Exhibit 10.2

GUARANTY

This Guaranty Agreement (this “Guaranty”) dated effective as of June 30, 2007,
is entered into by Avista Capital, Inc. (“Guarantor”), a Washington corporation,
in favor of Coral Energy Holding, L.P., a Delaware limited partnership, Coral
Energy Resources, L.P., a Delaware limited partnership, Coral Power, L.L.C., a
Delaware limited liability company and Coral Energy Canada Inc., an Alberta
corporation (each being a “Coral Entity” and collectively, the “Coral
Entities”).

Recitals:

A. Guarantor desires that the Coral Entities enter into the contracts and
agreements listed on Attachment A hereto with affiliates of Guarantor including
Avista Energy, Inc., Avista Energy Canada, Ltd. and Avista Turbine Power, Inc.
(each being a “Guaranteed Party” and collectively, the “Guaranteed Parties”), as
such contracts and agreements listed on Attachment A may be amended,
supplemented, renewed, or extended, collectively, from time to time, the
“Contracts”; and

B. The Guaranteed Parties are subsidiaries or affiliates of Guarantor and
Guarantor will directly or indirectly benefit from the Contracts to be entered
into between one or more of the Coral Entities and one or more of the Guaranteed
Parties; and

C. The Guaranteed Parties and the Coral Entities are parties to an
Indemnification Agreement of even date herewith with respect to certain
obligations between such parties in respect of the Contracts (the
“Indemnification Agreement”).

NOW, THEREFORE, in consideration of the Coral Entities entering into the
Contracts with Guaranteed Parties, Guarantor hereby covenants and agrees as
follows:

1. Guaranty. Subject to the terms and conditions hereof, Guarantor hereby
irrevocably and unconditionally guarantees the timely performance and payment
when due of the obligations of Guaranteed Parties (the “Obligations”) to the
Coral Entities, as applicable, under the Indemnification Agreement with respect
to the Contracts. To the extent that a Guaranteed Party shall fail to perform or
pay any Obligation, Guarantor shall promptly cause the performance or pay to the
applicable Coral Entity the amount due in accordance with the terms, conditions
and limitations contained in the Indemnification Agreement. This Guaranty shall
constitute a guarantee of payment and not of collection. Guarantor shall also be
liable for the reasonable attorneys’ fees and expenses of such Coral Entity’s
external counsel incurred in any successful effort to collect or enforce any of
the obligations under this Guaranty.

2. Limitations. Guarantor’s performance hereunder shall be limited to monetary
payments arising out of the Obligations (even if such payments are deemed to be
damages) and in no event shall Guarantor be subject hereunder to consequential,
exemplary, equitable, loss of profits, punitive, or any other damages, except to
the extent specifically provided in the Indemnification Agreement to be due from
a Guaranteed Party. Guarantor waives any and all defenses, rights and benefits
Guarantor might assert to avoid or limit liability on Guarantor’s obligations
arising from the bankruptcy, insolvency, dissolution, or liquidation of
Guaranteed Party. The aggregate amount of Guarantor’s liability under or in
respect of this Guaranty shall in no event exceed Thirty Million Dollars
(U.S.$30,000,000), in the aggregate, plus attorney’s fees and other expenses
specified under Section 1 hereto and shall be calculated by including any
amounts paid by any Guaranteed Party under the Indemnification Agreement, or
collected on any collateral securing Guarantor’s obligations under this
Guaranty, against such Thirty Million Dollar cap on Guarantor’s liability.

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3. Termination. This Guaranty shall remain in full force and effect until
April 30, 2011. No termination shall affect, release or discharge Guarantor’s
liability with respect to any Obligations existing or arising prior to the
effective date of termination.

4. Nature of Guaranty. The Guarantor’s obligations hereunder with respect to any
Obligation shall not be affected by the existence, validity, enforceability,
perfection, release, or impairment of value of any collateral for such
Obligations. The Coral Entities shall not be obligated to file any claim
relating to the Obligations owing to it in the event that a Guaranteed Party
becomes subject to a bankruptcy, reorganization, or similar proceeding, and the
failure of a Coral Entity to so file shall not affect the Guarantor’s
obligations hereunder. In the event that any payment to a Coral Entity in
respect of any Obligations is rescinded or must otherwise be returned in the
event that a Guaranteed Party becomes subject to a bankruptcy, reorganization,
or similar proceeding, Guarantor shall remain liable hereunder in respect to
such Obligations as if such payment had not been made.

5. Subrogation. Guarantor waives its right to be subrogated to the rights of the
Coral Entities with respect to any Obligations paid or performed by Guarantor
until all Obligations have been fully and indefeasibly paid to the Coral
Entities or otherwise terminated, subject to no rescission or right of return,
and Guarantor has fully and indefeasibly satisfied all of Guarantor’s
obligations under this Guaranty.

