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<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN">
<HTML><HEAD>
<META http-equiv=Content-Type content="text/html; charset=utf-8">
<META content="MSHTML 6.00.6000.16809" name=GENERATOR></HEAD>
<BODY>
<P style="FONT-FAMILY: times"><FONT size=2><B>Note 1. Summary of
Significant Accounting Policies </B></FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2><B><I>Basis of Presentation
</I></B></FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> EME Homer City's
significant accounting policies are described in "Note 1—Summary of
Significant Accounting Policies" on page 60 of EME Homer City's annual
report on Form 10-K for the year ended December 31, 2008. EME Homer
City follows the same accounting policies for interim reporting purposes, with
the exception of accounting principles adopted as of January 1, 2009 as
discussed below in "—New Accounting Pronouncements." This quarterly report
should be read in conjunction with such financial statements. </FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> In the opinion of
management, all adjustments, including recurring accruals, have been made that
are necessary to fairly state the financial position and results of operations
and cash flows in accordance with accounting principles generally accepted in
the United States of America for the periods covered by this quarterly report on
Form 10-Q. The results of operations for the six months ended June 30,
2009 are not necessarily indicative of the operating results for the full year.
</FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> Management has performed
an evaluation of subsequent events through August 7, 2009, the date the
financial statements were issued. </FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2><B><I>Cash Equivalents
</I></B></FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> Cash equivalents include
money market funds totaling $37 million and $38 million at
June 30, 2009 and December 31, 2008, respectively. The carrying value
of cash equivalents equals the fair value as all investments have maturities of
less than three months. For further discussion of money market funds, see
Note 2—Fair Value Measurements. </FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2><B><I>New Accounting Pronouncements
</I></B></FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2><I>Accounting Principles Adopted
</I></FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2>Statement of Financial Accounting
Standards No. 165— </FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> In May 2009, the FASB
issued SFAS No. 165, "Subsequent Events." SFAS No. 165 sets forth the
period after the balance sheet date during which management of a reporting
entity should evaluate events or transactions that may occur for potential
recognition or disclosure in the financial statements; the circumstances under
which an entity should recognize these events or transactions; and the
disclosures that an entity should make. EME Homer City adopted SFAS No. 165
effective April 1, 2009. The adoption of this standard had no impact on EME
Homer City's results of operations, financial position or cash flows.
</FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2>FSP SFAS No. 157-4— </FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> In April 2009, the FASB
issued FSP SFAS No. 157-4, "Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions that Are Not Orderly." FSP SFAS No. 157-4 affirms
the objective of a fair value measurement, which is to identify the price that
would be received to sell an asset or paid to transfer a liability in an orderly
transaction at the measurement date between market participants ("exit price")
under current market conditions. FSP SFAS No. 157-4 includes guidance on
identifying circumstances that indicate when there is no active market or
transactions where the price inputs being used represent distressed or forced
sales. If either of these conditions exists, FSP SFAS No. 157-4 provides <!-- SEQ.=1,FOLIO='6',FILE='DISK122:[09ZCF1.09ZCF45201]XA45201A.;2',USER='CMATTI',CD=';5-AUG-2009;18:14' --><A
name=page_xxx45201_1_7></A>additional direction for estimating fair value and
requires disclosure of a change in valuation technique (and the related inputs)
resulting from the application of this position and to quantify its effects, if
practicable. This position also requires disclosures on a more disaggregated
basis for investments in debt and equity securities measured at fair value. EME
Homer City adopted FSP SFAS No. 157-4 effective April 1, 2009. The
adoption of this position had no impact on EME Homer City's results of
operations, financial position or cash flows. </FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2>FSP SFAS No. 115-2 and SFAS
No. 124-2— </FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> In April 2009, the FASB
issued FSP SFAS No. 115-2 and SFAS No. 124-2, "Recognition and
Presentation of Other-Than-Temporary Impairments." This position amends existing
guidance for determining whether impairment is other than temporary for debt
securities. Under this position, an entity writes down to fair value through
earnings, impaired debt securities that it currently intends to sell or for
which it is more likely than not it will be required to sell before the
anticipated recovery. If an entity does not intend and will not be required to
sell a debt security but it is probable that the entity will not collect all
amounts due, the entity will separate the other-than-temporary impairment into
two components: 1) the amount due to credit loss would be recognized in
earnings, and 2) the remaining portion would be recognized in other
comprehensive income. EME Homer City adopted this position effective
April 1, 2009, resulting in increased disclosures. The adoption of this
position did not have an impact on EME Homer City's results of operations,
financial position or cash flows. For disclosures, see "—Cash Equivalents."
</FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2>FSP SFAS No. 107-1 and APB
No. 28-1— </FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> In April 2009, the FASB
issued FSP SFAS No. 107-1 and APB No. 28-1, "Interim Disclosures about
Fair Value of Financial Instruments." This position requires disclosures about
the fair value of all financial instruments, for which it is practicable to
estimate that fair value, for interim reporting periods as well as annual
statements. EME Homer City adopted this position effective April 1, 2009.
Since FSP SFAS No. 107-1 and APB No. 28-1 impacts disclosure only, the
adoption of this position did not have an impact on EME Homer City's results of
operations, financial position or cash flows. For disclosures, see
Note 2—Fair Value Measurements. </FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2>Statement of Financial Accounting
Standards No. 157— </FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> Effective January 1,
2009, EME Homer City adopted SFAS No. 157 for nonrecurring fair value
measurements of nonfinancial assets and liabilities. The adoption of SFAS
No. 157 for nonrecurring fair value measurements had no impact on EME Homer
City's financial statements. </FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2>Statement of Financial Accounting
Standards No. 161— </FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> In March 2008, the FASB
issued SFAS No. 161, which requires additional disclosures related to
derivative instruments, including how and why an entity uses derivative
instruments, how derivative instruments and related hedged items are accounted
for and how derivative instruments and related hedged items affect an entity's
financial position, financial performance, and cash flows. EME Homer City
adopted this pronouncement effective January 1, 2009. Since SFAS
No. 161 impacts disclosures only, the adoption of this standard did not
have an impact on EME Homer City's results of operations, financial position or
cash flows. For additional information regarding the adoption of SFAS
No. 161, see Note 3—Derivative Instruments. </FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2>FSP SFAS No. 142-3— </FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> In April 2008, the FASB
issued FSP SFAS No. 142-3, "Determination of the Useful Life of Intangible
Assets," which amends the factors that should be considered in developing
renewal or extension assumptions used to determine the useful life of a
recognized intangible asset under SFAS <!-- SEQ.=2,FOLIO='7',FILE='DISK122:[09ZCF1.09ZCF45201]XA45201A.;2',USER='CMATTI',CD=';5-AUG-2009;18:14' --><A
name=page_xxx45201_1_8></A>No. 142, "Goodwill and Other Intangible Assets."
The intent of the position is to improve the consistency between the useful life
of a recognized intangible asset under SFAS No. 142 and the period of
expected cash flows used to measure the fair value of the asset under SFAS
No. 141(R) and other U.S. generally accepted accounting principles. EME
Homer City adopted this pronouncement effective January 1, 2009. The
adoption of this position had no impact on EME Homer City's results of
operations, financial position or cash flows. </FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2><I>Accounting Principles Not Yet
Adopted </I></FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2>FSP SFAS No. 132(R)-1—
</FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> In December 2008, the
FASB issued FSP SFAS No. 132(R)-1, "Employers' Disclosures about
Postretirement Benefit Plan Assets." This position requires additional plan
asset disclosures about the major categories of assets, the inputs and valuation
techniques used to measure fair value, the level within the fair value
hierarchy, the effect of using significant unobservable inputs (Level 3)
and significant concentrations of risk. This position is effective for years
ending after December 15, 2009 and therefore, EME Homer City will adopt FSP
SFAS No. 132(R)-1 at year-end 2009. FSP SFAS No. 132(R)-1 will impact
disclosures only and will not have an impact on EME Homer City's results of
operations, financial position or cash flows. </FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2>Statement of Financial Accounting
Standards No. 168— </FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> In June 2009, the FASB
issued SFAS No. 168, "The FASB Accounting Standards Codification™ and the
Hierarchy of Generally Accepted Accounting Principles." This Statement
establishes the Codification to become the source of authoritative,
nongovernmental U.S. GAAP superseding existing FASB, American Institute of
Certified Public Accountants (AICPA), Emerging Issues Task Force (EITF) and
related literature. Following this Statement, the FASB will not issue new
standards in the form of Statements, FASB Staff Positions or EITF Abstracts.
