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

Form 10-Q

Commission file number 333-59348

MIDWEST GENERATION, LLC
(Exact name of registrant as specified in its charter)

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

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý

        Number of units outstanding of the registrant's Membership Interests as of November 8, 2004: 100 units (all units held by an affiliate of the registrant).

TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION
ITEM 1.    FINANCIAL STATEMENTS

MIDWEST GENERATION, LLC
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In thousands, Unaudited)

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

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MIDWEST GENERATION, LLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands, Unaudited)

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

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MIDWEST GENERATION, LLC
CONSOLIDATED BALANCE SHEETS
(In thousands, Unaudited)

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

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MIDWEST GENERATION, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, Unaudited)

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

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MIDWEST GENERATION, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
(Dollars in thousands; Unaudited)

Note 1. General

        In the opinion of management, all adjustments, including recurring accruals, have been made that are necessary to present fairly the consolidated financial position and results of operations for the periods covered by this report. The results of operations for the nine months ended September 30, 2004 are not necessarily indicative of the operating results for the full year.

        Midwest Generation, LLC's (Midwest Generation's) significant accounting policies are described in Note 2 to its financial statements as of December 31, 2003 and 2002, included in its annual report on Form 10-K for the year ended December 31, 2003. Midwest Generation follows the same accounting policies for interim reporting purposes. This quarterly report should be read in connection with such financial statements.

        Terms used but not defined in this report are defined in Midwest Generation's annual report on Form 10-K for the year ended December 31, 2003.

        Midwest Finance Corp., formed as a Delaware corporation on April 22, 2004, is Midwest Generation's wholly owned subsidiary. Therefore, Midwest Generation now reports on a consolidated basis. Midwest Finance has no material assets, operations or revenues. Midwest Finance was formed in April 2004 solely to serve as a co-issuer of Midwest Generation's second priority senior secured notes in order to facilitate the offering of these notes. For further discussion, see Note 5—Refinancing.

        On June 8, 2004, PricewaterhouseCoopers LLP, independent registered public accounting firm, reissued via a current report on Form 8-K, dated June 8, 2004, its original Report of Independent Registered Public Accounting Firm that was included in Part II, Item 8 of the annual report on Form 10-K of Midwest Generation, LLC for the fiscal year ended December 31, 2003 filed with the Securities and Exchange Commission on March 15, 2004. The original report of PricewaterhouseCoopers LLP dated March 10, 2004 contained an explanatory paragraph indicating that the financial statements included in Midwest Generation's 2003 annual report on Form 10-K were prepared on the basis that Midwest Generation would continue as a going concern and that the uncertainty about Edison Mission Midwest Holdings' ability to repay or refinance $693 million of debt that was to mature in December 2004 raised substantial doubt about Midwest Generation's ability to continue as a going concern. In April 2004, the $693 million of debt was repaid in full through new financings obtained by Midwest Generation. For further discussion, see Note 5—Refinancing. Accordingly, the going concern explanatory paragraph referred to above has been removed.

Note 2. Loss on Lease Termination, Asset Impairment and Other Charges

        Loss on lease termination, asset impairment and other charges was $41.0 million and $104.7 million for the third quarter and nine months ended September 30, 2004, respectively. On April 27, 2004, Midwest Generation terminated the Collins Station lease through a negotiated transaction with the lease equity investor. Midwest Generation made a lease termination payment of approximately $960 million. This amount represented the $774 million of lease debt outstanding, plus accrued interest, and the amount owed to the lease equity investor for early termination of the lease. Midwest Generation received title to the Collins Station as part of the transaction. Midwest Generation recorded a pre-tax loss of approximately $64 million (approximately $39 million after tax) during the

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quarter ended June 30, 2004, due to termination of the lease and the planned decommissioning of the asset. Included in the pre-tax loss is a $2.7 million inventory reserve for excess spare parts at the Collins Station.

        Following the termination of the Collins Station lease, Midwest Generation announced plans to permanently cease operations at the Collins Station by December 31, 2004 and decommission the plant. On July 30, 2004, PJM Interconnection, LLC (PJM) accepted Midwest Generation's request to cease operations at the Collins Station. PJM found that the decommissioning of the plant would not affect the operation or reliability of the PJM markets. During the third quarter of 2004, Midwest Generation reached an agreement with Exelon Generation to terminate the power purchase agreement effective September 30, 2004 for the two units at the Collins Station that remained under contract. As a result of the termination of the power purchase agreement, Midwest Generation revised the estimated useful life of the remaining plant assets to end on September 30, 2004 instead of December 31, 2004. Accordingly, Midwest Generation recorded a pre-tax impairment charge of $10.3 million during the third quarter of 2004. During the quarter ended September 30, 2004, Midwest Generation recorded a pre-tax loss of $1.9 million for fuel oil inventory at the Collins Station. In October 2004, Midwest Generation finalized plans to reduce the workforce in Illinois and expects to recognize a $4 million pre-tax charge for exit costs during the fourth quarter of 2004.

        In September 2004, management completed an analysis of future competitiveness in the expanded PJM marketplace of its eight small peaking units in Illinois. Based on this analysis, management decided to decommission six of the eight small peaking units, subject to regulatory review and approval. As a result of this decision, projected future cash flows associated with the Illinois peaking units were less than the book value of the units resulting in an impairment under Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or the Disposal of Long-Lived Assets." During the third quarter of 2004, Midwest Generation recorded a pre-tax impairment charge of $28.8 million (approximately $17.7 million after tax).

        Asset impairment charges for the nine months ended September 30, 2003 consisted of a $1.025 billion ($625 million after tax) impairment charge that resulted from a revised long-term outlook for capacity revenues from the Collins Station and eight small peaking units. The lower capacity revenue outlook is the result of a number of factors, including higher long-term natural gas prices and the current oversupply of generation in the MAIN region market.

Note 3. Accumulated Other Comprehensive Income (Loss)

        Accumulated other comprehensive income (loss) consisted of the following:

        Unrealized losses on cash flow hedges at September 30, 2004 include forward energy sales contracts that did not meet the normal sales and purchases exception under SFAS No. 133. These losses arise because current forecasts of future electricity prices are higher than Midwest Generation's contract prices. As Midwest Generation's hedged positions are realized, approximately $10.2 million, after tax, of the net unrealized losses on cash flow hedges will be reclassified into earnings during the next twelve months. Management expects that reclassification of net unrealized losses will offset energy

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revenue recognized at market prices. Actual amounts ultimately reclassified to earnings over the next twelve 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, 2006.

        Under SFAS No. 133, the portion of a cash flow hedge that does not offset the change in value of the transaction being hedged, which is commonly referred to as the ineffective portion, is immediately recognized in earnings. Midwest Generation recorded net losses of $4.6 million and $4.8 million during the third quarters of 2004 and 2003, respectively, and $0.2 million and $0.9 million during the nine months ended September 30, 2004 and 2003, respectively, representing the amount of cash flow hedges' ineffectiveness, reflected in income (loss) from price risk management in the consolidated statement of operations.

Note 4. Employee Benefit Plans

Pension Plan

        Midwest Generation previously disclosed in its financial statements for the year ended December 31, 2003, that it expected to contribute $9.1 million to its pension plan in 2004. As of September 30, 2004, $7.6 million in contributions have been made. Midwest Generation anticipates that its original expectation will be met by year-end 2004.

        Components of pension expense are:

Postretirement Benefits Other Than Pensions

        Midwest Generation previously disclosed in its financial statements for the year ended December 31, 2003, that it expected to contribute $90 thousand to its postretirement benefits other than its pension plan in 2004. Midwest Generation expects to make these contributions in the fourth quarter of 2004.

        Components of postretirement benefits expense are:

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Note 5. Refinancing

Midwest Generation Financing Developments

        On April 27, 2004, Midwest Generation completed a private offering of $1 billion aggregate principal amount of its 8.75% second priority senior secured notes due 2034. The notes were co-issued by a newly formed wholly owned subsidiary, Midwest Finance Corp. Holders of the notes may require Midwest Generation to repurchase, or Midwest Generation may elect to repay, the notes on May 1, 2014 and on each one-year anniversary thereafter at 100% of their principal amount, plus accrued and unpaid interest. Concurrent with the issuance of the notes, Midwest Generation borrowed $700 million under a new first priority senior secured term loan facility. The term loan has a final maturity of April 27, 2011 and bears interest at LIBOR plus 3.25% per annum. Midwest Generation has agreed to repay $1,750,000 of the term loan on each quarterly payment date. Midwest Generation also entered into a new five-year $200 million working capital facility that replaced a prior facility. The new working capital facility also provides for the issuance of letters of credit. As of September 30, 2004, Midwest Generation had no borrowings outstanding under the working capital facility and had reimbursement obligations under a letter of credit for $2.6 million that expires in 2005. Midwest Generation used the proceeds of the notes issuance and the term loan to refinance $693 million of indebtedness (plus accrued interest and fees) owed by its direct parent, Edison Mission Midwest Holdings Co., which had been guaranteed by Midwest Generation and was due in December 2004, and to make the termination payment under the Collins Station lease in the amount of approximately $960 million.

