As filed with the Securities and Exchange Commission on October 1, 2001


                                                      Registration No. 333-69232

================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   ----------


                                AMENDMENT NO. 1
                                       TO
                                    FORM S-4
                             REGISTRATION STATEMENT
                                      Under
                           THE SECURITIES ACT OF 1933


                                   ----------

                            PSEG Energy Holdings Inc.
             (Exact name of registrant as specified in its charter)

         New Jersey                   6719                      22-2983750
(State or other jurisdiction     (Primary Standard           (I.R.S. Employer
      of incorporation        Industrial Classification   Identification Number)
      or organization)             Code Number)


                                80 Park Plaza-T22
                          Newark, New Jersey 07102-4194
                                 (973) 456-3581
    (Address, including zip code and telephone number, including area code,
                  of Registrant's principal executive offices)

                                   ----------

                                Derek M. DiRisio
                          Vice President and Controller
                                80 Park Plaza-T22
                          Newark, New Jersey 07102-4194
                                 (973) 456-3581
            (Name, address, including zip code and telephone number,
                   including area code, of agent for service)

                                   ----------

                                   Copies to:
                             James T. Foran, Esquire
                            Associate General Counsel
                  Public Service Enterprise Group Incorporated
                                  80 Park Plaza
                                  P.O. Box 1171
                          Newark, New Jersey 07101-1171
                                 (973) 430-7000

                                   ----------

      Approximate  date of commencement of proposed sale to the public:  As soon
as practicable after this registration statement becomes effective.

      If any of the securities  being  registered on this Form are to be offered
in connection  with the  formation of a holding  company and there is compliance
with General Instruction G, check the following box. [ ]

      If this Form is filed to register  additional  securities  for an offering
pursuant to Rule 462 (b) under the  Securities  Act,  please check the following
box and list the Securities  Act  registration  statement  number of the earlier
effective registration statement for the same offering. [ ]

      If this Form is a post-effective  amendment filed pursuant to Rule 462 (c)
under the Securities Act, please check the following box and list the Securities
Act registration number of the earlier effective  registration statement for the
same offering. [ ]

                         CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
==========================================================================================
                                                  Proposed      Proposed
                                                   Maximum      Maximum
        Title of Each               Amount        Offering      Aggregate      Amount of
     Class of Securities             to be        Price Per     Offering      Registration
      to be Registered            Registered        Unit          Price         Fee (1)
------------------------------------------------------------------------------------------

                              <C>               <C>        <C>               <C>
8.625% Senior Notes due 2008     $400,000,000      100%       $400,000,000      $100,000
==========================================================================================
</TABLE>

(1)   The registration fee has been calculated  pursuant to rule 457(f)(2) under
      the  Securities  Act.  The  proposed  maximum  aggregate   offering  price
      represents  the  total  value of the  bonds  being  exchanged  under  this
      registration statement.

      The Registrant hereby amends this  registration  statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further  amendment  which  specifically  states  that  this  registration
statement shall thereafter  become effective in accordance with Section 8 (a) of
the Securities  Act of 1933 or until this  registration  statement  shall become
effective on such date as the Commission, acting pursuant to said Section 8 (a),
may determine.

================================================================================


<PAGE>

      The information in this prospectus is not complete and may be changed.  We
may not sell these securities  until the  registration  statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to  sell  these  securities  and it is not  soliciting  an  offer  to buy  these
securities in any state where the offer or sale is not permitted.


                  Subject to completion, dated October 1, 2001.


PROSPECTUS

[LOGO]

                                  $400,000,000

                            PSEG Energy Holdings Inc.

                                Offer to Exchange

                          8.625% Senior Notes due 2008
               Which have been registered under the Securities Act
                           For Any and All Outstanding
                          8.625% Senior Notes due 2008
                        Which have not been so registered

                           TERMS OF THE EXCHANGE OFFER

o     The exchange  offer expires at 5:00 p.m.,  Eastern  Time, on  ___________,
      unless extended by us in our sole discretion subject to applicable law.

o     The  terms  of the  exchange  notes  are  substantially  identical  to the
      original  notes,  except that the exchange notes are registered  under the
      Securities  Act and the  transfer  restrictions  and  registration  rights
      applicable to the original notes do not apply to the exchange notes.

o     All original  notes that are validly  tendered  and not validly  withdrawn
      will be exchanged.

o     Tenders of original notes may be withdrawn at any time prior to expiration
      of the exchange offer.

o     We do not  intend  to  apply  for  listing  of the  exchange  notes on any
      securities  exchange or to arrange for them to be quoted on any  quotation
      system.

o     The  exchange  offer is subject to  customary  conditions,  including  the
      condition  that the  exchange  offer  not  violate  applicable  law or any
      applicable  interpretation  of the staff of the  Securities  and  Exchange
      Commission.

o     We will not receive any proceeds from the exchange offer.

o     You will not incur any material federal income tax consequences  from your
      participation in the exchange offer.

      Please see "Risk Factors" beginning on page 13 for a discussion of factors
you should consider in connection with the exchange offer.

      Neither the  Securities and Exchange  Commission nor any state  securities
commission has approved or disapproved of the exchange  notes,  or determined if
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.


                 The date of this prospectus is October __, 2001.



<PAGE>


                                TABLE OF CONTENTS
                                                                           Page
                                                                           ----
Where to Find More Information ..........................................     3
Prospectus Summary ......................................................     4
The Company .............................................................     8
Summary Consolidated Financial Data .....................................    12
Risk Factors ............................................................    13
Forward-Looking Statements ..............................................    17
Use of Proceeds .........................................................    18
Capitalization ..........................................................    18
The Exchange Offer ......................................................    19
Description of Exchange Notes ...........................................    27
Federal Income Tax Considerations .......................................    42
Plan of Distribution ....................................................    45
Legal Opinions ..........................................................    46
Experts .................................................................    46


      When we refer to the term "note" or "notes",  we are referring to both the
original notes and the exchange notes to be issued in the exchange  offer.  When
we refer to "holders" of the notes,  we are  referring to those  persons who are
the registered  holders of notes on the books of the registrar  appointed  under
the indenture.

      No  dealer,  salesperson  or  other  person  is  authorized  to  give  any
information or to represent anything not contained in this prospectus.  You must
not rely on any unauthorized information or representations.  This prospectus is
an offer to exchange only the notes offered by this  prospectus,  but only under
circumstances and in jurisdictions  where it is lawful to do so. The information
contained in this prospectus is current only as of its date.


                                       2
<PAGE>

                         WHERE TO FIND MORE INFORMATION

      In connection  with the exchange  offer, we have filed with the Securities
and Exchange  Commission a  registration  statement  under the  Securities  Act,
relating to the exchange notes to be issued in the exchange  offer. As permitted
by SEC rules,  this prospectus  omits  information  included in the registration
statement.  For a more complete understanding of this exchange offer, you should
refer to the registration statement, including its exhibits.

      The public may read and copy any reports or other information that we file
with the SEC at the SEC's public  reference room, Room 1024 at Judiciary  Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, or at the SEC's regional offices
located at 7 World Trade Center, 13th Floor, New York, New York 10048, and Suite
1400, 500 West Madison Street,  Chicago,  Illinois 60661.  The public may obtain
information on the operation of the public  reference room by calling the SEC at
1-800-SEC-0330. Our SEC filings are also available to the public from commercial
document  retrieval  services  and at the  web  site  maintained  by the  SEC at
http://www.sec.gov.

Incorporation of Certain Documents by Reference

      The SEC allows us to  "incorporate  by reference" the  information we file
with it,  which  means  that we can  disclose  important  information  to you by
referring you to those documents.  The information  incorporated by reference is
an important part of this  prospectus,  and information  that we file later with
the SEC will automatically update and supercede this information. We incorporate
by reference the documents listed below and any future filings made with the SEC
under  Section 13 (a), 13 (c), 14 or 15 (d) of the  Securities  Exchange  Act of
1934.

      Our annual Report on Form 10-K for the year ended December 31, 2000.

      Our  quarterly  Reports on Form 10-Q for the periods  ended March 31, 2001
and June 30, 2001.

      You  may  request  a  copy  of  this  filing,   other  than  exhibits  not
specifically  incorporated by reference  therein,  which will be provided to you
without charge, by writing or telephoning:

                          Director, Investor Relations
                            PSEG Services Corporation
                                80 Park Plaza T6B
                                  P.O. Box 570
                            Newark, New Jersey 07101
                            Telephone (973) 430-6564

      You should  rely only on the  information  incorporated  by  reference  or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone  else to provide  you with  different  information.  We are not making an
offer of these exchange notes in any state where the offer is not permitted. You
should not assume that the  information  in this  prospectus  or any  prospectus
supplement  is accurate as of any date other than the date on the front of those
documents.


                                       3
<PAGE>

--------------------------------------------------------------------------------

                               PROSPECTUS SUMMARY

   The following information is qualified in its entirety by the more detailed
  information and financial statements appearing elsewhere in this prospectus.

                          Summary of the Exchange Offer

The Exchange Offer ...............  We are  offering to exchange an aggregate of
                                    $400,000,000  principal  amount of  exchange
                                    notes for  $400,000,000  of original  notes.
                                    The original  notes may be exchanged only in
                                    multiples of $1,000.

Issuance of the Original Notes ...  The  original  notes were issued and sold on
                                    February  10,  2001  in  a  transaction  not
                                    requiring  registration under the Securities
                                    Act.

Exchange and Registration
  Rights .........................  At the time we issued the original notes, we
                                    entered  into an exchange  and  registration
                                    rights  agreement which obligates us to make
                                    this exchange offer.

Required Representations .........  In  order  to  participate  in the  exchange
                                    offer,  you will be  required  to make  some
                                    representations  in a letter of transmittal,
                                    including that:

                                    o  you are not affiliated with us,

                                    o  you are  not a  broker-dealer who  bought
                                       your original notes directly from us,

                                    o  you will  acquire the  exchange notes  in
                                       the ordinary course of business, and

                                    o  you  have  not  agreed  with  nanyone  to
                                       distribute the exchange notes.

                                    If you are a  broker-dealer  that  purchased
                                    original  notes for your own account as part
                                    of market-making or trading activities,  you
                                    may represent to us that you have not agreed
                                    with us or our  affiliates to distribute the
                                    exchange    notes.    If   you   make   this
                                    representation,  you  need not make the last
                                    representation provided for above.

Resale of the Exchange Notes .....  We are making the exchange offer in reliance
                                    on the position of the staff of the Division
                                    of Corporation Finance of the SEC as defined
                                    in certain  interpretive  letters  issued to
                                    third  parties  in  other  transactions.  We
                                    believe that the exchange  notes acquired in
                                    this  exchange  offer may be  freely  traded
                                    without  compliance  with the  provisions of
                                    the    Securities    Act   that   call   for
                                    registration  and delivery of a  prospectus,
                                    except  as   described   in  the   following
                                    paragraph.

                                    The exchange  notes will be freely  tradable
                                    only  if the  holders  meet  the  conditions
                                    described under  "Required  Representations"
                                    above.  If  you  are  a  broker-dealer  that
                                    purchased   original   notes  for  your  own
                                    account as part of  market-making or trading
                                    activities,  you must  deliver a  prospectus
                                    when you sell exchange notes. We have agreed
                                    in  the  exchange  and  registration  rights
                                    agreement  relating to the original notes to
                                    allow  you to use this  prospectus  for this
                                    purpose during the 180-day period  following
                                    completion of the exchange offer, subject to
                                    our  right  under  some   circumstances   to
                                    restrict  your use of this  prospectus.  See
                                    "The  Exchange  Offer -- Resales of Exchange
                                    Notes".

--------------------------------------------------------------------------------


                                       4
<PAGE>

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                                    Broker  dealers who acquired  original notes
                                    directly from us may not rely on the staff's
                                    interpretations  and  must  comply  with the
                                    registration    and   prospectus    delivery
                                    requirements    of   the   Securities   Act,
                                    including being named as a selling  security
                                    holder,  in order  to  resell  the  original
                                    notes or the exchange notes.

Accrued Interest on the
   Original Notes ................  The exchange  notes will bear interest at an
                                    annual rate of 8.625%. Any interest that has
                                    accrued on the  original  notes before their
                                    exchange  in  this  exchange  offer  will be
                                    payable on the  exchange  notes on the first
                                    interest  payment date after the  conclusion
                                    of this exchange offer.

Procedures for Exchanging
  Notes ..........................  The procedures for exchanging original notes
                                    involve  notifying the exchange agent before
                                    the expiration date of the exchange offer of
                                    your  intention to do so. The procedures for
                                    properly making  notification  are described
                                    in this  prospectus  under the heading  "The
                                    Exchange  Offer -- Procedures  for Tendering
                                    Original Notes".

Expiration Date ..................  5:00 p.m., Eastern Time, on       unless the
                                    exchange offer is extended.

Exchange Date ....................  We will  notify  the  exchange  agent of the
                                    date of acceptance of the original notes for
                                    exchange.


Withdrawal Rights ................  If  you  tender  your  original   notes  for
                                    exchange  in this  exchange  offer and later
                                    wish to withdraw  them, you may do so at any
                                    time before 5:00 p.m.,  Eastern Time, on the
                                    day this exchange offer expires.

Acceptance of Original
  Notes and Delivery of
  Exchange Notes .................  We will accept any  original  notes that are
                                    properly  tendered for exchange  before 5:00
                                    p.m., Eastern Time, on the day this exchange
                                    offer  expires.  The exchange  notes will be
                                    delivered  promptly after expiration of this
                                    exchange offer.

Tax Consequences .................  You  will not  incur  any  material  federal
                                    income    tax    consequences    from   your
                                    participation in this exchange offer.

Use of Proceeds ..................  We will not receive any cash  proceeds  from
                                    this exchange offer.

Exchange Agent ...................  First Union  National Bank is serving as the
                                    exchange  agent.  Its address and  telephone
                                    number are provided in this prospectus under
                                    the heading "The Exchange  Offer -- Exchange
                                    Agent".

Effect on Holders of
  Original Notes .................  Any original  notes that remain  outstanding
                                    after this  exchange  offer will continue to
                                    be   subject   to   restrictions   on  their
                                    transfer. After this exchange offer, holders
                                    of  original  notes  will not (with  limited
                                    exceptions)  have any further  rights  under
                                    the   exchange   and   registration   rights
                                    agreement.  Any  market for  original  notes
                                    that are not  exchanged  could be  adversely
                                    affected by the  conclusion of this exchange
                                    offer.

--------------------------------------------------------------------------------


                                       5
<PAGE>

--------------------------------------------------------------------------------

                          Summary of the Exchange Notes

      This exchange offer applies to $400,000,000  aggregate principal amount of
the original notes. The terms of the exchange notes will be essentially the same
as the original notes,  except that the exchange notes will not contain language
restricting their transfer, and holders of the exchange notes generally will not
be entitled to further  registration  rights under the exchange and registration
rights agreement.  The exchange notes issued in the exchange offer will evidence
the same debt as the outstanding  original notes,  which they will replace,  and
both  the  original  notes  and the  exchange  notes  are  governed  by the same
indenture.

Securities Offered ...............  $400,000,000   principal  amount  of  8.625%
                                    Senior   Notes  due  2008  which  have  been
                                    registered under the Securities Act.

Interest Payment Dates ...........  February 15 and August 15, commencing August
                                    15, 2001

Stated Maturity Date .............  February 15, 2008

Optional Redemption ..............  The exchange notes will be redeemable at our
                                    option in whole or in part at any time, at a
                                    redemption price equal to the greater of

                                    o   100%  of  the  principal  amount  of the
                                        exchange notes to be redeemed, and

                                    o   the  sum of the  present  values  of the
                                        principal   amount  and  the   remaining
                                        scheduled  payments  of  interest on the
                                        exchange  notes to be redeemed  from the
                                        redemption  date  to February  15,  2008
                                        discounted   on  a   semi-annual   basis
                                        (assuming a 360-day year  consisting  of
                                        30-day  months) at a specified  Treasury
                                        Rate plus 40 basis points,

                                    o   plus, in either case,  accrued  interest
                                        to   the   date   of   redemption.   See
                                        "Description   of   Exchange   Notes  --
                                        Optional Redemption".

Ranking ..........................  The exchange notes will be senior  unsecured
                                    obligations  and will rank  equally with our
                                    senior  unsecured  indebtedness.  As of June
                                    30, 2001, we had outstanding $837 million of
                                    debt  that  ranks  equal  with the  exchange
                                    notes and had no secured  debt  outstanding.
                                    An  additional  $550  million  of debt  that
                                    ranks  equal  with the  exchange  notes  was
                                    issued in July, 2001. Since we are a holding
                                    company,   the   exchange   notes   will  be
                                    structurally     subordinated     to     any
                                    indebtedness  and other  liabilities  of our
                                    operating subsidiaries.

Cross Acceleration ...............  The  exchange  notes  will be subject to the
                                    acceleration  of their maturity in the event
                                    of  the  acceleration  of  the  indebtedness
                                    under our revolving  credit  facilities  and
                                    certain  other   indebtedness  as  described
                                    under  "Description  of  Exchange  Notes  --
                                    Events of Default and Remedies".

Ratings ..........................  The  exchange   notes  have  been   assigned
                                    ratings  of  "BBB-"  by  Standard  &  Poor's
                                    Ratings  Group  and  Fitch  IBCA,  Inc.  and
                                    "Baa3" by Moody's Investors Service, Inc.

                                    A security rating is not a recommendation to
                                    buy,  sell  or  hold  securities  and may be
                                    subject to  revision  or  withdrawal  at any
                                    time by the assigning  rating  agency.  Each
                                    rating should be evaluated  independently of
                                    any other rating.

--------------------------------------------------------------------------------


                                       6
<PAGE>


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Sinking Fund                        None.

Limitation on Liens                 PSEG Energy Holdings Inc. (Energy  Holdings)
                                    and its subsidiaries may not incur any liens
                                    to  secure  indebtedness  without  providing
                                    that the exchange  notes will be equally and
                                    ratably  secured  with  such   indebtedness.
                                    These  restrictions  do not  apply  to liens
                                    granted   by   subsidiaries    (other   than
                                    "Material  Subsidiaries"  as  defined  under
                                    "Description  of  Exchange  Notes--  Certain
                                    Definitions")  in  connection  with  project
                                    financings,  liens securing indebtedness not
                                    exceeding 10% of  Consolidated  Net Tangible
                                    Assets  as  defined  under  "Description  of
                                    Exchange  Notes-- Certain  Definitions"  and
                                    other specified liens.

Limitation on Sale and
  Leasebacks                        Energy Holdings and its subsidiaries may not
                                    enter into sale and  leaseback  transactions
                                    unless  it  would  be  permissible  to incur
                                    indebtedness  secured  by a lien  under  the
                                    foregoing  Limitation  on Liens  covenant in
                                    the  amount of the  indebtedness  associated
                                    with that sale and leaseback  transaction or
                                    unless  the   proceeds   of  that  sale  and
                                    leaseback  were applied to the  reduction of
                                    indebtedness.   Also   not   restricted   is
                                    indebtedness   associated   with   sale  and
                                    leaseback  transactions not exceeding 10% of
                                    Consolidated Net Tangible Assets.

Change of Control                   Upon   a   "Change   of    Control"    under
                                    "Description  of  Exchange  Notes -- Certain
                                    Definitions", a holder of exchange notes may
                                    require  us  to  repurchase   that  holder's
                                    exchange notes, in whole or in part, at 101%
                                    of the  principal  amount  of  the  exchange
                                    notes,  plus accrued  interest.  A Change of
                                    Control will not be deemed to have  occurred
                                    if,  after  giving  effect to  circumstances
                                    otherwise  constituting a Change of Control,
                                    the  exchange  notes  are  rated  "BBB-"  or
                                    better by  Standard & Poor's  Ratings  Group
                                    and  "Ba1" or better  by  Moody's  Investors
                                    Service, Inc.

Form                                The exchange  notes will be  represented  by
                                    one or more permanent  global exchange notes
                                    in fully  registered  form without  interest
                                    coupons,   deposited  with  the  Trustee  as
                                    custodian  for, and  registered  in the name
                                    of, a  nominee  of DTC,  except  in  certain
                                    limited  circumstances   described  in  this
                                    prospectus.

Risk Factors                        Our  business,  and  an  investment  in  the
                                    exchange  notes,  is  subject  to risks (see
                                    "Risk Factors"), including the following:

                                    o   Because  we are a holding  company,  our
                                        ability  to  service  our debt  could be
                                        limited.

                                    o   Our  ability  to  control  the cash flow
                                        from   our   minority   investments   is
                                        limited.

                                    o   We may not  have  access  to  sufficient
                                        capital in the  amounts and at the times
                                        needed.

                                    o   We cannot assure sufficient cash flow to
                                        service the notes.

                                    o   Because  a  substantial  amount  of  our
                                        business is conducted outside the United
                                        States,       adverse      international
                                        developments could negatively impact our
                                        business.

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                                       7
<PAGE>

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                                   The Company

      Energy  Holdings  participates in three  energy-related  lines of business
through its wholly-owned subsidiaries: PSEG Global Inc. (Global), PSEG Resources
Inc.  (Resources) and PSEG Energy Technologies Inc. (Energy  Technologies).  Our
objective  is  to  pursue  investment  opportunities  in  the  rapidly  changing
worldwide  energy markets where our technical,  market and regulatory  expertise
can be applied to create economic value.