Instead, the FASB will issue Accounting Standards Updates. Two levels of
U.S. GAAP will exist: authoritative and non-authoritative. Codification is
not intended to change U.S. GAAP or guidance issued by the SEC. However,
Codification will affect the way EME Homer City researches accounting issues and
references U.S. GAAP in its notes to financial statements and MD&A. EME
Homer City will adopt this Statement in the third quarter of 2009.
</FONT></P></BODY></HTML>
<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN">
<HTML><HEAD>
<META http-equiv=Content-Type content="text/html; charset=utf-8">
<META content="MSHTML 6.00.6000.16809" name=GENERATOR></HEAD>
<BODY>
<P style="FONT-FAMILY: times"><FONT size=2><B>Note 2. Fair Value
Measurements </B></FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> SFAS No. 157 defines
fair value as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date (referred to as an "exit price" in SFAS No. 157). SFAS
No. 157 clarifies that a fair value measurement for a liability should
reflect the entity's nonperformance risk. In addition, SFAS No. 157
establishes a fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value. The hierarchy gives the highest priority
to unadjusted quoted market prices in active markets for identical assets and
liabilities (Level 1 measurements) and the lowest priority to unobservable
inputs (Level 3 measurements). The three levels of the fair value hierarchy
under SFAS No. 157 are: </FONT></P>
<UL>
<DL compact>
<DT style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"><FONT size=2>•</FONT>
<DD style="FONT-FAMILY: times"><FONT size=2>Level 1—Unadjusted quoted
prices in active markets that are accessible at the measurement date for
identical assets and liabilities; </FONT><FONT size=2><BR><BR></FONT>
<DT style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"><FONT size=2>•</FONT>
<DD style="FONT-FAMILY: times"><FONT size=2>Level 2—Pricing inputs that
include quoted prices for similar assets and liabilities in active markets
and inputs that are observable for the asset or liability, either directly
or indirectly, for substantially the full term of the derivative instrument;
and </FONT>
<P style="FONT-FAMILY: times"><FONT size=2><!-- SEQ.=3,FOLIO='8',FILE='DISK122:[09ZCF1.09ZCF45201]XA45201A.;2',USER='CMATTI',CD=';5-AUG-2009;18:14' --><A
name=page_xxx45201_1_9></A></FONT></P>
<DT style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"><FONT size=2>•</FONT>
<DD style="FONT-FAMILY: times"><FONT size=2>Level 3—Prices or
valuations that require inputs that are both significant to the fair value
measurements and unobservable. </FONT></DD></DL></UL>
<P style="FONT-FAMILY: times"><FONT
size=2> EME Homer City's assets
and liabilities carried at fair value primarily consist of derivative contracts
and money market funds. Derivative contracts primarily relate to power and
include contracts for forward physical sales and purchases, options and forward
price swaps which settle only on a financial basis (including futures
contracts). Derivative contracts can be exchange traded or over-the-counter
traded. </FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> The fair value of
derivative contracts takes into account quoted market prices, time value of
money, volatility of the underlying commodities and other factors. Derivatives
that are exchange traded in active markets for identical assets or liabilities
are classified as Level 1. The majority of derivative contracts used for
hedging purposes are based on forward market prices in active markets (PJM West
Hub) adjusted for nonperformance risks. EMMT obtains forward market prices from
traded exchanges (ICE Futures U.S. or New York Mercantile Exchange) and
available broker quotes. Then, EMMT selects a primary source that best
represents traded activity for each market to develop observable forward market
prices in determining the fair value of these positions. Broker quotes or prices
from exchanges are used to validate and corroborate the primary source. These
price quotations reflect mid-market prices (average of bid and ask) and are
obtained from sources that EMMT believes to provide the most liquid market for
the commodity. EMMT considers broker quotes to be observable when corroborated
with other information which may include a combination of prices from exchanges,
other brokers, and comparison to executed trades. The majority of the fair value
of EME Homer City's derivative contracts determined in this manner are
classified as Level 2. </FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> Derivatives that trade
infrequently (such as financial transmission rights and over-the-counter
derivatives at illiquid locations) and derivatives with counterparties that have
significant nonperformance risks, as discussed below, are classified as
Level 3. For illiquid financial transmission rights, EMMT reviews objective
criteria related to system congestion on a quarterly basis and other underlying
drivers and adjusts fair value when EMMT concludes a change in objective
criteria would result in a new valuation that better reflects the fair value.
Changes in fair values are based on the hypothetical sale of illiquid positions.
In circumstances where EMMT cannot verify fair value with observable market
transactions, it is possible that a different valuation model could produce a
materially different estimate of fair value. As markets continue to develop and
more pricing information becomes available, EMMT continues to assess valuation
methodologies used to determine fair value. </FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> In assessing
nonperformance risks, EMMT reviews credit ratings of counterparties (and related
default rates based on such credit ratings) and prices of credit default swaps.
The market price (or premium) for credit default swaps represents the price that
a counterparty would pay to transfer the risk of default, typically bankruptcy,
to another party. A credit default swap is not directly comparable to the credit
risks of derivative contracts, but provides market information of the related
risk of nonperformance. EME Homer City reduced the fair value of derivative
assets for nonperformance risks by $2 million at June 30, 2009.
</FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> Investments in money
market funds are generally classified as Level 1 as fair value is
determined by observable market prices (unadjusted) in active markets.
</FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2><!-- SEQ.=4,FOLIO='9',FILE='DISK122:[09ZCF1.09ZCF45201]XA45201A.;2',USER='CMATTI',CD=';5-AUG-2009;18:14' --><A
name=page_xxx45201_1_10></A></FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> The following table sets
forth EME Homer City's assets and liabilities that were accounted for at fair
value by level within the fair value hierarchy as of June 30, 2009 and
December 31, 2008: </FONT></P><!-- User-specified TAGGED TABLE -->
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 border=0>
<TBODY>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD style="FONT-FAMILY: times" align=left width=10></TD>
<TD style="FONT-FAMILY: times" align=left width=251></TD>
<TD style="FONT-FAMILY: times" width=12></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=21></TD>
<TD style="FONT-FAMILY: times" width=15></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=21></TD>
<TD style="FONT-FAMILY: times" width=15></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=21></TD>
<TD style="FONT-FAMILY: times" width=15></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=32></TD>
<TD style="FONT-FAMILY: times" width=15></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=21></TD>
<TD style="FONT-FAMILY: times"
width=3></TD><!-- TABLE COLUMN WIDTHS END --></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times" noWrap align=left colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 67pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>As of June 30, 2009
<!-- COMMAND=ADD_SCROPPEDRULE,67pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 23pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Level 1
<!-- COMMAND=ADD_SCROPPEDRULE,23pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 23pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Level 2
<!-- COMMAND=ADD_SCROPPEDRULE,23pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 23pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Level 3
<!-- COMMAND=ADD_SCROPPEDRULE,23pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 26pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Netting<SUP>(2)</SUP>
<!-- COMMAND=ADD_SCROPPEDRULE,26pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 18pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Total <!-- COMMAND=ADD_SCROPPEDRULE,18pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times" align=left colSpan=2><FONT
size=1> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" align=middle colSpan=14><FONT size=1><B>(in
millions)</B></FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH></TR>
<TR vAlign=top bgColor=#cceeff>
<TD style="FONT-FAMILY: times" colSpan=2>
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Assets at Fair Value</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=top bgColor=white>
<TD style="FONT-FAMILY: times"><FONT size=0> </FONT></TD>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Money market funds<SUP>(1)</SUP></FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>37</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>37</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=top bgColor=#cceeff>
<TD style="FONT-FAMILY: times"><FONT size=0> </FONT></TD>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Derivative contracts</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>164</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>1</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>165</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=top bgColor=white>
<TD style="FONT-FAMILY: times" colSpan=2>
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Liabilities at Fair Value</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=top bgColor=#cceeff>
<TD style="FONT-FAMILY: times"><FONT size=0> </FONT></TD>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Derivative contracts</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(3</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>)</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(1</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>)</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(4</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT
size=2>)</FONT></TD></TR></TBODY></TABLE></DIV><!-- end of user-specified TAGGED TABLE -->
<P style="FONT-FAMILY: times"><FONT size=1><BR></FONT> </P><!-- User-specified TAGGED TABLE -->
