<PAGE>
                                                            Exhibit 10.22.1

               
               
                NRG GENERATING (PARLIN) COGENERATION INC./
                   STEWART & STEVENSON OPERATIONS, INC.
                    OPERATING AND MAINTENANCE AGREEMENT

This System Operating and Maintenance Agreement ("Agreement") is made as of
the 1st day of May 1996 between NRG Generating (Parlin) Cogeneration Inc.,
a Delaware corporation ("Owner"), and Stewart & Stevenson Operations, Inc.,
a Delaware corporation ("Operator"), having its principal place of business
at Houston, Texas, whose obligations hereunder shall be fully guaranteed by
STEWART & STEVENSON SERVICES, INC. ("SSSI"), pursuant to a Guarantee in the
form of Appendix I.

Owner (formerly named "O'Brien (Parlin) Cogeneration, Inc.") and Operator
entered into an Operation & Maintenance Contract dated as of April 1, 1994
with respect to the System (as defined below), a copy of which is attached
as Appendix II (the "Existing O&M Agreement").

In connection with the bankruptcy of Owner's parent, the existing
Electricity Purchase Agreement between Owner and Jersey Central Power Light
Company relating to the System has been amended with the Third Amendment to
the Power Purchase Agreement (as defined below).

Owner and Operator have renegotiated the terms and conditions of the
Existing O&M Agreement and desire to replace it with this Agreement
effective upon the Effective Date.

In consideration of the foregoing and the mutual covenants and benefits
contained herein, the parties hereby agree as follow:

I.   DEFINITIONS

In this Agreement the following terms have the associated meaning:

1 .  Affiliate - With reference to a specified person, any other person  or
     entity,  directly  or  indirectly through one or more  intermediaries,
     which  controls,  is controlled by, or is under common  control  with,
     such  person.  A person or entity is controlled by another  person  or
     entity  if  the second person or entity holds a sufficient  number  of
     securities  in the first person or entity to elect a majority  of  the
     directors of the first person or entity.

2.   Agent - The agent for the lenders under the Financing Agreements.

3.   Amended Power Purchase Agreement - The Amended Power Purchase
     Agreement for Purchase and Sale of Electric Power, dated April 30,
     1996, between Owner and Jersey Central Power & Light, a copy of which
     Is attached as Appendix III hereto.

4.   Annual Operating Plan and Budget - As set forth In Article VI, Section
     6.

5.   Bonus - As set forth in Exhibit A.

6.   Change - Shall mean any of the following that are proposed by one
     party to the other by a written notice to the other party: (i) a
     change in the then current Annual Operating Plan and Budget: (ii) a
     change in connection with the services to be provided by Operator
     hereunder (iii) a change made necessary to avoid injury to persons or
     property or to mitigate losses as a result of the occurrence of an
     Emergency; and (iv) a change enabling Operator to accomplish or
     contract for a Major System Repair.

<PAGE>

7.   Change Order - Shall mean the written approval of a proposed Change
     and the related Change Order Budget Statement by Operator and Owner as
     further provided for In Article VI, Section 7(b).

8.   Change  Order Budget Statement - Shall mean the statement prepared  by
     Operator  pursuant  to  Article VI, Section 7(b)  with  respect  to  a
     proposed  Change setting forth In reasonable detail:  (i)  the  direct
     cost  or  savings to Owner of the proposed Change; (ii)  the  indirect
     costs or savings of the proposed Change, including without limitation,
     any  loss  of  electricity revenues or steam  host  revenues  and  any
     increased  insurance, operating. maintenance or other costs during  or
     following the implementation of the proposed Change; (iii) changes  in
     the  operating  efficiency of the System; and (iv) any other  material
     effect  on the operation, maintenance, efficiency or profitability  of
     the System or the provision of the services hereunder.

9.   Contract  Year  -  As  set  forth in the Amended  and  Restated  Power
     Purchase Agreement.

10.  Effective Date - May 1, 1996.

11.  Emergency - Any event or occurrence which in the judgment of  Operator
     or  Owner,  as  the case may be, requires immediate action  and  which
     constitutes  a serious hazard to the safety of persons or property  or
     may  materially  Interfere  with  the  safe,  economical,  lawful   or
     environmentally sound operation of the System.

12.  Event of Default - As set forth in Article XII.

13.  Existing O&M Agreement - As set forth in the Recitals.

14.  Expenses - As set forth in Article VI, Section 2.

15.  Financing Agreements - Any loan, lease financing, security, of related
     agreements entered into at any time by and among owner and the lending
     institutions providing financing for the System.

16.  Force Majeure - Unforeseeable causes beyond the reasonable control  of
     and  without  the  fault  or negligence of the  party  claiming  Force
     Majeure,  including  but not limited to acts of  God,  strike,  flood,
     earthquake,  storm,  fire.  lightning.  epidemic,  war,  riot,   civil
     disturbance,   sabotage,  change  in  low  or  applicable   regulation
     subsequent to the date thereof and action or inaction by any  federal,
     state  or  local  legislative, executive, administrative  or  judicial
     agency  or  body which, in any of the foregoing cases, by exercise  of
     due  foresight such party could not reasonably have been  expected  to
     avoid,  and  which by the exercise of due diligence, it is  unable  to
     overcome.

17.  Legal and Contractual Requirements - All:

     a.   Laws, permits, approvals, regulations or orders of governmental
          authorities applicable to the Amended and Restated Power Purchase
          Agreement, the System.  Owner's obligations under this Agreement
          as owner of the System and Operator's scope of work hereunder;

     b.   Provisions of the System Contracts;

     c.   Agreements, warranties and specifications of Operator's or
          Owner's suppliers or vendors; and

                                     2

<PAGE>

          d.   Operating and maintenance manuals and procedures furnished
          by Owner applicable to the System or the components thereof (such
          operating manuals to reflect Sound Independent Power Industry
          Practice).

l8.  Liquidated Damages -As set forth in Exhibit A.

19.  Major System Repair

     The inspection, overhaul, repair or replacement of any piece of
     equipment needed to operate the System where such inspection,
     overhaul, repair or replacement is the result of: (i) an unscheduled
     breakdown, repair, or failure of such equipment or (ii) a scheduled
     inspection, overhaul, repair or replacement of such equipment (union
     the inspection, overhaul, repair or replacement has been incorporated
     into the Annual Operating Plan and Budget) and further that such
     inspection, overhaul, repair or replacement shall have a cost in
     excess of $10,000, which includes labor and material costs, and shall
     be adjusted each year by the increase or decrease in the Producer
     Price Index.  Equipment shall include the gas turbines, the
     generators, boilers, heat steam recovery generators, chillers, load
     gears, exhaust ducting, emissions equipment. water and waste water
     treatment, fuel treatment facilities and interconnection facilities;
     provided, however, that a Major System Repair shall not include the
     replacement of accessories, equipment and consumables required in the
     ordinary course of Routine Maintenance and preventative maintenance of
     the System reflecting Sound Independent Power Industry Practice.

20.  Operating Fee - As set forth in Article VI Section 1.

21.  Owner's Plan of Operation - Owner's instructions to Operator as to the
     desired electricity  and/for thermal energy production schedule and
     other operating and maintenance objectives.

22.  Owner's Representative - As set forth in Article V. Section 1 (a).

23.  Producer Price Index - The U.S. Producer Price Index for All Item, as
     currently published in the United States Department of Labor Bureau of
     Labor Statistic's monthly publication, PPI Detailed Report or any
     successor publication of such information, or if such index is no
     longer published or the method of computation thereof is substantially
     modified, a mutually agreeable alternative index.

24.  Proprietary Information - All financial, technical and operating
     information which the parties, directly or indirectly, acquire from
     each other, and any other information which a party expressly
     designates in writing to be confidential.  However, Proprietary
     Information shall exclude information failing into any of the
     following categories

     a.   Information that, at the time of disclosure thereof, is in the
          public domain;

     b.   Information  that,  after disclosure thereof, enters  the  public
          domain other than by breach of this Agreement;

     c.   Information that prior to disclosure thereof, was already in the
          recipient's possession, either without limitation on disclosure
          to others or subsequently becoming free of such limitation;

     d.   Information  obtained by the recipient from a third party  having
          an independent right to disclose such information;

                                     3

<PAGE>

     e.   Information that is available by independent research without use
          of or access to the Proprietary Information acquired from the
          other party; and

     f.   Information  that  a  party is required by  low  or  governmental
          action  to  disclose, provided the disclosing party notifies  the
          party  from whom the information originated in advance and  gives
          it the opportunity to resist the order.

25.  Routine  Maintenance - Those activities including the  replacement  of
     accessories,  equipment,  and consumables  required  in  the  ordinary
     course  of  routine  and preventative maintenance of  the  System  and
     System  site  in  accordance  with Sound  Independent  Power  Industry
     Practice.

26.  Sound  Independent  Power Industry Practice - Those prudent  practices
     and  methods  in effect at the time of performance that am customarily
     followed by operators of similarly situated plants and equipment.

27.  System   -   Owner's  properties,  plant  and  equipment  located   in
     Sayreville, New Jersey, including a single gas turbine combined  cycle
     generating station with a nominal capacity of 52 megawatts, more fully
     defined in Exhibit B.

28.  System Contracts - Contracts and agreements to which Owner is a  party
     (including,  without limitation, insurance policies) relating  to  the
     operation and maintenance of the System, set forth an Exhibit C, which
     Exhibit shall be amended by Owner to provide a more comprehensive list
     on or before June 15, 1996.

II.  ENGAGEMENT OF OPERATOR

1.   Effective on the Effective Date, Owner engages Operator to operate and
     maintain the System and perform certain duties, all as hereinafter set
     forth  in  this  Agreement, and Operator accepts  such  engagement  to
     operate  and  maintain the System and perform the duties specified  in
     this Agreement in accordance with its terms and conditions.

