Exhibit 10.1


                                                              EXECUTION COPY

                                    GUARANTY



                            Dated as of May 25, 2004



                                     made by



                              KEYSPAN CORPORATION,
                                  as Guarantor




<PAGE>


<TABLE>

                                TABLE OF CONTENTS
<CAPTION>

                                                                                                                Page
                                                                                                                ----
<S>    <C>                                                                                                      <C>
Section 1 DEFINED TERMS...........................................................................................1


Section 2 GUARANTY................................................................................................1

         2.1      Guaranty........................................................................................1

         2.2      Guaranty Absolute...............................................................................2

         2.3      Reinstatement...................................................................................2

         2.4      Enforcement.....................................................................................2

         2.5      Guaranty Not Subject to Setoff, etc.............................................................2

         2.6      Waiver..........................................................................................4


Section 3 COVENANTS OF THE GUARANTOR..............................................................................5

         3.1      Reports.........................................................................................5

         3.2      Maintenance of Ownership Interest in Lessee.....................................................6

         3.3      Merger, Consolidation, Sale of Substantially All Assets.........................................6

         3.4      Securities Act Information......................................................................6


Section 4 REPRESENTATIONS AND WARRANTIES..........................................................................6

         4.1      Organization; Power and Authority...............................................................7

         4.2      Authorization, etc..............................................................................7

         4.3      Non-Contravention...............................................................................7

         4.4      Governmental Approvals..........................................................................7

         4.5      Financial Statements............................................................................7

         4.6      Litigation......................................................................................7

         4.7      Investment Company Act..........................................................................8

         4.8      Taxes...........................................................................................8


Section 5 GUARANTEED PARTIES......................................................................................8


Section 6 MISCELLANEOUS...........................................................................................8

         6.1      Payments........................................................................................8

         6.2      Parties.........................................................................................8

         6.3      Notices.........................................................................................8


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<PAGE>


         6.4      Remedies........................................................................................9

         6.5      Right to Deal with the Lessee...................................................................9

         6.6      Subrogation.....................................................................................9

         6.7      Survival of Representations, Warranties, etc....................................................9

         6.8      Governing Law...................................................................................9

         6.9      Consent to Jurisdiction; Waiver of Trial by Jury................................................9

         6.10     Severability; Amendments and Waivers...........................................................10
</TABLE>



Schedule 4.6......Litigation





                                       ii

<PAGE>

                                    GUARANTY

     GUARANTY,  dated  as of  May  25,  2004  (this  "Guaranty"),  from  KEYSPAN
CORPORATION,  a  New  York  corporation  (the  "Guarantor"),  in  favor  of  the
Guaranteed Parties (as defined in Section 5 below).

     WHEREAS,  the Guarantor  wishes to induce the  Guaranteed  Parties to enter
into a certain  Participation  Agreement  dated as of the date of this  Guaranty
(the  "Participation  Agreement") among  KeySpan-Ravenswood,  LLC, as Lessee, SE
Ravenswood  Trust,  as Owner  Lessor,  SE  Ravenswood  Lease,  L.L.C.,  as Owner
Participant,  Wilmington Trust Company, and Wells Fargo Bank Northwest, N.A., as
Indenture  Trustee and Pass Through  Trustee,  and consummate  the  Transactions
contemplated therein with KeySpan-Ravenswood,  LLC, a wholly-owned subsidiary of
the Guarantor; and

     WHEREAS,   the  Guaranteed   Parties  are  unwilling  to  enter  into  such
Participation  Agreement and consummate the  Transactions  contemplated  therein
unless the Guarantor enters into this Guaranty;

     NOW,  THEREFORE,  in order to induce the  Guaranteed  Parties to enter into
such  Participation  Agreement  and  consummate  the  Transactions  contemplated
therein, the Guarantor hereby agrees as follows:

                                   Section 1

                                  DEFINED TERMS

     Unless the context hereof shall otherwise require,  capitalized terms used,
including those in the recitals, and not otherwise defined herein shall have the
respective  meanings  specified  therefor  in  Appendix  A to the  Participation
Agreement.  The  general  provisions  of such  Appendix  A shall  apply  to this
Guaranty, including the terms specifically defined herein.