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 border=0>
<TBODY>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD style="FONT-FAMILY: times" align=left width=10></TD>
<TD style="FONT-FAMILY: times" align=left width=251></TD>
<TD style="FONT-FAMILY: times" width=12></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=21></TD>
<TD style="FONT-FAMILY: times" width=15></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=21></TD>
<TD style="FONT-FAMILY: times" width=15></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=21></TD>
<TD style="FONT-FAMILY: times" width=15></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=32></TD>
<TD style="FONT-FAMILY: times" width=15></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=21></TD>
<TD style="FONT-FAMILY: times"
width=3></TD><!-- TABLE COLUMN WIDTHS END --></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times" noWrap align=left colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 85pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>As of December 31, 2008 <!-- COMMAND=ADD_SCROPPEDRULE,85pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 23pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Level 1
<!-- COMMAND=ADD_SCROPPEDRULE,23pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 23pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Level 2
<!-- COMMAND=ADD_SCROPPEDRULE,23pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 23pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Level 3
<!-- COMMAND=ADD_SCROPPEDRULE,23pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 26pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Netting<SUP>(2)</SUP>
<!-- COMMAND=ADD_SCROPPEDRULE,26pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 18pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Total <!-- COMMAND=ADD_SCROPPEDRULE,18pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times" align=left colSpan=2><FONT
size=1> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" align=middle colSpan=14><FONT size=1><B>(in
millions)</B></FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH></TR>
<TR vAlign=top bgColor=#cceeff>
<TD style="FONT-FAMILY: times" colSpan=2>
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Assets at Fair Value</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=top bgColor=white>
<TD style="FONT-FAMILY: times"><FONT size=0> </FONT></TD>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Money market funds<SUP>(1)</SUP></FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>38</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>38</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=top bgColor=#cceeff>
<TD style="FONT-FAMILY: times"><FONT size=0> </FONT></TD>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Derivative contracts</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>131</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>1</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>132</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=top bgColor=white>
<TD style="FONT-FAMILY: times" colSpan=2>
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Liabilities at Fair Value</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=top bgColor=#cceeff>
<TD style="FONT-FAMILY: times"><FONT size=0> </FONT></TD>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Derivative contracts</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(1</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>)</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(1</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>)</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(2</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT
size=2>)</FONT></TD></TR></TBODY></TABLE></DIV><!-- end of user-specified TAGGED TABLE --><!-- COMMAND=ADD_LINERULETXT,NOSHADE COLOR="#000000" SIZE="1.0PT" WIDTH="10%" ALIGN="LEFT" -->
<HR align=left width="10%" color=#000000 noShade SIZE=1>
<DL compact>
<DT style="MARGIN-BOTTOM: -9pt; FONT-FAMILY: times"><FONT size=1>(1)</FONT>
<DD style="FONT-FAMILY: times"><FONT size=1>Included in cash and cash
equivalents on EME Homer City's balance sheet. <BR><BR></FONT>
<DT style="MARGIN-BOTTOM: -9pt; FONT-FAMILY: times"><FONT size=1>(2)</FONT>
<DD style="FONT-FAMILY: times"><FONT size=1>Represents the impact of netting
across the levels of the fair value hierarchy. Netting among positions
classified within the same level is included in that level. </FONT></DD></DL>
<P style="FONT-FAMILY: times"><FONT
size=2> The following table sets
forth a summary of changes in the fair value of EME Homer City's Level 3
derivative contracts, net for the periods ended June 30, 2009 and 2008:
</FONT></P><!-- User-specified TAGGED TABLE -->
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 border=0>
<TBODY>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD style="FONT-FAMILY: times" align=left width=10></TD>
<TD style="FONT-FAMILY: times" align=left width=200></TD>
<TD style="FONT-FAMILY: times" width=12></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=46></TD>
<TD style="FONT-FAMILY: times" width=15></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=46></TD>
<TD style="FONT-FAMILY: times" width=15></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=46></TD>
<TD style="FONT-FAMILY: times" width=15></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=46></TD>
<TD style="FONT-FAMILY: times"
width=3></TD><!-- TABLE COLUMN WIDTHS END --></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times" align=left colSpan=2><FONT
size=2> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times"
align=middle colSpan=5><FONT size=1><B>Three Months Ended<BR>June 30,
</B></FONT></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times"
align=middle colSpan=5><FONT size=1><B>Six Months Ended<BR>June 30,
</B></FONT></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times" align=middle colSpan=2><FONT
size=1> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 17pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>2009 <!-- COMMAND=ADD_SCROPPEDRULE,17pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 17pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>2008 <!-- COMMAND=ADD_SCROPPEDRULE,17pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 17pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>2009 <!-- COMMAND=ADD_SCROPPEDRULE,17pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 17pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>2008 <!-- COMMAND=ADD_SCROPPEDRULE,17pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times" align=left colSpan=2><FONT
size=1> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" align=middle colSpan=11><FONT size=1><B>(in
millions)</B></FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH></TR>
<TR vAlign=bottom bgColor=#cceeff>
<TD style="FONT-FAMILY: times" colSpan=2>
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Fair value of derivative contracts, net at
beginning of periods</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>1</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(2</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>)</FONT></TD></TR>
<TR vAlign=bottom bgColor=white>
<TD style="FONT-FAMILY: times" colSpan=2>
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Total realized/unrealized gains
(losses):</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=bottom bgColor=#cceeff>
<TD style="FONT-FAMILY: times"><FONT size=0> </FONT></TD>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Included in
earnings<SUP>(1)</SUP></FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(1</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>)</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>2</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=bottom bgColor=white>
<TD style="FONT-FAMILY: times"><FONT size=0> </FONT></TD>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Included in accumulated other comprehensive
income</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(4</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>)</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(3</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>)</FONT></TD></TR>
<TR vAlign=bottom bgColor=#cceeff>
<TD style="FONT-FAMILY: times" colSpan=2>
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Purchases and settlements, net</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(2</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>)</FONT></TD></TR>
<TR vAlign=bottom bgColor=white>
<TD style="FONT-FAMILY: times" colSpan=2>
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Transfers in or out of
Level 3</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>1</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>2</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR style="FONT-SIZE: 1.5pt" vAlign=top>
<TD style="FONT-FAMILY: times" colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD></TR>
<TR vAlign=bottom bgColor=#cceeff>
<TD style="FONT-FAMILY: times" colSpan=2>
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Fair value of derivative contracts, net at
June 30</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(3</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>)</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(3</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>)</FONT></TD></TR>
<TR style="FONT-SIZE: 1.5pt" vAlign=top>
<TD style="FONT-FAMILY: times" colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times"
align=right colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times"
align=right colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times"
align=right colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times"
align=right colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD></TR></TBODY></TABLE></DIV><!-- end of user-specified TAGGED TABLE --><!-- COMMAND=ADD_LINERULETXT,NOSHADE COLOR="#000000" SIZE="1.0PT" WIDTH="10%" ALIGN="LEFT" -->
<HR align=left width="10%" color=#000000 noShade SIZE=1>
<DL compact>
<DT style="MARGIN-BOTTOM: -9pt; FONT-FAMILY: times"><FONT size=1>(1)</FONT>
<DD style="FONT-FAMILY: times"><FONT size=1>Reported in operating revenues on
EME Homer City's statements of income. </FONT></DD></DL>
<P style="FONT-FAMILY: times"><FONT
size=2> The change in unrealized
gains (losses) related to derivative contracts, net held at June 30, 2009
during the three months and six months ended June 30, 2009 and 2008 was
immaterial. </FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2><B><I>Long-term Obligations
</I></B></FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> The carrying amount of
EME Homer City's subordinated loan with an affiliate was $473 million at
June 30, 2009 and $358 million at December 31, 2008. It is not
practicable to estimate the fair value of this financial instrument due to the