      We focus on

      o     supplying  reliable,  competitively  priced  energy  in high  growth
            markets;

      o     providing capital to finance energy-related assets; and

      o     supplying  products  and  services  designed to assist  customers in
            efficient energy utilization.

      We are a direct,  wholly-owned  subsidiary  of Public  Service  Enterprise
Group  Incorporated  (PSEG) and an affiliate of Public Service  Electric and Gas
Company, a public utility operating in New Jersey,  which is also a wholly-owned
subsidiary of PSEG. We provide  administrative  support for our subsidiaries and
financing on the basis of a combined credit profile.  In addition,  PSEG Capital
Corporation (PSEG Capital),  our subsidiary,  has provided debt financing in the
form of  Medium-Term  Notes,  with  maturities  ranging from 2001 to 2003, in an
aggregate  principal  amount of up to $650  million to our  subsidiaries  on the
basis of a net worth maintenance agreement with PSEG.

Global

      Global  develops,  acquires,  owns and operates  electric  generation  and
distribution  facilities  and  engages  in power  production  and  distribution,
including  wholesale and retail sales of electricity,  in selected  domestic and
international markets. Global has ownership interests in 30 operating generation
projects  totaling  4,964  megawatts  (MW)  (1,935  MW  net of  other  partners'
interest)  located in the United States,  Argentina,  China,  India,  Poland and
Venezuela.  Global has  ownership  interests  in 15 projects  totaling  3,210 MW
(1,577 MW net) in construction or advanced  development  that are located in the
United States, Argentina, China, India, Italy, Oman, Poland, Taiwan, Tunisia and
Venezuela.  Of  Global's  generation  projects  in  operation,  construction  or
advanced  development,  1,463 MW net, or 42%, are located in the United  States.
Global is actively involved,  through affiliates and joint ventures, in managing
the operations of 15 operating generation projects and will be actively involved
through  affiliates  and joint  ventures in managing the operations of 12 of the
projects in construction or advanced development. Global owns interests in seven
distribution companies which, as of June 30, 2001 and December 31, 2000, totaled
approximately  50%  and  54%,  respectively,   of  Global's  assets,   providing
electricity to approximately three million customers in Argentina, Brazil, Chile
and Peru.  Global is  actively  involved  in managing  the  operations  of these
distribution  companies.  Global was established in 1984 and as of June 30, 2001
and December 31, 2000 had assets of  approximately  $2.9 billion  ($1.4  billion
distribution,  $1.3 billion generation,  and $0.2 billion other assets) and $2.3
billion ($1.2 billion  distribution,  $0.9 billion generation,  and $0.2 billion
other assets),  respectively.  The information stated in this paragragh includes
the interests in certain projects,  located in Argentina, that are pending sale.
For further discussion, see "Recent Developments -- Global."

Resources

         Resources  provides  energy   infrastructure   financing  in  developed
countries.  Resources invests in energy-related  financial  transactions through
leveraged leases and manages a diversified portfolio of more than 60 investments
including  leveraged leases,  leveraged buyout funds,  limited  partnerships and
marketable securities.  As of June 30, 2001 and December 31, 2000, Resources had
approximately $2.7 billion and $2.3 billion, respectively, invested in leveraged
leases  representing  approximately  90% and 88%,  respectively,  of  Resources'
assets.  Approximately  94% of these leveraged leases are with lessees that have
investment grade credit ratings.  Leveraged leases of  energy-related  plant and
equipment totaled  approximately  $2.3 billion or 83% and $1.8 billion or 79% of
the lease portfolio and 77% and

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                                       8
<PAGE>

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70%  of  Resources'   assets  as  of  June  30,  2001  and  December  31,  2000,
respectively.  The  remainder of  Resources'  portfolio  is further  diversified
across a wide spectrum of asset types and business sectors,  including leveraged
leases of aircraft,  railcars,  real estate and  industrial  equipment,  limited
partnership  interests in project  finance  transactions,  leveraged  buyout and
venture funds and marketable  securities.  All of Resources'  investments  since
1992 have been energy-related.  Resources was established in 1985 and as of June
30, 2001 and December 31, 2000 had assets of approximately $3.0 billion and $2.6
billion, respectively.

Energy Technologies

      Energy  Technologies  is an energy  management  company  that  constructs,
operates and maintains heating,  ventilating and air conditioning (HVAC) systems
for,  and  provides  energy-related   engineering,   consulting  and  mechanical
contracting services to, industrial and commercial customers in the Northeastern
and Middle Atlantic United States.  Energy  Technologies was established in 1997
and as of June 30, 2001 and December 31, 2000 had assets of  approximately  $326
million and $312 million, respectively.

                               Recent Developments

Energy Holdings


      o     We  are  currently  evaluating  the  economic  consequences  of  the
            September  11,  2001   terrorist   attacks  on  the  United  States,
            particularly  their impact on  accelerating  the continued  economic
            slowdown in the United States and worldwide.  The  consequences of a
            prolonged  recession may include the continued  weakening of certain
            Latin  American  currencies,  including the  Brazilian  Real and the
            Chilean  Peso,  and  further  credit  rating  downgrades  of certain
            airlines in the United  States and  worldwide.  As of June 30, 2001,
            $1.589  billion or 25% of Energy  Holdings'  assets were invested in
            Latin America,  specifically in Brazil,  Argentina,  Chile, Peru and
            Venezuela  and $198  million or 3% of Energy  Holdings'  assets were
            comprised  of  leveraged  leases of sixteen  aircraft  leased to six
            separate  lessees.  We cannot  predict  the  impact  of any  further
            currency  devaluations,  continued  economic  slowdown and potential
            lessee payment defaults;  however, such impact could have a material
            adverse effect on Energy Holdings' financial  condition,  results of
            operations and net cash flows.


      o     In July 2001, we issued $550 million of 8.50% senior notes due 2011.
            We have filed a  registration  statement with the SEC relating to an
            exchange  offer  for,  or the  resale  of,  these  senior  notes  in
            September  2001.  The net  proceeds  from the sale were used for the
            repayment of short-term debt from intercompany  loans and borrowings
            under our  revolving  credit  facilities  and for general  corporate
            purposes.

      o     In June 2001,  Moody's Investors  Service,  Inc. upgraded our senior
            unsecured  debt  ratings  to Baa3 from Ba1.  The  rating  outlook is
            stable.

      o     In the  second  quarter  of 2001,  PSEG  invested  $300  million  in
            additional equity in our company,  which we used to repay short-term
            debt incurred in connection with recent investment activity.

      o     In  May  2001,  we  extended  our  existing  $165  million,  364-day
            revolving  credit facility to May 2002 and increased the facility to
            allow for borrowings of up to $200 million.

      o     In February  2001, we issued $400 million of 8.625% senior notes due
            2008.  The net proceeds from the sale were used for the repayment of
            short-term debt outstanding  under our revolving credit  facilities.
            These are the original notes being offered for exchange.

Global

      o     In August  2001,  Global  purchased  a 94% equity  stake in Sociedad
            Austral de  Electricidad  S.A.  (SAESA) and all of its  subsidiaries
            from Compania de Petroleos de Chile S.A. (COPEC). The SAESA group of
            companies   consists  of  four   distribution   companies   and  one
            transmission  company that provide  electric service in the southern
            part of Chile. Additionally, Global

--------------------------------------------------------------------------------



                                       9
<PAGE>

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            purchased from COPEC  approximately  14% of Empresa  Electrica de la
            Frontera S.A.  (Frontel)  not owned by SAESA.  SAESA also owns a 50%
            interest in the Argentine distribution company Empresa Electrica del
            Rio Negro S.A.  Collectively,  the companies serve more than 615,000
            customers. The purchase will total approximately $460 million, after
            Global  completes a required  tender offer for 6% of publicly traded
            SAESA  shares in Chile,  expected to occur in the fourth  quarter of
            2001.

      o     In  August  2001,  Global  entered  into an  agreement  to sell  its
            interests in several joint  ventures in Argentina to a subsidiary of
            the AES Corporation  (AES) for $376 million.  The  transaction  will
            involve the  transfer of Global's  30%  interest in three  Argentine
            distribution companies,  Empresa Distribuidora de Energia Norte S.A.
            (EDEN), Empresa Distribuidora de Energia Sur S.A. (EDES) and Empresa
            Distribuidora  La Plata  S.A.  (EDELAP),  a 19%  share in the 650 MW
            Central  Termica San Nicolas power plant,  and a 33% interest in the
            830 MW Parana power plant nearing the  completion  of  construction.
            Payment  terms for the  transaction  include a 10% down payment with
            the remainder of the purchase price payable under a promissory  note
            to be issued by a subsidiary of AES to Global and  collateralized by
            AES  subsidiary's  interests  in  the  assets.  Consummation  of the
            transaction  is subject to Global and a subsidiary  of AES obtaining
            certain lender and regulatory approvals.

      o     In July 2001, the first 500 MW power block of the Odessa-Ector Power
            Partner,  L.P.  (OEP)  1,000 MW  gas-fired  combined-cycle  electric
            generation facility in Odessa, Texas commenced commercial operation.
            In August 2001,  the second 500 MW power block of the 1,000 MW power
            generation plant commenced commercial operation. OEP is wholly-owned
            by Texas  Independent  Energy,  L.P. (TIE), a 50/50 joint venture of
            Global and Panda Energy International, Inc.

      o     In July 2001,  Global won the bid to purchase up to a 100%  interest
            in Empresa de Electricidad de los Andes S.A.  (Electroandes)  with a
            bid  of  approximately  $227  million.  Global's  closing  for  this
            acquisition is scheduled for the  fourth  quarter of 2001 and may be
            dependent upon  resolution of certain matters  regarding  applicable
            tax rates.  Electroandes is the sixth largest electric  generator in
            Peru with a 6% market share.  Electroandes' main assets include four
            hydroelectric  facilities with a combined  installed capacity of 183
            MW and 460 miles of transmission lines located in the Central Andean
            region  (northeast  of  Lima).  In  addition,  Electroandes  has the
            exclusive  rights  to  develop  a 100 MW  expansion  of an  existing
            station and a 150 MW  greenfield  hydroelectric  facility.  In 2000,
            Electroandes  generated  1,150  gigawatts of electrical  energy,  of
            which  97% was sold  through  power  purchase  agreements  to mining
            companies in the region.

      o     In June 2001,  Global  exercised its option to acquire an additional
            49% of  Empresa  Distribuidora  de  Electricidad  de Entre Rios S.A.
            (EDEERSA),  bringing  its total  ownership  of EDEERSA  to 90%.  The
            additional  ownership was purchased for approximately  $110 million.
            EDEERSA is the main  distributor  of  electricity in the Province of
            Entre Rios, Argentina. EDEERSA holds a 40-year exclusive concession,
            granted  in  1996  at  the  time  of  privatization,  to  distribute
            electricity  throughout its service  territory,  which covers 21,000
            square miles and has an estimated  population of 1.1 million people.
            EDEERSA's distribution network consists of approximately 9,100 miles
            of high, medium and low voltage power lines. EDEERSA's approximately
            230,000   customers   consume   approximately   1,500  gigawatts  of
            electrical energy per annum.

      o     In June 2001, the Fushi Hydropower Plant began commercial  operation
            of all  units of the plant  located  along  the  Rongjiang  River in
            China.  Global owns an indirect 35% interest in the Fushi Hydropower
            Plant.

      o     In June 2001,  Global  announced  that the Tanir Bavi Power Company,
            located in India, had begun simple-cycle  operation of 170 MW of its
            planned 220 MW barge-mounted combined-cycle generating facility. The
            plant is expected to begin combined-cycle  operation in in the third
            quarter  of  2001.  Power  from  the  facility  will  be sold to the
            Karnataka  Electricity  Board  pursuant to a seven-year  fixed price
            power purchase agreement (PPA).

--------------------------------------------------------------------------------


                                       10
<PAGE>

--------------------------------------------------------------------------------

      o     In May 2001,  GWF Energy LLC (GWF  Energy),  a 50/50  joint  venture
            between  Global and  Harbinger  GWF LLC,  entered into a 10-year PPA
            with the California  Department of Water Resources to provide 340 MW
            of electric capacity to California from three new peaker plants that
            GWF Energy is constructing and will operate in California. The first
            plant,  a 90 MW  natural  gas-fired  plant, was completed  and began
            operation  in  August  2001.  Global's  equity  investment  in these
            plants,  including  contingencies,  is not  expected  to exceed $100
            million.

      o     In April 2001,  Global  announced that the PPN  Generation  Station,
            located  in  India,   began  commercial   operations.   The  330  MW
            combined-cycle  plant is  currently  being run on  naphtha  and will
            switch to a mixture of naphtha and natural gas as offshore gas wells
            are completed.  The Tamil Nadu  Electricity  Board will purchase the
            output of the plant under a PPA.

      o     In March 2001, Global, through Dhofar Power Company (DPCO), signed a
            20-year  concession  with the  government  of Oman to privatize  the
            electric  system of Salalah.  A consortium led by Global and several
            major Omani  investment  groups owns DPCO.  The project will enhance
            the existing network of generation, transmission and delivery assets
            and is  expected  to add  195 MW of  new  generating  capacity.  The
            project achieved financial closure in August 2001 and is expected to
            achieve  commercial  operation by March 2003.  Total project cost is
            estimated at $277 million.  Global's  equity  investment,  including
            contingencies, is expected to be approximately $82 million.

      o     In February  2001,  Global  withdrew  from its interest in the Eagle
            Point Cogeneration  partnership,  a 225 MW gas-fired  combined-cycle
            facility  in New  Jersey,  in  exchange  for a  series  of  payments
            expected to total up to $290  million,  to be received over the next
            five years, subject to certain contingencies.

      o     In January 2001, Global and its partner, Panda Energy International,
            Inc.,  announced  that  the OEP  1,000 MW  gas-fired  combined-cycle
            electric  generation  facility in  Guadalupe  County,  Texas,  began
            commercial operation.  Approximately 60% of the plant's total output
            has been sold via bilateral  PPAs and the remainder  will be sold on
            the Texas spot market.

Resources

      o     In 2001,  Resources  invested  approximately  $438  million  in five
            leveraged  lease  financing  transactions  of three  electric  power
            stations  in the United  States;  an electric  distribution  network
            operated by an electric  power district  heating and  transportation
            utility in Austria, a coal-fired facility in Belgium and a gas-fired
            cogeneration facility in the Netherlands.

      o     In 2001,  Resources  through its  investments in a leveraged  buyout
            fund,  received  cash  distributions  of  approximately  $64 million
            resulting in a net after-tax gain of  approximately  $2 million from
            the fund's sale of portions of its equity interests.

--------------------------------------------------------------------------------


                                       11
<PAGE>

                       SUMMARY CONSOLIDATED FINANCIAL DATA

         The following table sets forth summary consolidated  financial data for
the periods  indicated.  The  summary  consolidated  financial  data for the six
months  ended June 30, 2001 and 2000 was derived  from our  unaudited  financial
statements which have been  incorporated by reference in this Prospectus and, in
the opinion of management,  have been prepared in a manner  consistent  with the
audited  financial  statements  for the five  years  ended  December  31,  2000.
Operating  results for the six months  ended June 30,  2001 are not  necessarily
indicative  of results  which may be  expected  for the full year.  The  summary
consolidated  financial data as of December 31, 2000 and 1999, and for the three
years ended  December 31, 2000 have been  derived from our audited  consolidated
financial  statements,  which  have  been  incorporated  by  reference  in  this
Prospectus.  The summary  consolidated  financial  data as of December 31, 1998,
1997,  and 1996, and for the two years ended December 31, 1997 have been derived
from our audited consolidated  financial statements not included or incorporated
by reference in this  Prospectus.  This summary  consolidated  financial data is
qualified  in its  entirety  by the  more  detailed  information  and  financial
statements noted above, including the notes thereto.  Certain  reclassifications
of prior period data have been made to conform with the current presentation.

<TABLE>
<CAPTION>
                                     Six Months Ended
                                          June 30,                      Years Ended December 31,
                                    -------------------   ----------------------------------------------------
                                       2001      2000       2000       1999       1998       1997       1996
                                    --------   --------    -------   --------   --------   --------   ---------
Operating Data:                         (unaudited)               (Thousands of Dollars, except ratios)
<S>                                 <C>        <C>        <C>        <C>        <C>        <C>        <C>
Total Revenues ..................   $424,095   $384,807   $794,710   $686,955   $440,284   $341,590   $302,800
Total Operating Expenses ........    271,400    270,669    502,886    424,468    250,539    196,462    171,169
Interest, Net of Capitalized
  Interest ......................     74,704     71,569    136,517     94,685     90,367     72,363     58,261
Taxes ...........................     10,929     12,898     45,337     68,942     30,160     25,816     24,968
Income from Discontinued
 Operations (A) .................         --         --         --         --         --         --     24,238
Loss on Early Extinguishment
 of Debt ........................      1,680         --         --         --         --         --         --
Cumulative Effect of a Change
  in Accounting Principle - Gain       8,849         --         --         --         --         --         --
Net Income ......................     76,923     31,898    113,947    107,999     69,204     47,873     72,662
Preferred Stock Dividends (B) ...     11,380     12,504     23,886     25,007     17,478        598         --
Earnings Available to
  Common Stockholder ............   $ 65,543   $ 19,394   $ 90,061   $ 82,992   $ 51,726   $ 47,275   $ 72,662
</TABLE>

<TABLE>
<CAPTION>

                                  As of June 30,                        As of December 31,
                                  -------------- --------------------------------------------------------------
                                       2001         2000         1999         1998         1997         1996
Balance Sheet Data:                 ----------   ----------   ----------   ----------   ----------   ----------
                                    (unaudited)
<S>                                 <C>          <C>          <C>          <C>          <C>          <C>
Total Assets ....................   $6,239,915   $5,197,534   $4,114,385   $3,168,530   $3,022,956   $2,122,413
Total Liabilities ...............    1,490,021    1,266,925    1,037,834      958,528      962,954      817,889
Total Capitalization:
  Debt (F) ......................    2,692,574    2,181,776    1,701,686      967,673    1,275,103      627,381
  Common Equity (B) .............    1,548,120    1,239,633      865,665      733,129      709,899      677,143
  Preferred Equity (B) ..........      509,200      509,200      509,200      509,200       75,000         --
                                    ----------   ----------   ----------   ----------   ----------   ----------
  Total Stockholder's Equity ....    2,057,320    1,748,833    1,374,865    1,242,329      784,899      677,143
                                    ----------   ----------   ----------   ----------   ----------   ----------
  Total Capitalization ..........   $4,749,894   $3,930,609   $3,076,551   $2,210,002   $2,060,002   $1,304,524
</TABLE>

<TABLE>
<CAPTION>

                             Six Months Ended
                                  June 30,                          Years Ended December 31,
                           ---------------------    ---------------------------------------------------------------
                             2001        2000         2000          1999         1998          1997         1996
Other Data:                ---------    --------    ---------    -----------    ---------    ---------    ---------
                                (unaudited)
<S>                        <C>          <C>         <C>          <C>            <C>          <C>          <C>
Earnings Before Interest
  and Taxes (EBIT) ......  $ 155,142    $115,587    $ 294,722    $   270,709    $ 187,927    $ 145,813    $ 131,631
Cash flows from:
  Operating ............   $ 137,687    $ 24,407    $ 152,384    $   163,827    $  52,780    $ 137,057    $ 232,411
  Investing ............    (732,387)    (73,280)    (762,761)    (1,031,803)    (160,133)    (998,424)    (560,965)
  Financing ............     596,465      22,604      589,269        902,320      105,133      722,832     (726,442)
</TABLE>

<TABLE>
<CAPTION>
                                                          Six Months Ended
                                                               June 30,           Years Ended December 31,
                                                          ----------------  ------------------------------------
                                                            2001    2000    2000    1999    1998    1997    1996
                                                            ----    ----    ----    ----    ----    ----    ----
                                                             (unaudited)
<S>                                                         <C>     <C>     <C>     <C>     <C>     <C>     <C>
Earnings to Fixed Charges (C) ...........................   1.4x    1.8x    1.9x    2.7x    2.4x    1.4x    3.0x
EBIT to Interest Expense (D) (H) ........................   2.1x    1.6x    2.2x    2.9x    2.1x    2.0x    2.3x
EBITDA to Interest Expense (E) (H) ......................   2.1x    1.8x    2.3x    3.1x    2.4x    2.2x    2.5x
Consolidated Debt to Capitalization (F) .................    57%     56%     56%     55%     44%     62%     48%
Consolidated Recourse Debt to Recourse Capitalization (G)    50%     53%     51%     50%     38%     57%     48%
</TABLE>
----------------------
(A)   In 1996,  EDC was sold for an aggregate  price of $779 million.  This sale
      resulted in an after-tax gain of $13.5 million.

(B)   All outstanding preferred and common stock is owned by PSEG.

(C)   The ratio of earnings to fixed charges is computed by dividing earnings by
      fixed charges.  For this ratio,  earnings include net income before income
      taxes and all fixed  charges  (net of  capitalized  interest)  and exclude
      non-distributed   income  from   investments  in  which  Energy  Holdings'
      subsidiaries have less than a 50% interest. Fixed charges include interest
      expense, expensed or capitalized,  amortization of premiums,  discounts or
      capitalized  expenses  related to indebtedness and an estimate of interest
      expense included in rental expense.

