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Ohio Municipal ElectricGeneration AgencyJoint Venture 1Financial StatementsDecember 31, 2001 and 2000

35 North Fourth StreetColumbus, Ohio Facsimilewww.auditor.state.oh.usBoard of ParticipantsOMEGA Joint Venture 1, 2, 4, 5 and Municipal Energy ServicesWe have reviewed the Independent Auditor's Report of the OMEGA Joint Venture 1, 2, 4, 5 andMunicipal Energy Services, Franklin County, prepared by PricewaterhouseCoopers LLP for theaudit period January 1, 2001 through December 31, 2001 (December 1, 2000 through December31, 2001 for OMEGA Joint Venture 2). Based upon this review, we have accepted these reportsin lieu of the audit required by Section 117.11, Revised Code. The Auditor of State did not auditthe accompanying financial statements and, accordingly, we are unable to express, and do notexpress an opinion on them.Our review was made in reference to the applicable sections of legislative criteria, as reflected bythe Ohio Constitution, and the Revised Code, policies, procedures and guidelines of the Auditorof State, regulations and grant requirements. The OMEGA Joint Venture 1, 2, 4, 5 andMunicipal Energy Services are responsible for compliance with these laws and regulations.JIM PETROAuditor of StateJuly 26, 2002

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Ohio Municipal Electric Generation Agency Joint Venture 1Table of ContentsDecember 31, 2001 and 2000PageReport of Independent Accountants1Financial StatementsBalance Sheets2Statements of Operations3Statements of Participants' Equity4Statements of Cash Flows5Notes to Financial StatementsReport of Independent Accountants on Compliance and on Internal Control OverFinancial Reporting Based on an Audit of Financial Statements Performed inAccordance with Government Auditing Standards6-1011

Report of Independent AccountantsBoard of ParticipantsOhio Municipal Electric Generation AgencyJoint Venture 1In our opinion, the accompanying general-purpose financial statements as listed in the table of contentspresent fairly, in all material respects, the financial position of Ohio Municipal Electric GenerationAgency Joint Venture 1 (OMEGA JV-1) at December 31, 2001 and 2000, and the results of itsoperations and its cash flows for the years then ended, in conformity with accounting principlesgenerally accepted in the United States of America. These general-purpose financial statements are theresponsibility of OMEGA JV-1’s management; our responsibility is to express an opinion on thesegeneral-purpose financial statements based on our audits. We conducted our audits of these statementsin accordance with auditing standards generally accepted in the United States of America and thestandards applicable to financial audits contained in Government Auditing Standards, issued by theComptroller General of the United States, which require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free of material misstatement. Anaudit includes examining, on a test basis, evidence supporting the amounts and disclosures in thefinancial statements, assessing the accounting principles used and significant estimates made bymanagement, and evaluating the overall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion.In accordance with Government Auditing Standards, we also have issued our report dated March 27,2002 on our consideration of OMEGA JV-1’s internal control over financial reporting and on our testsof its compliance with certain provisions of laws, regulations, contracts and grants for the year endedDecember 31, 2001. That report is an integral part of an audit performed in accordance withGovernment Auditing Standards and should be read in conjunction with this report in considering theresults of our audit./s/ PricewaterhouseCoopers LLPMarch 27, 2002Columbus, Ohio

Ohio Municipal Electric Generation Agency Joint Venture 1Balance SheetsAt December 31, 2001 and 20002001AssetsElectric plantElectric generatorsFuel tankAccumulated depreciation Total electric plantCurrent assetsCash and cash equivalentsReceivables from participantsFuel inventoryPrepaid expensesTotal current assetsTotal assetsParticipants' Equity and LiabilitiesParticipants' equityParticipants' contributionsAccumulated net margins 4788,76421,28427,66721,2029,878130,34780,031 438,297 402,822 582,452(162,411) 485,184(106,810)Total participants' equityCurrent liabilitiesPayable to American Municipal Power-Ohio, Inc.Accounts payable, tradeTotal current liabilitiesTotal participants' equity and liabilities410,22935,000(137,279)2000 38,297 402,822The accompanying notes are an integral part of these general-purpose financial statements.-2-

