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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

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|(Mark One) |                                                                                                                                
|---------- | -------------------------------------------------------------------------------------------------------------------------------
||X|        | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGEACT OF 1934
For the fiscal year ended December 31, 2002

OR

||_| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934
For the transition period from                 
            to
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------

AES IRONWOOD,
L.L.C.(Exact name of Registrant as specified in its charter)

|Delaware                                                      | 54-1457573                          
|------------------------------------------------------------- | ------------------------------------
|(State of other jurisdiction of incorporationor organization) | (I.R.S. Employer Identification No.)

|305 Prescott Road, Lebanon, Pennsylvania | 17042     
|---------------------------------------- | ----------
|(Address of principal executive offices) | (Zip Code)

Registrants
telephone number, including area code: (717) 228-1328Securities Registered Pursuant To
Section 12(b) of The Act: NoneSecurities Registered Pursuant To Section 12(g) of The
Act: None

Indicate by check mark
whether the Registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days.

Yes |X|     No |_|

Indicate by check mark
whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

Yes |_|     No |X|

Indicate by check mark if
disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of Registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K |X|

As of June 28, 2002,
the last business day of the Registrants most recently completed second fiscal
quarter, and as of March 28, 2003, AES Ironwood, L.L.C had one membership interest
outstanding, which was held by AES Ironwood, Inc., the Companys parent and a wholly
owned subsidiary of The AES Corporation.

All of the
Registrants equity securities are indirectly owned by The AES Corporation.
Registrant meets the conditions set forth in General Instruction I(1)(a) and (b) of Form
10-K and is therefore filing this Form 10-K with the reduced disclosure format authorized
by General Instruction I of Form 10-K.

DOCUMENTS
INCORPORATED BY REFERENCENone

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TABLE OF CONTENTS

|PART I   |                                                                                      
|-------- | -------------------------------------------------------------------------------------
|ITEM 1   | Business                                                                             
|ITEM 2   | Properties                                                                           
|ITEM 3   | Legal Proceedings                                                                    
|ITEM 4   | Submission of Matters to a Vote of Security Holders                                  
|        
|PART II 
|ITEM 5   | Market for Registrants Common Equity and Related Stockholder Matters                
|ITEM 6   | Selected Financial Data                                                              
|ITEM 7   | Managements Discussion and Analysis of Financial Condition and Results of Operations
|ITEM 7A  | Quantitative and Qualitative Disclosure About Market Risk                            
|ITEM 8   | Financial Statements and Supplemental Data                                           
|ITEM 9   | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 
|        
|PART III
|ITEM 10  | Directors and Executive Officers of the Registrant                                   
|ITEM 11  | Executive Compensation                                                               
|ITEM 12  | Security Ownership of Certain Beneficial Owners and Management                       
|ITEM 13  | Certain Relationships and Related Transactions                                       
|ITEM 14  | Controls and Procedures                                                              
|        
|PART IV 
|ITEM 15  | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                     

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CAUTIONARY NOTE
REGARDING FORWARD-LOOKING STATEMENTS

Some
of the statements in this Form 10-K, as well as statements made by us in periodic press
releases and other public communications, constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995.Certain, but not necessarily all, of such forward-looking statements can be
identified by the use of forward-looking terminology, such as believes,
estimates, plans, projects, expects,
may, will, should, approximately, or
anticipates or the negative thereof or other variations thereof or comparable
terminology, or by discussion of strategies, each of which involves risks and
uncertainties. We have based these forward-looking statements on our current
expectations and projections about future events based upon our knowledge of facts as of
the date of this Form 10-K and our assumptions about future events.

All
statements herein other than of historical facts, including those regarding market trends,
our financial position, business strategy, projected plans and objectives of management
for future operations of the facility, are forward-looking statements. Such
forward-looking statements involve known and unknown risks, uncertainties and other
factors outside of our control that may cause our actual results or performance to be
materially different from any future results, performance or achievements expressed or
implied by the forward-looking statements. These risks, uncertainties and other
factors include, among others, the following:

| |  | unexpected
problems relating to the operations and performance of our facility;
| | - | -------------------------------------------------------------------------------

| |  | the
financial condition of third parties on which we depend, including in particular,
Williams Energy Marketing & Trading  Company (Williams Energy), as the power
purchaser and fuel supplier under the power purchase agreement, and The Williams Companies, Inc., as the guarantor of
performance under the power  purchase agreement;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | unanticipated
effects of the arbitration decision relating to our power purchase agreement  dispute
with Williams Energy and the possibility of future disputes or proceedings regarding the  power
purchase agreement;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | the
continued performance of Williams Energy under the power purchase agreement;
| | - | --------------------------------------------------------------------------------

| |  | the
ability of The Williams Companies, Inc. or its affiliates to avoid a default
under the power purchase agreement by continuing to provide adequate security to
supplement or replace their guarantee of Williams Energys performance under the
power purchase agreement;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | our
ability to find a replacement power purchaser on favorable or reasonable terms, if
necessary;
| | - | -------------------------------------------------------------------------------------------------

| |  | an
adequate merchant market after the expiration of the power purchase agreement;
| | - | ---------------------------------------------------------------------------------

| |  | capital
shortfalls and access to additional capital on reasonable terms, or in the event that the
power purchase agreement  is terminated;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------

| |  | inadequate
insurance coverage;
| | - | ------------------------------

| |  | unexpected
expenses or lower than expected revenues;
| | - | ----------------------------------------------------

| |  | environmental
and regulatory compliance;
| | - | ----------------------------------------

| |  | terrorists
acts and adverse reactions to United States anti-terrorism activities; and
| | - | -------------------------------------------------------------------------------------

| |  | the
additional factors that are unknown to us or beyond our control.
| | - | --------------------------------------------------------------------

We have no obligation
to publicly update or revise any forward-looking statement, whether as a result of new
information, future events or otherwise.

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PART I

ITEM 1.     Business

General

We
are a Delaware limited liability company formed on October 30, 1998 to develop, construct,
own, operate and maintain a 705-megawatt (MW) gas-fired electric generating power plant in
Lebanon County, Pennsylvania, and to manage the production of electric generating
capacity, ancillary services and energy at our facility. References to us, our,
we or the Company herein mean AES Ironwood, L.L.C.  We commenced commercial
operations on December 28, 2001. Since the commercial operation date, our sole business is
the ownership and operation of this facility.

We
own the land on which our facility is located. Our facility was designed,
engineered, procured and constructed for us by Siemens Westinghouse Power Corporation
(Siemens Westinghouse) on a fixed-price, turnkey basis under the construction
agreement.Siemens Westinghouse is also providing combustion turbine maintenance
services and spare parts for our facility for an initial term of between eight and ten
years, depending on the timing of scheduled outages, under the maintenance services
agreement. AES Prescott, L.L.C. (AES Prescott), an indirect
wholly-owned subsidiary of The AES Corporation, provides development, construction
management and operations and maintenance services for the project under an operations
agreement.

We
entered into a power purchase agreement for a term of 20 years under which Williams
Energy. is committed to purchase all of the net capacity, fuel conversion and
ancillary services of our facility. Net capacity is the maximum amount of
electricity generated by our facility net of electricity used at our facility. Fuel
conversion services consist of the combustion of natural gas in order to generate electric
energy. Ancillary services consist of services necessary to support the
transmission of capacity and energy. Williams Energy is obligated to supply us with
all natural gas necessary to provide net capacity, fuel conversion services and ancillary
services under the power purchase agreement. During the term of the power purchase
agreement, substantially all of our revenues will be derived from payments made by
Williams Energy under the power purchase agreement.

Organizational
Structure

All
of our equity interests are owned by AES Ironwood, Inc., a wholly-owned subsidiary
of The AES Corporation. The AES Corporation has provided funds to AES Ironwood,
Inc. so that AES Ironwood, Inc. can make equity contributions to us to fund
project costs. Under an Equity Subscription Agreement dated June 1, 1999, with AES
Ironwood, Inc., these contributions are limited to $50.1 million. As of December 31, 2002,
AES Ironwood, Inc. had made net contributions of $38.8 million. On March 12, 2003, final
acceptance under the agreement was granted and an Officers Certificate has been
submitted to the Collateral Agent indicating that the facility has been fully funded and
no further contribution will be required. AES Ironwood, Inc. currently has no
operations outside of its activities in connection with our project and does not
anticipate undertaking any operations not associated with our project. AES
Ironwood, Inc. has no assets other than its membership interests in us and AES
Prescott. AES Prescott has no operations outside of its activities in connection
with our project. Under a services agreement, The AES Corporation supplies to AES
Prescott all of the personnel and services necessary for AES Prescott to comply with its
obligations under the operations agreement. As of December 31, 2002, The AES
Corporation provided 36 employees to our facility.

The
AES Corporation is a leading global power company. The AES Corporations purpose is
to better society by serving the worlds need for electricity in ways that benefit
its stakeholders including shareholders, customers, AES people, local communities, host
nations, regulators, lenders, suppliers and partners. The AES Corporation is a
public company and is subject to the informational requirements of the Securities Exchange
Act of 1934 and, in accordance therewith, files reports, proxy statements and other
information, including financial reports, with the SEC.

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The
following organizational chart illustrates the relationship among our company, AES
Ironwood, Inc., AES Prescott and The AES Corporation:

|
|

Our
principal executive offices are located at 305 Prescott Road, Lebanon, Pennsylvania
17042. Our telephone number is (717) 228-1328.

Project Status and
Recent Developments

| | Developments
Relating to Siemens Westinghouse
| | ---------------------------------------------

By
meeting the provisions in Section 6.3 of the construction agreement, provisional
acceptance was granted by us on December 27, 2001. We previously had a dispute with
Siemens Westinghouse over which party was responsible for the payment of the cost of
electricity and natural gas used by the project during certain periods prior to the
December 28, 2001 commercial acceptance. As a result of a settlement agreement with
Siemens Westinghouse entitled Agreement Change Order No. 71, we granted final acceptance
as of March 12, 2003.

As
a result of the settlement agreement, we have agreed, among other things, not to pursue
the cost of electricity and natural gas used by the project during certain periods prior
to the December 28, 2001 commercial acceptance date. We have also agreed to pay $156,000
relating to an outstanding claim by Siemens Westinghouse regarding an April 2002
outage. This amount was recorded as an accrued expense and was paid as part of the
settlement. Siemens Westinghouse has agreed to waive their right to receive any payments with
respect to a milestone payment of $2.2 million and to the retainage of $12.1 million held
by us. Additionally, Siemens Westinghouse made a payment of $4.8 million to us in respect of
items related to final acceptance.  This amount was recorded as a reduction in the cost of the facility.

The
effects of this settlement agreement have been recorded in our financial statements as of
December 31, 2002. For further discussion, please see Legal Proceedings.

| | Developments
Relating to Williams Energy
| | ----------------------------------------

Under
the power purchase agreement, in the event that S&P or Moodys rate the long term
senior unsecured debt of The Williams Companies, Inc. lower than investment grade,
The Williams Companies, Inc., or affiliate thereof, is required to replace The
Williams Companies, Inc. guarantee with an alternative security that is acceptable
to us. According to published sources, on July 23, 2002, S&P lowered the long
term senior unsecured debt rating of The Williams Companies, Inc. to BB
from BBB-", and further lowered such rating to B on July 25,
2002. According to published sources, on July 24, 2002, Moodys lowered the
long-term senior unsecured debt rating of The Williams Companies, Inc. to
B1 from Baa3. According to published sources, this rating
was further lowered on November 22, 2002 to Caa1 by Moodys. Accordingly,
The Williams Companies, Inc.s long term senior unsecured debt is currently
rated below investment grade by both S&P and Moodys.

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In
an action related to the ratings downgrade of The Williams Companies, Inc., S&P
lowered its ratings on the Companys senior secured bonds to BB- from
BBB- on July 26, 2002, and placed the rating on credit watch. On November 27,
2002, Moodys lowered its ratings on our senior secured bonds to
B2 from Ba2. We do not believe
that such ratings downgrades will have any other direct or immediate effect on us, as
none of the other financing documents or project contracts have provisions
that are triggered by a reduction of the ratings of the bonds.