        Midwest Generation is permitted to use the new working capital facility and cash on hand to provide credit support (either through loans or letters of credit) for forward contracts with third-party counterparties entered into by Edison Mission Marketing & Trading on its behalf for capacity and energy generated by Midwest Generation. Utilization of this credit facility in support of such forward contracts provides additional liquidity support for implementation of Midwest Generation's contracting strategy for the Illinois Plants. See "—Loan Agreement with Edison Mission Marketing & Trading."

        The term loan and working capital facility share a first priority lien and the senior secured notes have a second priority lien in a collateral package which consists of, among other things, substantially all the coal-fired generating plants owned by Midwest Generation and the assets relating to those plants, as well as the equity interests of Midwest Generation and its parent company and the intercompany notes entered into by EME and Midwest Generation in connection with the Powerton-Joliet sale-leaseback transaction.

        Simultaneously with the closing of the above financing, Edison Mission Midwest Holdings made an equity contribution to Midwest Generation of approximately $2.2 billion, which was used to settle the outstanding balance due under the subordinated revolving loan. As a result of the settlement and termination of this loan, Midwest Generation will no longer incur intercompany interest costs related to this debt.

Loan Agreement with Edison Mission Marketing & Trading

        Midwest Generation entered into a revolving credit agreement with Edison Mission Marketing & Trading, dated as of April 27, 2004, pursuant to which Midwest Generation will, from time to time, make revolving loans to, and have letters of credit issued on behalf of, Edison Mission Marketing & Trading. The loans and letters of credit provide credit support for forward contracts entered into by Edison Mission Marketing & Trading related to the Illinois Plants. As of September 30, 2004, Midwest Generation has provided Edison Mission Marketing & Trading $1.8 million, which Edison Mission Marketing & Trading has used to provide credit support for forward contracts. Loans provided under

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this revolving credit agreement are repaid by Edison Mission Marketing & Trading upon the return of the funds under the terms of the related forward contract. The amount repaid includes interest earned, if any, under margining agreements supporting such contracts. The maximum amount of available credit under the agreement is $200 million.

Note 6. Commitments and Contingencies

Power Purchase Agreements

        Energy generated by Midwest Generation has historically been sold under three power purchase agreements with Exelon Generation Company, LLC (Exelon Generation) under which Exelon Generation is obligated to make capacity payments for the plants under contract and energy payments for the energy produced by these plants and taken by Exelon Generation. The power purchase agreements became effective on December 15, 1999. The power purchase agreement for the Collins Station was terminated effective September 30, 2004; the other two contracts (for coal-fired generation and peaking units) expire on December 31, 2004. The capacity payments provide units under contract with revenue for fixed charges, and the energy payments compensate those units for all, or a portion of, variable costs of production.

        Under each of the power purchase agreements, Exelon Generation, upon notice by given dates, has had the option to terminate each agreement with respect to all or a portion of the units subject to it. As a result of notices given in 2002 and 2003, Exelon Generation released 5,428 MW of Midwest Generation's generating capacity from the power purchase agreements. As a result, 3,859 MW of Midwest Generation's generating capacity (2,383 MW of capacity related to its coal-fired generation units, 1,084 MW of capacity and energy related to its Collins Station, and 392 MW of capacity and energy related to its peaking units) remained subject to the power purchase agreements with Exelon Generation for the nine months ended September 30, 2004. Following the termination of the Collins Station power purchase agreement, 2,775 MW will be subject to power purchase agreements with Exelon Generation during the fourth quarter of 2004. 2004 is the final contract year under the power purchase agreements.

        When Exelon Generation does not fully dispatch the power generation plants under the power purchase agreements, Midwest Generation may sell the excess energy at market prices, subject to specified conditions, to neighboring utilities, municipal utilities, third-party electric retailers and power marketers on a spot basis. A bilateral trading infrastructure existed with access to the Mid American Interconnected Network through April 30, 2004. On May 1, 2004, Midwest Generation began participating directly in the PJM markets with the integration of Commonwealth Edison with PJM. As a participant in PJM, Midwest Generation may sell its output into PJM's spot market through a bid process.

Capital Improvements

        At September 30, 2004, Midwest Generation had firm commitments to spend approximately $10 million on capital expenditures during the remainder of 2004 and 2005. These capital expenditures are planned to be financed by cash generated from operations. During the third quarter of 2004, Midwest Generation decided to return Will County Units 1 and 2 to service. Operations at these units were suspended in 2002, pending recovery of market prices. As part of returning these units to service, Midwest Generation expects to spend approximately $10 million installing environmental improvements by June 30, 2005.

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Fuel Supply Contracts

        Midwest Generation has entered into additional fuel purchase agreements with various third-party suppliers during the first nine months of 2004. Midwest Generation's fuel purchase commitments under these agreements are currently estimated to be $10.6 million for 2005, $49.8 million for 2006, $53.6 million for 2007, and $57.3 million for 2008.

Interconnection Agreements

        Midwest Generation has entered into interconnection agreements with Commonwealth Edison to provide interconnection services necessary to connect the Illinois Plants with Commonwealth Edison's transmission systems. Unless terminated earlier in accordance with the terms thereof, the interconnection agreements will terminate on a date mutually agreed to by both parties. This date may not exceed the retirement date of the Illinois Plants. Midwest Generation is required to compensate Commonwealth Edison for all reasonable costs associated with any modifications, additions or replacements made to the interconnection facilities or transmission systems in connection with any modification, addition or upgrade to the Illinois Plants.

Guarantees and Indemnities

Tax Indemnity Agreements

        In connection with the sale-leaseback transactions related to the Collins Station and the Powerton and Joliet Stations, EME, Midwest Generation and another wholly owned subsidiary of EME entered into tax indemnity agreements. Under these tax indemnity agreements, these entities agreed to indemnify the lessors in the sale-leaseback transactions for specified adverse tax consequences that could result in certain situations set forth in each tax indemnity agreement, including specified defaults under the respective leases. The potential indemnity obligations under these tax indemnity agreements could be significant. Due to the nature of these potential obligations, Midwest Generation cannot determine a maximum potential liability which would be triggered by a valid claim from the lessors. Midwest Generation has not recorded a liability related to these indemnities. In connection with the termination of the lease for the Collins Station (See Note 5—Refinancing), Midwest Generation will continue to have obligations under the tax indemnity agreement with the former lease equity investor.

Indemnity Provided as Part of the Acquisition from Commonwealth Edison

        Midwest Generation entered into a supplemental agreement with Commonwealth Edison and Exelon Generation on February 20, 2003 to resolve a dispute regarding interpretation of its reimbursement obligation for asbestos claims under the environmental indemnities set forth in the Asset Sale Agreement dated March 22, 1999. Under this supplemental agreement, Midwest Generation agreed to reimburse Commonwealth Edison and Exelon Generation for 50% of specific existing asbestos claims and expenses less recovery of insurance costs, and agreed to a sharing arrangement for liabilities and expenses associated with future asbestos related claims as specified in the agreement. The obligations under this agreement are not subject to a maximum liability. The supplemental agreement has a five-year term with an automatic renewal provision (subject to the right to terminate). Payments are made under this indemnity upon tender by Commonwealth Edison of appropriate proof of liability for an asbestos-related settlement, judgment, verdict, or expense. At September 30, 2004, Midwest Generation had $14.2 million recorded as a liability related to this matter and had made $3.4 million in payments through September 2004.

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Environmental Matters and Regulations

        Midwest Generation is subject to environmental regulation by federal, state and local authorities in the United States. Midwest Generation believes that it is in substantial compliance with environmental regulatory requirements and that maintaining compliance with current requirements will not materially affect its financial position or results of operations. However, possible future developments, such as the promulgation of more stringent environmental laws and regulations, future proceedings that may be initiated by environmental authorities, and settlements agreed to by other companies could affect the costs and the manner in which Midwest Generation conducts its business and could cause it to make substantial additional capital expenditures. There is no assurance that Midwest Generation would be able to recover these increased costs from its customers or that Midwest Generation's financial position and results of operations would not be materially adversely affected.

        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 expenditures. If Midwest Generation fails to comply with applicable environmental laws, it may be subject to injunctive relief or penalties and fines imposed by regulatory authorities.

Note 7. Supplemental Statements of Cash Flows Information

*

$161.4 million of cash paid for interest was funded from borrowings on the subordinated revolving line of credit with its affiliate.

Note 8. Cumulative Effect of Change in Accounting Principle

        Effective January 1, 2003, Midwest Generation adopted Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, the entity capitalizes the cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is increased to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. The adoption of SFAS No. 143 did not have a material impact on Midwest Generation's consolidated financial statements ($74 thousand, after tax, decrease to net income as the cumulative effect of the adoption of SFAS No. 143).

