

B.    Accounting and Reporting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Mirant North America and its wholly-owned subsidiaries have been prepared in accordance
with GAAP for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on
Form 10-K for the year ended December 31, 2006.

The
accompanying unaudited condensed consolidated financial statements include the accounts of Mirant North America and its wholly-owned subsidiaries and have been prepared from records
maintained by Mirant North America and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

In
accordance with SFAS No. 144, the results of operations of the Company's assets to be disposed of have been reclassified to discontinued operations, and the associated assets
and liabilities have been reclassified to assets and liabilities held for sale for all periods presented. Certain prior period amounts have been reclassified to conform to the current period financial
statement presentation.

9

---



Cash and Cash Equivalents

The Company considers all short-term investments with an original maturity of three months or less to be cash equivalents. At September 30,
2007, except for amounts held in bank accounts to cover current payables, all of the Company's cash and cash equivalents were invested in AAA-rated money market funds. During the fourth
quarter of 2007, the Company has transferred all of its cash investments into AAA-rated U.S. Treasury money market funds.

Capitalization of Interest Cost

Mirant North America capitalizes interest on projects during their construction period. The Company determines which debt instruments represent a reasonable
measure of the cost of financing construction assets in terms of interest cost incurred that otherwise could have been avoided. These debt instruments and associated interest costs are included in the
calculation of the weighted average interest rate used for determining the capitalization rate. Once placed in service, capitalized interest, as a component of the total cost of the plant, is
amortized over the estimated useful life of the plant. For the three and nine months ended September 30, 2007 and 2006, the Company incurred the following interest costs on debt to
nonaffiliates (in millions):

Three Months Ended September 30,

Nine Months Ended September 30,2007

2006

2007

2006Total interest costs

$
30

$
33

$
94

$
108Capitalized and included in property, plant and equipment, net


(6
)

(2
)

(16
)

(6
)Interest expensenonaffiliate

$
24

$
31

$
78

$
102


Recently Adopted Accounting Standards

On July 13, 2006, the FASB issued FIN 48, which clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial
statements in accordance with SFAS No. 109. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position
taken or expected to be taken in a tax return.

On
January 1, 2007, the Company adopted the provisions of FIN 48 for all uncertain tax positions. Only tax positions that met the
more-likely-than-not recognition threshold at the effective date were recognized or will continue to be recognized. The total effect of adopting FIN 48 was
an increase in member's interest of $51 million. See Note I for additional information on FIN 48.

On
May 2, 2007, the FASB issued FSP FIN 48-1, which amended FIN 48 to provide guidance on how an enterprise should determine whether a tax position is
effectively settled for the purpose of recognizing previously unrecognized tax benefits. In determining whether a tax position is effectively settled, companies are required to make the assessment on
a position-by-position basis; however, a company could conclude that all positions in a particular tax year are effectively settled. The Company's initial adoption of
FIN 48 on January 1, 2007, was consistent with the provisions of FSP FIN 48-1.

In
February 2006, the FASB issued SFAS No. 155, which allows fair value measurement for any hybrid financial instrument that contains an embedded derivative that otherwise
would require bifurcation. SFAS No. 155 is effective for all financial instruments acquired, issued or subject to a re-measurement event beginning in the first fiscal year after
September 15, 2006. At the date of adoption, any difference between the total carrying amount of the existing bifurcated hybrid financial instrument and the fair value of the combined hybrid
financial instrument will be recognized as a

10

---



cumulative
effect adjustment to beginning retained earnings. The Company adopted SFAS No. 155 on January 1, 2007. The adoption of SFAS No. 155 did not affect the Company's
statements of operations, financial position or cash flows.

On
June 28, 2006, the FASB ratified the EITF's consensus reached on EITF 06-3, which relates to the income statement presentation of taxes collected from
customers and remitted to government authorities. The Task Force affirmed as a consensus on this issue that the presentation of taxes on either a gross basis or a net basis within the scope of
EITF 06-3 is an accounting policy decision that should be disclosed pursuant to APB No. 22. A company should disclose the amount of those taxes that is recognized on a gross
basis in interim and annual financial statements for each period for which an income statement is presented if those amounts are significant. The Company adopted EITF 06-3 on
January 1, 2007. While the amounts are not material, the Company's policy is to present such taxes on a net basis in the consolidated statements of operations.

New Accounting Standards Not Yet Adopted

On September 15, 2006, the FASB issued SFAS No. 157, which establishes a framework for measuring fair value under GAAP and expands disclosure about
fair value measurement. SFAS No. 157 requires companies to disclose the fair value of their financial instruments according to a fair value hierarchy (i.e., levels 1, 2 and 3 as defined).
Additionally, companies are required to provide enhanced disclosure regarding fair value measurements in the level 3 category, including a reconciliation of the beginning and ending balances
separately for each major category of assets and liabilities accounted for at fair value. SFAS No. 157 is effective at the beginning of the first fiscal year after November 15, 2007. The
Company will adopt SFAS No. 157 on January 1, 2008, and as of that date, evaluate the fair value of its assets and liabilities according to the hierarchy established by the FASB and
present the required disclosures. It is also expected that the adoption of SFAS No. 157 will affect the measurement of certain liabilities by incorporating the Company's own credit standing and
the accounting for inception gains and losses currently being deferred under EITF 02-3. The net deferred inception gains and losses at September 30, 2007, were not material.

On
February 15, 2007, the FASB issued SFAS No. 159, which permits an entity to measure many financial instruments and certain other items at fair value by electing a fair
value option. Once elected, the fair value option may be applied on an instrument by instrument basis, is irrevocable and is applied only to entire instruments. SFAS No. 159 also requires
companies with trading and available-for-sale securities to report the unrealized gains and losses for which the fair value option has been elected within earnings for the
period presented. SFAS No. 159 is effective at the beginning of the first fiscal year after November 15, 2007. The Company will adopt SFAS No. 159 on January 1, 2008. The
Company does not expect the adoption of SFAS No. 159 to have a material effect on its statements of operations, financial position or cash flows.

On
April 30, 2007, the FASB issued FSP FIN 39-1, which amended FIN 39, to indicate that the following fair value amounts could be offset against each
other if certain conditions of FIN 39 are otherwise met: (a) those recognized for derivative instruments executed with the same counterparty under a master netting arrangement and
(b) those recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) arising from the same master netting arrangement as the
derivative instruments. In addition, a reporting entity is not precluded from offsetting the derivative instruments if it determines that the amount recognized upon payment or receipt of cash
collateral is not a fair value amount. FSP FIN 39-1 is effective at the beginning of the first fiscal year after November 15, 2007. The Company will adopt FSP
FIN 39-1 on January 1, 2008. The Company has not yet determined the potential effect of FSP FIN 39-1 on its statements of financial position.

11

---



C.    Dispositions

Assets and Liabilities Held for Sale

The Company had no assets or liabilities held for sale at September 30, 2007. Assets and liabilities held for sale at December 31, 2006, included
discontinued operations and other assets that the Company disposed of in 2007. In the third quarter of 2006, Mirant commenced auction processes to sell six of its U.S. natural gas-fired
assets, including the Company's Zeeland (903 MW) and Bosque (546 MW) plants. In addition, the Company sought to sell Mirant NY-Gen (121 MW).

The
sale of the Company's Zeeland and Bosque natural gas-fired plants was completed on May 1, 2007. The Company recognized a cumulative loss of $8 million
related to the sale. In the third quarter of 2006, the Company recorded an impairment loss of $71 million to reduce the carrying value of the assets held for sale to estimated fair value. In
subsequent periods, the Company recorded reductions to the impairment loss of approximately $63 million due to the results of the sale process. The net proceeds to the Company after transaction
costs were $524 million. In accordance with Mirant North America's debt covenants, the proceeds from the sale of the Zeeland and Bosque natural gas-fired plants are being reinvested
in the Company.

The
Company completed the sale of Mirant NY-Gen on May 7, 2007, and recognized a gain of $8 million.

At
December 31, 2006, assets and liabilities held for sale consisted of the assets discussed above and certain ancillary equipment included in the sale of the Zeeland and Bosque
natural gas-fired plants.

The
table below presents the components of the balance sheet accounts classified as assets and liabilities held for sale (in millions):

At December 31, 2006Current Assets

$
27Property, Plant and Equipment


505Total Assets

$
532Current Liabilities

$
14Noncurrent Liabilities


15Total Liabilities

$
29


Discontinued Operations

The Company has reclassified amounts for prior periods in the financial statements to report separately, as discontinued operations, the revenues and expenses of
components of the Company that have been disposed of as of September 30, 2007.

For
the nine months ended September 30, 2007 and the three and nine months ended September 30, 2006, income from discontinued operations included the results of operations
of the Zeeland and Bosque natural gas-fired plants and Mirant NY-Gen through their respective dates of sale described above.

12

---



The
following summarizes certain financial information of the assets reported as discontinued operations (in millions):

Three Months Ended September 30,

Nine Months Ended September 30,2007

2006

2007

2006Operating revenues

$


$
29

$
10

$
59Operating expenses(1)


1


89


11


119Operating loss


(1
)

(60
)

(1
)

(60
)Other expense (income), net


(1
)




1


1Net loss

$


$
(60
)
$
(2
)
$
(61
)


---

D.    Impairments on Assets Held and Used

In accordance with SFAS No. 144, an asset classified as held and used shall be tested for recoverability whenever events or changes in circumstances
indicate that the carrying amount of the asset may not be recoverable. An asset impairment charge must be recognized if the sum of the undiscounted expected future cash flows from a
long-lived asset is less than the carrying value of that asset. The amount of any impairment charge is calculated as the excess of the carrying value of the asset over its fair value. Fair
value is estimated based on the discounted future cash flows from that asset or determined by other valuation techniques.

Nine Months Ended September 30, 2007

Background

The Mirant Lovett generation facility in New York has been in ongoing discussions with the NYSDEC and the New York State Office of the Attorney
General regarding environmental controls. Under the terms of a consent decree dated June 11, 2003 (the "2003 Consent Decree"), Mirant Lovett was required to install certain environmental
controls on unit 5 of the Lovett facility, convert unit 5 to operate exclusively on natural gas, or discontinue operation of unit 5 by April 30, 2007. The 2003 Consent
Decree also required that certain environmental controls be installed on unit 4 by April 30, 2008, or operation of unit 4 had to be discontinued.

On
September 19, 2006, Mirant Lovett sought Bankruptcy Court approval to discontinue operation of units 3 and 5 of the Lovett generation facility if an alternative
environmental compliance mechanism for environmental controls agreeable to the State of New York was not approved by April 30, 2007. On
October 18, 2006, the Bankruptcy Court approved the Company's request. On October 19, 2006, Mirant Lovett submitted notices of its intent to discontinue operations of units 3 and
5 of the Lovett facility on April 30, 2007, to the New York Public Service Commission, NYISO, Orange and Rockland and several other affected transmission and distribution utilities in
New York.

On
April 30, 2007 and May 7, 2007, Mirant Lovett entered into two tolling agreements with the New York State Office of the Attorney General and the NYSDEC to allow
the operation of unit 5 to continue on coal until May 14, 2007, while the parties sought to reach agreement on an amendment to the 2003 Consent Decree. The second tolling agreement also
required the temporary suspension of operation of unit 4. Mirant Lovett advised the New York Public Service Commission, the NYISO, Orange and Rockland and other potentially affected
transmission and distribution companies in New York of the changes in expected operating status of units 4 and 5.

13

---



On
May 10, 2007, Mirant Lovett entered into an amendment to the 2003 Consent Decree with the State of New York that switched the deadlines for shutting down units 4
and 5 so that the deadline for compliance by unit 5 was extended until April 30, 2008, and the deadline for unit 4 was shortened. Unit 4 discontinued operation as of May 7,
2007. In addition, unit 3 discontinued operation because it is uneconomic for the unit to continue to run. On May 8, 2007, Mirant New York, Mirant Lovett, Mirant Bowline and
Hudson Valley Gas also entered into an agreement (the "Tax Assessments Agreement") with the Town of Stony Point, the Town of Haverstraw and the Village of Haverstraw to set the assessed values for the
Lovett and Bowline facilities and the pipeline owned by Hudson Valley Gas for 2007 and 2008 for property tax purposes at the values established for 2006 under a settlement agreement entered into by
the Mirant entities and those taxing authorities in December 2006. The Bankruptcy Court approved the amendment to the 2003 Consent Decree and the Tax Assessments Agreement on May 10,
2007. The amendment to the 2003 Consent Decree was approved by the United States District Court for the Southern District of New York on May 11, 2007. On October 20, 2007, Mirant
Lovett submitted notices of its intent to discontinue operations of unit 5 of the Lovett generation facility as of midnight on April 19, 2008, to the New York Public Service
Commission, the NYISO, Orange and Rockland and several other potentially affected transmission and distribution companies in New York.

In
its impairment analysis of the Lovett generation facility in prior periods, the Company assumed multiple scenarios, including the operation of all units of the Lovett facility beyond
April 2008. Entering into the amendment to the 2003 Consent Decree and the Tax Assessments Agreement prompted management to test for recoverability of the Lovett facility under SFAS
No. 144 in the second quarter of 2007.

Assumptions and Results

The Company's assessment of Lovett under SFAS No. 144 in the second quarter of 2007 involved developing two scenarios for the future expected operation of
the Lovett facility. The first scenario considered was the shutdown of unit 5 by April 30, 2008, in accordance with the amendment to the 2003 Consent Decree. The Company also considered
a second scenario that assumed operation of unit 5, utilizing coal as the primary fuel source, through 2012 to allow the Lovett facility to continue to contribute to the reliability of the electric
system of the State of New York. Property taxes under both scenarios were assumed at the assessed levels specified in the Tax Assessments Agreement for those periods. Additionally, both
scenarios included an estimated cost for demolition of the facility to reduce future property taxes, a value for the land on which the facility operates and the sale of previously granted emissions
allowances for periods beyond the shutdown date. For purposes of measuring an impairment loss, a long-lived asset or assets must be grouped at the lowest level of independent identifiable
cash flows. All of the units at Mirant Lovett are viewed as one group. As required under SFAS No. 144, the assessment did not include the value of new generation capacity that could potentially
be constructed at the current Lovett facility site.

As
a result of this assessment, in the second quarter of 2007, the Company recorded an impairment loss of $175 million to reduce the carrying value of the Lovett facility to its
estimated fair value. The carrying value of the Lovett facility prior to the impairment was approximately $185 million. The remaining depreciable life for the Lovett facility was also adjusted
to April 30, 2008, based on the high likelihood of a shutdown of unit 5 on that date.

Three and Nine Months Ended September 30, 2006

In 2006, the Company's assessment of the Bowline unit 3 suspended construction project resulted in the conclusion that the Bowline 3 project as
configured and permitted was not economically viable. As a result of this conclusion, the Company determined the estimated value of the equipment and project termination liabilities. At
September 30, 2006, the carrying value of the development and

14

---



construction
costs for Bowline unit 3 exceeded the estimated undiscounted cash flows from the abandonment of the project. The Company recorded an impairment of $118 million, which is
reflected in impairment losses on the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2006.

E.    Price Risk Management Assets and Liabilities

The fair values of the Company's price risk management assets and liabilities, net of credit reserves, at September 30, 2007 and December 31, 2006,
were as follows (in millions):

At September 30, 2007Assets

LiabilitiesCurrent

Noncurrent

Current

Noncurrent

Net Fair ValueElectricity

$
277

$
36

$
(185
)
$
(68
)
$
60Natural Gas


6


1


(9
)




(2
)Oil


39


14


(77
)

(11
)

(35
)Coal


3





(1
)




2Other, including credit reserves


(2
)










(2
)Total

$
323

$
51

$
(272
)
$
(79
)
$
23At December 31, 2006Assets

LiabilitiesCurrent

Noncurrent

Current

Noncurrent

Net Fair ValueElectricity

$
619

$
104

$
(260
)
$
(12
)
$
451Natural Gas


21


1


(26
)

(2
)

(6
)Oil


83





(10
)

(29
)

44Coal


13





(3
)




10Other, including credit reserves


(5
)










(5
)Total

$
731

$
105

$
(299
)
$
(43
)
$
494


The following table represents the net price risk management assets and liabilities by tenor (in millions):

At September 30, 20072007

$
662008


92009


(33
)2010


(18
)Thereafter


(1
)Net assets (liabilities)

$
23


The volumetric weighted average maturity, or weighted average tenor, of the price risk management portfolio at September 30, 2007, was approximately
12 months. The net notional amount of the price risk management assets and liabilities at September 30, 2007, was a net short position of approximately 28 million equivalent MWh.

15

---



The
following table provides a summary of the factors affecting the change in net fair value of the price risk management asset and liability accounts for the nine months ended
September 30, 2007 (in millions):

Proprietary Trading and Fuel Oil Management

Asset Management

TotalNet fair value of portfolio at December 31, 2006

$
106

$
388

$
494Changes in fair value, net


(27
)

(89
)

(116
)Contracts settled during the period, net


(84
)

(271
)

(355
)Net fair value of portfolio at September 30, 2007

$
(5
)
$
28

$
23


F.     Debt

Long-term debt was as follows (in millions):

|                                        |                                                    | At September 30, 2007 |      | At December 31, 2006 |  | Interest Rate |       | Secured/Unsecured
|--------------------------------------- | -------------------------------------------------- | --------------------- | ---- | -------------------- |  | ------------- | ----- | -----------------
|Long-term debt:                         |                                                    |                       |      |                      |  |               |       |                  
|Mirant North America:                   |                                                    |                       |      |                      |  |               |       |                  
|                                        | Term loan, due 2007 to 2013                        |                       | $    | 556                  |  | $             | 693   |                  
|                                        | Notes, due 2013                                    |                       |      | 850                  |  |               | 850   |                  
|                                        | Mirant Chalk Point capital lease, due 2007 to 2015 |                       |      | 32                   |  |               | 33    |                  
|                                        |                                                    |                       |      |                      |  |               |       |                  
|                                        | Total                                              |                       |      | 1,438                |  |               | 1,576 |                  
|Less: current portion of long-term debt |                                                    |                       | (109 | )                    |  | (141          | )     |                  
|                                        |                                                    |                       |      |                      |  |               |       |                  
|                                        | Total long-term debt, excluding current portion    |                       | $    | 1,329                |  | $             | 1,435 |                  
|                                        |                                                    |                       |      |                      |  |               |       |                  

Senior Secured Credit Facilities

Mirant North America entered into senior secured credit facilities in January 2006, which are comprised of an $800 million six-year
senior secured revolving credit facility and a $700 million seven-year senior secured term loan. At the closing, $200 million drawn under the senior secured term loan was
deposited into a cash collateral account to support the issuance of up to $200 million of letters of credit. As of September 30, 2007, there were approximately $198 million of
letters of credit outstanding under the senior secured term loan and $76 million of letters of credit outstanding under the senior secured revolving credit facility. At September 30,
2007, $724 million was available under the senior secured revolving credit facility for cash draws or for the issuance of letters of credit.