2.   All  operating and management personnel involved in the operation  and
     maintenance  of  the  System shall be employees  of  Operator  or  its
     Affiliates  and  shall  not for any purposes be  deemed  employees  of
     Owner.

III. TERM

The term of this Agreement shall become effective upon the Effective Date
and expire on the sixth (6th) anniversary of the Effective Date, unless
terminated earlier in accordance with Article XII of this Agreement.

IV.  OPERATING AND MAINTENANCE DUTIES OF OPERATOR

1.   Subject  to  the  terms of this Agreement Operator shall  operate  and
     maintain  the  System  and  shall control the  details  and  means  of
     performing its obligations hereunder.

2.   For  the  period  prior to and including the Effective Date,  Operator
     shall  assist  Owner in preparing the System for operation  under  the
     Amended Power Purchase Agreement.  These services will include but not
     be limited to:

     a.   Preparing a plan and schedule to staff the System;

     b.   Recruiting and training the staff which will operate and maintain
          the System;

                                     4

<PAGE>

     c.   Responding, in a timely manner, to Owners requests for
          information;

     d.   Procuring,   as  agent  for  Owner,  replacement  of   stock   of
          consumables, spare parts, tools, and supplies in accordance  with
          the Annual Operating Plan and Budget;

     e.   Appointing  a  plant  manager (subject to Owner's  approval)  who
          shall  supervise  the performance of Operators employees  at  the
          System site;

     f.   Reviewing plans, specifications and drawings of machinery and
          equipment layouts and commenting to Owner thereon with regard to
          matters affecting operation and maintenance;

     g.   Observing  and  receiving training and instructions  from  Owner,
          such  training  and instructions to be in accordance  with  Sound
          Independent Power Industry Practice;

     h.   Performing for Owner such other services as may from time to time
          be reasonably requested or are reasonably necessary or
          appropriate in connection with the operation and maintenance of
          the System; and

     i.   Reporting to and consulting with Owner about the operation of the
          System on a scheduled basis, as reasonably requested by Owner.

Such services shall be provided in a manner consistent with all Legal and
Contractual Requirements, Sound Independent Power Industry Practice and the
Annual Operating Plan and Budget.

3.   All  full  time personnel whom Operator will provide for the operation
     and  maintenance of the System shall be at the site and available full
     time  for training and to perform services to support System operation
     and  maintenance as required by the staffing plan to be  developed  by
     Operator and approved by Owner.

4.   A  written  management  program shall be  developed  by  operator  for
     approval  by Owner to ensure optimal performance, responsiveness,  and
     cost-effectiveness  in the operation and maintenance  of  the  System.
     The program shall include provisions regarding:

     a.   Budget tracking, analysis and adjustments;

     b.   Personnel   policies,  including  policies   regarding   payroll,
          compensation, pensions and other benefits;

     c.   Training;

     d.   Purchasing and inventory control;

     e.   A  System safety and health program which will include procedures
          and a manual;

     f.   An  employee job-site handbook for Operator's employees operating
          and maintaining the System;

     g.   A maintenance planning and scheduling system; and

                                     5

<PAGE>

     h.   A  system  for  maintaining an inventory  of  consumables,  spare
          parts, tools and supplies.

5.   Subsequent   to  the  Effective  Date,  Operator  shall  provide   all
     operations  and maintenance services necessary to efficiently  operate
     and  maintain the System, including but not limited to performing  the
     following operating and maintenance services:

     a.   Operating and maintaining the System in compliance with all Legal
          and Contractual Requirements, Sound Independent Power Industry
          Practice and the Annual Operating Plan and Budget;
          
     b.   Obtaining and maintaining in effect all licenses and permits
          required by law to be obtained and maintained in Operator's name
          and assisting Owner in obtaining and renewing all licenses and
          permits required by low to be obtained and maintained by Owner or
          in Owners name;
          
     c.   Paying all employees of itself and its Affiliates, agents and
          subcontractors promptly and filing all reports and remitting all
          payments required under labor statutes to the appropriate
          governmental authorities, as the obligations arise:
          
     d.   Conducting the operations and maintenance of the System
          including, but not limited to. entering into contracts with third
          parties as agent for Owner (subject to Owner's approval if not in
          the ordinary course of business);
          
     e.   Employing, and ensuring adequate training of, Operator employees
          and employees of its Affiliates (duly licensed where required by
          statute or regulation) for the operation and maintenance of the
          System consistent with Sound Independent Power Industry Practice,
          and planning and administering all matters pertaining to employee
          relations, salaries, wages, working conditions, hours of work,
          termination of employment, employee benefits, employee staffing.
          safety and related matters pertaining to such employees, and
          maintaining records with respect to all such matters;
          
     f.   Monitoring, preparing and maintaining records of the operations
          and maintenance aspects of the System (including records of
          financial, business, and sales tax aspects of the System) in such
          form and covering such matters as Owner may reasonably request,
          consistent with Sound Independent Power Industry Practice,
          generally accepted accounting principles, and applicable records
          retention requirements; and making such records available for
          inspection and/or audit by Owner and Owner's designees;
          
     g.   Implementing  an  inventory control system to identify,  catalog,
          and  disburse spare parts for the maintenance of the  System  and
          procuring,  as  agent  for  Owner, replacement  spare  parts  and
          refurbishing. where practical or economical, spare parts to allow
          their reuse;
          
     h.   Operating and maintaining the System according to the operations
          and maintenance programs prepared by Operator for Owner and, if
          necessary, creating updates for such programs and creating new
          programs as required for operation and maintenance of the System;
          
     i.   Operating and maintaining the System to maximize the continuous,
          reliable, safe and efficient generation of electrical and/or
          thermal energy by the System so as to conserve fuel and financial
          resources and to minimize unscheduled outages, and providing
          maintenance for the System in a cost-effective manner to prevent
          deterioration beyond normal wear and tear provided, however, that
     
                                     6

<PAGE>

          Owner acknowledges such efforts shall necessarily be limited by
          the operating life, capacity and maintenance requirements of the
          system and by Legal and Contractual Requirements;
          
     j.   Using  all reasonable care necessary to keep the System  and  the
          System  site  clean,  orderly, and free from debris,  rubbish  or
          waste to the extent consistent with the operation of the System;
          
     k.   Taking necessary precautions and corrective actions in the  event
          of an Emergency;
          
     l.   Keeping the System and the System site free and clear of all
          liens and encumbrances arising out of the acts, omissions, or
          debts of Operator or its employees, agents or subcontractors
          claiming by, through or under Operator (this subsection shall not
          apply to mechanics liens and liens of any nature arising by
          operation of law, provided such liens are promptly removed by the
          payment of the debts they secure when due; in the event of a
          dispute between Operator or its subcontractors and a lienholder,
          Operator's obligation to Owner pursuant to this provision may be
          satisfied by the posting of an appropriate bond to the extent
          acceptable to the Agent);
          
     m.   Within 30 days of its receipt of Owner's Plan of Operation
          submitted in accordance with Article V, Section 1 (c), preparing
          and submitting to Owner for Owner's approval a written proposed
          Annual Operating Plan and Budget which shall include all
          anticipated Expenses of the System to be paid by Owner for each
          succeeding calendar year, all as more fully described in Article
          VI, Section 6 or required by the Agent;
          
     n.   Reporting to and consulting with Owner about the operation of the
          System on a scheduled basis, as reasonably requested by Owner;

     o.   Using reasonable commercial efforts to secure from vendors,
          suppliers and subcontractors the best indemnities, warranties and
          guarantees as may be commercially available regarding supplies.
          equipment and services purchased for the System, all of which
          shall be assigned to Owner (Operator shall render reasonable
          assistance to Owner for the purpose of enforcing such
          indemnities, warranties or guarantees of which Owner is a
          beneficiary regarding the System);

     p.   Performing for Owner such other services as may from time to time
          be reasonably requested or are necessary or appropriate in
          connection with the operation and maintenance of the System;
          
     q.   Promptly notifying Owner of:
          
          i.   Any  condition, event or act which is likely to result in  a
               material  deficiency  in  budgeted revenues,  or  excess  in
               budgeted costs, of Owner;
               
          ii.  Any  forced outages or significant malfunction of the System
               as soon as practicable;
               
          iii. Any material failure to comply with any Legal and
               Contractual Requirements or any event which is reasonably
               expected to cause such material failure;
               
     r.   Promptly providing Owner with such information relative  to  the
          System as Owner may reasonably request;
          
                                     7
          
<PAGE>
          
     S.   Establishing  an effective maintenance planning  and  scheduling
          system  to optimize the availability, reliability and heat  rate
          of the System;
          
     t.   Assisting Owner in the compliance by Owner with the terms of the
          Financing Agreements, as they relate to the operation and
          maintenance of the System, including the preparation of reports
          concerning operations and making personnel available for
          discussions with the Agent or other lender representatives;
          
     u.   Subject  to  Article XI, assisting Owner in selling or  otherwise
          disposing of used and/or unneeded parts and supplies; and
          
     v.     Providing and maintaining written procedures, in a form
          reasonably acceptable to Owner, required to enable Operator's
          employees to safety and efficiently startup, operate, and shut
          down the System equipment and to perform preventive maintenance
          on the System equipment.
          