Ohio Municipal Electric Generation Agency Joint Venture 1Statements of OperationsFor the Years Ended December 31, 2001 and 20002001RevenuesFees from participants ExpensesAmerican Municipal Power-Ohio, Inc. servicesMunicipal Energy Services Agency servicesFuelMaintenanceDepreciationProfessional servicesInsuranceElectric servicesOther operating expenses, net150,8582000 4,369Total expenses209,326192,506Operating margins(58,468)(16,848)2,8671,098Nonoperating RevenuesInvestment incomeNet margins (55,601) (15,750)The accompanying notes are an integral part of these general-purpose financial statements.-3-

Ohio Municipal Electric Generation Agency Joint Venture 1Statements of Participants' EquityFor the Years Ended December 31, 2001 and 2000Balances at December 31, 1999Participants'ContributionsAccumulatedNet Margins Net margins for the year endedDecember 31, 2000Balances at December 31, 2000Participant )378,374--Balances at December 31, 2001 (91,060) 394,124-97,268Net margins for the year endedDecember 31, 2001Total582,452(55,601) 97,268(55,601)(162,411) 420,041The accompanying notes are an integral part of these general-purpose financial statements.-4-

Ohio Municipal Electric Generation Agency Joint Venture 1Statements of Cash FlowsFor the Years Ended December 31, 2001 and 20002001Cash flows from operating activitiesOperating marginsAdjustments to reconcile operating margins to net cash used inoperating activities:Depreciation and amortizationChanges in assets and liabilities:Receivables from participantsFuel inventoryPrepaid expensesPayable to American Municipal Power-Ohio, Inc.Accounts payable, trade Net cash used in operating activitiesCash flows from capital and related financing activitiesParticipant contribution(58,468)2000 97,268-97,268-2,8671,0982,8671,098Net change in cash and cash equivalents78,646(42,458)Cash and cash equivalents, beginning of year21,28463,742Net cash provided by capital and related financing activitiesCash flows from investing activitiesInvestment incomeNet cash provided by investing activitiesCash and cash equivalents, end of year 99,930 21,284The accompanying notes are an integral part of these general-purpose financial statements.-5-

Ohio Municipal Electric Generation Agency Joint Venture 1Notes to Financial StatementsDecember 31, 2001 and 20001.OrganizationOhio Municipal Electric Generation Agency Joint Venture 1 (OMEGA JV-1) was organized by21 subdivisions of the State of Ohio (the Participants) on April 1, 1992, pursuant to a JointVenture Agreement (the Agreement) under the Ohio Constitution and Section 715.02 of the OhioRevised Code. Its purpose is to provide a source of supplemental capacity to the Participants.The Participants are members of American Municipal Power-Ohio, Inc. (AMP-Ohio) NortheastArea Service Group. The Participants are charged fees for the costs required to administer thejoint venture and maintain the jointly owned electric plant. OMEGA JV-1 purchased its electricgenerating facilities, known as the Engle Units, from AMP-Ohio in September 1992. Thesefacilities are located in Cuyahoga Falls, Ohio.2.Summary of Significant Accounting PoliciesThe following summarizes the significant accounting policies followed by OMEGA JV-1.Basis of AccountingThe accounting records of OMEGA JV-1 are maintained in conformity with the Uniform Systemof Accounts prescribed by the Federal Energy Regulatory Commission (FERC). The accounts ofOMEGA JV-1 are maintained on the accrual basis of accounting in accordance with accountingprinciples generally accepted in the United States of America. OMEGA JV-1 applies allFinancial Accounting Standards Board statements and interpretations except those that conflictwith or contradict Governmental Accounting Standards Board pronouncements.Cash and Cash EquivalentsFor purposes of the statements of cash flows, cash and cash equivalents consist of unrestrictedcash and highly liquid short-term investments with original maturities of three months or less.Electric PlantElectric plant is recorded at cost. Depreciation is provided on the straight-line method over 30years, the estimated useful lives of the assets. Major renewals, betterments and replacements arecapitalized, while maintenance and repair costs are charged to operations as incurred. Whenelectric plant assets are retired, the accumulated depreciation is charged with the cost of the assetsplus removal costs, less any salvage value, with any resulting gain or loss recognized inoperations.Electric plant assets are reviewed for impairment whenever events or changes in circumstancesindicate that full recovery is questionable.Fuel InventoryFuel inventory is stated at the lower of first-in, first-out cost or market.Participants’ EquityParticipants’ equity consists of contributed capital of the Participants and accumulated netmargins. Should OMEGA JV-1 cease business, these amounts, if available, will be returned tothe Participants. During 2001, OMEGA JV-1 received a capital contribution of 97,268.-6-