subordination features of the loan and the provisions of the sale-leaseback
agreements for the Homer City facilities. </FONT></P></BODY></HTML>
<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN">
<HTML><HEAD>
<META http-equiv=Content-Type content="text/html; charset=utf-8">
<META content="MSHTML 6.00.6000.16809" name=GENERATOR></HEAD>
<BODY>
<P style="FONT-FAMILY: times"><FONT size=2><B>Note 3. Derivative
Instruments </B></FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> EME Homer City uses
derivative instruments to reduce its exposure to market risks that arise from
fluctuations in electricity, capacity and fuel prices, emission allowances and
transmission rights. To the extent that EME Homer City does not use derivative
instruments to hedge these market risks, the unhedged portions will be subject
to the risks and benefits of spot market price movements. Hedge transactions are
primarily entered into using derivative instruments including: </FONT></P>
<UL>
<DL compact>
<DT style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"><FONT size=2>•</FONT>
<DD style="FONT-FAMILY: times"><FONT size=2>futures contracts cleared on the
Intercontinental Trading Exchange and the New York Mercantile Exchange or
executed bilaterally with counterparties, </FONT><FONT
size=2><BR><BR></FONT>
<DT style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"><FONT size=2>•</FONT>
<DD style="FONT-FAMILY: times"><FONT size=2>forward sales transactions
entered into on a bilateral basis with third parties, including electric
utilities, power marketing companies and financial institutions, and
</FONT><FONT size=2><BR><BR></FONT>
<DT style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"><FONT size=2>•</FONT>
<DD style="FONT-FAMILY: times"><FONT size=2>capacity transactions. </FONT>
<P style="FONT-FAMILY: times"><FONT size=2><!-- SEQ.=6,FOLIO='11',FILE='DISK122:[09ZCF1.09ZCF45201]XA45201A.;2',USER='CMATTI',CD=';5-AUG-2009;18:14' --><A
name=page_xxx45201_1_12></A></FONT></P></DD></DL></UL>
<P style="FONT-FAMILY: times"><FONT
size=2> The extent to which EME
Homer City hedges its market price risk depends on several factors. First, EME
Homer City evaluates over-the-counter market prices to determine if forward
market prices are sufficiently attractive compared to the risks associated with
the fluctuating spot market. Second, EME Homer City evaluates the sufficiency of
EMMT's credit capacity and whether the forward sales markets have sufficient
liquidity to enable EME Homer City to identify appropriate counterparties for
hedge transactions. In the case of hedging transactions related to the
generation and capacity of the Homer City facilities, credit support is provided
by EME. Hedge transactions entered into by EME Homer City are accounted for
under SFAS No. 133. </FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> SFAS No. 133, as
amended and interpreted by accounting literature, establishes accounting and
reporting standards for derivative instruments (including certain derivative
instruments embedded in other contracts). SFAS No. 133 requires a company
to record derivatives on its balance sheets as either assets or liabilities
measured at fair value unless otherwise exempted from derivative treatment as a
normal sale and purchase. Under SFAS No. 133, all changes in the fair value
of derivative instruments are recognized currently in earnings, unless specific
hedge criteria are met, which requires that EME Homer City formally document,
designate, and assess the effectiveness of transactions that receive hedge
accounting. </FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> SFAS No. 133 sets
forth the accounting requirements for cash flow hedges. SFAS No. 133
provides that the effective portion of gains or losses on derivative instruments
designated and qualifying as cash flow hedges be reported as a component of
other comprehensive income and be reclassified into earnings in the same period
during which the hedged forecasted transaction affects earnings. The remaining
gains or losses on the derivative instruments, if any, must be recognized
currently in earnings. </FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> Many of the derivative
instruments entered into for risk management purposes (also referred to as
non-trading purposes) meet the requirements for hedge accounting under SFAS
No. 133. However, not all derivative instruments entered into for risk
management purposes will qualify for hedge accounting treatment. Furthermore,
EME Homer City utilizes derivative contracts that are designed to adjust
financial and/or physical positions that reduce costs or increase gross margin.
Accordingly, risk management positions may not be designated as cash flow hedges
and are thus marked to market through current period earnings (derivatives that
are entered into for risk management, but which are not designated as cash flow
hedges, are referred to as economic hedges). </FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> SFAS No. 133 affects
the timing of income recognition, but has no effect on cash flow. To the extent
that income varies under SFAS No. 133 from accrual accounting
(i.e., revenue recognition based on the settlement of transactions), EME
Homer City records unrealized gains or losses. EME Homer City classifies
unrealized gains and losses from commodity contracts in operating revenues. In
addition, the results of derivative activities are recorded in cash flows from
operating activities in the statements of cash flows. </FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> Where EME Homer City's
derivative instruments are subject to a master netting agreement and the
criteria of FASB Interpretation (FIN) No. 39 "Offsetting of Amounts Related
to Certain Contracts" are met, EME Homer City presents its derivative assets and
liabilities on a net basis in its balance sheet. </FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2><!-- SEQ.=7,FOLIO='12',FILE='DISK122:[09ZCF1.09ZCF45201]XA45201A.;2',USER='CMATTI',CD=';5-AUG-2009;18:14' --><A
name=page_xxx45201_1_13></A></FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2><B><I>Notional Volumes of Derivative
Instruments </I></B></FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> The following table
summarizes the notional volumes of derivatives used for hedging activities at
June 30, 2009: </FONT></P><!-- User-specified TAGGED TABLE -->
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 border=0>
<TBODY>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD style="FONT-FAMILY: times" width=18></TD>
<TD style="FONT-FAMILY: times" align=left width=52></TD>
<TD style="FONT-FAMILY: times" width=18></TD>
<TD style="FONT-FAMILY: times" align=left width=52></TD>
<TD style="FONT-FAMILY: times" width=18></TD>
<TD style="FONT-FAMILY: times" align=left width=51></TD>
<TD style="FONT-FAMILY: times" width=18></TD>
<TD style="FONT-FAMILY: times" align=left width=31></TD>
<TD style="FONT-FAMILY: times" width=18></TD>
<TD style="FONT-FAMILY: times" align=c width=65></TD>
<TD style="FONT-FAMILY: times" width=18></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=44></TD>
<TD style="FONT-FAMILY: times" width=15></TD>
<TD style="FONT-FAMILY: times" align=left width=44></TD><!-- TABLE COLUMN WIDTHS END --></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times"><FONT size=2> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=left>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 40pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Commodity
<!-- COMMAND=ADD_SCROPPEDRULE,40pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=left>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 40pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Instrument
<!-- COMMAND=ADD_SCROPPEDRULE,40pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 48pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Classification
<!-- COMMAND=ADD_SCROPPEDRULE,48pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 31pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Unit of<BR>Measure
<!-- COMMAND=ADD_SCROPPEDRULE,31pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 37pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Cash Flow<BR>Hedges
<!-- COMMAND=ADD_SCROPPEDRULE,37pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 34pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Economic<BR>Hedges
<!-- COMMAND=ADD_SCROPPEDRULE,34pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" align=middle><FONT
size=1> </FONT><BR></TH></TR>
<TR vAlign=top bgColor=#cceeff>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Electricity</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Forwards</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Sales</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>GWh</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=middle><FONT
size=2>4,726<SUP>(1)</SUP></FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT
size=2>5,355<SUP>(2)</SUP></FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=top bgColor=white>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Electricity</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Forwards</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Purchases</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>GWh</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=middle><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT
size=2>5,355<SUP>(2)</SUP></FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=top bgColor=#cceeff>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Electricity</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Congestion</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Sales</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>GWh</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=middle><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT
size=2>136<SUP>(3)</SUP></FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=top bgColor=white>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Electricity</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Congestion</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Purchases</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>GWh</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=middle><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT
size=2>3,328<SUP>(3)</SUP></FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT
size=2> </FONT></TD></TR></TBODY></TABLE></DIV><!-- end of user-specified TAGGED TABLE --><!-- COMMAND=ADD_LINERULETXT,NOSHADE COLOR="#000000" SIZE="1.0PT" WIDTH="10%" ALIGN="LEFT" -->
<HR align=left width="10%" color=#000000 noShade SIZE=1>
<DL compact>
<DT style="MARGIN-BOTTOM: -9pt; FONT-FAMILY: times"><FONT size=1>(1)</FONT>
<DD style="FONT-FAMILY: times"><FONT size=1>Includes forward and futures
contracts that qualify for hedge accounting under SFAS No. 133.