V.   RESPONSIBILITIES OF OWNER
          
1.   Subject  to the terms of this Agreement, Owner shall, at its cost  and
     expense,  perform and provide the following at the times  required  to
     support the start-up, operation and maintenance of the System:
          
     a.     Providing an Owner's Representative who shall represent and
          bind Owner in all matters regarding this Agreement and the
          performance of Owner hereunder;
          
     b.     Providing the System and System site free and clear of all
          liens and encumbrances (except for any liens or encumbrances in
          favor of Agent or the lenders under the Financing Agreements);
          
     c.     Preparing the Owner's Plan of Operation and delivering the same
          to Operator on or before September 1 of each year;
          
     d.     With Operator's assistance, administering all System Contracts;
          
     e.      Providing  all  required  utility services,  including  water,
          sewer,   gas,   telephone,  water/wastewater   treatment,   waste
          disposal, special waste disposal and electricity;
          
     f.     With operators assistance, obtaining and reviewing all
          necessary licenses and permits except those required by law to be
          obtained and maintained in Operator's name;
          
     g.     Providing manufacturer's operating and maintenance manuals for
          the System;
          
     h.      With  Operator's  assistance,  preparing  and  submitting  any
          special  accounting and reporting documents that may be  required
          by governmental authorities;
          
     i.     Providing at its own expense, an office at the site for use by
          Operator
          
     j.     Within five days of its receipt thereof, providing Operator
          complete copies of all technical, operational and other System
          and System site related information, including the System
          Contracts, as are in the possession, or under the control of
          Owner;
          
                                     8

<PAGE>

     k.     Being responsible for the billing and collection of electricity
          revenues  under the Amended and Restated Power Purchase Agreement
          and under the Electricity Purchase Contract with E. I. Dupont  de
          Nemours  and  Company ("Dupont") and thermal revenues  under  the
          Steam Purchase Contract with Dupont;
          
     l.     Being solely responsible for obtaining, maintaining and
          renewing all licenses and permits necessary for (i) Owner to do
          business in the jurisdictions in which the System is located and
          (ii) the ownership, operation and maintenance of the System and
          System site;
          
     m.     Being responsible for arranging the disposal of hazardous
          wastes generated by or at the System or System site: provided,
          however, that Operator will coordinate removal of such waste from
          the System site using subcontractors chosen by Owner;
          
     n.     Complying with, and diligently enforcing, all agreements
          (including the System Contracts) to which Owner is a party and
          which relate to or impact upon the System or Operator's ability
          to perform its obligations hereunder; and
          
     o.     Timely paying all of Owner's vendors, suppliers and
          contractors.
          
     Such activities shall be provided in a manner consistent with all
     Legal and Contractual Requirements, Sound Independent Power Industry
     Practice and the Annual Operating Plan and Budget.
          
VI.  EXPENSES, RRIMSURUMENTS, BUDGET, CONSIDERATION, COMPENSATION
          
1.   As compensation to Operator for its performance of the Services, Owner
     shall  Pay operator (a) the Expenses incurred by Operator and  (b)  an
     annual  fee  ("Operator's Fee").  The Operator's  Fee  for  the  first
     Contract Year shall be $200,000.  The Operator's Fee shall be  payable
     in equal monthly installments in arrears.  The Operator's Fee shall be
     adjusted annually in accordance with the following sentence.  For each
     Contract Year after the first Contract Year, the Operator's Fee  shall
     be  equal to the product of: (i) the ratio of the Producer Price Index
     for the lag month of the then expiring Contract Year over the Producer
     Price Index for the last month of the previous Contract Year and  (ii)
     the  Operator's  Fee  for the then expiring Contract  Year,  provided,
     however, that for any partial Contract Year, the Operator's Fee  shall
     be multiplied by a fraction, the numerator of which shall be the total
     number  of  days  in such Contract Year and the denominator  of  which
     shall  be  365 or 366, as the case may be.  If Operator falls  to  pay
     accrued,  undisputed  Liquidated  Damages  in  any  Contract  Year  in
     accordance  with the provisions herein, Owner may elect to reduce  the
     Operator's  Fee  in  the subsequent Contract Year  by  the  amount  of
     undisputed Liquidated Damages owed to Owner.
          
2.   Owner  shall  directly pay, or promptly reimburse to Operator  as  the
     case  may  be,  the following expenses ("Expenses")  relating  to  the
     System:
          
     a.      Insurance and bond premiums for policies which are required by
          Article VIII hereof;
          
     b.     Property, and other taxes (including, without limitation, sales
          taxes, gross receipts taxes, value added taxes. energy taxes and
          capital taxes) related to Owner or the System, but not including
          those based an Operator's income or capital;
          
     c.     The base salaries, straight time hourly wages and overtime
          hourly wages of all of Operator's on-site personnel plus (i)
          thirty eight percent (38%) of (x) the base
     
                                     9
     
<PAGE>
     
            salaries and straight time hourly wages and (y) the straight
          time hourly portion of the actual overtime wages for all hourly
          employees, and (ii) five percent (5%) of the base salaries,
          straight time hourly wages, and overtime hourly wages.
          
     d.     Transportation, travel, lodging, and (for employees newly hired
          or newly assigned to the System site) relocation expenses of
          persons employed by Operator or its Affiliates performing the
          duties of Operator under this Agreement subject to advance
          approval by Owner in writing;
          
     e.      Reasonably incurred legal and accounting fees relating to  the
          System, subject to advance approval by Owner in writing;
          
     f.     Fuel expenses including fuel purchase, transportation, handling
          and demurrage charges;
          
     g.      The  expenses of purchased electric power, telephone and other
          communication services, purchased potable water. waste  disposal,
          special  waste  disposal, lubricants and chemicals necessary  for
          the operation of the System;
          
     h.     Costs reasonably incurred or paid by Operator due to an
          Emergency;
          
     i.     Training, including outside training services;
          
     j.      The  costs  of permits or licenses required for either  Owner,
          Operator or the System;
          
     k.     Costs associated with Routine Maintenance, Major System Repairs
          (including scheduled and unscheduled) inspections, and overhauls,
          outside   contractor  services  and  purchases   of   replacement
          equipment, parts and components;
          
     l.     Spare parts, tools, supplies and consumables;
          
     m.     Capital costs approved by Owner for improvements, alterations
          or additions to the System including those required by
          governmental laws, regulations or orders including without
          limitation, those arising from environmental concerns; and
          
     n.      The  cost  of transportation of spare parts, tools,  supplies,
          consumables  and  any  item  which  is  a  reimbursable   expense
          hereunder.
          
     For all Expenses (other then relating to labor, legal and accounting
     fees) incurred and paid by operator for which Operator is entitled to
     reimbursement hereunder, Owner additionally shall pay Operator a
     general and administrative expense fee of five percent (5%) of such
     Expenses.
          
3.        a.     For convenience and in order to save on expenses, Owner
          will directly pay certain Expenses reimbursable to Operator as
          set forth in the Annual Operating Plan and Budget described in
          Article VI, Section 2 as practicable.  To the extent reasonably
          practical, the items covered by such Article VI, Section 2 shall
          be procured through Operator's issuance of an Owner purchase
          order and the cost of any such items shall be paid directly by
          Owner to the vendor thereof.  Operator shall perform such duty as
          owner's agent.
          
     b.     Without Owners prior approval, Operator shall be empowered to
          prepare and issue an Owner purchase order for any material or
          service the cost of which would constitute an Expense, so long as
          the total cost for such item is less than or equal to $10,000.
          For any item or items whose total cost is greater than
     
                                    10
     
<PAGE>
     
            $10,000, Operator shall submit a written requisition to Owner,
          and after receipt of written approval from Owner,  Operator shall
          be authorized as agent for Owner to prepare and issue a purchase
          order on behalf of Owner on Owner's purchase order form for such
          item.  Operator shall (i) verify the receipt at the System site
          of all materials end services to be delivered to the System site
          covered by Owner's purchase orders issued by Operator, (ii)
          verify the accuracy of vendors' invoices in connection therewith.
          and (iii) forward such invoices to Owner for approval, processing
          and payment by Owner.  Nothing in this Agreement shall prevent
          Operator from procuring any material or service the cost of which
          would constitute an Expense under Article VI(2).
          
      C.  Operator shall periodically, but not more often than once a week,
          deliver to Owner invoices received by Operator from third parties
          for all direct Expenses, accompanied by a summary of all such
          invoices which itemizes all such invoices by operating cost
          account number.  Such invoices shall also be accompanied by a
          statement from Operator confirming that all such invoices are
          accurate, due and payable, together with all relevant
          documentation reasonably necessary for Owner to verify the
          accuracy thereof.  Each invoice submitted to Owner shall be paid
          by Owner directly to the payee of such invoice on or before the
          date such invoice is due.
          
4.   From time-to-time, Operator will prepare and send to Owner an invoice,
     including  expense  statements,  vouchers  or  such  other  supporting
     information as Owner may reasonably require, for the amounts then  due
     for   reimbursable  Expenses  and  the  monthly  installment  of   the
     Operator's Fee.  Owner shall pay the amount due to Operator  no  later
     than  thirty  (30)  days after receipt of the invoice.   All  payments
     shall be made by wire transfer of immediately available funds to Texas
     Commerce  Bank, Houston, Texas, Account No. 00101616119,  ABAR  113000
     609.  Any payment not made within 30 days after receipt of the invoice
     will  bear interest from the date on which payment was due at the rate
     of  one  and  one-half percent (1.5%) per month or  the  maximum  rate
     permitted by law, whichever is the lesser.

5.   Operator  shall  maintain  complete,  true,  and  correct  records  in
     connection  with  all Expenses incurred by Operator.   Operator  shall
     retain all such records for five (5) years after Expense reimbursement
     by  Owner has been fulfilled or for any longer period of time required
     by law.  All documents and records relating to this Agreement shall be
     available  for  inspection  by Owner anytime  during  normal  business
     hours.   Owner may audit all records of Operator relating to  Expenses
     and  services performed hereunder.  In the event the audit shows  that
     the  payment  by  Owner to Operator exceeds the amount  due  Operator,
     Owner  shall disclose such information to Operator and Operator  shall
     refund the excess amount to Owner within five (5) business days of the
     disclosure to Operator.  In the event the audit shows that the payment
     by  Owner  to  Operator is greater than the amount due Operator  under
     this  Agreement and such error was caused by Operator, Owner shall  be
     reimbursed its reasonable costs of performing the audit.  In the event
     the audit shows that the payment by Owner to Operator is less than the
     amount due Operator, Owner shall disclose such information to Operator
     and  pay  the underpayment amount to Operator within five (5) business
     days of the disclosure to Operator.