(D)   EBIT includes operating income plus other income. For this ratio, interest
      expense is net of  capitalized  interest of $10.3  million,  $8.2 million,
      $20.8 million,  $8.5 million,  $1.2 million, $5.1 million and $1.3 million
      for six  months  ended  June 30,  2001 and  2000 and for the  years  ended
      December 31, 2000, 1999, 1998, 1997, and 1996, respectively.

(E)   EBITDA includes  operating income plus other income plus  depreciation and
      amortization.  For this  ratio,  interest  expense  is net of  capitalized
      interest as noted above.

(F)   Includes  all  recourse  debt and debt  that is  non-recourse  to  Global,
      Resources,  Energy  Technologies and Energy Holdings which is consolidated
      on the balance sheet.

(G)   Excludes  consolidated  debt that is  non-recourse  to Global,  Resources,
      Energy  Technologies  and Energy  Holdings of $611 million,  $195 million,
      $354 million,  $327 million,  $220 million and $232 million as of June 30,
      2001 and 2000 and December 31, 2000,  1999,  1998 and 1997,  respectively.
      There was no consolidated non-recourse debt outstanding prior to 1997.

(H)   Information  concerning EBIT and EBITDA is presented here not as a measure
      of operating results,  but rather as a measure of ability to service debt.
      In addition,  EBIT and EBITDA may not be  comparable  to similarly  titled
      measures  by  other  companies.  EBITDA  should  not  be  construed  as an
      alternative to operating  income or cash flow from  operating  activities,
      each as determined according to generally accepted accounting  principles.
      Although we are not  required to meet  minimum  EBIT or EBITDA to interest
      charges tests as part of our debt covenants,  we use these measures in our
      financial and business  planning process to provide  reasonable  assurance
      that our forecasts will provide adequate  interest coverage to maintain or
      improve our target credit ratings.


                                       12
<PAGE>

                                  RISK FACTORS

 You should carefully consider the risks described below. Each of the following
     factors could have a material adverse effect on our business, financial
     condition, results of operations, net cash flows and/or our ability to
           service our outstanding indebtedness, including the notes.

Because we are a holding  company,  our  ability  to  service  our debt could be
limited

      The notes will be our exclusive obligations and not the obligations of any
of our  subsidiaries or affiliates.  Our  obligations  with respect to the notes
will not be supported by PSEG.

      We are a holding  company with no material  assets other than the stock of
our subsidiaries and project affiliates.  Accordingly, all of our operations are
conducted  by our  subsidiaries  and project  affiliates  which are separate and
distinct legal entities that have no obligation, contingent or otherwise, to pay
any amounts  when due on the notes or to make any funds  available  to us to pay
such amounts.  As a result,  the notes will  effectively be  subordinated to all
existing  and  future  debt,  trade  creditors,  and  other  liabilities  of our
subsidiaries  and project  affiliates and our rights and hence the rights of our
creditors (including holders of the notes) to participate in any distribution of
assets of any such  subsidiary  or project  affiliate  upon its  liquidation  or
reorganization  or  otherwise  would be  subject  to the  prior  claims  of such
subsidiary's  or project  affiliate's  creditors,  except to the extent that our
claims as a creditor of such subsidiary or project affiliate may be recognized.

      We depend on our subsidiaries'  and project  affiliates' cash flow and our
access to capital in order to service our indebtedness, including the notes. The
project-related debt agreements of subsidiaries and project affiliates generally
restrict their ability to pay dividends,  make cash  distributions  or otherwise
transfer funds to us. These  restrictions may include  achieving and maintaining
financial performance or debt coverage ratios,  absence of events of default, or
priority in payment of other current or prospective obligations.

      Our subsidiaries have financed some investments using non-recourse project
level financing.  Each non-recourse project financing is structured to be repaid
out of cash flow provided by the  investment.  In the event of a default under a
financing  agreement which is not cured, the lenders would generally have rights
to the  related  assets.  In the  event  of  foreclosure  after a  default,  our
subsidiary  may lose its equity in the asset or may not be  entitled to any cash
that the asset  may  generate.  Although  a  default  under a project  financing
agreement will not cause a default with respect to the notes,  it may materially
affect our ability to service our outstanding indebtedness, including the notes.

Our ability to control the cash flow from our minority  investments  is limited,
which could limit our ability to service our debt

      Our ability to control  investments in which we own a minority interest is
limited.  As such, we and Global are unable  unilaterally  to cause dividends or
distributions to be made to us or Global from these operations.

      Minority   investments  may  involve  risks  not  otherwise   present  for
investments  made solely by us and our  subsidiaries,  including the possibility
that a partner, majority investor or co-venturer might become bankrupt, may have
different  interests or goals, and may take action contrary to our instructions,
requests,  policies or business objectives.  Also, if no party has full control,
there could be an impasse on  decisions.  In addition,  certain  investments  of
Resources are managed by unaffiliated  entities which limits Resources'  ability
to control the activities or performance of such investments and managers.

We may not have  access to  sufficient  capital in the  amounts and at the times
needed

      Equity capital for our  subsidiaries'  projects and our  investments  have
been provided by equity contributions from PSEG,  internally-generated cash flow
and  borrowings by ourselves and PSEG Capital.  We require  continued  access to
debt capital  from outside  sources in order to assure the success of our future
projects and  acquisitions.  Our ability to arrange  financing on a non-recourse
basis and the costs of capital depend on numerous factors including, among other
things, general economic


                                       13
<PAGE>

and market conditions, the availability of credit from banks and other financial
institutions,  investor  confidence,  the  success of current  projects  and the
quality of new projects.

      We can give no assurances that our current and future capital structure or
financial condition will permit access to bank and debt capital markets. We also
will require  capital from PSEG, the  availability of which is not assured since
it is dependent upon our performance and that of PSEG's other subsidiaries. As a
result,  there is no assurance that we will be successful in obtaining financing
for our projects and acquisitions or funding the equity commitments required for
such projects and acquisitions in the future.

We cannot assure sufficient cash flow to service the notes

      As of June 30,  2001 and  December  31,  2000,  we had total  debt of $2.1
billion and $1.8 billion, respectively, excluding consolidated non-recourse debt
appearing on our balance sheet.  We can give no assurances that our projects and
investments   will  generate   sufficient   cash  to  service  our   outstanding
indebtedness, including the notes.

      Under the existing instruments governing our debt, including the indenture
under  which the notes  will be issued and our bank  agreements,  as well as the
agreement  governing debt of PSEG Capital,  debt may be accelerated or otherwise
be  subject  to  repayment  upon  certain  events of  default,  including  cross
defaults,  or if we undergo a change of control.  In addition,  a default on the
notes would result in a cross  default  under our bank  agreements.  If any such
event were to occur,  we may not have  sufficient  capital to pay holders of the
notes in full the  amounts  due under  the notes or to repay any notes  tendered
pursuant to the Change of Control Offer described under "Description of Exchange
Notes -- Certain Covenants -- Repayment of Notes Upon a Change of Control".

Because a  substantial  amount of our business is  conducted  outside the United
States, adverse international developments could negatively impact our business

      A key component of our business  strategy is the development,  acquisition
and operation of projects outside the United States.  The economic and political
conditions in certain countries where Global has interests or in which Global is
or could be exploring  development  or acquisition  opportunities  present risks
that may be different than those found in the United States including: delays in
permitting and licensing,  construction delays and interruption of business,  as
well  as  risks  of  war,  expropriation,   nationalization,   renegotiation  or
nullification of existing contracts and changes in law or tax policy. Changes in
the legal  environment  in foreign  countries  in which  Global  may  develop or
acquire  projects  could make it more difficult to obtain  non-recourse  project
refinancing on suitable terms and could impair  Global's  ability to enforce its
rights under agreements relating to such projects.

      Operations  in  foreign  countries  also  present  risks  associated  with
currency exchange and convertibility,  inflation,  and repatriation of earnings.
In some countries in which Global may develop or acquire projects in the future,
economic and monetary conditions and other factors could affect Global's ability
to convert  its cash  distributions  to United  States  Dollars or other  freely
convertible   currencies  or  to  move  funds  offshore  from  such   countries.
Furthermore,  the central  bank of any such  country may have the  authority  to
suspend,   restrict  or  otherwise   impose   conditions  on  foreign   exchange
transactions or to approve  distributions to foreign investors.  Although Global
generally seeks to structure power purchase  contracts and other project revenue
agreements  to provide for payments to be made in, or indexed to,  United States
Dollars or a currency freely convertible into United States Dollars, its ability
to do so in all cases may be limited.  See "-- Credit,  currency,  commodity and
financial market risks may have an adverse impact".

Our future  revenues from projects in development  could be limited  because our
project  development,   construction  and  acquisition  activities  may  not  be
successful

      Our project  development and acquisition  activities  require  significant
expenditures  for  evaluation,  engineering,  permitting,  legal  and  financial
advisory  services,  some of which may not  result in  increased  revenues.  For
example,  we may choose not to proceed with development or may not be successful
in competitive bids despite having incurred  significant  expenses in connection
with potential investments.


                                       14
<PAGE>

      The  construction,  expansion or  refurbishment  of a power  generation or
distribution  facility may involve equipment and material supply  interruptions,
labor disputes,  unforeseen  engineering,  environmental and geological problems
and  unanticipated  cost  overruns.  The  proceeds  of  any  insurance,   vendor
warranties or performance guarantees may not be adequate to cover lost revenues,
increased expenses or payments of liquidated  damages.  In addition,  some power
purchase contracts permit the customer to terminate the related contract, retain
security posted by the developer as liquidated damages or change the payments to
be  made  to the  subsidiary  or the  project  affiliate  in the  event  certain
milestones,  such as commencing commercial operation of the project, are not met
by specified  dates. If project  start-up is delayed and the customer  exercises
these rights,  the project may be unable to fund principal and interest payments
under its project financing agreements.

If our operating performance falls below projected levels, we may not be able to
service our debt

      The risks  associated with operating power generation  facilities  include
the  breakdown  or failure of equipment or  processes,  labor  disputes and fuel
supply  interruption,  each of which could result in performance  below expected
capacity  levels.  Operation  below expected  capacity levels may result in lost
revenues,  increased expenses,  higher maintenance costs and penalties, in which
case there may not be  sufficient  cash  available to service  project  debt. In
addition,  many of Global's  generation  projects rely on a single fuel supplier
and a single  customer  for the purchase of the  facility's  output under a long
term contract.  While Global generally has liquidated  damage  provisions in its
contracts, the default by a supplier under a fuel contract or a customer under a
power purchase  contract could  adversely  affect the facility's cash generation
and ability to service project debt.

      Countries in which Global owns and operates  electric and gas distribution
facilities may impose financial penalties if reliability  performance  standards
are not met. In addition, inefficient operation of the facilities may cause lost
revenue  and  higher  maintenance  expenses,  in  which  case  there  may not be
sufficient cash available to service project debt.

Credit, currency,  commodity and financial market risks may adversely impact our
business

      Adverse  changes in commodity  prices,  equity security  prices,  interest
rates and foreign currency exchange rates and  non-performance or non-payment by
counterparties  could  lower  revenues,  raise  costs and  adversely  affect our
financial condition, results of operations and net cash flows and our ability to
service our outstanding indebtedness, including the notes.

We and our  subsidiaries  are  subject  to  substantial  competition  from  well
capitalized participants in the worldwide energy markets

      We and our  subsidiaries  are subject to  substantial  competition  in the
United States and in  international  markets from  independent  power producers,
domestic  and  multi-national   utility   generators,   fuel  supply  companies,
engineering   companies,   equipment   manufacturers  and  affiliates  of  other
industrial companies.  Restructuring of worldwide energy markets,  including the
privatization  of  government-owned  utilities  and the  sale  of  utility-owned
assets,  is  creating  opportunities  for,  and  substantial  competition  from,
well-capitalized  entities  which  may  adversely  affect  our  ability  to make
investments  on  favorable  terms and achieve our growth  objectives.  Increased
competition  could  contribute  to a reduction  in prices  offered for power and
could  result in lower  returns  which may  affect our  ability  to service  our
outstanding indebtedness, including the notes.

      Deregulation   may  continue  to  accelerate   the  current  trend  toward
consolidation among domestic utilities and could also result in the splitting of
vertically-integrated  utilities  into  separate  generation,  transmission  and
distribution businesses.  As a result,  additional significant competitors could
become active in the  independent  power industry.  Resources faces  competition
from numerous  well-capitalized  investment  and finance  company  affiliates of
banks, utilities and industrial companies. Energy Technologies faces substantial
competition  from  utilities  and  their  affiliates,  and HVAC  and  mechanical
contractors.


                                       15
<PAGE>

Compliance with  environmental and other  governmental  regulation is costly and
could negatively impact our business

      We and the  projects in which we invest are subject to a number of complex
and stringent  environmental  and other laws and  regulations,  including  those
which regulate the construction or permitting of new facilities and operation of
existing facilities.  Compliance is costly and could delay project operation and
the receipt of revenues.

      Global's  electric  and gas  distribution  facilities  are  rate-regulated
enterprises.   Rates  charged  to  customers  are  established  by  governmental
authorities  and are  currently  sufficient  to cover  all  operating  costs and
provide  a  return.  We can  give  no  assurances  that  future  rates  will  be
established at levels sufficient to cover such costs and provide a return on our
investment.  In addition,  future rates may not be adequate to provide cash flow
to pay principal and interest on our  subsidiaries'  and affiliates' debt and to
enable  such  subsidiaries  and  affiliates  to  comply  with the  terms of debt
agreements.

PSEG could exercise its power over us to the detriment of holders of the notes

      As our sole stockholder, PSEG has the power to control the election of the
directors  and all other  matters  submitted  for  stockholder  approval and has
control over our management and affairs.  In circumstances  involving a conflict
of interest  between PSEG,  as the sole  stockholder,  on the one hand,  and our
creditors,  on the other, we can give no assurances that PSEG would not exercise
its power to control us and allocate  resources  in a manner that would  benefit
PSEG or another subsidiary to the detriment of the holders of the notes.

      The indenture imposes no limitations on our ability to pay dividends or to
make other  payments to PSEG or on our ability to enter into  transactions  with
PSEG or our other  affiliates.  Payment of dividends to PSEG without limit could
impact our cash  available to service the notes.  PSEG could decide to no longer
continue to hold our stock, although failure to maintain ownership of a majority
of the common stock could trigger the change of control repurchase provisions in
the  indenture.  Any of these  actions  could  materially  adversely  affect our
business and thus ultimately our ability to service the notes.

      As a wholly-owned subsidiary of PSEG, we and our domestic subsidiaries are
included  in PSEG's  consolidated  tax filing for federal  income tax  purposes.
Generally,  the leveraged lease  transactions in which Resources invests provide
tax losses in the early  years of their term that  offset  taxable  income  from
other PSEG subsidiaries. We and our subsidiaries are parties to a tax allocation
agreement with PSEG under which we and each of our  subsidiaries are responsible
to pay the  respective  share of taxes due or entitled  to receive tax  benefits
earned.  If PSEG  were  to  modify  the tax  allocation  agreement,  our  future
investment strategy might change,  including  Resources' possible curtailment of
new leveraged lease investments that generate tax benefits.

The exchange  notes may not be liquid  because there is no public market for the
exchange notes

      There is currently no trading  market for the exchange notes and we do not
intend to list the exchange notes on any  securities  exchange or to arrange for
them to be quoted on any quotation  system.  We can give no assurances as to the
liquidity of any market that may develop for the exchange notes,  the ability of
investors to sell the exchange  notes or the price at which  investors  would be
able to sell their exchange notes.

Consequences  of failure to exchange  original  notes -- original  notes  remain
subject to transfer restrictions

      Any original notes that remain  outstanding after this exchange offer will
continue to be subject to restrictions  on their  transfer.  After this exchange
offer,  holders of original  notes will not (with limited  exceptions)  have any
further rights under the exchange and registration rights agreement.  Any market
for original  notes that are not  exchanged  could be adversely  affected by the
conclusion of this exchange offer.


                                       16
<PAGE>

Exchange  offer  procedures  -- late  deliveries  of notes  and  other  required
documents could prevent a holder from exchanging its notes

      Holders are responsible for complying with all exchange offer  procedures.
Issuance of exchange  notes in exchange for original  notes will only occur upon
completion of the procedures described in this prospectus under the heading "The
Exchange Offer -- Procedures for Tendering Original Notes".  Therefore,  holders
of original  notes who wish to exchange  them for  exchange  notes  should allow
sufficient  time for timely  completion  of the exchange  procedure.  We are not
obligated to notify you of any failure to follow the proper procedure.

Restrictions  applicable  to  participating  broker-dealers  --  if  you  are  a
broker-dealer, your ability to transfer the notes may be restricted

      A broker-dealer  that purchased original notes for its own account as part
of market-making  or trading  activities must deliver a prospectus when it sells
the  exchange  notes.  Our  obligation  to make  this  prospectus  available  to
broker-dealers  is  limited.  Consequently,  we cannot  guarantee  that a proper
prospectus will be available to broker-dealers  wishing to resell their exchange
notes.

                           FORWARD-LOOKING STATEMENTS

      Except  for  the  historical  information  contained  or  incorporated  by
reference herein,  certain of the matters discussed or incorporated by reference
in this prospectus constitute "forward-looking statements" within the meaning of
the  Private  Securities  Litigation  Reform Act of 1995.  Such  forward-looking
statements  are subject to risks and  uncertainties  which  could  cause  actual
results to differ materially from those anticipated.  These statements are based
on management's beliefs as well as assumptions made by and information currently
available to  management.  When used  herein,  the words  "will",  "anticipate",
"intend", "estimate",  "believe", "expect", "plan", "hypothetical",  "potential"
and  variations of such words and similar  expressions  are intended to identify
forward-looking statements.

      In addition to any assumptions and other factors  referred to specifically
in connection with forward-looking  statements,  factors that could cause actual
results to differ  materially  from those  contemplated  in any  forward-looking
statements include, among others, the following,  some of which relate to Energy
Holdings indirectly as a result of their potential impact upon PSEG or its other
subsidiaries:

      o     deregulation  and the unbundling of energy supplies and services and
            the establishment of a competitive  energy  marketplace for products
            and services;

      o     managing  rapidly changing  wholesale  energy trading  operations in
            conjunction  with  electricity and gas production,  transmission and
            distribution systems;

      o     managing   foreign   investments   and   electric   generation   and
            distribution  operations  in  locations  outside of the  traditional
            utility service territory;

      o     political and foreign currency risks;

      o     sales retention and growth potential in a mature service territory;

      o     ability to complete development or acquisition of current and future
            investments;

      o     partner and counterparty risk;

      o     exposure to market price  fluctuations  and  volatility  of fuel and
            power supply,  power output and marketable  securities,  among other
            commodities and assets;

      o     ability to obtain  adequate and timely rate relief,  cost  recovery,
            and other necessary regulatory approvals;

      o     federal, state and foreign regulatory actions;

      o     regulatory   oversight  with  respect  to  utility  and  non-utility
            affiliate relations and activities;

      o     operating  restrictions,  increased  costs and  construction  delays
            attributable to environmental regulations;


                                       17
<PAGE>

      o     nuclear  decommissioning  and the  availability of reprocessing  and
            storage facilities for spent nuclear fuel;

      o     licensing and regulatory  approvals  necessary for nuclear and other
            operating stations;

      o     the ability to economically and safely operate nuclear facilities in
            which  PSEG  has  an  interest   in   accordance   with   regulatory
            requirements;

      o     environmental concerns; and

      o     market  risk and debt and equity  market  concerns  associated  with
            these issues.

                                 USE OF PROCEEDS

      The exchange  offer is intended to satisfy some of our  obligations  under
the exchange and  registration  rights  agreement.  We will not receive any cash
proceeds  from the issuance of the  exchange  notes in the  exchange  offer.  In
exchange for issuing the exchange notes as described in this prospectus, we will
receive an equal principal amount of original notes, which will be canceled.

      The net  proceeds  from the sale of the  original  notes were used for the
repayment of short-term  debt  outstanding  under revolving  credit  facilities.
Borrowings  under  the  revolving   credit   facilities  were  used  to  finance
investments and acquisitions and for general corporate purposes.  The applicable
per annum interest rate on the revolving credit facilities was LIBOR plus 1.375%
at the time of issuance.

                                 CAPITALIZATION

      The   following   table   sets   forth   Energy   Holdings'   consolidated
capitalization  as of June 30,  2001  which  reflects  the sale of the  original
notes.

                                                            As of June 30, 2001
                                                          ---------------------
                                                          (Thousands of Dollars)
      Short-term debt (A) .............................        $  613,921
      Long-term debt ..................................         2,078,653
                                                               ----------
      Total debt ......................................         2,692,574
                                                               ----------
      Total common equity (B) .........................         1,548,120
      Total preferred equity (B) ......................           509,200
                                                               ----------
      Total stockholder's equity ......................         2,057,320
                                                               ----------
      Total capitalization ............................        $4,749,894
                                                               ==========

----------
(A)   Short-term debt includes the portion of long-term debt due within one year
      and intercompany loans due to PSEG.

(B)   Owned by PSEG.


                                       18
<PAGE>

                               THE EXCHANGE OFFER

Purpose of the Exchange Offer

      In  connection  with the sale of the  original  notes,  we entered into an
exchange and registration  rights agreement with the initial  purchasers.  Under
the exchange and registration rights agreement,  we agreed to use our reasonable
best  efforts to  complete  the  exchange  offer and to file and cause to become
effective with the SEC a registration statement for the exchange of the original
notes for exchange notes.