<BR><BR></FONT>
<DT style="MARGIN-BOTTOM: -9pt; FONT-FAMILY: times"><FONT size=1>(2)</FONT>
<DD style="FONT-FAMILY: times"><FONT size=1>EME Homer City also entered into
transactions that adjust financial and physical positions, or day-ahead and
real-time positions to reduce costs or increase gross margin. These positions
largely offset each other. The net sales positions of these categories are
primarily related to hedge transactions that are not designated as cash flow
hedges under SFAS No. 133. <BR><BR></FONT>
<DT style="MARGIN-BOTTOM: -9pt; FONT-FAMILY: times"><FONT size=1>(3)</FONT>
<DD style="FONT-FAMILY: times"><FONT size=1>Congestion contracts are financial
transmission rights, transmission congestion contracts or congestion revenue
rights. These positions are similar to a swap, where the buyer is entitled to
receive a stream of revenues (or charges) based on the hourly day-ahead price
differences between two locations. </FONT></DD></DL>
<P style="FONT-FAMILY: times"><FONT size=2><B><I>Fair Value of Derivative
Instruments </I></B></FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> The following table
summarizes the gross fair value of commodity derivative instruments for
non-trading purposes at June 30, 2009: </FONT></P><!-- User-specified TAGGED TABLE -->
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 border=0>
<TBODY>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD style="FONT-FAMILY: times" align=left width=10></TD>
<TD style="FONT-FAMILY: times" align=left width=172></TD>
<TD style="FONT-FAMILY: times" width=6></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=35></TD>
<TD style="FONT-FAMILY: times" width=6></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=33></TD>
<TD style="FONT-FAMILY: times" width=6></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=26></TD>
<TD style="FONT-FAMILY: times" width=6></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=35></TD>
<TD style="FONT-FAMILY: times" width=6></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=33></TD>
<TD style="FONT-FAMILY: times" width=6></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=26></TD>
<TD style="FONT-FAMILY: times" width=6></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=21></TD>
<TD style="FONT-FAMILY: times"
width=3></TD><!-- TABLE COLUMN WIDTHS END --></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times" align=left colSpan=2><FONT
size=2> </FONT><BR></TH>
<TH style="FONT-FAMILY: times" rowSpan=2><FONT size=1> </FONT></TH>
<TH style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times"
align=middle colSpan=8 rowSpan=2><FONT size=1><B>Derivative Assets
</B></FONT></TH>
<TH style="FONT-FAMILY: times" rowSpan=2><FONT size=1> </FONT></TH>
<TH style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times"
align=middle colSpan=8 rowSpan=2><FONT size=1><B>Derivative Liabilities
</B></FONT></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" align=left colSpan=2><FONT
size=1> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times" align=left colSpan=2><FONT
size=1> </FONT><BR></TH>
<TH style="FONT-FAMILY: times" rowSpan=2><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2 rowSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 22pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Net<BR>Assets
<!-- COMMAND=ADD_SCROPPEDRULE,22pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times" align=middle colSpan=2><FONT
size=1> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 93pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Short-term
<!-- COMMAND=ADD_SCROPPEDRULE,93pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 91pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Long-term
<!-- COMMAND=ADD_SCROPPEDRULE,91pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 30pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Subtotal
<!-- COMMAND=ADD_SCROPPEDRULE,30pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 93pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Short-term
<!-- COMMAND=ADD_SCROPPEDRULE,93pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 91pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Long-term
<!-- COMMAND=ADD_SCROPPEDRULE,91pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 30pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Subtotal
<!-- COMMAND=ADD_SCROPPEDRULE,30pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times" align=left colSpan=2><FONT
size=1> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" align=middle colSpan=20><FONT size=1><B>(in
millions)</B></FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH></TR>
<TR vAlign=top bgColor=#cceeff>
<TD style="FONT-FAMILY: times" colSpan=2>
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Cash flow hedges</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>119</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>42</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>161</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>161</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=top bgColor=white>
<TD style="FONT-FAMILY: times" colSpan=2>
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Economic hedges</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>71</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>5</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>76</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>71</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>5</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>76</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR style="FONT-SIZE: 1.5pt" vAlign=top>
<TD style="FONT-FAMILY: times" colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD></TR>
<TR vAlign=top bgColor=#cceeff>
<TD style="FONT-FAMILY: times" colSpan=2>
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>190</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>47</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>237</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>71</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>5</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>76</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>161</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=top bgColor=white>
<TD style="FONT-FAMILY: times" colSpan=2>
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Netting</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(67</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>)</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(5</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>)</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(72</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>)</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(67</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>)</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(5</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>)</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(72</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>)</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR style="FONT-SIZE: 1.5pt" vAlign=top>
<TD style="FONT-FAMILY: times" colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD></TR>
<TR vAlign=top bgColor=#cceeff>
<TD style="FONT-FAMILY: times"><FONT size=0> </FONT></TD>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Total</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>123</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>42</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>165</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>4</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>4</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>161</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR style="FONT-SIZE: 1.5pt" vAlign=top>
<TD style="FONT-FAMILY: times" colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times"
align=right colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times"
align=right colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times"
align=right colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times"
align=right colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times"
align=right colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times"
align=right colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times"
align=right colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD></TR></TBODY></TABLE></DIV><!-- end of user-specified TAGGED TABLE -->
<P style="FONT-FAMILY: times"><FONT size=2><B><I>Income Statement Impact of
Derivative Instruments </I></B></FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> The following table
provides the activity of accumulated other comprehensive income for the six
months ended June 30, 2009, containing the information about the changes in
the fair value of cash <!-- SEQ.=8,FOLIO='13',FILE='DISK122:[09ZCF1.09ZCF45201]XC45201A.;2',USER='CMATTI',CD=';5-AUG-2009;18:14' --><A
name=page_xxx45201_1_14></A>flow hedges and reclassification from accumulated
other comprehensive income into results of operations: </FONT></P><!-- User-specified TAGGED TABLE -->
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 border=0>
<TBODY>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD style="FONT-FAMILY: times" align=left width=195></TD>
<TD style="FONT-FAMILY: times" width=12></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=57></TD>
<TD style="FONT-FAMILY: times" width=15></TD>
<TD style="FONT-FAMILY: times" align=left width=99></TD><!-- TABLE COLUMN WIDTHS END --></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times" align=left><FONT
size=2> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 51pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Cash Flow<BR>Hedge Activity<SUP>(1)</SUP> <!-- COMMAND=ADD_SCROPPEDRULE,51pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 69pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Income<BR>Statement Location <!-- COMMAND=ADD_SCROPPEDRULE,69pt --></B></FONT></DIV></TH></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times" align=left><FONT
size=1> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" align=middle colSpan=2><FONT size=1><B>(in
millions)</B></FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" align=left><FONT
size=1> </FONT><BR></TH></TR>
<TR vAlign=bottom bgColor=#cceeff>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Accumulated other comprehensive income
derivative gain at December 31, 2008</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>130</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=bottom bgColor=white>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Effective portion of changes in fair
value</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>24</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=bottom bgColor=#cceeff>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Reclassification from accumulated other
comprehensive income to net income</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>2</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Operating
revenues<SUP>(2)</SUP></FONT></TD></TR>
<TR style="FONT-SIZE: 1.5pt" vAlign=top>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="FONT-FAMILY: times"> </TD></TR>
<TR vAlign=bottom bgColor=white>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Accumulated other comprehensive income
derivative gain at June 30, 2009</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>156</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR style="FONT-SIZE: 1.5pt" vAlign=top>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times"
align=right colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="FONT-FAMILY: times"> </TD></TR></TBODY></TABLE></DIV><!-- end of user-specified TAGGED TABLE --><!-- COMMAND=ADD_LINERULETXT,NOSHADE COLOR="#000000" SIZE="1.0PT" WIDTH="10%" ALIGN="LEFT" -->
<HR align=left width="10%" color=#000000 noShade SIZE=1>
<DL compact>
<DT style="MARGIN-BOTTOM: -9pt; FONT-FAMILY: times"><FONT size=1>(1)</FONT>
<DD style="FONT-FAMILY: times"><FONT size=1>Unrealized derivative gains are
before income taxes. The after-tax amounts recorded in accumulated other
comprehensive income at June 30, 2009 and December 31, 2008 were
$90 million and $76 million, respectively. <BR><BR></FONT>
<DT style="MARGIN-BOTTOM: -9pt; FONT-FAMILY: times"><FONT size=1>(2)</FONT>
<DD style="FONT-FAMILY: times"><FONT size=1>Represents reclassification of
unrealized losses to operating revenues. </FONT></DD></DL>
<P style="FONT-FAMILY: times"><FONT
size=2> Under SFAS No. 133,
the portion of a cash flow hedge that does not offset the change in the value of
the transaction being hedged, which is commonly referred to as the ineffective
portion, is immediately recognized in earnings. EME Homer City recorded a net
gain of $4 million and a net loss of $10 million during the second
quarters of 2009 and 2008, respectively, and a net gain of $5 million and a
net loss of $16 million during the six months ended June 30, 2009 and
2008, respectively, representing the amount of cash flow hedge ineffectiveness