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Note 9. New Accounting Pronouncements

Statement of Financial Accounting Standards Interpretation No. 46

        In December 2003, the FASB re-issued Statement of Financial Accounting Standards Interpretation No. 46, "Consolidation of Variable Interest Entities" (FIN 46R) The primary objective of the interpretation is to provide guidance on the identification of, and financial reporting for, entities over which control is achieved through means other than voting rights; such entities are known as variable interest entities. This interpretation applies to variable interest entities created after January 31, 2003, and applies to variable interest entities in which Midwest Generation holds a variable interest that it acquired before February 1, 2003. This interpretation is effective for special purpose entities as of December 31, 2003 and for all other entities as of March 31, 2004. The adoption of this standard had no impact on Midwest Generation's consolidated financial statements.

FASB Staff Position FAS 106-2

        In May 2004, the FASB issued FASB Staff Position FAS 106-2, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003." The primary objective of the position is to provide accounting guidance related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003. Midwest Generation adopted this guidance effective July 1, 2004, which had an immaterial impact on its consolidated financial statements. According to proposed federal regulations, Midwest Generation's retiree health care plans provide prescription drug benefits that are deemed to be actuarially equivalent to Medicare benefits. Accordingly, Midwest Generation recognized the subsidy in the measurement of its accumulated obligation and recorded an actuarial gain.

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

        This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements. These statements are based on Midwest Generation, LLC's (Midwest Generation's) knowledge of present facts, current expectations about future events and assumptions about future developments. Forward-looking statements are not guarantees of performance; they are subject to risks, uncertainties and assumptions that could cause actual future activities and results of operations to be materially different from those set forth in this discussion. Important factors that could cause actual results to differ include risks set forth in "Market Risk Exposures" below, and under "Risks Related to the Business" in the MD&A included in Item 7 of Midwest Generation's annual report on Form 10-K for the year ended December 31, 2003.

        The MD&A of this Form 10-Q discusses material changes in the results of operations, financial condition and other developments of Midwest Generation since December 31, 2003, and as compared to the third quarter and nine months ended September 30, 2003. This discussion presumes that the reader has read or has access to the MD&A included in Item 7 of Midwest Generation's annual report on Form 10-K for the year ended December 31, 2003.

        The MD&A presents a discussion of management's focus during the third quarter of 2004, a discussion of Midwest Generation's financial results and an analysis of Midwest Generation's management efforts with respect to its financial condition. It is presented in four major sections:

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MANAGEMENT'S OVERVIEW; CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management's Overview

Introduction

        During the first nine months of 2004, management has focused on the refinancing of Edison Mission Midwest Holding's debt, which Midwest Generation had guaranteed, the termination of the Collins Station lease and related power purchase agreement and actively participating in regulatory developments.

Completion of Refinancing

        On April 27, 2004, Midwest Generation completed the issuance of $1 billion aggregate principal amount of its 8.75% second priority senior secured notes and entered into a new credit agreement, which includes a $700 million, first priority senior secured term loan facility and a $200 million, first priority senior secured working capital facility. Proceeds from these transactions were used to refinance $693 million of indebtedness (plus accrued interest and fees) and to make termination payments under the Collins Station lease in the amount of approximately $960 million. The new working capital facility replaced Edison Mission Midwest Holding's existing working capital facility. Completion of these financings was a major goal for 2004. See "Liquidity and Capital Resources—Midwest Generation Financing Developments" for further details related to these financings. Also, see "Liquidity and Capital Resources—Termination of the Collins Station Lease" for details related to termination of the Collins Station lease and related power purchase agreement.

Overview of Midwest Generation's 2004 Operating Performance

        Midwest Generation's net income (loss) for the third quarter and nine months ended September 30, 2004 was $41 million and $(54) million, respectively, compared to $77 million and $(642) million, respectively, for the corresponding periods of 2003. The 2004 year-to-date reduction in loss was affected by three significant items:

•

A $1.025 billion (pre-tax), $625 million (after tax), asset impairment charge related to the Collins Station and small peaking units recorded during the second quarter of 2003;



•

A $64 million (pre-tax), $39 million (after tax), loss on lease termination and other charges related to the termination of the Collins Station lease recorded during the second quarter of 2004. The third quarter of 2004 included a $12 million (pre-tax), $7 million (after tax), asset impairment and other charge related to the Collins Station. During the third quarter of 2004, Midwest Generation reached an agreement with Exelon Generation Company, LLC (Exelon Generation) to terminate the power purchase agreement effective September 30, 2004 for the two units at the Collins Station that remained under contract. Management concluded the Collins Station was not economically competitive in the current marketplace given the current generation overcapacity in the region and ceased operations effective September 30, 2004. The Collins Station is in the process of being decommissioned.



•

The third quarter of 2004 included a charge of $29 million (pre-tax), $18 million (after tax), related to impairment of six small peaking units in Illinois. In September 2004, management completed an analysis of future competitiveness in the expanded PJM Interconnection, LLC (PJM) marketplace of its eight small peaking units in Illinois. Based on this analysis, management decided to decommission six of the eight small peaking units, subject to regulatory

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review and approval. As a result of this decision, projected future cash flows associated with the Illinois peaking units were less than the book value of the units resulting in an impairment.

        Excluding these charges, net income (loss) for the third quarter and nine months ended September 30, 2004 was $66 million and $10 million, respectively, compared to $77 million and $(17) million, respectively, for the corresponding periods of 2003. The decrease in the third quarter earnings is due to lower capacity payments received under the Exelon Generation power purchase agreements in 2004. The improvement in the year-to-date performance is primarily attributable to the gross margin earned from energy revenues sold from the merchant coal plants which exceeded the loss of capacity revenues from the coal plants under the power purchase agreement. The improvement is also attributable to lower interest in 2004 as a result of the equity contribution by Midwest Generation's parent used to repay intercompany indebtedness.

        In accordance with the power purchase agreements, Exelon Generation released an additional 880 MW of Midwest Generation's generating capacity for 2004 from the power purchase agreements. As a result, beginning in 2004, Midwest Generation had 3,989 MW of uncontracted capacity available for sale in the merchant generation market. Due to the decline in contracted generating capacity under the power purchase agreements, revenues from Exelon Generation as a percentage of Midwest Generation's total energy and capacity revenues decreased from 71% for the first nine months of 2003 to 59% in the first nine months of 2004. Operating revenues decreased $57 million and $37 million for the third quarter and nine months ended September 30, 2004, respectively, compared to the corresponding periods of 2003. The 2004 decreases were due to lower capacity revenues of $52 million and $81 million for the third quarter and nine months ended September 30, 2004, respectively, resulting from the reduction in megawatts contracted under these power purchase agreements. Partially offsetting the year-to-date lower capacity revenues were higher energy revenues of $42 million resulting from increased merchant generation. Midwest Generation's shift to merchant generation has resulted in substantially lower capacity revenues but higher energy revenues. The higher energy revenues are due to higher average realized energy prices as compared to the energy prices set forth in the power purchase agreements with Exelon Generation.

        The energy and capacity from any units not subject to one of the power purchase agreements are sold under terms, including price and quantity, negotiated by Edison Mission Marketing & Trading on behalf of Midwest Generation with customers through a combination of bilateral agreements, forward energy sales and spot market sales. These arrangements generally have a term of two years or less. Thus, Midwest Generation is increasingly subject to near-term market volatility related to the price of energy and capacity. See "Market Risk Exposures—Commodity Price Risk" for further discussion of forward market prices in the region.

Expansion of PJM in Illinois

        The Illinois Plants are located within the service territory of Exelon Generation's affiliate Commonwealth Edison, which on April 27, 2004 was granted approval by the Federal Energy Regulatory Commission (the FERC) to join PJM effective May 1, 2004. EME had protested the integration of Commonwealth Edison into PJM before American Electric Power (AEP), because Commonwealth Edison's service territory, independent of AEP, was only partially integrated into PJM via a limited transmission pathway of 500 MW capability. This lack of interconnection capability limited Midwest Generation's access to the broader PJM market. These concerns became moot on October 1, 2004, when AEP was integrated into PJM. As of October 1, 2004, Midwest Generation had direct access to a fully interconnected market that covers twelve states and the District of Columbia, and serves a peak load of over 107,000 MW over 49,300 miles of transmission lines. For further discussion, see "Market Risk Exposures—Regulatory Matters."

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Critical Accounting Policies and Estimates

        For a discussion of Midwest Generation's critical accounting policies, refer to "Critical Accounting Policies and Estimates" on page 34 of Midwest Generation's annual report on Form 10-K for the year ended December 31, 2003. Except as set forth below, there have been no other significant developments with respect to critical accounting policies and estimates that affect disclosures presented in the annual report.