                                   Section 2

                                    GUARANTY

     2.1 Guaranty.  Subject to the terms and  conditions in this  Guaranty,  the
Guarantor  absolutely,   unconditionally  and  irrevocably   guarantees  to  the
Guaranteed  Parties (a) the due and punctual  performance  and observance by the
Lessee of each term,  provision and condition  binding upon or applicable to the
Lessee under or pursuant to any of the  Operative  Documents  (the  "Performance
Obligations"),  and (b) the due, punctual and full payment (when and as the same
may  become  due and  payable,  at the  stated  due  date,  by  acceleration  or
otherwise)  of each  amount  that the Lessee is or may become  obligated  to pay
under or pursuant to any of the  Operative  Documents,  in  accordance  with the
terms  thereof (the "Payment  Obligations"  and,  together with the  Performance
Obligations,  individually and collectively,  the "Obligations"),  in each case,
without  regard to whether such  Obligation  is direct or indirect,  absolute or
contingent,  now or  hereafter  existing  or owing,  voluntary  or  involuntary,
created or arising by  contract,  operation  of law or  otherwise or incurred or
payable before or after commencement of any proceedings by or against the Lessee
under any bankruptcy law.


<PAGE>


     2.2  Guaranty  Absolute.  This  Guaranty  is  an  absolute,  unlimited  and
continuing  guaranty of  performance  and payment (and not of collection) of the
Obligations.  This Guaranty is in no way conditioned upon any attempt to collect
from the  Lessee or upon any other  event or  contingency,  and shall be binding
upon and  enforceable  against the  Guarantor  without  regard to the  validity,
regularity or enforceability of any Operative Document or of any term thereof.

     The  obligations  of the  Guarantor  set forth herein  constitute  the full
recourse obligations of the Guarantor  enforceable against it to the full extent
of all its assets and properties, notwithstanding any provision in any Operative
Document  limiting the liability of any Person, or any agreement by a trustee or
a Noteholder or a  Certificateholder  to look for payment with respect  thereto,
solely to certain  property and other  collateral  as described in the Operative
Documents.  Without limiting the foregoing, it is agreed and understood that (a)
repeated and successive  demands may be made and recoveries may be had hereunder
as and when,  from time to time,  the Lessee shall be in default with respect to
the   Obligations   under  the  terms  of  any  Operative   Document,   and  (b)
notwithstanding  the recovery  hereunder  for or in respect of any given default
with respect to the Obligations by the Lessee under any Operative Document, this
Guaranty shall remain in full force and effect and shall apply to each and every
subsequent default with respect to the Obligations.

     2.3 Reinstatement.  In case any Operative Document shall be terminated as a
result of the  rejection  thereof by the Lessee or by any  trustee,  receiver or
liquidating  agent of the  Lessee or any of its  properties  in any  bankruptcy,
insolvency, reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar proceeding,  the Guarantor's  obligations hereunder shall
continue to the same extent as if such  agreement had not been so rejected.  The
Guarantor  agrees  that this  Guaranty  shall  continue  to be  effective  or be
reinstated,  as the case may be, if at any time payment to any Guaranteed  Party
is rescinded or must  otherwise  be returned by such  Guaranteed  Party upon the
insolvency,  bankruptcy or reorganization of the Lessee, or otherwise, as though
such payment to such Guaranteed Party had not been made.

     2.4  Enforcement.  The Guarantor shall pay all costs and expenses  incurred
(including  reasonable attorneys' fees and disbursements) in connection with the
enforcement  of the  Obligations  to the extent that such costs and expenses are
not  paid  by  the  Lessee,  and  in  connection  with  the  enforcement  of the
obligations of the Guarantor under this Guaranty.  The  Guarantor's  obligations
under this Section 2.4 shall survive the termination of this Guaranty.