In
addition to the quarterly installments, Mirant North America is required to prepay a portion of the outstanding senior secured term loan principal balance once a year. The prepayment
is based on an adjusted EBITDA calculation that determines excess free cash flows, as defined in the loan agreement. On March 20, 2007, the Company made a mandatory principal prepayment of
approximately $131 million on the term loan. Based on projections for 2007, the current estimate of the mandatory principal prepayment of the term loan in March 2008 is approximately
$99 million. This amount has been reclassified from long-term debt to current portion of long-term debt at September 30, 2007.

16

---



G.    Bankruptcy Related Disclosures

The Company's New York subsidiaries, Mirant New York, Mirant Bowline, Mirant Lovett, Hudson Valley Gas and Mirant NY-Gen, remained in
bankruptcy at December 31, 2006. On January 26, 2007, Mirant New York, Mirant Bowline and Hudson Valley Gas (collectively the "Emerging New York Entities") filed a Supplemental
Joint Chapter 11 Plan of Reorganization with the Bankruptcy Court and subsequently filed amendments to that plan (as subsequently amended, the "Supplemental Plan"). The Supplemental Plan was
confirmed by the Bankruptcy Court on March 23, 2007, and became effective on April 16, 2007, resulting in the Emerging New York Entities' emergence from bankruptcy. For financial
statement presentation purposes, the effects of the Supplemental Plan were recorded on March 31, 2007.

On
January 31, 2007, Mirant New York entered into an agreement with Alliance Energy Renewables, LLC for the sale of Mirant NY-Gen, which owns the
Hillburn and Shoemaker gas turbine facilities and the Swinging Bridge, Rio and Mongaup hydroelectric generating facilities. The sale closed on May 7, 2007, and the Company recognized a gain of
$8 million. Mirant NY-Gen emerged from bankruptcy under a plan of reorganization that incorporated the sale and was approved by the Bankruptcy Court on April 27, 2007.

On
July 13, 2007, Mirant Lovett filed a plan of reorganization (the "Mirant Lovett Plan") with the U.S. Bankruptcy Court in Texas. The Mirant Lovett Plan was confirmed by the
Bankruptcy Court on September 19, 2007, and became effective on October 2, 2007, resulting in Mirant Lovett's emergence from bankruptcy and payment of claims of approximately
$2 million in October 2007. For financial statement presentation purposes, the effects of the Mirant Lovett Plan were recorded on September 30, 2007. As a result of Mirant
Lovett's emergence, Mirant has no subsidiaries that remain in bankruptcy. See Note LLitigation and Other Contingenciesfor further
discussion regarding Mirant Lovett's emergence from bankruptcy.

H.    Related Party Arrangements and Transactions

Management, Personnel and Services Agreement with Mirant Services

Mirant Services provides the Company with various management, personnel and other services. The Company reimburses Mirant Services for amounts equal to Mirant
Services' direct costs of providing such services.

The
total costs incurred under the Management, Personnel and Services Agreement with Mirant Services have been included in the accompanying unaudited condensed consolidated statements of
operations as follows (in millions):

For the Three Months Ended September 30,

For the Nine Months Ended September 30,2007

2006

2007

2006Cost of fuel, electricity and other productsaffiliate

$
2

$
3

$
6

$
7Operations and maintenance expenseaffiliate


40


38


117


114Total

$
42

$
41

$
123

$
121


Services and Risk Management Agreements with Affiliates

Historically, the Company provided energy marketing and fuel procurement services through Mirant Energy Trading to the following affiliates: Mirant Las Vegas,
Mirant Sugar Creek, Shady Hills, West Georgia and Mirant Wichita Falls. Mirant Wichita Falls was sold by Mirant in the second quarter of 2006. On May 1, 2007, Mirant completed the sale of the
other four affiliates. For the nine months

17

---



ended
September 30, 2007, the Company recorded a reduction to operations and maintenance of $1 million related to these agreements. For the three and nine months ended
September 30, 2006, the Company recorded a reduction to operations and maintenance of $1 million and $4 million, respectively, related to these agreements. Subsequent to the sale
of these affiliates, the Company no longer recognizes a reduction to operations and maintenance associated with providing services to these affiliates.

Administration Arrangements with Mirant Services

Substantially all of Mirant's corporate overhead costs are allocated to Mirant's operating subsidiaries. For the three and nine months ended September 30,
2007, the Company incurred approximately $36 million and $89 million, respectively, compared to $35 million and $100 million, respectively, for the same periods in 2006, in
costs under these arrangements, which are included in operations and maintenanceaffiliate in the accompanying unaudited condensed consolidated statements of operations.

The
Company's allocation of Mirant's overhead costs has increased as a result of the recent disposition of Mirant's Philippine and Caribbean businesses and six U.S. natural
gas-fired plants.

Notes Receivable from Affiliate and Notes Payable to Affiliate

During the pendency of the Chapter 11 proceedings, Mirant and certain of its subsidiaries participated in an intercompany cash management program whereby
cash balances at Mirant and the participating subsidiaries were transferred to central concentration accounts to fund working capital and other needs. At September 30, 2007 and
December 31, 2006, the Company had current notes receivable from Mirant Americas Generation of $93 million and $125 million, respectively, related to the intercompany cash
management program. For the three and nine months ended September 30, 2007 and 2006, the Company earned $1 million and $4 million, respectively, of interest income related to the
notes
receivable, which is recorded in interest incomeaffiliate in the accompanying unaudited condensed consolidated statements of operations. At September 30, 2007 and
December 31, 2006, the Company had current notes payable to affiliate of $19 million and $27 million, respectively. For the nine months ended September 30, 2007, the
Company incurred interest expenseaffiliate of $1 million related to the notes payable. For the three and nine months ended September 30, 2006, the Company incurred interest
expenseaffiliate of $1 million related to the notes payable.

Payable to Mirant Americas Pursuant to the Plan

Pursuant to the Plan, Mirant North America was required to pay $250 million to Mirant Americas within five days of the effective date of the Plan in return
for Mirant's contribution of its interest in the following: Mirant Americas Energy Marketing, Mirant Americas Development, Inc., Mirant Americas Production Company, Mirant Americas Energy
Capital, LLC, Mirant Americas Energy Capital Assets, LLC, Mirant Americas Development Capital, LLC, Mirant Americas Retail Energy Marketing, LP, and Mirant Americas Gas
Marketing, I-XV, LLCs. This amount was paid in January 2006.

Mirant Letters of Credit

Mirant posted pre-petition letters of credit and a guarantee on behalf of Mirant Mid-Atlantic to provide for the rent payment reserve
required in connection with Mirant Mid-Atlantic's lease obligations in the event that it was unable to pay its lease payment obligations. On January 3, 2006, as part of the
settlement and the Company's emergence from bankruptcy, Mirant North America posted a $75 million letter of credit for the benefit of Mirant Mid-Atlantic to cover rent payment
reserve

18

---



obligations
on Mirant Mid-Atlantic's leases. Upon the posting of the letter of credit, the trustee returned $56 million of cash collateral to Mirant Mid-Atlantic.

Mirant
posted a post-petition letter of credit in the amount of $5 million on behalf of Mirant Texas, LP ("Mirant Texas") as of December 31, 2004,
related to a tolling agreement. This post-petition letter of credit was set to expire in January 2006. Upon emergence from bankruptcy, Mirant North America replaced this
post-petition letter of credit with a letter of credit issued under its senior secured credit facilities. The letter of credit expired in February 2007.

Prior
to 2005, Mirant entered into pre-petition letters of credit to support the Company's asset management activities. In September 2005, several of these letters of
credit were drawn in the amount of $39 million. In January 2006, the remaining pre-petition letter of credit of $7 million was drawn in full. In addition, Mirant
entered into post-petition letters of credit to support its asset management activities. In January 2006, letters of credit from the Mirant North America senior secured credit
facilities replaced the eleven post-petition letters of credit outstanding at December 31, 2005.

Preferred Stock in Mirant Americas

Mirant Americas issued mandatorily redeemable Series A preferred shares to Mirant Mid-Atlantic for the purpose of funding future environmental
capital expenditures. For the nine months ended September 30, 2007, the Company recorded $10 million in preferred stock in affiliate and member's interest in the unaudited condensed
consolidated balance sheet related to the amortization of the discount on the preferred stock in Mirant Americas.

The
Series A preferred shares issued by Mirant Americas are mandatorily redeemable by Mirant Americas at various dates. On June 30, 2007, Mirant Americas was required to
redeem $5 million in preferred stock held by Mirant Mid-Atlantic, which was completed on July 2, 2007.

Debtor-in-Possession Financing for New York Subsidiaries

Mirant North America and Mirant Americas Energy Marketing, (the "Primary DIP Lenders") entered into an agreement (the "Primary New York DIP Agreement") to
make secured debtor-in-possession financing in an amount of (i) $20 million, plus (ii) an amount equal to the amount of credit support provided on behalf
of Mirant New York, Mirant Bowline, Mirant Lovett and Hudson Valley Gas (collectively, the "New York DIP Borrowers"), to the extent such amounts were collateralized with cash or cash
equivalents by the New York DIP Borrowers. The New York DIP Borrowers had posted $21 million cash collateral with Mirant Energy Trading (successor to Mirant Americas Energy
Marketing) in accordance with the March 31, 2007, collateral allocation performed in good faith by Mirant Energy Trading. This cash collateral amount was returned to the New York DIP
Borrowers, and the Primary New York DIP Agreements were terminated in conjunction with the Emerging New York Entities' emergence from bankruptcy on April 16, 2007.

The
Bankruptcy Court approved a debtor-in-possession loan to Mirant NY-Gen from Mirant Americas under which Mirant Americas, subject to certain
conditions, would lend up to $16.5 million to Mirant NY-Gen to provide funding for the repairs on the Swinging Bridge dam. When Mirant NY-Gen emerged from bankruptcy and
was sold on May 7, 2007, all claims held by Mirant NY-Gen were assigned to Mirant
Americas, Mirant Americas released all of its claims and liens against Mirant NY-Gen, and this loan was cancelled.

On
April 18, 2007, a new debtor-in-possession agreement was established between Mirant Lovett and Mirant Americas to make secured
debtor-in-possession financing in an amount of $20 million. At September 30, 2007, there were no amounts outstanding under this loan. In addition, Mirant Lovett
was required to post cash collateral with Mirant Energy Trading to collateralize Mirant Energy Trading for collateral that Mirant Energy Trading has posted on Mirant Lovett's behalf. At
September 30, 2007,

19

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Mirant
Lovett was not required to post any collateral with Mirant Energy Trading in accordance with the September 15, 2007, collateral allocation performed in good faith by Mirant Energy
Trading. The debtor-in-possession agreement was terminated in conjunction with Lovett's emergence from bankruptcy on October 2, 2007.

I.     Income Taxes

The Company is a limited liability company treated as a branch of Mirant Americas for income tax purposes. As a result, Mirant Americas and Mirant have direct
liability for the majority of the federal and state income taxes relating to the Company's operations. Through December 31, 2005, the Company has allocated current and deferred income taxes to
each regarded corporate member entity of our consolidated group as if each regarded corporate entity member were a single tax payer utilizing the asset and liability method to account for income taxes
except with respect to recognizing certain current period tax benefits. Specifically, the Company did not record current period tax benefits on each regarded corporate entity's ability to carry back
its separate company current year net operating loss as realization of such losses were dependent on reimbursements from Mirant, which were at Mirant's discretion under the tax sharing agreement.

Several
significant changes to the Company's tax posture occurred as a result of the Plan, including the conversion of certain of the Company's regarded corporate entities to limited
liability companies coupled with the liquidation and/or merger of these regarded corporate entities into other disregarded corporate entities for income tax purposes, and certain partnerships owned by
the regarded corporate entities were also liquidated and now form part of these disregarded entities for income tax purposes. The result eliminates the Company's recording of tax expense and benefit
beginning January 1, 2006, with respect to the liquidated regarded corporate entities. Furthermore, with respect to those liquidated regarded corporate entities, all previously existing
deferred tax assets and liabilities were eliminated as of December 31, 2005. In May 2007, Mirant New York, Inc. was converted to a limited liability company, resulting in the
elimination of any existing deferred tax assets and liabilities related to Mirant New York.

Certain
of the Company's other subsidiaries continue to exist as regarded corporate entities for income tax purposes. For those corporate regarded entities, the Company allocates current
and deferred income taxes to each regarded corporate entity as if such entity were a single taxpayer utilizing the asset and liability method to account for income taxes. To the extent the Company
provides tax expense or benefit, any related tax payable or receivable to Mirant is reclassified to equity in the same period.

The
Company adopted the provisions of FIN 48 on January 1, 2007. Prior to adoption of FIN 48, the Company recognized contingent liabilities related to tax
uncertainties when it was probable that a loss had occurred and the loss or range of loss could be reasonably estimated. The recognition of contingent losses for tax uncertainties required management
to make significant assumptions about the expected outcomes of certain tax contingencies. Upon adoption of FIN 48, the Company changed its method to recognize only liabilities for uncertain tax
positions that are less than or subject to the measurement threshold of the more-likely-than-not standard. As a result of the implementation of FIN 48, for
continuing operations the Company recognized a decrease in accrued liabilities of approximately $51 million. The additional tax benefit resulted in an increase of the same amount to member's
interest. The unrecognized tax benefit as a result of adopting FIN 48 is an insignificant amount and would not materially affect the Company's effective tax rate if it were to be recognized.
The Company does not currently anticipate any significant changes to the amount of the unrecognized tax benefit absent changes in judgment about the realizability of its recognized or unrecognized tax
benefits. The Company's tax provision continues to include the accrual for any penalties and interest subsequent to its adoption of FIN 48.

20

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The
amount and ultimate utilization of the Company's remaining NOLs and pro forma NOLs will depend on several factors, including the Company's future financial performance and certain
tax elections. At December 31, 2006, Mirant considered it to be more likely than not that it would elect treatment under §382(l)(5). As a result of further tax planning, Mirant made
the decision to elect §382(l)(6) in its 2006 income tax return that was filed on September 15, 2007. As a result, the recorded deferred income tax items and pro forma deferred
income tax items, including pre-emergence NOLs and pro forma NOLs, are presented in accordance with the §382(l)(6) treatment at September 30, 2007. This change had no
net effect on the consolidated balance sheets or consolidated statements of operations. Similarly, this change had no net effect on the Company's pro forma deferred tax items or pro forma income tax
because the increase in the pro forma deferred tax asset NOLs was equally offset by an increase in the related pro forma deferred tax asset valuation allowance.

Under
§382(l)(6), the Company will be subject to an annual limitation on the use of the pre-emergence NOLs and pro forma NOLs including the effect of net
unrealized built-in gains. The pro forma NOLs under this election will not be subject to any previous adjustments for interest accrued on debt settled with Mirant stock as required under
§382(l)(5). The Company has elected in its 2006 tax return to reduce the income tax basis of depreciable assets for any cancellation of debt income that arises from making the
§382(l)(6) election.

SFAS
No. 109 requires that a valuation allowance be established when it is more-likely-than-not that all or a portion of a deferred tax asset
will not be realized. The establishment of a valuation allowance requires significant judgment as to a company's ability to generate taxable income during future periods in which temporary differences
are expected to be deductible. In making this determination, management considers all available positive and negative evidence affecting specific deferred tax assets, including its past and
anticipated future performance, the reversal of deferred tax liabilities and the implementation of tax planning strategies. The Company continues to maintain its valuation allowance against its
deferred tax assets. As such, the Company's deferred tax assets reduced by the valuation allowance are completely offset with its deferred tax liabilities.

If
the Company were to be allocated income taxes attributable to its operations, pro forma income tax expense attributable to income before tax would be $5 million and
$15 million, for the three and nine months ended September 30, 2007, respectively, compared to $1 million and $3 million for the same periods in 2006. The pro forma balance
of the Company's deferred income taxes would be zero as of September 30, 2007. The pro forma increase in tax benefits that would have been recognized upon adoption of FIN 48 is
$86 million. The pro forma unrecognized tax benefit as a result of adopting FIN 48 is an insignificant amount and would not materially affect the Company's pro forma effective tax rate
if it were recognized.

21

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J.     Segment Reporting

The Company has four operating segments: Mid-Atlantic, Northeast, California and Other Operations. Other Operations includes proprietary trading and
fuel oil management. In the following tables, eliminations are primarily related to intercompany sales of emissions allowances and interest on intercompany notes receivable and notes payable.