Deferred Tax Assets

        As of September 30, 2004, Midwest Generation had net federal and California state deferred tax assets of $368.4 million reflecting net operating loss carryforwards available to reduce federal and California state taxable income in future years. The net operating losses primarily relate to planned tax deductions related to the termination of the Collins Station lease and subsequent decommissioning of the power plant. In assessing the realization of Midwest Generation's deferred tax assets, management considered whether it is more likely than not the deferred tax assets will be realized. The ultimate realization of Midwest Generation's deferred income tax assets depends upon its ability to generate taxable income in the future (which under Midwest Generation's tax-allocation agreement is not subject to a net operating loss carryforward period). On a quarterly basis, management evaluates the recoverability of its deferred tax assets based upon forecasted taxable income to ensure there is adequate support for the realization of the deferred tax assets. While management has considered future taxable income in assessing the need for a valuation allowance, in the event management were to determine that Midwest Generation would not be able to realize all or part of its net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged as a reduction to income in the period such determination was made. Although realization is not assured, management believes it is more likely than not the net deferred tax asset balance as of September 30, 2004 will be realized.

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RESULTS OF OPERATIONS

Introduction

        This section discusses results for the third quarters and nine months of 2004 and 2003 and the effect of new accounting pronouncements on Midwest Generation's consolidated financial statements. As discussed further below, beginning in 2003, Midwest Generation has been selling a significant portion of its energy into wholesale power markets through an energy services agreement with Edison Mission Marketing & Trading. Under this energy services agreement, Edison Mission Marketing & Trading enters into forward contracts with third parties and back-to-back power purchases from Midwest Generation on the same terms. For a description of the energy services agreement, see "Related Party Transactions" on page 40 of Midwest Generation's annual report on Form 10-K for the year ended December 31, 2003.

Summary

        The table below summarizes total revenues as well as key performance measures related to coal-fired generation, which represents the majority of Midwest Generation's operations.

(1)

The availability factor is determined by the number of megawatt-hours the coal plants are available to generate electricity divided by the product of the capacity of the coal plants (in megawatts) and the number of hours in the period. The coal plants are not available during periods of planned and unplanned maintenance.

(2)

Midwest Generation generally refers to unplanned maintenance as a forced outage.

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Operating Revenues

        Operating revenues decreased $56.8 million and $36.5 million for the third quarter and nine months ended September 30, 2004, respectively, compared to the corresponding periods of 2003. The third quarter decline was primarily due to a $51.5 million decrease in capacity revenues under the power purchase agreements. The year-to-date decrease was primarily due to lower capacity revenues resulting from the reduction in megawatts contracted under the power purchase agreements. This decrease was partially offset by higher energy revenues due to increased merchant generation at the coal plants released from their power purchase agreement with Exelon Generation and higher merchant energy prices. Midwest Generation currently earns minimal capacity revenues from its merchant activities.

        Income (loss) from price risk management was $(3.0) million and $(6.0) million for the third quarters of 2004 and 2003, respectively, and $0.4 million and $(2.3) million for the nine months ended September 30, 2004 and 2003, respectively. The losses partially represented the ineffective portion of Midwest Generation's forward energy sales contracts which are derivatives that qualified as cash flow hedges under SFAS No. 133. Under SFAS No. 133, the portion of a cash flow hedge that does not offset the change in value of the transaction being hedged, which is commonly referred to as the ineffective portion, is immediately recognized in earnings. Midwest Generation recorded net losses of $4.6 million and $4.8 million during the third quarters of 2004 and 2003, respectively, and $0.2 million and $0.9 million during the nine months ended September 30, 2004 and 2003, respectively, representing the amount of cash flow hedges' ineffectiveness. The ineffective portion of the cash flow hedges was partially attributable to differences in energy prices between "Into ComEd" and delivery points outside "Into ComEd" prior to May 1, 2004 and differences in energy prices between the aggregate Midwest Generation unit price and other delivery points, effective May 1, 2004. In addition, Midwest Generation recognized gains (losses) on the ineffective portion of forward contracts that expired during the respective periods.

        Also included in income (loss) from price risk management activities were income (losses) of $2.4 million and $(1.3) million for the third quarter and nine months ended September 30, 2004, respectively, compared to $0.6 million and $(0.1) million for the third quarter and nine months ended September 30, 2003, respectively, related to power contracts that did not qualify for hedge accounting under SFAS No. 133. In addition, for the third quarter and nine months ended September 30, 2004, there were gains of approximately $0.9 million and $3.4 million, respectively, compared to $1.4 million for both the third quarter and nine months ended September 30, 2003, related to realized gains on swaps and financial transmission rights that did not qualify for hedge accounting under SFAS No. 133. Included in the 2003 losses is a mark-to-market adjustment for $2.7 million related to an option in which Midwest Generation had to purchase energy from Calumet Energy Team LLC, which is accounted for as a derivative under SFAS No. 133.

        Due to higher electric demand resulting from warmer weather during the summer months, electric revenues are generally substantially higher during the third quarter of each year.

Operating Expenses

        Operating expenses increased $35.3 million and decreased $939.1 million in the third quarter and nine months ended September 30, 2004, compared to the corresponding periods of 2003. Operating expenses consist of expenses for fuel, plant operations, loss on lease termination, asset impairment and other charges, depreciation and amortization and administrative and general expenses. The change in the components of operating expenses is discussed below.

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        Fuel expenses decreased $17.5 million and $13.2 million in the third quarter and nine months ended September 30, 2004, respectively, compared to the corresponding periods of 2003. The decreases were primarily attributable to lower fuel costs at the Collins Station, partially offset by increased merchant generation at the coal plants.

        Plant operations expenses increased $2.2 million and decreased $3.6 million for the third quarter and nine months ended September 30, 2004, respectively, compared to the corresponding periods of 2003. The year-to-date decrease was primarily due to lower property taxes, plant overhaul expenses and railcar lease costs.

        Loss on lease termination, asset impairment and other charges was $41.0 million for the third quarter and $104.7 million for the nine months ended September 30, 2004. Loss on lease termination, asset impairment and other charges in 2004 consisted of $71.3 million related to the termination of the Collins Station lease and termination of the power purchase agreement for the remaining two units at the Collins Station, a $4.6 million inventory reserve for excess spare parts and fuel oil inventory at the Collins Station, and $28.8 million related to the impairment of the small peaking units in Illinois. See "Liquidity and Capital Resources—Termination of the Collins Station Lease" for further discussion.

        Asset impairment charges for the nine months ended September 30, 2003 consisted of a $1.025 billion impairment charge that resulted from a revised long-term outlook for capacity revenues from the Collins Station and eight small peaking units. The lower capacity revenue outlook is the result of a number of factors, including higher long-term natural gas prices and the current oversupply of generation in the MAIN region market. The book value of capitalized assets related to the Collins Station was written down from $858 million to a then estimated fair market value of $78 million, and the book value of the eight small peaking units was also written down in June 2003 from $286 million to a then estimated fair market value of $41 million.

        Depreciation and amortization expense increased $12.3 million and decreased $0.4 million in the third quarter and nine months ended September 30, 2004, respectively, compared to the corresponding periods of 2003. The third quarter increase was primarily attributable to additional depreciation expense recorded in 2004 related to the change in the estimated useful life of the remaining plant assets at the Collins Station. Depreciation and amortization expense for the 2004 year-to-date period was slightly lower than the 2003 year-to-date period due to the elimination of depreciation and amortization on the portion of the Collins Station and eight peaking units as a result of impairment charges taken in June 2003, mostly offset by the additional depreciation expense related to the change in the estimated useful life of the remaining plant assets at the Collins Station. See "Liquidity and Capital Resources—Termination of the Collins Station Lease" for further discussion.

Other Income (Expense)

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        Interest expense increased $22.3 million and $36.5 million in the third quarter and nine months ended September 30, 2004, respectively, compared to the corresponding periods of 2003. Interest expense relates to the lease financings of the Powerton and Joliet Stations and the Collins Station through April 27, 2004. Also included in interest expense is interest on $1.74 billion in new debt entered into by Midwest Generation during the second quarter of 2004. See "Liquidity and Capital Resources—Midwest Generation Financing Developments" for further discussion related to the new debt.

        Interest expense to affiliate decreased $55.3 million and $99.0 million in the third quarter and nine months ended September 30, 2004, respectively, compared to the corresponding periods of 2003. Interest expense to affiliate related to borrowings from Edison Mission Overseas Co., a wholly owned subsidiary of Midwest Generation's parent, under subordinated loan agreements. The 2004 decreases were due to the repayment of $692.7 million with a portion of the proceeds of the notes issuance and the term loan, and the settlement of the outstanding balance due under the subordinated revolving loan in April 2004 with an equity contribution of approximately $2.2 billion. As a result of the settlement and termination of this loan, Midwest Generation will no longer incur intercompany costs related to this debt.