Ohio Municipal Electric Generation Agency Joint Venture 1Notes to Financial StatementsDecember 31, 2001 and 2000All property constituting OMEGA JV-1 is owned by the Participants as tenants in common inundivided shares, each share being equal to that participant’s percentage ownership interest asfollows:Percent ProjectOwnership andEntitlementMunicipalityCuyahoga rdColumbianaWellingtonNewton ch CityProspectLucasSouth Vienna21.05 721.501.451.160.710.550.500.230.19Total100.00 %Revenue Recognition and RatesRevenues are recognized when earned as electric service is delivered. OMEGA JV-1’s rates forelectric power are designed to cover annual operating costs except depreciation. Rates are setannually by the Board of Participants.Use of EstimatesThe preparation of financial statements in conformity with accounting principles generallyaccepted in the United States of America requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities and disclosure of contingentassets and liabilities at the date of the financial statements and reported amounts of revenues andexpenses during the reporting period. Actual results could differ from those estimates.New Accounting StandardsStatement of Financial Accounting Standards (SFAS) No. 143, Accounting for Asset RetirementObligations (SFAS No. 143), will become effective beginning January 1, 2003. SFAS No. 143establishes accounting and reporting for obligations associated with the retirement of tangible-7-

Ohio Municipal Electric Generation Agency Joint Venture 1Notes to Financial StatementsDecember 31, 2001 and 2000long-lived assets and related asset retirement costs. OMEGA JV-1 is currently evaluating theprovisions of the standard and the potential impact on its financial statements.The Financial Accounting Standards Board also issued SFAS No. 144, Accounting for theImpairment of Disposal of Long-Lived Assets, which sets forth the accounting to recognize andmeasure an impairment loss. SFAS No. 144 was effective beginning January 1, 2002. OMEGAJV-1 does not expect the implementation of SFAS No. 144 to have a material effect on itsfinancial statements.3.Related AgreementsOMEGA JV-1 has entered the following agreements:4. AMP-Ohio provided staffing and expertise to fulfill the management and operationalobligations under the agreement. AMP-Ohio also acts as OMEGA JV-1’s agent. Beginningin 1992, and for each year that the agreement is in effect, AMP-Ohio is paid a managementfee of 60,000 per year; plus for each year after the initial term, such management fee shallbe increased by 5% per year, compounded; plus, a reasonable allocation of the cost to AMPOhio for direct expenses, personnel and overhead related to AMP-Ohio’s performance of itsobligations. Effective January 1, 2001, the management fee under the agreement wascanceled. The management fee for the year ended December 31, 2000 was 93,080. AtDecember 31, 2001 and 2000, OMEGA JV-1 owed AMP-Ohio 7,012 and 10,461,respectively, related to all services. The City of Cuyahoga Falls, Ohio, agreed to provide a suitable site for the generatingfacilities, and OMEGA JV-1 agreed to lease such site for the period of the agreement plusone year, for the sum of one dollar. Cuyahoga Falls also has agreed to perform operationaltasks and perform routine maintenance on the generating facilities at no charge to OMEGAJV-1 in consideration of the availability of the electric generation project to Cuyahoga Fallsfor electric system emergency backup. OMEGA JV-1 entered an agreement with Municipal Energy Services Agency (MESA), arelated joint venture, for MESA to provide certain engineering, finance, administration andother services. The expenses related to these services were 15,060 and 16,441 for the yearsended December 2001 and 2000, respectively.Cash and Cash EquivalentsAt December 31, 2001 and 2000, the carrying amount of OMEGA JV-1’s operating cash depositswas 14,270 and 4,759, respectively, and the bank balance was 15,141 and 4,759,respectively. The difference between operating cash deposits and the bank balance is due tooutstanding checks. At December 31, 2001 and 2000, 85,660 and 16,525, respectively, wasinvested in certain money market funds associated with the bank. Periodically, cash on deposit isinvested overnight in these funds, which consists principally of obligations guaranteed by theUnited States government. The funds are collateralized by investments purchased by the funds,which are not held in the name of OMEGA JV-1.-8-