Operating Segments

|                                                            |                                                    | Mid-Atlantic |       | Northeast |   | California |     | Other Operations |     | Eliminations |   | Total |    
|----------------------------------------------------------- | -------------------------------------------------- | ------------ | ----- | --------- | - | ---------- | --- | ---------------- | --- | ------------ | - | ----- | ---
|
|Three Months Ended September 30, 2007:                      |                                                    |              |       |           |   |            |     |                  |     |              |   |       |    
|Operating revenuesaffiliate                                |                                                    | $            | 538   |           | $ | 186        |     | $                | 8   |              | $ | 73    |    
|Operating revenuesnonaffiliate                             |                                                    |              | 4     |           |   | 3          |     |                  | 37  |              |   | 735   |    
|                                                            |                                                    |              |       |           |   |            |     |                  |     |              |   |       |    
|                                                            | Total operating revenues                           |              |       | 542       |   |            | 189 |                  |     | 45           |   |       | 808
|                                                            |                                                    |              |       |           |   |            |     |                  |     |              |   |       |    
|Cost of fuel, electricity and other productsaffiliate      |                                                    |              | 113   |           |   | 47         |     |                  | 9   |              |   | 639   |    
|Cost of fuel, electricity and other productsnonaffiliate   |                                                    |              | 54    |           |   | 71         |     |                  | 1   |              |   | 163   |    
|                                                            |                                                    |              |       |           |   |            |     |                  |     |              |   |       |    
|                                                            | Total cost of fuel, electricity and other products |              |       | 167       |   |            | 118 |                  |     | 10           |   |       | 802
|                                                            |                                                    |              |       |           |   |            |     |                  |     |              |   |       |    
|Gross Margin                                                |                                                    |              | 375   |           |   | 71         |     |                  | 35  |              |   | 6     |    
|                                                            |                                                    |              |       |           |   |            |     |                  |     |              |   |       |    
|Operating Expenses:                                         |                                                    |              |       |           |   |            |     |                  |     |              |   |       |    
|                                                            | Operations and maintenanceaffiliate               |              |       | 39        |   |            | 21  |                  |     | 11           |   |       | 5  
|                                                            | Operations and maintenancenonaffiliate            |              |       | 52        |   |            | 25  |                  |     | 7            |   |       | (1 
|                                                            | Depreciation and amortization                      |              |       | 21        |   |            | 6   |                  |     | 3            |   |       |   
|                                                            |                                                    |              |       |           |   |            |     |                  |     |              |   |       |    
|Total operating expenses                                    |                                                    |              | 112   |           |   | 52         |     |                  | 21  |              |   | 4     |    
|                                                            |                                                    |              |       |           |   |            |     |                  |     |              |   |       |    
|Operating income                                            |                                                    |              | 263   |           |   | 19         |     |                  | 14  |              |   | 2     |    
|Total other expense (income), net                           |                                                    |              | (1    | )         |   |           |     |                  |    |              |   | 6     |    
|                                                            |                                                    |              |       |           |   |            |     |                  |     |              |   |       |    
|Income (loss) from continuing operations                    |                                                    | $            | 264   |           | $ | 19         |     | $                | 14  |              | $ | (4    | )  
|                                                            |                                                    |              |       |           |   |            |     |                  |     |              |   |       |    
|Total assets of continuing operations at September 30, 2007 |                                                    | $            | 3,702 |           | $ | 623        |     | $                | 195 |              | $ | 1,780 |    
|                                                            |                                                    |              |       |           |   |            |     |                  |     |              |   |       |    

22

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Operating Segments

|                                                                     |                                                    | Mid-Atlantic |       | Northeast |   | California |     | Other Operations |     | Eliminations |   | Total |      
|-------------------------------------------------------------------- | -------------------------------------------------- | ------------ | ----- | --------- | - | ---------- | --- | ---------------- | --- | ------------ | - | ----- | -----
|
|Nine Months Ended September 30, 2007:                                |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|Operating revenuesaffiliate                                         |                                                    | $            | 1,040 |           | $ | 502        |     | $                | 23  |              | $ | 498   |      
|Operating revenuesnonaffiliate                                      |                                                    |              | (151  | )         |   | 11         |     |                  | 107 |              |   | 1,614 |      
|                                                                     |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|                                                                     | Total operating revenues                           |              |       | 889       |   |            | 513 |                  |     | 130          |   |       | 2,112
|                                                                     |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|Cost of fuel, electricity and other productsaffiliate               |                                                    |              | 284   |           |   | 117        |     |                  | 31  |              |   | 1,628 |      
|Cost of fuel, electricity and other productsnonaffiliate            |                                                    |              | 120   |           |   | 214        |     |                  | 1   |              |   | 456   |      
|                                                                     |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|                                                                     | Total cost of fuel, electricity and other products |              |       | 404       |   |            | 331 |                  |     | 32           |   |       | 2,084
|                                                                     |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|Gross Margin                                                         |                                                    |              | 485   |           |   | 182        |     |                  | 98  |              |   | 28    |      
|                                                                     |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|Operating Expenses:                                                  |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|                                                                     | Operations and maintenanceaffiliate               |              |       | 105       |   |            | 57  |                  |     | 29           |   |       | 14   
|                                                                     | Operations and maintenancenonaffiliate            |              |       | 160       |   |            | 81  |                  |     | 25           |   |       |     
|                                                                     | Depreciation and amortization                      |              |       | 60        |   |            | 19  |                  |     | 10           |   |       |     
|                                                                     | Impairment losses                                  |              |       |          |   |            | 175 |                  |     |             |   |       |     
|                                                                     | Gain on sales of assets, net                       |              |       | (2        | ) |            | (25 | )                |     | (2           | ) |       |     
|                                                                     |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|                                                                     | Total operating expenses                           |              |       | 323       |   |            | 307 |                  |     | 62           |   |       | 14   
|                                                                     |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|Operating income (loss)                                              |                                                    |              | 162   |           |   | (125       | )   |                  | 36  |              |   | 14    |      
|                                                                     |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|Total other expense (income), net                                    |                                                    |              | (4    | )         |   | (6         | )   |                  | (5  | )            |   | 45    |      
|                                                                     |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|Income (loss) from continuing operations before reorganization items |                                                    |              | 166   |           |   | (119       | )   |                  | 41  |              |   | (31   | )    
|Reorganization items, net                                            |                                                    |              |      |           |   | (2         | )   |                  |    |              |   |      |      
|                                                                     |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|Income (loss) from continuing operations                             |                                                    | $            | 166   |           | $ | (117       | )   | $                | 41  |              | $ | (31   | )    
|                                                                     |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|Total assets of continuing operations at September 30, 2007          |                                                    | $            | 3,702 |           | $ | 623        |     | $                | 195 |              | $ | 1,780 |      
|                                                                     |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      

23

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Operating Segments

|                                                             |                                                    | Mid-Atlantic |       | Northeast |   | California |     | Other Operations |     | Eliminations |   | Total |      
|------------------------------------------------------------ | -------------------------------------------------- | ------------ | ----- | --------- | - | ---------- | --- | ---------------- | --- | ------------ | - | ----- | -----
|
|Three Months Ended September 30, 2006:                       |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|Operating revenuesaffiliate                                 |                                                    | $            | 546   |           | $ | 210        |     | $                | 22  |              | $ | 168   |      
|Operating revenuesnonaffiliate                              |                                                    |              | 97    |           |   | (2         | )   |                  | 34  |              |   | 890   |      
|                                                             |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|                                                             | Total operating revenues                           |              |       | 643       |   |            | 208 |                  |     | 56           |   |       | 1,058
|                                                             |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|Cost of fuel, electricity and other productsaffiliate       |                                                    |              | 183   |           |   | 107        |     |                  | 16  |              |   | 673   |      
|Cost of fuel, electricity and other productsnonaffiliate    |                                                    |              | 7     |           |   | 21         |     |                  |    |              |   | 347   |      
|                                                             |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|                                                             | Total cost of fuel, electricity and other products |              |       | 190       |   |            | 128 |                  |     | 16           |   |       | 1,020
|                                                             |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|Gross Margin                                                 |                                                    |              | 453   |           |   | 80         |     |                  | 40  |              |   | 38    |      
|                                                             |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|Operating Expenses:                                          |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|                                                             | Operations and maintenanceaffiliate               |              |       | 35        |   |            | 20  |                  |     | 11           |   |       | 6    
|                                                             | Operations and maintenancenonaffiliate            |              |       | 45        |   |            | 33  |                  |     | 6            |   |       |     
|                                                             | Depreciation and amortization                      |              |       | 19        |   |            | 7   |                  |     | 3            |   |       | 3    
|                                                             | Impairment losses                                  |              |       |          |   |            | 118 |                  |     |             |   |       |     
|                                                             | Gain on sales of assets, net                       |              |       | (2        | ) |            | (3  | )                |     |             |   |       | (1   
|                                                             |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|                                                             | Total operating expenses                           |              |       | 97        |   |            | 175 |                  |     | 20           |   |       | 8    
|                                                             |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|Operating income (loss)                                      |                                                    |              | 356   |           |   | (95        | )   |                  | 20  |              |   | 30    |      
|                                                             |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|Total other expense (income), net                            |                                                    |              |      |           |   | (2         | )   |                  | (1  | )            |   | 11    |      
|                                                             |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|Income (loss) from continuing operations before income taxes |                                                    |              | 356   |           |   | (93        | )   |                  | 21  |              |   | 19    |      
|                                                             |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|Provision for income taxes                                   |                                                    |              |      |           |   |           |     |                  |    |              |   | 1     |      
|                                                             |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|Income (loss) from continuing operations                     |                                                    | $            | 356   |           | $ | (93        | )   | $                | 21  |              | $ | 18    |      
|                                                             |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|Total assets of continuing operations at December 31, 2006   |                                                    | $            | 3,404 |           | $ | 1,184      |     | $                | 443 |              | $ | 1,976 |      
|                                                             |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      

24

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Operating Segments

|                                                                                      |                                                    | Mid-Atlantic |       | Northeast |   | California |     | Other Operations |     | Eliminations |   | Total |      
|------------------------------------------------------------------------------------- | -------------------------------------------------- | ------------ | ----- | --------- | - | ---------- | --- | ---------------- | --- | ------------ | - | ----- | -----
|
|Nine Months Ended September 30, 2006:                                                 |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|Operating revenuesaffiliate                                                          |                                                    | $            | 1,436 |           | $ | 650        |     | $                | 41  |              | $ | 285   |      
|Operating revenuesnonaffiliate                                                       |                                                    |              | 152   |           |   | (1         | )   |                  | 97  |              |   | 2,368 |      
|                                                                                      |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|                                                                                      | Total operating revenues                           |              |       | 1,588     |   |            | 649 |                  |     | 138          |   |       | 2,653
|                                                                                      |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|Cost of fuel, electricity and other productsaffiliate                                |                                                    |              | 404   |           |   | 277        |     |                  | 43  |              |   | 1,742 |      
|Cost of fuel, electricity and other productsnonaffiliate                             |                                                    |              | 76    |           |   | 92         |     |                  |    |              |   | 806   |      
|                                                                                      |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|                                                                                      | Total cost of fuel, electricity and other products |              |       | 480       |   |            | 369 |                  |     | 43           |   |       | 2,548
|                                                                                      |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|Gross Margin                                                                          |                                                    |              | 1,108 |           |   | 280        |     |                  | 95  |              |   | 105   |      
|                                                                                      |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|Operating Expenses:                                                                   |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|                                                                                      | Operations and maintenanceaffiliate               |              |       | 104       |   |            | 59  |                  |     | 30           |   |       | 17   
|                                                                                      | Operations and maintenancenonaffiliate            |              |       | 149       |   |            | 106 |                  |     | 17           |   |       |     
|                                                                                      | Depreciation and amortization                      |              |       | 55        |   |            | 18  |                  |     | 10           |   |       | 8    
|                                                                                      | Impairment losses                                  |              |       |          |   |            | 118 |                  |     |             |   |       |     
|                                                                                      | Gain on sales of assets, net                       |              |       | (7        | ) |            | (46 | )                |     |             |   |       | (1   
|                                                                                      |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|                                                                                      | Total operating expenses                           |              |       | 301       |   |            | 255 |                  |     | 57           |   |       | 24   
|                                                                                      |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|Operating income                                                                      |                                                    |              | 807   |           |   | 25         |     |                  | 38  |              |   | 81    |      
|                                                                                      |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|Total other expense (income), net                                                     |                                                    |              | (3    | )         |   | (1         | )   |                  | (2  | )            |   | 64    |      
|                                                                                      |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|Income (loss) from continuing operations before reorganization items and income taxes |                                                    |              | 810   |           |   | 26         |     |                  | 40  |              |   | 17    |      
|                                                                                      |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|Reorganization items, net                                                             |                                                    |              |      |           |   | (1         | )   |                  |    |              |   |      |      
|Provision for income taxes                                                            |                                                    |              |      |           |   |           |     |                  |    |              |   | 3     |      
|                                                                                      |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|Income (loss) from continuing operations                                              |                                                    | $            | 810   |           | $ | 27         |     | $                | 40  |              | $ | 14    |      
|                                                                                      |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      
|Total assets of continuing operations at December 31, 2006                            |                                                    | $            | 3,404 |           | $ | 1,184      |     | $                | 443 |              | $ | 1,976 |      
|                                                                                      |                                                    |              |       |           |   |            |     |                  |     |              |   |       |      

25

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K.    Guarantor/Non-Guarantor Condensed Consolidating Financial Information

The Company's $850 million of 7.375% senior notes, which mature on December 31, 2013, are unsecured obligations of Mirant North America. However,
they are jointly and severally and fully and unconditionally guaranteed on an unsecured senior basis by Mirant North America and certain of its subsidiaries (all of which are wholly-owned). The
accompanying consolidating financial information has been prepared and presented pursuant to SEC Regulation S-X Rule 3-10, "Financial
Statements of Guarantors and Issuers of Guaranteed Securities Registered or being Registered." This information is not intended to present the financial position, results of
operations and cash flows of the individual companies or groups of companies in accordance with GAAP.

During
the second quarter of 2007, the Emerging New York Entities emerged from bankruptcy and became subsidiary guarantors. The unaudited condensed consolidated financial
statements for prior periods have been revised to conform to the current period financial statement presentation. On September 19, 2007, the Mirant Lovett Plan was confirmed by the Bankruptcy
court and became effective on October 2, 2007, resulting in Mirant Lovett's emergence from bankruptcy. At September 30, 2007, Mirant Lovett is not a subsidiary guarantor. As Mirant
Lovett's emergence from bankruptcy occurred during the fourth quarter of 2007, it will be a subsidiary guarantor at December 31, 2007.

The
following sets forth unaudited condensed consolidating financial statements of the guarantor and non-guarantor subsidiaries:

MIRANT NORTH AMERICA
GUARANTOR/NON-GUARANTOR

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)

Three Months Ended September 30, 2007

(in millions)

|                                             |  | Parent |     | Mirant Lovett |   | Guarantor |   | Non-Guarantor |     | Eliminations |   | Consolidated
|-------------------------------------------- |  | ------ | --- | ------------- | - | --------- | - | ------------- | --- | ------------ | - | ------------
|Operating revenues                           |  | $      |    |               | $ | 28        |   | $             | 205 |              | $ | 794         
|Cost of fuel, electricity and other products |  |        | (5  | )             |   | 12        |   |               | 115 |              |   | 413         
|                                             |  |        |     |               |   |           |   |               |     |              |   |             
|Gross Margin                                 |  |        | 5   |               |   | 16        |   |               | 90  |              |   | 381         
|                                             |  |        |     |               |   |           |   |               |     |              |   |             
|Operating Expenses:                          |  |        |     |               |   |           |   |               |     |              |   |             
|Operations and maintenance                   |  |        |    |               |   | 14        |   |               | 50  |              |   | 95          
|Depreciation and amortization                |  |        |    |               |   | 2         |   |               | 8   |              |   | 20          
|Loss (gain) on sales of assets, net          |  |        | 1   |               |   |          |   |               | (1  | )            |   |            
|                                             |  |        |     |               |   |           |   |               |     |              |   |             
|Total operating expenses                     |  |        | 1   |               |   | 16        |   |               | 57  |              |   | 115         
|                                             |  |        |     |               |   |           |   |               |     |              |   |             
|Operating Income                             |  |        | 4   |               |   |          |   |               | 33  |              |   | 266         
|Other Expense (Income), net                  |  |        | 19  |               |   | 1         |   |               | (1  | )            |   | (7          
|                                             |  |        |     |               |   |           |   |               |     |              |   |             
|Income (loss) from continuing operations     |  |        | (15 | )             |   | (1        | ) |               | 34  |              |   | 273         
|Income (loss) from discontinued operations   |  |        | 1   |               |   |          |   |               |    |              |   | (1          
|                                             |  |        |     |               |   |           |   |               |     |              |   |             
|Net Income (Loss)                            |  | $      | (14 | )             | $ | (1        | ) | $             | 34  |              | $ | 272         
|                                             |  |        |     |               |   |           |   |               |     |              |   |             

26

---



MIRANT NORTH AMERICA
GUARANTOR/NON-GUARANTOR

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)

Three Months Ended September 30, 2006

(in millions)

|                                             |  | Parent |     | Mirant Lovett |   | Guarantor |   | Non-Guarantor |      | Eliminations |   | Consolidated |  
|-------------------------------------------- |  | ------ | --- | ------------- | - | --------- | - | ------------- | ---- | ------------ | - | ------------ | -
|Operating revenues                           |  | $      |    |               | $ | 51        |   | $             | 213  |              | $ | 1,117        |  
|Cost of fuel, electricity and other products |  |        | (6  | )             |   | 28        |   |               | 115  |              |   | 627          |  
|                                             |  |        |     |               |   |           |   |               |      |              |   |              |  
|Gross Margin                                 |  |        | 6   |               |   | 23        |   |               | 98   |              |   | 490          |  
|                                             |  |        |     |               |   |           |   |               |      |              |   |              |  
|Operating Expenses:                          |  |        |     |               |   |           |   |               |      |              |   |              |  
|Operations and maintenance                   |  |        |    |               |   | 20        |   |               | 53   |              |   | 83           |  
|Depreciation and amortization                |  |        |    |               |   | 3         |   |               | 8    |              |   | 21           |  
|Impairment loss                              |  |        |    |               |   |          |   |               | 118  |              |   |             |  
|Loss (gain) on sales of assets               |  |        | 3   |               |   |          |   |               | (4   | )            |   | (2           | )
|                                             |  |        |     |               |   |           |   |               |      |              |   |              |  
|Total operating expenses                     |  |        | 3   |               |   | 23        |   |               | 175  |              |   | 102          |  
|                                             |  |        |     |               |   |           |   |               |      |              |   |              |  
|Operating Income (Loss)                      |  |        | 3   |               |   |          |   |               | (77  | )            |   | 388          |  
|                                             |  |        |     |               |   |           |   |               |      |              |   |              |  
|Other Expense (Income), net                  |  |        | 35  |               |   |          |   |               | (4   | )            |   | (20          | )
|Reorganization items, net                    |  |        |    |               |   | (1        | ) |               |     |              |   |             |  
|Provision for income tax                     |  |        | 1   |               |   |          |   |               |     |              |   |             |  
|                                             |  |        |     |               |   |           |   |               |      |              |   |              |  
|Income (loss) from continuing operations     |  |        | (33 | )             |   | 1         |   |               | (73  | )            |   | 408          |  
|Loss from discontinued operations            |  |        |    |               |   |          |   |               | (59  | )            |   | (1           | )
|                                             |  |        |     |               |   |           |   |               |      |              |   |              |  
|Net Income (Loss)                            |  | $      | (33 | )             | $ | 1         |   | $             | (132 | )            | $ | 407          |  
|                                             |  |        |     |               |   |           |   |               |      |              |   |              |  