Benefit For Income Taxes

        Midwest Generation had an effective income tax benefit rate of 39% in both the first nine months of 2004 and 2003, respectively. The effective income tax rates were different from the federal statutory rate of 35% due to state income taxes.

Cumulative Effect of Change in Accounting Principle

        Effective January 1, 2003, Midwest Generation adopted Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, the entity capitalizes the cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is increased to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. As of January 1, 2003, Midwest Generation recorded a $74 thousand, after tax, decrease to net income as the cumulative effect of adoption of SFAS No. 143.

Net Income (Loss)

        Net income (loss) decreased $36.3 million and $588.2 million in the third quarter and nine months ended September 30, 2004, respectively, compared to the corresponding periods of 2003. See "Management's Overview—Overview of Midwest Generation's 2004 Operating Performance." Although Midwest Generation expects to generate positive cash flow from operations, it expects to incur annual losses after depreciation, amortization and interest expense for 2004. Midwest Generation's future results of operations will depend primarily on revenues from the sale of energy, capacity and other related products, and the level of its operating expenses.

New Accounting Pronouncements

Statement of Financial Accounting Standards Interpretation No. 46

        In December 2003, the FASB re-issued Statement of Financial Accounting Standards Interpretation No. 46, "Consolidation of Variable Interest Entities" (FIN 46R). The primary objective

20

of the interpretation is to provide guidance on the identification of, and financial reporting for, entities over which control is achieved through means other than voting rights; such entities are known as variable interest entities. This interpretation applies to variable interest entities created after January 31, 2003, and applies to variable interest entities in which Midwest Generation holds a variable interest that it acquired before February 1, 2003. This interpretation is effective for special purpose entities as of December 31, 2003 and for all other entities as of March 31, 2004. The adoption of this standard had no impact on Midwest Generation's consolidated financial statements.

FASB Staff Position FAS 106-2

        In May 2004, the FASB issued FASB Staff Position FAS 106-2, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003." The primary objective of the position is to provide accounting guidance related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003. Midwest Generation adopted this guidance effective July 1, 2004, which had an immaterial impact on its consolidated financial statements. According to proposed federal regulations, Midwest Generation's retiree health care plans provide prescription drug benefits that are deemed to be actuarially equivalent to Medicare benefits. Accordingly, Midwest Generation recognized the subsidy in the measurement of its accumulated obligation and recorded an actuarial gain.

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LIQUIDITY AND CAPITAL RESOURCES

Introduction

        The following discussion of liquidity and capital resources is organized in the following sections:

        For a complete discussion of these issues, read this quarterly report in conjunction with Midwest Generation's annual report on Form 10-K for the year ended December 31, 2003.

Midwest Generation Financing Developments

        On April 27, 2004, Midwest Generation completed a private offering of $1 billion aggregate principal amount of its 8.75% second priority senior secured notes due 2034. The notes were co-issued by a newly formed wholly owned subsidiary, Midwest Finance Corp. Holders of the notes may require Midwest Generation to repurchase, or Midwest Generation may elect to repay, the notes on May 1, 2014 and on each one-year anniversary thereafter at 100% of their principal amount, plus accrued and unpaid interest. Concurrent with the issuance of the notes, Midwest Generation borrowed $700 million under a new first priority senior secured term loan facility. The term loan has a final maturity of April 27, 2011 and bears interest at LIBOR plus 3.25% per annum. Midwest Generation has agreed to repay $1,750,000 of the term loan on each quarterly payment date. Midwest Generation also entered into a new five-year $200 million working capital facility that replaced a prior facility. The new working capital facility also provides for the issuance of letters of credit. As of September 30, 2004, Midwest Generation had no borrowings outstanding under the working capital facility and had reimbursement obligations under a letter of credit for $2.6 million that expires in 2005. Midwest Generation used the proceeds of the notes issuance and the term loan to refinance $693 million of indebtedness (plus accrued interest and fees) owed by its direct parent, Edison Mission Midwest Holdings Co., which had been guaranteed by Midwest Generation and was due in December 2004, and to make the termination payment under the Collins Station lease in the amount of approximately $960 million.

        Midwest Generation is permitted to use the new working capital facility and cash on hand to provide credit support (either through loans or letters of credit) for forward contracts with third-party counterparties entered into by Edison Mission Marketing & Trading on its behalf for capacity and energy generated by Midwest Generation. Utilization of this credit facility in support of such forward contracts provides additional liquidity support for implementation of Midwest Generation's contracting strategy for the Illinois Plants. See "—Loan Agreement with Edison Mission Marketing & Trading."

        The term loan and working capital facility share a first priority lien and the senior secured notes have a second priority lien in a collateral package which consists of, among other things, substantially all the coal-fired generating plants owned by Midwest Generation and the assets relating to those

22

plants, as well as the equity interests of Midwest Generation and its parent company and the intercompany notes entered into by EME and Midwest Generation in connection with the Powerton-Joliet sale-leaseback transaction.

        Simultaneously with the closing of the above financing, Edison Mission Midwest Holdings made an equity contribution to Midwest Generation of approximately $2.2 billion, which was used to settle the outstanding balance due under the subordinated revolving loan. As a result of the settlement and termination of this loan, Midwest Generation will no longer incur intercompany interest costs related to this debt.

Midwest Generation Credit Facility and Indenture Covenants

        Midwest Generation is bound by the covenants in its credit facility and indenture as well as certain covenants under the Powerton-Joliet lease documents with respect to Midwest Generation making payments under the leases. These covenants include restrictions on the ability to, among other things, incur debt, create liens on its property, merge or consolidate, sell assets, make investments, engage in transactions with affiliates, make distributions, make capital expenditures, enter into agreements restricting its ability to make distributions, engage in other lines of business or engage in transactions for any speculative purpose. In addition, the credit facility contains financial covenants binding on Midwest Generation.

Covenants in Credit Agreement

        In order for Midwest Generation to make a distribution, it must be in compliance with covenants specified under its credit agreement. Compliance with the covenants in its credit agreement includes maintaining the following two financial performance requirements:

•

At the end of each fiscal quarter, Midwest Generation's consolidated interest coverage ratio for the immediately preceding four consecutive fiscal quarters must be at least 1.25 to 1. The consolidated interest coverage ratio is defined as the ratio of consolidated net income (plus or minus specified amounts as set forth in the credit agreement), to consolidated interest expense (as more specifically defined in the credit agreement). During the twelve months ended September 30, 2004, the interest coverage ratio was 2.39 to 1 (computed on a pro forma basis assuming the credit agreement had been in existence for a twelve-month period).



•

Midwest Generation's secured leverage ratio for the 12-month period ended on the last day of the immediately preceding fiscal quarter may be no greater than 8.75 to 1. The secured leverage ratio is defined as the ratio of the aggregate principal amount of Midwest Generation secured debt plus all indebtedness of a subsidiary of Midwest Generation, to the aggregate amount of consolidated net income (plus or minus specified amounts as set forth in the credit agreement). During the twelve months ended September 30, 2004, the secured leverage ratio was 5.94 to 1.

        In addition, Midwest Generation's distributions are limited in amount. The aggregate amount of distributions made by Midwest Generation since April 27, 2004 may not exceed the sum of (i) 75% of excess cash flow (as defined in the credit agreement) generated since that date, plus (ii) up to 100% of the amount of equity contributions or subordinated loans made by EME or a subsidiary of EME to Midwest Generation after April 27, 2004, but in the latter case only to the extent excess cash flow not used for a dividend under (i) is available for such payments. With the remaining 25% of excess cash flow, Midwest Generation must offer to prepay the term loan to the lenders. Each of the lenders may, at its option, decline such prepayment with respect to its pro rata share of the term loan. If Midwest Generation is rated investment grade, the aggregate amount of distributions made by Midwest Generation may equal but not exceed 100% of excess cash flow generated since becoming investment

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grade plus 75% of excess cash flow generated during the period between April 27, 2004 and the date immediately prior to becoming investment grade.

        Excess cash flow was $117 million for the period between April 27, 2004 and September 30, 2004. At September 30, 2004, Midwest Generation met both of the covenant requirements described above under the credit agreement and made a distribution of $88 million in October 2004. As required under the credit agreement, Midwest Generation made an offer to the lenders to prepay $29 million of the term loan, of which $5 million was accepted by certain lenders and repaid on October 20, 2004. The remaining $24 million of excess cash flow not repaid will be retained by Midwest Generation as working capital or used to make a voluntary prepayment at a later date, as provided under the credit agreement.

Covenants in Indenture

        Midwest Generation's indenture contains restrictions on its ability to make a distribution substantially similar to those in the credit agreement. Failure to achieve the conditions required for distributions will not result in a default under the indenture, nor does the indenture contain any other financial performance requirements.