      The terms of the exchange  notes are the same as the terms of the original
notes except that the exchange notes have been  registered  under the Securities
Act and will not be subject to some  restrictions  on transfer that apply to the
original notes. In that regard, the original notes provide,  among other things,
that if a  registration  statement  relating to the exchange  offer has not been
filed and declared  effective within the period specified in the original notes,
the interest  rate on the original  notes will  increase by 0.25% per annum each
90-day period that such  additional  interest rate continues to accrue under any
such  circumstance,  up to an aggregate  maximum increase equal to 1% per annum,
until the registration statement is filed or declared effective, as the case may
be.

      Upon completion of the exchange offer,  holders of original notes will not
be  entitled  to  any  further   registration  rights  under  the  exchange  and
registration  rights agreement,  except under limited  circumstances.  See "Risk
Factors -- Consequences of failure to exchange  original notes" and "Description
of Exchange Notes".  The exchange offer is not being made to holders of original
notes in any  jurisdiction  in which the exchange offer or the acceptance of the
notes  would not comply  with  securities  or blue sky laws.  Unless the context
requires  otherwise,  the term "holder" with respect to the exchange offer means
any person who has obtained a properly  completed bond power from the registered
holder,  or any person whose original notes are held of record by The Depository
Trust  Company  (DTC) who desires to deliver such  original  notes by book-entry
transfer at DTC. We will exchange as soon as  practicable  after the  expiration
date of the exchange  offer the original  notes for a like  aggregate  principal
amount of the exchange notes.

      Completion  of the exchange  offer is subject to the  conditions  that the
exchange offer not violate any applicable law or  interpretation of the staff of
the Division of Corporate  Finance of the SEC and that no  injunction,  order or
decree has been issued which would  prohibit,  prevent or materially  impair our
ability to proceed with the exchange  offer.  The exchange offer is also subject
to various  procedural  requirements  discussed  below with which  holders  must
comply.  We reserve the right, in our absolute  discretion,  to waive compliance
with these requirements subject to applicable law.

Terms of the Exchange Offer

      We are offering, upon the terms and subject to the conditions described in
this prospectus and in the accompanying letter of transmittal, to exchange up to
$400,000,000  aggregate  principal amount of exchange notes for a like aggregate
principal amount of original notes properly tendered on or before the expiration
date of the exchange  offer and not properly  withdrawn in  accordance  with the
procedures described below. We will issue, promptly after the expiration date of
the exchange  offer,  an aggregate  principal  amount of up to  $400,000,000  of
exchange notes in exchange for a like principal  amount of outstanding  original
notes tendered and accepted in connection  with the exchange  offer. We will pay
all charges and expenses,  other than certain  applicable taxes described below,
in connection with the exchange offer. See "-- Fees and Expenses".

      Holders  may  tender  their  original  notes  in  whole  or in part in any
integral  multiple  of  $1,000  principal  amount.  The  exchange  offer  is not
conditioned upon any minimum  principal amount of original notes being tendered.
As of the date of this prospectus,  $400,000,000  aggregate  principal amount of
the original  notes is  outstanding.  Holders of original  notes do not have any
appraisal or dissenters' rights in connection with the exchange offer.  Original
notes which are not tendered for or are tendered but not accepted in  connection
with the exchange offer will remain  outstanding and be entitled to the benefits
of the indenture,  but will not be entitled to any further  registration  rights
under the exchange  and  registration  rights  agreement,  except under  limited
circumstances. See "Risk Factors -- Consequences


                                       19
<PAGE>

of failure to exchange  original notes" and "Description of exchange notes".  If
any tendered  original notes are not accepted for exchange because of an invalid
tender,  the  occurrence  of  other  events  described  in  this  prospectus  or
otherwise, appropriate book-entry transfer will be made, without expense, to the
tendering holder of the notes promptly after the expiration date of the exchange
offer.  Holders who tender  original notes in connection with the exchange offer
will not be required to pay  brokerage  commissions  or fees or,  subject to the
instructions  in the letter of  transmittal,  transfer taxes with respect to the
exchange of original notes in connection with the exchange offer.

      Neither  Energy  Holdings nor the Board of  Directors  of Energy  Holdings
makes any recommendation to holders of original notes as to whether to tender or
refrain  from  tendering  all or any  portion  of  their  original  notes in the
exchange  offer.   In  addition,   no  one  has  been  authorized  to  make  any
recommendation  as to whether holders should tender notes in the exchange offer.
Holders  of  original  notes  must make  their own  decisions  whether to tender
original  notes in the  exchange  offer  and,  if so,  the  aggregate  amount of
original  notes to tender  based on the  holders' own  financial  positions  and
requirements.

Expiration Date; Extensions; Amendments

      The term  "expiration  date"  means 5:00 p.m.,  Eastern  Time,  on , 2001.
However,  if the exchange  offer is extended by us, the term  "expiration  date"
will mean the latest date and time to which we extend the exchange offer.

      We  expressly  reserve  the  right in our sole  and  absolute  discretion,
subject to applicable law, at any time and from time to time:

      o     to delay the acceptance of the original notes for exchange,

      o     to extend the  expiration  date of the exchange offer and retain all
            original notes tendered in the exchange offer, subject,  however, to
            the right of holders of original  notes to withdraw  their  tendered
            original notes as described under "-- Withdrawal Rights", and

      o     to waive any condition or otherwise  amend the terms of the exchange
            offer in any respect.

      If  the  exchange  offer  is  amended  in a  manner  determined  by  us to
constitute a material change,

      o     we will promptly  disclose the amendment in a prospectus  supplement
            that will be distributed  to the registered  holders of the original
            notes,

      o     we  will  file  a  post-effective   amendment  to  the  registration
            statement  filed with the SEC with regard to the exchange  notes and
            the exchange offer, and

      o     we will  extend the  exchange  offer to the extent  required by Rule
            14e-1 under the Exchange Act.

      We will  promptly  notify the exchange  agent by making an oral or written
public  announcement  of any  delay in  acceptance,  extension,  termination  or
amendment.  This  announcement in the case of an extension will be made no later
than 9:00 a.m.,  Eastern  Time,  on the next  business day after the  previously
scheduled expiration date. Without limiting the manner in which we may choose to
make any public  announcement  and,  subject to applicable  law, we will have no
obligation  to  publish,  advertise  or  otherwise  communicate  any such public
announcement other than by issuing a release to an appropriate news agency.

Acceptance for Exchange and Issuance of Exchange Notes

      Upon the terms and subject to the  conditions  of the exchange  offer,  we
will exchange and issue to the exchange agent, exchange notes for original notes
validly  tendered and not withdrawn  promptly after the expiration  date. In all
cases,  delivery of exchange  notes in exchange for original  notes tendered and
accepted  for exchange  pursuant to the  exchange  offer will be made only after
timely receipt by the exchange agent of:


                                       20
<PAGE>

      -     original notes or a book-entry confirmation of a book-entry transfer
            of  original  notes  into  the  exchange  agent's  account  at  DTC,
            including  an agent's  message (as defined  below) if the  tendering
            holder has not delivered a letter of transmittal,

      -     the letter of transmittal (or facsimile thereof), properly completed
            and duly executed, with any required signature guarantees or (in the
            case of a  book-entry  transfer) an agent's  message  instead of the
            letter of transmittal, and

      -     any other documents required by the letter of transmittal.

      The  term  "book-entry  confirmation"  means a  timely  confirmation  of a
book-entry  transfer of original notes into the exchange agent's account at DTC.
The term "agent's  message" means a message,  transmitted by DTC to and received
by the  exchange  agent and forming a part of a book-entry  confirmation,  which
states that DTC has received an express  acknowledgment  from the  tendering DTC
participant.  This  acknowledgment  states that the participant has received and
agrees to be bound by the letter of  transmittal  and that Energy  Holdings  may
enforce the letter of transmittal against the participant.

      Subject to the terms and  conditions  of the  exchange  offer,  we will be
deemed to have accepted for exchange,  and therefore  exchanged,  original notes
validly  tendered  and not  withdrawn  as, if and when we give  oral or  written
notice  to the  exchange  agent of our  acceptance  of such  original  notes for
exchange  pursuant to the exchange  offer.  The exchange agent will act as agent
for us for the  purpose of  receiving  tenders  of  original  notes,  letters of
transmittal and related  documents,  and as agent for tendering  holders for the
purpose  of  receiving  original  notes,  letters  of  transmittal  and  related
documents and transmitting  exchange notes to validly  tendering  holders.  This
exchange will be made promptly after the expiration date.

      If, for any reason whatsoever,  acceptance for exchange or the exchange of
any tendered  original notes is delayed,  whether before or after our acceptance
for exchange of original notes, or we extend the exchange offer or are unable to
accept for exchange or exchange tendered original notes, then, without prejudice
to  the  rights  we  have  in  the  exchange  offer,  the  exchange  agent  may,
nevertheless, on our behalf and subject to Rule 14e-1(c) under the Exchange Act,
retain tendered original notes. These original notes may not be withdrawn except
to the extent tendering  holders are entitled to withdrawal  rights as described
under "-- Withdrawal Rights".

      Under the letter of transmittal or agent's  message,  a holder of original
notes will  warrant  and agree that it has full power and  authority  to tender,
exchange,  sell,  assign and transfer original notes, that we will acquire good,
marketable and unencumbered title to the tendered original notes, free and clear
of all liens,  restrictions,  charges and  encumbrances,  and the original notes
tendered  for  exchange  are not subject to any adverse  claims or proxies.  The
holder  also will  warrant  and agree that it will,  upon  request,  execute and
deliver  any  additional  documents  deemed  by us or the  exchange  agent to be
necessary or desirable to complete the exchange, sale, assignment,  and transfer
of the original notes tendered in the exchange offer.

Procedures for Tendering Original Notes

      Valid Tender. Except as indicated below, in order for original notes to be
validly  tendered in the  exchange  offer,  an original  copy or  facsimile of a
properly  completed and duly executed letter of  transmittal,  with any required
signature guarantees, or, in the case of a book-entry tender, an agent's message
instead of the letter of transmittal,  and any other required documents, must be
received by the exchange agent at one of its addresses listed under "-- Exchange
Agent". In addition, either:

      -     tendered original notes must be received by the exchange agent,

      -     the  tender  of  original  notes  must  follow  the  procedures  for
            book-entry  transfer described below and a book-entry  confirmation,
            including  an  agent's  message  if the  tendering  holder  has  not
            delivered a letter of transmittal,  must be received by the exchange
            agent, in each case on or before the expiration date, or

      -     the guaranteed delivery procedures  described below must be complied
            with.


                                       21
<PAGE>

      If less than all of the original  notes are tendered,  a tendering  holder
should fill in the amount of original  notes being  tendered in the  appropriate
box on the letter of transmittal.  The entire amount of original notes delivered
to the  exchange  agent will be deemed to have been  tendered  unless  otherwise
indicated.

      The method of delivery of certificates,  the letter of transmittal and all
other required documents is at the option and sole risk of the tendering holder.
Delivery will be deemed made only when actually  received by the exchange agent.
If delivery is by mail, we recommend  properly insured  registered mail,  return
receipt requested,  or an overnight  delivery service.  In all cases, you should
allow sufficient time to ensure timely delivery.

      Book-Entry  Transfer.  The exchange  agent will  establish an account with
respect to the original  notes at DTC for purposes of the exchange  offer within
two business days after the date of this prospectus.  Any financial  institution
that is a participant in DTC's  book-entry  transfer  facility system may make a
book-entry  delivery  of the  original  notes by causing  DTC to  transfer  such
Original Notes into the exchange agent's account at DTC in accordance with DTC's
procedures for transfers.  However,  although  delivery of original notes may be
effected through  book-entry  transfer into the exchange agent's account at DTC,
the letter of transmittal (or facsimile  thereof),  properly  completed and duly
executed, with any required signature guarantees,  or an agent's message instead
of the letter of transmittal, and any other required documents, must in any case
be delivered to and received by the exchange  agent at its address  listed under
"--  Exchange  Agent" on or  before  the  expiration  date.  Alternatively,  the
guaranteed delivery procedure described below must be complied with.

      Delivery of documents to DTC in accordance with DTC's  procedures does not
constitute delivery to the exchange agent.

      Signature  Guarantees.  Certificates  for the  original  notes need not be
endorsed and signature  guarantees on the letter of transmittal  are unnecessary
unless

      (1) a  certificate  for the original  notes is  registered in a name other
than  that  of the  person  surrendering  the  certificate  or (2)  such  holder
completes the box entitled "Special Issuance  Instructions" or "Special Delivery
Instructions" in the letter of transmittal. In the case of (1) or (2) above, the
certificates  for  original  notes must be duly  endorsed  or  accompanied  by a
properly  executed  bond power,  with the  endorsement  or signature on the bond
power and on the  letter of  transmittal  guaranteed  by a firm or other  entity
identified  in Rule 17Ad-15  under the  Exchange  Act as an "eligible  guarantor
institution," including (as such terms are defined therein):

      -     a bank;

      -     a  broker,   dealer,   municipal  securities  broker  or  dealer  or
            government securities broker or dealer;

      -     a credit union;

      -     a national securities exchange, registered securities association or
            clearing agency; or

      -     a savings association that is a participant in a Securities Transfer
            Association  (an  "Eligible  Institution"),  unless  surrendered  on
            behalf of that Eligible Institution. See Instruction 1 to the letter
            of transmittal.

      Guaranteed  Delivery.  If a holder desires to tender original notes in the
exchange offer and the  certificates  for the original notes are not immediately
available or time will not permit all  required  documents to reach the exchange
agent on or  before  the  expiration  date,  or the  procedures  for  book-entry
transfer  cannot  be  completed  on a  timely  basis,  the  original  notes  may
nevertheless be tendered, provided that all of the following guaranteed delivery
procedures are complied with:

      (1) the tenders are made by or through an Eligible Institution;

      (2) a properly completed and duly executed Notice of Guaranteed  Delivery,
substantially in the form accompanying the letter of transmittal, is received by
the exchange agent, as provided below, on or before the expiration date; and (3)
the  certificates  (or a  book-entry  confirmation)  representing  all  tendered
original notes, in proper form for transfer,  together with a properly completed
and duly


                                       22
<PAGE>

executed  letter  of  transmittal  (or  facsimile  thereof),  with any  required
signature   guarantees,   or  an  agent's  message  instead  of  the  letter  of
transmittal,  and any other documents required by the letter of transmittal, are
received by the exchange agent within three New York Stock Exchange trading days
after the date of execution of the Notice of Guaranteed Delivery.

      The Notice of Guaranteed Delivery may be delivered by hand, or transmitted
by facsimile  or mail to the  exchange  agent and must include a guarantee by an
Eligible  Institution  in the form shown in the notice.  Regardless of any other
provision in this  prospectus,  the  delivery of exchange  notes in exchange for
original  notes tendered and accepted for exchange in the exchange offer will in
all cases be made only after timely  receipt by the  exchange  agent of original
notes, or of a book-entry confirmation with respect to those original notes, and
an original copy or facsimile of a properly  completed and duly executed  letter
of transmittal,  together with any required signature guarantees,  or an agent's
message instead of the letter of transmittal,  and any other documents  required
by the letter of transmittal.  Accordingly, the delivery of exchange notes might
not be made to all tendering holders at the same time, and will depend upon when
original  notes,  book-entry  confirmations  with respect to original  notes and
other required  documents are received by the exchange agent. Our acceptance for
exchange of original notes tendered under any of the procedures  described above
will constitute a binding agreement between the tendering holder and us upon the
terms and subject to the conditions of the exchange offer.

      Determination  of Validity.  All  questions  as to the form of  documents,
validity, eligibility, including time of receipt, and acceptance for exchange of
any tendered  original  notes will be determined by us, in our sole  discretion.
The  interpretation  by us of the terms and  conditions  of the exchange  offer,
including the letter of transmittal and the accompanying  instructions,  will be
final and binding.

      We reserve the absolute  right,  in our sole and absolute  discretion,  to
reject  any and all  tenders  determined  by us not to be in proper  form or the
acceptance of which,  or exchange  for,  may, in the opinion of our counsel,  be
unlawful.  We also reserve the absolute  right,  subject to  applicable  law, to
waive any  condition  or  irregularity  in any tender of  original  notes of any
particular holder whether or not similar conditions or irregularities are waived
in the case of other holders. No tender of original notes will be deemed to have
been validly made until all irregularities with respect to such tender have been
cured or waived.  Neither we, any of our  affiliates  or assigns,  the  exchange
agent nor any other  person will be under any duty to give any  notification  of
any  irregularities  in tenders or incur any  liability  for failure to give any
notification.

      If any letter of transmittal,  endorsement, bond power, power of attorney,
or any other  document  required  by the  letter of  transmittal  is signed by a
trustee,  executor,  administrator,  guardian,  attorney-in-fact,  officer  of a
corporation  or other person acting in a fiduciary or  representative  capacity,
that person  should so indicate  when  signing,  and unless waived by us, proper
evidence satisfactory to us, in our sole discretion,  of that person's authority
must be  submitted.  A  beneficial  owner of original  notes that are held by or
registered in the name of a broker,  dealer,  commercial  bank, trust company or
other  nominee or  custodian  is urged to contact  that entity  promptly if that
beneficial holder wishes to participate in the exchange offer.

Resales of Exchange Notes

      We are making the exchange offer for the exchange notes in reliance on the
position  of the staff of the  Division  of  Corporation  Finance  of the SEC as
defined in certain  interpretive  letters  addressed  to third  parties in other
transactions. However, we did not seek our own interpretive letter and we cannot
assure that the staff of the  Division of  Corporation  Finance of the SEC would
make a similar  determination  with respect to the  exchange  offer as it has in
other interpretive letters to third parties.  Based on these  interpretations by
the staff of the Division of Corporation  Finance of the SEC, and subject to the
two  immediately  following  sentences,  we believe that  exchange  notes issued
pursuant to this  exchange  offer in exchange for original  notes may be offered
for resale,  resold and otherwise  transferred by a holder thereof (other than a
holder who is a broker-dealer)  without further compliance with the registration
and prospectus  delivery  requirements of the Securities Act, provided that such
exchange notes are acquired in the ordinary course of the holder's  business and
that the holder is not


                                       23
<PAGE>

participating,  and has no  arrangement  or  understanding  with any  person  to
participate, in a distribution (within the meaning of the Securities Act) of the
exchange notes.

      However, any holder of original notes who is an "affiliate" of ours or who
intends to  participate  in the exchange  offer for the purpose of  distributing
exchange notes,  or any  broker-dealer  who purchased  original notes from us to
resell  pursuant  to Rule  144A  or any  other  available  exemption  under  the
Securities Act,

      (a) will not be able to rely on the  interpretations  of the  staff of the
Division  of  Corporation  Finance  of the SEC  defined  in the  above-mentioned
interpretive letters,

      (b) will not be permitted or entitled to tender such original notes in the
exchange offer and

      (c) must comply with the registration and prospectus delivery requirements
of the  Securities  Act in  connection  with any sale or other  transfer of such
original  notes  unless  such sale is made  pursuant to an  exemption  from such
requirements.

      In addition, as described below, if any broker-dealer holds original notes
acquired  for its own  account  as a result of  market-making  or other  trading
activities  and exchanges  those original  notes for exchange  notes,  then that
broker-dealer  must  deliver  a  prospectus  meeting  the  requirements  of  the
Securities  Act in connection  with any resales of those  exchange  notes.  Each
holder of original  notes who wishes to  exchange  original  notes for  exchange
notes in the exchange offer will be required to represent that:

      -     it is not an "affiliate" of Energy Holdings,

      -     any  exchange  notes to be received by it are being  acquired in the
            ordinary course of its business,

      -     it  has  no  arrangement  or   understanding   with  any  person  to
            participate in a distribution  (within the meaning of the Securities
            Act) of such exchange notes, and

      -     if the tendering holder is not a  broker-dealer,  that holder is not
            engaged in, and does not intend to engage in, a distribution (within
            the meaning of the Securities Act) of its exchange notes.

      In addition,  we may require the holder,  as a condition to that  holder's
eligibility to participate in the exchange  offer, to furnish to us (or an agent
of ours) in writing, information as to the number of "beneficial owners" (within
the meaning of Rule 13d-3 under the Exchange  Act) on behalf of whom that holder
holds the original notes to be exchanged in the exchange offer.

      Each broker-dealer that receives exchange notes for its own account in the
exchange offer must  acknowledge that it acquired the original notes for its own
account as the result of  market-making  activities or other trading  activities
and must agree that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of those exchange notes. The letter
of  transmittal  states that by making that  acknowledgement  and  delivering  a
prospectus,  a  broker-dealer  will  not  be  deemed  to  admit  that  it  is an
"underwriter"  within the meaning of the  Securities  Act. Based on the position
taken by the staff of the  Division  of  Corporation  Finance  of the SEC in the
interpretive   letters   referred  to  above,  we  believe  that   participating
broker-dealers who acquired original notes for their own accounts as a result of
market-making   activities  or  other  trading   activities  may  fulfill  their
prospectus  delivery  requirements  with respect to the exchange  notes received
upon exchange of original  notes (other than original  notes which  represent an
unsold  allotment from the initial sale of the original notes) with a prospectus
meeting the  requirements  of the  Securities  Act,  which may be the prospectus
prepared for this  exchange  offer so long as it contains a  description  of the
plan of distribution regarding the resale of the exchange notes.