27

---



MIRANT NORTH AMERICA
GUARANTOR/NON-GUARANTOR

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)

Nine Months Ended September 30, 2007

(in millions)

|                                             |  | Parent |     | Mirant Lovett |   | Guarantor |   | Non-Guarantor |     | Eliminations |   | Consolidated |  
|-------------------------------------------- |  | ------ | --- | ------------- | - | --------- | - | ------------- | --- | ------------ | - | ------------ | -
|Operating revenues                           |  | $      |    |               | $ | 106       |   | $             | 536 |              | $ | 1,767        |  
|Cost of fuel, electricity and other products |  |        | (14 | )             |   | 51        |   |               | 311 |              |   | 1,254        |  
|                                             |  |        |     |               |   |           |   |               |     |              |   |              |  
|Gross Margin                                 |  |        | 14  |               |   | 55        |   |               | 225 |              |   | 513          |  
|                                             |  |        |     |               |   |           |   |               |     |              |   |              |  
|Operating Expenses:                          |  |        |     |               |   |           |   |               |     |              |   |              |  
|Operations and maintenance                   |  |        | 1   |               |   | 44        |   |               | 151 |              |   | 275          |  
|Depreciation and amortization                |  |        |    |               |   | 7         |   |               | 22  |              |   | 60           |  
|Impairment loss                              |  |        |    |               |   | 175       |   |               |    |              |   |             |  
|Loss (gain) on sales of assets, net          |  |        | 11  |               |   |          |   |               | (28 | )            |   | (2           | )
|                                             |  |        |     |               |   |           |   |               |     |              |   |              |  
|Total operating expenses                     |  |        | 12  |               |   | 226       |   |               | 145 |              |   | 333          |  
|                                             |  |        |     |               |   |           |   |               |     |              |   |              |  
|Operating Income (Loss)                      |  |        | 2   |               |   | (171      | ) |               | 80  |              |   | 180          |  
|                                             |  |        |     |               |   |           |   |               |     |              |   |              |  
|Other Expense (Income), net                  |  |        | 80  |               |   | 1         |   |               | (13 | )            |   | (22          | )
|Reorganization items, net                    |  |        |    |               |   |          |   |               | (2  | )            |   |             |  
|                                             |  |        |     |               |   |           |   |               |     |              |   |              |  
|Income (loss) from continuing operations     |  |        | (78 | )             |   | (172      | ) |               | 95  |              |   | 202          |  
|Income (loss) from discontinued operations   |  |        | 3   |               |   |          |   |               |    |              |   | (5           | )
|                                             |  |        |     |               |   |           |   |               |     |              |   |              |  
|Net Income (Loss)                            |  | $      | (75 | )             | $ | (172      | ) | $             | 95  |              | $ | 197          |  
|                                             |  |        |     |               |   |           |   |               |     |              |   |              |  

28

---



MIRANT NORTH AMERICA
GUARANTOR/NON-GUARANTOR

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)

Nine Months Ended September 30, 2006

(in millions)

|                                             |  | Parent |      | Mirant Lovett |   | Guarantor |   | Non-Guarantor |     | Eliminations |   | Consolidated |  
|-------------------------------------------- |  | ------ | ---- | ------------- | - | --------- | - | ------------- | --- | ------------ | - | ------------ | -
|Operating revenues                           |  | $      |     |               | $ | 153       |   | $             | 634 |              | $ | 2,760        |  
|Cost of fuel, electricity and other products |  |        | (38  | )             |   | 96        |   |               | 316 |              |   | 1,547        |  
|                                             |  |        |      |               |   |           |   |               |     |              |   |              |  
|Gross Margin                                 |  |        | 38   |               |   | 57        |   |               | 318 |              |   | 1,213        |  
|                                             |  |        |      |               |   |           |   |               |     |              |   |              |  
|Operating Expenses:                          |  |        |      |               |   |           |   |               |     |              |   |              |  
|Operations and maintenance                   |  |        |     |               |   | 62        |   |               | 157 |              |   | 263          |  
|Depreciation and amortization                |  |        |     |               |   | 9         |   |               | 19  |              |   | 63           |  
|Impairment loss                              |  |        |     |               |   |          |   |               | 118 |              |   |             |  
|Loss (gain) on sales of assets               |  |        | 45   |               |   | (1        | ) |               | (46 | )            |   | (7           | )
|                                             |  |        |      |               |   |           |   |               |     |              |   |              |  
|Total operating expenses                     |  |        | 45   |               |   | 70        |   |               | 248 |              |   | 319          |  
|                                             |  |        |      |               |   |           |   |               |     |              |   |              |  
|Operating Income (Loss)                      |  |        | (7   | )             |   | (13       | ) |               | 70  |              |   | 894          |  
|                                             |  |        |      |               |   |           |   |               |     |              |   |              |  
|Other Expense (Income), net                  |  |        | 101  |               |   |          |   |               | (4  | )            |   | (33          | )
|Reorganization items, net                    |  |        |     |               |   | (1        | ) |               | (1  | )            |   |             |  
|Provision for income tax                     |  |        | 3    |               |   |          |   |               |    |              |   |             |  
|                                             |  |        |      |               |   |           |   |               |     |              |   |              |  
|Income (loss) from continuing operations     |  |        | (111 | )             |   | (12       | ) |               | 75  |              |   | 927          |  
|Income (loss) from discontinued operations   |  |        |     |               |   |          |   |               | (57 | )            |   | (4           | )
|                                             |  |        |      |               |   |           |   |               |     |              |   |              |  
|Net Income (Loss)                            |  | $      | (111 | )             | $ | (12       | ) | $             | 18  |              | $ | 923          |  
|                                             |  |        |      |               |   |           |   |               |     |              |   |              |  

29

---



MIRANT NORTH AMERICA
GUARANTOR/NON-GUARANTOR

CONDENSED CONSOLIDATING BALANCE SHEETS (UNAUDITED)

At September 30, 2007

(in millions)

|                                               |                              | Parent |       | Mirant Lovett |   | Guarantor |    | Non-Guarantor |     | Eliminations |   | Consolidated
|---------------------------------------------- | ---------------------------- | ------ | ----- | ------------- | - | --------- | -- | ------------- | --- | ------------ | - | ------------
|ASSETS                                         |                              |        |       |               |   |           |    |               |     |              |   |             
|Current Assets:                                |                              |        |       |               |   |           |    |               |     |              |   |             
|Cash and cash equivalents                      |                              | $      | 422   |               | $ | 7         |    | $             |    |              | $ | 517         
|Funds on deposit                               |                              |        | 202   |               |   |          |    |               | 3   |              |   | 118         
|Receivablesaffiliate                          |                              |        |      |               |   | 9         |    |               | 34  |              |   | 2           
|Receivablesnonaffiliate                       |                              |        |      |               |   |          |    |               | 11  |              |   | 226         
|Notes receivableaffiliate                     |                              |        | 8     |               |   |          |    |               | 111 |              |   |            
|Price risk management assetsaffiliate         |                              |        |      |               |   |          |    |               | 20  |              |   |            
|Price risk management assetsnonaffiliate      |                              |        |      |               |   |          |    |               |    |              |   | 323         
|Prepaid rent and other payments                |                              |        |      |               |   | 10        |    |               | 17  |              |   | 111         
|Inventories                                    |                              |        | (4    | )             |   | 12        |    |               | 31  |              |   | 260         
|                                               |                              |        |       |               |   |           |    |               |     |              |   |             
|                                               | Total current assets         |        |       | 628           |   |           | 38 |               |     | 227          |   |             
|                                               |                              |        |       |               |   |           |    |               |     |              |   |             
|Property, Plant and Equipment, net             |                              |        |      |               |   | 7         |    |               | 478 |              |   | 1,888       
|                                               |                              |        |       |               |   |           |    |               |     |              |   |             
|Noncurrent Assets:                             |                              |        |       |               |   |           |    |               |     |              |   |             
|Goodwill, net                                  |                              |        | (799  | )             |   |          |    |               |    |              |   | 799         
|Intangible assets, net                         |                              |        |      |               |   |          |    |               | 55  |              |   | 151         
|Price risk management assetsaffiliate         |                              |        |      |               |   |          |    |               | 5   |              |   |            
|Price risk management assetsnonaffiliate      |                              |        |      |               |   |          |    |               |    |              |   | 51          
|Prepaid rent                                   |                              |        |      |               |   |          |    |               |    |              |   | 213         
|Debt issuance costs, net                       |                              |        | 42    |               |   |          |    |               |    |              |   |            
|Other                                          |                              |        | 4,698 |               |   | 6         |    |               | 214 |              |   | 1           
|                                               |                              |        |       |               |   |           |    |               |     |              |   |             
|                                               | Total noncurrent assets      |        |       | 3,941         |   |           | 6  |               |     | 274          |   |             
|                                               |                              |        |       |               |   |           |    |               |     |              |   |             
|                                               | Total Assets                 |        | $     | 4,569         |   | $         | 51 |               | $   | 979          |   | $           
|                                               |                              |        |       |               |   |           |    |               |     |              |   |             
|LIABILITIES AND EQUITY                         |                              |        |       |               |   |           |    |               |     |              |   |             
|Current Liabilities:                           |                              |        |       |               |   |           |    |               |     |              |   |             
|Notes payableaffiliate                        |                              | $      | 24    |               | $ |          |    | $             | 21  |              | $ |            
|Current portion of long-term debt              |                              |        | 106   |               |   |          |    |               |    |              |   | 3           
|Accounts payable and accrued liabilities       |                              |        | 17    |               |   | 7         |    |               | 13  |              |   | 214         
|Payable to affiliate                           |                              |        |      |               |   | 2         |    |               | 9   |              |   | 54          
|Price risk management liabilitiesaffiliate    |                              |        |      |               |   |          |    |               |    |              |   | 20          
|Price risk management liabilitiesnonaffiliate |                              |        |      |               |   |          |    |               |    |              |   | 272         
|Accrued property taxes                         |                              |        |      |               |   |          |    |               | 1   |              |   | 4           
|Other                                          |                              |        |      |               |   |          |    |               | 1   |              |   |            
|                                               |                              |        |       |               |   |           |    |               |     |              |   |             
|                                               | Total current liabilities    |        |       | 147           |   |           | 9  |               |     | 45           |   |             
|                                               |                              |        |       |               |   |           |    |               |     |              |   |             
|Noncurrent Liabilities:                        |                              |        |       |               |   |           |    |               |     |              |   |             
|Long-term debt                                 |                              |        | 1,301 |               |   |          |    |               |    |              |   | 28          
|Price risk management liabilitiesaffiliate    |                              |        |      |               |   |          |    |               |    |              |   | 5           
|Price risk management liabilitiesnonaffiliate |                              |        |      |               |   |          |    |               |    |              |   | 79          
|Asset retirement obligations                   |                              |        |      |               |   | 9         |    |               | 21  |              |   | 14          
|Other                                          |                              |        |      |               |   |          |    |               | 1   |              |   | 24          
|                                               |                              |        |       |               |   |           |    |               |     |              |   |             
|                                               | Total noncurrent liabilities |        |       | 1,301         |   |           | 9  |               |     | 22           |   |             
|                                               |                              |        |       |               |   |           |    |               |     |              |   |             
|Commitments and Contingencies                  |                              |        |       |               |   |           |    |               |     |              |   |             
|Equity                                         |                              |        | 3,121 |               |   | 33        |    |               | 912 |              |   | 3,943       
|                                               |                              |        |       |               |   |           |    |               |     |              |   |             
|                                               | Total Liabilities and Equity |        | $     | 4,569         |   | $         | 51 |               | $   | 979          |   | $           
|                                               |                              |        |       |               |   |           |    |               |     |              |   |             

30

---



MIRANT NORTH AMERICA
GUARANTOR/NON-GUARANTOR

CONDENSED CONSOLIDATING BALANCE SHEETS

At December 31, 2006

(in millions)

|                                               |                              | Parent |       | Mirant Lovett |   | Guarantor |     | Non-Guarantor |       | Eliminations |   | Consolidated
|---------------------------------------------- | ---------------------------- | ------ | ----- | ------------- | - | --------- | --- | ------------- | ----- | ------------ | - | ------------
|ASSETS                                         |                              |        |       |               |   |           |     |               |       |              |   |             
|Current Assets:                                |                              |        |       |               |   |           |     |               |       |              |   |             
|Cash and cash equivalents                      |                              | $      | 231   |               | $ |          |     | $             | 98    |              | $ | 421         
|Funds on deposit                               |                              |        | 201   |               |   |          |     |               | 3     |              |   | 29          
|Receivablesaffiliate                          |                              |        |      |               |   | 13        |     |               | 54    |              |   | 33          
|Receivablesnonaffiliate                       |                              |        |      |               |   |          |     |               | 71    |              |   | 300         
|Notes receivableaffiliate                     |                              |        | 22    |               |   | 50        |     |               | 502   |              |   | 357         
|Price risk management assetsaffiliate         |                              |        |      |               |   |          |     |               | 56    |              |   | 4           
|Price risk management assetsnonaffiliate      |                              |        |      |               |   |          |     |               |      |              |   | 728         
|Prepaid rent and other payments                |                              |        |      |               |   | 5         |     |               | 11    |              |   | 115         
|Inventories                                    |                              |        | (7    | )             |   | 13        |     |               | 30    |              |   | 251         
|Assets held for sale                           |                              |        | (8    | )             |   |          |     |               | 535   |              |   | 5           
|                                               |                              |        |       |               |   |           |     |               |       |              |   |             
|                                               | Total current assets         |        |       | 439           |   |           | 81  |               |       | 1,360        |   |             
|                                               |                              |        |       |               |   |           |     |               |       |              |   |             
|Property, Plant and Equipment, net             |                              |        |      |               |   | 187       |     |               | 483   |              |   | 1,498       
|                                               |                              |        |       |               |   |           |     |               |       |              |   |             
|Noncurrent Assets:                             |                              |        |       |               |   |           |     |               |       |              |   |             
|Goodwill, net                                  |                              |        | (799  | )             |   |          |     |               |      |              |   | 799         
|Intangible assets, net                         |                              |        |      |               |   |          |     |               | 56    |              |   | 156         
|Price risk management assetsaffiliate         |                              |        |      |               |   |          |     |               | 6     |              |   | 1           
|Price risk management assetsnonaffiliate      |                              |        |      |               |   |          |     |               |      |              |   | 104         
|Prepaid rent                                   |                              |        |      |               |   |          |     |               |      |              |   | 218         
|Debt issuance costs, net                       |                              |        | 48    |               |   |          |     |               |      |              |   |            
|Other                                          |                              |        | 6,178 |               |   | 6         |     |               | 525   |              |   |            
|                                               |                              |        |       |               |   |           |     |               |       |              |   |             
|                                               | Total noncurrent assets      |        |       | 5,427         |   |           | 6   |               |       | 587          |   |             
|                                               |                              |        |       |               |   |           |     |               |       |              |   |             
|                                               | Total Assets                 |        | $     | 5,866         |   | $         | 274 |               | $     | 2,430        |   | $           
|                                               |                              |        |       |               |   |           |     |               |       |              |   |             
|LIABILITIES AND EQUITY                         |                              |        |       |               |   |           |     |               |       |              |   |             
|Current Liabilities:                           |                              |        |       |               |   |           |     |               |       |              |   |             
|Notes payableaffiliate                        |                              | $      | 767   |               | $ |          |     | $             | 60    |              | $ | 7           
|Current portion of long-term debt              |                              |        | 138   |               |   |          |     |               |      |              |   | 3           
|Accounts payable and accrued liabilities       |                              |        | 33    |               |   | 10        |     |               | 16    |              |   | 233         
|Payable to affiliate                           |                              |        | 9     |               |   | 3         |     |               | 17    |              |   | 67          
|Price risk management liabilitiesaffiliate    |                              |        |      |               |   |          |     |               |      |              |   | 70          
|Price risk management liabilitiesnonaffiliate |                              |        |      |               |   |          |     |               |      |              |   | 286         
|Accrued property taxes                         |                              |        | 51    |               |   | 20        |     |               | 4     |              |   |            
|Other                                          |                              |        |      |               |   |          |     |               | 28    |              |   | 13          
|                                               |                              |        |       |               |   |           |     |               |       |              |   |             
|                                               | Total current liabilities    |        |       | 998           |   |           | 33  |               |       | 125          |   |             
|                                               |                              |        |       |               |   |           |     |               |       |              |   |             
|Noncurrent Liabilities:                        |                              |        |       |               |   |           |     |               |       |              |   |             
|Long-term debt                                 |                              |        | 1,404 |               |   |          |     |               |      |              |   | 31          
|Price risk management liabilitiesaffiliate    |                              |        |      |               |   |          |     |               |      |              |   | 10          
|Price risk management liabilitiesnonaffiliate |                              |        |      |               |   |          |     |               |      |              |   | 39          
|Asset retirement obligations                   |                              |        |      |               |   | 6         |     |               | 22    |              |   | 12          
|Other                                          |                              |        |      |               |   |          |     |               |      |              |   | 22          
|                                               |                              |        |       |               |   |           |     |               |       |              |   |             
|                                               | Total noncurrent liabilities |        |       | 1,404         |   |           | 6   |               |       | 22           |   |             
|                                               |                              |        |       |               |   |           |     |               |       |              |   |             
|Liabilities Subject to Compromise              |                              |        |      |               |   | 24        |     |               | 51    |              |   | 4           
|                                               |                              |        |       |               |   |           |     |               |       |              |   |             
|Commitments and Contingencies                  |                              |        |       |               |   |           |     |               |       |              |   |             
|Equity                                         |                              |        | 3,464 |               |   | 211       |     |               | 2,232 |              |   | 4,222       
|                                               |                              |        |       |               |   |           |     |               |       |              |   |             
|                                               | Total Liabilities and Equity |        | $     | 5,866         |   | $         | 274 |               | $     | 2,430        |   | $           
|                                               |                              |        |       |               |   |           |     |               |       |              |   |             