Loan Agreement with Edison Mission Marketing & Trading

        Midwest Generation entered into a revolving credit agreement with Edison Mission Marketing & Trading, dated as of April 27, 2004, pursuant to which Midwest Generation will, from time to time, make revolving loans to, and have letters of credit issued on behalf of, Edison Mission Marketing & Trading. The loans and letters of credit provide credit support for forward contracts entered into by Edison Mission Marketing & Trading related to the Illinois Plants. As of September 30, 2004, Midwest Generation has provided Edison Mission Marketing & Trading $1.8 million, which Edison Mission Marketing & Trading has used to provide credit support for forward contracts. Loans provided under this revolving credit agreement are repaid by Edison Mission Marketing & Trading upon the return of the funds under the terms of the related forward contract. The amount repaid includes interest earned, if any, under margining agreements supporting such contracts. The maximum amount of available credit under the agreement is $200 million.

Termination of the Collins Station Lease

        On April 27, 2004, Midwest Generation terminated the Collins Station lease through a negotiated transaction with the lease equity investor. Midwest Generation made a lease termination payment of approximately $960 million. This amount represented the $774 million of lease debt outstanding, plus accrued interest, and the amount owed to the lease equity investor for early termination of the lease. Midwest Generation received title to the Collins Station as part of the transaction. Midwest Generation recorded a pre-tax loss of approximately $64 million (approximately $39 million after tax) during the quarter ended June 30, 2004, due to termination of the lease and the planned decommissioning of the asset. Included in the pre-tax loss is a $2.7 million inventory reserve for excess spare parts at the Collins Station.

        Following the termination of the Collins Station lease, Midwest Generation announced plans to permanently cease operations at the Collins Station by December 31, 2004 and decommission the plant. On July 30, 2004, PJM accepted Midwest Generation's request to cease operations at the Collins Station. PJM found that the decommissioning of the plant would not affect the operation or reliability of the PJM markets. During the third quarter of 2004, Midwest Generation reached an agreement with Exelon Generation to terminate the power purchase agreement effective September 30, 2004 for the

24

two units at the Collins Station that remained under contract. As a result of the termination of the power purchase agreement, Midwest Generation revised the estimated useful life of the remaining plant assets to end on September 30, 2004 instead of December 31, 2004. Accordingly, Midwest Generation recorded a pre-tax impairment charge of $10.3 million during the third quarter of 2004. During the quarter ended September 30, 2004, Midwest Generation recorded a pre-tax loss of $1.9 million for fuel oil inventory at the Collins Station. In October 2004, Midwest Generation finalized plans to reduce the workforce in Illinois and expects to recognize a $4 million pre-tax charge for exit costs during the fourth quarter of 2004.

        In September 2004, management completed an analysis of future competitiveness in the expanded PJM marketplace of its eight small peaking units in Illinois. Based on this analysis, management decided to decommission six of the eight small peaking units, subject to regulatory review and approval. As a result of this decision, projected future cash flows associated with the Illinois peaking units were less than the book value of the units resulting in an impairment under Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or the Disposal of Long-Lived Assets." During the third quarter of 2004, Midwest Generation recorded a pre-tax impairment charge of $28.8 million (approximately $17.7 million after tax).

Consolidated Cash Flow

        At September 30, 2004, Midwest Generation had cash and cash equivalents of $216.6 million, compared to $36.5 million at December 31, 2003. Net working capital at September 30, 2004 was $225.2 million, compared to $(675.8) million at December 31, 2003. The improvement in working capital was primarily the result of the repayment of the $692.7 million of debt in April 2004 that was classified as a current liability at December 31, 2003.

        Net cash provided by operating activities increased $88.6 million in the first nine months of 2004, compared to the corresponding period of 2003. The increase in cash provided by operating activities was primarily due to the timing of cash receipts and disbursements relating to working capital items.

        Net cash provided by financing activities decreased $92.3 million in the first nine months of 2004, compared to the corresponding period of 2003. The 2004 decrease in net cash provided by financing activities was primarily attributable to the repayment of the capital lease obligation related to the Collins Station lease and the repayment of the $692.7 million of debt in April 2004. In addition, Midwest Generation borrowed approximately $181 million in 2003 on its subordinated revolving line of credit with affiliate primarily to pay for interest owed on both affiliate loans. Partially offsetting these decreases was borrowings in April 2004 totaling $1.7 billion consisting of the $1 billion secured notes and the $700 million term loan facility.

        Net cash used in investing activities decreased $13.3 million in the first nine months of 2004, compared to the corresponding period of 2003. The 2004 decrease was primarily due to a reduction in capital expenditures.

        Midwest Generation's principal source of liquidity is cash on hand, available credit under its new $200 million working capital line of credit, payments by EME under the intercompany notes issued in connection with the Powerton-Joliet facilities sale-leaseback and future cash flow from operations.

2004 Capital Expenditures

        Midwest Generation plans to spend approximately $8.7 million on capital expenditures for the remainder of 2004. These capital expenditures are planned to be financed by cash generated from

25

operations. During the third quarter of 2004, Midwest Generation decided to return Will County Units 1 and 2 to service. Operations at these units were suspended in 2002, pending recovery of market prices. As part of returning these units to service, Midwest Generation expects to install environmental improvements of approximately $10 million by June 30, 2005.

Powerton-Joliet Lease Payments

        As part of the sale-leaseback of the Powerton and Joliet Stations, Midwest Generation loaned the proceeds (in the original amount of $1.367 billion) to EME in exchange for promissory notes in the same aggregate amount. Midwest Generation's use of debt service payments by EME on the promissory notes is currently the only source of cash available to Midwest Generation to meet its lease payment obligations under the Powerton and Joliet leases. EME's obligations under the promissory notes payable to Midwest Generation are general corporate obligations of EME and are not contingent upon receiving distributions from its subsidiaries. There is no assurance that EME will have sufficient cash flow to meet these obligations. Furthermore, EME has guaranteed Midwest Generation's lease obligations under these leases. If EME failed to pay under its guarantee, including payments due under the Powerton-Joliet leases in the event that Midwest Generation could not make such payments, this would result in an event of default under the Powerton and Joliet leases. This event would have a material adverse effect on Midwest Generation.

Credit Ratings

Overview

        Credit ratings for EME, Midwest Generation, LLC and Edison Mission Marketing & Trading are as follows:

        On August 6, 2004, Moody's raised EME's credit rating to B1 from B2. Midwest Generation cannot provide assurance that the credit ratings above will remain in effect for any given period of time or that one or more of these ratings will not be lowered. Midwest Generation notes that these credit ratings are not recommendations to buy, sell or hold securities and may be revised at any time by a rating agency.

Credit Rating of Edison Mission Marketing & Trading

        Midwest Generation sells merchant energy and capacity and purchases its natural gas through its marketing affiliate, Edison Mission Marketing & Trading, which currently has a below investment grade credit rating. In order to support Midwest Generation's forward sales and hedging, historically, EME (which also has a below investment grade credit rating) provided collateral in the form of cash and letters of credit for the benefit of Edison Mission Marketing & Trading's counterparties. As a result of the new working capital facility entered into by Midwest Generation described above, Midwest Generation provides credit support for forward contracts entered into by Edison Mission Marketing & Trading related to the Illinois Plants. See "—Loan Agreement with Edison Mission Marketing & Trading."

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        Midwest Generation anticipates that sales of its power through Edison Mission Marketing & Trading may require additional credit support, depending upon market conditions and the strategies adopted for the sale of this power. Changes in forward market prices and margining requirements and increases in merchant sales could further increase the need for credit support related to price risk management activities. Midwest Generation is able to provide collateral to support bilateral contracts for power and fuel to the extent that any such transactions relate to Midwest Generation's merchant energy operations. Depending on market conditions and the volume and duration of forward sales, there is no assurance that Midwest Generation will be able to provide sufficient credit support to Edison Mission Marketing & Trading.

Contractual Obligations

Fuel Supply Contracts

        Midwest Generation has entered into additional fuel purchase agreements with various third-party suppliers during the first nine months of 2004. Midwest Generation's fuel purchase commitments under these agreements are currently estimated to be $10.6 million for 2005, $49.8 million for 2006, $53.6 million for 2007, and $57.3 million for 2008.

Off-Balance Sheet Transactions

        For a discussion of Midwest Generation's off-balance sheet transactions, refer to "Off-Balance Sheet Transactions" on page 49 of Midwest Generation's annual report on Form 10-K for the year ended December 31, 2003.

Environmental Matters and Regulations

        For a discussion of Midwest Generation's environmental matters, refer to "Environmental Matters and Regulations" on page 52 of Midwest Generation's annual report on Form 10-K for the year ended December 31, 2003 and the notes to the Financial Statements set forth therein. There have been no other significant developments with respect to environmental matters specifically affecting Midwest Generation since the filing of its annual report.