      Accordingly,  this prospectus,  as it may be amended or supplemented  from
time to time, may be used by a  participating  broker-dealer  in connection with
resales of exchange  notes  received in exchange  for  original  notes where the
original  notes were  acquired by the  participating  broker-dealer  for its own
account as a result of market-making or other trading  activities.  See "Plan of
Distribution".  Subject to certain  provisions  contained  in the  exchange  and
registration rights agreement, we have agreed that this prospectus, as it may be
amended  or  supplemented  from  time to  time,  may be used by a  participating
broker-dealer  in  connection  with  resales of exchange  notes for a period not
exceeding


                                       24
<PAGE>

180 days after the expiration date.  However, a participating  broker-dealer who
intends to use this  prospectus in connection  with the resale of exchange notes
received in exchange for  original  notes  pursuant to the  exchange  offer must
notify  us on  or  before  the  expiration  date,  that  it  is a  participating
broker-dealer.  This notice may be given in the space  provided for that purpose
in the letter of transmittal or may be delivered to the exchange agent at one of
the addresses set forth herein under "-- Exchange Agent".

      Any  participating  broker-dealer who is an "affiliate" of Energy Holdings
may not rely on these interpretive letters and must comply with the registration
and prospectus  delivery  requirements  of the Securities Act in connection with
any resale  transaction.  In that regard,  each participating  broker-dealer who
surrenders  original  notes in the exchange offer will be deemed to have agreed,
by  execution  of the letter of  transmittal  or an agent's  message,  that upon
receipt of notice from Energy  Holdings  of the  occurrence  of any event or the
discovery of:

      (1)   any fact which makes any  statement  contained  or  incorporated  by
            reference in this prospectus untrue in any material respect or

      (2)   any fact which  causes this  prospectus  to omit to state a material
            fact  necessary  in  order  to  make  the  statements  contained  or
            incorporated  by  reference  in this  prospectus,  in  light  of the
            circumstances under which they were made, not misleading, or

      (3)   the  occurrence  of  other  events  specified  in the  exchange  and
            registration rights agreement,

that  participating  broker-dealer will suspend the sale of exchange notes under
this prospectus until we have amended or supplemented this prospectus to correct
the  misstatement  or  omission  and have  furnished  copies of the  amended  or
supplemented  prospectus to the  participating  broker-dealer,  or we have given
notice that the sale of the exchange notes may be resumed, as the case may be.

Withdrawal Rights

      Except as otherwise provided in this prospectus, tenders of original notes
may be withdrawn at any time on or before the  expiration  date.  In order for a
withdrawal  to  be  effective  a  written,   telegraphic,   telex  or  facsimile
transmission of the notice of withdrawal must be timely received by the exchange
agent  at its  address  listed  under  "--  Exchange  Agent"  on or  before  the
expiration  date.  Any notice of withdrawal  must specify the name of the person
who tendered the original notes to be withdrawn,  the aggregate principal amount
of original notes to be withdrawn,  and, if certificates  for the original notes
have been tendered,  the name of the registered holder of the original notes, if
different from that of the person who tendered the original notes.

      If original  notes have been  delivered  or  otherwise  identified  to the
exchange  agent,  then before the physical  release of the original  notes,  the
tendering holder must submit the serial numbers shown on the particular original
notes to be  withdrawn  and the  signature on the notice of  withdrawal  must be
guaranteed  by an Eligible  Institution,  except in the case of  original  notes
tendered for the account of an Eligible Institution. For original notes tendered
under the  procedures for  book-entry  transfer  described in "-- Procedures for
Tendering  Original  Notes",  the notice of withdrawal must specify the name and
number of the  account at DTC to be  credited  with the  withdrawal  of original
notes,  in which case a notice of  withdrawal  will be effective if delivered to
the exchange  agent by written,  telegraphic,  telex or facsimile  transmission.
Withdrawals  of tenders of original  notes may not be rescinded.  Original notes
properly  withdrawn  will not be deemed  validly  tendered  for  purposes of the
exchange  offer,  but may be retendered at any subsequent  time on or before the
expiration  date by following any of the  procedures  described  above under "--
Procedures for Tendering Original Notes". All questions as to the validity, form
and  eligibility,  including  time of receipt,  of  withdrawal  notices  will be
determined by us, in our sole discretion, whose determination shall be final and
binding on all parties.  Neither  Energy  Holdings,  the exchange  agent nor any
other person is under any duty to give any notification of any irregularities in
any notice of withdrawal  nor will those parties incur any liability for failure
to give that notice.  Any original  notes which have been tendered but which are
withdrawn will be returned to the holder promptly after withdrawal.


                                       25
<PAGE>

Interest on Exchange Notes

      Interest on the notes is payable  semi-annually  on February 15 and August
15 of each year, beginning August 15, 2001, at the rate of 8.625% per annum. The
exchange  notes will bear interest from and including the last interest  payment
date on the original notes, or if one has not yet occurred, the date of issuance
of the original notes. Accordingly,  holders of original notes that are accepted
for exchange will not receive  accrued but unpaid  interest on original notes at
the time of tender.  Rather, that interest will be payable on the exchange notes
delivered in exchange for the original notes on the first interest  payment date
after the expiration date.

Accounting Treatment

      The  exchange  notes will be  recorded at the same  carrying  value as the
original  notes for which they are exchanged,  which is the aggregate  principal
amount of the original notes, as reflected in our accounting records on the date
of  exchange.  Accordingly,  no gain or loss  for  accounting  purposes  will be
recognized in connection with the exchange offer.
The cost of the exchange  offer will be amortized  over the term of the exchange
notes.

Exchange Agent

      First Union  National  Bank has been  appointed as exchange  agent for the
exchange  offer.  Delivery of the letters of transmittal  and any other required
documents,  questions,  requests for  assistance,  and  requests for  additional
copies of this prospectus or of the letter of transmittal  should be directed to
the exchange agent as follows:

                        By Registered or Certified Mail:
                            First Union National Bank
                     First Union Customer Information Center
                           1525 West W.T. Harris Blvd.
                           Corporate Trust Department
                         Charlotte, North Carolina 28262
                            Attention: Marsha Rice

                     By Hand or Overnight Delivery Service:
                            First Union National Bank
                     First Union Customer Information Center
                           1525 West W.T. Harris Blvd.
                           Corporate Trust Department
                         Charlotte, North Carolina 28262
                            Attention: Marsha Rice

           By Facsimile Transmission (for Eligible Institutions only):
                                 (704) 590-7628
                        Confirm by Telephone: Marsha Rice
                                or (704) 590-7413

      Delivery to other than the above  addresses or  facsimile  number will not
constitute a valid delivery.


Fees and Expenses

      We have agreed to pay the exchange agent reasonable and customary fees for
its services and will reimburse it for its reasonable out-of-pocket expenses. We
will also pay brokerage  houses and other  custodians,  nominees and fiduciaries
the reasonable  out-of-pocket  expenses incurred by them in forwarding copies of
this  prospectus  and related  documents  to the  beneficial  owners of original
notes,  and in handling or  tendering  for their  customers.  Holders who tender
their  original  notes for  exchange  will not be  obligated to pay any transfer
taxes in connection  with the transfer.  If,  however,  exchange notes are to be
delivered  to, or are to be issued in the name of,  any  person  other  than the
registered  holder of the  original  notes  tendered,  or if a  transfer  tax is
imposed for any reason other than the exchange of original  notes in  connection
with the exchange  offer,  then the amount of any such transfer


                                       26
<PAGE>

taxes,  whether imposed on the registered  holder or any other persons,  will be
payable by the tendering  holder.  If  satisfactory  evidence of payment of such
taxes or exemption  therefrom is not submitted  with the letter of  transmittal,
the amount of such  transfer  taxes will be billed  directly  to such  tendering
holder.  We will not make any  payment to  brokers,  dealers  or other  nominees
soliciting acceptances of the exchange offer.

                          DESCRIPTION OF EXCHANGE NOTES

      Holders can find the  definitions  of some terms used in this  description
under the subheading "Certain Definitions".

      The terms of the  exchange  notes to be issued in the  exchange  offer are
identical in all material  respects to the terms of the original  notes,  except
for the transfer restrictions relating to the original notes. The exchange notes
will be issued,  and the original  notes were issued,  under an indenture  dated
October 8, 1999,  between  Energy  Holdings and First Union  National  Bank,  as
trustee.  The exchange notes will evidence the same debt as the original  notes,
and both series of notes will be entitled to the benefits of the  indenture  and
will be treated as a single class of debt securities.  Upon effectiveness of the
registration statement of which this prospectus is a part, the indenture will be
subject to and governed by the Trust Indenture Act of 1939.

      The following  description is a summary of the material  provisions of the
notes, the indenture and the exchange and registration rights agreement relating
to the notes.  It does not restate those  documents in their  entirety.  We urge
holders to read the notes, the indenture and the  registration  rights agreement
because  they,  and not this  description,  define your rights as holders of the
notes.  Copies  of the  indenture,  including  a  form  of the  notes,  and  the
registration  rights  agreement  are  available  as  described  below  under "--
Additional Information".

Brief Description of the Notes

      The notes are general senior unsecured  obligations of Energy Holdings and
rank  equally  in  right  of  payment  with  all  of  the  other  unsecured  and
unsubordinated  indebtedness of Energy  Holdings.  Although the notes are senior
unsecured  obligations,  Energy  Holdings has not issued,  and does not have any
current firm arrangements to issue, any significant  additional  indebtedness to
which the notes  would be senior.  In  addition,  the notes will be  effectively
subordinate  to any  secured  indebtedness  issued  by Energy  Holdings.  Energy
Holdings  has not issued,  and does not have any current  firm  arrangements  to
issue,  any  secured  obligations  to  which  the  notes  would  be  effectively
subordinate.

      Because  Energy  Holdings is a holding  company  that  conducts all of its
operations through its subsidiaries,  holders of the notes will generally have a
junior  position to claims of creditors of those  subsidiaries,  including trade
creditors, debtholders, secured creditors and taxing authorities.

Principal, Maturity and Interest

      The  indenture  does not  limit  the  aggregate  principal  amount of debt
securities  which may be issued under it. The exchange  notes will  initially be
limited to  $400,000,000  and will be issued in  registered  form only,  without
coupons,  in minimum  denominations of $1,000.  Energy Holdings may "reopen" any
series of debt  securities and issue  additional debt securities of that series.
The notes will mature on February 15, 2008,  the stated  maturity  date,  unless
redeemed or repurchased prior to that date.

      Interest  on the  notes  accrues  at the rate of  8.625%  per annum and is
payable  semi-annually  in  arrears on  February  15 and August 15 of each year.
Energy  Holdings will make each  interest  payment to the persons in whose names
the notes are  registered at the close of business on the January 31 and July 31
immediately preceding any interest payment date.

      Interest  on the  exchange  notes will  accrue  from the date of  original
issuance or, if interest has already  been paid,  from the most recent  interest
payment date to which  interest was paid or duly provided for.  Interest will be
computed on the basis of a 360-day year  comprised of twelve 30-day  months.  If
any  interest  payment  date or the  stated  maturity  date  or date of  earlier
redemption or  repurchase  is not a business day, the required  payment shall be
made on the next succeeding day


                                       27
<PAGE>

which is a business day, without any interest or other payment in respect of the
payment  subject  to delay,  with the same  force  and  effect as if made on the
interest  payment date or stated maturity date or date of earlier  redemption or
repurchase.

      "Business Day" means each Monday, Tuesday, Wednesday,  Thursday and Friday
which is not a day on which banking  institutions in Newark,  New Jersey and The
City of New York are authorized or obligated by law or executive order to close.

Payment and Paying Agents

      Interest on the notes is payable at any office or agency to be  maintained
by Energy Holdings in Newark, New Jersey and The City of New York. At the option
of Energy Holdings, however, interest may be paid

      o     by  check  mailed  to the  address  of the  person  entitled  to the
            interest  payment  at the  address  that  appears  in the  "security
            register" maintained by Energy Holdings or

      o     by wire transfer to an account  maintained by the person entitled to
            the  interest  payment  as  specified  in  the  security   register.
            (Sections 301, 1001 and 1002 of the Indenture).

Transfer and Exchange

      Under the indenture,  debt securities of any series,  including the notes,
may be presented for registration of transfer and may be presented for exchange

      o     at each  office  or  agency  required  to be  maintained  by  Energy
            Holdings  for payment of such series as described in "-- Payment and
            Paying Agents", and

      o     at each other office or agency that Energy  Holdings  may  designate
            from time to time for such purposes.

      No  service  charge  will be made for any  transfer  or  exchange  of debt
securities,  including the notes, but Energy Holdings may require payment of any
tax or other  governmental  charge  payable in  connection  with the transfer or
exchange. (Section 305 of the indenture).

      The indenture does not require Energy Holdings to

      o     issue, register the transfer of or exchange debt securities during a
            period  beginning  at the  opening of  business  15 days  before any
            selection  of debt  securities  of that  series to be  redeemed  and
            ending at the close of  business  on (A) if debt  securities  of the
            series are issuable only in registered  form,  the day of mailing of
            the relevant  notice of redemption and (B) if debt securities of the
            series are issuable in bearer form, the day of the first publication
            of the relevant notice of redemption,  or, if debt securities of the
            series  are  also  issuable  in  registered  form  and  there  is no
            publication,   the  day  of  mailing  of  the  relevant   notice  of
            redemption;

      o     register the transfer of or exchange any debt security in registered
            form,  or  portion  thereof,  called  for  redemption,   except  the
            unredeemed  portion of any debt  security in  registered  form being
            redeemed in part;

      o     exchange  any debt  security in bearer  form called for  redemption,
            except to  exchange  such debt  security  in bearer  form for a debt
            security  in  registered  form of that series and like tenor that is
            simultaneously surrendered for redemption; or

      o     issue,  register the transfer of or exchange any debt security which
            has been  surrendered  for  repayment  at the option of the  holder,
            except the portion,  if any, of that debt security not to be repaid.
            (Section 305 of the Indenture).

      The registered holder of a note will be treated as the owner of it for all
purposes.


                                       28
<PAGE>

Optional Redemption

      The notes will be redeemable at the option of Energy Holdings, in whole or
in part at any time, on at least 30 days but not more than 60 days prior written
notice mailed to the registered holders thereof,  at a redemption price equal to
the greater of

      o     100% of the principal amount of the notes to be redeemed, and

      o     the sum, as determined by the Quotation Agent (as defined below), of
            the  present  values  of the  principal  amount  of the  notes to be
            redeemed and the remaining  scheduled  payments of interest  thereon
            from the redemption date to February 15, 2008,  which we refer to as
            the remaining life,  discounted from their respective  payment dates
            to the date of redemption on a semiannual basis,  assuming a 360-day
            year  consisting of twelve 30-day  months,  at the Treasury Rate (as
            defined below) plus 40 basis points

plus, in either case, accrued interest thereon to the date of redemption.

      If money sufficient to pay the redemption price of and accrued interest on
all of the notes to be redeemed on the  redemption  date is  deposited  with the
trustee or paying agent on or before the  redemption  date and other  conditions
under the  indenture  are  satisfied,  then on and after that  redemption  date,
interest will cease to accrue on those notes called for redemption.

      "Comparable  Treasury  Issue" means the United  States  Treasury  security
selected by the Quotation Agent as having a maturity comparable to the remaining
life that would be utilized,  at the time of selection  and in  accordance  with
customary financial practice, in pricing new issues of corporate debt securities
of comparable maturity with the remaining life of the notes to be redeemed.

      "Comparable  Treasury Price" means,  with respect to any redemption  date,
the average of four Reference  Treasury  Dealer  Quotations for such  redemption
date,  after excluding the highest and lowest of such Reference  Treasury Dealer
Quotations, or, if the trustee obtains fewer than four Reference Treasury Dealer
Quotations, the average of all of the quotations.

      "Quotation Agent" means the Reference  Treasury Dealer appointed by Energy
Holdings.  "Reference  Treasury  Dealer"  means (i) Lehman  Brothers  Inc.,  its
successors; provided, however, that if the foregoing shall cease to be a primary
United States  Government  securities dealer in New York City, which we refer to
as a Primary Treasury Dealer,  Energy Holdings shall substitute therefor another
Primary Treasury Dealer,  and (ii) any other Primary Treasury Dealer selected by
Energy Holdings.

      "Reference  Treasury  Dealer  Quotations"  means,  with  respect  to  each
Reference Treasury Dealer and any redemption date, the average, as determined by
the trustee,  of the bid and asked  prices for the  Comparable  Treasury  Issue,
expressed  in each  case as a  percentage  of its  principal  amount,  quoted in
writing to the trustee by such Reference  Treasury Dealer at 5:00 p.m., New York
City time, on the third business day preceding such redemption date.

      "Treasury Rate" means,  with respect to any redemption  date, the rate per
annum  equal to the  semiannual  yield to maturity  of the  Comparable  Treasury
Issue,  calculated on the third business day preceding the redemption date using
a price for the  Comparable  Treasury  Issue,  expressed as a percentage  of its
principal  amount,  equal to the Comparable  Treasury Price for such  redemption
date.

      Energy Holdings may at any time, and from time to time, purchase the notes
at any price or prices in the open market or otherwise.

Mandatory Redemption

      Energy  Holdings is not required to make  mandatory  redemption or sinking
fund payments with respect to the notes.

Certain Definitions

      The following is a summary of certain defined terms used in the indenture.
Article One of the indenture contains the full definition of all such terms.


                                       29
<PAGE>

      "Attributable Debt" in respect of a Sale and Leaseback  Transaction means,
as at the time of  determination,  the present value  (discounted  at a rate per
annum  equal to the  weighted  average  interest  rate of all  outstanding  debt
securities, compounded semi-annually) of the total obligations of the lessee for
rental payments during the remaining term of the lease included in such Sale and
Leaseback  Transaction  (including  any  period  for which  such  lease has been
extended).

      "Capitalized  Lease  Obligations"  means all rental  obligations as lessee
which,  under GAAP,  are or will be required to be  capitalized  on the books of
Energy  Holdings  or any of its  subsidiaries,  in each case taken at the amount
thereof accounted for as indebtedness in accordance with such principles.

      "Change of Control"  means the  occurrence of one or more of the following
events:

      (1)   PSEG  (or its  successors)  shall  cease  to own a  majority  of the
            outstanding voting stock of Energy Holdings,


      (2)   at any time  following  the  occurrence  of the event  described  in
            clause  (1),  a person  or group  (as that  term is used in  Section
            13(d)(3) of the  Securities  Exchange Act of 1934) of persons (other
            than PSEG) shall have become, directly or indirectly, the beneficial
            owner or shall have acquired the absolute  power to direct the vote,
            of more than 35% of the outstanding voting stock of Energy Holdings,

      (3)   during any twelve-month period,  individuals who at the beginning of
            such period  constitute  the Board of Directors  of Energy  Holdings
            (together  with any new directors  whose  election or nomination was
            approved  by a  majority  of the  directors  then in office who were
            either  directors  at the  beginning  of  such  period  or who  were
            previously  so approved)  shall cease for any reason to constitute a
            majority  of the  Board of  Directors  of  Energy  Holdings,  unless
            approved  by a majority of the Board of  Directors  in office at the
            beginning of such period (including such new directors), or

      (4)   Energy  Holdings  shall have merged or  consolidated  with any other
            corporation or the  properties  and assets of Energy  Holdings shall
            have been conveyed or  transferred  substantially  as an entirety to
            any  person in  accordance  with  Section  801 of the  indenture  as
            described under "-- Merger or Consolidation".

      However,  regardless  of whether one or more of the above events occurs or
circumstances exist, a Change of Control shall be deemed not to have occurred if
after giving effect to the event or circumstance, the debt securities, including
the notes,  are rated no less than "BBB-" by Standard & Poor's Ratings Group and
"Ba1" by Moody's Investors Service.

      "Consolidated Net Tangible Assets" means, as of any date of determination,
the total  amount of assets,  less  accumulated  depreciation  or  amortization,
valuation  allowances,  other applicable  reserves and other properly deductible
items in  accordance  with GAAP,  which would appear on a  consolidated  balance
sheet of Energy  Holdings and its  consolidated  subsidiaries,  determined  on a
consolidated  basis in  accordance  with GAAP,  after giving  effect to purchase
accounting and after deduction therefrom,  to the extent otherwise included, the
amounts of

      o     consolidated current liabilities;

      o     deferred income taxes;

      o     minority  interests  in  consolidated  Subsidiaries  held by persons
            other than Energy Holdings or a subsidiary;

      o     excess of cost over fair value of assets of businesses acquired,  as
            determined by the Board of Directors; and

      o     unamortized debt discount and expense and other unamortized deferred
            changes,   goodwill   (including   the  amounts  of  investments  in
            affiliates that consist of goodwill),  patents, trademarks,  service
            names, trade names,  copyrights,  licenses,  deferred project costs,
            organizational  or other  development  expenses and other intangible
            items.