31

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MIRANT NORTH AMERICA
GUARANTOR/NON-GUARANTOR

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED)

Nine Months Ended September 30, 2007

(in millions)

|                                                                             |  | Parent |      | Mirant Lovett |   | Guarantor |   | Non-Guarantor |      | Eliminations |   | Consolidated |  
|---------------------------------------------------------------------------- |  | ------ | ---- | ------------- | - | --------- | - | ------------- | ---- | ------------ | - | ------------ | -
|Cash Flows provided by (used in):                                            |  |        |      |               |   |           |   |               |      |              |   |              |  
|Operating activities                                                         |  | $      | 224  |               | $ | (12       | ) | $             | 198  |              | $ | 582          |  
|Investing activities                                                         |  |        | 477  |               |   | 19        |   |               | (258 | )            |   | (359         | )
|Financing activities                                                         |  |        | (510 | )             |   |          |   |               | (38  | )            |   | (130         | )
|                                                                             |  |        |      |               |   |           |   |               |      |              |   |              |  
|Net increase (decrease) in cash and cash equivalents                         |  |        | 191  |               |   | 7         |   |               | (98  | )            |   | 93           |  
|Cash and Cash Equivalents, beginning of period                               |  |        | 231  |               |   |          |   |               | 98   |              |   | 421          |  
|Plus: Cash and Cash Equivalents in Assets Held for Sale, beginning of period |  |        |     |               |   |          |   |               |     |              |   | 3            |  
|                                                                             |  |        |      |               |   |           |   |               |      |              |   |              |  
|Cash and Cash Equivalents, end of period                                     |  | $      | 422  |               | $ | 7         |   | $             |     |              | $ | 517          |  
|                                                                             |  |        |      |               |   |           |   |               |      |              |   |              |  

MIRANT NORTH AMERICA
GUARANTOR/NON-GUARANTOR

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED)

Nine Months Ended September 30, 2006

(in millions)

|                                                                       |  | Parent |     | Mirant Lovett |   | Guarantor |   | Non-Guarantor |      | Eliminations |   | Consolidated |  
|---------------------------------------------------------------------- |  | ------ | --- | ------------- | - | --------- | - | ------------- | ---- | ------------ | - | ------------ | -
|Cash Flows provided by (used in):                                      |  |        |     |               |   |           |   |               |      |              |   |              |  
|Operating activities                                                   |  | $      | 288 |               | $ | 9         |   | $             | 231  |              | $ | 1,157        |  
|Investing activities                                                   |  |        | (19 | )             |   | (9        | ) |               | (146 | )            |   | (401         | )
|Financing activities                                                   |  |        | (98 | )             |   |          |   |               | 15   |              |   | (642         | )
|                                                                       |  |        |     |               |   |           |   |               |      |              |   |              |  
|Net increase in cash and cash equivalents                              |  |        | 171 |               |   |          |   |               | 100  |              |   | 114          |  
|Cash and Cash Equivalents, beginning of period                         |  |        |    |               |   |          |   |               | 3    |              |   | 292          |  
|Less: Cash and Cash Equivalents in Assets Held for Sale, end of period |  |        |    |               |   |          |   |               |     |              |   | 5            |  
|                                                                       |  |        |     |               |   |           |   |               |      |              |   |              |  
|Cash and Cash Equivalents, end of period                               |  | $      | 171 |               | $ |          |   | $             | 103  |              | $ | 401          |  
|                                                                       |  |        |     |               |   |           |   |               |      |              |   |              |  

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L.    Litigation and Other Contingencies

The Company is involved in a number of significant legal proceedings. In certain cases plaintiffs seek to recover large and sometimes unspecified damages, and
some matters may be unresolved for several years. The Company cannot currently determine the outcome of the proceedings described below or the ultimate amount of potential losses and therefore has not
made any provision for such matters unless specifically noted below. Pursuant to SFAS No. 5, management provides for estimated losses to the extent information becomes available indicating that
losses are probable and that the amounts are reasonably estimable. Additional losses could have a material adverse effect on the Company's consolidated financial position, results of operations or
cash flows.

Chapter 11 Proceedings

On July 14, 2003, and various dates thereafter, Mirant Corporation and certain of its subsidiaries (collectively, the "Mirant Debtors"), including the
Company and its subsidiaries, filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. Mirant, the Company and most of the Mirant Debtors emerged
from bankruptcy on January 3, 2006, when the Plan became effective. As of September 30, 2007, approximately one million of the shares of Mirant common stock to be distributed under the
Plan have not yet been distributed and have been reserved for distribution with respect to claims disputed by the Mirant Debtors that have not been resolved. Under the terms of the Plan, to the extent
unresolved claims are resolved now that the Company has emerged from bankruptcy, the claimants will receive the same pro rata distributions of Mirant common stock, cash, or both common stock and cash
as previously allowed claims.

To
the extent the aggregate amount of the payouts determined to be due with respect to disputed claims ultimately exceeds the amount of the funded claim reserve, Mirant would have to
issue additional shares of common stock to address the shortfall, which would dilute existing Mirant shareholders, and Mirant and Mirant Americas Generation would have to pay additional cash amounts
as necessary under the terms of the Plan to satisfy such pre-petition claims.

On
July 13, 2007, Mirant Lovett filed the Mirant Lovett Plan with the Bankruptcy Court for its approval. The Bankruptcy Court entered an order confirming the Mirant Lovett Plan on
September 19, 2007. The Mirant Lovett Plan became effective on October 2, 2007, resulting in Mirant Lovett's emergence from bankruptcy. The Mirant Lovett Plan provided unsecured
creditors of Mirant Lovett
with the same treatment afforded holders of unsecured claims against Mirant Americas Generation and its subsidiaries under the Plan. Such unsecured creditors of Mirant Lovett received their pro ratashare of the pool of assets created under the Plan for the benefit of the unsecured creditors of Mirant Americas Generation and its
subsidiaries.

Pepco Litigation

In 2000, Mirant purchased power generating facilities and other assets from Pepco, including certain PPAs between Pepco and third parties. Under the terms of the
APSA, Mirant and Pepco entered into a contractual agreement with respect to certain PPAs (the "Back-to-Back Agreement"), including Pepco's long-term PPA with Panda,
under which (1) Pepco agreed to resell to Mirant all capacity, energy, ancillary services and other benefits to which it is entitled under those agreements and (2) Mirant agreed to pay
Pepco each month all amounts due from Pepco to the sellers under those agreements for the immediately preceding month associated with such capacity, energy, ancillary services and other benefits. The
Back-to-Back Agreement, which did not expire until 2021, obligated Mirant to purchase power from Pepco at prices that typically were higher than the market prices for power.

Mirant
assigned its rights and obligations under the Back-to-Back Agreement to Mirant Americas Energy Marketing. In the Chapter 11 cases of the Mirant
Debtors, Pepco asserted that an Assignment

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and
Assumption Agreement dated December 19, 2000, that included as parties Pepco and various of the Company's subsidiaries, caused the Company's subsidiaries that were parties to the agreement
to be jointly and severally liable to Pepco for various obligations, including the obligations under the Back-to-Back Agreement. The Mirant Debtors sought to reject the APSA,
the Back-to-Back Agreement, and the Assignment and Assumption Agreement. Under the Plan, the obligations of the Mirant Debtors under the APSA (including any other agreements
executed pursuant to the terms of the APSA and found by a final court order to be part of the APSA), the Back-to-Back Agreement, and the Assignment and Assumption Agreement
were performed after January 3, 2006, by Mirant Power Purchase, whose performance was guaranteed by Mirant, pending resolution of the rejection motions.

On
May 30, 2006, Mirant and various of its subsidiaries, including subsidiaries of the Company (collectively the "Mirant Settling Parties"), entered into a Settlement Agreement
and Release (the "Settlement Agreement") with Pepco and various affiliates of Pepco (collectively the "Pepco Settling Parties"). The Settlement Agreement could not become effective until it had been
approved by the Bankruptcy Court and that approval order had become a final order no longer subject to appeal. The Bankruptcy Court entered an order approving the Settlement Agreement on
August 9, 2006. That order was appealed, but the appeal was dismissed by agreement of the parties in August 2007, and the Settlement Agreement became effective August 10, 2007.
The Settlement Agreement fully resolved the
contract rejection motions that remained pending in the bankruptcy proceedings, as well as other matters disputed between Pepco and Mirant and its subsidiaries. The Pepco Settling Parties and the
Mirant Settling Parties have released each other from all claims known as of May 30, 2006. Under the Settlement Agreement, Mirant Power Purchase will perform any remaining obligations under the
APSA, and Mirant will guaranty its performance. The Back-to-Back Agreement was rejected and terminated effective as of May 31, 2006, and the Assignment and Assumption
Agreement was also rejected.

With
respect to the other agreements executed as part of the closing of the APSA (the "Ancillary Agreements") and other agreements between Pepco and subsidiaries of Mirant, including
subsidiaries of the Company, the Mirant subsidiary that is a party to each agreement has assumed the agreement and Mirant has guaranteed that subsidiary's performance. Mirant Power Purchase's
obligations under the APSA do not include any obligations related to the Ancillary Agreements. The Settlement Agreement provides that a future breach of the APSA or any Ancillary Agreement by a party
to such agreement will not entitle the non-defaulting party to terminate, suspend performance under, or exercise any other right or remedy under or with respect to any of the remainder of
such agreements.

The
Settlement Agreement granted Pepco a claim against Old Mirant in Old Mirant's bankruptcy proceedings that was to result in Pepco receiving common stock of Mirant and cash having a
value, after liquidation of the stock by Pepco, equal to $520 million. Shortly after the Settlement Agreement became effective, Mirant distributed approximately 14 million shares of
Mirant common stock from the shares reserved for disputed claims under the Plan to Pepco to satisfy its claim. Pepco's liquidation of those shares resulted in net proceeds of approximately
$522 million, and Pepco paid Mirant the amount in excess of $520 million.

California and Western Power Markets

FERC Refund Proceedings Arising Out of California Energy Crisis.High prices experienced in California and western wholesale
electricity markets in 2000 and 2001 caused various purchasers of electricity in those markets to initiate proceedings seeking refunds. Several of those proceedings remain pending either before the
FERC or on appeal to the United States Court of Appeals for the Ninth Circuit (the "Ninth Circuit"). The proceedings that remain pending include proceedings (1) ordered by FERC on
July 25, 2001, (the "FERC Refund Proceedings") to determine the amount of any refunds and amounts owed for sales made by market participants, including Mirant Americas Energy Marketing, to the
CAISO or the Cal PX from October 2, 2000, through June 20, 2001 (the "Refund

34

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Period"),
(2) ordered by FERC to determine whether there had been unjust and unreasonable charges for spot market bilateral sales in the Pacific Northwest from December 25, 2000, through
June 20, 2001 (the "Pacific Northwest Proceeding"), and (3) arising from a complaint filed in 2002 by the California Attorney General that sought refunds for transactions conducted in
markets administered by the CAISO and the Cal PX outside the Refund Period set by the FERC and for transactions between the DWR and various owners of generation and power marketers, including
Mirant Americas Energy Marketing and subsidiaries of the Company. Various parties appealed FERC orders related to these proceedings to the Ninth Circuit seeking review of a number of issues, including
changing the Refund Period to include periods prior to October 2, 2000, and expanding the sales of electricity subject to potential refund to include bilateral sales made to the DWR and other
parties. While various of these appeals remain pending, the Ninth Circuit has ruled that the FERC should consider further whether to grant relief for sales of electricity made in the CAISO and
Cal PX markets prior to October 2, 2000, at rates found to be unjust, and, in the proceeding initiated by the California Attorney General, what remedies, including potential refunds, are
appropriate where entities, including Mirant Americas Energy Marketing, purportedly did not comply with certain filing requirements for transactions conducted under market-based rate tariffs.

On
January 14, 2005, Mirant and certain of its subsidiaries, including the Company (the "Mirant Settling Parties"), entered into a Settlement and Release of Claims Agreement (the
"California Settlement") with PG&E, Southern California Edison Company, San Diego Gas and Electric Company, the CPUC, the DWR, the EOB and the Attorney General of the State of California
(collectively, the "California Parties"). The California Settlement was approved by the FERC on April 13, 2005, and became effective April 15, 2005, upon its approval by the Bankruptcy
Court. The California Settlement resulted in the release of most of Mirant Americas Energy Marketing's potential liability (1) in the FERC Refund Proceedings for sales made in the CAISO or the
Cal PX markets, (2) in the Pacific Northwest Proceeding, and (3) in any proceedings at the FERC resulting from the complaint filed in 2002 by the California Attorney General.
Under the California Settlement, the California Parties and those other market participants who have opted into the settlement have released the Mirant Settling Parties, including Mirant Americas
Energy Marketing, from any liability for refunds related to sales of electricity and natural gas in the western markets from January 1, 1998, through July 14, 2003. Also, the California
Parties have assumed the obligation of Mirant Americas Energy Marketing to pay any refunds determined by the FERC to be owed by Mirant Americas Energy Marketing to other parties that do not opt into
the settlement for transactions in the CAISO and Cal PX markets during the Refund Period, with the liability of the California Parties for such refund obligation limited to the amount of
certain receivables assigned by Mirant Americas Energy Marketing to the California Parties under the California Settlement. The settlement did not relieve Mirant Americas Energy Marketing of liability
for any refunds that the FERC determines it to owe (1) to participants in the Cal PX and CAISO markets that are not California Parties (or that did not elect to opt into the settlement)
for
periods outside the Refund Period and (2) to participants in bilateral transactions with Mirant Americas Energy Marketing that are not California Parties (or that did not elect to opt into the
settlement).

Resolution
of the refund proceedings that remain pending before the FERC or that currently are on appeal to the Ninth Circuit could ultimately result in the FERC concluding that the
prices received by Mirant Americas Energy Marketing in some transactions occurring in 2000 and 2001 should be reduced. The Company's view is that the bulk of any obligations of Mirant Americas Energy
Marketing to make refunds as a result of sales completed prior to July 14, 2003, in the CAISO or Cal PX markets or in bilateral transactions either have been addressed by the California
Settlement or have been resolved as part of Mirant Americas Energy Marketing's bankruptcy proceedings. To the extent that Mirant Americas Energy Marketing's potential refund liability arises from
contracts that were transferred to Mirant Energy Trading as part of the transfer of the trading and marketing business

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under
the Plan, Mirant Energy Trading may have exposure to any refund liability related to transactions under those contracts.

FERC Show Cause Proceeding Relating to Trading Practices.On June 25, 2003, the FERC issued a show cause order (the
"Trading Practices Order") to more than 50 parties, including Mirant Americas Energy Marketing and subsidiaries of the Company. The Trading Practices Order identified certain specific trading
practices that the FERC indicated could constitute gaming or anomalous market behavior in violation of the CAISO and Cal PX tariffs, and required sellers previously involved in transactions of
those types to demonstrate why such transactions were not violations of the CAISO and Cal PX tariffs. On September 30, 2003, and December 19, 2003, the Mirant entities filed with
the FERC for approval of a settlement agreement (the "Trading Settlement Agreement") entered into between certain Mirant entities and the FERC Trial Staff and an amendment to that agreement, under
which Mirant Americas Energy Marketing would pay $332,411 and the FERC would have an allowed unsecured claim in Mirant Americas Energy Marketing's bankruptcy proceeding for $3.67 million to
settle the show cause proceeding. The FERC approved the Trading Settlement Agreement, as amended, on June 27, 2005, and the Bankruptcy Court approved it on August 24, 2005. Certain
parties filed motions for rehearing with the FERC, which it denied on October 11, 2006. A party to the proceeding has appealed the FERC's June 27, 2005, order to the Ninth Circuit.

Mirant Americas Energy Marketing Contract Dispute with Nevada Power.On December 5, 2001, Nevada Power Co. filed a
complaint at the FERC seeking reformation of the purchase price of energy under a contract it had entered with Mirant Americas Energy Marketing, claiming that the prices under that contract were
unjust and unreasonable because, when it entered into the contract, western power markets were dysfunctional and non-competitive markets. On June 25, 2003, the FERC dismissed this
complaint. Nevada Power appealed that dismissal to the United States Court of Appeals for the Ninth Circuit, which on December 19, 2006, reversed the dismissal of the complaint and remanded the
proceeding to the FERC. On September 25, 2007, the United States Supreme Court granted a petition for writ of certiorari asking that it review that decision by the Ninth Circuit. The sales made
under the contract with Nevada Power have been completed, and the Company expects that any refund claim related to that contract, if not now barred, will be addressed in the Chapter 11
proceedings.

Mirant Americas Energy Marketing Contract Dispute with Southern California Water.On December 21, 2001, Southern
California Water Co. filed a complaint at the FERC seeking reformation of the purchase price of energy under a long-term contract it had entered with Mirant Americas Energy Marketing,
claiming that the prices under that contract were unjust and unreasonable because, when it entered the contract, western power markets were dysfunctional and non-competitive markets. The
contract was for the purchase of 15 MWs during the period April 1, 2001, through December 31, 2006. On June 25, 2003, the FERC dismissed this proceeding. Southern
California Water appealed that dismissal to the United States Court of Appeals for the Ninth Circuit, which on December 19, 2006, reversed the dismissal of the complaint and remanded the
proceeding to the FERC. On September 25, 2007, the United States Supreme Court granted a petition for writ of certiorari asking that it review that decision by the Ninth Circuit. Upon the
transfer of the assets of the trading and marketing business to Mirant Energy Trading under the Plan, Mirant Energy Trading assumed Mirant Americas Energy Marketing's contract obligations to Southern
California Water Company, including any potential refund obligations.