6.   On  or  before October 1 of each year, the Operator shall prepare  and
     submit to Owner a written Annual Operating Plan and Budget which shall
     include all expenses of the System anticipated to be paid by Owner  as
     either  a  direct or reimbursable Expense during the upcoming calendar
     year pursuant to Section 1 of this Article VI, together with a written
     operations  and maintenance plan for the same period  of  time.   Such
     Annual  Operating  Plan  and Budget shall set  forth  the  anticipated
     operations   and  maintenance  plan  including  projected   electrical
     production from the System on a monthly basis, and a

                                    11

<PAGE>

     complete  schedule  (to the extent technically feasible)  of  Operator
     responsible   Routine   Maintenance  and  all   Owner-directed   major
     maintenance  tasks (including Major System Repairs) to be accomplished
     during  said  year.  Owner and Operator shall agree  upon  the  budget
     operations  and  maintenance plan, and persons to perform  maintenance
     under

     the  plan prior to the start of the calendar year, and shall meet  and
     exchange information as is necessary and convenient to such end.
          
     It the parties cannot reach agreement on the Annual Operating Plan and
     Budget by the start of any calendar year, then, until such time as
     agreement is reached or the dispute is resolved, the Annual Operating
     Plan and Budget for such calendar year shall be based on the Annual
     Operating Plan and Budget for the preceding calendar year, as adjusted
     to reflect the net change, if any, between the most recently published
     Producer Price Index available on the first day of the calendar year
     in question and the corresponding Producer Price index in effect at
     the start of the immediately preceding calendar year.
          
     Operator  has submitted, and Owner has accepted, the Annual  Operating
     Budget for the calendar year ending December 31, 1996. a copy of which
     is  attached as Exhibit F.  All Annual Operating Budgets shall  be  in
     substantially the form attached as Exhibit F.  The amounts  set  forth
     on  Exhibit  F shall be reduced pro rata based on the number  of  days
     remaining  in  the  calendar year from and after the  Effective  Date.
     Likewise,  the  amounts  set forth in the Annual  Operating  Plan  and
     Budget  in  effect  during the calendar year in which  this  Agreement
     expires or is terminated shall be reduced on a pro rata basis based on
     actual  number of days elapsed during such calendar year prior to  the
     date of the expiration or termination of this Agreement

7.        a.     The parties recognize that Changes may be required during
          the term of this Agreement.  Either Owner or Operator may by a
          written notice to the other party propose a Change.  The written
          notice shall describe the proposed Change in reasonable detail
          and the reasons therefor.

     b.     The written notice of a Change proposed by Operator shall be
          accompanied by a Change Order Budget Statement.  Upon receipt by
          Operator of any proposed Change from Owner, Operator shall use
          its best efforts to prepare and submit to Owner a Change Order
          Budget Statement with respect to such proposed Change within
          fifteen (15) days of the receipt of Owner's proposed Change.  No
          proposed Change the cost of which is in excess of $10,000 shall
          be implemented until a Change Order has been executed by both
          parties approving the Change and the related Change Order Budget
          Statement; provided, however, that Operator shall be entitled to
          implement a proposed Change without the prior approval of Owner
          if such Change is required due to an Emergency.  If Operator
          implements a Change without the prior approval of Owner due to an
          Emergency, Operator shall promptly notify Owner of such Change
          and pursue Owner's approval thereof in accordance with subsection
          c below.  Operator acknowledges that Owner's approval of any
          proposed Change and/or the related Change Order Budget Statement
          may require the approval of the Agent.

     c.     Owner and Operator shall diligently and in good faith endeavor
          to reach agreement upon any proposed Change and the related
          Change Order Budget Statement within thirty (30) days after the
          date of the receipt of a proposed Change and related Change Order
          Budget Statement.  If a Change is required as a result of an
          Emergency. then Operator shall provide to Owner, as soon as
          practicable, notice of such Change, together with a statement
          describing the Emergency and a Change Order Budget Statement.  If
          a Change due to an Emergency causes the Annual Operating Plan and
          Budget to be exceeded and Owner believes that an Emergency did
          not exist, then Owner shall have the right
     
                                    12

<PAGE>
     
            to dispute the Change.  If Owner and Operator do not agree as
          to the resolution of such dispute, then either party may submit
          the dispute to arbitration in accordance with the provisions of
          Article XVIII, Section 2 and 3.

8.      Operator shall report to Owner in writing monthly on electrical and
     thermal output and expenditures incurred to date; projected electrical
     and  thermal  output and expenditures for the balance of the  calendar
     year,  performance to date under the operations and  maintenance  plan
     and  such  other  matters as Owner may reasonably request  as  to  the
     operation  and  maintenance of the System.  In such  report,  Operator
     shall recommend such changes to the then current budget and operations
     and maintenance plan as Operator considers necessary or appropriate.

9.      Operator  shall  use its best efforts to operate and  maintain  the
     System  each year within the budget approved by Owner (as  amended  by
     Change  Orders).  For purposes of determining the approved budget  for
     the  initial calendar year, the budget provided as Exhibit  F  in  the
     aggregate  amount of $1,871,860, for operating and maintenance  duties
     set  forth  in  Article IV, shall be adjusted  by  the  ratio  of  the
     remaining  number of days from the Effective Date to year-end  divided
     by  366.   If  for  any calendar year the Expenses (other  than  those
     Expenses  set forth In Article VI, Section 2 (b) and Expenses incurred
     in  response to Emergencies) whether direct or reimbursable,  paid  by
     Owner exceed the approved Annual Operating Plan and Budget, as amended
     by  Change Orders mutually agreed by Owner and Operator, then Operator
     shall be solely responsible for any such excess.

10.  Operator's  consideration  for services performed  and  expenses  paid
     pursuant  to  this  Agreement shall be the reimbursement  of  expenses
     described  In  Article  VI, Section 2, the  Operator's  Fee,  and,  if
     applicable, the Bonus.

VII. INDEMNIFICATION

1.     Operator will protect, indemnify and hold harmless Owner, Owner's
     Affiliates and Agent, and their respective directors, officers,
     employees, agents and representatives against and from any and all
     demands, losses, claims, actions or suits, including costs, judgments,
     penalties, fines and attorney's fees, for or on account of injury to
     or death of third persons, or for damage to or destruction of property
     belonging to third persons or for violation of law, in each case
     resulting from or arising out of Operator's negligent maintenance or
     operation of the System or Operator's willful act or omission, except
     to the extent caused by System design or construction defect, by
     Owner's act or omission, or the act or omission of third parties.

2.     Owner will protect, indemnify and hold harmless Operator, Operator's
     Affiliates. and their respective directors, officers, employees,
     agents and representatives against and from any and all demands,
     losses, claims, actions or suits, including costs, judgments,
     penalties, fines and attorneys' fees, for or on account of injury to
     or death of third persons, or for damage to or destruction of property
     belonging to third persons, or for violation of law, in each case
     resulting from or arising out of a System design or construction
     defect, or the negligence or willful act or omission of Owner.

3.     The duty to indemnify under this Article will continue in full force
     and effect, notwithstanding the expiration or termination of this
     Agreement, with respect to any claim or action based on facts or
     conditions which occurred prior to such termination.

4.     If any indemnified party intends to seek indemnification under this
     Article from any indemnifying party with respect to any action or
     claim, the indemnified party shall give the indemnifying party notice
     of such claim or action within thirty (30) days of the commencement
     of, or actual knowledge by the indemnified party of, such claim or

                                    13

<PAGE>

       action.  The indemnifying party shall have no liability under this
     Article for any claim or actions for which such notice is not
     conveyed; provided, however, that so long as the indemnifying party is
     not materially harmed by the indemnified party's failure to give
     timely notice of a claim or action, then the indemnifying party's
     indemnify obligation shall be unaffected.  The indemnifying party
     shall, at its sole cost and expense, defend any such claim or action;
     provided. however, that the indemnified party shall, at its own cost
     and expense, have the right to participate in the defense or
     settlement of any such claim or action.  The indemnified party shall
     not compromise or settle any such claim or action without the prior
     written consent of the indemnifying party, which consent shall not be
     unreasonably withheld.

VIII.INSURANCE COVERAGE

1.     Operator, on its behalf and on the behalf of all subcontractors of
     Operator performing any on-site services in connection with the
     operation and maintenance of the System or any of its appurtenant
     equipment, shall procure and maintain in effect during the term for
     which they perform services pursuant to this Agreement the following
     minimum insurance coverages, in the given amounts:

     a.     Vehicle liability insurance covering all owned, non-owned and
          hired automobiles, trucks, trailers and other vehicles.  Such
          insurance shall provide coverage not less than that of the
          standard comprehensive automobile liability policy in limits not
          less than $1,000,000 combined single limit each occurrence for
          bodily injury and property damage.  The Owner and NRG Generating
          (U.S.) Inc. shall be named as additional insureds.

     b.     Workers' Compensation insurance that satisfies statutory
          requirements and Employers' Liability Insurance with limits of
          $1,000,000.  This insurance shall include All States Coverage and
          Longshoremen & Harbor Workers Compensation Act coverage (if
          exposure exists.) The Employer's Liability Coverage shall not
          contain an occupational disease exclusion.

     c.     Liability insurance, on an "Occurrence" basis and in a form
          providing coverage not less than that of the standard Commercial
          General Liability policy, covering operations of the System
          including independent contractors, products and completed
          operations, broad form property damage, blanket contractual
          liability coverage (for any written or oral contracts related to
          the System) and personal injury liability coverage for claims
          arising out of the operations of the System for bodily injury,
          property damage and personal injury with policy limits not low
          than $1,000,000 combined single limit each occurrence and
          $2,000,000 aggregate limit.  The aggregate policy limits shall
          apply solely to this project or site.  Coverage shall include a
          standard severability of interests clause and cross liability
          coverage.  The Owner and NRG Generating (U.S.) Inc. shall be
          named as additional insureds.

     d.     Excess or umbrella liability insurance, on an "Occurrence"
          basis and with coverage at least as broad as the vehicle
          liability, employers' liability and general liability policies,
          to provide limits of insurance in excess of Owner's vehicle
          liability, employers liability and general liability policies for
          not less than $10,000,000 combined single limit each occurrence
          and in the aggregate for bodily injury. property damage and
          personal injury.  The aggregate policy limits shall apply solely
          to this project or site.  Coverage shall include a standard
          severability of interests clause and cross liability coverage.
          The Owner and NRG Generating (U.S.) Inc. shell be named as
          additional insureds.