and is reflected in operating revenues in the income statement. </FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> The effect of realized
and unrealized gains (losses) from derivative instruments used for non-trading
purposes on the statement of income for the periods ended June 30, 2009 is
presented below: </FONT></P><!-- User-specified TAGGED TABLE -->
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 border=0>
<TBODY>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD style="FONT-FAMILY: times" align=left width=162></TD>
<TD style="FONT-FAMILY: times" width=12></TD>
<TD style="FONT-FAMILY: times" align=left width=83></TD>
<TD style="FONT-FAMILY: times" width=12></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=46></TD>
<TD style="FONT-FAMILY: times" width=15></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=44></TD>
<TD style="FONT-FAMILY: times"
width=3></TD><!-- TABLE COLUMN WIDTHS END --></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times" noWrap align=left>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 16pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Type <!-- COMMAND=ADD_SCROPPEDRULE,16pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 69pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Income<BR>Statement Location <!-- COMMAND=ADD_SCROPPEDRULE,69pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 50pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Three Months<BR>Ended<BR>June 30, 2009 <!-- COMMAND=ADD_SCROPPEDRULE,50pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 46pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Six Months<BR>Ended<BR>June 30, 2009 <!-- COMMAND=ADD_SCROPPEDRULE,46pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times" align=left><FONT
size=1> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" align=left><FONT
size=1> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" align=middle colSpan=5><FONT size=1><B>(in
millions)</B></FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH></TR>
<TR vAlign=top bgColor=#cceeff>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Economic hedges</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Operating revenue</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT
size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>(3)</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT
size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT
size=2>(4)</FONT></TD></TR></TBODY></TABLE></DIV></BODY></HTML>
<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN">
<HTML><HEAD>
<META http-equiv=Content-Type content="text/html; charset=utf-8">
<META content="MSHTML 6.00.6000.16809" name=GENERATOR></HEAD>
<BODY>
<P style="FONT-FAMILY: times"><FONT size=2><B>Note 4. Accumulated Other
Comprehensive Income </B></FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> Accumulated other
comprehensive income consisted of the following: </FONT></P><!-- User-specified TAGGED TABLE -->
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 border=0>
<TBODY>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD style="FONT-FAMILY: times" align=left width=187></TD>
<TD style="FONT-FAMILY: times" width=12></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=69></TD>
<TD style="FONT-FAMILY: times" width=15></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=90></TD>
<TD style="FONT-FAMILY: times" width=15></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=65></TD>
<TD style="FONT-FAMILY: times"
width=3></TD><!-- TABLE COLUMN WIDTHS END --></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times" align=left><FONT
size=2> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 73pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Unrealized Gains on<BR>Cash Flow Hedges <!-- COMMAND=ADD_SCROPPEDRULE,73pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 94pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Unrecognized Gains<BR>(Losses) and Prior Service<BR>Adjustments,
Net<SUP>(1)</SUP>
<!-- COMMAND=ADD_SCROPPEDRULE,94pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 69pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Accumulated Other<BR>Comprehensive<BR>Income <!-- COMMAND=ADD_SCROPPEDRULE,69pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times" align=left><FONT
size=1> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" align=middle colSpan=8><FONT size=1><B>(in
millions)</B></FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH></TR>
<TR vAlign=top bgColor=#cceeff>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Balance at December 31, 2008</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>76</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(5</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>)</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>71</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=top bgColor=white>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Current period change</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>14</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>14</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR style="FONT-SIZE: 1.5pt" vAlign=top>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD></TR>
<TR vAlign=top bgColor=#cceeff>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Balance at June 30, 2009</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>90</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(5</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>)</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>85</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR style="FONT-SIZE: 1.5pt" vAlign=top>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times"
align=right colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times"
align=right colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times"
align=right colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD></TR></TBODY></TABLE></DIV><!-- end of user-specified TAGGED TABLE --><!-- COMMAND=ADD_LINERULETXT,NOSHADE COLOR="#000000" SIZE="1.0PT" WIDTH="10%" ALIGN="LEFT" -->
<HR align=left width="10%" color=#000000 noShade SIZE=1>
<DL compact>
<DT style="MARGIN-BOTTOM: -9pt; FONT-FAMILY: times"><FONT size=1>(1)</FONT>
<DD style="FONT-FAMILY: times"><FONT size=1>For further detail, see
Note 5—Compensation and Benefit Plans. </FONT></DD></DL>
<P style="FONT-FAMILY: times"><FONT
size=2> Unrealized gains on cash
flow hedges, net of tax, at June 30, 2009, included unrealized gains on
commodity hedges related to futures and forward electricity contracts that
qualify for hedge accounting. <!-- SEQ.=9,FOLIO='14',FILE='DISK122:[09ZCF1.09ZCF45201]XC45201A.;2',USER='CMATTI',CD=';5-AUG-2009;18:14' --><A
name=page_xxx45201_1_15></A>These gains arise because current forecasts of
future electricity prices are lower than EME Homer City's contract prices. As
EME Homer City's hedged positions are realized, $69 million, after tax, of
the net unrealized gains on cash flow hedges at June 30, 2009 are expected
to be reclassified into earnings during the next 12 months. Management
expects that reclassification of net unrealized gains will increase energy
revenue recognized at market prices. Actual amounts ultimately reclassified into
earnings over the next 12 months could vary materially from this estimated
amount as a result of changes in market conditions. The maximum period over
which a cash flow hedge is designated is through December 31, 2010.
</FONT></P></BODY></HTML>
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<META content="MSHTML 6.00.6000.16809" name=GENERATOR></HEAD>
<BODY>
<P style="FONT-FAMILY: times"><FONT size=2><B>Note 5. Compensation and
Benefit Plans </B></FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2><B><I>Pension Plans and
Postretirement Benefits Other Than Pensions </I></B></FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2><I>Pension Plans </I></FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> As of June 30, 2009,
EME Homer City had made approximately $0.3 million in contributions to its
pension plans and estimates to make $0.3 million of contributions in the
last six months of 2009. </FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> The following are
components of pension expense: </FONT></P><!-- User-specified TAGGED TABLE -->
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 border=0>
<TBODY>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD style="FONT-FAMILY: times" align=left width=188></TD>
<TD style="FONT-FAMILY: times" width=12></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=23></TD>
<TD style="FONT-FAMILY: times" width=24></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=23></TD>
<TD style="FONT-FAMILY: times" width=24></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=23></TD>
<TD style="FONT-FAMILY: times" width=24></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=23></TD>
<TD style="FONT-FAMILY: times"
width=3></TD><!-- TABLE COLUMN WIDTHS END --></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times" align=left><FONT
size=2> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times"
align=middle colSpan=5><FONT size=1><B>Three Months Ended<BR>June 30,
</B></FONT></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times"
align=middle colSpan=5><FONT size=1><B>Six Months Ended<BR>June 30,
</B></FONT></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times" align=middle><FONT
size=1> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 17pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>2009 <!-- COMMAND=ADD_SCROPPEDRULE,17pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 17pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>2008 <!-- COMMAND=ADD_SCROPPEDRULE,17pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 17pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>2009 <!-- COMMAND=ADD_SCROPPEDRULE,17pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 17pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>2008 <!-- COMMAND=ADD_SCROPPEDRULE,17pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times" align=left><FONT
size=1> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" align=middle colSpan=11><FONT size=1><B>(in
millions)</B></FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH></TR>
<TR vAlign=top bgColor=#cceeff>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Service cost</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>0.3</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>0.3</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>0.6</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>0.7</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=top bgColor=white>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Interest cost</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>0.5</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>0.4</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>0.8</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>0.8</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=top bgColor=#cceeff>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Expected return on plan assets</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(0.3</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>)</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(0.4</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>)</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(0.5</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>)</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(0.8</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>)</FONT></TD></TR>
<TR vAlign=top bgColor=white>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Amortization of net loss</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>0.1</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>0.2</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR style="FONT-SIZE: 1.5pt" vAlign=top>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD></TR>
<TR vAlign=top bgColor=#cceeff>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Total expense</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>0.6</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>0.3</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>1.1</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>0.7</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR style="FONT-SIZE: 1.5pt" vAlign=top>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times"
align=right colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times"
align=right colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times"
align=right colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times"
align=right colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD></TR></TBODY></TABLE></DIV><!-- end of user-specified TAGGED TABLE -->
<P style="FONT-FAMILY: times"><FONT size=2><I>Postretirement Benefits Other Than
Pensions </I></FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> As of June 30, 2009,
EME Homer City had made approximately $0.3 million in contributions to its
postretirement benefits other than pensions and estimates to make