6. Waivers. Guarantor hereby waives any circumstance which might constitute a
legal or equitable discharge of a surety or guarantor, including but not limited
to (a) notice of acceptance of this Guaranty; (b) presentment and demand
concerning the liabilities of Guarantor; (c) notice of any dishonor or default
by, or disputes with, a Guaranteed Party; and (d) any right to require that any
action or proceeding be brought against a Guaranteed Party or any other person,
or to require that a Coral Entity seek enforcement of any performance against a
Guaranteed Party or any other person, prior to any action against Guarantor
under the terms hereof. Guarantor consents to the renewal, compromise,
extension, acceleration, or other modification of the terms of a Contract,
without in any way releasing or discharging Guarantor from its obligations
hereunder. Except as to applicable statute of limitations, the time for bringing
any claim under the terms of the Indemnification Agreement and duration of this
Guaranty as provided in Section 3 above, no delay of a Coral Entity in the
exercise of, or failure to exercise, any rights hereunder shall operate as a
waiver of such rights, a waiver of any other rights, or a release of Guarantor
from any obligations hereunder.

7. REPRESENTATIONS. Guarantor is a corporation duly organized and validly
existing under the laws of the State of Washington. The execution, delivery and
performance of this Guaranty have been duly authorized by all necessary
corporate action on the part of Guarantor. This Guaranty constitutes the legal,
valid and binding obligation of Guarantor enforceable against Guarantor in
accordance with its terms (except that enforcement may be limited by bankruptcy,
insolvency, reorganization, or similar laws affecting the enforcement of
creditors’ rights generally and general principles of equity, whether considered
in a proceeding in equity or at law).

8 Notice. Any payment demand, notice, correspondence or other document to be
given hereunder by any party to another (herein collectively called “Notice”)
shall be in writing and delivered personally or mailed by certified mail,
postage prepaid and return receipt requested, or by facsimile, to the addresses
set forth below. Notice given by personal delivery or mail shall be

 

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effective upon actual receipt, or, if receipt is refused or rejected, upon
attempted delivery. Notice given by facsimile shall be effective upon actual
receipt if received during the recipient’s normal business hours, or at the
beginning of the recipient’s next business day after receipt if not received
during the recipient’s normal business hours. All Notices by facsimile shall be
confirmed promptly after transmission in writing by certified mail or personal
delivery. Any party may change any address to which Notice is to be given to it
by giving Notice as provided above of such change of address.

9. Miscellaneous. THIS GUARANTY SHALL BE IN ALL RESPECTS GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS EXCEPT SECTIONS 5-1401 AND 5-1402 OF THE NEW
YORK GENERAL OBLIGATIONS LAW. No term or provision of this Guaranty shall be
amended or modified except in a writing signed by Guarantor and each of the
Coral Entities. A party may assign its rights and obligations hereunder only
with the prior written consent of the Coral Entities, in the case of Guarantor,
and Guarantor, in the case of any of the Coral Entities, and any attempted
assignment without such prior written consent shall be null and void. Subject to
the foregoing, this Guaranty shall be binding upon Guarantor, its successors and
assigns, and shall inure to the benefit of and be enforceable by the Coral
Entities, their successors and assigns. This Guaranty and the Indemnification
Agreement embodies the entire agreement and understanding between Guarantor and
the Coral Entities, and supersedes all prior guaranties issued by Guarantor in
connection with the Contracts.

 

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IN WITNESS WHEREOF, Guarantor has executed this Guaranty effective as of the
date first herein written.

 

Avista Capital, Inc.

/s/ Malyn K. Malquist

Name:   Malyn K. Malquist Title:  

Senior Vice President & Chief

Financial Officer

 

Address of: Coral Energy Holding, L.P.   Address of Guarantor: Avista Capital,
Inc.

Coral Energy Resources, L.P.

 

Coral Power, L.L.C.

 

909 Fannin, Plaza Level 1

  1411 East Mission Avenue

Houston, Texas 77010

  Spokane, Washington 99202

Attn: Credit Department

  Attn: General Counsel Fax No.:   Fax No.: (509) 495-4361 Address of: Coral
Energy Canada Inc.   Coral Energy Canada Inc. 3500, 450-1st Street S.W. Calgary,
Alberta Canada T2P 5H1 Facsimile: 403-716-3501 Attn: Senior Vice President

 

Signature Page - Guaranty

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Attachment A to Guaranty

1. That certain Purchase and Sale Agreement, dated as of April 16, 2007 (the
“Purchase Agreement”) by and among Avista Energy, Inc., Avista Energy Canada,
Ltd., Coral Energy Holding, L.P., Coral Energy Resources, L.P., Coral Power,
L.L.C., and Coral Energy Canada Inc.

2. If and when entered into, that certain Agency Agreement, to be dated as of
June 30, 2007 (the “Agency Agreement”) by and among Avista Energy, Inc., Avista
Energy Canada, Ltd., Coral Energy Holding, L.P., Coral Energy Resources, L.P.,
Coral Power, L.L.C., and Coral Energy Canada Inc.

3. That certain Post-Closing Transition Services Agreement dated as of June 30,
2007 (the “Transition Services Agreement”) by and among Avista Energy, Inc.,
Avista Energy Canada, Ltd., Coral Energy Holding, L.P., Coral Energy Resources,
L.P., Coral Power, L.L.C., and Coral Energy Canada Inc.

4. That certain Energy Conversion Agreement dated as of June 30, 2007 (the
“Lancaster Agreement”) by and between Avista Turbine Power, Inc. and Coral
Power, L.L.C.

5. That certain Agreement to Temporarily Assign Rights to Use Jackson Prairie
Expansion Capacity dated as of June 30, 2007 (the “JP Agreement”) by and between
Avista Energy, Inc. and Coral Energy Resources, L.P.

6. Each of the documents and agreements entered into pursuant to any of the
foregoing agreements.