Environmental Matters

EPA Information Request.In January 2001, the EPA issued a request for information to Mirant concerning the
implications under the EPA's NSR regulations promulgated under the Clean Air Act of past repair and maintenance activities at the Potomac River plant in Virginia and the Chalk Point, Dickerson and
Morgantown plants in Maryland. The requested information concerns the period of operations that predates the Company subsidiaries' ownership and lease of those plants. Mirant

36

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responded
fully to this request. Under the APSA, Pepco is responsible for fines and penalties arising from any violation associated with operations prior to the acquisition or lease of the plants by
subsidiaries of the Company. If a violation is determined to have occurred at any of the plants, the Company subsidiary owning or leasing the plant may be responsible for the cost of purchasing and
installing emissions control equipment, the cost of which may be material. The Company's subsidiaries owning or leasing the Chalk Point, Dickerson and Morgantown plants in Maryland are installing a
variety of emissions control equipment on those plants to comply with the Maryland Healthy Air Act, but that equipment may not include all of the emissions control equipment that could be required if
a violation of the EPA's NSR regulations is determined to have occurred at one or more of those plants. If such a violation is determined to have occurred after the Company's subsidiaries acquired or
leased the plants or, if occurring prior to the acquisition or lease, is determined to constitute a continuing violation, the Company's subsidiary owning or leasing the plant at issue could also be
subject to fines and penalties by the state or federal government for the period after its acquisition or lease of the plant, the cost of which may be material, although applicable bankruptcy law may
bar such liability for periods prior to January 3, 2006, when the Plan became effective for the Company and its subsidiaries that own or lease these plants.

Mirant Potomac River Operations.On May 23, 2007, the Virginia State Air Pollution Control Board directed the Director
of the Virginia DEQ to issue a state operating permit (the "Permit") for the Potomac River plant that significantly restricted the plant's operations by imposing stringent limits on its SO2 emissions,
which limits Mirant Potomac River views as unreasonably low and arbitrary. The Virginia DEQ issued the Permit as directed on June 1, 2007. In June 2007, Mirant Potomac River filed a
petition for appeal in the Circuit Court of the City of Richmond, Virginia seeking to set aside the Virginia State Air Pollution Control Board's directive of May 23, 2007, and the Permit issued
by the Virginia DEQ on June 1, 2007. The Virginia State Air Pollution Control Board stated that the Permit is intended to be supplanted by a more comprehensive permit that it expects to issue.
On October 19, 2007, the Virginia DEQ published a draft of this more comprehensive permit to solicit comments from the public. If adopted as proposed, this comprehensive permit would also
impose stringent limits on SO2 emissions that would limit Mirant Potomac to operating no more than three of the five units of the Potomac River generating facility at any one time.

New York State Administrative Claim.On January 24, 2006, the State of New York and the NYSDEC filed a
notice of administrative claims in the Mirant Debtors' Chapter 11 proceedings asserting a claim seeking to require the Mirant Debtors to provide funding to the Company's subsidiaries owning
generating facilities in New York to satisfy certain specified environmental compliance obligations. The State of New York cited various existing outstanding matters between the State
and the Company's subsidiaries owning generating facilities in New York related to compliance with environmental laws and regulations. The State of New York and the NYSDEC executed a
stipulated order with the Company's New York subsidiaries and the other Mirant Debtors to stay resolution of this administrative claim. That stipulated order was approved by the Bankruptcy
Court on February 23, 2006. Although this administrative claim remains stayed, the bulk of the existing outstanding matters upon which the claim was based have been separately resolved with the
NYSDEC.

Riverkeeper Suit Against Mirant Lovett.On March 11, 2005, Riverkeeper, Inc. filed suit against Mirant Lovett
in the United States District Court for the Southern District of New York under the Clean Water Act. The suit alleges that Mirant Lovett failed to implement a marine life exclusion system at
its Lovett generating plant and to perform monitoring for the exclusion of certain aquatic organisms from the plant's cooling water intake structures in violation of Mirant Lovett's water discharge
permit issued by the State of New York. The plaintiff requested the court to enjoin Mirant Lovett from continuing to operate the Lovett generating plant in a manner that allegedly violates the
Clean Water Act, to impose civil penalties of $32,500 per day of violation, and to award the plaintiff attorneys' fees. Mirant Lovett's view is that it has complied with the terms of its water
discharge permit, as amended

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by
a Consent Order entered June 29, 2004. On April 20, 2005, the district court approved a stipulation agreed to by the plaintiff and Mirant Lovett that has stayed the suit until
60 days after the entry of the order by the Bankruptcy Court confirming the plan of reorganization for Mirant Lovett became final and non-appealable.

Notices of Intent to Sue for Alleged Violations of the Endangered Species Act.Mirant and Mirant Delta have received two
letters, one dated September 27, 2007, sent on behalf of the Coalition for a
Sustainable Delta, four water districts, and an individual and the second dated October 16, 2007, sent on behalf of San Francisco Baykeeper (collectively with the parties sending the
September 27, 2007, letter, the "Noticing Parties"), providing notice that the Noticing Parties intend to file suit alleging that Mirant Delta has violated, and continues to violate, the
federal Endangered Species Act through the operation of its Contra Costa and Pittsburg generating plants. The Noticing Parties contend that the plants use of water drawn from the
Sacramento-San Joaquin Delta for cooling purposes results in harm to four species of fish listed as endangered species. The Noticing Parties assert that a biological opinion and incidental
take statement issued by the National Marine Fisheries Service on October 17, 2002, for three of the fish species and a biological opinion and incidental take statement issued by the United
States Fish and Wildlife Service on November 4, 2002, for the fourth fish species have not been complied with by Mirant Delta and no longer apply to permit the impacts on the four fish species
caused by the operation of the Contra Costa and Pittsburg generating plants. Mirant Delta disputes the allegations made by the Noticing Parties.

Pepco Assertion of Breach of Local Area Support Agreement

In 2005, computer modeling predicted that emissions from the Potomac River plant had the potential to contribute to localized, modeled instances of exceedances of
the NAAQS for SO2, NOx and PM10 under certain conditions. On August 24, 2005, Mirant Potomac River temporarily halted power production at all five units of the Potomac River generating facility
in response to a directive from the Virginia DEQ. Following that action, Mirant Potomac River notified Pepco that it considered the circumstances resulting in the shutdown of the plant to constitute a
force majeure event under the Local Area Support Agreement dated December 19, 2000, between Pepco and Mirant Potomac River. That agreement imposes obligations upon Mirant Potomac River to
dispatch the Potomac River plant under certain conditions, to give Pepco several years advance notice of any indefinite or permanent shutdown of the plant and to pay all or a portion of certain costs
incurred by Pepco for transmission additions or upgrades when an indefinite or permanent shutdown of the plant occurs prior to December 19, 2010. Pepco responded that it considered Mirant
Potomac River's shutdown of the plant to be a material breach of the Local Area Support Agreement that was not excused under the force majeure provisions of the agreement. Pepco contended that Mirant
Potomac River's actions entitled Pepco to recover as damages the cost of constructing additional transmission facilities. Pepco, on January 24, 2006, filed a notice of administrative claims in
Mirant's bankruptcy proceedings asserting that Mirant Potomac River's shutdown of the Potomac River plant caused Mirant Potomac River to be liable for the cost of such transmission facilities, which
cost it estimated to be in excess of $70 million.

The
Settlement Agreement entered into on May 30, 2006, by the Mirant Settling Parties and the Pepco Settling Parties that became effective August 10, 2007, resolved all
claims asserted by Pepco against Mirant Potomac River arising out of the suspension of operations of the Potomac River plant in August 2005. Under the Settlement Agreement, Pepco released all
claims it asserted against Mirant Potomac River related to the shutdown of the plant in return for the claim Pepco received in the Mirant bankruptcy proceeding.

Other Legal Matters

The Company is involved in various other claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the Company's financial position, results of operations or cash flows.

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

The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto, which are included
elsewhere in this report.

Overview

Our continuing operations generate revenues primarily through the production of electricity. Those operations consist of the ownership, long-term
lease and operation of 10,301 MW of power generation facilities located in markets in the Mid-Atlantic and Northeast regions and in California, and energy trading and marketing
operations based in Atlanta, Georgia.

On
May 1, 2007, we completed the sale of our Zeeland and Bosque natural gas-fired plants to Broadway Generating Company, LLC, a member of the LS Power Group. We
recognized a cumulative loss of $8 million related to the sale. In the third quarter of 2006, we recorded an impairment loss of $71 million to reduce the carrying value of the assets
held for sale to the estimated fair value. In subsequent periods, we recorded reductions to the impairment loss of approximately $63 million due to the results of the sale process. The net
proceeds from the sale, after paying transaction costs were $524 million. In addition, on May 7, 2007, we completed the sale of Mirant NY-Gen to Alliance Energy
Renewables, LLC and recognized a gain of $8 million.

We
are a direct wholly-owned subsidiary of Mirant Americas Generation and an indirect wholly-owned subsidiary of Mirant. On November 9, 2007, Mirant announced a conclusion to the
strategic review process it had announced on April 9, 2007. Mirant plans to return a total of $4.6 billion of excess cash to its stockholders. The first stage of the return of cash will
consist of an accelerated share repurchase program for $1 billion together with open market purchases for an additional $1 billion. Mirant will determine how best to return additional
cash upon completion of the accelerated share repurchase.

Our
Mid-Atlantic operations contributed 73% of our $474 million of realized gross margin for the three months ended September 30, 2007, and 63% of our
$1.278 billion of realized gross margin for the nine months ended September 30, 2007. Our power plants located in the
Mid-Atlantic region that sell power into the PJM market participate in the reliability pricing model ("RPM") forward capacity market, which is designed to provide prices for capacity that
are intended to ensure that adequate resources are in place to meet the region's demand requirements. PJM has conducted three RPM auctions. The results of the PJM RPM capacity auctions for the SWMAAC
delivery area, where our plants are located, were as follows:

Auction Date

Delivery of Capacity Period

Resource Clearing Price per MW-dayApril 2007

June 1, 2007 to May 31, 2008

$
188.54July 2007

June 1, 2008 to May 31, 2009

$
210.11October 2007

June 1, 2009 to May 31, 2010

$
237.33


An additional auction will be held in January 2008 for the June 1, 2010 to May 31, 2011 period. Thereafter, annual auctions will be conducted
to procure capacity three years prior to each delivery period beginning in May 2008, for delivery of capacity from June 1, 2011 to May 31, 2012.

On
July 30, 2007, our subsidiaries Mirant Mid-Atlantic and Mirant Chalk Point entered into an agreement with Stone & Webster, Inc. for engineering,
procurement and construction services relating to the installation of air quality control systems at the Morgantown, Dickerson and Chalk Point generating stations. The expected cost under the
agreement is approximately $1.1 billion and is a part of total capital expenditures of approximately $1.6 billion that we expect to incur through 2009 to comply with the requirements for
SO2 and NOx emissions under the Maryland Healthy Air Act.

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Results of Operations

The following discussion of our performance is organized by reportable segment, which is consistent with the way we manage our business.

Consolidated Financial Performance

We reported net income of $298 million and $61 million for the three and nine months ended September 30, 2007, respectively, compared to
$245 million and $823 million for the same periods in 2006.

Income
from continuing operations was $298 million and $63 million for the three and nine months ended September 30, 2007, respectively, compared to
$305 million and $884 million for the comparable periods in 2006. Significant factors contributing to the change for the 2007 periods as compared to the 2006 periods were:



40

---





Our
operating revenues and expenses from affiliates and nonaffiliates aggregated by classification are detailed as follows (in millions):

|                                                                                    |              | Three Months Ended September 30, |     |    |   | Nine Months Ended September 30, |    |   |     
|----------------------------------------------------------------------------------- | ------------ | -------------------------------- | --- | -- | - | ------------------------------- | -- | - | ----
|
|
|Realized gross margin                                                               |              | $                                | 474 |    | $ | 401                             |    | $ | 73  
|Unrealized gross margin                                                             |              |                                  | 18  |    |   | 216                             |    |   | (198
|                                                                                    |              |                                  |     |    |   |                                 |    |   |     
|Total gross margin                                                                  |              |                                  | 492 |    |   | 617                             |    |   | (125
|                                                                                    |              |                                  |     |    |   |                                 |    |   |     
|Operating expenses:                                                                 |              |                                  |     |    |   |                                 |    |   |     
|Operations and maintenance                                                          |              |                                  |     |    |   |                                 |    |   |     
|                                                                                    | Affiliate    |                                  |     | 76 |   |                                 | 72 |   |     
|                                                                                    | Nonaffiliate |                                  |     | 83 |   |                                 | 84 |   |     
|Depreciation and amortization                                                       |              |                                  | 30  |    |   | 32                              |    |   | (2  
|Impairment losses                                                                   |              |                                  |    |    |   | 118                             |    |   | (118
|Gain on sales of assets, net                                                        |              |                                  |    |    |   | (3                              | )  |   | 3   
|                                                                                    |              |                                  |     |    |   |                                 |    |   |     
|Total operating expenses                                                            |              |                                  | 189 |    |   | 303                             |    |   | (114
|                                                                                    |              |                                  |     |    |   |                                 |    |   |     
|Operating income                                                                    |              |                                  | 303 |    |   | 314                             |    |   | (11 
|                                                                                    |              |                                  |     |    |   |                                 |    |   |     
|Other expense (income), net                                                         |              |                                  |     |    |   |                                 |    |   |     
|                                                                                    | Affiliate    |                                  |     | (1 | ) |                                 |   |   |     
|                                                                                    | Nonaffiliate |                                  |     | 6  |   |                                 | 8  |   |     
|                                                                                    |              |                                  |     |    |   |                                 |    |   |     
|Income from continuing operations before reorganization items, net and income taxes |              |                                  | 298 |    |   | 306                             |    |   | (8  
|Reorganization items, net                                                           |              |                                  |    |    |   |                                |    |   |    
|Provision for income taxes                                                          |              |                                  |    |    |   | 1                               |    |   | (1  
|                                                                                    |              |                                  |     |    |   |                                 |    |   |     
|Income from continuing operations                                                   |              |                                  | 298 |    |   | 305                             |    |   | (7  
|Loss from discontinued operations                                                   |              |                                  |    |    |   | (60                             | )  |   | 60  
|                                                                                    |              |                                  |     |    |   |                                 |    |   |     
|Net income                                                                          |              | $                                | 298 |    | $ | 245                             |    | $ | 53  
|                                                                                    |              |                                  |     |    |   |                                 |    |   |     

In the tables below, the Mid-Atlantic region includes our Chalk Point, Morgantown, Dickerson and Potomac River facilities. The Northeast region
includes our Bowline, Canal, Lovett, Kendall, Martha's Vineyard and Wyman facilities. The California region includes our Pittsburg, Contra Costa and Potrero facilities. Other Operations includes
proprietary trading, fuel oil management activities, expenses, interest on our debt and interest income on our invested cash balances.

Operating Statistics

The following table summarizes capacity factor (average percentage of full capacity used over a specific period) by region:

Three Months Ended September 30,



Nine Months Ended September 30,Increase/
(Decrease)

Increase/
(Decrease)2007

2006

2007

2006Mid-Atlantic

41
%
44
%
(3
)%
36
%
36
%

%Northeast

25
%
22
%
3
%
24
%
18
%
6
%California

9
%
8
%
1
%
5
%
6
%
(1
)%Total

30
%
30
%

%
26
%
24
%
2
%


41

---



The following table summarizes power generation volumes by region (in gigawatt hours):

Three Months Ended September 30,



Nine Months Ended September 30,Increase/
(Decrease)

Increase/
(Decrease)2007

2006

2007

2006Mid-Atlantic

4,746

5,066

(320
)
12,541

12,385

156Northeast

1,475

1,434

41

4,389

3,564

825California

450

414

36

697

943

(246
)Total

6,671

6,914

(243
)
17,627

16,892

735


Three Months Ended September 30, 2007 versus Three Months Ended September 30, 2006

Gross Margin

The following table details realized and unrealized gross margin by operating region (in millions):

|                 |       | Three Months Ended September 30,
|---------------- | ----- | --------------------------------
|
|
|Mid-Atlantic     |       | $                               
|Northeast        |       |                                 
|California       |       |                                 
|Other Operations |       |                                 
|Eliminations     |       |                                 
|                 |       |                                 
|                 | Total |                                 
|                 |       |                                 

Gross margin for the three months ended September 30, 2007 and 2006, is further detailed as follows (in millions):

|                                     |  | Three Months Ended September 30, 2007
|------------------------------------ |  | -------------------------------------
|
|Energy                               |  | $                                    
|Contracted and capacity              |  |                                      
|Incremental realized value of hedges |  |                                      
|Unrealized gross margin              |  |                                      
|                                     |  |                                      
|Total                                |  | $                                    
|                                     |  |                                      
|
|
|Energy                               |  | $                                    
|Contracted and capacity              |  |                                      
|Incremental realized value of hedges |  |                                      
|Unrealized gross margin              |  |                                      
|                                     |  |                                      
|Total                                |  | $                                    
|                                     |  |                                      

Energy represents gross margin from the generation of electricity, sales and purchases of emissions allowances, fuel sales, purchases and handling of fuel, steam
sales and our proprietary trading and fuel oil management activities.

42

---



Contracted
and capacity represents gross margin received through RMR contracts and other installed capacity arrangements and ancillary services.

Incremental
realized value of hedges represents the actual margin upon the settlement of our power and fuel hedging derivative contracts.

Unrealized
gross margin represents the net unrealized gain or loss from our derivative contracts.

Our
gross margin for the three months ended September 30, 2007, was $492 million as compared to $617 million for the same period in 2006. The decrease in gross
margin, which includes net unrealized gains and losses from our hedging activities, is principally due to the following:

A
decrease of $198 million in unrealized gross margin was primarily due to the following:



Realized
gross margin increased $73 million primarily as a result of higher capacity revenues due principally to the introduction of the RPM capacity market in the
Mid-Atlantic region during 2007.