To
satisfy the requirements of the power purchase agreement, on September 20, 2002, Citibank,
N.A., issued a $35 million Irrevocable Standby Letter of Credit (the
Letter of Credit) on behalf of Williams Energy. The Letter of Credit does not
alter, modify, amend or nullify the guaranty issued by The Williams Companies, Inc.
in favor of us and is considered to be additional security to the security amounts
provided by such guaranty. The Letter of Credit became effective on September 20,
2002 and shall expire upon the close of business on July 10, 2003; except that the Letter
of Credit will be automatically extended without amendment for successive one-year periods
from the present or any future expiration date hereof, unless Citibank, N.A.provides written notice of its election not to renew the Letter of Credit at least
thirty days prior to any such expiration date. Additionally, in a Letter Agreement
dated September 20, 2002, Williams Energy agreed to (a) provide eligible credit support
prior to the stated expiration date of the Letter of Credit and (b) replenish any portion
of the Letter of Credit or eligible credit support that is drawn, reduced, cashed or
redeemed, at any time, with an equal amount of Eligible Credit Support. Within
twenty days prior to the expiration of the Letter of Credit and/or any expiration date of
eligible credit support posted by Williams Energy, Williams Energy shall post eligible
credit support to us in place of the Letter of Credit and/or any expiring eligible credit
support unless The Williams Companies, Inc. regains and maintains its investment
grade status, in which case the Letter of Credit or eligible credit support shall
automatically terminate and no additional eligible credit support shall be
required. We and Williams Energy acknowledge that the posting of such Letter of
Credit and Williams Energys agreement and performance of the requirements of (a) and
(b) as set forth in the immediately preceding sentence shall be in full satisfaction of
Williams Energys obligations contained in Section 19.3 of the power purchase
agreement to provide replacement security due to the downgrade of The Williams Companies,
Inc. falling below investment grade status.

We
previously entered into arbitration with Williams Energy to resolve certain disputes
regarding the proper interpretation of certain provisions of the power purchase agreement
relating to amounts claimed by us to be payable by Williams Energy. On February 5, 2003
the arbitration panel handed down their decision to the parties. The arbitration decision
interprets key provisions of the power purchase contract and covers both revenue and
non-revenue items. The most important item to us was in respect of the calculation of
total annual available capacity, which we believe was decided in our favor. However, there
were several other items that were not in our favor. The net effect of
these items for fiscal year 2002 was a reduction of revenues of approximately $320,000.
See Legal Proceedings.

Additionally,
we are in ongoing discussions with Williams Energy relating to the calculation of certain amounts
under the power purchase agreement.  Under the agreement, we have earned an annual availability bonus and
an additonal capacity payment for 2002. We have invoiced Williams Energy approximately $1.4 million as an
annual availability bonus for 2002 and approximately $0.1 million as a capacity payment
for 2002. Because the amounts are in dispute, we have only recognized the amounts that Williams
Energy paid us, approximately $0.3 million. We will continue to
discuss with Williams Energy the calculation of these amounts but are unable to predict the
outcome of these discussions and their potential impact on our ability to collect these
contractual items either for 2002 or in the future.

Energy Revenues

We
generate energy revenues under the power purchase agreement with Williams Energy.
During the 20 year term of the agreement, we also expect to sell electric energy and
capacity produced by the facility, as well as ancillary and fuel conversion
services. Under the power purchase agreement, we also generate revenues from
meeting (1) base electrical output guarantees and (2) heat rate rebates through efficient
electrical output.

Upon
its expiration, or in the event that the power purchase agreement is terminated prior its
20 year term, we would seek to generate energy revenues from the sale of electric energy
and capacity into the merchant market or

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under new short- or
long-term power purchase or  similar agreements. There can be no assurances as to the
whether such efforts would  be successful.

Operating Expenses

Under
an agreement with AES Prescott, L.L.C., we are required to reimburse
it all operator costs on a monthly basis. Operator costs generally consist of all
direct costs and overhead. Additionally, an operator fee of $400,000, subject to
annual adjustment, is payable on each bond payment date.

Competition

Under
the power purchase agreement, Williams Energy is required to purchase all of our
facilitys capacity and energy. Therefore, during the 20 year term of the
power purchase agreement, competition from other capacity and energy providers will only
become an issue if Williams Energy breaches its agreement and ceases to purchase our
capacity and energy or the power purchase agreement is otherwise terminated or not
performed in accordance with its terms. Upon the expiration of the power purchase
agreement or in the event the power purchase agreement is terminated prior to the
expiration of its term, we anticipate selling our facilitys net capacity, ancillary
services and energy under a new power purchase agreement or into the Pennsylvania-New
Jersey-Maryland (PJM) power pool market. At that time, we will face competition
from other generating facilities selling into the PJM power pool market including,
possibly, other facilities owned by The AES Corporation or its affiliates.

Employees

As
of December 31, 2002, we had thirteen officers. Except for these officers we do not
have any employees and do not anticipate having any employees in the future. Under
the operations agreement, AES Prescott has managed the development and construction of and
now operates and maintains our facility.The direct labor personnel and the plant
operations management are employees of The AES Corporation which are provided to AES
Prescott under the services agreement. As of December 31, 2002, AES Corporation provided
36 employees to our facility.

Insurance

As
owner of our facility, we maintain a comprehensive insurance program as required under our
various project contracts and the indenture governing our senior secured bonds and
underwritten by recognized insurance companies. Among other insurance policies, we
also maintain commercial general liability insurance, permanent property insurance for
full replacement value of our facility and business interruption insurance covering at
least 12 months of debt service and fixed operation and maintenance expenses. We
have obtained title insurance in an amount equal to the principal amount of the senior
secured bonds.

AES
Prescott, as operator of our facility, maintains, among other insurance policies,
workers compensation insurance, or evidence of self-insurance, if required, and
comprehensive automobile bodily injury and property damage liability insurance.

Permits and
Regulatory Approvals

AES
Prescott, as operator of our facility, and we, as owner of our facility, must comply with
numerous federal, state and local regulatory requirements including environmental
requirements in the operation of our facility.

On
March 31, 1999, we received a certification from the Federal Energy Regulatory Commission
(FERC) that we are an Exempt Wholesale Generator.Certification as an Exempt
Wholesale Generator exempts us from regulation under the Public Utility Holding Company
Act of 1935. We will maintain this status so long as we continue to make only
wholesale sales of electricity, which we intend to do. Prior to commercial
operation, we filed the power purchase agreement with FERC and obtained approval for the
rates contained therein. We may also need to obtain FERC approval for sales of
electricity at market-based rates after the power purchase agreement is no longer in
effect.

On
March 29, 1999, we received our Prevention of Significant Deterioration Permit, or  air
permit, from the Pennsylvania Department of Environmental  Protection. The
appeal period in respect of the air permit expired on

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May 3, 1999  and no
appeal was filed. The air permit required that our facility be constructed  in a manner
that would allow it to meet specified limitations on emissions of air  pollutants. Under
the construction agreement, Siemens Westinghouse was required to  construct our facility
to meet these requirements. During the April 2002 outage,  Siemens Westinghouse made
certain modifications to ensure the facilitys emissions  would be within the limits
set by the EPC construction contract. Testing on May 22, 2002  indicated the
modifications to be successful and at that date the facilitys  emissions were in
compliance and Siemens-Westinghouse had met the emission guarantees of  the EPC
construction contract.

We
are subject to a number of statutory and regulatory standards and required approvals
relating to energy, labor and environmental laws. Although the necessary
environmental permits for the commencement of construction of our facility have been
obtained, we are required to comply with the terms of our environmental permits and to
obtain other permits for the operation of our facility.

The
permits that have been obtained and that will be obtained contain ongoing
requirements. Failure to satisfy and maintain any of the permit conditions or other
applicable requirements could prevent the operation of our facility and/or result in
additional costs.

Summary of Principal
Project Contracts

While
we believe that the following summaries contain the material terms of the principal
project contracts, such summaries may not include all of the provisions of each agreement
that each individual investor may feel is important. These summaries do not restate
each agreement discussed herein and exclude certain definitions and complex legal
terminology that may be contained in each relevant agreement. You should carefully
read each agreement discussed herein, each of which is filed as an exhibit to this Form
10-K.

Power Purchase
Agreement

We
entered into an Amended and Restated Power Purchase Agreement, dated as of February 5,
1999, with Williams Energy for the sale to Williams Energy of all of the electric energy
and capacity produced by our facility as well as ancillary services and fuel conversion
services.We previously entered into arbitration with Williams Energy to resolve
certain disputes regarding the proper interpretation of certain provisions of the power
purchase agreement relating to amounts claimed by us to be payable by Williams Energy. On
February 5, 2003 the arbitration panel handed their decision to the parties. The arbitration
decision covered both revenue and non-revenue items. The most important item to us was in
respect of the calculation of total available capacity, which was decided in our favor.
However, there were several other items that were not in our favor. The
net effect of these items for fiscal year 2002 was a reduction of revenues of
approximately $320,000. For further information, please see Legal Proceedings.

Term

The
term of the power purchase agreement extends for 20 years after the first contract
anniversary date, which is the last day in the month in which the commercial operation
date occurs. The commercial operation date occurs when

| |  | the
initial start-up testing of our facility has been successfully completed,
| | - | -----------------------------------------------------------------------------

| |  | we
have received all approvals from PJM Interconnection, L.L.C., which is the independent
system operator that operates the transmission system  to which our facility will
interconnect, and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | we
have obtained all required permits and authorizations for operation of our facility.
| | - | ---------------------------------------------------------------------------------------

These
prerequisites were met and the facility commenced operations, subject to the terms
of the power purchase agreement, on December 28, 2001,
accordingly, the power purchase agreements initial term is expected to expire on
December 31, 2021.

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Purchase and Sale of
Capacity and Services

During
the term, commencing with the commercial operation date, we must sell and make available
to Williams Energy on an exclusive basis, and Williams Energy must purchase and pay for,
our facilitys net capacity and ability to generate electric energy. In
addition, during the term, commencing with the commercial operation date, we must perform
for Williams Energy on an exclusive basis, and Williams Energy must purchase and pay for
fuel conversion services and ancillary services. Fuel conversion services consist
of the generation of electric energy from fuel provided by Williams Energy.Ancillary services consist of services necessary to support the transmission of
capacity and energy.

Fuel Conversion and
Other Services

Williams
Energy must deliver or cause to be delivered to us at the gas delivery point on an
exclusive basis all quantities of natural gas as we require:

| |  | to
generate net electric energy and/or ancillary services,
| | - | ----------------------------------------------------------

| |  | to
perform start-ups,
| | - | ---------------------

| |  | to
perform shutdowns, and
| | - | -------------------------

| |  | to
operate our facility during any period other than a start-up, shutdown or dispatch period
for any reason.
| | - | ------------------------------------------------------------------------------------------------------------

Pricing and Payments

For
each month of the term after the commercial operation date, Williams Energy must pay us
for our facilitys net capacity, successful start-ups and associated shutdowns, other
services and fuel conversion services at the applicable rates described in the power
purchase agreement. Each monthly payment by Williams Energy will consist of a total
fixed payment, a fuel conversion payment and a start-up payment. The total fixed
payment, which is payable regardless of facility dispatch by Williams Energy but is
subject to adjustment based on facility availability, is calculated by multiplying a fixed
capacity rate for each contract year by our facilitys net capacity in the billing
month and is anticipated to be sufficient to cover our debt service and fixed operating
and maintenance costs and to provide us a return on equity. The fuel conversion
payment is intended to cover our variable operating and maintenance costs and escalates
annually based on an escalation index described in the power purchase agreement.
The start-up payment is intended to cover our non-fuel variable costs when the plant is
starting a dispatch period. In addition, we may receive heat rate bonuses or be
required to pay heat rate penalties.

Prior
to the commercial operation date, and during specific facility tests thereafter, we
purchased natural gas from Williams Energy. Williams Energy sold to us the natural
gas at prices specified in the power purchase agreement, and we sold to Williams Energy at
the electric delivery point any net electric energy produced during those periods at 90%
of the energy market clearing price.

Williams
Energy will be entitled to an annual fuel conversion volume rebate if its dispatch of our
facility exceeds specified levels and specified monthly non-dispatch payments if, under
specific circumstances, our facility is not available for dispatch. All fuel
conversion volume rebate payments and non-dispatch payments must be made to Williams
Energy after debt service and specified other payments but prior to any distribution to
holders of the equity interests in our company. Fuel conversion volume rebate
payments must be paid to Williams Energy within 30 days after the end of the contract year
in which the payments have been earned and non-dispatch payments must be paid to Williams
Energy within 20 days after the end of the month on which a payment obligation
arises. Fuel conversion volume rebate payments and any non-dispatch payments owed
to Williams Energy and not paid when due must be paid, together with interest, when funds
become available to us at the priority level described above.

Interconnection and
Metering Equipment

At
our sole cost and expense, we will maintain, or be responsible for the maintenance of our
facility, the interconnection facilities and protective gas apparatus needed to generate
and deliver net electric energy and/or ancillary services to the electric delivery point
in order to fulfill our obligations under the power purchase

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agreement, including
all  interconnection facilities and protective gas apparatus that may be located at any
switchyard and/or substation to be built at our facility. At our cost and expense,  the
interconnection facilities and protective gas apparatus needed to generate and deliver
net electric and/or ancillary services to the electric delivery point have been completed
as required under the power purchase agreement. The interconnection facilities and
protective gas apparatus have been designed, constructed and completed in a good and
workmanlike manner and in accordance with accepted electrical practices, with respect to
our facility and interconnection facilities or in accordance with standard gas industry
practices, with respect to protective gas apparatus, so that the expected useful life of
our facility, the interconnection facilities and protective gas apparatus will be not
less  than the term of the power purchase agreement.