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MARKET RISK EXPOSURES

Introduction

        As discussed further below, beginning in 2003, Midwest Generation has been selling a significant portion of its energy into wholesale power markets. Midwest Generation's primary market risk exposures arise from fluctuations in electricity and fuel prices, emission allowances, transmission rights and interest rates. Midwest Generation manages these risks in part by using derivative financial instruments in accordance with established policies and procedures. See "Management's Overview; Critical Accounting Policies and Estimates" and "Liquidity and Capital Resources—Credit Ratings" for a discussion of market developments and their impact on Midwest Generation's credit and the credit of its counterparties.

        This section discusses these market risk exposures under the following headings:

        For a complete discussion of these issues, read this quarterly report in conjunction with Midwest Generation's annual report on Form 10-K for the year ended December 31, 2003.

Commodity Price Risk

Overview

        Midwest Generation has been selling a significant portion of its energy and capacity into wholesale power markets through its affiliate, Edison Mission Marketing & Trading. Edison Mission Marketing & Trading enters into forward contracts for a portion of Midwest Generation's electric output that is not committed to be sold under the power purchase agreements with Exelon Generation in order to provide more predictable earnings and cash flow. When appropriate, Edison Mission Marketing & Trading manages the spread between electric prices and fuel prices, and uses forward contracts, swaps, futures, or options contracts to achieve those objectives. There is no assurance that contracts to hedge changes in market prices will be effective.

        With the exception of revenue generated by the two remaining power purchase agreements with Exelon Generation, Midwest Generation's revenues and results of operations will depend upon prevailing market prices for capacity, energy, ancillary services, emission allowances, fuel oil, coal, natural gas and associated transportation costs in the market area known as the MAIN region and neighboring markets. Among the factors that influence the price of power in the MAIN region and the region administered by PJM are:

•

prevailing market prices for fuel oil, coal and natural gas and associated transportation costs;



•

the cost of emission credits or allowances;



•

the extent of additional supplies of capacity, energy and ancillary services from current competitors or new market entrants, including the development of new generation facilities;

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•

transmission congestion in and to the MAIN region and/or PJM and regulatory developments surrounding the expansion of PJM;



•

the availability, reliability and operation of nuclear generating plants, where applicable, and the extended operation of nuclear generating plants in the MAIN region and PJM beyond their presently expected dates of decommissioning;



•

weather conditions prevailing in the MAIN region and PJM from time to time; and



•

the rate of electricity use as a result of factors such as regional economic conditions and the implementation of conservation programs.

Status of the Exelon Generation Power Purchase Agreements

        Approximately 57% and 68% of Midwest Generation's energy and capacity sales in the first nine months of 2004 and 2003, respectively, were to Exelon Generation under the power purchase agreements. As a result of Exelon Generation's election to release units from contract for 2004, Midwest Generation's reliance on sales into the wholesale market increased in 2004 from 2003. For the nine months ended September 30, 2004, 3,859 MW of Midwest Generation's generating capacity (2,383 MW related to its coal-fired generation units, 1,084 MW related to its Collins Station, and 392 MW related to its peaking units) was subject to power purchase agreements with Exelon Generation. Following the termination of the Collins Station power purchase agreement effective September 30, 2004, 2,775 MW will be subject to power purchase agreements with Exelon Generation during the fourth quarter of 2004. 2004 is the final contract year under these power purchase agreements.

Merchant Sales

        The energy and capacity from units not subject to a power purchase agreement with Exelon Generation are sold under terms, including price and quantity, negotiated by Edison Mission Marketing & Trading with customers through a combination of bilateral agreements, forward energy sales and spot market sales. These arrangements generally have a term of two years or less. Thus, Midwest Generation is subject to the market risks related to the price of energy and capacity from those units. Capacity prices for merchant energy sales are, and are expected in the near term to remain, substantially less than those Midwest Generation currently receives under the 1999 power purchase agreements with Exelon Generation. Midwest Generation further expects that the lower revenues resulting from this difference will be offset in part by energy prices, which Midwest Generation believes will, in the near term, be higher for merchant energy sales than those Midwest Generation currently receives under its existing agreements. Midwest Generation intends to manage this price risk, in part, by accessing both the wholesale customer and over-the-counter markets described below as well as using derivative financial instruments in accordance with established policies and procedures.

        Prior to May 1, 2004, the primary markets available to Midwest Generation for wholesale sales of electricity from the Illinois Plants were direct "wholesale customers" and broker arranged "over-the-counter customers." The most liquid over-the-counter markets in the Midwest region have historically been for sales into the control area of Cinergy and, to a lesser extent, for sales into the control areas of Commonwealth Edison and American Electric Power, referred to as "Into ComEd" and "Into AEP," respectively. "Into ComEd" and "Into AEP" are bilateral markets for the sale or purchase of electrical energy for future delivery. Due to geographic proximity, "Into ComEd" was the primary market for Midwest Generation.

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        The following table depicts the historical average market prices for energy per megawatt-hour "Into ComEd" for the first four months of 2004.

(1)

On-peak refers to the hours of the day between 6:00 a.m. and 10:00 p.m. Monday through Friday, excluding North American Electric Reliability Council (NERC) holidays. All other hours of the week are referred to as off-peak.

*

Source: Energy prices were determined by obtaining broker quotes and other public price sources, for "Into ComEd" delivery points.

        Following Commonwealth Edison's joining PJM on May 1, 2004, sales of electricity from the Illinois Plants now include bilateral and spot sales into PJM, with spot sales being based on locational marginal pricing. These sales, into the expanded PJM, the primary market currently available to Midwest Generation, replaced sales previously made as bilateral sales and spot sales "Into ComEd." See "—Regulatory Matters" for a more detailed discussion of recent developments regarding Commonwealth Edison's joining PJM. Performance of transactions in these markets is subject to contracts that generally provide for liquidated damages supported by a variety of credit requirements, which may include independent credit assessment, parent company guarantees, letters of credit, and cash margining arrangements.

        The following table depicts the historical average market prices for energy per megawatt-hour since joining PJM on May 1, 2004.

*

Energy prices calculated at the Northern Illinois Hub delivery point using hourly real-time prices as published by PJM. There is no comparison for the same months in 2003.

        Forward market prices in the Northern Illinois Hub fluctuate as a result of a number of factors, including natural gas prices, transmission congestion, changes in market rules, electricity demand which is affected by weather and economic growth, plant outages in the region, and the amount of existing and planned power plant capacity. The actual spot prices for electricity delivered into these markets may vary materially from the forward market prices set forth in the table below.

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        The following table sets forth the forward market prices for energy per megawatt-hour as quoted for sales into the Northern Illinois Hub at September 30, 2004:

(1)

Market price for energy purchases for the entire calendar year, as quoted for sales into the Northern Illinois Hub.

*

Energy prices were determined by obtaining broker quotes and other public sources for the Northern Illinois Hub delivery point.

        Midwest Generation intends to hedge a portion of its merchant portfolio risk through Edison Mission Marketing & Trading. The following table summarizes Midwest Generation's hedge position (primarily based on prices at the Northern Illinois Hub) at September 30, 2004:

        To the extent Midwest Generation does not hedge its merchant portfolio, the unhedged portion will be subject to the risks and benefits of spot market price movements. The extent to which Midwest Generation will hedge its market price risk through forward over-the-counter sales depends on several factors. First, Midwest Generation will evaluate over-the-counter market prices to determine whether sales at forward market prices are sufficiently attractive compared to assuming the risk associated with spot market sales. Second, Midwest Generation's ability to enter into hedging transactions will depend upon its and Edison Mission Marketing & Trading's credit capacity and upon the over-the-counter forward sales markets having sufficient liquidity to enable Midwest Generation to identify counterparties who are able and willing to enter into hedging transactions with it. Midwest Generation is permitted to use its new working capital facility and cash on hand to provide credit support for forward contracts entered into by Edison Mission Marketing & Trading for capacity and energy generation by Midwest Generation under an intercompany energy services agreement between Midwest Generation and Edison Mission Marketing & Trading. Utilization of this credit facility in support of such forward contracts is expected to provide additional liquidity support for implementation of Midwest Generation's contracting strategy for the Illinois Plants. See "—Credit Risk," below.

        In addition to the prevailing market prices, Midwest Generation's ability to derive profits from the sale of electricity from the units released from contract by Exelon Generation will be affected by the cost of production, including costs incurred to comply with environmental regulations. The costs of production of the released units vary and, accordingly, depending on market conditions, the amount of generation that will be sold from the released units is expected to vary from unit to unit.