$0.3 million of contributions in the last six months of 2009. </FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> The following are
components of postretirement benefits expense: </FONT></P><!-- User-specified TAGGED TABLE -->
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 border=0>
<TBODY>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD style="FONT-FAMILY: times" align=left width=188></TD>
<TD style="FONT-FAMILY: times" width=12></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=23></TD>
<TD style="FONT-FAMILY: times" width=24></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=23></TD>
<TD style="FONT-FAMILY: times" width=24></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=23></TD>
<TD style="FONT-FAMILY: times" width=24></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=23></TD>
<TD style="FONT-FAMILY: times"
width=3></TD><!-- TABLE COLUMN WIDTHS END --></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times" align=left><FONT
size=2> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times"
align=middle colSpan=5><FONT size=1><B>Three Months Ended<BR>June 30,
</B></FONT></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times"
align=middle colSpan=5><FONT size=1><B>Six Months Ended<BR>June 30,
</B></FONT></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times" align=middle><FONT
size=1> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 17pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>2009 <!-- COMMAND=ADD_SCROPPEDRULE,17pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 17pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>2008 <!-- COMMAND=ADD_SCROPPEDRULE,17pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 17pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>2009 <!-- COMMAND=ADD_SCROPPEDRULE,17pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 17pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>2008 <!-- COMMAND=ADD_SCROPPEDRULE,17pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times" align=left><FONT
size=1> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" align=middle colSpan=11><FONT size=1><B>(in
millions)</B></FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH></TR>
<TR vAlign=top bgColor=#cceeff>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Service cost</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>0.1</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>0.2</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>0.3</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>0.4</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=top bgColor=white>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Interest cost</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>0.5</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>0.5</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>0.9</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>0.8</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=top bgColor=#cceeff>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Amortization of prior service
credit</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(0.1</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>)</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(0.1</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>)</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(0.2</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>)</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(0.1</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>)</FONT></TD></TR>
<TR vAlign=top bgColor=white>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Amortization of net loss</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>0.1</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>0.2</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>0.1</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR style="FONT-SIZE: 1.5pt" vAlign=top>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD></TR>
<TR vAlign=top bgColor=#cceeff>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Total expense</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>0.6</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>0.6</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>1.2</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>1.2</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR style="FONT-SIZE: 1.5pt" vAlign=top>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times"
align=right colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times"
align=right colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times"
align=right colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times"
align=right colSpan=2> </TD>
<TD
style="FONT-FAMILY: times"> </TD></TR></TBODY></TABLE></DIV></BODY></HTML>
<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN">
<HTML><HEAD>
<META http-equiv=Content-Type content="text/html; charset=utf-8">
<META content="MSHTML 6.00.6000.16809" name=GENERATOR></HEAD>
<BODY>
<P style="FONT-FAMILY: times"><FONT size=2><B>Note 6. Income Taxes
</B></FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> EME Homer City had
effective income tax provision rates during the six months ended June 30,
2009 and 2008 of 37% and 40%, respectively. EME Homer City's effective income
tax provision rate varies from the federal statutory rate of 35% primarily due
to state income taxes and estimated benefits <!-- SEQ.=10,FOLIO='15',FILE='DISK122:[09ZCF1.09ZCF45201]XC45201A.;2',USER='CMATTI',CD=';5-AUG-2009;18:14' --><A
name=page_xxx45201_1_16></A>from a federal deduction related to qualified
domestic production activities under Section 199 of the Internal Revenue
Code. </FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> In May 2009, Edison
International and the Internal Revenue Service completed a settlement of federal
tax disputes and affirmative claims for open tax years 1986 through 2002. The
settlement includes resolution of issues pertaining to EME Homer City which were
timing in nature. During the second quarter of 2009, EME Homer City recorded an
income tax benefit of $0.3 million due to the settlement and related
estimated impact of interest and state income taxes. The amount recorded is
subject to change based on the final determination of interest and state taxes
and items affected under the tax-allocation agreement. </FONT></P></BODY></HTML>
<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN">
<HTML><HEAD>
<META http-equiv=Content-Type content="text/html; charset=utf-8">
<META content="MSHTML 6.00.6000.16809" name=GENERATOR></HEAD>
<BODY>
<P style="FONT-FAMILY: times"><FONT size=2><B>Note 7. Commitments and
Contingencies </B></FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2><B><I>Commitments </I></B></FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2><I>Capital Improvements
</I></FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> At June 30, 2009,
EME Homer City had firm commitments to spend approximately $13 million on
capital expenditures during the remainder of 2009 and $5 million in 2010
primarily related to non-environmental improvements such as upgrades to boiler
and turbine controls, replacement of major boiler components and main power
transformer replacement. These capital expenditures are planned to be financed
by cash generated from operations. </FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2><I>Fuel Supply Contracts
</I></FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> At June 30, 2009,
EME Homer City had fuel purchase commitments with various third-party suppliers
for the purchase of bituminous steam coal and fuel oil. The contracts require
EME Homer City to purchase a minimum quantity over the term of the contracts,
with an option at EME Homer City's discretion to purchase additional amounts as
stated in the agreements. Based on the contract provisions that consist of fixed
prices, subject to adjustment clauses in certain cases, these minimum
commitments are currently estimated to be $177 million summarized as
follows: remainder of 2009—$121 million; 2010—$46 million; and
2011—$10 million. </FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2><B><I>Interconnection Agreement
</I></B></FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> EME Homer City's general
partner, Mission Energy Westside, is a party to an interconnection agreement
with NYSEG and Penelec to provide interconnection services necessary to
interconnect the Homer City facilities with NYSEG's and Penelec's transmission
systems. Unless terminated earlier in accordance with specified terms, the
interconnection agreement will terminate on a date mutually agreed to by Mission
Energy Westside, NYSEG and Penelec. This date will not exceed the retirement
date of the Homer City units. NYSEG and Penelec have agreed to extend the
interconnection services (but not the expiration of the agreement) to
modifications, additions or upgrades to, or repowering of the Homer City units.
Mission Energy Westside is required to compensate NYSEG and Penelec for all
reasonable costs associated with any modifications, additions or replacements
made to NYSEG's or Penelec's interconnection facilities or transmission systems
in connection with any modification, addition or upgrade to, or repowering of
the Homer City units. </FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2><B><I>Guarantees and Indemnities
</I></B></FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2><I>Tax Indemnity Agreements
</I></FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> In connection with the
sale-leaseback transaction related to the Homer City facilities, EME Homer City
and its indirect parent, EME, entered into tax indemnity agreements. Under these
tax indemnity agreements, EME Homer City and EME agreed to indemnify the equity
investors in the sale-leaseback <!-- SEQ.=11,FOLIO='16',FILE='DISK122:[09ZCF1.09ZCF45201]XC45201A.;2',USER='CMATTI',CD=';5-AUG-2009;18:14' --><A
name=page_xxx45201_1_17></A>transaction for specified adverse tax consequences
that could result in certain situations set forth in the tax indemnity
agreements, including specified defaults under the respective leases. The
potential indemnity obligation under these tax indemnity agreements could be
significant. Due to the nature of the obligations under these tax indemnity
agreements, EME Homer City cannot determine a maximum potential liability which
would be triggered by a valid claim from the lessors. EME Homer City has not
recorded a liability related to these indemnities. </FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2><I>Indemnity Provided as Part of the
Acquisition of the Homer City Facilities </I></FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> In connection with the
acquisition of the Homer City facilities, EME Homer City agreed to indemnify the
sellers with respect to specific environmental liabilities before and after the
date of sale. Payments would be triggered under this indemnity by a valid claim
from the sellers. EME guaranteed the obligations of EME Homer City. Due to the
nature of the obligation under this indemnity provision, it is not subject to a
maximum potential liability and does not have an expiration date. For a
discussion of the NOV received by EME Homer City and associated indemnity
claims, see "—Contingencies—New Source Review Notice of Violation." EME Homer
City has not recorded a liability related to this indemnity. </FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2><B><I>Contingencies
</I></B></FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2><I>RPM Buyers' Complaint
</I></FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> On May 30, 2008, a
group of entities referring to themselves as the "RPM Buyers" filed a complaint
at the FERC asking that PJM's RPM, as implemented through the transitional base
residual auctions establishing capacity payments for the period from
June 1, 2008 through May 31, 2011, be found to have produced unjust
and unreasonable capacity prices. On September 19, 2008, the FERC dismissed
the RPM Buyers' complaint, finding that the RPM Buyers had failed to allege or
prove that any party violated PJM's tariff and market rules, and that the prices
determined during the transition period were determined in accordance with PJM's
FERC-approved tariff. On October 20, 2008, the RPM Buyers requested
rehearing of the FERC's order dismissing their complaint. On June 18, 2009,
the FERC denied rehearing of the order. </FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2><I>New Source Review Notice of
Violation </I></FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> On June 12, 2008,
EME Homer City received an NOV from the US EPA alleging that, beginning in 1988,
EME Homer City (or former owners of the Homer City facilities) performed repair
or replacement projects at Homer City Units 1 and 2 without first obtaining
construction permits as required by the Prevention of Significant Deterioration
requirements of the Clean Air Act. The US EPA also alleges that EME Homer City
has failed to file timely and complete Title V permits. The NOV does not specify
the penalties or other relief that the US EPA seeks for the alleged violations.