We
have been solely responsible for the negotiation and execution of the interconnection
agreement with GPU Energy under which GPU Energy will own and be responsible for the
electric metering equipment and the design, installation, construction and maintenance of
the electrical facilities and protective apparatus, including any transmission equipment
and related facilities, necessary to interconnect GPU Energys electrical system with
our facility at the electric delivery point. This equipment cost approximately
$5.1 million which was capitalized as part of the facility. Williams Energy
reimbursed us for the reasonable GPU Energy costs (i.e., transmission
facility costs, GPU Energy protective apparatus and other equipment, GPU Energy electric
meters, and GPU Energy costs for PJM and other required interconnection-related studies)
incurred, or to be reimbursed, by us under the interconnection agreement up to a maximum
amount of which is in excess of the costs anticipated to be incurred by us under the
interconnection agreement.

Williams
Energy was responsible for the installation and will be responsible for the maintenance
and testing of the gas metering equipment, to the extent not otherwise installed,
maintained and tested by the supplier of gas transportation services, as reasonably
approved by us.

All
electric metering equipment, gas metering equipment and oil metering equipment, whether
owned by us or by a third party, must be operated, maintained and tested in accordance
with accepted electrical practices, in the case of the electric metering equipment, and in
accordance with applicable industry standards, in the case of the gas metering equipment
and oil metering equipment.

Operation / Dispatch

Our
facility, the interconnection facilities and the protective gas apparatus must be operated
in accordance with accepted electrical practices and applicable requirements and
guidelines reasonably adopted by GPU Energy from time to time and applied consistently to
GPU Energys electric generating facilities, with respect to our facility and
interconnection facilities, or in accordance with standard gas industry practices, with
respect to protective gas apparatus. If there is a conflict between the terms and
conditions of the power purchase agreement and GPU Energy requirements, GPU Energy
requirements will control.

We
must operate our facility in parallel with GPU Energys electrical system with
governor control and the net electric energy to be delivered by us under the power
purchase agreement must be three-phase, 60 hertz, alternating current at a nominal voltage
acceptable to GPU Energy at the electric delivery point, must not adversely affect the
voltage, frequency, wave shape or power factor of power at the electric delivery point and
must be delivered to the electric delivery point in a manner acceptable to GPU Energy.

The
power purchase agreement acknowledges that GPU Energy has the right to require us to
disconnect our facility from GPU Energys electrical system, or otherwise curtail,
interrupt or reduce deliveries of net electric energy, for specific safety or emergency
reasons. If our facility has been disconnected for these reasons, Williams Energy
will continue to be obligated to make total fixed payments for at least 24 hours after the
occurrence of the disconnection of our facility by GPU Energy.

We
must use commercially reasonable efforts to promptly correct any condition at our
facility  which necessitates the disconnection of our facility from GPU Energys
electrical  system or the reduction, curtailment or interruption of electrical output of
our  facility. Williams Energy will have the exclusive right to schedule the
operation  of our facility or a unit in accordance with the provisions of the power
purchase  agreement so long as the

10

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scheduling is
consistent with the design limitations of our  facility, applicable law, regulations and
permits, and manufacturers reasonable  recommendations for operating limits with
respect to our facility and major components.

Up
to two times each year, we must demonstrate, in accordance with the then-applicable
criteria of PJM applicable generally to independent power and GPU Energy generating
facilities in PJM of similar technology, the capability of our facility to produce and
maintain, as required for the demonstration, our facilitys net capacity.

Force Majeure

A
party will be excused from performing its obligations under the power purchase agreement
and will not be liable in damages or otherwise to the other party if and to the extent the
party declares that it is unable to perform or is prevented from performing an obligation
under the power purchase agreement by a force majeure condition, except for any
obligations and/or liabilities under the power purchase agreement to pay money, which will
not be excused, and except to the extent an obligation accrues prior to the occurrence or
existence of a force majeure condition so long as:

| |  | the
party declaring its inability to perform by virtue of force majeure, as promptly as
practicable after the occurrence of the force majeure condition, but in no event more
than  five days later, gives the other party written notice describing, in detail, the
nature,  extent and expected duration of the force majeure condition;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | the
suspension of performance is of no greater scope and of no longer duration than is
reasonably required by the force majeure condition;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------

| |  | the
party declaring force majeure uses all commercially reasonable efforts to remedy its
inability to perform; and
| | - | ------------------------------------------------------------------------------------------------------------------

| |  | once
the party declaring force majeure is able to resume performance of its obligations
excused as a result of the force majeure condition, it promptly gives written notice to
the other party.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Irrespective
of whether the force majeure condition is declared by Williams Energy or us, the time
period of a force majeure will be excluded from the calculation of all payments under the
power purchase agreement and Williams Energy must be under no obligation to pay us any of
the payments described in the power purchase agreement. If Williams Energy declares
a force majeure, however, it must, subject to its right to terminate the power purchase
agreement if the force majeure has not been fully corrected or alleviated within 18 months
of the declaration, continue to pay us only the applicable monthly total fixed payment as
described in the power purchase agreement until the earlier of (1) the termination of the
force majeure condition or (2) the termination of the power purchase agreement.
Furthermore, if we declare a force majeure due to an action or inaction of GPU Energy that
prevents us from delivering net electric energy to the electric delivery point, Williams
Energy must continue to pay the applicable portion of the total fixed payment for the
first 24 hours of the period. Notwithstanding anything to the contrary contained in
the power purchase agreement, except as may expressly be provided in the power purchase
agreement, the term force majeure will not include the following nor will the following
excuse a partys performance:

| |  | Any
reduction, curtailment or interruption of generation or operation of our facility, or  of
the ability of Williams Energy to accept or transmit net electric energy, whether in
whole or in part, which reduction, curtailment or interruption is caused by or arises
from  the acts or omissions of any third party providing services or supplies to the
party  claiming force majeure, including any vendor or supplier to either party of
materials,  equipment, supplies or services, or any inability of GPU Energy to deliver
net electric  energy to Williams Energy, unless, and then only to the extent that, any
acts or omissions  would itself be excused under the power purchase agreement as a force
majeure; or
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Any
outage, whether or not due to the fault or negligence of us, of our facility
attributable to a defect or inadequacy in the manufacture, design or installation of our
facility that prevents, curtails, interrupts or reduces the ability of our facility to
generate net electric energy or the ability of us to perform our obligations under the
power purchase agreement; or
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

11

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| |  | To
the extent that the party claiming force majeure failed to prevent or remedy the force
majeure condition by taking all commercially reasonable acts, short of litigation if the
remedy requires litigation, and, except as otherwise provided in the power purchase
agreement, failed to resume performance under the power purchase agreement with
reasonable  dispatch after the termination of the force majeure condition; or
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | To
the extent that the claiming partys failure to perform was caused by lack of funds; or
| | - | ------------------------------------------------------------------------------------------

| |  | To
the extent Williams Energy is unable to perform due to a shortage of natural gas not
caused by an event of force majeure; or
| | - | -------------------------------------------------------------------------------------------------------------------------------

| |  | Because
of an increase or decrease in the market price of electric energy/capacity,  natural gas
or because it is uneconomic for the party to perform its obligations under the  power
purchase agreement.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Neither
party will be required to settle any strike, walkout, lockout or other labor dispute on
terms which, in the sole judgment of the party involved in the dispute, are contrary to
its interest. Williams Energy will have the right to terminate the power purchase
agreement if a force majeure has been declared by us and the effect of the force majeure
has not been fully corrected or alleviated within 18 months after the date the force
majeure was declared. Williams Energy, however, will not have the right to
terminate the power purchase agreement if (1) the force majeure was caused by Williams
Energy or (2) the force majeure event does not prevent or materially limit Williams
Energys ability to sell our facilitys net capacity into or through the PJM
power pool market or to a third party.

Events of Default;
Termination; Remedies

The
following will constitute events of default under the power purchase agreement:

| |  | breach
of any term or condition of the power purchase agreement, including, but not  limited to,
(1) any failure to maintain or to renew any security, (2) any breach of a
representation, warranty or covenant or (3) failure of either party to make a required
payment to the other party;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | our
facility is not available to provide fuel conversion services to Williams Energy  during
any period of 180 consecutive days after the commercial operation date, except as  may be
excused by force majeure or the absence of available natural gas, or if the
non-availability is caused by an act or failure to act by Williams Energy where the
action  is required by the power purchase agreement;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | we
sell or supply net electric energy, ancillary services or capacity from our facility,  or
agree to do the same, to any person or entity other than Williams Energy, without the
prior approval of Williams Energy;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | failure
by us for 30 consecutive days to perform regular and required maintenance, testing  or
inspection of the interconnection facilities, our facility and/or other electric
equipment and facilities;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | failure
by us for 30 consecutive days to correct or resolve a material violation of any  code,
regulation and/or statute applicable to the construction, installation, operation or
maintenance of our facility, the interconnection facilities, protective gas apparatus or
any other electric equipment and facilities required to be constructed and operated under
the power purchase agreement when the violation impairs our continued ability to perform
under the power purchase agreement;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | involuntary
bankruptcy or insolvency of either party and continues for more than 60 days;
| | - | -----------------------------------------------------------------------------------------

| |  | voluntary
bankruptcy or insolvency by either party;
| | - | ---------------------------------------------------

| |  | any
modifications, alterations or other changes to our facility by or on behalf of us  which
prevent us from fulfilling, or materially diminishes our ability to fulfill, our
obligations, duties, rights and responsibilities under the power purchase agreement and
which after reasonable notice and opportunity to cure, are not corrected;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

12

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| |  | there
will be outstanding for more than 60 days any unsatisfied final, non-appealable  judgment
against us in an amount exceeding $500,000, unless the existence of the  unsatisfied
judgment does not materially affect our ability to perform our obligations  under the
power purchase agreement; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (1)
The AES Corporation will cease to own, directly or indirectly, beneficially and of
record, at least 50 percent of the equity interests in our company or will cease to
possess the power to direct or cause the direction of our management or policies or (2)
any person or an affiliate, other than The AES Corporation or an affiliate, authorized to
act as a power marketer by FERC will own, directly or indirectly, beneficially or of
record, any of the equity interests in our company.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Upon
the occurrence of any event of default, other than an event of default for voluntary
bankruptcy or insolvency, for which no notice will be required or opportunity to cure
permitted, the party not in default, to the extent the party has actual knowledge of the
occurrence of the event of default, must give prompt written notice of the default to the
defaulting party. The notice must describe, in reasonable detail, the nature of the
default and, where known and applicable, the steps necessary to cure the default.
The defaulting party must have 30 days, but only two business days in the case of a
default for failure to make a requested payment to the non-defaulting party under the
power purchase agreement, following receipt of the notice either to cure the default or
commence in good faith all the steps as are necessary and appropriate to cure the default
if the default cannot be completely cured within the 30-day period. If the
defaulting party fails to cure the default or take the steps as provided under the
preceding paragraph, and immediately upon the occurrence of any event of default for
voluntary bankruptcy or insolvency, the power purchase agreement may be terminated by the
non-defaulting party, without any liability or responsibility whatsoever, by written
notice to the party in default. The non-defaulting party may exercise all the
rights and remedies as are available to it to recover damages caused by the default.

Security

Williams
Energy has provided us a guaranty, issued by The Williams Companies, Inc., of
Williams Energys performance and payment obligations under the power purchase
agreement. Under the power purchase agreement, in the event that S&P or
Moodys rates the long-term senior unsecured debt of The Williams Companies,
Inc. lower than investment grade, The Williams Companies, Inc. or an
affiliate thereof, is required to replace such Williams Companies, Inc. guaranty,
within thirty days, with an alternative security that is acceptable to us after
loss of such investment grade rating.

According
to published sources, on July 23, 2002, S&P lowered the long term senior unsecured
debt rating of The Williams Companies, Inc. to BB from
BBB-", and further lowered such rating to B on July 25,
2002. According to published sources, on July 24, 2002, Moodys lowered the
long-term senior unsecured debt rating of The Williams Companies, Inc. to
B1 from Baa3. According to published sources, this rating
was further lowered on November 22, 2002 to Caa1 by Moodys.

To
satisfy the requirements of the power purchase agreement, on September 20, 2002,
Citibank,  N.A., issued a $35 million Irrevocable Standby Letter of Credit (the
Letter of Credit) on behalf of Williams Energy. The Letter of Credit does
not  alter, modify, amend or nullify the guaranty issued by The Williams Companies, Inc. in
favor of the Company and is considered to be additional security to the security  amounts
provided by such guaranty. The Letter of Credit became effective on  September 20,
2002 and shall expire upon the close of business on July 10, 2003; except  that the
Letter of Credit will be automatically extended without amendment for successive  one
year periods from the present or any future expiration dates thereof, unless Citibank,  N.A. provides
written notice of its election not to renew the Letter of  Credit at least thirty days
prior to any such expiration date.Additionally, in a  Letter Agreement dated
September 20, 2002 (the Letter Agreement), Williams  Energy agreed to (a)
provide eligible credit support prior to the stated expiration date  of the Letter of
Credit and (b) replenish any portion of the Letter of Credit or eligible  credit support
that is drawn, reduced, cashed or redeemed, at any time, with an equal  amount of
Eligible Credit Support. Within twenty days prior to the expiration of  the Letter
of Credit and/or any expiration date of eligible credit support posted by  Williams
Energy, Williams Energy shall post eligible credit support to the Company in  place of
the Letter of Credit and/or any expiring eligible credit support unless The  Williams
Companies, Inc. regains and maintains its investment grade status, in  which case
the Letter of Credit or eligible credit support shall automatically terminate  and no
additional eligible credit support shall be required. We and Williams
Energy acknowledge that the posting of such Letter of Credit and Williams  Energys
agreement and performance of the requirements of (a) and (b) as set forth in  the
immediately preceding sentence

13

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shall be in full
satisfaction of Williams Energys  obligations contained in Section 19.3 of the
power purchase agreement to provide  replacement security due to the downgrade of The
Williams Companies, Inc. falling below  investment grade status.