        Effective May 1, 2004, the transmission system of Commonwealth Edison became integrated into PJM. Over EME's and Midwest Generation's objections, such integration was allowed to occur in advance of the integration of American Electric Power into PJM, which had resulted in the creation of an islanded market within PJM limited to the service territory of Commonwealth Edison. Concerns about the islanded market of Commonwealth Edison became moot on October 1, 2004, when American

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Electric Power was integrated into PJM. In general, power produced by Midwest Generation not under contract with Exelon Generation has been sold in the past using transmission obtained from Commonwealth Edison under its open-access tariff filed with the FERC, and the application of the PJM tariff to Commonwealth Edison's transmission system could also affect the rates, terms and conditions of transmission service received by Midwest Generation. Given the recent integration of American Electric Power into PJM, such changes, if any, are not expected to have a material effect on Midwest Generation. See "—Regulatory Matters" for further discussion.

        In addition to the price risks described previously, Midwest Generation's ability to transmit energy to counterparty delivery points to consummate spot sales and hedging transactions may also be affected by transmission service limitations and constraints and new standard market design proposals proposed by and currently pending before the FERC. Although the FERC and the relevant industry participants are working to minimize such issues, Midwest Generation cannot determine how quickly or how effectively such issues will be resolved.

        Midwest Generation is continuing to monitor the activities at the FERC related to the expansion of PJM and to advocate regulatory positions that promote efficient and fair markets in which the Illinois Plants compete.

Derivative Financial Instruments

        The following table summarizes the fair values for Midwest Generation's outstanding financial instruments used for price risk management activities. The change in fair value of electricity contracts in 2004 as compared to 2003 is attributable to the increase in average market prices during the third quarter of 2004 to above contracted prices at September 30, 2004, which is the valuation date, causing the fair value of the contracts to become liabilities instead of assets (in thousands).

        In assessing the fair value of Midwest Generation's derivative financial instruments, Edison Mission Marketing & Trading uses a variety of methods and assumptions based on the market conditions and associated risks existing at each balance sheet date. The fair value of commodity price contracts takes into account quoted market prices, time value of money, volatility of the underlying commodities and other factors. The following table summarizes the maturities, the valuation method and the related fair value of Midwest Generation's commodity risk management assets and liabilities as of September 30, 2004 (in thousands):

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Credit Risk

        As a result of Exelon Generation's releasing several of Midwest Generation's units from the respective power purchase agreements in 2003 and 2004, Midwest Generation is selling a significant portion of its energy into wholesale power markets and intends to hedge its merchant portfolio risk through Edison Mission Marketing & Trading.

        In conducting price risk management activities, Edison Mission Marketing & Trading enters into contracts with a number of utilities, energy companies and financial institutions, collectively referred to as counterparties. In the event a counterparty were to default on its trade obligation, Midwest Generation would be exposed to the risk of possible loss associated with reselling the contracted product at a lower price if the non-performing counterparty were unable to pay the resulting liquidated damages owed to Midwest Generation under the intercompany energy services agreement. Midwest Generation's agreement with Edison Mission Marketing & Trading transfers the risk of non-payment of accounts receivable from counterparties to Edison Mission Marketing & Trading. Notwithstanding the foregoing, Midwest Generation will not be in default under the senior secured notes and new credit agreement if it fails to enforce payment from Edison Mission Marketing & Trading in the case of nonpayment of an accounts receivable from a counterparty, so long as the counterparty is rated at least investment grade.

        The obligations of Midwest Generation under the senior secured notes and new credit agreement are secured by, among other things, an account of Edison Mission Marketing & Trading in which Edison Mission Marketing & Trading will deposit funds received from third-party counterparties for sales of energy and capacity from the Illinois Plants. See "Liquidity and Capital Resources—Midwest Generation Financing Developments." See also "Related Party Transactions—Edison Mission Marketing & Trading Agreements" on page 40 in Midwest Generation's annual report on Form 10-K for the year ended December 31, 2003.

        To manage credit risk, Edison Mission Marketing & Trading looks at the risk of a potential default by counterparties. Credit risk is measured by the loss that would be incurred if counterparties failed to perform pursuant to the terms of their contractual obligations. Edison Mission Marketing & Trading measures, monitors, and mitigates, to the extent possible, credit risk. To mitigate counterparty risk, master netting agreements are used whenever possible and counterparties may be required to pledge collateral when deemed necessary. Edison Mission Marketing & Trading also takes other appropriate steps to limit or lower credit exposure. Processes have also been established to determine and monitor the creditworthiness of counterparties. Edison Mission Marketing & Trading manages portfolio credit risk based on credit ratings using published ratings of counterparties and other publicly disclosed information, such as financial statements, regulatory filings, and press releases to guide it in the process of setting credit levels, risk limits and contractual arrangements, including master netting agreements. A risk management committee regularly reviews the credit quality of Edison Mission Marketing & Trading's counterparties. Despite this, there can be no assurance that these efforts will be wholly successful in mitigating credit risk or that collateral pledged will be adequate.

Interest Rate Risk

        Interest rate changes affect the cost of capital needed to operate the facilities. In April 2004, Midwest Generation entered into a $700 million variable rate term loan facility due in 2011 which exposes Midwest Generation to the risk of earnings loss resulting from changes in interest rates. See "Liquidity and Capital Resources—Midwest Generation Financing Developments" for a discussion of the facility.

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Regulatory Matters

        For a discussion of Midwest Generation's regulatory matters, refer to "Regulatory Matters" on page 17 of Midwest Generation's annual report on Form 10-K for the year ended December 31, 2003. There have been no other significant developments with respect to regulatory matters specifically affecting Midwest Generation since the filing of its annual report, except as follows:

        Commonwealth Edison's application to join PJM was approved by the FERC, on April 27, 2004, with an effective date of May 1, 2004. EME and Midwest Generation had protested such action before the FERC because the integration of Commonwealth Edison into PJM in advance of American Electric Power (AEP) created an isolated market within PJM limited to the service territory of Commonwealth Edison. The integration of AEP into PJM had been delayed by the actions of state regulatory authorities in Virginia and Kentucky. However, the issues raised in the Kentucky proceedings were resolved in June 2004 and the Virginia case was settled in August 2004, which permitted the integration of AEP to take place without incident on October 1, 2004.

        On March 19, 2004, in a separate but related matter, the FERC issued an order having the effect of postponing to December 1, 2004 the effective date for elimination of regional through and out rates in the region encompassed by PJM (as expanded by the addition of Commonwealth Edison and as to be further expanded by the addition of AEP) and the MISO. The effect of this order was that the so-called rate pancaking was not eliminated prior to the integration of Commonwealth Edison and AEP into PJM. Rate pancaking occurs when energy must move through multiple, separately priced transmission systems to travel from its point of production to its point of delivery, and each transmission owner along the line charges separately for the use of its system. The FERC included in its order a strong statement that the existing through and out rates must be eliminated no later than December 1, 2004.

        The transmission owners and other stakeholder interests in the region met on several occasions from June through early September 2004, attempting to reach consensus on an acceptable long-term rate structure for the combined PJM/MISO footprint. A consensus among all affected parties could not be reached; however, two competing proposals for a long-term rate structure have emerged from such discussions and both were filed with the FERC on October 1, 2004. Neither of those plans would impose transmission costs on system users other than load-serving entities. However, the FERC has also initiated an investigation under Section 206 of the Federal Power Act, which would permit the agency to adopt a structure different from those which have been proposed by the parties. In its order initiating the investigation, the FERC reiterated its previous statement that it would act on such a structure by December 1, 2004. Until through and out rates are eliminated, Midwest Generation will continue to have to pay transmission charges for power sold for delivery to customers within the MISO. In addition, sales to customers outside of the MISO and PJM will continue to be subject to the through and out rates applicable to such transactions.

        On July 27, 2004, AEP reached a settlement with staff of the Virginia State Corporation Commission that allowed AEP to transfer control of its transmission lines in the state to PJM. The settlement eliminated the need for the FERC to act to ensure that AEP was able to enter PJM on October 1, 2004, the target date set by both AEP and PJM. Such integration took place on October 1, 2004, as previously noted.

        Given the removal of the uncertainties regarding the market structure issues discussed previously, the direct impact on Midwest Generation of the above-described matters will be limited to the delay in the elimination of regional through and out rates. This is not expected to have a material effect on Midwest Generation's financial results prior to the anticipated elimination of such rates between PJM and the MISO on December 1, 2004.

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ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        For a discussion of market risk sensitive instruments, refer to "Market Risk Exposures" on page 59 of Midwest Generation's annual report on Form 10-K for the year ended December 31, 2003. Refer to "Market Risk Exposures" in Item 2 for an update to that disclosure.

ITEM 4.    CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

        Midwest Generation's management, with the participation of the company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of Midwest Generation's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period, Midwest Generation's disclosure controls and procedures are effective.

Internal Control Over Financial Reporting

        There were no changes in Midwest Generation's internal control over financial reporting (as such term is defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, Midwest Generation's internal control over financial reporting.

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PART II—OTHER INFORMATION

ITEM 6.    EXHIBITS

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SIGNATURES

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

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QuickLinks

PART I—FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 4. CONTROLS AND PROCEDURES

PART II—OTHER INFORMATION
ITEM 6. EXHIBITS