     2.5 Guaranty Not Subject to Setoff,  etc. The  obligations of the Guarantor
hereunder shall not be subject to any counterclaim, setoff, deduction or defense
(other  than  payment  or  performance)  based  upon any  claim or  defense  the
Guarantor  or the Lessee may have against any  Guaranteed  Party or any claim or
defense the  Guarantor may have against the Lessee or any other Person and shall
remain in full force and effect  without  regard to, and shall not be  released,
discharged,  reduced or in any way  affected by, any  circumstance  or condition
whatsoever  (whether or not the  Guarantor  shall have any  knowledge  or notice
thereof)  which  might  constitute  a legal or  equitable  discharge  or defense
including,  but not limited to, (a) the amending,  modifying,  supplementing  or
terminating (by operation of law or otherwise),  expressly or impliedly,  of any
Operative Document,  or any other instrument  applicable to the Lessee or to its
Obligations,  or any part thereof;  (b) any failure on the part of the Lessee to
perform or comply with any term of any Operative  Document or any failure of any


                                       2
<PAGE>


other Person to perform or comply with any term of any Operative  Document;  (c)
any waiver, consent, change, extension, indulgence or other action or any action
or  inaction  under or in  respect of any  Operative  Document,  including  this
Guaranty,  whether or not any Guaranteed  Party, the Lessee or the Guarantor has
notice or knowledge of any of the  foregoing;  (d) any  bankruptcy,  insolvency,
reorganization,  arrangement, readjustment,  composition, liquidation or similar
proceeding with respect to any Guaranteed Party, the Guarantor or the Lessee, or
their  respective  properties  or their  creditors,  or any action  taken by any
trustee or receiver or by any court in any such  proceeding;  (e) any furnishing
or  acceptance  of  additional  security or any release of any security (and the
Guarantor  authorizes each Guaranteed  Party to furnish,  accept or release said
security);  (f) any  limitation  on the liability or  Obligations  of the Lessee
under any  Operative  Document  (except as expressly  set forth  therein) or any
termination  (by operation of law or otherwise),  cancellation  (by operation of
law or otherwise), frustration or unenforceability,  in whole or in part, of any
Operative  Document,  or any  term  thereof;  (g) any Lien on or  affecting  the
respective assets and properties of the Guarantor,  the Lessee or any Guaranteed
Party; (h) any act, omission or breach on the part of any Guaranteed Party under
any Operative Document,  or any other agreement at any time existing between any
Guaranteed  Party and the Lessee or any other law,  governmental  regulation  or
other agreement  applicable to any Guaranteed  Party or any Obligation;  (i) any
claim  as a result  of any  other  dealings  among  any  Guaranteed  Party,  the
Guarantor,  or any of them; (j) the assignment or transfer of this Guaranty, any
Operative  Document  (whether or not in accordance with and subject to the terms
thereof) or any other  agreement  or  instrument  referred  to in any  Operative
Document or applicable to the Lessee or the Obligations by any Guaranteed  Party
to any other Person;  (k) any change in the name of any  Guaranteed  Party,  the
Lessee or any other  Person;  (l) any  subleasing  or further  subleasing of the
Facility,   the  Ground  Interest  or  any  part  thereof,  or  any  redelivery,
repossession,  sale, transfer or other disposition,  surrender or destruction of
the  Facility,  the  Ground  Interest  or any part  thereof;  (m) the  transfer,
assignment, mortgaging or purported transfer, assignment or mortgaging of all or
any part of the interest of the Owner Lessor or the Lessee in the Facility,  the
Ground  Interest,  any part thereof or any Operative  Document or the failure to
record a mortgage  on or with  respect to all or any part of the Owner  Lessor's
Interest or any part thereof or any other Recordable  Document;  (n) any failure
of title with  respect to the  interest of the Owner  Lessor or the  Lessee,  or
their respective successors and assigns, in the Facility, the Ground Interest or
any part thereof; (o) any merger or consolidation of the Lessee or the Guarantor
into or with any other Person or any direct or indirect sale,  lease or transfer
of any other assets of the Lessee or the Guarantor to any other Person;  (p) any
change in the  ownership of any shares of capital  stock of the Guarantor or the
Lessee  (including  any such change  which  results in the  Guarantor  no longer
owning  capital  stock of the Lessee);  (q) any  assumption  of the Notes by the
Lessee  pursuant to the terms of any Operative  Document or  otherwise;  (r) any
defect in the compliance with specifications,  condition,  design,  operation or
fitness  for  use  of,  or any  damage  to or loss  or  destruction  of,  or any
interruption  or cessation in the use of, the Facility or Ground Interest or any
part  thereof  by the  Lessee  or any other  Person  for any  reason  whatsoever
(including  without  limitation any  governmental  prohibition  or  restriction,
condemnation,  requisition,  seizure  or  any  other  act  on  the  part  of any
governmental or military authority, or any act of God or of the public enemy, or
any Event of Loss),  and  regardless  of the duration  thereof (even though such
duration would  otherwise  constitute a frustration of any Operative  Document),
whether or not without fault on the part of the Lessee or any other Person;  (s)
any  termination of the Facility  Lease as a result of the rejection  thereof or
other action by the Owner Lessor or any trustee,  receiver or liquidating  agent


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<PAGE>


of the Owner  Lessor or any of its  properties  in any  bankruptcy,  insolvency,
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar  proceeding  (whether or not the Lessee  remains in possession of the
Facility); or (t) any other event or circumstance whatsoever (other than payment
and performance in full of the Obligations).