Assignment

Generally,
neither the power purchase agreement nor any rights, duties, interests or obligations
thereunder may be assigned, transferred, pledged or otherwise encumbered or disposed of,
by operation of law or otherwise without the prior written consent of the other party.

We
agreed that we will not sell, transfer, assign, lease or otherwise dispose of our facility
or any substantial portion thereof or interest therein necessary to perform our
obligations under the power purchase agreement to any person that is a FERC-authorized
power marketer or an affiliate without the prior written consent of Williams Energy, which
consent must not be unreasonably withheld.

Construction
Agreement

We,
as assignee of AES Ironwood, Inc., entered into an Agreement for Engineering,
Procurement and Construction Services, dated as of September 23, 1998, as amended, with
Siemens Westinghouse for Siemens Westinghouse to perform services in connection with the
design, engineering, procurement, site preparation and clearing, civil works,
construction, start-up, training and testing and to provide all materials and equipment
(excluding operational spare parts), machinery, tools, construction fuels, chemicals and
utilities, labor, transportation, administration and other services and items
(collectively and separately, the services) for our facility.

By
meeting the provisions in Section 6.3 of the construction agreement, provisional
acceptance was granted by us on December 27, 2001. On March 12, 2003, we entered
into a settlement agreement with Siemens Westinghouse concerning final acceptance. This
agreement became effective as of that date and final acceptance was granted by us as of
that date. For further information, please see Legal Proceedings.

Siemens
Westinghouses Services and Other Obligations

Siemens
Westinghouse must complete our project by performing or causing to be performed all of the
services.The required services have included: engineering and design; construction
and construction management; providing design documents, instruction manuals, a project
procedures manual and quality assurance plan; procuring all materials, equipment and
supplies and all contractor and subcontractor labor and manufacturing and related
services; providing a spare parts list; providing all labor and personnel; obtaining some
applicable permits and providing information to assist us in obtaining other applicable
permits; performing inspection, expediting, quality surveillance and traffic services;
transporting, shipping, receiving and marshalling all materials, equipment and supplies
and other items; providing storage for all materials, supplies and equipment and
procurement or disposal of all soil and gravel (including remediation and disposal of
specific hazardous materials); providing for design, construction and installation of
electrical interconnection facilities (including electric metering equipment, automatic
regulation equipment, protective apparatus and control system equipment) and reviewing
other GPU Energy interconnections to our facility (including gas and water pipelines);
performing performance tests and power purchase agreement output tests; providing for
start-up and initial operation functions; and providing specified spare parts, waste
disposal services, chemicals, consumables and utilities.

The
services have also included: training our personnel prior to provisional acceptance;
providing us and our designee with access to the facility site; obtaining additional
necessary real estate rights; clean-up and waste disposal (including hazardous materials
brought to the facility site by Siemens Westinghouse or the subcontractors); submitting a
construction schedule and progress reports; payment of contractor taxes; employee
identification and security arrangements; protecting adjoining utilities and public and
private lands from damage; paying appropriate royalties and license fees; providing final
releases and waivers to us; posting collateral or providing other assurances if major
subcontractors fail to furnish final waivers; maintaining labor relations and project
labor agreements; providing further assurances; coordinating with other contractors; and
causing Siemens Corporation to execute and deliver the related guaranty.

14

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Construction and
Start-Up

Siemens
Westinghouse must perform certain services in accordance with prudent utility practices,
generally accepted standards of professional care, skill, diligence and competence
applicable to engineering, construction and project management practices, all applicable
laws, all applicable permits, the real estate rights, the quality assurance plan, GPU
Energy electrical interconnection requirements, the environmental requirements and safety
precautions described in the construction agreement, and all of the requirements necessary
to maintain the warranties granted by the subcontractors under the construction
agreement. Siemens Westinghouse must perform the services in accordance with our
construction schedule and must cause:

| |  | each
construction progress milestone to be achieved on or prior to the applicable construction
progress milestone date,
| | - | -----------------------------------------------------------------------------------------------------------------------

| |  | either
provisional acceptance or interim acceptance of our facility to occur on or prior to the
guaranteed provisional acceptance date, and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------

| |  | final
acceptance of our facility to occur on or before the guaranteed final acceptance date.
| | - | --------------------------------------------------------------------------------------------

Siemens
Westinghouse must perform the services so that our facility, when operated in accordance
with the instruction manual and the power purchase agreement operating requirements,
regardless of whether our facility is operated at 705 megawatts or at a different output,
on natural gas , respectively, as of provisional acceptance, interim acceptance and final
acceptance, will comply with all applicable laws and applicable permits, GPU Energy
electrical interconnection requirements and the guaranteed emissions limits in accordance
with the completed performance test requirements.

Contract Price and
Payment

The
adjusted contract price, including base scope changes through the date of the construction
agreement, is $241 million and commencing on the construction commencement date is to be
paid in installments in accordance with the payment and milestone schedule. The
contract price may be adjusted as a result of scope changes. We must make and have
made scheduled payments to Siemens Westinghouse upon receipt of Siemens
Westinghouses payment request unless the independent engineer fails to confirm the
matters certified to by Siemens Westinghouse in the request, in which case we may defer
the scheduled payments until the condition is satisfied. To date we have not
deferred any payment. We withheld from each scheduled payment 5%, other than our
project completion payment, of the payment until after final acceptance. As part of
a settlement agreement, Siemens Westinghouse has agreed to waive their right to receive
any payments with respect to the final milestone payment of $2.2 million and to the
retainage of $12.1 million held by us. Additionally, Siemens Westinghouse made a payment
of $4.8 million to us in respect of items related to final acceptance.  This amount was
recorded as a reduction in the cost of the facility. Upon the termination of the construction agreement,
Siemens Westinghouse will be entitled to termination costs incurred by Siemens
Westinghouse and subcontractors. We are not obligated to make any payment to
Siemens Westinghouse at any time Siemens Westinghouse is in material breach of the
construction agreement, unless Siemens Westinghouse is diligently pursuing a cure.
All payments are subject to release of claims.

Our Required Services

Our
responsibilities include: designating a representative for our project; furnishing Siemens
Westinghouse access to the facility site; securing specified applicable permits and real
estate rights; providing specified start-up personnel; furnishing water, water delivery
facilities, specified spare parts, water disposal services and consumables; providing
permanent utilities for the start-up, testing and operation of our facility; providing
fuel supply arrangements; providing electrical interconnection facilities arrangements;
furnishing approvals; administering third-party contracts; and causing The AES Corporation
to provide a pre-financial closing guaranty.

If
we fail to meet any of our obligations under the construction agreement, then, to the
extent that Siemens Westinghouse was reasonably delayed in the performance of the
services  as a direct result thereof, an equitable adjustment to one or more of the
contract price,  the guaranteed completion dates, the construction progress milestone
dates, the payment  and milestone schedule and our construction schedule, and, as
appropriate, the other

15

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provisions of the
construction agreement that may be affected thereby, will be made by  agreement between
us and Siemens Westinghouse.

Mechanical Completion

The
agreement sets forth certain conditions that were required to be met in order for
mechanical completion to occur. These conditions were deemed to be met on December
27, 2001 when provisional acceptance was granted.

Performance Tests
and Power Purchase Agreement Output Tests

Before
project completion is met, Siemens Westinghouse must perform the performance tests and
power purchase agreement output tests in accordance with criteria described in the
construction agreement. Siemens Westinghouse must give us notice of the performance
tests and power purchase agreement output tests. We must arrange for the
disposition of output during start-up and testing. Siemens Westinghouse may declare
the performance test or the power purchase agreement output test to be a completed
performance test or a completed power purchase agreement output test, respectively, if
during the tests the operation of our facility complies with applicable laws, applicable
permits, guaranteed emissions limits and other required standards.

Provisional and
Final Acceptance

The
agreement sets forth various requirements before provisional acceptance and final
acceptance of the project would be made by us. We granted provisional acceptance on
December 27, 2001. As part of a settlement agreement with Siemens Westinghouse, final
acceptance was granted on March 12, 2003.

Because
we have granted final acceptance on March 12, 2003, Siemens Westinghouse will have no
liability to us for any amounts thereafter arising as performance guarantee payments,
other than any interim period rebates that arose prior to the final acceptance, for
failure of our facility to achieve any or all of the applicable performance guarantees
other than modifications to the facility as set forth in our settlement agreement.

Project Completion

Project
completion will be achieved under the construction agreement when:

| |  | Final
acceptance of our facility will have occurred and the performance guarantees with
respect to our facility will have been achieved, or in lieu of achievement of the
performance guarantees, applicable rebates under the construction agreement will have
been  paid, we will have elected final acceptance. Pursuant to our arbitration settlement
agreement, we granted final acceptance on March 12, 2003;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | The
reliability guarantee will have been achieved;
| | - | --------------------------------------------------

| |  | Siemens
Westinghouse will have demonstrated during the completed performance test that the
operation of our facility does not exceed the guaranteed emissions limits;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | The
requirements for achieving mechanical completion of our facility will continue to be met;
| | - | ---------------------------------------------------------------------------------------------

| |  | The
punch list items will have been completed in accordance with the construction agreement;
and
| | - | ------------------------------------------------------------------------------------------------

| |  | Siemens
Westinghouse will have performed all of the services, other than those services,  such as
Siemens Westinghouses warranty obligations, which by their nature are  intended to
be performed after project completion.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

When
Siemens Westinghouse believes that it has achieved project completion, it must deliver to
us a notice of project completion. If we are satisfied that the project completion
requirements have been met, we must deliver to Siemens Westinghouse a project completion
certificate. If reasonable cause exists for doing so, we must notify Siemens
Westinghouse in writing that project completion has not been achieved, stating the
reasons  therefore.If our project completion has not been achieved as so
determined by us,  Siemens Westinghouse must promptly take such

16

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action or perform the
additional services as  will achieve project completion and must issue to us another
notice of project  completion. The procedure must be repeated as necessary until project
completion is  achieved.

Siemens
Westinghouse will be obligated to achieve project completion within 180 days after final
acceptance of our facility. If Siemens Westinghouse does not achieve our project
completion on or before our project completion deadline or if we determine that Siemens
Westinghouse is not proceeding with all due diligence to complete the services in order to
achieve project completion by the deadline, we may retain another contractor to complete
the work at the contractors expense.

Price Rebate for
Failure to Meet Guarantees

| | Completion
Dates
| | ----------------

Siemens
Westinghouse guarantees that (1) at least one of provisional acceptance, interim
acceptance or final acceptance of our facility will be achieved on or before the
guaranteed provisional acceptance date and (2) final acceptance of our facility will be
achieved on or before the guaranteed final acceptance date.

If
none of provisional acceptance, interim acceptance or final acceptance of our facility
occurs by the date that is 45 days after the guaranteed provisional acceptance date,
Siemens Westinghouse must pay us $110,000 per day for each day provisional acceptance,
interim acceptance or final acceptance is later than the guaranteed provisional acceptance
date, but in no event will the aggregate amount of the payments be greater than the Delay
LD SubCap (the aggregate amount of which is equal to 20% of the contract price).

Siemens
Westinghouse began paying liquidated damages of $110,000 per day beginning 45 days after
the guaranteed provisional acceptance date of May 22, 2001. The liquidated damages
ceased to accrue on December 27, 2001, the date upon which provisional acceptance was
granted. At December 31, 2001, we had invoiced Siemens Westinghouse approximately
$19 million. At December 31, 2002, Siemens Westinghouse had paid all liquidated
damages invoiced to them. These amounts were recorded as a reduction in the cost of the facility.

Performance
Guarantees

| | Electrical
Output
| | -----------------

If
the average net electrical output of our facility at provisional acceptance or interim
acceptance, whichever is the earlier to occur, is less than the natural gas-based
electrical output guarantee, then Siemens Westinghouse must pay us, as a rebate, for each
day during the interim period, an amount equal to $0.22 per day for each kilowatt
by which the average net electrical output is less than the natural gas-based electrical
output guarantee. During performance testing output was calculated to be 37,854 kilowatts
less than the natural gas-based electrical output guarantee. The daily charge for
this amount has been calculated at $8,328 per day.