                                    14

<PAGE>

2.      Owner shall procure and maintain in effect during the term of  this
     Agreement at its expense the following minimum insurance coverage:

     a.     Vehicle liability insurance covering all owned, non-owned and
          hired automobiles, trucks, trailers. and other vehicles.  Such
          insurance shall provide coverage not less then that of the
          standard comprehensive automobile liability policy in limits not
          less than $1,000,000 combined single limit each occurrence for
          bodily injury and property damage.  The Operator and NRG
          Generating (U.S.) Inc. shall be named as additional insureds.

     b.     Workers' Compensation insurance (if required) that satisfies
          statutory requirements and Employees' Liability Insurance with
          limits of $1,000,000.  This insurance shall include All States
          Coverage and Longshoreman & Harbor Workers Compensation Act
          coverage Of exposure exists.)  The Employer's Liability Coverage
          shall not contain an occupational disease exclusion.

     c.     Liability insurance, on an "Occurrence" basis and in a form
          providing coverage not less than that of the standard Commercial
          General Liability policy, covering operations of the System
          including independent contractors, products and completed
          operations, broad form property damage, blanket contractual
          liability coverage (for any written or oral contracts related to
          the System) and personal injury liability coverage for claims
          arising out of the operations of the System for bodily injury,
          property damage and personal injury with policy limits not less
          than $1,000,000 combined single limit each occurrence and
          $2,000,000 aggregate limit.  The aggregate policy limits shall
          apply solely to this project or site.  Coverage shall include a
          standard severability of interests clause and cross liability
          coverage.  The Operator and NRG Generating (L.I.S.) Inc, shall be
          named as additional insureds.

     d.     "All Risk" Property Insurance, including Boiler and Machinery
          Insurance and difference in conditions coverage (including flood
          perils), with an extension for Business Interruption Coverage,
          and naming Operator and NRG Generating (U.S.) Inc, as additional
          insureds for all such insurance coverage as their interests
          appear.

3.     Within thirty (30) days after the date of execution of this
     Agreement, each party shall provide to the other party, pursuant to
     the notice provisions of Article XIV, properly executed certificates
     of insurance, signed by an authorized representative of the insurance
     carrier.  These certificates shall provide the following information:

    a.     Name of insurance company, policy number and expiration date;

     b.      The coverage required hereunder and the limits on each covered
          item,  including  the  amount  of  deductibles  and  self-insured
          retentions;
     
     c.       A  statement  indicating  that  sixty  (60)  days  notice  of
          cancellation, non-renewal, or material change in coverage of  any
          of  the  policies  shall be given to each named insured  and  any
          additional insured; and
     
     d.     Named and additional insured.

4.     Each party shall have the right to inspect and photocopy the
     policies of insurance at the other party's place of business during
     regular business hours. on reasonable prior written notice.

                                    15

<PAGE>

5.      All  insurance policies, including Workers' Compensation insurance,
     provided  by  Owner and Operator shall waive all rights of subrogation
     against one another and NRG .

6.      The  provision  of insurance shall not be construed  to  limit  the
     liability of any party to the other party.

7.     All commercial insurance carriers providing insurance hereunder must
     be rated A- or better, with a minimum size rating of VIII by Bests
     Insurance Guide and Key Ratings or an equivalent rating by another
     nationally recognized insurance rating agency of a standing similar to
     Best.

8.      All deductibles or self insured retentions associated with policies
     required hereunder shall be the responsibility of the named insured.

IX.  ENGAGEMENT OF THIRD PARTIES

Operator may engage or subcontract in the ordinary course of business and
at Owner's expense such persons, corporations or other entities as Operator
deems advisable for the purpose of performing or carrying out any of the
obligations of Operator under this Agreement.  Except in the case of an
Emergency, before incurring an Expense under this Article IX In excess of
$10,000, Operator shall obtain the prior written approval from Owner.

X.     OPERATOR REPORTING OBLIGATIONS

Operator shall provide Owner with copies of all reports generated by
Operator's or Operator's Affiliates' employees, agents, or subcontractors
with respect to the operation of the System that are filed with any
federal, state, or local agency or governmental entity.  In addition,
Operator shall provide Owner with monthly compliance reports, summarizing
Operator's compliance with all System permits and licenses.  The content of
the monthly compliance reports shall be agreed to by Owner and Operator on
or before June 15, 1996.  All monthly compliance reports shall be delivered
to owner within ten (10) days after the last day of the relevant month.

XI.  SPECIFIC LIMITATIONS

In the conduct of its duties hereunder, Operator shall not, without first
obtaining the written consent of Owner:

1.     Limit on Expenditures.  Under-take an expenditure outside Operator's
     scope of responsibilities except that, in case of an Emergency,
     Operator may make such immediate expenditures as may be necessary, but
     notice of any such Emergency and expenditures shall be given to Owner
     as promptly as possible, but in no case more than 12 hours after the
     event.

2.     Settlement of Claims.  For any claim for which Owner is or may be
     responsible, pay in excess of $10,000 in the settlement of any claim
     for injury to or death of persons, or loss of or damage to property,
     or in settlement of any contract or other dispute.

3.     Disposition of Equipment.  On Owner's behalf, sell or otherwise
     dispose of any item of equipment which is part of or used in the
     operating or maintaining the System if the current price of new
     equipment similar thereto is in excess of $5,000.

4.      Contracts  with  Affiliates.  On Owner's  behalf,  enter  into  any
     contract  with  an  Affiliate of Operator with a value  in  excess  of
     $5,000.

                                    16

<PAGE>

XII. TERMINATION/DEFAULT

1.     This Agreement may be terminated:

     a.   By the non-defaulting party at any time following the occurrence
          of any Event of Default, as described In this Article XII, if
          such Event of Default is not cured within the period, if any,
          provided therefor,
     
     b.   By Operator, if, after Operator has taken all reasonable efforts
          to avoid regulation as a public utility, Operator's performance
          under this Agreement renders Operator subject to regulation as a
          public utility by any federal, state or local agency of any
          governmental entity, by delivery of thirty (30) days' prior
          written notice to Owner;
     
     c.   By Operator, if Owner's action or inactions under this Agreement
          renders Operator subject to regulation as a public utility by any
          federal, state or local agency of any governmental entity, by
          delivery of thirty (30) days' prior written notice to Owner
     
     d.   By Owner for its convenience, upon ninety (90) days' written
          notice to Operator provided that Owner pays Operator the
          applicable termination charge in accordance with the provisions
          of Exhibit D (no termination of this Agreement under this
          provision may be effective until the third anniversary of the
          Effective Date);
     
     e.   By Owner, if, at, on, or in connection with the operation and
          maintenance of any part or all of either or both of (x) the
          System or (y) the properties, plant or equipment operated by
          Operator for NRG Generating (Parlin) Cogeneration, Inc., Operator
          falls to achieve and maintain compliance with all applicable
          laws, permits, licenses, regulations, or orders of any
          Governmental Authority; provided. however, that no failure of
          Operator to perform its obligations under this Article XII,
          Section 1 (e) shall be grounds for termination if such failure is
          the result of the negligence of a third party other than
          subcontractors of or procured by Operator or Operator's
          affiliates or an act of Force Majeure, so long as Operator is
          diligently pursuing a cure as required by this Agreement.  Owner
          may exercise its right of termination under this Article XII
          action 1 (e), if and when Owner believes that Operator has failed
          to achieve and maintain compliance with an applicable law,
          permit, license, regulation or order, whether or not (s) a court
          or administrative agency with competent jurisdiction has
          determined that there has been such a failure or (t) a dispute
          resolution process has determined that the failure was not the
          result of either negligence of a third party other than
          subcontractors or an act of Force Majeure which Operator is
          diligently attempting to cure; provided, however, that following
          any termination by Owner under this Article XII Section 1 (e), if
          (u) a court or administrative agency, with competent jurisdiction
          to assess a fine, penalty or other action for failures in
          circumstances of the sort which were the basis of Owner's
          termination, issues a final nonapealable order (or issues an
          order for which all appeals periods have expired) determining as
          a matter of both fact and law that the circumstances which were
          the basis of Owner's termination did not constitute a violation
          of any law, permit, license, regulation or order. or (v) a
          dispute resolution process under Article XVIII determines that
          the failure was the result of negligence of a third party other
          then subcontractors or an act of Force Majeure which Operator is
          diligently attempting to cure, then Owner shall pay Operator the
          amount determined in accordance with Exhibit E.;
     
                                    17
     
<PAGE>

     f.   By the mutual agreement of the parties; and
     
     g.   By  Owner,  if the Amended Power Purchase Agreement is terminated
          for  any  reason  other  then a default  by  Owner  or  an  Owner
          Affiliate.

2.     Owner shall be in default under this Agreement upon the happening or
     occurrence of any of the following events or conditions, each of which
     shall be deemed to be an Event of Default for purposes of this
     Agreement:

     a.     Owner materially breaches any of Owner's obligations.
          covenants, conditions, services or other responsibilities under
          this Agreement unless within thirty (30) days after notice from
          Operator specifying the nature of such breach, Owner either cures
          such breach or, if such breach (other than the failure to make
          payment obligations) cannot be cured within thirty (30) days,
          Owner commences and diligently pursues such cure and thereafter
          continues to diligently pursue such cure.  If the breach is not
          cured within 120 days of the date of Operator's written notice to
          Owner, then Operator may terminate this Agreement;
     
     c.   There is an assignment for the benefit of Owner's creditors, or Owner
          or its Parent company, NRG Generating (U.S.) Inc.. is adjudged bank-
          rupt, or a petition is flied by or against Owner or its parent
          company under the provisions of any insolvency or bankruptcy laws
          (and such petition is not dismissed within six months), or the busi-
          ness or principal assets of Owner or its parent company are placed in
          the hands of a receiver, assignee or trustee, or Owner is dissolved,
          or Owner's existence is terminated or its business is discontinued; or
     
     c.     Any material representation or warranty furnished by Owner in
          connection with this Agreement was knowingly false or misleading
          in any material respect at the time it was made.

