Northeast: Adjusted EBITDA for 2011 was $100 million, $215 million lower as compared to 2010. This decline was driven by a $307 million drop in gross margin due to 21% lower generation primarily caused by coal-to-gas switching, in addition to a 24% decrease in realized energy prices. Furthermore, capacity revenues have declined $105 million as prices and volumes continue to fall in the Northeast capacity markets. Partially offsetting the decreased gross margins were $62 million in favorable operating expenses, as maintenance expenses have declined, and 2010 results included $21 million for asset write-offs, primarily in connection with the planned retirement of Indian River unit 3. In addition, equity earnings have increased by $10 million as GenConn’s Middletown and Devon facilities were both operational in 2011.

Adjusted EBITDA for the fourth quarter was a loss of $4 million, compared to a gain of $35 million in the fourth quarter of 2010. Gross margin declined $63 million due to a combination of factors, including a 44% decline in realized energy prices, a 70% drop in coal generation and a $22 million decrease in capacity revenues due to lower pricing across the region. Partially offsetting these decreases were lower operating expenses of $22 million, primarily driven by decreased maintenance costs.

South Central: Adjusted EBITDA was $127 million, an $18 million increase as compared to 2010. Overall, gross margin increased $33 million year-over-year driven by increases in both contract and merchant sales activity. The long-term contracts were positively impacted by the addition of three regional municipality contracts which contributed to a 3% increase in MWh sold. Meanwhile, a 155% increase in merchant MWhs sold was driven by the acquisition of Cottonwood, which added 4.6 TWh of additional generation. Partially offsetting the increased gross margin were higher operating expenses due to the addition of Cottonwood which was acquired in November 2010.

Adjusted EBITDA for the fourth quarter of 2011 was $18 million, down $6 million from 2010. The quarter was impacted by higher operating expenses resulting from the maintenance outage performed on Big Cajun unit 1 in fall of 2011 versus the maintenance outage on the partially owned unit 3 in fall of 2010. Offsetting the cost increases were higher gross margins, which increased as a result of 4% higher co-op and contract revenue and merchant generation sales that increased by 0.7 TWhs.

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