At
the conclusion of the April 2002 outage, Siemens-Westinghouse retested the facility and
achieved no improvement in electrical output. The daily charge for electrical
output shortfall remained at $8,328 per day through June 30, 2002.

Output
was improved in July 2002 to 3,195 kilowatts less than the natural gas-based electrical
output guarantee and accordingly the interim rebate was lowered to $645 per day on July 4,
2002, the day we began receiving higher capacity payments from Williams Energy.

Under
the terms of the agreement, various provisions relating to electrical output performance
provided either for a bonus to be paid by us to Siemens Westinghouse or for Siemens
Westinghouse to pay us a rebate based on the outcome of those performance tests. As a
result of our settlement agreement, however, Siemens Westinghouse is deemed to have met
but not exceeded the performance guarantees and no bonus will be paid by us and no rebate
will be paid by Siemens Westinghouse.

17

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| | Heat
Rate Guarantees
| | --------------------

If
the average net heat rate of our facility at provisional acceptance and/or interim
acceptance, if having occurred before final acceptance, exceeds the natural gas-based heat
rate guarantee, then Siemens Westinghouse must pay us, as a rebate, for each day during
the interim period, an amount equal to $44 per day for each BTU/KwH by which the measured
net heat rate is greater than the natural gas-based heat rate guarantee. During
performance testing heat rate was calculated to be 162 BTU/KwH more than the natural
gas-based heat rate guarantee. The daily charge for this amount has been calculated
at $7,116 per day.

At
the conclusion of the April outage Siemens-Westinghouse retested the facility and achieved
an improvement in heat rate. During performance testing heat rate was calculated to
be 71 BTU/KwH more than the natural gas-based natural heat rate guarantee. The
daily charge for this amount has been calculated at $3,118 per day. The improvement
in heat rate commenced on May 23, 2002, and the lesser amount was invoiced to
Siemens-Westinghouse from that date until December 31, 2002.

Under
the terms of the agreement, various provisions relating to heat performance provided
either for a bonus to be paid by us to Siemens Westinghouse or for Siemens Westinghouse to
pay us a rebate based on the outcome of those performance tests. As a result of our
settlement agreement, however, Siemens Westinghouse is deemed to have met but not exceeded
the performance guarantees and no bonus will be paid by us and no rebate will be paid by
Siemens Westinghouse.

| | Limitation
of Liability
| | -----------------------

In
no event will Siemens Westinghouses liability exceed (1) the Delay LD SubCap, the
aggregate of which is equal to 20% of the contract price, and (2) the Total LD SubCap (the
aggregate amount of which is equal to 45% of the contract price).

Liability and Damages

Consequential
Damages

Neither
party nor any of its contractors, subcontractors or other agents providing equipment,
material or services for our project will be liable for any indirect, incidental, special
or consequential loss or damage of any type.

Aggregate
Liability of Contractor

The
total aggregate liability of Siemens Westinghouse and any of its subcontractors, including
liabilities covered by the Delay LD SubCap and the Total LD SubCap, to us will not in any
event exceed an amount equal to the contract price so long as the limitation of liability
will not apply to obligations to remove liens or to make indemnification payments.

Warranties
and Guarantees

Siemens
Westinghouse warrants and guarantees that during the applicable warranty period:

| |  | all
machinery, equipment, materials, systems, supplies and other items comprising our
project must be new and of first-rate quality which satisfies GPU Energy grade standards
and in accordance with prudent utility practices and the specifications described in the
construction agreement, suitable for the use in generating electric energy and capacity
under the climatic and normal operating conditions and free from defective workmanship or
materials,
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | it
will perform all of its design, construction, engineering and other services in
accordance with the construction agreement,
| | - | ------------------------------------------------------------------------------------------------------------------------------

| |  | our
project and its components must be free from all defects caused by errors or omissions
in engineering and design, as determined by reference to prudent utility practices, and
must comply with all applicable
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

18

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| | laws,
all applicable permits, GPU Energy electrical  interconnection requirements, the power
purchase agreement operating requirements and the  guaranteed emissions limits; and
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | the
completed project must perform its intended functions of generating electric energy  and
capacity as a complete, integrated operating system as contemplated in the  construction
agreement. If we notify Siemens Westinghouse within 30 days after the  expiration
of the applicable warranty period of any defects or deficiencies discovered  during the
applicable warranty period, Siemens Westinghouse must promptly reperform any of  the
services at its own expense to correct any errors, omissions, defects or deficiencies
and, in the case of defective or otherwise deficient machinery, equipment, materials,
systems supplies or other items, replace or repair the same at its own expense. Siemens
Westinghouse warrants and guarantees that, to the extent we have made all payments  then
due to Siemens Westinghouse, title to our facility and all work, materials, supplies  and
equipment must pass to us free and clear of all liens, other than any permitted  liens. Other
than the warranties and guarantees provided in the construction  agreement, there are no
other warranties of any kind, whether statutory, express or  implied relating to the
services.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

During
the applicable warranty period, Siemens Westinghouse must promptly notify us of any
engineering and design defects which are manifested in any of Siemens Westinghouses
fleet of 501G combustion turbines under construction, start-up or testing or in operation
during the warranty period and which could reasonably be expected to be common to the
fleet or this facility. Upon the notification from Siemens Westinghouse of a
fleet-wide or common defect and otherwise upon notification from us no later than 30 days
after the expiration of the applicable warranty period of any defects or deficiencies in
our project or any component, we must, subject to the provisions of the construction
agreement, make our facility or the subject equipment available to Siemens Westinghouse
for Siemens Westinghouse to re-perform, replace or, at its option, repair the same at its
expense so that it is in compliance with the standards warranted and guaranteed, all in
accordance with the construction agreement.

Force
Majeure Event

A
force majeure event means any act or event that prevents the affected party from
performing its obligations, other than the payment of money, under the construction
agreement or complying with any conditions required to be complied with under the
construction agreement if the act or event is beyond the reasonable control of and not the
fault of the affected party and the party has been unable by the exercise of due diligence
to overcome or mitigate the effects of the act or event. Force majeure events
include, but are not limited to, acts of declared or undeclared war, sabotage, landslides,
revolution, terrorism, flood, tidal wave, hurricane, lightning, earthquake, fire,
explosion, civil disturbance, insurrection or riot, act of God or the public enemy, action
(including unreasonable delay or failure to act) of a court or public authority, or
strikes or other labor disputes of a regional or national character that are not limited
to only the employees of Siemens Westinghouse or its subcontractors and that are not due
to the breach of a labor contract or applicable law by the party claiming force majeure or
any of its subcontractors. Force majeure events do not include (1) strikes, work
stoppages and labor disputes or unrest of any kind that involve only employees of Siemens
Westinghouse or any subcontractors, except as expressly provided in the preceding
sentence, (2) late delivery of materials or equipment, except to the extent caused by a
force majeure event and (3) economic hardship.

Excused
Performance

If
either party is rendered wholly or partly unable to perform its obligations because of a
force majeure event, that party will be excused from whatever performance is affected by
the force majeure event to the extent affected so long as:

| |  | the
non-performing party gives the other party prompt notice describing the particulars of
the occurrence;
| | - | ----------------------------------------------------------------------------------------------------------

| |  | the
suspension of performance is of no greater scope and of no longer duration than is
reasonably required by the force majeure event;
| | - | --------------------------------------------------------------------------------------------------------------------------------------

| |  | the
non-performing party exercises all reasonable efforts to mitigate or limit damages to the
other party;
| | - | ----------------------------------------------------------------------------------------------------------

19

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| |  | the
non-performing party uses its best efforts to continue to perform its obligations  under
the construction agreement and to correct or cure the event or condition excusing
performance; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | when
the non-performing party is able to resume performance of its obligations, that party
must give the other party written notice to that effect and must promptly resume
performance under the construction agreement.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Scope
Changes

We
may order scope changes to the services, in which event one or more of the contract price,
the construction progress milestone dates, the guaranteed completion dates, the payment
and milestone schedule, our construction schedule and the performance guarantees will be
adjusted accordingly, if necessary. All scope changes must be authorized by a scope
change order and only we or our representative may issue scope change orders. As
soon as Siemens Westinghouse becomes aware of any circumstances which it has reason to
believe may necessitate a scope change, Siemens Westinghouse must issue to us a scope
change order notice at its expense. If we desire to make a scope change, in
response to a scope change order notice or otherwise, we must submit a scope change order
request to Siemens Westinghouse. Siemens Westinghouse must promptly review the
scope change order request and notify us in writing of the options for implementing the
proposed scope change and the effect, if any, each option would have on the contract
price, the guaranteed completion dates, the construction progress milestone dates, the
payment and milestone schedule, our construction schedule and the performance guarantees.
No scope change order will be issued and no adjustment of the contract price, the
guaranteed completion dates, the construction progress milestone dates, the payment and
milestone schedule, our construction schedule or the performance guarantees will be made
in connection with any correction of errors, omission, deficiencies, or improper or
defective work on the part of Siemens Westinghouse or any subcontractors in the
performance of the services. Changes due to changes in applicable laws or
applicable permits occurring after the date of the construction agreement must be treated
as scope changes.

In
December 2001, we reached an agreement with Siemens Westinghouse to eliminate the
requirement to use fuel oil as a secondary fuel from the construction agreement. In
a separate agreement, Williams Energy agreed to eliminate the requirement to use fuel oil
as a secondary fuel from the power purchase agreement contract. The result of the
non-use of fuel oil will enhance the reliability of the plant as well as increase the
efficiency of the plant.

Effect of Force
Majeure Event

If
and to the extent that any force majeure events affect Siemens Westinghouses ability
to meet the guaranteed completion dates, or the construction progress milestone dates, an
equitable adjustment in one or more of the dates, the payment and milestone schedule and
our construction schedule must be made by agreement between us and Siemens
Westinghouse. No adjustment to the performance guarantees and, except as otherwise
expressly described below, the contract price must be made as a result of a force majeure
event. If Siemens Westinghouse is delayed in the performance of the services by a
force majeure event, then:

| |  | to
the extent that the delay(s) are, in the aggregate, six months or less, Siemens
Westinghouse must absorb all of its costs and expenses resulting from the delay(s); and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | to
the extent that the delay(s) are, in the aggregate, more than six months, Siemens
Westinghouse must be reimbursed by us for those incremental costs and expenses resulting
from the delay(s) which are incurred by Siemens Westinghouse after the six-month  period.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Price Change

An
increase or decrease in the contract price, if any, resulting from a scope change
requested by us or made under the construction agreement must be determined, upon the
mutual agreement of the parties.

20

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Continued
Performance Pending Resolution of Disputes

If
a dispute arises regarding the amount of any increase or decrease in Siemens
Westinghouses costs with respect to a scope change, Siemens Westinghouse must
proceed with the performance of the scope change promptly following our execution of the
corresponding scope change order.

If
hazardous materials were not identified in an environmental site assessment report
delivered by us to Siemens Westinghouse prior to the construction commencement date and
were not brought onto the facility site by Siemens Westinghouse or any of its
subcontractors, then Siemens Westinghouse will be entitled to a scope change under the
construction agreement.

Risk of Loss

Until
the risk transfer date, which was December 27, 2001, the date at which provisional
acceptance was achieved, Siemens Westinghouse bore the risk of loss and full
responsibility for the costs of replacement, repair or reconstruction resulting from any
damage to or destruction of our facility or any materials, equipment, tools and supplies,
which are purchased for permanent installation in or for use during construction of our
facility. Since December 27, 2001, the risk transfer date with respect to our
facility, we have born all risk of loss and full responsibility for repair, replacement or
reconstruction with respect to any loss, damage or destruction to our facility.

Termination

Termination
for Companys Convenience

We
may for our convenience terminate any part of the services or all remaining services at
any time upon 30 days prior written notice to Siemens Westinghouse specifying the
part of the services to be terminated and the effective date of termination. We may
elect to suspend completion of all or any part of the services upon 10 days prior
written notice to Siemens Westinghouse or, in emergency situations, upon prior notice as
circumstances permit.

Termination
by Contractor

If
we fail to pay to Siemens Westinghouse any payment and our failure continues for 20 days,
then (1) Siemens Westinghouse may suspend its performance of the services upon 10
days prior written notice to us, which suspension may continue until the time as the
payment, plus accrued interest, is paid to Siemens Westinghouse, and/or (2) if the payment
has not been made prior to the commencement of a suspension by Siemens Westinghouse under
clause (1) above, Siemens Westinghouse may terminate the construction agreement upon 60
days prior written notice to us so long as the termination does not become effective
if the payment, plus accrued interest, is made to Siemens Westinghouse prior to the end of
the notice period. In the event of a suspension, an equitable adjustment to one or
more of the contract price, the guaranteed completion dates, the construction progress
milestone dates, the payment and milestone schedule and our construction schedule, and, as
appropriate, the other provisions of the construction agreement that may be affected
thereby, must be made by agreement between us and Siemens Westinghouse. If we have
suspended completion of all or any part of the services in accordance with the
construction agreement for a period in excess of two years in the aggregate, Siemens
Westinghouse may, at its option, at any time thereafter so long as the suspension
continues; give written notice to us that Siemens Westinghouse desires to terminate the
suspended services. Unless we order Siemens Westinghouse to resume performance of
the suspended services within 10 days of the receipt of the notice from Siemens
Westinghouse, the suspended services will be deemed to have been terminated by us for its
convenience. If the occurrence of one or more force majeure events prevents Siemens
Westinghouse from performing the services for a period of 365 consecutive days, Siemens
Westinghouse may, at its option, give written notice to us of its desire to terminate the
construction agreement.