3.     Operator shall be in default under this Agreement upon the happening
     or occurrence of any of the following events or conditions, each of
     which shall be deemed to be an Event of Default for purposes of this
     Agreement:

     a.     Operator materially breaches or falls to observe or timely
          perform any of Operator's obligations, covenants, conditions,
          services or responsibilities under this Agreement, unless within
          thirty (30) days after notice from Owner specifying the nature of
          such breach or failure, Operator either cures such breach or
          failure or, if such breach cannot be cured within thirty (30)
          days, Operator commences and diligently pursues such cure and
          thereafter continues to diligently pursue such cure.  If the
          breach is not cured within 120 days of the date of Owner's
          written notice to Operator, then Owner may terminate this
          Agreement;
     
     b.     There is an assignment for the benefit of Operator's creditors,
          or Operator is adjudged bankrupt, or a petition is filed by or
          against Operator under the provisions of any insolvency or
          bankruptcy laws (and such petition is not dismissed within six
          months), or the business or principal assets of Operator are
          placed in the hands of a receiver, assignee or trustee, or
          Operator is dissolved, or Operators existence is terminated or
          its business is discontinued; or
     
     c.      Any  material representation or warranty furnished by Operator
          in   connection  with  this  Agreement  was  knowingly  false  or
          misleading in any material respect at the time when made.

Notwithstanding subsection (a) above, Operator (i) shall not be afforded
any cure period, (ii) will not be permitted to invoke or utilize the
Article XVIII Dispute Resolution

                                    18

<PAGE>

provisions, and (iii) will be subject to immediate termination if the
termination of this Agreement is affected under the language of Article
XII, Section 1(e).

4.     Upon the occurrence of an Event of Default, the non-defaulting party
     may:

     a.   Without recourse to legal process, terminate this Agreement by
          delivery of a written notice of termination to the defaulting
          party or its assigns; and/or
     
     b.   Pursue, concurrently or separately, other remedies existing in
          law, any provision of this Agreement, or otherwise.
     
5.          Upon termination or expiration of this Agreement, Operator
          shall:
     
     a.   Deliver to Owner all books, records, operator logs, accounts and
          manuals developed or maintained by Operator pursuant to this
          Agreement, provided however, that Operator may retain copies of
          such documents.  Furthermore, Owner shall have the right to take
          possession of all of the equipment, spare parts and supplies
          purchased for the System and paid for by Owner,
     
     b.   At Owner's request and expense, cooperate with Owner to effect an
          orderly transition of the operations and maintenance of the
          System, including, without limitation, perform the following:

          i.     Continue to operate the System in accordance with this
               Agreement for a period not to exceed 180 days while Owner
               appoints and mobilizes a successor operator;
          
          ii.  Assist Owner in preparing an inventory of all material,
               equipment, spare parts and supplies purchased for the
               System; and
          
          iii. Assign to Owner all Operator's contractual agreements with
               third parties relating to the operations or maintenance of
               the System, to the extent such agreements are so assignable.

XIII.ACCESS TO SYSTEM

Operator and Owner and their agents, representatives, and employees shall
have full and free access at all times to the System.

XIV.  NOTICES

1.     Any notice required or permitted under this Agreement shall be in
     writing and shall be valid and sufficient if delivered personally,
     mailed by registered or certified mail, or sent by a recognized
     private overnight express delivery service.  In each case postage
     prepaid, return receipt requested, addressed to the other party as
     follows:

If to Operator:

STEWART & STEVENSON OPERATIONS, INC.
2707 North Loop West
Houston, Texas 77008
Attn:  Vice-President of North American Operations
Telephone: 713-803-0300


If to Owner:

                                    19

<PAGE>

NRG Generating (U.S.) Inc.
1221 Nicollet Mall, Suite 600
Minneapolis, Minnesota 55403
Attn:  Chief Executive Officer
Telephone: 612-373-5300

2.     Any party may change its address, or add additional addresses, by
     notice given to the other parties in the manner se forth above

XV.  FURTHER ASSURANCES

1.     Owner and Operator agree to execute, acknowledge and deliver any and
     all such further documents and instruments and to take such action as
     may reasonably be required in order to allow the financing of the
     System to proceed, to effectuate the purpose of this Agreement, and to
     obtain any government permits, licenses, or approvals necessary or
     convenient to accomplish the foregoing.

2.     Title to all materials, equipment, supplies, consumables, spare
     parts and other items purchased or obtained by Operator for the System
     shall pass to and vest in Owner upon the passage of title from the
     vendor or supplier thereof and the payment or reimbursement of
     Operator's costs by Owner.

XVI. REPRESENTATIONS AND WARRANTIES

1.     Owner represents and warrants to Operator as follows:

     a.      Owner  is a corporation duly formed, validly existing, and  in
          good  standing  under the laws of Delaware, and  it  is  properly
          qualified to do business in New Jersey;

     b.     The execution of this Agreement has been duly authorized and
          approved by Owner, and no other authorizations, approvals, or
          consents are required in order for this agreement to constitute a
          binding and enforceable legal obligation of Owner;
     
     c.     The execution of this Agreement by Owner, and the performance
          of Owner's obligations under this Agreement will not conflict
          with, or result in a breach or default under, any agreement,
          contract, or covenant to which Owner is a party; and
     
     d.      This  Agreement,  as  executed, constitutes  a  binding  legal
          obligation  of Owner that is enforceable in accordance  with  its
          terms and conditions.

2.     Operator represents and warrants to Owner as follows:

     a.     Operator is a corporation duly incorporated, validly existing,
          and in good standing under the laws of Delaware, and it is
          properly qualified to do business in New Jersey;
     
     b.     The execution of this Agreement by Operator has been duly
          authorized and approved by Operator and no other authorization,
          approvals, or consents are required in order for this Agreement
          to constitute a binding and enforceable legal obligation of
          Operator;
     
     c.     The execution of this Agreement by Operator, and the
          performance of its obligations under this Agreement will not
          conflict with, or result in a breach or
     
                                    20
     
<PAGE>
     
            default under, any agreement, contract, or covenant to which
          Operator is a party; provided, however. that this provision is
          modified to be consistent with Section 7 of the Agreement which
          is being executed contemporaneously herewith as an inducement to
          the execution of this agreement; and
     
     d.      This  Agreement  as  executed,  constitutes  a  binding  legal
          obligation of Operator that is enforceable in accordance with its
          terms and conditions.

XVII.FORCE MAJEURE

1.     Except for the obligation of either party to make any required
     payments hereunder, the parties shall be excused from performing their
     respective obligations under this Agreement and shall not be liable in
     damages or otherwise if and to the extent that they are unable to so
     perform or are prevented from performing by a Force Majeure, provided
     that;

     a.     The non-performing party, as promptly as practicable after the
          occurrence of the Force Majeure, but in no event later than 14
          days thereafter, gives the other party written notice describing
          the particulars of the occurrence;
     
     b.      The suspension of performance is of no greater scope and of no
          longer duration than is reasonably required by the Force Majeure;
     
     c.     The non-performing party uses its best efforts to remedy its
          inability to perform; and
     
     d.     As soon as the non-performing party is able to resume
          performance of its obligations excused as a result of the
          occurrence, it shall give prompt written notification thereof to
          the other party.
     
2.           Neither party shall be required to settle any strike, walkout,
          lockout  or  other  labor dispute on terms  which,  in  the  sole
          judgment  of  the party involved in the dispute, are contrary  to
          its  interest, it being understood and agreed that the settlement
          of  strikes, walkouts, lockouts or other labor disputes shaft  be
          entirely within the discretion of the party having such dispute.

XVIII.  DISPUTE RESOLUTION

1.     Resolution by Parties.

     a.     First Attempt.  In the event that a dispute arises hereunder
          between the parties, the parties shall attempt in good faith to
          settle such dispute by mutual discussions within 30 days after
          the date that a party gives written notice of the dispute to the
          other party; provided, however, that if the dispute involves any
          amount claimed under an invoice and after 10 days of mutual
          discussion either party believes in good faith that further
          discussion will not resolve the dispute to its satisfaction, such
          party may immediately refer the matter to arbitration in
          accordance with Section 2 of this Article XVIII.
     
     b.     Chief Executive Officers.  In the event that the dispute is not
          resolved in accordance with subsection 1 (a) above, either party
          may refer the dispute to the chief executive officers or chief
          operating officers of the respective parties for further
          consideration.  In the event that such individuals are unable to
          reach agreement within 15 days, or such longer period as they may
          agree, then either party may refer the matter to arbitration in
          accordance with Section 2 of this Article XVIII.

                                    21

<PAGE>

2.     Arbitration.  In the event a dispute arises between Owner and
     Operator which is not resolved pursuant to Section 1 of this Article
     XVIII, shall be resolved by arbitration pursuant to the terms hereof.
     As a condition to initiating arbitration proceedings, a party must
     first have attempted to resolve the dispute under Section 1 of this
     Article XVIII.  All claims, disputes, and other matters in question
     arising out of or relating to this Agreement or the breach thereof
     shall be decided by arbitrators selected as hereinafter provided and
     shall be conducted in accordance with the Commercial Arbitration Rules
     of the American Arbitration Association then obtaining, unless the
     parties mutually agree otherwise.  The resolution of such disputes
     shall not delay Operator's or Owner's performance of their undisputed
     obligations under the terms of this Agreement.  The arbitration shall
     be held in Newark, New Jersey and any arbitration demand must be filed
     with the American Arbitration Association office located closest to
     Newark, New Jersey.  If the claim or defense of either party is
     determined to be frivolous, the arbitrators may require that the party
     at fault pay or reimburse the other party for (i) fees and expenses,
     including. attorneys and expert fees and expenses, and (ii) reasonable
     out of pocket expenses incurred by the other party in connection with
     the arbitration proceedings.  Notwithstanding the foregoing, a
     termination of the Agreement under the language of Article XII,
     Section 1 (e) shall not, under any circumstances (except for disputes
     relating to the settlement of payment obligations), be subject to
     arbitration under this Article VXIII.