Ohio Municipal Electric Generation Agency Joint Venture 1Notes to Financial StatementsDecember 31, 2001 and 2000OMEGA JV-1 categorizes its cash and cash equivalents into three categories as to its risk: Category 1 is federally insured deposits, or deposits fully collateralized with securities heldby OMEGA JV-1 or its agent in OMEGA JV-1’s name. Category 2 is deposits uninsured but fully collateralized with securities held by the pledgingfinancial institution’s trust department or agent in OMEGA JV-1’s name. Category 3 is uncollateralized. This includes any bank balance that is collaterized withsecurities held by the pledging financial institution, or by its trust department or agent, but notin OMEGA JV-1’s name.The bank balances of these funds are categorized by risk as follows:Bank BalanceDecember 31,2001RiskCategory5.Bank BalanceDecember 31,2000123 15,14185,660 39816,525Total 100,801 16,923Risk ManagementOMEGA JV-1 is covered under the insurance policies of AMP-Ohio and is billed for itsproportionate share of the insurance expense. AMP-Ohio maintains insurance policies related tocommercial property, motor vehicle liability, workers’ compensation, excess liability, generalliability, pollution liability, directors and officers insurance, fiduciary liability and fidelity crimecoverage. To the extent that liabilities are incurred and the amount of the loss can be reasonablyestimated, an accrual is recorded for any amount not covered by insurance and any deductiblesrelated to the insurance policy.6.Commitments and ContingenciesEnvironmental MattersThe six diesel-fired generators at Cuyahoga Falls received a permit to install on September 13,1989. The latest permit to operate was received June 23, 1998 and expires June 23, 2003.The OMEGA JV-1 units are potentially affected by maximum achievable control technology(MACT) standards. OMEGA JV-1 is evaluating the applicability of this rule to each unit. Thoseunits affected must have hazardous air pollutant emissions no worse than the 12th percentile of thebest performing units. This may require the installation of catalytic oxidation equipment todestroy hazardous air pollutants.-9-

Ohio Municipal Electric Generation Agency Joint Venture 1Notes to Financial StatementsDecember 31, 2001 and 2000Most metropolitan and industrial counties in Ohio are expected to become nonattainment areasunder the new zone and fine particulate matter ambient air quality standards. This will requiresubstantial local reductions of nitrogen oxides, volatile organic compounds, sulfur dioxide andparticulate matter. In addition to emissions reductions required to achieve local compliance,additional reductions may be required to achieve compliance in down-wind, neighboring states.Other CommitmentsFrom time to time, OMEGA JV-1 is subject to claims and litigation in the normal course ofbusiness. At December 31, 2001 and 2000, OMEGA JV-1’s management is unaware of anyclaims or litigation requiring accrual in the financial statements.- 10 -

Report of Independent Accountants on Compliance and on Internal Control OverFinancial Reporting Based on an Audit of Financial Statements Performed inAccordance with Government Auditing StandardsBoard of ParticipantsOhio Municipal Generation Agency Joint Venture 1We have audited the general-purpose financial statements of Ohio Municipal Electric GenerationAgency Joint Venture 1 (OMEGA JV-1) at and for the year ended December 31, 2001, and have issuedour report thereon dated March 27, 2002. We conducted our audit in accordance with auditingstandards generally accepted in the United States of America and the standards applicable to financialaudits contained in Government Auditing Standards, issued by the Comptroller General of the UnitedStates.ComplianceAs part of obtaining reasonable assurance about whether OMEGA JV-1’s financial statements are freeof material misstatement, we performed tests of its compliance with certain provisions of laws,regulations, contracts and grants, noncompliance with which could have a direct and material effect onthe determination of financial statement amounts. However, providing an opinion on compliance withthose provisions was not an objective of our audit and, accordingly, we do not express such an opinion.The results of our tests disclosed no instances of noncompliance that are required to be reported underGovernment Auditing Standards.Internal Control Over Financial ReportingIn planning and performing our audit, we considered OMEGA JV-1’s internal control over financialreporting in order to determine our auditing procedures for the purpose of expressing our opinion onthe financial statements and not to provide assurance on the internal control over financial reporting.Our consideration of the internal control over financial reporting would not necessarily disclose allmatters in the internal control over financial reporting that might be material weaknesses. A materialweakness is a condition in which the design or operation of one or more of the internal controlcomponents does not reduce to a relatively low level the risk that misstatements in amounts that wou