Consequences of
Termination

| |  | Upon
any termination, unless the termination is pursuant to any default, Siemens  Westinghouse
will have been paid all amounts due and owing to it under the construction  agreement and
it is not deemed to
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

21

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| | constitute
a waiver by Siemens Westinghouse of any  rights to payment  it may have as a result of a
non-default related termination in the  event of a  termination pursuant to a default, we
may, at our option elect to have  ourselves, or our  designee, which may include any
other affiliate of The AES Corporation  or any  third-party purchaser, (1) assume
responsibility for and take title to and  possession of  our project and any or all work,
materials or equipment remaining at the  facility site  and (2) succeed automatically,
without the necessity of any further action  by Siemens  Westinghouse, to the interests
of Siemens Westinghouse in any or all items  procured by  Siemens Westinghouse for our
project and in any and all contracts and  subcontracts  entered into between Siemens
Westinghouse and any subcontractor with respect  to the  equipment specified in the
construction agreement with respect to any or all other  subcontractors selected by us
which are materially necessary to the timely completion of  our project, Siemens
Westinghouse must use all reasonable efforts to enable us, or our  designee, to succeed
to Siemens Westinghouses interests thereunder.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | If
any termination occurs, we may, without prejudice to any other right or remedy it may
have, at its option, finish the services by whatever method we may deem expedient.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Default and Remedies

Contractors
Default

Siemens Westinghouses
events of default include: voluntary bankruptcy or insolvency; involuntary bankruptcy or
insolvency; materially adverse misleading or false representation or warranty; improper
assignment; failure to maintain required insurance; failure to comply with applicable laws
or applicable permits; cessation or abandonment of the performance of services;
termination or repudiation of, or default under the related guaranty; failure to supply
sufficient skilled workers or suitable material or equipment; failure to make payment when
due for labor, equipment or materials; non-occurrence of provisional acceptance, interim
acceptance, final acceptance and construction progress milestones; and failure to remedy
non-performance or non-observance of any provision in the construction agreement.

Our
Rights and Remedies

If
Siemens Westinghouse is in default of its obligations, we will have any or all of the
following rights and remedies, in addition to any other rights and remedies that may be
available to us under the construction agreement or at law or in equity, and Siemens
Westinghouse will have the following obligations:

| |  | We
may, without prejudice to any other right or remedy we may have under the construction
agreement or at law or in equity, terminate the construction agreement in whole or in
part  immediately upon delivery of notice to Siemens Westinghouse. In case of
partial  termination, the parties must mutually agree upon a scope change order to make
equitable  adjustments, including the reduction and/or deletion of obligations of the
parties  commensurate with the reduced scope Siemens Westinghouse must have after taking
into  account the partial termination, to one or more of the guaranteed completion dates,
the  construction progress milestone dates, the contract price, the payment and milestone
schedule, our construction schedule, the performance guarantees and the other provisions
of the construction agreement which may be affected thereby, as appropriate. If
the  parties are unable to reach mutual agreement as to the scope change order and the
dispute  resolution procedures described in the construction agreement are invoked, the
procedures  must give due consideration to customary terms and conditions under which
Siemens  Westinghouse has entered subcontracts with third party prime contractors
covering services  substantially similar to those services which are not being terminated.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | If
requested by us, Siemens Westinghouse must withdraw from the facility site, must assign
to us its subcontracts, to the extent permitted therein, as we may request, and must
remove the materials, equipment, tools and instruments used by, and any debris and waste
materials generated by, Siemens Westinghouse in the performance of the services as we may
direct, and we, without incurring any liability to Siemens Westinghouse (other than the
obligation to return to Siemens Westinghouse at the completion of our project the
materials that are not consumed or incorporated into our project, solely on an as
is, where is basis without any representation or warranty of any kind whatsoever)
may take possession of any and all designs,
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| | drawings,
materials, equipment, tools,  instruments, purchase orders, schedules and facilities of
Siemens Westinghouse at the  facility site that we deem necessary to complete the services.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Assignment

Generally,
neither we nor Siemens Westinghouse will have any right to assign or delegate any of their
respective rights or obligations under the construction agreement either voluntarily or
involuntarily or by operation of law.

Maintenance
Services Agreement

We,
as assignee of AES Ironwood, Inc., have entered into the Maintenance Program Parts,
Shop Repairs and Scheduled Outage TFA Services Contract, dated as of September 23, 1998,
with Siemens Westinghouse by which Siemens Westinghouse will provide us with, among other
things, combustion turbine parts, shop repairs and scheduled outage technical field
assistance services.

The
maintenance services agreement became effective on the date of execution and unless
terminated early, must terminate upon completion of shop repairs performed by Siemens
Westinghouse following the eighth scheduled outage of the applicable combustion turbine or
10 years from initial synchronization of the applicable combustion turbine, whichever
occurs first.

Scope of Work

During
the term of the maintenance services agreement, and in accordance with the scheduled
outage plan, Siemens Westinghouse is required to do the following:

deliver
the type and quantity of new program parts for installation of the combustion turbine;
repair/refurbish program parts and equipment for the combustion turbine;

| |  | provide
miscellaneous hardware;
| | - | -------------------------------

| |  | provide
us with material safety data sheets for all hazardous materials Siemens Westinghouse
intends to bring/use on the facility site;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------

| |  | provide
the services of a maintenance program engineer to manage the combustion turbine
maintenance program; and
| | - | ----------------------------------------------------------------------------------------------------------------

| |  | provide
TFA Services.
| | - | ---------------------

| |  | We
are responsible  for, among other things:
| | - | --------------------------------------------

| |  | storing
and maintaining parts, materials and tools to be used in or on the combustion turbine;
| | - | ----------------------------------------------------------------------------------------------

| |  | maintaining
and operating the combustion turbine consistently with the warranty conditions;
| | - | -------------------------------------------------------------------------------------------

| |  | ensuring
that its operator and maintenance personnel are properly trained;
| | - | --------------------------------------------------------------------------

| |  | transporting
program parts in need of repair/refurbish; and
| | - | -----------------------------------------------------------

| |  | providing
Siemens  Westinghouse, on a monthly basis, with the required equivalent starts and
equivalent base  load hours (EBHs).
| | - | ----------------------------------------------------------------------------------------------------------------------------------

We
and Siemens Westinghouse have jointly developed the scheduled outage plan. The
scheduled outage plan is consistent with the terms and conditions of the power purchase
agreement.

23

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Early Replacement

If
it is determined that due to normal wear and tear a program part(s) for the combustion
turbine has failed or will not last until the next scheduled outage, and the part has to
be repaired before the scheduled replacement period, Siemens Westinghouse will replace the
program part by moving up a new program part which is otherwise scheduled to be delivered
at a later date. The contract price for the replacement will not be affected if the
replacement date is less than or equal to one year earlier than the scheduled outage
during which the program part was scheduled to be replaced. If the actual
replacement date for a program part is more than one year earlier than the scheduled
outage at which point the program part was scheduled to be replaced, the early replacement
will result in an adjustment to the payment schedule. Siemens Westinghouse has the
final decision with regard to the replacement or refurbishment associated with any program
part. If we dispute Siemens Westinghouses decision, we may seek to resolve
the dispute in accordance with the dispute resolution procedures discussed below.

Parts Life Credit

After
applicable warranty periods described in the maintenance services agreement and the
construction agreement, Siemens Westinghouse will provide a parts life credit if a program
part requires replacement due to normal wear and tear prior to meeting its expected useful
life. Siemens Westinghouse has the final decision with regard to actual parts life
and the degree of repair or refurbishment associated with any program parts. The
parts life credit will be calculated in terms of EBHs and equivalent starts. The
price of the replacement part will be adjusted for inflation. If we dispute Siemens
Westinghouses decision, we may seek to resolve the dispute in accordance with the
dispute resolution procedures discussed below.

Contract Price and
Payment Terms

Siemens
Westinghouse will invoice us monthly and payments are then due within 25 days. The
fees assessed by Siemens Westinghouse will be based on the number of EBHs accumulated by
the applicable combustion turbine as adjusted for inflation. The contract price
will be the aggregate number of fees as adjusted plus any additional payment amount
mutually agreed to by the parties under a change order.

Unscheduled Outages
and Unscheduled Outage Work

If
during the term of the maintenance services agreement an unscheduled outage occurs
resulting from (1) the non-conformity of new program parts; (2) the failing of a shop
repair; (3) a program part requiring replacement due to normal wear and tear prior to
achieving its expected life in terms of EBHs or equivalent starts; or (4) the failure of a
service, performed by Siemens Westinghouse, we must hire Siemens Westinghouse, to the
extent not supplied by Siemens Westinghouse as a warranty remedy under Siemens
Westinghouses warranties under the maintenance services agreement to supply any
additional parts, miscellaneous hardware, shop repairs and TFA Services under a change
order. We will be entitled to any applicable parts life credit with respect to
program parts as well as a discount for TFA services. If the unscheduled outage
occurs within a specified number of EBHs of a scheduled outage and it was anticipated that
the additional parts, miscellaneous hardware, shop repairs and TFA services to be used in
the unscheduled outage were to be used during the upcoming scheduled outage, the upcoming
Scheduled outage must be moved up in time to become the unscheduled outage/moved-up
scheduled outage. We will not be required to pay any additional money for the
program parts, miscellaneous hardware, shop repairs and TFA Services.

If
any program parts are delivered by Siemens Westinghouse within 15 days of receipt of the
change order, we will pay to Siemens Westinghouse the price for the program part described
in the maintenance services agreement plus a specified percentage. Any program part
delivered after 30 days of the change order will cost us the price described in the
maintenance services agreement minus a specified percentage.

Changes in Operating
Restrictions

The
maintenance services agreement requires that each combustion turbine be operated in
accordance with the requirements of the power purchase agreement and prudent utility
practices, with 8,000 EBH/year and 100 equivalent starts per year by using natural gas
fuel and water. Should the actual operations differ from these

24

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operating parameters
which cause a scheduled outage to be planned/performed earlier or later than as expected,
then, under a change order, an adjustment in the scope, schedule, and price must be  made.

Warranties

Siemens
Westinghouse warrants that the new program parts, miscellaneous hardware and any shop
repairs must conform to standards of design, materials and workmanship consistent with
generally accepted practices of the electric utility industry. The warranty period
with respect to program parts, hardware and shop repair is until the earlier of one year
from the date of installation of the original program part or hardware, a specific number
of starts or fired hours after installation of the program parts and hardware, or three
years from the date of delivery of the original program part, hardware, and in the case of
shop repair, three years from completion of the work. Warranties on the program
parts and hardware must not expire more than one year after the conclusion of the
maintenance services agreement.

Siemens
Westinghouse will repair or replace any program part or hardware, at its cost, if notified
of any failure or non-conformity of the program part or hardware during the warranty
period. Siemens Westinghouse also warrants that the services of its personnel and
technical information transmitted will be competent and consistent with prudent utility
practices and the services will comply in all material respects with laws and will be free
from defects in workmanship for a period of one year from the date of completion of that
item of services. The warranties on the services must expire no later than one year
after the termination or end of the term of the maintenance services agreement.

In
addition, Siemens Westinghouse warrants any program part removed during a scheduled outage
and delivered by us to the designated facility for repair will be repaired and delivered
by Siemens Westinghouse within 26 weeks. If Siemens Westinghouse does not deliver
the program part within this time frame or does not provide a new program part in lieu of
the program part being shop repaired and an outage occurs which requires a program part,
Siemens Westinghouse will pay us liquidated damages for each day the program part is not
repaired and delivered the aggregate of which liquidated damage payments must not exceed a
maximum annual cap. If upon reaching the maximum cap on aggregate liquidated
damages, Siemens Westinghouse still has not repaired and delivered the program part, we
may elect to terminate the maintenance services agreement because Siemens Westinghouse
will be considered to have failed to perform its material obligations.

Except
for the express warranties described in the maintenance services agreement, Siemens
Westinghouse makes no other warranties or representations of any kind. No implied
statutory warranty of merchantability or fitness for a particular purpose applies.