3.     Selection of Arbitrators.  Each dispute shall be submitted to three
     arbitrators, one arbitrator being selected by Owner, one arbitrator
     being selected by Operator, and the third arbitrator being selected by
     the two so selected.  The party initiating the arbitration shall
     include in its notification under Section 4 below the designation of
     its selected arbitrator and the party receiving such notification
     shall designate its arbitrator within fifteen (15) days thereafter by
     notify the initiating party and its arbitrator of the selection.  If
     the arbitrators selected by Owner and Operator cannot agree on a third
     arbitrator within fifteen (15) days after the second arbitrator is
     selected, the third arbitrator shall be selected by the American
     Arbitration Association.  In the event the party receiving
     notification of a demand for arbitration shall not have selected its
     arbitrator and given notice thereof to the other party and its
     arbitrator within fifteen (15) days after receiving such notification,
     such arbitrator shall be selected by the American Arbitration
     Association.

4.      Notice.  Notice of demand for arbitration shall be filed in writing
     with  the  other  party  to  this  Agreement  and  with  the  American
     Arbitration Association.  The demand shall be made within a reasonable
     time  after the claim, dispute or other matter in question has arisen.
     In  no  event shall the demand for arbitration be made after the  date
     when the applicable statute of limitations would bar institution of  a
     legal  or equitable proceeding based on such claim, dispute, or  other
     matter in question.

5.     Award.  This agreement to arbitrate shall be specifically
     enforceable under the prevailing arbitration law.  The award rendered
     by the arbitrators shall be final and judgment may be entered upon it
     in accordance with applicable law in any court having jurisdiction
     thereof.

6.     Survival.  This Article shall survive termination of this Agreement.

XIX. GENERAL PROVISIONS

1.      Governing  Law.  This Agreement shall be governed by and  construed
     under the laws of New Jersey.

                                    22

<PAGE>

2.       Counterparts.   This  Agreement  may  be  executed   in   multiple
     counterparts, each of which shall be deemed an original,  but  all  of
     which together shall constitute one and the same instrument.

3.     Headings.  Title and headings of the articles and sections of this
     Agreement are for convenience of reference only and do not form a part
     of and shall not in any way affect the interpretation of this
     Agreement.

4.      Amendment.  No modification or amendment of this Agreement shall be
     valid  unless  in  writing  and  executed  by  both  parties  to  this
     Agreement.

5.     Assignment.  This Agreement may not be assigned by Operator without
     the written consent of Owner and written agreement of assignee whereby
     it expressly assumes and agrees to perform each and every obligation
     of Operator hereunder.  Any assignment by Operator in violation hereof
     shall be null and void.  Owner may, without the consent of Operator,
     assign its rights (but not its obligations) under this Agreement to or
     by a lender (including finance lessor) providing funds to refinance
     the System.

6.      Successors and Assigns.  This Agreement shall be binding and  inure
     to  the  benefit of the parties hereto and their respective successors
     and  assigns,  to the extent that assignment is permitted  under  this
     Agreement.

7.      Entire  Agreement.  This Agreement constitutes the entire agreement
     between  the parties, supersedes all prior representations,  documents
     or statements transmitted between the parties.

8.     Consequential Damages.  In no event will Owner or Operator have the
     right, with or without legal process. to recover punitive or special
     damages, or indirect or consequential damages, such as loss of use,
     lost profits, costs incurred because of delays, cost of replacement
     energy, "idle plant" costs, interest on borrowed money, letters of
     credit, security deposits or bonds.  In no event will Owner or
     Operator be liable for representations, oral or otherwise, as to the
     results intended to be achieved through its undertakings pursuant to
     this Agreement, except as specifically provided in this Agreement.

9.      Other Provisions.  Nothing in this Agreement shall be construed  to
     prevent or prohibit Operator from providing operating services to  any
     other person, organization, or entity.

10.  Waiver.  The waiver of any breach of any term or condition hereof
     shall not be deemed a waiver of any other or subsequent breach,
     whether of like or different nature.

11.  Not for Benefit of Third Parties.  This Agreement and each and every
     provision thereof is for the exclusive benefit of the parties to this
     Agreement and not for the benefit of any third party.

12.  Survival of Representations, Warranties and Indemnities. All
     representations, warranties and indemnities of the parties set forth
     in this Agreement shall survive the termination or expiration of this
     Agreement.

13.  Approval by Proposed Lender.  If any provision of this Agreement must
     be approved by a lender, lessor or equity investor in connection with
     the financing of the System or any other action contemplated hereby,
     and such lender requires any modification of the provisions of this
     Agreement, neither owner nor Operator shall unreasonably withhold its
     approval and execution of any such modifications.

                                    23

<PAGE>

14.  Survival of Obligations.  Termination of this Agreement for any reason
     shall  not  relieve  Owner or Operator of any obligation  accruing  or
     arising prior to such termination.

15.  Confidentiality.  The parties shall hold in confidence, and shall  use
     only  for  the  purposes of this Agreement, any  and  all  Proprietary
     information disclosed to each other.

16.  Severability.  Should any section or subsection hereof be declared
     invalid or unenforceable for any reason, the remaining sections and
     subsections of this Agreement shall remain in full force an affect,
     and the parties hereto agree to immediately renegotiate in good faith
     such section or subsection as was declared invalid or unenforceable.

17.  Duty  to  Mitigate.  Each party must use its best efforts to  mitigate
     the  injury or damage caused by the other party's failure to  perform.
     When  a  party seeking damages fails to make these efforts, the  other
     party shall be entitled to have the damages accordingly reduced.

18.  Consent.  Except in the case of an Emergency, when either party's
     consent or approval is required, such consent or approval must be in
     writing and given prior to the act for which such consent or approval
     is sought.

19.  Reasonableness.  Except as expressly stated to be within the sole
     discretion of any party, all consents or approvals required of either
     party shall not be unreasonably withheld or delayed, nor shall any
     acts or requests of a party be unreasonable in light of the
     surrounding facts and circumstances.

20.  Disclaimer, THE WARRANTIES EXPRESSLY PROVIDED BY OPERATOR HEREUNDER
     ARE THE SOLE, INTENDED WARRANTIES AND OPERATOR HEREBY DISCLAIMS ALL
     OTHER WARRANTIES OF ANY KIND, WHETHER STATUTORY, ORAL, WRITTEN,
     EXPRESS OR IMPLIED, INCLUDING ALL IMPLIED WARRANTIES OF
     MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, AND ALL
     WARRANTIES ARISING FROM COURSE OF DEALING OR USAGE OF TRADE.

21.  Limits on Liability.  Notwithstanding any provision contained in this
     Agreement to the contrary, for any Contract Year, Operator shall not
     be liable to Owner (whether by contract, warranty, tort, statute or
     otherwise, including Liquidated Damages or penalties owed by Operator
     under this Agreement) for any amounts that in the aggregate exceed the
     amount of the Operating Fee and Bonuses paid for the Contract Year in
     which the claim is made.  If a claim(s) is made after the end of the
     term, then the claim(s) shall be deemed to have been made in the last
     Contract Year of the term.  The limits of liability set forth herein
     shall not apply to any damages incurred by a party as a result of its
     gross negligence or willful misconduct.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the day and year first set forth above.

OWNER:

NRG Generating (Parlin) Cogeneration Inc.

By: /s/ Leonard Bluhm
Its:  President


OPERATOR:

Stewart & Stevenson Operations, Inc.

By: /s/ Harvey Braswell
Its:  VP North American OPS

                                    24

<PAGE>

                                 EXHIBIT A
                                     
                         BONUS/LIQUIDATED DAMAGES


For the purpose of determining the liquidated damages ("Liquidated
Damages") payable by Operator to Owner, or the bonus ("Bonus") payable by
Owner to Operator, the effectiveness of Operator under this Agreement shall
be measured in terms of both availability and heat rate.  These
measurements shall be applied at the completion of each Contract Year to
determine the Liquidated Damages or Bonus for that Contract Year.

Availability.  Operator shall undertake to operate the System to maximize
availability.  Availability will be measured for both the Base Capacity and
Dispatchable Capacity levels, as defined in the Amended and Restated Power
Purchase Agreement.  In each case the following formula will be used:

Contract Availability =

[Total Hours - (Equivalent Contract Unavailable Hours)]
                           Total Hours

where:

Total Hours = total hours in the Contract Year; and

Equivalent Contract Unavailable Hours = total of all hours during the
Contract Year during which there occurred a full or partial Planned,
Forced, or Maintenance Outage, as those terms are defined in Article 3 of
the Amended and Restated Power Purchase Agreement (including outages
resulting from Force Majeure events, but excluding outages resulting from
(x) JCP&L's failure to supply natural gas to the Facility during periods
when PSE&G has not interrupted transportation that it supplies under the
PSE&G Gas Supply Agreement and (y) JCP&L's failure to accept available
Output from the Facility).  Partial outages are measured on an equivalency
basis, e.g., a 50% outage for one hour would be equivalent to a full outage
for one-half hour, and so forth.

Availability.  For purposes of Bonus/Liquidated Damages availability
calculation, the target Base availability will be 97%, and the Dispatchable
availability will be 94%, for the term of this Contract.  Each one tenth of
one percent (0.1%) of availability will have a value of $10,000 as a Bonus
or Liquidated Damages for availability measurement.