     2.6 Waiver. The Guarantor  unconditionally waives: (a) notice of any of the
matters  referred to in Section 2 hereof;  (b) all notices which may be required
by statute,  rule of law or otherwise (except as expressly  required to be given
to the Guarantor by any Operative  Document) to preserve any rights  against the
Guarantor hereunder,  including notice of the acceptance of this Guaranty by any
Guaranteed Party, or the creation, renewal,  extension,  modification or accrual
of the  Obligations  or  notice  of any  other  matters  relating  thereto,  any
presentment, demand, notice of dishonor, protest or nonpayment of any damages or
other amounts payable under any Operative Document;  (c) any requirement for the
enforcement,  assertion  or exercise of any right,  remedy,  power or  privilege
under or in respect of any Operative Document, including diligence in collection
or protection of or  realization  upon or in respect of the  Obligations  or any
part thereof;  (d) any  requirement  of diligence;  (e) the  occurrence of every
other condition  precedent to which the Guarantor or the Lessee may otherwise be
entitled,  except as provided in any Operative Document;  (f) any requirement to
mitigate the damages resulting from a default or termination under any Operative
Document,  except that this shall not relieve any  Guaranteed  Party of any such
obligation;  and (g) the  right to  require  each  Guaranteed  Party to  proceed
against the Lessee or any other  Person  liable on the  Obligations,  to proceed
against or exhaust  security  held from the  Lessee or any other  Person,  or to
pursue any other remedy in such  Guaranteed  Party's power  whatsoever,  and the
Guarantor  waives the right to have the property of the Lessee first  applied to
the discharge of the Obligations.

     Each Guaranteed Party may, at its election, exercise any right or remedy it
might have against the Lessee or any  security  held by such  Guaranteed  Party,
including  the  right to  foreclose  upon  any  such  security  by  judicial  or
nonjudicial sale, without affecting or impairing in any way the liability of the
Guarantor  hereunder,  except to the  extent the  Obligations  have been paid or
satisfied,  and the  Guarantor  waives any defense  arising out of the  absence,
impairment or loss of any right of reimbursement, contribution or subrogation or
any other  right or  remedy  of the  Guarantor  against  the  Lessee or any such
security,  whether  resulting from such election by such  Guaranteed  Party,  or
otherwise.  The Guarantor  understands  that the exercise of certain  rights and
remedies contained in the Operative Documents by any Guaranteed Party may affect
or eliminate the Guarantor's  rights of subrogation  against the Lessee and that
the Guarantor may therefore incur partially or totally nonreimbursable liability
hereunder;  nevertheless,  the  Guarantor  hereby  authorizes  and empowers each
Guaranteed Party and its successors,  endorsees and/or assignees to exercise, in
its or their  sole  discretion,  any  rights and  remedies,  or any  combination
thereof, which may then be available.

     The Guarantor assumes the  responsibility for being and keeping informed of
the  financial  condition of the Lessee and of all other  circumstances  bearing
upon the risk of nonpayment or nonperformance of the Obligations and agrees that
no Guaranteed  Party shall have any duty to advise the Guarantor of  information
regarding  any  condition  or  circumstance  or any change in such  condition or


                                       4
<PAGE>


circumstance.  The Guarantor  acknowledges that no Guaranteed Party has made any
representation  to the  Guarantor  concerning  the  financial  condition  of the
Lessee.