The
warranties provided by Siemens Westinghouse are conditioned upon (1) our receipt,
handling, storage, operation and maintenance of our project, including any program parts
and miscellaneous hardware, being done in accordance with the terms of the combustion
turbine instruction manuals; (2) operation of the combustion turbine in accordance with
the terms of the maintenance services agreement; (3) repair of accidental damage done
consistently with the equipment manufacturers recommendations; (4) us providing
Siemens Westinghouse with access to the facility site to perform its services under the
maintenance services agreement; and (5) hiring Siemens Westinghouse to provide TFA
services, program parts, shop repairs and miscellaneous hardware required to dissemble,
repair and reassemble the combustion turbine.

Termination

We
may terminate the maintenance services agreement if:

| |  | specific
bankruptcy events affecting Siemens Westinghouse occur;
| | - | ----------------------------------------------------------------

| |  | Siemens
Westinghouse fails to perform or observe in any material respect any provision in  the
maintenance services agreement and fails to (1) promptly commence to cure and  diligently
pursue the cure of the failure or (2) remedy the failure within 45 days after  Siemens
Westinghouse receives written notice of the failure;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | we
terminate the construction agreement due to the contractors default thereunder or due to
our inability to obtain construction financing or  environmental operating permits; or
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

25

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| |  | the
contractor terminates the construction agreement for any reason other than our default
thereunder.
| | - | ------------------------------------------------------------------------------------------------------

Notwithstanding
the preceding, we may terminate the maintenance services agreement at any time for its
convenience following the completion of the first major outage of both combustion
turbines. In addition, the maintenance services agreement will automatically
terminate if:

| |  | we
terminate the construction agreement for reasons other than (1) the default of the
contractor and (2) our inability to obtain permits for  our project; or
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | the
contractor terminates the construction agreement for our default thereunder. If
the termination occurs, Siemens Westinghouse must discontinue any work or services being
performed and continue to protect our property. Siemens Westinghouse must transfer
title to and deliver any new program parts and miscellaneous hardware already purchased
by  us. We must pay Siemens Westinghouse those amounts owed at the time of
termination.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Limitation of
Liability

We
agreed that the remedies provided in the maintenance services agreement are exclusive and
that under no circumstances must the total aggregate liability of Siemens Westinghouse
during a given year exceed 100% of the contract price payable to Siemens Westinghouse for
that given year under the maintenance services agreement. We further agreed that
under no circumstances must the total aggregate liability of Siemens Westinghouse for
liquidated damages during a given year exceed a specified percentage of the contract price
payable to Siemens Westinghouse for that given year under the maintenance services
agreement. We further agreed that under no circumstances must the total aggregate
liability of Siemens Westinghouse exceed a specified percentage of the contract price
payable to Siemens Westinghouse under the maintenance services agreement.

Force Majeure

Neither
party will be liable for failure to perform any obligation or delay in performance,
excluding payment, to the extent the failure or delay is caused by any act or event beyond
the reasonable control of the affected party or Siemens Westinghouses suppliers so
long as the act or event is not the fault or the result of negligence of the affected
party and the party has been unable by exercise of reasonable diligence to overcome or
mitigate the effects of the act or event. Force majeure includes: any act of God;
act of civil or military authority; act of war whether declared or undeclared; act
(including delay, failure to act, or priority) of any governmental authority; civil
disturbance; insurrection or riot; sabotage; fire; inclement weather conditions;
earthquake; flood; strikes, work stoppages or other labor difficulties of a regional or
national character which are not limited to only the employees of Siemens Westinghouse or
its subcontractors or suppliers and which are not due to the breach of an applicable labor
contract by the party claiming force majeure; embargo; fuel or energy shortage; delay or
accident in shipping or transportation to the extent attributable to another force
majeure; changes in laws which substantially prevents a party from complying with its
obligations in conformity with its requirements under the maintenance services agreement
or failure or delay beyond its reasonable control in obtaining necessary manufacturing
facilities, labor, or materials from usual sources to the extent attributable to another
force majeure; or failure of any principal contractor to provide equipment to the extent
attributable to another force majeure. Force majeure does not include: (1) economic
hardship, (2) changes in market conditions or (3) except due to an event of force majeure,
late delivery of program parts or other equipment.

If
a delay in performance is excusable due to a force majeure, the date of delivery or time
for performance of the work will be extended by a period of time reasonably necessary to
overcome the effect of the force majeure and if the force majeure lasts for a period
longer than 30 days and the delay directly increases Siemens Westinghouses costs or
expenses, we, after reviewing Siemens Westinghouses additional direct costs and
expenses, will reimburse Siemens Westinghouse for its reasonable additional direct costs
and expenses incurred after 30 days from the beginning of the force majeure resulting from
the delay.

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Interconnection
Agreement

We
have entered into a Generation Facility Transmission Interconnection Agreement, dated as
of March 23, 1999, with GPU Energy for the installation, operation and maintenance of the
facilities necessary to interconnect our facility to the transmission system of GPU
Energy. Under the interconnection agreement, we and GPU Energy will construct, own,
operate and maintain the interconnection facilities. We will be responsible for all
of the costs of construction, operation and maintenance of the interconnection facilities,
including those owned by GPU Energy.

The
interconnection facilities and protective gas apparatus needed to generate and deliver net
electric and/or ancillary services to the electric delivery point were completed in 2001,
as required under the power purchase agreement.

Scope

The
interconnection agreement became effective on March 23, 1999 (the effective date
established by FERC), and will continue in full force and effect until a mutually
agreeable termination date not to exceed the retirement date for our facility.

Our Obligations

At
December 31, 2002, we owned, operated and maintained a portion of the interconnection
facilities, including, but not limited to, a 230 kV switchyard, including generator step
up transformers, instrument transformers, revenue metering, power circuit breakers,
control and protective relay panels, supervisory control and data acquisition equipment,
and protective relaying equipment.

We
reimbursed GPU Energy for its actual costs of installing the interconnection
facilities. Our payments to GPU Energy have consisted of an advance payment of
$500,000 on the execution date of the interconnection agreement, another payment of
$40,000 within 30 days of the execution date of the interconnection agreement (for work
undertaken by GPU Energy prior to December 17, 1998), a payment of $1,000,000 at financial
closing, June 25, 1999, and monthly invoices for the work performed.

We
are obligated to modify our portion of the interconnection facilities as may be required
to conform to changes in good utility practice or as required by PJM.

We
are obligated to keep our facility insured against loss or damage in accordance with the
minimum coverages specified in the interconnection agreement.

Operation and
Maintenance of Interconnection Facilities

The
parties are obligated to operate and maintain their respective portions of the
interconnection facilities in accordance with good utility practices and the requirements
and guidelines of PJM and GPU Energy.

GPU
Energy will have the right to disconnect our facility from its transmission system and/or
curtail, interrupt or reduce the output of our facility when operation of our facility or
the interconnection facilities adversely affects the quality of service rendered by GPU
Energy or interferes with the safe and reliable operation of its transmission system or
the regional transmission system. GPU Energy, however, is obligated to use
reasonable efforts to minimize any disconnection, curtailment, interruption or reduction
in output.

In
accordance with good utility practice, GPU Energy may remove the interconnection
facilities from service as necessary to perform maintenance or testing or to install or
replace equipment on the interconnection facilities or the transmission system. GPU
Energy is obligated to use due diligence to restore the interconnection facilities to
service as promptly as practicable.

In
addition, if we fail to operate, maintain, administer, or insure our facility or its
portion of the interconnection facilities, GPU Energy may, following 30 days notice
and opportunity to cure the failure, disconnect our facility from the transmission
system.

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Force Majeure

If
either party is delayed in or prevented from performing or carrying out its obligations
under the interconnection agreement by reason of force majeure, the party will not be
liable to the other party for or on account of any loss, damage, injury or expense
resulting from or arising out of the delay or prevention so long as the party encountering
the delay or prevention uses due diligence to remove the cause or causes thereof.

Default

The
events of default under the interconnection agreement are:

| |  | breach
of a material term or condition and uncured failure to provide a required schedule,
report or notice;
| | - | ------------------------------------------------------------------------------------------------------------

| |  | failure
or refusal of a party to permit the representatives of the other party access to
maintenance records, or its interconnection facilities  or protective apparatus;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | appointment
by a court of a receiver or liquidator or trustee that is not discharged  within 60 days,
issuance by a court of a decree adjudicating a party as bankrupt or  insolvent or
sequestering a substantial part of its property that has not been discharged  within 60
days after its entry, or filing of a petition to declare a party bankrupt or to
reorganize a party under the Federal Bankruptcy Code or similar state statute that has
not  been dismissed within 60 days;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | voluntary
filing by a party of a petition in bankruptcy or consent to the filing of a  bankruptcy
or reorganization petition, an assignment for the benefit of creditors, an  admission by
a party in writing of its inability to pay its debts as they come due, or  consent to the
appointment of a receiver, trustee, or liquidator of a party or any part of  its
property; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | failure
to provide the other party with reasonable written assurance of the partys  ability
to perform any of the material duties and responsibilities under the  interconnection
agreement within 60 days of a reasonable request for the assurance.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Upon
an event of default, the non-defaulting party may give notice of the event of default to
the defaulting party. The defaulting party will have 60 days following the receipt
of the notice to cure the default or to commence in good faith the steps necessary to cure
a default that cannot be cured within that 60-day period. If the defaulting party
fails to cure its default within 60 days or fails to take the steps necessary to cure a
default that cannot be cured within a 60-day period, the non-defaulting party will have
the right to terminate the interconnection agreement. GPU Energy will have the
right to operate and/or to purchase specific equipment, facilities and appurtenances from
us that are necessary for GPU Energy to operate and maintain its transmission system if
(1) we commence bankruptcy proceedings or petitions for the appointment of a trustee or
other custodian, liquidator, or receiver, (2) a court issues a decree for relief of us or
appoints a trustee or other custodian, liquidator, or receiver for us or a substantial
part of our assets and the decree is not dismissed within 60 days or (3) we cease
operation for 30 consecutive days without having an assignee, successor, or transferee in
place.

Operations
Agreement

We
entered into a Development and Operations Services Agreement, dated as of June 1, 1999,
with AES Prescott by which AES Prescott is providing development and construction
management services and, after the commercial operation date, operating and maintenance
services for our facility for a period of 27 years. Under the operations
agreement,  AES Prescott is responsible for, among other things, preparing plans and
budgets related  to start-up and commercial operation of our facility, providing
qualified operating  personnel, making repairs, purchasing consumables and spare parts
(not otherwise provided  under the maintenance services agreement) and providing other
services as needed according  to industry standards. During fiscal year 2002, AES
Prescott was compensated for  the services on a cost plus fixed-fee basis of $421,000 per
month. The fee is  adjusted annually by the change in Gross Domestic Product,
Implicit Price Deflator. Total fees paid by us were $5.0 million for the year
ended December 31, 2002. Under the  services agreement between AES Prescott and The AES
Corporation, The

28

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AES Corporation
provides to AES Prescott all of the personnel and services necessary for AES Prescott to
comply with its obligations under the operations agreement.

Effluent Supply
Agreement

We,
as assignee of AES Ironwood, Inc., have entered into an Effluent Supply Agreement,
dated as of March 3, 1998, with the City of Lebanon Authority, by which City of Lebanon
Authority will provide effluent to be used by us at the electric generating facility to be
constructed in South Lebanon Township, Pennsylvania.

Supply of Effluent

Subsequent
to completion of the pipeline connecting our facility with the wastewater treatment
facility owned and operated by City of Lebanon Authority and throughout the term of the
effluent supply agreement, City of Lebanon Authority must make available to us a supply of
effluent not less than 2,160,000 gallons per day. In the event of a shortfall, we
may elect to accept potable water from City of Lebanon Authority in accordance with the
effluent supply agreement. We will not be obligated to purchase any minimum amount
of effluent and will be entitled to seek and obtain water from other available
sources. City of Lebanon Authority must use its best efforts to comply with
requests by us for excess effluent, which must not exceed (1) 4,600,000 gallons per day or
(2) 1,679,000,000 gallons per calendar year. In addition, City of Lebanon Authority
must use its best efforts to meet our minimum effluent requirements.

Compensation

We
are obligated to pay City of Lebanon Authority monthly for all effluent delivered to the
point of delivery during the prior month. The base rate for effluent supplied is:
(1) for 0-2,160,000 gallons per day, $0.29 per thousand gallons and (2) for
2,160,000 or greater gallons per day, $0.21 per thousand gallons, which rates are
subject to annual adjustments for inflation.

Pipeline and Real
Estate Rights

We
have been solely responsible, at our cost and expense, for constructing and installing the
pipeline.

We
and City of Lebanon Authority must cooperate in good faith to obtain the necessary real
estate rights for constructing, operating, maintaining and accessing the pipeline.

Operation and
Maintenance

The
City of Lebanon Authority must operate and maintain the pipeline in accordance with the
effluent supply agreement, and as compensation, we must pay to City of Lebanon Authority
$18,250 per year, which amount will be subject to annual adjustment for inflation.

Capital Improvements

The
effluent supply agreement provides for capital improvements.

Potable Water

The City
of Lebanon Authority must make available to us on a continuous basis a potable water
supply of not less than 50 gallons per minute. We will not be obligated to purchase
a minimum amount of potable water, but must pay the City of Lebanon Authority for potable
water accepted at the potable delivery point at the rate applicable to us described in
City of Lebanon Authoritys applicable rate schedule.