Heat Rate.  For purposes of Bonus/Liquidated Damages heat rate
calculations, the heat rate incentive will be based on 9500 Btu per kwh
HHV, as calculated in accordance with Article 8.3, Section h of the Amended
and Restated Power Purchase Agreement, as adjusted by Article 9, for the
term of this Contract.

                                    25

<PAGE>

                       LIQUIDATED DAMAGES AND BONUS

The Liquidated Damages payable by Operator to Owner and the Bonus payable
by Owner to operator shall be based on the Availability and Heat Rate
guarantees set forth in this Exhibit.  For any Contract Year, the maximum
Liquidated Damages (in the aggregate for each category as adjusted by the
amounts of any Bonus payable to Operator) payable by Operator shall be no
more than one hundred percent(100%) of the Operator's Fee for such Contract
Year.  For any Contract Year, once the aggregate Bonuses payable to
Operator (adjusted for the Liquidated Damages, if any, owed by Operator
equal $200,000, then any amounts in excess of $200,000 shall be payable to
Operator at a rate of 4O% of such excess.  The availability and heat rate
Bonus/Liquidated Damages calculations will be determined monthly and will
be payable after the end of the Contract Year as set forth in the Amended
and Restated Power Purchase Agreement.

                                    26

<PAGE>


                                 EXHIBIT B
                         DESCRIPTION OF THE SYSTEM

                               PARLIN SYSTEM


The cogeneration plant consists of a dual combustion gas turbine-steam
turbine combined cycle (topping cycle) plant.

The nominal rating is 120 MW electrical, with average thermal output of
30,000 lbs/hr steam.  The prime movers of the plant are two General
Electric Frame 6 dual fuel combustion turbines, each direct connected to a
54,000 kVA synchronous generator with electrical output at 3 PH, 60 Hz and
13.8 kV.

The exhaust from each of the G.E. Frame 6 turbines is directed into a three
drum (tri-pressure) heat recovery steam generator (HRSG).  Each HRSG, at
full turbine load and 59 F ambient temperature produces when fired with
94.0 million BtuHHV an hour of auxiliary filing, 227,000 lbs/hr of 700
psig, 900 F steam; 23,000 lbs/hr of 285 psig/521 F steam; and 12,300 lbs/hr
of 30 psig dry and saturated steam.

The combined 700 psig steam is directed to two condensing extraction steam
turbines, each of which is direct connected through a step-up gearbox to a
24,000 kVa synchronous generator with an electrical output of 3PH, 60 Hz
and 13.8 kV.

The 165 psig steam extracted from the steam turbine is directed into a
header from which 35,000 lbs/hr is directed to process to the site steam
host.

Thermal loads of the system vary seasonally from an average of 30,000
lbs/hr over the course of an 8760 hour year.

The plant will operate on natural gas under normal circumstances other then
interruptions due to curtailment of supply on extremely cold days.
Kerosene fuel is used as the alternate, approximately 480 hr/yr.  Output of
the combustion turbine is controlled by sensing and maintaining a constant
optimum turbine exhaust temperature.

NOX emission from the plant are controlled by a combination of steam
injection into the combustion turbine and Selective Catalytic Reduction
using anhydrous ammonia injection with a semi-precious metal catalyst in
the HRSG.  The plant is equipped with Continuous Emission Monitoring
equipment.

The interconnection points for the System are shown an identified an the
following diagram associated with this Exhibit.

                                    27

<PAGE>

                                 EXHIBIT C
                                     
                             SYSTEM CONTRACTS
                                     
                                  NEWARK



Power Purchase Agreement                            dated 04/30/96
Gas Service Agreement                               dated 04/30/96
Electricity Agreement with Dupont                   dated 01/18/88
Steam Purchase Agreement                            dated 12/08/86


Permits

Air Permit/Certification (Storage Tank #1)          issued 10/10/90
Air Permit/Certification (Auxiliary Boiler)         issued 05/21/89
Wastewater Discharge Permit                         issued 04/01/93
Air Permit/Certification (Auxiliary Boiler)         issued 06/15/95
Air Permit/Certification (Stack #2)                 issued 10/21/90
Air Permit/Certification (Stack #1)                 issued 12/22/93
Air Permit/Certification (Storage Tank #2)          issued 10/10/90


                                    28

<PAGE>


                                 EXHIBIT D
                                     
                                     
                        TERMINATION FOR CONVENIENCE

Commencing on the third anniversary of the Effective Date, the Owner may
terminate this agreement for convenience as set forth In Article XII
Section 1 (d).  The termination fee shall be $570,000 reduced pro-rata
based on the number of calendar days remaining in the Agreement term as the
numerator and 1096 calendar days as the denominator.  The termination fee
will be adjusted accordingly for any pro-rated undisputed Bonus/Liquidated
Damage payments due on the Termination Date.  This right of payment shall
be Operator's sole and exclusive remedy for any termination of the
Agreement by Owner under Article XII Section I (d) or the circumstances
that were the basis thereof or were related thereto.

                                    29

<PAGE>

                                 EXHIBIT E


                TERMINATION UNDER ARTICLE XII SECTION 1(e)

Commencing on the Effective Date, the Owner has the right to terminate the
Agreement immediately as set forth in Article XII Section 1 (e).  If Owner
exercises such termination right and Operator thereafter becomes entitled
to receive a payment from Owner under the language of the second of the
provisos of Article XII Section 1 (e), then the amount of the payment shall
be determined as follows: (i) if the termination occurs on the Effective
Date, then the amount of the payment shall be $1.4mm for Parlin or (ii) if
the termination occurs after the Effective Date, then the amount of the
payment shall be the product of the amount specified in clause (i) times a
fraction, the numerator of which is the number of calendar days remaining
in the term of the Agreement, measured from the date that Operator
surrendered control of the Project to Owner, and the denominator of which
is 2,191 calendar days.  The amount of this payment shall be adjusted for
any prorated undisputed Bonus/Liquidated Damage payments due under the
terms of the Agreement on the date of termination.  This right of payment
shall be Operator's sole and exclusive remedy for any termination of the
Agreement by Owner under Article XII Section 1 (a) or the circumstances
that were the basis thereof or were related thereto.

                                    30

<PAGE>

EXHIBIT F


1996 Budget



SEE ATTACHED



                                    31

<PAGE>

APPENDIX I

                    GUARANTEE OF OPERATOR'S OBLIGATIONS
                   BY STEWART & STEVENSON SERVICES, INC.


     In consideration of, and as an inducement for NRG Generating (Parlin)
Cogeneration, Inc. ("Owner") to enter into certain agreements with Stewart
& Stevenson Operations, Inc. ("Subsidiary"), Stewart & Stevenson Services,
Inc. hereby, irrevocably guarantees to Owner the Prompt performance and
payment when due, whether by acceleration or otherwise, of all obligations,
indebtedness, liabilities or undertakings according to the terms of the NRG
Generating (Parlin) Cogeneration Inc./Stewart & Stevenson Operations, Inc.
Operating and Maintenance Agreement dated    , 1996 and the Agreement
between Stewart & Stevenson Operations, Inc., NRG Generating (Newark)
Cogeneration Inc., NRG Generating (Parlin) Cogeneration Inc., NRG
Generating (U, S.) Inc., and Stewart & Stevenson Services, Inc. (the
"Agreements").
     
     Subject to the terms and provisions herein set forth, the Guaranty is
continuing, absolute and unconditional irrespective of (a) any lack of
validity or enforceability of the Agreements, (b) any amendment to, waiver
of or consent to, departure from, or failure to exercise any right or
remedy under the Agreements, (c) any acceptance of partial payment or
performance of any of the guaranteed obligations, (d) any release,
application or amendment of or consent to departure from any security or
guaranty therefor, (e) any assignment of this Guaranty, (f) the insolvency,
bankruptcy, dissolution or liquidation of Subsidiary or any change in
ownership of Subsidiary, or (g) any other circumstance of a similar or
different nature which might otherwise constitute a defense available to
Subsidiary or the undersigned except as to the legal rights and defenses of
Subsidiary watch arc provided for under the Agreements.  Notice of
acceptance of the Guaranty is hereby waived, and this Guaranty shall remain
in full force and effect up to and including the expiration of the
Agreements.
     
     The Guarantor waives promptness, diligence, any and all demands for
payment, any notice of credits extended and shipments of merchandise made
hereunder, and all other notices whatsoever.  The Guarantor consents to any
extensions of time for the payment of said account, to any changes in the
terms of any settlement or adjustment thereof and to any changes in the
terms of the Agreements.  No delays on the part of Owner in the exercise by
Owner of any right or remedy shall preclude other or further exercise
thereof or the exercise of any other right or remedy.  No actions of
Subsidiary shall in any way impair or affect this Guaranty.
     
     If Subsidiary defaults in the payment of any amounts due or in the
performance of any other obligation under the Agreements, the Guarantor
shall (a) pay upon demand (i) any sum due and to become due, (ii) any
damages, costs and expenses entitled to be recovered from Subsidiary by
reason of such default, and (iii) reasonable attorneys' fees and all costs
and other expenses incurred as a result of any such default or in enforcing
this Guaranty and (b) upon demand, perform or cause such obligation to be
performed.  This
     
                                    32
     
<PAGE>

Guaranty is a guarantee of payment and not of collection and no action need
be brought against Subsidiary as a precondition to the enforcement of this
Guaranty.
     
     This Guaranty shall be binding upon the Guarantor and its successors
and assigns and shall be for the benefit of the person named above, its
successors and assigns.  Should any one or more of the provisions of the
Guaranty be determined by a court of competent jurisdiction to be illegal
or unenforceable, all other provisions shall remain effective.
     
     This Guaranty shall be governed by and construed under the laws of the
State of New Jersey.

     IN WITNESS WHEREOF, this Guaranty has been duly executed this   day
of    , 1996.


STEWART & STEVENSON SERVICES, INC.

By: /S/
Title:

                                    33