Mid-Atlantic

Our Mid-Atlantic segment, which accounts for approximately half of our generating capacity, includes four generation facilities with total generating
capacity of 5,256 MW. The following tables summarize our Mid-Atlantic segment (in millions):

Three Months Ended September 30,Increase/
(Decrease)2007

2006Realized gross margin

$
345

$
267

$
78Unrealized gross margin


30


186


(156
)Total gross margin


375


453


(78
)Operating expenses:Operations and maintenance


91


80


11Depreciation and amortization


21


19


2Gain on sales of assets, net





(2
)

2Total operating expenses


112


97


15Operating income


263


356


(93
)Total other income, net


(1
)




(1
)Income from continuing operations before reorganization items and income taxes

$
264

$
356

$
(92
)


43

---



Gross Margin

Three Months Ended September 30,Increase/
(Decrease)2007

2006Energy

$
243

$
239

$
4Contracted and capacity


84


12


72Incremental realized value of hedges


18


16


2Total realized gross margin


345


267


78Unrealized gross margin


30


186


(156
)Total gross margin

$
375

$
453

$
(78
)


The increase of $78 million in realized gross margin was primarily due to the following:



The
decrease of $156 million in unrealized gross margin was primarily due to the following:



Operating Expenses

The increase of $15 million in operating expenses includes an increase of $11 million in operations and maintenance expense. Of the
$11 million increase, $7 million was related to higher maintenance and environmental compliance costs in 2007 and $4 million was due to an increase in overhead allocations as a
result of Mirant's and our dispositions completed in 2007.

44

---



Northeast

Our Northeast segment is comprised of our assets located in New York and New England with total generating capacity of 2,698 MW. The following
tables summarize the operations of our Northeast segment (in millions):

Three Months Ended September 30,Increase/
(Decrease)2007

2006Realized gross margin

$
77

$
72

$
5Unrealized gross margin


(6
)

8


(14
)Total gross margin


71


80


(9
)Operating expenses:Operations and maintenance


46


53


(7
)Depreciation and amortization


6


7


(1
)Impairment losses





118


(118
)Gain on sales of assets, net





(3
)

3Total operating expenses


52


175


(123
)Operating income (loss)


19


(95
)

114Total other income, net





(2
)

2Income (loss) from continuing operations before reorganization items and income taxes

$
19

$
(93
)
$
112


Gross Margin

Three Months Ended September 30,Increase/
(Decrease)2007

2006Energy

$
36

$
41

$
(5
)Contracted and capacity


21


13


8Incremental realized value of hedges


20


18


2Total realized gross margin


77


72


5Unrealized gross margin


(6
)

8


(14
)Total gross margin

$
71

$
80

$
(9
)


The increase of $5 million in realized gross margin was primarily due to the following:



The
decrease of $14 million in unrealized gross margin was primarily due to the following:



45

---





Operating Expenses

Operating expenses decreased $123 million, primarily due to the $118 million impairment loss in 2006 on the Bowline unit 3 suspended
construction project. See Note D to the unaudited condensed consolidated financial statements for additional information related to this impairment. In addition, operations and maintenance
expense decreased $7 million primarily due to a $5 million decrease in property taxes and a $2 million decrease in maintenance costs.

California

Our California segment consists of the Pittsburg, Contra Costa and Potrero facilities with total generating capacity of 2,347 MW. The following tables
summarize our California segment (in millions):

Three Months Ended September 30,Increase/
(Decrease)2007

2006Realized gross margin

$
35

$
39

$
(4
)Unrealized gross margin





1


(1
)Total gross margin


35


40


(5
)Operating expenses:Operations and maintenance


18


17


1Depreciation and amortization


3


3


Total operating expenses


21


20


1Operating income


14


20


(6
)Total other income, net





(1
)

1Income from continuing operations before reorganization items and income taxes

$
14

$
21

$
(7
)


Gross Margin

Three Months Ended September 30,Increase/
(Decrease)2007

2006Energy

$
1

$
10

$
(9
)Contracted and capacity


34


30


4Incremental realized value of hedges





(1
)

1Total realized gross margin


35


39


(4
)Unrealized gross margin





1


(1
)Total gross margin

$
35

$
40

$
(5
)


The decrease in our energy gross margin and increase in our contracted and capacity gross margin were primarily a result of the commencement of the new tolling
agreement in the first quarter of 2007 at our Contra Costa and Pittsburg facilities. See "Item 1. Business Segments" in our Annual Report on Form 10-K for the year ended
December 31, 2006, for additional information regarding the tolling agreement.

46

---



Other Operations

Other Operations includes proprietary trading and fuel oil management. The following tables summarize our Other Operations segment (in millions):

Three Months Ended September 30,Increase/
(Decrease)2007

2006Realized gross margin

$
12

$
17

$
(5
)Unrealized gross margin


(6
)

21


(27
)Total gross margin


6


38


(32
)Operating expenses:Operations and maintenance


4


6


(2
)Depreciation and amortization





3


(3
)Gain on sales of assets, net





(1
)

1Total operating expenses


4


8


(4
)Operating income


2


30


(28
)Total other expense, net


6


11


(5
)Income (loss) from continuing operations before reorganization items and income taxes

$
(4
)
$
19

$
(23
)


Gross Margin

Three Months Ended September 30,2007

2006

DecreaseEnergy

$
12

$
17

$
(5
)Total realized gross margin


12


17


(5
)Unrealized gross margin


(6
)

21


(27
)Total gross margin

$
6

$
38

$
(32
)


The decrease of $27 million in unrealized gross margin was primarily due to the following:



Discontinued Operations

Loss from discontinued operations decreased $60 million for the three months ended September 30, 2007, as compared to the same period in 2006. In
2006, loss from discontinued operations included the results of operations of the Mirant Zeeland, Mirant Texas and Mirant NY-Gen. The decrease of $60 million was primarily due to
the disposition of these assets in the second quarter of 2007.

See
Note C to our unaudited condensed consolidated financial statements for additional information related to dispositions and discontinued operations.

47

---



Nine Months Ended September 30, 2007 versus Nine Months Ended September 30, 2006

The following table details realized and unrealized gross margin by operating region (in millions):

|                 |       | Nine Months Ended September 30,
|---------------- | ----- | -------------------------------
|
|
|Mid-Atlantic     |       | $                              
|Northeast        |       |                                
|California       |       |                                
|Other Operations |       |                                
|Eliminations     |       |                                
|                 |       |                                
|                 | Total |                                
|                 |       |                                

Gross margin for the nine months ended September 30, 2007 and 2006, is further detailed as follows (in millions):

|                                     |  | Nine Months Ended September 30, 2007 |      
|------------------------------------ |  | ------------------------------------ | -----
|
|Energy                               |  | $                                    | 552  
|Contracted and capacity              |  |                                      | 122  
|Incremental realized value of hedges |  |                                      | 134  
|Unrealized gross margin              |  |                                      | (323 
|                                     |  |                                      |      
|Total                                |  | $                                    | 485  
|                                     |  |                                      |      
|
|
|Energy                               |  | $                                    | 457  
|Contracted and capacity              |  |                                      | 31   
|Incremental realized value of hedges |  |                                      | 109  
|Unrealized gross margin              |  |                                      | 511  
|                                     |  |                                      |      
|Total                                |  | $                                    | 1,108
|                                     |  |                                      |      

Energy represents gross margin from the generation of electricity, sales and purchases of emissions allowances, fuel sales, purchases and handling of fuel, steam
sales and our proprietary trading and fuel oil management activities.

Contracted
and capacity represents gross margin received through RMR contracts and other installed capacity arrangements and ancillary services.

Incremental
realized value of hedges represents the actual margin upon the settlement of our power and fuel hedging derivative contracts.

Unrealized
gross margin represents the unrealized gain or loss from our derivative contracts.

48

---



Our
gross margin for the nine months ended September 30, 2007, was $807 million as compared to $1.626 billion for the same period in 2006. The decrease in gross
margin, which includes net unrealized gains and losses from our hedging activities, is principally due to the following:

A
decrease of $1.064 billion in unrealized gross margin was primarily due to the following:



An
increase of $245 million in realized gross margin primarily as a result of higher capacity revenues, higher energy prices and higher generation volumes.

Mid-Atlantic

Our Mid-Atlantic segment, which accounts for approximately half of our generating capacity, includes four generation facilities with total generating
capacity of 5,256 MW. The following tables summarize our Mid-Atlantic segment (in millions):

Nine Months Ended September 30,Increase/
(Decrease)2007

2006Realized gross margin

$
808

$
597

$
211Unrealized gross margin


(323
)

511


(834
)Total gross margin


485


1,108


(623
)Operating expenses:Operations and maintenance


265


253


12Depreciation and amortization


60


55


5Gain on sales of assets, net


(2
)

(7
)

5Total operating expenses


323


301


22Operating income


162


807


(645
)Total other income, net


(4
)

(3
)

(1
)Income from continuing operations before reorganization items and income taxes

$
166

$
810

$
(644
)


49

---



Gross Margin

Nine Months Ended September 30,Increase/
(Decrease)2007

2006Energy

$
552

$
457

$
95Contracted and capacity


122


31


91Incremental realized value of hedges


134


109


25Total realized gross margin


808


597


211Unrealized gross margin


(323
)

511


(834
)Total gross margin

$
485

$
1,108

$
(623
)


The increase of $211 million in realized gross margin was primarily due to the following:



The
decrease of $834 million in unrealized gross margin was primarily due to the following:



Operating Expenses

The increase of $22 million in operating expenses includes an increase of $12 million in operations and maintenance expense. Of the
$12 million increase, $10 million was related to higher maintenance and environmental compliance costs in 2007 as compared to the same period in 2006.

50

---



Northeast

Our Northeast segment is comprised of our assets located in New York and New England with total generating capacity of 2,698 MW. The following
tables summarize the operations of our Northeast segment (in millions):

Nine Months Ended September 30,Increase/
(Decrease)2007

2006Realized gross margin

$
220

$
239

$
(19
)Unrealized gross margin


(38
)

41


(79
)Total gross margin


182


280


(98
)Operating expenses:Operations and maintenance


138


165


(27
)Depreciation and amortization


19


18


1Impairment losses


175


118


57Gain on sales of assets, net


(25
)

(46
)

21Total operating expenses


307


255


52Operating income (loss)


(125
)

25


(150
)Total other income, net


(6
)

(1
)

(5
)Income (loss) from continuing operations before reorganization items and income taxes

$
(119
)
$
26

$
(145
)


Gross Margin

Nine Months Ended September 30,Increase/
(Decrease)2007

2006Energy

$
91

$
101

$
(10
)Contracted and capacity


66


29


37Incremental realized value of hedges


63


109


(46
)Total realized gross margin


220


239


(19
)Unrealized gross margin


(38
)

41


(79
)Total gross margin

$
182

$
280

$
(98
)


The decrease of $19 million in realized gross margin was primarily due to the following:



51

---





The
decrease of $79 million in unrealized gross margin was primarily due to the following:



Operating Expenses

Operating expenses increased $52 million primarily due to the following:



California

Our California segment consists of the Pittsburg, Contra Costa and Potrero facilities with total generating capacity of 2,347 MW. The following tables
summarize our California segment (in millions):

Nine Months Ended September 30,Increase/
(Decrease)2007

2006Realized gross margin

$
98

$
93

$
5Unrealized gross margin





2


(2
)Total gross margin


98


95


3Operating expenses:Operations and maintenance


54


47


7Depreciation and amortization


10


10


Gain on sales of assets, net


(2
)




(2
)Total operating expenses


62


57


5Operating income


36


38


(2
)Total other income, net


(5
)

(2
)

(3
)Income from continuing operations before reorganization items and income taxes

$
41

$
40

$
1


52

---



Gross Margin

Nine Months Ended September 30,Increase/
(Decrease)2007

2006Energy

$
3

$
13

$
(10
)Contracted and capacity


95


82


13Incremental realized value of hedges





(2
)

2Total realized gross margin


98


93


5Unrealized gross margin





2


(2
)Total gross margin

$
98

$
95

$
3


The increase in our contracted and capacity gross margin and decrease in our energy gross margin were primarily a result of the commencement of a new tolling
agreement in the first quarter of 2007 at our Contra Costa and Pittsburg facilities. See "Item 1. Business Segments" in our Annual Report on Form 10-K for the year ended
December 31, 2006, for additional information regarding the tolling agreement.

Other Operations

Other Operations includes proprietary trading and fuel oil management. The following tables summarize our Other Operations segment (in millions):

Nine Months Ended September 30,Increase/
(Decrease)2007

2006Realized gross margin

$
138

$
66

$
72Unrealized gross margin


(110
)

39


(149
)Total gross margin


28


105


(77
)Operating expenses:Operations and maintenance


14


17


(3
)Depreciation and amortization





8


(8
)Gain on sale of assets, net





(1
)

1Total operating expenses


14


24


(10
)Operating income


14


81


(67
)Total other expense, net


45


64


(19
)Income (loss) from continuing operations before reorganization items and income taxes

$
(31
)
$
17

$
(48
)


Gross Margin

Nine Months Ended September 30,Increase/
(Decrease)2007

2006Energy

$
138

$
66

$
72Total realized gross margin


138


66


72Unrealized gross margin


(110
)

39


(149
)Total gross margin

$
28

$
105

$
(77
)


53

---



The decrease of $149 million in unrealized gross margin was primarily due to the following:



The
increase of $72 million in realized gross margin was due to the increase of in energy related to our proprietary trading and fuel oil management activities as favorable
positions entered into prior to 2007 were settled in the current period.

Operating Expenses

Operating expenses decreased $10 million primarily due to a decrease of $8 million in depreciation expense.

Other Expense, Net

Other expense, net decreased $19 million primarily due to the following:



Discontinued Operations

For the nine months ended September 30, 2007 and 2006, loss from discontinued operations was $2 million and $61 million, respectively, and
included the results of operations of Mirant Zeeland, Mirant Texas and Mirant NY-Gen. See Note C to our unaudited condensed consolidated financial statements for additional
information related to discontinued operations.

Financial Condition

Liquidity and Capital Resources

Overview

Our liquidity and capital requirements are primarily a function of the ability of our subsidiaries to pay dividends and our debt maturities and our subsidiaries'
lease and debt service requirements, capital expenditures, collateral requirements, fuel procurement and power sale contract obligations, legal settlements and working capital needs. Net cash flow
provided by operating activities for the nine months ended September 30, 2007, totaled $661 million compared to $1.122 billion for the same period in 2006.

54

---



Debtor-in-Possession Financing for New York Subsidiaries

Mirant North America and Mirant Americas Energy Marketing, (the "Primary DIP Lenders") entered into an agreement (the "Primary New York DIP Agreement") to
make secured debtor-in-possession financing in an amount of (i) $20 million, plus (ii) an amount equal to the amount of credit support provided on behalf
of Mirant New York, Mirant Bowline, Mirant Lovett, and Hudson Valley Gas (collectively, the "New York DIP Borrowers"), to the extent such amounts were collateralized with cash or cash
equivalents by the New York DIP Borrowers. The New York DIP Borrowers had posted $21 million cash collateral with Mirant Energy Trading (successor to Mirant Americas Energy
Marketing) in accordance with the March 31, 2007, collateral allocation performed in good faith by Mirant Energy Trading. This cash collateral amount was returned to the New York DIP
Borrowers and the Primary New York DIP Agreements were terminated in conjunction with the Emerging New York Entities' emergence from bankruptcy on April 16, 2007.

The
Bankruptcy Court approved a debtor-in-possession loan to Mirant NY-Gen from Mirant Americas under which Mirant Americas, subject to certain
conditions, would lend up to $16.5 million to Mirant NY-Gen to provide funding for the repairs on the Swinging Bridge dam. When Mirant NY-Gen emerged from bankruptcy and
was sold on May 7, 2007, all claims held by Mirant NY-Gen were assigned to Mirant Americas, Mirant Americas released all of its claims and liens against Mirant NY-Gen,
and this loan was cancelled.

On
April 18, 2007, a new DIP Agreement was established between Mirant Lovett and Mirant Americas to make secured debtor-in-possession financing in an
amount of $20 million. The financing has a stated maturity of 180 days and bears interest at a rate of LIBOR plus 4.25%. At September 30, 2007, there were no amounts outstanding
under this loan. In addition, Mirant Lovett is required to post cash collateral with Mirant Energy Trading to collateralize Mirant Energy Trading for collateral that Mirant Energy Trading has posted
on Mirant Lovett's behalf. At September 30, 2007, Mirant Lovett was not required to post any collateral with Mirant Energy Trading. The DIP Agreement was terminated in conjunction with Lovett's
emergence from bankruptcy on October 2, 2007.

Cash Flows

Continuing Operations

Operating Activities.Our cash provided by operating activities is affected by seasonality, changes in energy prices and
fluctuations in our working capital requirements. Cash provided by operating activities from continuing operations decreased $426 million for the nine months ended September 30, 2007,
compared to the same period in 2006, primarily due to the following:



55

---





Investing Activities.Net cash used in investing activities from continuing operations was $351 million for the nine
months ended September 30, 2007, compared to net cash provided by investing activities of $147 million the same period in 2006. This difference was primarily due to the following:



Financing Activities.Net cash used in financing activities from continuing operations was $619 million for the nine
months ended September 30, 2007, compared to $880 million for the same period in 2006. This difference of $261 million was primarily due to the following:



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Discontinued Operations

Operating Activities.Cash used in operating activities from discontinued operations was $14 million for the nine
months ended September 30, 2007, compared to cash provided by operating activities of $21 million for the same period in 2006. In 2006, operating activities included cash flows from the
Zeeland and Bosque natural gas-fired plants and Mirant NY-Gen for the entire nine month period. In 2007, operating activities included cash flows from the Zeeland and Bosque
natural gas-fired plants and Mirant NY-Gen through their respective dates of sale.

Investing Activities.Net cash provided by investing activities from discontinued operations was $502 million for the
nine months ended September 30, 2007, compared to net cash used in investing activities of $4 million in 2006. The difference was primarily due to proceeds from the sale of the Zeeland
and Bosque natural gas-fired plants and Mirant NY-Gen in the second quarter of 2007.

Total Cash, Cash Equivalents and Credit Facility Availability

At September 30, 2007, we had total cash, cash equivalents, and credit facility availability of approximately $1.665 billion. The table below sets
forth total cash, cash equivalents and availability of credit facilities of Mirant North America and its subsidiaries (in millions):

At
September 30, 2007

At
December 31, 2006Cash and Cash Equivalents:Mirant North America

$
695

$
675Mirant Mid-Atlantic


251


75Total cash and cash equivalents


946


750Less: Cash restricted due to bankruptcy of New York entities and reserved for working capital and other purposes


7


99Total available cash and cash equivalents


939


651Available under credit facilities


726


796Total cash, cash equivalents and credit facilities availability


1,665

$
1,447Cash and cash equivalents of discontinued operations

$


$
3


We consider all short-term investments with an original maturity of three months or less to be cash equivalents. At September 30, 2007, except
for amounts held in bank accounts to cover upcoming payables, all of our cash and cash equivalents were invested in AAA-rated money market funds. During the fourth quarter of 2007, we
transferred all of our cash investments into AAA-rated U.S. Treasury money market funds.