                                       30
<PAGE>

            "Indebtedness" of any person means

      o     all  indebtedness of such person for borrowed money,  whether or not
            represented by bonds, debentures, notes or other securities,

      o     the  deferred   purchase  price  of  assets  or  services  which  in
            accordance  with GAAP  would be shown on the  liability  side of the
            balance sheet of such person,

      o     all  Indebtedness  of  another  person  secured  by any  Lien on any
            property owned by such person,  whether or not such Indebtedness has
            been assumed,

      o     all obligations of such person to pay a specified purchase price for
            goods or services  whether or not delivered,  i.e.,  take-or-pay and
            similar obligations,

      o     all Capitalized Lease Obligations of such person and

      o     all obligations of such person guaranteeing any Indebtedness, lease,
            dividend  or other  obligation  of any  other  person,  directly  or
            indirectly, whether contingent or otherwise.

      "Lien" means any  mortgage,  pledge,  hypothecation,  assignment,  deposit
arrangement,  encumbrance,  lien (statutory or other),  preference,  priority or
other security  agreement of any kind or nature whatsoever  (including,  without
limitation,  any  conditional  sale or  other  title  retention  agreement,  any
financing  or  similar  statement  or  notice  filed  under the UCC or any other
similar recording or notice statute, and any lease having substantially the same
effect as any of the foregoing).

      "Material   Subsidiary"  means  any  subsidiary  of  Energy  Holdings  the
consolidated  assets  of  which,  as of the date of any  determination  of those
assets,  constitute at least 10% of the  consolidated  assets of Energy Holdings
and its  subsidiaries,  or the  consolidated  earnings  before  taxes  of  which
constituted  at least 10% of the  consolidated  earnings  before taxes of Energy
Holdings  and its  subsidiaries  for the most  recently  completed  fiscal year,
provided, however, that

      o     no  subsidiary  of  a  Material   Subsidiary  shall  be  a  Material
            Subsidiary, and

      o     in all instances each of Global, Resources and PSEG Capital shall be
            a Material Subsidiary.

      "Sale and Leaseback Transaction" means an arrangement relating to property
or assets now owned or acquired  after the date of the indenture  whereby Energy
Holdings  or a  subsidiary  transfers  such  property  or assets to a person and
leases it back from such  person,  other than leases for a term of not more than
36 months or between Energy  Holdings and a  wholly-owned  subsidiary or between
wholly-owned subsidiaries.

Certain Covenants

      The notes and other series of debt securities issuable under the indenture
will have the  benefit  of the  following  covenants  which may be waived by the
holders of at least a majority  in  principal  amount of the notes  outstanding.
These covenants may not be waived by us or the Trustee.

      Limitation on Liens

      Energy Holdings  covenants in the indenture that it will not, and will not
permit any of its subsidiaries to create,  incur,  assume or suffer to exist any
Lien upon or with respect to any property or assets (real or personal,  tangible
or intangible) of Energy Holdings or any of its subsidiaries,  whether now owned
or acquired after the date of the indenture,  to secure any Indebtedness that is
incurred,  issued,  assumed  or  guaranteed  by  Energy  Holdings  or any of its
subsidiaries without in any such case effectively  providing,  concurrently with
the incurrence,  issuance, assumption or guaranty of any such Indebtedness, that
the debt  securities  shall be equally and ratably secured with any and all such
Indebtedness;  provided,  however, that these restrictions shall not apply to or
prevent the creation, incurrence, assumption or existence of:

      o     Liens existing on the date of the indenture;


                                       31
<PAGE>

      o     Liens to secure or provide for the payment of all or any part of the
            purchase  price  of any  such  property  or  assets  or the  cost of
            construction  or  improvement  thereof;  provided  that no such Lien
            shall  extend  to or cover any  other  property  or assets of Energy
            Holdings or such Subsidiary of Energy Holdings;

      o     Liens  granted or  assumed  by  subsidiaries  (other  than  Material
            Subsidiaries)  in  connection  with  project   financings  or  other
            Indebtedness that is not guaranteed by or otherwise an obligation of
            a Material Subsidiary;

      o     Liens  on the  equity  interest  of  any  subsidiary  that  is not a
            Material Subsidiary in connection with project financings;

      o     Liens for taxes not yet due, or Liens for taxes being  contested  in
            good  faith  and  by  appropriate  proceedings  for  which  adequate
            reserves have been established;

      o     Liens  incidental to the conduct of the business of or the ownership
            of property by Energy Holdings or any of its subsidiaries which were
            not  incurred  in  connection  with  the  borrowing  of money or the
            obtaining  of advances  of credit and which do not in the  aggregate
            materially  detract  from the  value of its  property  or  assets or
            materially impair the use thereof in the operation of its business;

      o     Liens created in connection with worker's compensation, unemployment
            insurance and other social security legislation;

      o     the replacement,  extension or renewal (or successive  replacements,
            extensions or  renewals),  as a whole or in part, of any Lien, or of
            any agreement,  referred to above, or the replacement,  extension or
            renewal (not exceeding the principal amount of Indebtedness  secured
            thereby together with any premium,  interest, fee or expense payable
            in connection  with any such  replacement,  extension or renewal) of
            the Indebtedness  secured thereby;  provided that such  replacement,
            extension  or  renewal  is  limited  to all or a  part  of the  same
            property that secured the Lien  replaced,  extended or renewed (plus
            improvements thereon or additions or accessions thereto); or

      o     any other Lien not excepted by the foregoing clauses; provided that,
            immediately  after the creation or assumption of such Lien,  the sum
            of (x) the amount of  outstanding  Indebtedness  of Energy  Holdings
            secured by all Liens created or assumed under the provisions of this
            clause  plus  (y)  the   Attributable   Debt  with  respect  to  all
            outstanding   leases  in   connection   with   Sale  and   Leaseback
            transactions   entered  into  pursuant  to  the  proviso  under  "--
            Limitation  on Sale and Leaseback  Transactions"  does not exceed an
            amount equal to 10% of Consolidated Net Tangible Assets, as shown on
            the   consolidated   balance  sheet  of  Energy   Holdings  and  its
            subsidiaries  as of the end of the most  recent  fiscal  quarter for
            which  financial  statements  are  available.  (Section  1005 of the
            indenture).

      Limitation on Sale and Leaseback Transactions

      Energy Holdings  covenants in the indenture that it will not, and will not
permit any Subsidiary to, enter into any Sale and Leaseback Transaction unless

      (1)   Energy  Holdings  or such  Subsidiary  would be entitled to create a
            Lien on such property or assets  securing  Indebtedness in an amount
            equal to the  Attributable  Debt with  respect  to such  transaction
            without  equally  and  ratably   securing  the  debt  securities  as
            described under the preceding subsection "-- Limitation on Liens" or

      (2)   the net proceeds of such sale are

            o     at least equal to the fair value (as  determined  by our board
                  of directors) of such property and

            o     Energy Holdings or such Subsidiary  shall apply or cause to be
                  applied  an amount in cash equal to the net  proceeds  of such
                  sale to the  retirement,  within 90 days of the effective date
                  of any such arrangement, of debt securities or Indebtedness of
                  Energy  Holdings  which  ranks  senior or equal  with the debt
                  securities or with  Indebtedness  of a Subsidiary  (other than
                  Indebtedness  owed to Energy  Holdings or a  Subsidiary  or to
                  PSEG).


                                       32
<PAGE>

      However,  in addition to the  transactions  permitted  as described in the
clauses (1) and (2), Energy Holdings or any subsidiary may enter into a Sale and
Leaseback Transaction as long as the sum of

      (x)   the  Attributable  Debt  with  respect  to such  Sale and  Leaseback
            Transaction  and all other Sale and Leaseback  Transactions  entered
            into as described in this proviso, plus

      (y)   the amount of outstanding  Indebtedness secured by Liens incurred as
            described in the last bullet  paragraph of the preceding  subsection
            "Limitation on Liens",

does not exceed an amount equal to 10% of Consolidated Net Tangible  Assets,  as
shown on the consolidated  balance sheet of Energy Holdings and its subsidiaries
as of the end of the most recent fiscal quarter for which  financial  statements
are available. (Section 1006 of the indenture).

      Repayment of Notes Upon a Change of Control

      Upon a Change of  Control,  holders  of the  notes  will have the right to
require  Energy  Holdings to repurchase  their notes,  in whole or in part, at a
repayment price of 101% of their principal  amount plus accrued  interest to the
repayment  date. The holder of debt securities of each other series to be issued
under the indenture will have the right to require Energy Holdings to repurchase
its debt securities at a repayment price in cash equal to a specified percentage
of the  principal  amount of the notes to be  repurchased  established  for that
series plus accrued  interest,  if any, to the date of repayment,  in accordance
with the terms described below and in Article 13 of the indenture.

      Within 30 days following any Change of Control,  Energy Holdings will mail
a notice to each holder of debt  securities  of each series  (with a copy to the
trustee) stating:

      o     that a Change of Control  has  occurred  and that the holder has the
            right to  require  Energy  Holdings  to  repay  that  holder's  debt
            securities,  in  whole  or in part,  in not  less  than the  minimum
            denomination  required  for debt  securities  of that  series,  at a
            repayment  price in cash equal to the  percentage  of the  principal
            amount  of the debt  securities  established  for that  series  plus
            accrued interest, if any, to the date of repayment;

      o     the  circumstances  and  relevant  facts  regarding  such  Change of
            Control,  including information with respect to pro forma historical
            income, cash flow and capitalization of Energy Holdings after giving
            effect to the Change of Control;

      o     the repayment date,  which will be a Business Day and be not earlier
            than 45 days or later  than 60 days  from the date  such  notice  is
            mailed;

      o     that any debt  security of the series not tendered for purchase will
            continue to accrue interest;

      o     that  interest  on any debt  security  of the  series  accepted  for
            repayment  pursuant  to the change of control  offer  shall cease to
            accrue  after the  repayment of the debt  security on the  repayment
            date;

      o     that holders electing to have any debt security repaid pursuant to a
            change of  control  offer will be  required  to  surrender  the debt
            security,  with the form entitled "Option to Elect Repayment" on the
            reverse  of the  debt  security  completed,  to the  trustee  at the
            address  specified  in the notice not  earlier  than 45 days and not
            later than 30 days prior to the repayment date;

      o     that  holders  will be entitled to  withdraw  their  election if the
            paying agent  receives,  not later than the close of business on the
            third  business day preceding  the  repayment  date, or such shorter
            period as may be required  by  applicable  law, a  telegram,  telex,
            facsimile  transmission or letter  providing the name of the holder,
            the principal  amount of debt  securities  the holder  delivered for
            repayment,  and a  statement  that the  holder  is  withdrawing  its
            election to have those debt securities repaid; and

      o     that holders of the series that elect to have their debt  securities
            purchased  only in part will be issued  new debt  securities  of the
            series in a principal  amount equal to then  unpurchased  portion of
            the debt securities surrendered.

      Energy Holdings has covenanted to comply with the tender offer  provisions
of Rule 14e-1 under the Securities Exchange Act of 1934 and any other applicable
laws and regulations in the event that a


                                       33
<PAGE>

Change of Control  occurs and Energy  Holdings  is  required to make a change of
control offer. (Section 1007 of the indenture).

Events of Default and Remedies

      The following will constitute events of default under the indenture:

      o     default in the payment of any interest upon any debt  security,  any
            coupon appertaining  thereto or any "additional  amounts" (which, if
            the terms of the  particular  series of debt  securities so specify,
            will be  payable  upon the  occurrence  of  certain  events  of tax,
            assessment  or  governmental  charge with respect to payments on the
            debt  securities)  payable in respect of any debt  security  of that
            series when such interest,  coupon or additional  amounts become due
            and payable,  and the continuance of such default for a period of 30
            days;

      o     default in the payment of the principal of (or premium,  if any, on)
            any debt  security  of that  series,  when the same  becomes due and
            payable at maturity, upon redemption;

      o     default in the deposit of any sinking  fund  payment when due by the
            terms of any debt security of that series;

      o     default in the performance,  or breach, of any covenant or agreement
            of  Energy  Holdings  in the  indenture  with  respect  to any  debt
            security of that series,  and the continuance of such default for 60
            days after written notice of such default to Energy Holdings;

      o     acceleration  of any  bond,  debenture,  note or other  evidence  of
            Indebtedness  or  under  any  mortgage,  indenture,   including  the
            indenture, or instrument under which there may be issued or by which
            there  may be  secured  or  evidenced  any  Indebtedness  by  Energy
            Holdings or any subsidiary in excess of $25,000,000 in the aggregate
            other than

            (1)   any Indebtedness arising from the obligation to make an equity
                  investment in a subsidiary or

            (2)   Indebtedness  which is payable  solely out of the  property or
                  assets of a  partnership,  joint venture or similar  entity of
                  which Energy Holdings or any such subsidiary is a participant,
                  or which is secured by a Lien on the  property or assets owned
                  or  held  by  such  entity,  without  further  recourse  to or
                  liability of Energy Holdings or any such subsidiary,

      o     whether such Indebtedness now exists or shall be created later;

      o     certain events in bankruptcy, insolvency or reorganization affecting
            Energy Holdings; and

      o     any other event of default  provided with respect to debt securities
            of that series. (Section 501 of the indenture).

      Energy  Holdings  is  required  to file  with the  trustee,  annually,  an
officer's  certificate as to Energy Holdings' compliance with all conditions and
covenants under the indenture.  (Section 1008 of the  indenture).  The indenture
provides that the trustee may withhold  notice to the holders of debt securities
of a series, including the notes, of any default (except payment defaults on the
debt  securities  of that  series) if it  considers  it in the  interest  of the
holders  of  debt  securities  of  the  series  to do  so.  (Section  601 of the
indenture).

      If an event of  default  with  respect  to debt  securities  of a  series,
including the notes, has occurred and is continuing,  the trustee or the holders
of not less than 25% in principal  amount of outstanding debt securities of that
series may declare the principal of all of the debt securities of that series to
be due and  payable  immediately,  by a notice in  writing  to Energy  Holdings.
However,  if the debt  securities of that series are issued with original  issue
discount or are  "indexed  debt  securities,"  the trustee or the holders of not
less than 25% of the debt  securities  may declare that portion of the principal
as may be  specified  in the  terms of those  debt  securities  due and  payable
immediately.  (Section 502 of the  indenture).  Indexed debt securities are debt
securities,  the  interest and  principal  payments on which are  determined  by
reference to a particular index, such as a foreign currency or commodity.

      Subject to the  provisions of the indenture  relating to the duties of the
trustee,  in case an event of default  with  respect to debt  securities  of any
series, including the notes, has occurred and is continuing,


                                       34
<PAGE>

the trustee is under no obligation to exercise any of its rights or powers under
the  indenture  at the  request,  order  or  direction  of the  holders  of debt
securities  of that  series,  unless  those  holders  have  offered  the trustee
reasonable  indemnity  against  the  expenses  and  liabilities  which  might be
incurred by it in compliance with such request. (Section 507 of the indenture).

      Subject to the  provisions  for the  indemnification  of the trustee,  the
holders of a majority in principal  amount of the outstanding debt securities of
any  series of debt  securities,  including  the  notes,  will have the right to
direct the time,  method and place of conducting  any  proceeding for any remedy
available  to the trustee,  or  exercising  any trust or power  conferred on the
trustee with respect to the debt securities of that series.  (Section 512 of the
indenture).

      The  holders of a majority in  principal  amount of the  outstanding  debt
securities of a series,  including  the notes,  may, on behalf of the holders of
all debt  securities  of such  series and any  related  coupons,  waive any past
default  under the indenture  with respect to that series and its  consequences,
except a default

      o     in the payment of the principal of (or premium, if any) or interest,
            if any,  on or  additional  amounts  payable  in respect of any debt
            security of such series or any related coupons or

      o     in respect of a covenant  or  provision  that  cannot be modified or
            amended without the consent of the holder of each  outstanding  debt
            security of that series. (Section 513 of the indenture).

Repayment of Notes Upon Certain Events Involving Resources

If

      (1)   Energy  Holdings  shall no longer own 100% of the  equity  ownership
            interest in Resources, or

      (2)   (a)   a transaction or series of related  transactions (a "Resources
                  Transaction") causes the assets of Resources immediately after
                  such  Resources  Transaction  to be at least 20% less than the
                  assets  of  Resources  immediately  prior  to  such  Resources
                  Transaction (as measured from the end of the month immediately
                  preceding  the  Resources  Transaction  (or in the  case  of a
                  Resources Transaction involving a series of transactions,  the
                  month immediately  preceding the first of such  transactions))
                  and

            (b)   as a direct result of such  Resources  Transaction,  either of
                  Standard & Poor's Ratings Group or Moody's Investors  Service,
                  Inc. shall downgrade its respective  rating of Energy Holdings
                  below  BBB- or Ba1 (or if either of such  ratings  immediately
                  preceding the Resources Transaction is lower than BBB- or Ba1,
                  such  rating  shall  as a  direct  result  of  such  Resources
                  Transaction be downgraded),

then the holders of the notes shall have the right to require Energy Holdings to
repurchase  their notes,  in whole or in part, at a repayment price equal to the
greater of

      o     100% of the principal amount of the notes to be repurchased, and

      o     the sum,  as  determined  by the  Quotation  Agent  (as  defined  in
            "Description  of  Exchange  Notes -  Optional  Redemption"),  of the
            present  values  of  the  principal   amount  of  the  notes  to  be
            repurchased and the remaining scheduled payments of interest thereon
            from the repayment date to February 15, 2008  discounted  from their
            respective  payment  dates to the date of  repayment on a semiannual
            basis  (assuming a 360-day year  consisting of twelve 30-day months)
            at the Treasury Rate (as defined in  "Description  of Exchange Notes
            -- Optional Redemption"), plus 40 basis points

plus, in either case, accrued interest on the notes to the date of repayment.

Merger or Consolidation

      The indenture  provides that Energy Holdings may not  consolidate  with or
merge with or into any other  corporation  or convey or transfer its  properties
and assets  substantially  as an entirety to any person,  unless  either  Energy
Holdings is the continuing  corporation or such corporation or person assumes by
supplemental  indenture  all  the  obligations  of  Energy  Holdings  under  the
indenture and the


                                       35
<PAGE>

debt securities issued under it and immediately after the transaction no default
shall exist. (Section 801 of the indenture).

No Personal Liability of Directors, Officers, Employees and Stockholders

      No past, present or future director,  officer,  employee,  incorporator or
stockholder  of Energy  Holdings,  as such,  shall  have any  liability  for any
obligations  of Energy  Holdings  under the notes and the  indenture  or for any
claim  based on, in  respect  of, or by reason  of,  such  obligations  or their
creation.  Each holder of notes by accepting a note waives and releases all such
liability.  The waiver and release are part of the consideration for issuance of
the notes.  The  waiver  may not be  effective  to waive  liabilities  under the
federal securities laws. (Section 113 of the indenture).

Satisfaction and Discharge, Defeasance and Covenant Defeasance

      According to the terms of the  indenture,  Energy  Holdings may  discharge
certain  obligations to holders of any series of debt securities,  including the
notes,  that have not already been delivered to the trustee for cancellation and
that  either  have  become due and payable or are by their terms due and payable
within one year, or scheduled  for  redemption  within one year, by  irrevocably
depositing with the trustee,  in trust, funds in an amount sufficient to pay the
entire indebtedness on such debt securities for principal,  and premium, if any,
and  interest,  if any,  and any  additional  amounts  with  respect to the debt
securities,  to the date of such deposit, if the debt securities have become due
and payable,  or to the maturity  date or  redemption  date, as the case may be.
(Section 401 of the indenture).

      The indenture  provides that, if the provisions of Article Fourteen of the
indenture are made  applicable  to the debt  securities of or within any series,
including the notes, and any related coupons, Energy Holdings may elect either

      (a)   to  defease  and be  discharged  from any and all  obligations  with
            respect to the debt securities and any related  coupons,  except for
            the  obligations  to  pay  additional  amounts,  if  any,  upon  the
            occurrence  of certain  events of tax,  assessment  or  governmental
            charge  with  respect to payments  on such debt  securities  and the
            obligations  to  register  the  transfer  or  exchange  of such debt
            securities  and  any  related  coupons,   to  replace  temporary  or
            mutilated, destroyed, lost or stolen debt securities and any related
            coupons,  to  maintain  an office or agency in  respect of such debt
            securities and any related  coupons,  and to hold moneys for payment
            in trust (Section 1402 of the indenture) or

      (b)   to be released  from its  obligations  under any covenant  specified
            pursuant to Section 301 with respect to such debt securities and any
            related  coupons,  and any omission to comply with such  obligations
            shall not  constitute  a default or an event of default with respect
            to such debt securities and any related coupons (Section 1403 of the
            indenture),

in either case upon the irrevocable deposit by Energy Holdings with the trustee,
in trust, of

      (1)   an amount in United States Dollars,

      (2)   Government  Obligations  (as defined below)  applicable to such debt
            securities  and coupons that  through the payment of  principal  and
            interest in  accordance  with their terms will  provide  money in an
            amount, or

      (3)   a combination of the items referred to in (1) or (2)

in an amount,  sufficient  to pay the  principal  of, and  premium,  if any, and
interest,  if any,  on the debt  securities  and any  related  coupons,  and any
mandatory  sinking  fund or analogous  payments on them,  on all  scheduled  due
dates.