                                   Section 3

                           COVENANTS OF THE GUARANTOR

     3.1  Reports.  In the event the  Guarantor  (x)  ceases  to be  subject  to
periodic  SEC  reporting  requirements  pursuant  to  Section 13 or 15(d) of the
Exchange Act, or (y) while subject to such reporting requirements, fails to file
with  the SEC the  reports  so  required  to be  filed  within  30 days of their
respective due dates,  the Guarantor will deliver or otherwise make available to
the Owner  Participant,  the  Indenture  Trustee  and the Pass  Through  Trustee
through electronic media:

          (a)  Quarterly  Statements  --  within  60 days  after the end of each
     quarterly  fiscal period in each fiscal year of the  Guarantor  (other than
     the last quarterly fiscal period of each such fiscal year), copies of

               (i) a  consolidated  balance  sheet  of  the  Guarantor  and  its
          subsidiaries as at the end of such quarter, and

               (ii)  consolidated  statements  of income  and cash  flows of the
          Guarantor and its  subsidiaries,  for such quarter and (in the case of
          the  second and third  quarters)  for the  portion of the fiscal  year
          ending with such quarter,

setting forth in each case in comparative form the figures for the corresponding
periods in the  previous  fiscal year,  all in  reasonable  detail,  prepared in
accordance with GAAP applicable to quarterly financial statements generally, and
certified by a Responsible Officer of the Guarantor as fairly presenting, in all
material respects, the financial position of the companies being reported on and
their results of operations  and cash flows,  subject to changes  resulting from
year-end adjustments; and

          (b) Annual  Statements -- as soon as available and in any event within
     120 days after the end of each fiscal year of the Guarantor, copies of

               (i) a  consolidated  balance  sheet  of  the  Guarantor  and  its
          subsidiaries as at the end of such year, and

               (ii) consolidated  statements of income, changes in shareholders'
          equity and cash flows of the Guarantor and its  subsidiaries  for such
          year,

setting  forth in each case in  comparative  form the figures  for the  previous
fiscal year,  all in reasonable  detail,  prepared in accordance  with GAAP, and
accompanied  by  an  opinion  thereon  of  independent   public  accountants  of
recognized  national  standing,  which opinion  shall state that such  financial
statements present fairly, in all material  respects,  the financial position of
the companies being reported upon and their results of operations and cash flows
and have been prepared in conformity with GAAP, and that the examination of such


                                       5
<PAGE>


accountants  in  connection  with  such  financial  statements  has been made in
accordance  with  generally  accepted  auditing  standards,  and that such audit
provides a reasonable basis for such opinion in the circumstances.

     3.2  Maintenance  of  Ownership  Interest  in Lessee.  The  Guarantor  will
maintain  ownership of (and retain the right to vote),  directly or  indirectly,
beneficially and of record, equity interests in the Lessee representing at least
5% of the aggregate ordinary voting power and aggregate equity value represented
by the issued and outstanding equity interests in the Lessee.

     3.3 Merger, Consolidation,  Sale of Substantially All Assets. The Guarantor
will not  consolidate  or merge with or into any other  Person or sell,  convey,
transfer or lease all or  substantially  all of its properties and assets to any
other Person without the prior written consent of the Owner Lessor and the Owner
Participant  and,  so long as the Lien of the  Indenture  shall  not  have  been
terminated or discharged,  the Indenture  Trustee and the Pass Through  Trustee,
unless (i) immediately  prior to and immediately  following such  consolidation,
merger,  sale,  conveyance,  transfer or lease, no Significant  Lease Default or
Lease Event of Default  shall have occurred and be  continuing,  (ii) the Person
resulting from such  consolidation,  surviving such merger or succeeding to such
assets (if other than the  Guarantor)  shall (a) be organized  under the laws of
the United  States,  any state  thereof or the  District  of  Columbia,  and (b)
expressly assume,  pursuant to an agreement  reasonably  acceptable to the Owner
Participant,  the Owner Lessor and, so long as the Lien of the  Indenture  shall
not have been terminated or discharged,  the Indenture Trustee,  each obligation
of the  Guarantor  under this  Guaranty,  (iii) if the  Guarantor  is the Person
resulting from such  consolidation or surviving such merger, the Guarantor shall
affirm  in  writing  its  obligations  under  this  Guaranty,   (iv)  the  Owner
Participant,  the Owner Lessor and, so long as the Lien of the  Indenture  shall
not have been  terminated  or  discharged,  the  Indenture  Trustee  shall  have
received an opinion of counsel in each case  reasonably  satisfactory to each of
them with respect to such  assumption  agreement  referred to in clause (ii) and
(v) so long as the Lien of the  Indenture  shall  not have  been  terminated  or
discharged,  the Pass  Through  Trustee  shall have  received  copies of (a) the
opinion  referred to in clause (iv) above and (b) the  assumption  agreement  or
written affirmation referred to in clause (ii) or (iii) above.