On June 30, 2009, the US EPA issued a request for information to EME Homer
City under Section 114 of the CAA. EME Homer City is working on a response
to the request. EME Homer City has met with the US EPA and has expressed its
intent to explore the possibility of a settlement. If no settlement is reached
and the United States Department of Justice files suit, litigation could take
many years to resolve the issues alleged in the NOV. EME Homer City cannot
predict the outcome of this matter or estimate the impact on its facilities, its
results of operations, financial position or cash flows. </FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> EME Homer City has sought
indemnification for liability and defense costs associated with the NOV from the
sellers under the asset purchase agreement pursuant to which EME Homer City
acquired the Homer City facilities. The sellers responded by denying the
indemnity obligation, but accepting a portion of defense costs related to the
claims. </FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2><!-- SEQ.=12,FOLIO='17',FILE='DISK122:[09ZCF1.09ZCF45201]XC45201A.;2',USER='CMATTI',CD=';5-AUG-2009;18:14' --><A
name=page_xxx45201_1_18></A></FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> EME Homer City notified
the sale-leaseback owner participants of the Homer City facilities of the NOV
under the operative indemnity provisions of the sale-leaseback documents. The
owner participants of the Homer City facilities, in turn, have sought
indemnification and defense from EME Homer City for costs and liability
associated with the EME Homer City NOV. EME Homer City responded by undertaking
the indemnity obligation and defense of the claims. </FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2><I>Ash Disposal Site </I></FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> EME Homer City's ash
disposal site is a permitted Class I Residual Waste Landfill, the most
stringently regulated of the three categories of residual waste landfills
authorized by the regulations of the PADEP. EME Homer City's permit allows it to
dispose of coal combustion by-products, including fly ash, bottom ash, pyrites,
gypsum, and miscellaneous plant wastes at the landfill. The wastes are deposited
in compacted layers within lifts, or sections. Each lift where coal ash is
disposed must be capped and covered when it reaches final grade. EME Homer City
must also monitor groundwater quality at and adjacent to the ash disposal site
through a network of monitoring wells and report the results to the PADEP on a
periodic basis. In the event that a disposal facility's groundwater monitoring
identifies degradation in any of its wells, the PADEP's regulations require the
facility to first confirm the existence and nature of the degradation by
conducting a groundwater assessment. If the assessment confirms groundwater
degradation in excess of the applicable regulatory standards, the facility is
then required to prepare and implement an abatement plan that could include
measures such as installing a liner in a previously unlined area. To date, no
degradation has been found in the groundwater monitoring system at EME Homer
City that would require the development of an assessment or abatement plan. EME
Homer City also provides financial assurance in the form of a surety bond to
guarantee its closure and post-closure obligations at the landfill. The
estimated closure date is 2018. Based on the remaining capacity of the landfill
and the estimated material requiring future disposal, EME Homer City has begun
permitting additional areas for expansion of the landfill. Management does not
believe that the costs of maintaining and closing the ash disposal site will
have a material impact on EME Homer City's financial statements. </FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2><I>Insurance </I></FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> EME Homer City maintains
insurance policies that it believes are comparable to those carried by other
electric generating facilities of a similar size. The insurance program includes
all-risk real and personal property insurance, including coverage for losses
from boiler and machinery breakdowns, and the perils of earthquake and flood,
subject to certain sublimits. The property insurance program currently covers
losses up to $1.6 billion. Under the terms of the participation agreements
entered into as part of EME Homer City's sale-leaseback transaction, EME Homer
City is required to maintain specified minimum insurance coverages with insurers
having specific minimum ratings if and to the extent that such insurance is
available on a commercially reasonable basis. Although the insurance covering
the Homer City facilities is comparable to insurance coverages normally carried
by companies engaged in similar businesses, and owning similar properties, the
insurance coverages that are in place do not meet the minimum insurance
coverages required under the participation agreements. In addition, some of the
insurers providing EME Homer City's insurance do not meet the minimum ratings
required under the participation agreement. Due to the current market
environment, the minimum insurance coverage and rating are not commercially
available at reasonable prices. EME Homer City has obtained a waiver under the
participation agreements which permits it to maintain its current insurance
through June 1, 2010. </FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> EME Homer City also
carries general liability insurance covering liabilities to third parties for
bodily injury or property damage resulting from operations, automobile liability
insurance and excess liability insurance. Limits and deductibles in respect of
these insurance policies are consistent with the <!-- SEQ.=13,FOLIO='18',FILE='DISK122:[09ZCF1.09ZCF45201]XC45201A.;2',USER='CMATTI',CD=';5-AUG-2009;18:14' --><A
name=page_xxx45201_1_19></A>requirements of the participation agreements.
However, some insurers providing general liability coverage do not meet the
minimum ratings requirements under the participation agreements. The waiver
obtained permits EME Homer City to retain these insurers for all of its
insurance coverages. </FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2><B><I>Environmental Matters and
Regulations </I></B></FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> The construction and
operation of power plants are subject to environmental regulation by federal,
state and local authorities. EME Homer City believes that it is in substantial
compliance with existing environmental regulatory requirements. However,
possible future developments, such as the promulgation of more stringent
environmental laws and regulations, future proceedings that may be initiated by
environmental and other regulatory authorities, cases in which new theories of
liability are recognized, and settlements agreed to by other companies that
establish precedent or expectations for the power industry, could affect the
costs and the manner in which EME Homer City conducts its business and could
require substantial additional capital or operational expenditures or the
ceasing of operations at certain of its facilities. There is no assurance that
EME Homer City's financial position and results of operations would not be
materially adversely affected. EME Homer City is unable to predict the precise
extent to which additional laws and regulations may affect its future operations
and capital expenditure requirements. For a more complete discussion of EME
Homer City's environmental contingencies, refer to "Note 9—Commitments and
Contingencies—Environmental Matters and Regulations" on page 83 of EME
Homer City's annual report on Form 10-K for the year ended
December 31, 2008. </FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> Typically, environmental
laws and regulations require a lengthy and complex process for obtaining
licenses, permits and approvals prior to construction, operation or modification
of a project or generating facility. Meeting all the necessary requirements can
delay or sometimes prevent the completion of a proposed project, as well as
require extensive modifications to existing projects, which may involve
significant capital or operational expenditures. If EME Homer City fails to
comply with applicable environmental laws, it may be subject to injunctive
relief or penalties and fines imposed by federal and state regulatory
authorities. </FONT></P></BODY></HTML>
<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN">
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<META http-equiv=Content-Type content="text/html; charset=utf-8">
<META content="MSHTML 6.00.6000.16809" name=GENERATOR></HEAD>
<BODY>
<P style="FONT-FAMILY: times"><FONT size=2><B>Note 8. Supplemental Cash
Flows Information </B></FONT></P><!-- User-specified TAGGED TABLE -->
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 border=0>
<TBODY>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD style="FONT-FAMILY: times" align=left width=10></TD>
<TD style="FONT-FAMILY: times" align=left width=278></TD>
<TD style="FONT-FAMILY: times" width=12></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=29></TD>
<TD style="FONT-FAMILY: times" width=15></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=29></TD>
<TD style="FONT-FAMILY: times"
width=3></TD><!-- TABLE COLUMN WIDTHS END --></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times" align=left colSpan=2><FONT
size=2> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times"
align=middle colSpan=5><FONT size=1><B>Six Months Ended<BR>June 30,
</B></FONT></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times" align=middle colSpan=2><FONT
size=1> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 17pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>2009 <!-- COMMAND=ADD_SCROPPEDRULE,17pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 17pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>2008 <!-- COMMAND=ADD_SCROPPEDRULE,17pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times" align=left colSpan=2><FONT
size=1> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" align=middle colSpan=5><FONT size=1><B>(in
millions)</B></FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH></TR>
<TR vAlign=bottom bgColor=#cceeff>
<TD style="FONT-FAMILY: times" colSpan=2>
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Cash paid</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=bottom bgColor=white>
<TD style="FONT-FAMILY: times"><FONT size=0> </FONT></TD>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Interest</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>51</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>64</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=bottom bgColor=#cceeff>
<TD style="FONT-FAMILY: times"><FONT size=0> </FONT></TD>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Income taxes</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>8</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>6</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=bottom bgColor=white>
<TD style="FONT-FAMILY: times" colSpan=2>
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Non-cash investing and financing
activities</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=bottom bgColor=#cceeff>
<TD style="FONT-FAMILY: times"><FONT size=0> </FONT></TD>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Non-cash settlement of intercompany tax
liabilities through an increase in the subordinated revolving loan
agreement with affiliate</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>90</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT
size=2>—</FONT></TD></TR></TBODY></TABLE></DIV></BODY></HTML>
0
24000000
7000000
29000000
29000000
14000000
14000000
367000000
1000000
324000000
1000000
0