      Such a trust  may only be  established  if,  among  other  things,  Energy
Holdings  has  delivered to the trustee an opinion of counsel to the effect that
the holders of such debt  securities and any related  coupons will not recognize
income,  gain or loss for United States  federal income tax purposes as a


                                       36
<PAGE>

result of such  defeasance or covenant  defeasance and will be subject to United
States  Federal  income tax on the same  amounts,  in the same manner and at the
same times as would have been the case if such defeasance or covenant defeasance
had not occurred. The opinion of counsel, in the case of defeasance under clause
(a)  above,  must refer to and be based  upon a ruling of the  Internal  Revenue
Service or a change in applicable United States federal income tax law occurring
after the date of the indenture. (Section 1404 of the indenture).

      "Government Obligations" means securities which are

      o     direct obligations of the United States or

      o     obligations of a person controlled or supervised by and acting as an
            agency or instrumentality of the United States, the payment of which
            is unconditionally  guaranteed as a full faith and credit obligation
            by the United  States,  which are not callable or  redeemable at the
            option of the issuer of that obligation.

Government  Obligations  also include a depository  receipt  issued by a bank or
trust company as custodian with respect to any such  Government  Obligation or a
specific  payment of interest on or principal of any such Government  Obligation
held by such  custodian  for the account of the holder of a depository  receipt;
provided  that,  except as required by law, such  custodian is not authorized to
make any  deduction  from the amount  payable  to the holder of such  depository
receipt from the amount  received by the custodian in respect of the  Government
Obligation or the specific payment of interest on or principal of the Government
Obligation evidenced by such depository receipt. (Section 101 of the indenture).

      In the event Energy Holdings effects  covenant  defeasance with respect to
any debt  securities  and any  related  coupons  and those debt  securities  and
coupons are declared due and payable  because of the  occurrence of any event of
default,  other than the events of default  described  in clauses  (4) or (8) of
Section 501 of the  indenture,  with  respect to any covenant to which there has
been defeasance,  the amount of Government Obligations and funds on deposit with
the trustee will be  sufficient to pay amounts due on such debt  securities  and
coupons at the time of their stated  maturity but may not be  sufficient  to pay
amounts due on such debt securities and coupons at the time of the  acceleration
resulting from such event of default. In such case, Energy Holdings would remain
liable to make payment of such amounts due at the time of acceleration. (Section
501 of the indenture).

      If the  trustee  or any  paying  agent is  unable  to apply  any  money in
accordance with the indenture by reason of any order or judgment of any court or
governmental  authority  enjoining,  restraining or otherwise  prohibiting  such
application, then Energy Holdings' obligations under the indenture and such debt
securities and any related  coupons shall be revived and reinstated as though no
deposit had occurred pursuant to the indenture,  until such time as such trustee
or paying  agent is  permitted  to apply all such money in  accordance  with the
indenture.  However,  if Energy  Holdings  makes any payment of principal of, or
premium,  if any, or interest,  if any, on any such debt security or any related
coupon following the reinstatement of its obligations,  Energy Holdings shall be
subrogated to the rights of the holders of such debt  securities and any related
coupons to receive  such  payment  from the money held by such trustee or paying
agent.

Amendment, Supplement and Waiver

      Energy  Holdings and the trustee may modify and amend the  indenture  with
the consent of the holders of a majority in principal  amount of all outstanding
debt  securities that are affected by the  modification  or amendment;  provided
that no modification or amendment may, without the consent of the holder of each
outstanding debt security affected by the modification or amendment, among other
things:

      o     change the stated maturity date of the principal of, or premium,  if
            any, on, or any  installment of principal of or interest on any debt
            security;

      o     reduce the principal amount of, or the rate or amount of interest in
            respect of, or any premium  payable upon the redemption of, any debt
            security;


                                       37
<PAGE>

      o     change the manner of calculating the rate of interest;

      o     change any obligation of Energy  Holdings to pay additional  amounts
            in respect of any debt security;

      o     reduce the portion of the principal of a debt  security  issued with
            the original  issue  discount or an indexed debt security that would
            be  due  and  payable  upon a  declaration  of  acceleration  of the
            maturity of the debt security or provable in bankruptcy;

      o     adversely  affect any right of repayment at the option of the holder
            of any such debt security;

      o     change  the place of  payment  of  principal  of, or any  premium or
            interest on, the debt security;

      o     impair  the  right  to  institute  suit for the  enforcement  of any
            payment on or after the stated maturity date of the debt security or
            on or  after  any  redemption  date or  repayment  date for the debt
            security;

      o     adversely affect any right to convert or exchange any debt security;

      o     reduce the percentage in principal  amount of such  outstanding debt
            securities,  the  consent of whose  holders is  required to amend or
            waive  compliance  with certain  provisions  of the  indenture or to
            waive certain defaults under the indenture;

      o     reduce the requirements for voting or quorum described below; or

      o     modify any of the preceding  requirements  or any of the  provisions
            relating  to  waiving  past  defaults  or  compliance  with  certain
            restrictive provisions, except to increase the percentage of holders
            required  to  effect   waiver  or  to  provide  that  certain  other
            provisions of the indenture cannot be modified or waived without the
            consent  of  the  holder  of  each  debt  security  affected  by the
            modification or waiver. (Section 902 of the indenture).

      Energy Holdings and the trustee may modify and amend the indenture without
the consent of any holder, for any of the following purposes:

      o     to evidence the succession of another person to Energy  Holdings and
            the assumption by any successor of the covenants of Energy  Holdings
            under the indenture and the debt securities;

      o     to add to the  covenants  of Energy  Holdings for the benefit of the
            holders of all or any  series of debt  securities  issued  under the
            indenture,  including  the  notes,  and any  related  coupons  or to
            surrender any right or power  conferred upon Energy  Holdings by the
            indenture;

      o     to add events of default  for the  benefit of the  holders of all or
            any series of debt securities, including the notes, issued under the
            indenture;

      o     to add to or change any  provisions  of the  indenture to facilitate
            the  issuance  of, or to  liberalize  the terms of, debt  securities
            issued in bearer  form or to permit or  facilitate  the  issuance of
            debt  securities  in  uncertificated  form,  provided  that any such
            actions do not adversely  affect the interests of the holders of the
            debt securities issued under the indenture or any related coupons in
            any material respect;

      o     to change or eliminate  any  provisions of the  indenture,  provided
            that any change or elimination of this nature will become  effective
            only when  there are no debt  securities  outstanding  of any series
            created prior to the change or  elimination  of the provision  which
            are entitled to the benefit of the provisions;

      o     to  secure  the debt  securities,  including  the  notes,  under the
            indenture  pursuant  to the  requirements  of  Section  1005  of the
            indenture, or otherwise;

      o     to establish the form or terms of debt  securities of any series and
            any related coupons;

      o     to evidence  and  provide for the  acceptance  of  appointment  by a
            successor  trustee or facilitate  the  administration  of the trusts
            under the indenture by more than one trustee;


                                       38
<PAGE>

      o     to cure any  ambiguity,  defect or  inconsistency  in the indenture,
            provided  such action does not  adversely  affect the  interests  of
            holders of debt securities of a series,  including the notes, issued
            under the indenture or any related coupons in any material way; or

      o     to supplement  any of the  provisions of the indenture to the extent
            necessary to permit or  facilitate  defeasance  and discharge of any
            series of debt securities issued under the indenture,  including the
            notes,  provided  that the  action  does not  adversely  affect  the
            interests  of the  holders of the debt  securities  of that  series,
            including  the notes,  and any related  coupons in any material way.
            (Section 901 of the indenture).

      In determining  whether the holders of the requisite  principal  amount of
outstanding  debt  securities  have given any  request,  demand,  authorization,
direction,  notice, consent or waiver under the indenture or whether a quorum is
present at a meeting of holders of debt securities thereunder,

      o     the principal  amount of a debt security  issued with original issue
            discount that will be deemed to be outstanding will be the amount of
            the  principal  thereof that would be due and payable as of the date
            of such  determination upon acceleration of the maturity of the debt
            security,

      o     the principal amount of an indexed debt security that may be counted
            in making the  determination  or calculation and that will be deemed
            outstanding  will be  equal  to the  principal  face  amount  of the
            indexed  debt  security  at  original  issuance,   unless  otherwise
            provided pursuant to Section 301 of the indenture, and

      o     Debt  securities  owned by Energy Holdings or any other obligor upon
            the debt  securities or any affiliate of Energy  Holdings or of such
            other obligor shall be disregarded. (Section 101 of the indenture).

      The indenture contains provisions for convening meetings of the holders of
debt  securities  of a series if debt  securities of that series are issuable in
bearer form. (Section 1501 of the indenture) A meeting may be called at any time
by the trustee,  and also, upon request, by Energy Holdings or the holders of at
least 10% in principal amount of the outstanding debt securities of that series,
in any such case upon notice given as provided in the  indenture.  (Section 1502
of the  indenture)  Except for any  consent  that must be given by the holder of
each debt security,  as described above,  any resolution  presented at a meeting
(or an adjourned  meeting duly  reconvened)  at which a quorum is present may be
adopted by the affirmative vote of the holders of a majority in principal amount
of  outstanding  debt  securities of that series;  provided,  however,  that any
resolution  with  respect  to any  request,  demand,  authorization,  direction,
notice,  consent, waiver or other action that may be made, given or taken by the
holders of a specified  percentage  which is less than a majority  in  principal
amount of  outstanding  debt  securities of a series may be adopted at a meeting
(or an adjourned  meeting duly  reconvened)  at which a quorum is present by the
affirmative vote of the holders of such specified percentage in principal amount
of the  outstanding  debt  securities of that series.  Any resolution  passed or
decision  taken at any  meeting of holders of debt  securities  of a series duly
held in  accordance  with the  indenture  will be binding on all holders of debt
securities  of that  series and any related  coupons.  The quorum at any meeting
called to adopt a resolution  will be persons holding or representing a majority
in principal  amount of the outstanding  debt securities of a series;  provided,
however,  that,  if any  action is to be taken at a meeting  with  respect  to a
consent or waiver which may be given by the holders of not less than a specified
percentage in principal  amount of the outstanding  debt securities of a series,
the persons holding or representing the specified percentage in principal amount
of the  outstanding  debt  securities  of that series will  constitute a quorum.
(Section 1504 of the indenture).

      Regardless of the foregoing provisions,  if any action is to be taken at a
meeting of holders of debt  securities of a series,  including  the notes,  with
respect to any  request,  demand,  authorization,  direction,  notice,  consent,
waiver or other action that the indenture  expressly provides may be made, given
or taken by the holders of a specified  percentage  in  principal  amount of all
outstanding  debt  securities  affected  by the action or of the holders of that
series and one or more additional series:

      o     there shall be no minimum quorum requirement for that meeting and


                                       39
<PAGE>

      o     the  principal  amount of the  outstanding  debt  securities  of the
            series  that  vote  in  favor  of  request,  demand,  authorization,
            direction,  notice,  consent,  waiver or other  action will be taken
            into  account  in   determining   whether  such   request,   demand,
            authorization,  direction,  notice,  consent, waiver or other action
            has been made, given or taken under the indenture.  (Section 1504 of
            the indenture).

Additional Information

      Anyone who receives  this  prospectus  may obtain a copy of the  indenture
without charge by writing to PSEG Energy  Holdings Inc. at 80 Park Plaza,  T-22,
Newark, NJ 07102, Attention: Treasurer.

Reports

      Following the  consummation  of the exchange offer, to the extent required
by the SEC,  Energy  Holdings  will  file a copy of all of the  information  and
reports  referred  to in  clauses  (1) and (2)  below  with  the SEC for  public
availability   within  the  time  periods  specified  in  the  SEC's  rules  and
regulations  (unless  the SEC will  not  accept  such a  filing)  and make  such
information available to holders of the notes upon request:

      (1)   all  quarterly  and  annual  financial  information  required  to be
            contained in a filing with the SEC on Forms 10-Q and 10-K and,  with
            respect  to the  annual  information  only,  a report on the  annual
            financial  statements  certified  by  Energy  Holdings'  independent
            auditors; and

      (2)   all information of the type contained in current reports required to
            be filed with the SEC on Form 8-K.

      The indenture  requires Energy Holdings to file the documents  referred to
in clauses  (1) and (2) above with the  trustee  within 15 days of the filing of
those  documents  with the SEC.  So long as any  notes are  outstanding,  Energy
Holdings  will  furnish to the  holders of notes the  documents  referred  to in
clauses (1) and (2) above in the manner and to the extent  required by the Trust
Indenture Act within 30 days of the filing of those documents with the SEC.

      In addition,  Energy Holdings has agreed that, for so long as any original
notes  remain  outstanding,  it will  furnish  upon  request  to  holders of the
original  notes  and  prospective  purchasers  the  information  required  to be
delivered pursuant to Rule 144A(d) (4) under the Securities Act.

Book-Entry, Delivery and Form

      The exchange  notes  initially will be represented by one or more notes in
registered, global form without interest coupons (collectively, global notes).

      Except as set forth below,  the global notes may be transferred,  in whole
and not in part,  only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the global notes may not be exchanged for notes
in certificated  form except in the limited  circumstances  described below. See
"--Exchange of Book-Entry Notes for Certificated  Notes".  Except in the limited
circumstances  described  below,  owners of  beneficial  interests in the global
notes will not be entitled to receive  physical  delivery of certificated  notes
(as defined below).

      Initially,  the trustee will act as paying agent and registrar.  The notes
may be presented for registration of transfer and exchange at the offices of the
registrar.

Depository Procedures

      The following  description  of the  operations  and  procedures of DTC are
provided solely as a matter of convenience.  These operations and procedures are
solely within the control of the respective  settlement  systems and are subject
to changes by them from time to time.  Energy  Holdings takes no  responsibility
for these operations and procedures and urges investors to contact the system or
their participants directly to discuss these matters.

      DTC has  advised  Energy  Holdings  that  DTC is a  limited-purpose  trust
company  created  to  hold  securities  for  its   participating   organizations
(collectively,  participants)  and to facilitate the clearance and


                                       40
<PAGE>

settlement of  transactions in those  securities  between  participants  through
electronic book-entry changes in accounts of its participants.  The participants
include  securities brokers and dealers (including the initial purchasers of the
original notes), banks, trust companies, clearing corporations and certain other
organizations.  Access to DTC's system is also  available to other entities such
as banks, brokers,  dealers and trust companies that clear through or maintain a
custodial  relationship  with  a  participant,  either  directly  or  indirectly
(collectively,  indirect  participants).  Persons who are not  participants  may
beneficially  own  securities  held by or on  behalf  of DTC  only  through  the
participants  or the indirect  participants.  The  ownership  interests  in, and
transfers of ownership  interests  in, each security held by or on behalf of DTC
are recorded on the records of the participants and indirect participants.

      DTC  has  also  advised  Energy  Holdings  that,  pursuant  to  procedures
established  by it, (i) upon  deposit of the global  notes,  DTC will credit the
accounts of  participants  designated by the Initial  Purchasers of the original
notes  with  portions  of the  principal  amount  of the  global  notes and (ii)
ownership  of such  interests  in the  global  notes  will be shown on,  and the
transfer of ownership thereof will be effected only through,  records maintained
by DTC  (with  respect  to the  participants)  or by the  participants  and  the
indirect  participants  (with respect to other owners of beneficial  interest in
the global notes).

      Investors in the global notes may hold their  interests  therein  directly
through DTC, if they are  participants  in such system,  or  indirectly  through
organizations  which are participants in such system.  All interests in a global
note may be subject to the procedures and  requirements  of DTC. Those interests
held  through  Euroclear  or Cedel may also be  subject  to the  procedures  and
requirements  of such  systems.  The laws of some states  require  that  certain
persons take physical  delivery in definitive  form of securities that they own.
Consequently,  the ability to transfer beneficial  interests in a global note to
such persons will be limited to that extent.  Because DTC can act only on behalf
of  participants,  which in turn act on  behalf  of  indirect  participants  and
certain banks, the ability of a person having  beneficial  interests in a global
note to pledge such interests to persons or entities that do not  participate in
the DTC system,  or otherwise take actions in respect of such interests,  may be
affected by the lack of a physical certificate evidencing such interests.

      Except as described below, owners of interest in the global notes will not
have notes  registered  in their names,  will not receive  physical  delivery of
notes in certificated  form and will not be considered the registered  owners or
"holders" thereof under the indenture for any purpose.

      Payments in respect of the principal of, premium,  if any, and interest on
a global note  registered  in the name of DTC or its nominee  will be payable to
DTC in its  capacity as the  registered  holder under the  Indenture.  Under the
terms of the indenture,  Energy  Holdings and the trustee will treat the persons
in whose names the notes,  including  the global  notes,  are  registered as the
owners  thereof for the purpose of receiving  such  payments and for any and all
other purposes whatsoever.  Consequently,  neither Energy Holdings,  the trustee
nor  any  agent  of  Energy  Holdings  or the  trustee  has  or  will  have  any
responsibility or liability for

      o     any  aspect  of  DTC's  records  or any  participant's  or  indirect
            participant's  records  relating to or  payments  made on account of
            beneficial   ownership   interest  in  the  global  notes,   or  for
            maintaining,  supervising  or reviewing  any of DTC's records or any
            participant's  or  indirect  participant's  records  relating to the
            beneficial ownership interests in the global notes or

      o     any other matter relating to the actions and practices of DTC or any
            of its participants or indirect participants.

      DTC has advised Energy Holdings that its current practice, upon receipt of
any payment in respect of securities such as the notes (including  principal and
interest),  is to credit the  accounts  of the  relevant  participants  with the
payment on the  payment  date,  in  amounts  proportionate  to their  respective
holdings in the principal amount of beneficial interest in the relevant security
as shown on the  records  of DTC  unless  DTC has  reason to believe it will not
receive  payment on such  payment  date.  Payments by the  participants  and the
indirect  participants  to the  beneficial  owners of notes will be  governed by
standing  instructions and customary practices and will be the responsibility of
the participants or the


                                       41
<PAGE>

indirect  participants and will not be the responsibility of DTC, the trustee or
Energy Holdings.  Neither Energy Holdings nor the trustee will be liable for any
delay by DTC or any of its participants in identifying the beneficial  owners of
the notes, and Energy Holdings and the Trustee may conclusively rely on and will
be  protected  in  relying  on  instructions  from  DTC or its  nominee  for all
purposes.

      Interest in the global notes are expected to be eligible to trade in DTC's
same-day funds  settlement  system and secondary market trading activity in such
interests will, therefore, settle in immediately available funds, subject in all
cases to the rules and procedures of DTC and its participants.

      DTC has advised Energy Holdings that it will take any action  permitted to
be taken by a holder of notes only at the direction of one or more  participants
to whose  account DTC has credited the interests in the global notes and only in
respect of such  portion of the  aggregate  principal  amount of the notes as to
which  such  participant  or  participants  has or have  given  such  direction.
However, if there is an event of default under the notes, DTC reserves the right
to exchange the global notes for legended  notes in  certificated  form,  and to
distribute such notes to its participants.

Exchange of Book-Entry Notes for Certificated Notes

      If

      o     DTC is at any time  unwilling,  unable or  ineligible to continue as
            depository  and a successor  depository  is not  appointed by Energy
            Holdings within 90 days following notice to Energy Holdings,

      o     DTC determines, in its sole discretion, not to have any of the notes
            represented by one or more global notes, or

      o     an  event  of  default  under  the  indenture  has  occurred  and is
            continuing,

then  Energy  Holdings  will  issue  individual  notes in  certificated  form in
exchange for the relevant  global  notes.  In any such  instance,  an owner of a
beneficial  interest in a global  note will be entitled to physical  delivery of
individual notes in certificated form of like tenor and rank, equal in principal
amount to such beneficial  interest and to have such notes in certificated  form
registered in its name. In all cases,  notes in  certificated  form delivered in
exchange for any global note or beneficial  interests therein will be registered
in the  names,  and issued in any  approved  denominations,  requested  by or on
behalf of the depositary (in accordance with its customary procedures).

                        FEDERAL INCOME TAX CONSIDERATIONS

General

      The following is a summary of the material  United States  federal  income
tax consequences resulting from the exchange offer and from the ownership of the
exchange notes. It deals only with exchange notes held as capital assets and not
with  special  classes  of  noteholders,   such  as  dealers  in  securities  or
currencies, life insurance companies, tax exempt entities, and persons that hold
an exchange note in connection with an arrangement  that completely or partially
hedges the exchange note. The discussion is based upon the Internal Revenue Code
of 1986, as amended, and regulations,  rulings and judicial decisions thereunder
as of the date hereof. Such authorities may be repealed,  revoked or modified so
as to produce  federal income tax  consequences  different from those  discussed
below. The information  contained in this section has been passed upon for us by
James T. Foran, Esquire,  Associate General Counsel of PSEG. We have received an
opinion of counsel from Mr. Foran  regarding  the  material  federal  income tax
consequences of the exchange offer.

      Noteholders  tendering  their original notes or prospective  purchasers of
exchange  notes  should  consult  their own tax advisors  concerning  the United
States  federal  income  tax and any  state or local  income  or  franchise  tax
consequences in their particular  situations and any consequences under the laws
of any other taxing jurisdiction.