     3.4  Securities Act  Information.  So long as any of the  Certificates  are
"restricted   securities"  within  the  meaning  of  Rule  144(a)(3)  under  the
Securities Act, unless at the time the Guarantor is subject to and in compliance
with the reporting  requirements of Section 13 or 15(d) of the Exchange Act, the
Guarantor  shall  provide to any  Certificateholder  or  beneficial  owner of an
interest in a Certificate or any prospective  purchaser of any Certificate or of
a beneficial  ownership  interest therein designated by a  Certificateholder  or
beneficial  owner of an  interest  in a  Certificate,  upon the  request of such
Certificateholder,  beneficial owner or prospective  purchaser,  the information
described in Rule 144A(d)(4) under the Securities Act.


                                   Section 4

                         REPRESENTATIONS AND WARRANTIES

     The Guarantor represents and warrants to the Guaranteed Parties that:


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<PAGE>


     4.1 Organization;  Power and Authority. The Guarantor is a corporation duly
organized,  validly existing and in good standing under the laws of the State of
New York.  The  Guarantor  has the  requisite  corporate  power and authority to
execute and deliver and perform its obligations under this Guaranty.

     4.2  Authorization,  etc. The  execution,  delivery and  performance by the
Guarantor of this Guaranty have been duly authorized by all necessary  corporate
action on the part of the  Guarantor,  and,  when executed and  delivered,  this
Guaranty  will  constitute  the  legal,  valid  and  binding  obligation  of the
Guarantor enforceable against the Guarantor in accordance with its terms, except
as such enforceability may be limited by (a) applicable bankruptcy,  insolvency,
fraudulent  conveyance,  reorganization,  arrangement,  moratorium or other laws
relating  to or  affecting  the rights of  creditors  generally  and (b) general
principles of equity.

     4.3  Non-Contravention.  The  execution,  delivery and  performance of this
Guaranty do not and will not (A)  contravene  any  Applicable Law binding on the
Guarantor or its  property,  (B) require any action,  consent or approval by any
trustee or holder of  indebtedness  of the Guarantor  (other than those obtained
prior to or on the Closing  Date) or (C)  constitute a violation of or a default
under any indenture,  mortgage or other material contract to which the Guarantor
is a party  or by  which  any of its  property  is  bound,  which  in any  case,
individually or in the aggregate,  is reasonably  likely to result in a Material
Adverse Effect.

     4.4 Governmental  Approvals.  All Governmental Approvals (if any) which are
required as of the Closing Date for the  execution,  delivery or  performance by
the Guarantor of its obligations under this Guaranty have been obtained or made,
were validly issued, are not the subject of any pending request for rehearing or
appeal, and are in full force and effect (other than any Governmental Approvals,
the failure to obtain which is not likely to cause a Material Adverse Effect).

     4.5  Financial  Statements.  The  Guarantor  has  delivered  to the  Equity
Investor  and the  Debt  Placement  Agent  copies  of the  audited  consolidated
financial   statements  dated  December  31,  2003  and  the  interim  unaudited
consolidated  financial  statements dated March 31, 2004 of the Guarantor.  Such
financial  statements  (including in each case the related  schedules and notes)
are true,  complete and correct in all material respects as of the dates thereof
and fairly present in all material respects the consolidated  financial position
of the  Guarantor  and its  Subsidiaries  as of such dates and the  consolidated
results of their operations and cash flows for the respective  periods specified
in such statements and have been prepared in accordance with GAAP.

     Since  December  31, 2003,  no material  adverse  change has occurred  with
respect to the financial condition of the Guarantor,  other than as disclosed in
the  Guarantor's  Form 10-Q for the period  ended March 31, 2004 or in any other
report  filed with the SEC  subsequent  to  December  31,  2003 and prior to the
Closing Date.