Except
for existing cash on hand, we are dependent on the distributions and dividends of our subsidiaries for liquidity. Our ability and the ability of our subsidiary Mirant
Mid-Atlantic to pay distributions and dividends is restricted under the terms of our debt agreements and leverage lease documentation, respectively. At September 30, 2007, we had
distributed to Mirant Americas Generation, all available cash that was permitted to be distributed under the terms of our debt agreements, leaving us and our subsidiaries with approximately
$946 million. Approximately $251 million of such amount was held by Mirant Mid-Atlantic which, as of September 30, 2007, met the ratio tests under the leveraged lease
documents for distribution to us. After taking into account our financial results for the nine months ended September 30, 2007, we expect to be able to distribute approximately
$166 million to Mirant Americas Generation in November 2007.

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Mirant
Lovett emerged from bankruptcy on October 2, 2007. As a result, on this date, approximately $7 million of cash at Mirant Lovett was no longer considered restricted,
but will be subject to our debt agreement restrictions described above.

Cash Collateral and Letters of Credit

In order to sell power and purchase fuel in the forward markets and perform other energy trading and marketing activities, we are often required to provide trade
credit support to our counterparties or make deposits with brokers. In addition, we are often required to provide cash collateral or letters of credit for access to the transmission grid, to
participate in power pools, to fund debt service reserves and for other operating activities. Trade credit support includes cash collateral, letters of credit and financial guarantees. In the event
that we default, the counterparty can draw on a letter of credit or apply cash collateral held to satisfy the existing amounts outstanding under an open contract. At September 30, 2007, our
outstanding issued letters of credit totaled $274 million.

The
following table summarizes cash collateral posted with counterparties and brokers and letters of credit issued as of September 30, 2007 and December 31, 2006
(in millions):

At
September 30, 2007

At
December 31, 2006Continuing operations:Cash collateral postedenergy trading and marketing

$
117

$
27Cash collateral postedother operating activities


11


11Letters of creditenergy trading and marketing


88


100Letters of creditdebt service and rent reserves


75


84Letters of creditother operating activities


111


15402


237Discontinued operations:Assets held for saleletters of credit





5Total

$
402

$
242


Debt Obligations, Off-Balance Sheet Arrangements and Contractual Obligations

The following is a significant change to our debt obligations, off-balance sheet arrangements and contractual obligations as of September 30,
2007, from those presented in our Annual Report on Form 10-K for the year ended December 31, 2006:

On
July 30, 2007, we entered into an agreement related to the installation of air quality control systems at our Morgantown, Dickerson and Chalk Point generation facilities for a
target cost of approximately $1.1 billion.

Other Developments

Climate change.Concern over climate change has led to significant legislative and regulatory efforts to limit greenhouse gas
emissions. One such effort is the Regional Greenhouse Gas Initiative (the "RGGI"), which is a multi-state regional initiative that uses a regional cap-and-trade program to
reduce CO2 emissions from power plants of 25 MW or greater. The program aims to stabilize CO2 emissions to current levels from 2009 to 2015. This is to be followed by a 10% reduction in
emissions by 2019. In August 2006, seven states in the Northeast executed the RGGI memorandum of understanding indicating their intent to implement the RGGI. Three additional states have since
joined the RGGI. At this time, our assets in Maryland, Massachusetts and New York will be affected. In

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August 2007,
the Massachusetts Department of Environmental Protection and the Massachusetts Department of Energy Resources proposed regulations to implement the RGGI. The NYSDEC and the
New York State Energy Research and Development Authority issued proposed regulations to implement the RGGI in October 2007. Also in October 2007, the Maryland Department of the
Environment issued a draft of regulations to be proposed to implement the RGGI, and it is expected to issue actual proposed regulations prior to the end of 2007. These proposed and draft regulations,
if adopted in their current form, would require emitters of CO2 in each state to obtain allowances to emit CO2. No allowances would be granted to existing sources of such emissions, such as the
generating facilities owned by our subsidiaries in Maryland, Massachusetts and New York. Instead, allowances would be made available for such facilities only by purchase through an auction
process conducted by the state or through subsequent purchase from a party who held the allowances that had been sold through the auction. We and a number of other parties have submitted comments on
the proposed regulations in Massachusetts, and we expect to comment on the proposed rules recently issued in New York and to be issued in Maryland. The final form of the regulations in each
state and when they will take effect are uncertain. We are continuing to evaluate our options to comply with the RGGI, but implementation of the RGGI in Maryland, Massachusetts and New York
could have a material impact upon our operations or our operating costs depending upon the availability and cost of emissions allowances and the extent to which such costs may be offset by higher
market prices resulting from market participants seeking to recover increases in operating costs caused by the RGGI.

Virginia CAIR Implementation.In April 2006, Virginia enacted legislation, which among other things granted the
Virginia State Air Pollution Control Board the discretion to prohibit electric generating facilities located in a non-attainment area from purchasing SO2 and NOx allowances to achieve
compliance under the CAIR. On October 10, 2007, the State Air Pollution Control Board orally approved regulations that it interprets as prohibiting the purchase of SO2 and NOx allowances by
facilities in non-attainment areas to satisfy the requirements of the CAIR as implemented by Virginia by imposing a cap on emissions equal to the number of allowances allocated under the
CAIR. These regulations are expected to be published in the near future. The Potomac River generating facility is located in a non-attainment area for ozone and PM2.5. Application of these
regulations, if not modified or waived, will reduce our flexibility in complying with
the CAIR in Virginia beginning in 2009 and could result in operating restrictions for our Potomac River generating facility.

Critical Accounting Estimates

The sections below contain material updates to our summary of critical accounting estimates included under Item 7, Management's Discussion and Analysis of
Results of Operations and Financial Condition, in our Annual Report on Form 10-K for the year ended December 31, 2006.

Long-Lived Asset Impairments

Nature of Estimates Required.We evaluate our long-lived assets, including goodwill and intangible assets for
impairment in accordance with applicable accounting guidance. The amount of an impairment charge is calculated as the excess of the asset's carrying value over its fair value, which generally
represents the discounted expected future cash flows attributable to the asset or in the case of assets we expect to sell, at fair value less costs to sell.

SFAS
No. 144 requires management to recognize an impairment charge if the sum of the undiscounted expected future cash flows from a long-lived asset or definite-lived
intangible is less than the carrying value of that asset. We evaluate our long-lived assets (property, plant and equipment) and definite-lived intangibles for impairment whenever
indicators of impairment exist or when we commit to sell the asset. These evaluations of long-lived assets and definite-lived intangibles may result from significant decreases in the
market price of an asset, a significant adverse change in the extent or manner in which an asset is being used or in its physical condition, a significant adverse change in legal

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factors
or in the business climate that could affect the value of an asset, as well as other economic or operations analyses. If the carrying amount is not recoverable, an impairment charge is
recorded.

Key Assumptions and Approach Used.The fair value of an asset is the amount at which the asset could be bought or sold in a
current transaction between willing parties, that is, other than in a forced or liquidation sale. Quoted market prices in active markets are the best evidence of fair value and are used as the basis
for the measurement, when available. In the absence of quoted prices for identical or
similar assets, fair value is estimated using various internal and external valuation methods. These methods include discounted cash flow analyses and reviewing available information on comparable
transactions. The determination of fair value requires management to apply judgment in estimating future energy prices, environmental and maintenance expenditures and other cash flows. Our estimates
of the fair value of the assets include significant assumptions about the timing of future cash flows, remaining useful lives and selecting a discount rate that reflects the risk inherent in future
cash flows.

As
a result of entering into the amendment to the 2003 Consent Decree and the Tax Assessments Agreement, we tested the recoverability of the Lovett facility under SFAS No. 144 in
the second quarter of 2007. Our estimate of cash flows related to our impairment analysis of our Lovett generation facility involved considering scenarios for the future expected operation of the
Lovett facility. The most likely scenario considered was the shut down of unit 5 by April 30, 2008, according to the amended 2003 Consent Decree. We also considered a scenario that
assumes operations, utilizing coal as the primary fuel source, through 2012 to allow the Lovett facility to continue to contribute to the reliability of the electric system of the State of
New York. As a result of the analysis, we recorded an impairment of long-lived assets of $175 million in the second quarter of 2007 to reduce the carrying value of the Lovett
facility to its estimated fair value.

Effect if Different Assumptions Used.The estimates and assumptions used to determine whether an impairment exists are
subject to a high degree of uncertainty. The estimated fair value of an asset would change if different estimates and assumptions were used in our applied valuation techniques, including estimated
undiscounted cash flows, discount rates and remaining useful lives for assets held and used.

See
Note DImpairments on Assets Held and Usedin the notes to the unaudited condensed consolidated financial
statements where further discussed.

Income Taxes

We are a limited liability company treated as a branch for income tax purposes. As a result, Mirant Americas and Mirant have direct liability for the majority of
the federal and state income taxes relating to our operations. Through December 31, 2005, we have allocated current and deferred income taxes to each regarded corporate member entity of our
consolidated group as if each regarded corporate entity member were a single taxpayer utilizing the asset and liability method to account for income taxes except with respect to recognizing certain
current period tax benefits. Specifically, we did not record current period tax benefits on each regarded corporate entity's ability to carry back its separate company current year net operating loss
as realization of such losses were dependent on reimbursements from Mirant, which were at Mirant's discretion under the tax sharing agreement. Deferred tax assets and liabilities are recognized for
future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and net tax operating losses and
tax credit carryforwards. When necessary, deferred tax assets are reduced by a valuation allowance to reflect the amount that is estimated to be recoverable. In assessing the recoverability of our
deferred tax assets, we consider whether it is likely that some portion or all of the deferred tax assets will be realized. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences

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are
expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enacted change.

The
determination of a valuation allowance requires significant judgment as to the generation of taxable income during future periods for which temporary differences are expected to be
deductible. In making this determination, management considers all available positive and negative evidence affecting specific deferred tax assets, including our past and anticipated future
performance, the reversal of deferred tax liabilities and the implementation of tax planning strategies.

Several
significant changes to our tax posture occurred as a result of the Plan. Implementation of the Plan included the conversion of certain of our regarded corporate entities to
limited liability companies coupled with the liquidation and/or merger of these regarded corporate entities into other disregarded corporate entities for income tax purposes. As a result, certain
subsidiaries previously treated as regarded corporate entities for income tax purposes have either been liquidated or converted into disregarded entities for income tax purposes pursuant to the Plan.
Additionally, certain partnerships owned by the regarded corporate entities were also liquidated, and now form part of these disregarded entities for income tax purposes. The result of the above Plan
effects was to eliminate our recording of tax expense and benefit prospectively with respect to the liquidated regarded corporate entities. Furthermore, with respect to those liquidated regarded
corporate entities, all previously existing deferred tax assets and liabilities were eliminated as of December 31, 2005. In May 2007, Mirant New York, Inc. converted to a
limited liability company, resulting in the elimination of any existing deferred tax assets and liabilities related to Mirant New York. Certain of our other subsidiaries continue
to exist as regarded corporate entities for income tax purposes, including Hudson Valley Gas, Mirant Kendall and Mirant Special Procurement, Inc.

Additionally,
we have not recognized any tax benefits relating to tax uncertainties arising in the ordinary course of business that are less than or subject to the measurement threshold
of the more-likely-than-not standard prescribed under FIN 48. These unrecognized tax benefits may be either a tax liability or an adjustment to the Company's
NOLs based on the specific facts of each tax uncertainty. We periodically assess our tax uncertainties based on the latest information available. The amount of the unrecognized tax benefit requires
management to make significant assumptions about the expected outcomes of certain tax positions included in the Company's filed or yet to be filed tax returns. See Note I to our unaudited
condensed consolidated financial statements for information about our January 1, 2007, adoption of FIN 48.

When
it emerged from bankruptcy, Mirant terminated the tax sharing agreement with its direct and indirect wholly owned regarded corporate entities. As a result, Mirant's direct and
indirect wholly owned regarded corporate entities are no longer responsible for reimbursing Mirant for their intercompany tax obligations attributable to their operations. Accordingly, our income tax
receivables and payables with Mirant or Mirant Americas were resolved pursuant to a global settlement under the Plan whereby intercompany receivables and payables received no distribution. Income tax
payables and receivables related to Mirant New York which emerged from bankruptcy on April 16, 2007, were also resolved pursuant to the Supplemental Plan.

For
those subsidiaries that continue to exist as corporate regarded entities, we allocate current and deferred income taxes to each corporate regarded entity as if such entity were a
single taxpayer utilizing the asset and liability method to account for income taxes. To the extent we provide tax expense or benefit, any related tax payable or receivable to Mirant is reclassified
to equity in the same period.

Effect if Different Assumptions Used.The amount and ultimate utilization of our remaining NOLs and pro forma NOLs will
depend on several factors, including our future financial performance and certain tax elections. At December 31, 2006, Mirant considered it to be more likely than not that it would elect
treatment under §382(l)(5). As a result of further tax planning, Mirant made the decision

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to
elect §382(l)(6) in its 2006 income tax return that was filed on September 15, 2007. As a result, our recorded deferred income tax items and pro forma deferred income tax items,
including our pre-emergence NOLs and pro forma NOLs, are presented in accordance with the §382(l)(6) treatment at September 30, 2007. This change had no net effect on
the consolidated balance sheets or consolidated statements of operations. Similarly, this change had no net effect on our pro forma deferred taxes or pro forma income tax because the increase in the
pro forma deferred tax asset NOLs was equally offset by an increase in the related pro forma deferred tax asset valuation allowance.

Under
§382(l)(6), we will be subject to an annual limitation on the use of the pre-emergence NOLs and pro forma NOLs, including the effect of net unrealized
built-in gains. The pro forma NOLs under this election will not be subject to any previous adjustments for interest accrued on debt settled with Mirant stock as required under
§382(l)(5). We also elected in our 2006 tax return to reduce the income tax basis of depreciable assets for any cancellation of debt income that arises from making the
§382(l)(6) election.

Item 3.    Quantitative and Qualitative Disclosures about Market Risk

In connection with our power generating business, we are exposed to energy commodity price risk associated with the acquisition of fuel needed to generate
electricity, as well as the electricity produced and sold. A portion of our fuel requirements is purchased in the spot market and a portion of the electricity we produce also is sold in the spot
market. In addition, the open positions in our proprietary trading and fuel management portfolios expose us to risks associated with the changes in energy commodity prices. As a result, our financial
performance varies depending on changes in the prices of energy and energy-related commodities. See "Critical Accounting Policies and Estimates" in our Annual Report on Form 10-K
for the year ended December 31, 2006, for a discussion of the accounting treatment for our energy trading and marketing activities and see Note E to our unaudited condensed consolidated
financial statements for detail of our price risk management assets and liabilities.

For
a further discussion of market risks, our risk management policy and our use of Value at Risk to measure some of these risks, see Item 7A. "Quantitative and Qualitative
Disclosures about Market Risk" in our Annual Report on Form 10-K for the year ended December 31, 2006.

Item 4.    Controls and Procedures

Inherent Limitations in Control Systems

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are
met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent
limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These
inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented
by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain
assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls
may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective
control system, misstatements due to error or fraud may occur and not be detected. As a result, our management, including the Chief Executive Officer and Chief Financial Officer, does not

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expect
that our disclosure controls and procedures, or our internal control over financial reporting, will prevent all error and all fraud.

Effectiveness of Disclosure Controls and Procedures

As required by Exchange Act Rule 13a-15(b), our management, including our Chief Executive Officer and our Chief Financial Officer, conducted an
assessment of the effectiveness of the design and operation of our disclosure controls and procedures (as defined by Rules 13a-15(e) and 15d-15(e) under the Exchange
Act), as of September 30, 2007. Based upon this assessment, our management concluded that, as of September 30, 2007, the design and operation of these disclosure controls and procedures
were effective.

Appearing
as exhibits to this report are the certifications of the Chief Executive Officer and the Chief Financial Officer required in accordance with Section 302 of the
Sarbanes-Oxley Act of 2002.

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PART II

Item 1.    Legal ProceedingsSee  Note LLitigation and Other Contingenciesto the
accompanying unaudited condensed consolidated financial statements for discussion of  the material legal proceedings to which we are a party.

Item 1A.    Risk Factors

There have been no material changes in risk factors since those reported in Mirant North America's Annual Report on Form 10-K for the year
ended December 31, 2006.

Item 6.    Exhibits



| | Exhibit
Number |  | Exhibit Name                                                                                                                                                                                                                              
| | -------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3.1*           |  | Certificate of Incorporation of Mirant North America (designated on Form S-4 filed June 5, 2006 as Exhibit 3.1)                                                                                                                           
| | 3.2*           |  | Limited Liability Company Agreement of Mirant North America (designated on Form S-4 filed June 5, 2006 as Exhibit 3.2)                                                                                                                    
| | 3.3*           |  | Certificate of Incorporation of MNA Finance Corp. (designated on Form S-4 filed June 5, 2006 as Exhibit 3.3)                                                                                                                              
| | 3.4*           |  | Bylaws of MNA Finance Corp. (designated on Form S-4 filed June 5, 2006 as Exhibit 3.4)                                                                                                                                                    
| | 10.1*          |  | Engineering, Procurement and Construction Agreement dated as of July 30, 2007, by and between Mirant Mid-Atlantic, LLC, Mirant Chalk Point, LLC and Stone and Webster, Inc. (designated on Form 8-K filed August 3, 2007, as
exhibit 10.1)
| | 31.1           |  | Certification of Chief Executive Officer Pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a)).                                                                       
| | 31.2           |  | Certification of Chief Financial Officer Pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a)).                                                                       
| | 32.1           |  | Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(b)).                                                                   
| | 32.2           |  | Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(b)).                                                                   

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, on this 13th day of November, 2007.

| | MIRANT NORTH AMERICA, LLC
| | -------------------------
| | By:                      

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