                                       42
<PAGE>

Consequences of Tendering Original Notes

      The  exchange of original  notes for the  exchange  notes  pursuant to the
exchange  offer will not be treated as an "exchange"  for United States  federal
income tax purposes  because the exchange notes will not be considered to differ
materially in kind or extent from the original notes. Rather, the exchange notes
received by a noteholder will be treated as a continuation of the original notes
in the hands of such  noteholder.  As a result,  there will be no United  States
federal income tax consequences to noteholders exchanging the original notes for
the exchange notes pursuant to the exchange offer.  The noteholder must continue
to include  stated  interest in income as if the exchange had not occurred.  The
adjusted basis and holding period of the exchange notes for any noteholder  will
be the same as the  adjusted  basis and holding  period of the  original  notes.
Similarly,  there would be no United States federal income tax consequences to a
holder of original notes that does not participate in the exchange offer.

United States Holders

      For purposes of this discussion, a "United States Holder" means:

      (1)   a citizen or resident of the United States;

      (2)   a partnership,  corporation or other entity treated as a corporation
            or  partnership  for United  States  federal  income  tax  purposes,
            created or organized in or under the law of the United  States or of
            any State of the United States including the District of Columbia;

      (3)   an estate the income of which is  subject to United  States  federal
            income tax regardless of its source;

      (4)   a trust, if either:

            (a)   a court within the United  States is able to exercise  primary
                  supervision over the  administration  of the trust, and one or
                  more United  States  persons have the authority to control all
                  substantial decisions of the trust; or

            (b)   the trust was in  existence  on August 20, 1996 and elected to
                  be treated as a United States person at all times thereafter;

      (5)   any other person that is subject to United States federal income tax
            on interest  income  derived  from a note as a result of such income
            being  effectively  connected  with the  conduct by such person of a
            trade or business within the United States; or

      (6)   certain  former  citizens of the United States whose income and gain
            on the exchange notes will be subject to U.S. income tax.

      Payments of Interest

      Interest on an exchange  note will be taxable to a United States Holder as
ordinary interest income at the time it is received or accrued, depending on the
noteholder's method of accounting for tax purposes.

      Disposition of an Exchange Note

      Upon the sale, exchange or retirement of an exchange note, a United States
Holder  generally  will  recognize  taxable gain or loss equal to the difference
between the amount  realized on the sale,  exchange  or  retirement  (other than
amounts  representing  accrued  and  unpaid  interest,  which will be treated as
ordinary  income) and such holder's  adjusted basis in the exchange  note.  Such
gain or loss  generally  will be long-term  capital gain or loss if the holder's
holding  period  in the  exchange  note  was  more  than one year at the time of
disposition.

      Backup Withholding and Information Reporting

      In general,  information reporting requirements will apply with respect to
non-corporate  United States Holders to payments of principal and interest on an
exchange note and the proceeds of the sale


                                       43
<PAGE>

of an exchange note before maturity.  A 31% "backup  withholding" tax will apply
to such  payments  if the United  States  Holder  fails to  provide an  accurate
taxpayer  identification number or to report all interest and dividends required
to be shown on its federal income tax returns.

Payments to United States Aliens

      As used herein,  a "United  States Alien" is a person or entity that,  for
United States  federal  income tax  purposes,  is not a United States Holder (as
defined above).

      Under current United States federal income and estate tax law:

      (1)   payments of principal  and interest on an exchange note by us or any
            paying agent to a noteholder  that is a United States Alien will not
            be subject to  withholding  of United  States  federal  income  tax,
            provided that the noteholder:

            (a)   does not  actually  or  constructively  own 10% or more of the
                  combined voting power of our stock;

            (b)   is not a controlled foreign  corporation related to us through
                  stock ownership;

            (c)   is  not  a  bank  receiving   interest  described  in  Section
                  881(c)(3)(A) of the Internal Revenue Code; and

            (d)   provides a statement, under penalties of perjury (such as Form
                  W-8BEN),  to us that the holder is a United  States  Alien and
                  provides its name and address;

      (2)   a  noteholder  that is a United  States Alien will not be subject to
            United  States  federal  income  tax on gain  realized  on the sale,
            exchange or redemption of such note, unless:

            (a)   the gain is effectively  connected with the conduct of a trade
                  or  business  within  the United  States by the United  States
                  Alien; or

            (b)   in the  case of a United  States  Alien  who is a  nonresident
                  alien  individual  and  holds the  exchange  note as a capital
                  asset,  such holder is present in the United States for 183 or
                  more days in the taxable year and certain  other  requirements
                  are met; and

      (3)   an exchange note will not be subject to United States federal estate
            tax as a result of the death of a noteholder who is not a citizen or
            resident of the United States at the time of death, provided that:

            (a)   such  noteholder  did not at the  time of  death  actually  or
                  constructively own 10% or more of the combined voting power of
                  all classes of our stock; and,

            (b)   at the time of such noteholder's  death,  payments of interest
                  on  such  exchange  note  would  not  have  been   effectively
                  connected  with the conduct by such  noteholder  of a trade or
                  business in the United States.

      United States  information  reporting  requirements and backup withholding
tax will not apply to  payments  on an  exchange  note made  outside  the United
States  by us or  any  paying  agent  (acting  in its  capacity  as  such)  to a
noteholder  that is a United States Alien  provided  that a statement  described
in(1)(c)  above has been received and neither we nor our paying agent has actual
knowledge that the payee is not a United States Alien.

      Information  reporting  requirements  and backup  withholding tax will not
apply to any payment of the  proceeds of the sale of an exchange  note  effected
outside  the  United  States by a foreign  office of a "broker"  (as  defined in
applicable Treasury regulations), provided that such broker:

      (1)   is a United States Alien;

      (2)   derives less than 50% of its gross  income for certain  periods from
            the conduct of a trade or business in the United States; and

      (3)   is not a controlled  foreign  corporation as to the United States (a
            person  described  in  (1),  (2)  and (3)  above  being  hereinafter
            referred  to as a  "foreign  controlled  person").  Payment  of  the
            proceeds of the sale of an exchange note effected outside the United
            States by a foreign office


                                       44
<PAGE>

      of any broker that is not a foreign  controlled person will not be subject
      to backup  withholding  tax, but will be subject to information  reporting
      requirements  unless such broker has  documentary  evidence in its records
      that the  beneficial  owner is a United  States  Alien and  certain  other
      conditions  are met, or the  beneficial  owner  otherwise  establishes  an
      exemption.

      New regulations governing backup withholding and information reporting are
generally  scheduled to become  effective for payments  made after  December 31,
2000.  Rules under these  regulations will have essentially the same substantive
effect, but will unify current certification procedures and forms.

                              PLAN OF DISTRIBUTION

      We are making the exchange  offer in reliance on the position of the staff
of the  Division  of  Corporation  Finance  of the  SEC as  defined  in  certain
interpretive letters issued to third parties in other transactions.

      Each  broker-dealer  that  receives  exchange  notes  for its own  account
pursuant  to the  exchange  offer  must  acknowledge  that  it  will  deliver  a
prospectus meeting the requirements of the Securities Act in connection with any
resale  of  such  exchange  notes.  This  prospectus,  as it may be  amended  or
supplemented  from time to time,  may be used by a  broker-dealer  in connection
with resales of exchange  notes  received in exchange  for original  notes where
such  original  notes were acquired as a result of  market-making  activities or
other trading  activities.  We have agreed that,  for a period not to exceed 180
days after the exchange offer has been completed,  we will make this prospectus,
as amended or  supplemented,  available  to any  broker-dealer  that  reasonably
requests  such  document  for use in  connection  with any such  resale.  Broker
dealers who acquired original notes directly from us may not rely on the staff's
interpretations  and must comply with the registration  and prospectus  delivery
requirements of the Securities Act,  including being named as a selling security
holder, in order to resell the original notes or the exchange notes.

      We will not  receive  any  proceeds  from any  sale of  exchange  notes by
broker-dealers.  Exchange notes received by broker-dealers for their own account
pursuant  to the  exchange  offer  may be sold  from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the exchange notes or a combination of such methods of
resale,  at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated  prices. Any such resale may be made
directly  to  purchasers  or to or through  brokers or dealers  who may  receive
compensation   in  the  form  of  commissions  or  concessions   from  any  such
broker-dealer   and/or  the   purchasers  of  any  such  exchange   notes.   Any
broker-dealer  that resells  exchange notes that were received by it for its own
account   pursuant  to  the  exchange  offer  and  any  broker  or  dealer  that
participates  in a  distribution  of such exchange  notes may be deemed to be an
"underwriter"  within the  meaning of the  Securities  Act and any profit on any
such resale of exchange notes and any commissions or concessions received by any
such persons may be deemed to be underwriting  compensation under the Securities
Act. The letter of transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.

      For a period of 180 days after the exchange offer has been  completed,  we
will promptly send  additional  copies of this  prospectus  and any amendment or
supplement to this prospectus to any  broker-dealer  that requests such document
in the letter of transmittal. We have agreed to pay certain expenses incident to
the exchange  offer,  other than  commission  or  concessions  of any brokers or
dealers,  and will  indemnify the holders of the exchange  notes  (including any
broker-dealers)  against certain  liabilities,  including  liabilities under the
Securities Act.

      By acceptance of this exchange  offer,  each  broker-dealer  that receives
exchange  notes for its own account  pursuant to the exchange offer agrees that,
upon receipt of notice from Energy  Holdings of the happening of any event which
makes any statement in the prospectus untrue in any material respect or requires
the making of any  changes  in the  prospectus  in order to make the  statements
therein  not  misleading  (which  notice we agree to  deliver  promptly  to such
broker-dealer),  such  broker-dealer will suspend use of the prospectus until we
have amended or  supplemented  the  prospectus to correct such  misstatement  or
omission and have furnished copies of the amended or supplemental  prospectus to
such broker-dealer.


                                       45
<PAGE>

                                 LEGAL OPINIONS

      The validity of the notes will be passed upon for Energy Holdings by James
T.  Foran,  Esquire,  Associate  General  Counsel of PSEG or R.  Edwin  Selover,
Esquire,  Vice President and General Counsel of PSEG. The information  contained
in Federal Income Tax Considerations has been passed upon for Energy Holdings by
Mr. Foran.

                                     EXPERTS

      The  consolidated  balance sheets as of December 31, 2000 and 1999 and the
related consolidated statements of income,  stockholder's equity, and cash flows
for each of the three  years in the period  ended  December  31,  2000,  and the
related  financial  statement  schedules,  incorporated  in this  prospectus  by
reference  from Energy  Holdings'  Annual Report on Form 10-K for the year ended
December  31,  2000,  have been  audited by Deloitte & Touche  LLP,  independent
auditors,  as stated in their report, which is incorporated herein by reference,
and have been so  incorporated  in  reliance  upon the report of such firm given
upon their authority as experts in accounting and auditing.


                                       46
<PAGE>

================================================================================

                                  $400,000,000

                                   ----------
                            [Logo] PSEG
                                   Energy Holdings Inc.
                                   ----------

                                Offer to Exchange

                          8.625% Senior Notes due 2008
               Which have been registered under the Securities Act

                           For Any and All Outstanding
                          8.625% Senior Notes due 2008
                        Which have not been so registered

================================================================================


<PAGE>

                                     Part II
                     Information not required in Prospectus

Item 20. Indemnification of Directors and Officers

      Article 6 of Energy  Holdings'  Certificate of  Incorporation  provides as
follows:

      To the full  extent  from time to time  permitted  by law,  directors  and
officers of the corporation shall not be personally liable to the corporation or
its  shareholders  for damages for breach of any duty owed to the corporation or
its  shareholders.  No amendment  or repeal of this  provision  shall  adversely
affect  any right or  protection  of a director  of  officer of the  corporation
existing at the time of such amendment or repeal.

      Section 24 of Energy Holdings' By-laws provides as follows:

      The  corporation  shall  indemnify  to the full  extent  from time to time
permitted  by law any person  made,  or  threatened  to be made,  a party to any
pending, threatened or completed civil, criminal,  administrative or arbitrative
action,  suit  or  proceeding  and  any  appeal  therein  (and  any  inquiry  or
investigation which could lead to such action, suit or proceedings) by reason of
the fact that he is or was a director, officer or employee of the corporation or
serves or served any other enterprise as a director,  officer or employee at the
request of the  corporation.  Such right of  indemnification  shall inure to the
benefit of the legal representative of any such person.

      The directors and officers of Energy  Holdings are insured under  policies
of insurance,  within the limits and subject to the limitations of the policies,
against claims made against them for acts in the discharge of their duties,  and
Energy Holdings is insured to the extent that it is required or permitted by law
to indemnify  the  directors  and officers for such loss.  The premiums for such
insurance are paid by Energy Holdings.

Item 21. Exhibits and Financial Statement

Attorney-in-Fact
Exhibit Index

Exhibit
Number                        Description
-------                       -----------

3.1   -- Certificate of Incorporation, as amended.*

3.2   -- By-Laws.*

4.1   -- Indenture dated October 8, 1999 between Energy Holdings and First Union
         National Bank.*

4.2   -- Exchange  and  Registration  Rights  Agreement  dated  February 8, 2001
         between Energy  Holdings and the purchasers  named in Schedule I of the
         purchase agreement.***

4.3   -- Form of Exchange Note.***

5     -- Opinion of James T. Foran, Esquire.***

8     -- Opinion of James T. Foran, Esquire regarding tax matters.***

12    -- Statement regarding computation of ratios of earnings.**

21    -- Subsidiaries of the Registrant.***

23.1  -- Consent of James T. Foran, Esquire (contained in Exhibits 5 and 8).***

23.2  -- Independent Auditors' Consent.

24.1  -- Power of Attorney.

25    -- Statement of Eligibility of Trustee on Form T-1.***

99.1  -- Form of Letter of Transmittal.***

99.2  -- Form of Notice of Guaranteed Delivery.***

----------
  *   Incorporated by reference from Registration Statement No. 333-95697

 **   Incorporated by reference from the Annual Report on Form 10-K for the year
      ended  December  31, 2000 and the  Quarterly  Reports on Form 10-Q for the
      periods ended March 31, 2001 and June 30, 2001.

***   Previously filed.



                                      II-1
<PAGE>

Item 22. Undertakings

      Insofar as  indemnification  for liabilities  arising under the Securities
Act may be  permitted to  directors,  officers  and  controlling  persons of the
registrant pursuant to the foregoing  provisions,  or otherwise,  the registrant
has been advised that in the opinion of the Securities  and Exchange  Commission
such  indemnification  is against  public policy as expressed in the Act and is,
therefore  unenforceable.  In the event that a claim for indemnification against
such liabilities  (other than the payment by the registrant of expenses incurred
or paid by a director,  officer or  controlling  person of the registrant in the
successful  defense of any  action,  suit or  proceeding)  is  asserted  by such
director,  officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been  settled by  controlling  precedent,  submit to a court of  appropriate
jurisdiction the question whether such  indemnification  by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

      The undersigned  registrant  hereby  undertakes to file an application for
the  purpose  of  determining  the  eligibility  of the  trustee  to  act  under
subsection (a) of Section 310 of the Trust  Indenture Act in accordance with the
rules and regulations  prescribed by the Commission  under Section  305(b)(2) of
the Act.

      The undersigned registrant hereby undertakes (a):

      1.    To file,  during any period in which offers or sales are being made,
            a post-effective amendment to this registration statement:

            (i)   To include any prospectus  required by Section 10(a)(3) of the
                  Securities Act.

            (ii)  To reflect in the prospectus any facts or events arising after
                  the effective date of the registration  statement (or the most
                  recent post-effective  amendment thereof) which,  individually
                  or in the  aggregate,  represent a  fundamental  change in the
                  information set forth in the registration statement.

            (iii) To include any material  information  with respect to the plan
                  of distribution  not previously  disclosed in the registration
                  statement or any material  change in such  information  in the
                  registration statement; provided, however, that the registrant
                  need  not  file a  post-effective  amendment  to  include  the
                  information required to be included by subsection (a)(1)(i) or
                  (a)(l)(ii)  if  such  information  is  contained  in  periodic
                  reports  filed by the  registrant  pursuant  to  Section 13 or
                  Section  15(d)  of  the  Securities   Exchange  Act  that  are
                  incorporated by reference in the registration statement.

      2.    That,  for the  purpose  of  determining  any  liability  under  the
            Securities Act, each such  post-effective  amendment shall be deemed
            to  be a new  registration  statement  relating  to  the  securities
            offered  therein,  and the offering of such  securities at that time
            shall be deemed to be the initial bona fide offering thereof.

      3.    To remove from  registration by means of a post-effective  amendment
            any of the securities  being  registered  which remain unsold at the
            termination of the offering.

      The  undersigned  registrant  hereby  undertakes  that,  for  purposes  of
determining  any  liability  under  the  Securities  Act,  each  filing  of  the
registrant's  annual  report  pursuant to section  13(a) or section 15(d) of the
Securities  Exchange Act that is incorporated by reference in this  registration
statement  shall be deemed to be a new  registration  statement  relating to the
securities  offered  thereby,  and the offering of such  securities at that time
shall be deemed to be the initial bona fide offering thereof.


                                      II-2
<PAGE>

                                   SIGNATURES


      Pursuant  to  the   requirements  of  the  Securities  Act  of  1933,  the
registrant,  PSEG Energy Holdings Inc., certifies that it has reasonable grounds
to believe it meets all of the  requirements for filing on Form S-4 and has duly
caused this  Amendment No. 1 to the  Registration  Statement to be signed on its
behalf by the  undersigned,  thereunto duly  authorized,  in the City of Newark,
State of New Jersey, on this 1st day of October 2001.


                                       PSEG ENERGY HOLDINGS INC.


                                       By:      /s/ ROBERT J. DOUGHERTY
                                           -------------------------------------
                                                Robert J. Dougherty, Jr
                                           President and Chief Operating Officer


      Pursuant to the requirements of the Securities  Exchange Act of 1933, this
Amendment  No. 1 to the  Registration  Statement  has been  signed  below by the
following persons in the capacities and on the dates indicated.

      Signature                          Title                      Date
      ---------                           ----                      ----
   /s/ E. James Ferland             Chairman of the Board      October 1, 2001
-------------------------------     and Chief Executive
    E. James Ferland                Officer (Principle
                                    Executive Officer)


   /s/ Robert J. Dougherty, Jr.     President and Chief        October 1, 2001
-------------------------------     Operating Officer
    Robert J. Dougherty, Jr.        (Principal Financial
                                    Officer)


   /s/ Derek M. DiRisio             Vice President and         October 1, 2001
-------------------------------     Controller (Principal
    Derek M. DiRisio                Accounting Officer)


      This Amendment No. 1 to the Registration Statement has also been signed by
Derek M.  DiRisio,  Attorney-in-Fact,  on behalf of the  following  Directors on
October 1, 2001.

      Robert E. Busch
      Frank Cassidy
      Robert J. Dougherty, Jr.
      Thomas M. O'Flynn
      R. Edwin Selover


                                        By:           /s/ DEREK M. DIRISIO
                                                  -----------------------------
                                                        Derek M. DiRisio
                                                        Attorney-in-Fact


                                      II-3
<PAGE>

                                POWER OF ATTORNEY

      Each Director of PSEG Energy Holdings Inc. whose  signature  appears below
hereby   appoints  Derek  M.  DiRisio  the  agent  for  service  named  in  this
Registration Statement, and James T. Foran, Esq. as attorney-in-fact, to execute
in the name of each such  person and to file with the  Securities  and  Exchange
Commission this  Registration  Statement and any and all  amendments,  including
post-effective amendments to this Registration Statement.

            Signature                    Title                      Date
            ---------                    ----                       ----


      /s/ ROBERT E. BUSCH               Director              September 28, 2001
----------------------------
        Robert E. Busch


        /s/ FRANK CASSIDY               Director              September 28, 2001
----------------------------
          Frank Cassidy


  /s/ ROBERT J. DOUGHERTY, JR.          Director              September 28, 2001
----------------------------
    Robert J. Dougherty, Jr.


      /s/ E. JAMES FERLAND              Director              September 28, 2001
----------------------------
        E. James Ferland


      /s/ THOMAS M. O'FLYNN             Director              September 28, 2001
----------------------------
        Thomas M. O'Flynn


      /s/ R. EDWIN SELOVER              Director              September 28, 2001
----------------------------
        R. Edwin Selover



                                      II-4
<PAGE>


                                 Exhibit Index

Exhibit
Number                        Description
-------                       -----------
3.1   -- Certificate of Incorporation, as amended.*

3.2   -- By-Laws.*

4.1   -- Indenture dated October 8, 1999 between Energy Holdings and First Union
         National Bank.*

4.2   -- Exchange  and  Registration  Rights  Agreement  dated  February 8, 2001
         between Energy  Holdings and the purchasers  named in Schedule I of the
         purchase agreement.***

4.3   -- Form of Exchange Note.***

5     -- Opinion of James T. Foran, Esquire.***

8     -- Opinion of James T. Foran, Esquire regarding tax matters.***

12    -- Statement regarding computation of ratios of earnings.**

21    -- Subsidiaries of the Registrant.***

23.1  -- Consent of James T. Foran, Esquire (contained in Exhibits 5 and 8).***

23.2  -- Independent Auditors' Consent.

24.1  -- Power of Attorney.

25    -- Statement of Eligibility of Trustee on Form T-1.***

99.1  -- Form of Letter of Transmittal.***

99.2  -- Form of Notice of Guaranteed Delivery.***

----------
  *   Incorporated by reference from Registration Statement No. 333-95697

 **   Incorporated by reference from the Annual Report on Form 10-K for the year
      ended  December  31, 2000 and the  Quarterly  Reports on Form 10-Q for the
      periods ended March 31, 2001 and June 30, 2001.

***   Previously filed.