     4.6 Litigation. (a) Except as disclosed in Schedule 4.6 to this Guaranty or
disclosed in the  Guarantor's  most recent annual,  quarterly or current reports
filed with the SEC,  there is no  pending  or, to the  Actual  Knowledge  of the
Guarantor,  threatened  action,  suit,  investigation or proceeding  against the
Guarantor or any property or other asset of the  Guarantor,  which is reasonably
likely to result in a Material Adverse Effect.


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<PAGE>


     4.7 Investment Company Act. The Guarantor is not an "investment company" as
defined in, or subject to regulation under, the Investment Company Act of 1940.

     4.8 Taxes. The Guarantor has filed all Federal, state and local tax returns
that are  required  to have been  filed,  has paid all Taxes to the extent  such
Taxes have  become due and payable  (other  than any Taxes  which are  currently
being  contested in good faith by appropriate  proceedings)  and has established
adequate  reserves in  accordance  with GAAP,  except,  in each case,  as is not
reasonably likely to result in a Material Adverse Effect.

                                   Section 5

                               GUARANTEED PARTIES

     Each of the Owner Lessor,  the Owner Trustee,  the Owner  Participant,  the
Equity Investor, the Trust Company and, so long as the Lien of the Indenture has
not been  terminated or discharged,  the Indenture  Trustee and the Pass Through
Trustee,  and in respect of any amount or amounts  due and payable by the Lessee
pursuant to Section 9 of the Participation Agreement, any Indemnitee and any Tax
Indemnitee,  in  each  case,  together  with  their  respective  successors  and
permitted  assigns,  are each  Guaranteed  Parties  of this  Guaranty  (each,  a
"Guaranteed Party" or, together, the "Guaranteed Parties").



                                   Section 6

                                  MISCELLANEOUS

     6.1 Payments.  Each payment by the Guarantor  under this Guaranty  shall be
made in immediately  available funds,  without setoff or counterclaim;  provided
that,  no such payment  shall be deemed a waiver of any rights the Guarantor may
have against any Guaranteed Party or the Lessee.

     6.2  Parties.  This  Guaranty  shall  inure to the benefit of, and shall be
enforceable  by, each of the Guaranteed  Parties,  and shall be binding upon the
Guarantor  and its  successors  and assigns.  The  Guarantor may not delegate or
assign any of its duties under this Guaranty  without the prior written  consent
of the Guaranteed Parties or except as otherwise permitted by Section 3.3.

     6.3 Notices.  All  communications  and notices  hereunder  shall be made in
accordance with the provisions of Section 14.4 of the  Participation  Agreement,
which are hereby  incorporated  herein by reference.  The initial address of the
Guarantor is as follows:

                           KeySpan Corporation
                           One MetroTech Center
                           Brooklyn, New York  11201

                           Attention:  General Counsel
                           Telecopier: (718) 403-1000
                           Telephone: (718) 696-7139


                                       8
<PAGE>


     6.4 Remedies.  In the event the Guarantor shall fail to pay immediately any
amounts  due  under  this  Guaranty,  or to comply  with any other  term of this
Guaranty,  each Guaranteed Party shall be entitled to all rights and remedies to
which it may be entitled hereunder or at law, in equity or by statute.

     6.5  Right to Deal  with  the  Lessee.  At any time and from  time to time,
without terminating, affecting or impairing the validity of this Guaranty or the
obligations of the Guarantor  hereunder,  any Guaranteed Party may deal with the
Lessee in the same manner and as fully and as if this Guaranty did not exist and
shall be entitled,  among other things,  to grant the Lessee,  without notice or
demand and without affecting the Guarantor's liability hereunder, such extension
or extensions  of time to perform,  renew,  compromise,  accelerate or otherwise
change the time for payment of or  otherwise  change the terms of payment or any
part thereof contained in or arising under any Operative  Document,  or to waive
any Obligation of the Lessee to perform any act or acts as such Guaranteed Party
may deem advisable.

     6.6  Subrogation.  The Guarantor  will not exercise any rights which it may
acquire by way of  subrogation  hereunder,  by any  payment  made  hereunder  or
otherwise,  until all of the Obligations have been paid in full and performed in
full.  If any  amount  shall  be  paid  to the  Guarantor  on  account  of  such
subrogation  rights at any time when all of the Obligations  shall not have been
paid in  full,  such  amount  shall  be held in  trust  for the  benefit  of the
Guaranteed Parties and shall forthwith be paid as provided in Section 6.1 hereof
on account of the Obligations,  whether matured or unmatured,  and thereafter to
be applied in accordance  with the terms of the Operative  Document  under which
such  Obligation  arose,  when such  Obligation  is due and payable.  If (a) the
Guarantor  shall make payment to any Guaranteed  Party of all or any part of the
Obligations and (b) all the  Obligations  shall be paid in full, such Guaranteed
Party will, at the Guarantor's  request and expense,  execute and deliver to the
Guarantor appropriate documents,  without recourse and without representation or
warranty,  necessary to evidence the transfer by subrogation to the Guarantor of
an interest in the Obligations resulting from such payment by the Guarantor.

     6.7 Survival of  Representations,  Warranties,  etc.  All  representations,
warranties,   covenants  and  agreements   made  herein  and  in  statements  or
certificates  delivered  pursuant  hereto  shall  survive any  investigation  or
inspection made by or on behalf of the Guaranteed  Parties and shall continue in
full force and effect,  notwithstanding  any termination or  unenforceability of
any Operative Document,  until all of the Obligations have been paid in full and
performed in full. Upon payment and performance in full of all Obligations, this
Guaranty shall  terminate and, except as set forth in Sections 2.3, 2.4 and 6.6,
the representations,  warranties, covenants and agreements made by the Guarantor
shall not survive the termination of this Guaranty.

     6.8 Governing  Law.  This  Guaranty has been  delivered in the State of New
York and shall be in all respects governed by, and construed in accordance with,
the laws of the  State of New  York,  including  all  matters  of  construction,
validity and performance.

     6.9 Consent to Jurisdiction; Waiver of Trial by Jury.


                                       9
<PAGE>


     (a) The  Guarantor  (i)  hereby  irrevocably  submits  to the  nonexclusive
jurisdiction  of the  Supreme  Court of the State of New York,  New York  County
(without  prejudice  to the right of any party to  remove to the  United  States
District  Court for the Southern  District of New York) and to the  nonexclusive
jurisdiction  of the United States  District Court for the Southern  District of
New York for the purposes of any suit, action or other proceeding arising out of
this Guaranty or the subject matter hereof brought by any Guaranteed Party; (ii)
hereby  irrevocably  agrees  that  all  claims  in  respect  of such  action  or
proceeding may be heard and determined in such New York State court,  or in such
federal  court;  and (iii) to the extent  permitted by  Applicable  Law,  hereby
irrevocably waives, and agrees not to assert, by way of motion, as a defense, or
otherwise, in any such suit, action or proceeding,  any claim that such party is
not personally subject to the jurisdiction of the above-named  courts,  that the
suit,  action or proceeding is brought in an inconvenient  forum, that the venue
of the suit,  action or  proceeding  is  improper  or that this  Guaranty or the
subject matter hereof may not be enforced in or by such court.

     (b) TO THE EXTENT  PERMITTED BY APPLICABLE LAW, THE GUARANTOR HEREBY WAIVES
THE RIGHT TO DEMAND A TRIAL BY JURY IN ANY SUCH SUIT, ACTION OR OTHER PROCEEDING
ARISING  OUT OF THIS  GUARANTY  OR THE  SUBJECT  MATTER  THEREOF  BROUGHT BY ANY
GUARANTEED PARTY.

     6.10  Severability;  Amendments  and  Waivers.  If any  provision  of  this
Guaranty  or any  application  hereof  shall be invalid or  unenforceable  under
Applicable  Law, the  validity,  legality and  enforceability  of the  remaining
provisions hereof shall not be affected or impaired thereby. No term,  covenant,
agreement  or  condition  of this  Guaranty  may be  terminated  or amended,  or
compliance  therewith waived,  except by an instrument or instruments in writing
executed  by the  Guarantor  and  consented  to by the Owner  Lessor,  the Owner
Trustee,  the Owner  Participant,  the Trust Company and, so long as the Lien of
the Indenture has not been terminated or discharged,  the Indenture  Trustee and
the Pass Through Trustee.





                                       10
<PAGE>



     IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be executed
and delivered as of the day and year first above written.

                                             KEYSPAN CORPORATION
                                             as Guarantor



                                        By:
                                              ------------------------
                                              Name:
                                              Title:














                                       11
<PAGE>



                                  SCHEDULE 4.6

                                   Litigation


None.