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Force Majeure

If
either party is unable to carry out any obligation under the effluent supply agreement due
to force majeure, the effluent supply agreement must remain in effect, but the obligation
will be suspended for the period necessary as a result of the force majeure so long as:
(1) the non-performing party gives the other party written notice not later than 48 hours
after the occurrence of the force majeure describing the particulars of the force majeure;
(2) the suspension of performance is of no greater scope and of longer duration than is
required by the force majeure; and (3) the non-performing party uses its best efforts to
remedy its inability to perform. Notwithstanding the preceding, the settlement of
strikes, lockouts, and other labor disputes will be entirely within the discretion of the
affected party, and the party will not be required to settle any strike, lockout or other
labor dispute on terms which it deems inadvisable.

Term

The
term of the effluent supply agreement will be 25 years unless terminated early as a result
of (1) our inability to obtain financing for our project; (2) our inability to obtain
necessary approvals to construct and operate our project; (3) failure by us to deliver the
commencement notice by December 31, 2004, or (4) the occurrence of any event of
default.

Early Termination
for Event of Default

A
party may terminate the effluent supply agreement (1) upon a bankruptcy event of the other
party or (2) if the other party fails to perform or observe any of its material
obligations under the effluent supply agreement within the time contemplated by the
effluent supply agreement and the failure continues for a period of time greater than 30
days from the defaulting party.

Pennsy Supply
Agreements

We,
as assignee of AES Ironwood, Inc., entered into an Agreement Relating to Real
Estate, dated as of October 22, 1998, with Pennsy Supply, Inc.under which Pennsy
Supply has agreed to grant to us specific easements and the right to pump water from
Pennsy Supply-owned property. The easements, which are primarily for access and
utility purposes, would run from property owned by us, on which it will develop and
construct its electric generating facility, across property owned by Pennsy Supply and
require that our property be used as a power plant. Pennsy Supply has also agreed
to grant to us easements with respect to storm-water facilities and construction of a rail
spur. Pennsy Supply will make water available to us during construction and testing
of our facility and for as long as we operate our facility. We will bear all costs
and expenses with respect to water-pumping. In consideration for the easements and
the water-pumping rights, we have agreed to convey to Pennsy Supply title to a parcel of
land adjacent to the property owned by us.

We
also entered into an Easement and Right of Access Agreement, dated as of April 15, 1999,
with Pennsy Supply under which Pennsy Supply has granted us the rights and easements
referred to in the prior paragraph as well as specific other rights and easements required
by us for the construction and operation of our facility.

ITEM 2.     Properties

Our
principal property is the land for the facility site, which we own, and the completed
power plant. The facility site is located in South Lebanon Township, Lebanon County,
Pennsylvania on an approximately 35-acre parcel of land. We have access, utility, drainage
and construction easements across neighboring property. We are able to use these easements
as long as there is no default under the agreements with the owner of the adjacent
property and we are using the facility site for a power plant. We have constructed a rail
spur to facilitate the transportation of heavy equipment to the facility site, but will
not maintain rights in the rail spur after construction has been completed. We have title
insurance in connection with our property rights. In June and December 2001, we purchased
two parcels of land of approximately 15 acres, contiguous to the existing property for
approximately $619,000.

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Under
certain financing documents, our rights and interests in our property rights are
encumbered by mortgages, security agreements, collateral assignments and pledges for the
benefit of the bondholders and other senior creditors.

Our
facility consists of a 705 megawatt (net) gas-fired combined cycle electric generating
facility. The plant became operational with commercial acceptance on December 28, 2001.

Our
facility was designed, engineered, procured and constructed for us by Siemens Westinghouse
under a fixed-price construction agreement. Among other components, our facility uses two
Siemens Westinghouse model 501G combustion turbines with hydrogen-cooled generators, two
unfired heat recovery steam generators and one multi-cylinder steam turbine with a
hydrogen-cooled generator. Siemens Westinghouse has provided us with specific combustion
turbine maintenance services and spare parts for an initial term of between eight and ten
years, depending on the timing of scheduled outages, under a maintenance services
agreement. Under the power purchase agreement, Williams Energy or its affiliates will
supply fuel necessary to allow us to provide capacity, fuel conversion and ancillary
services to Williams Energy. AES Prescott, the operator, will provide development,
construction management and operations and maintenance services for our facility under an
operations agreement. We will provide installation, operation and maintenance of
facilities necessary to interconnect our facility to the transmission system of GPU
Energy, under an interconnection agreement.

ITEM 3.     Legal
Proceedings

| | Developments
Relating to Siemens Westinghouse
| | ---------------------------------------------

We
previously had a dispute with Siemens Westinghouse over which party was responsible for the
payment of the cost of electricity and natural gas used by the project during certain
periods prior to the December 28, 2001 commercial acceptance. On March 12, 2003, we
entered into a settlement agreement with Siemens Westinghouse entitled Agreement Change
Order No. 71 concerning final acceptance. This agreement became effective as of that date
and final acceptance was granted by us as of that date.

The
terms of the agreement include but are not limited to the following items:

We
have agreed not to pursue the cost of electricity and natural gas used by the project
during certain periods prior to the December 28, 2001 commercial acceptance date. These
costs totaled approximately $10.7 million, and were included in accounts receivable.

We
have agreed to pay approximately $156,000 in respect of an outstanding amount claimed by
Siemens Westinghouse regarding an April 2002 outage to test and inspect the facility.
This  amount was included in our calculation of the April outage and was recorded in
Accounts  Payable. Siemens  Westinghouse has agreed to waive their right to receive any
payments with respect to a  milestone payment of $2.2 million and to the retainage
amounts relating to performance  guarantees of $12.1 million held by us. Additionally,
Siemens Westinghouse made a payment of $4.8 million to us in respect of items related
to final acceptance.  This amount was recorded as a reduction in the cost of the facility.
The financial impact from the settlement has been recorded in our financial statements as of  December 31, 2002.
The effect of this settlement for fiscal year 2002 was a reduction in insurance of $291,000
and a $182,000 reduction in depreciation as a result of the reduction in facility cost.

| | Developments
Relating to Williams Energy
| | ----------------------------------------

We
previously entered into arbitration with Williams Energy to resolve certain disputes
regarding the proper interpretation of certain provisions of the power purchase agreement
relating to amounts claimed by us to be payable by Williams Energy.

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On
February 5, 2003 the arbitration panel handed down its decision. The arbitration
decision covered both revenue and non-revenue items. The revenue items were mainly
concerned with the interpretation the power purchase agreement regarding the of
calculation of revenue. The net effect of these items was a reduction of revenues for 2002 of
approximately $320,000.

Additionally,
we are in ongoing discussions with Williams Energy relating to the calculation of certain amounts
under the power purchase agreement.  Under the agreement we have earned an annual availability bonus and
capacity payment for 2002. We have invoiced Williams Energy approximately $1.4 million as an
annual availability bonus for 2002 and approximately $0.1 million as a capacity payment
for 2002. Because the amounts are in dispute, we have recognized only the amounts
Williams Energy has paid us, approximately $0.3 million. We will continue to
discuss with Williams Energy the calculation of these amounts but are unable to predict the
outcome of these discussions and their potential impact on our ability to collect these
revenue items either for 2002 or in the future.

ITEM 4.     Submission
of Matters to a Vote of Security Holders

Not
applicable pursuant to General Instruction I of the Form 10-K.

PART II

ITEM 5.     Market for
Registrants Common Equity and Related Stockholder Matters

There
is no market for our equity interests. All of our member interests are owned by our
parent, AES Ironwood, Inc., a subsidiary of The AES Corporation. During December 2002 we
declared and paid $4.3 million in dividends to AES Ironwood, Inc.

ITEM 6.     Selected
Financial Data

Not
applicable pursuant to General Instruction I of the Form 10-K.

ITEM 7.     Managements
Discussion and Analysis of Financial Condition and Results of Operations

The following
discussion and analysis should be read in conjunction with our financial statements and
the notes thereto included elsewhere in this annual report. The following discussion
involves forward-looking statements. Our actual results may differ significantly from the
results suggested by these forward-looking statements.

General

We
were formed on October 30, 1998 to develop, construct, own, operate and maintain the
facility. We were dormant until June 25, 1999, the date of the sale of the senior secured
bonds. We granted provisional acceptance on December 27, 2001.  We commenced commercial
operations subject to the power purchase agreement on December 28, 2001. We obtained $308.5 million
of project financing from the sale of the senior secured bonds. The total cost of the
construction of our facility was estimated to be approximately $339.1 million, which was
financed by the proceeds from the sale of the senior secured bonds and the equity
contributions described below. As a result of the Siemens Westinghouse settlement, the
facility cost was reduced by approximately $7.3 million. In May 2000, we consummated an
exchange offer whereby the holders of the senior secured bonds exchanged their privately
placed senior secured bonds for registered senior secured bonds.

Equity Contributions

Under
an Equity Subscription Agreement, AES Ironwood, Inc. is obligated to contribute up to
approximately $50.1 million in the form of either subordinated debt or equity to us to
fund project costs. In 2001 AES Ironwood, Inc. provided a $30 million subordinated loan
to  us under the equity subscription agreement. In January 2002, the $30 million payable
to  AES Ironwood, Inc. was converted to an equity contribution. On February 26, 2002, AES
Ironwood, Inc. contributed an additional $8.8 million of equity to us. The remaining $9.1
million contribution was supported by a surety bond until June 25, 2002, when the surety
bond expired. At that time the surety bond was replaced by an acceptable letter of credit
in the amount of $9.1 million. The need for the letter of credit ceased with

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the granting  of
final acceptance on March 12, 2003. We have notified the collateral agent and have
requested they release us of this requirement.

Results of Operations

For
the years ended December 31, 2002, 2001 and 2000, operating revenues were approximately
$51.9 million, $1.2 million and $0 respectively. Operating revenues consist of capacity
payments of approximately $3.9 million per month. The remaining revenue consists of fuel
conversion and heat rate bonus payments. Operating revenues in 2002 reflect a full year of
operation. Operating revenues in 2001 reflected operation for a portion of the
month of December. There were no operating revenues in 2000 as the facility was under construction.

For
the years ended December 31, 2002, 2001 and 2000, depreciation expense was approximately
$10.1 million, $85,000 and $0 respectively. Depreciation expense in 2002 reflects a full
year of operation. Depreciation expense in 2001 reflected operation for a portion of the
month of December. There was no depreciation expense in 2000 as the facility was under
construction.

For
the years ended December 31, 2002, 2001 and 2000, management services and fees were
approximately $8.4 million, $20,000 million and $0 respectively. Management services and fees
in 2002 reflect a full year of operation. Management services and fees in 2001 reflected
operation for a portion of the month of December and management services and fees that
were not capitalized as part of the construction of the facility.

For
the years ended December 31, 2002, 2001 and 2000, operating fees were approximately $5.0
million, $0 million and $0 respectively. Operating fees in 2002 reflect a full year of
operation. Operating fees in 2001 reflected operation for a portion of the month of
December and operating expenses that were not capitalized as part of the construction of
the facility.

For
the years ended December 31, 2002, 2001 and 2000, interest cost incurred on the bond
proceeds not spent on construction of our facility was approximately $27.2 million, $0.2
million and $2.9 million respectively, and is included as interest expense in the
statements of operations. This increase reflects the impact of a full year of operation in
2002 compared to operation for a portion of the month of December in 2001.

A
portion of the proceeds from the sale of the senior secured bonds had not yet been
expended on construction and were invested by the trustee. For the years ended December
31, 2002, 2001 and 2000, the interest income earned on these invested funds was
approximately $0.1, $0.5 million and $2.7 million, respectively, and is included in the
Statements of Operations.

For
the years ended December 31, 2002, 2001 and 2000, general and administrative costs of $5.5
million, $0.4 million and $0.3 million, respectively, were incurred. These costs did not
directly relate to construction and are included as expenses in the Statement of
Operations. This increase reflects the impact of a full year of operation in 2002 compared
to operation for a portion of the month of December in 2001.

For
the year ended 2002, we had a net loss of $1.6 million versus net income of $1.0 million
for 2001. For fiscal year 2000, we had a net loss of $0.5 million. The net loss for 2002
is attributable to our costs being higher than originally budgeted. We incurred increased
expenses due to arbitration, higher security costs, and other smaller operating items. The
facility was in operation for a portion of December 2001 and there were no operations in
2000.

Additionally,
we are in ongoing discussions with Williams Energy relating to the calculation of certain
amounts under the power purchase agreement. Under the agreement we have earned an annual
availability bonus and an additional capacity payment for 2002. We have invoiced Williams Energy
approximately $1.4 million as an annual availability bonus for 2002 and approximately $0.1
million as a capacity payment for 2002. Because the amounts are in dispute, we have only
recognized the amounts that Williams Energy paid us, approximately $0.3 million. We will
continue to discuss with Williams Energy the calculation of these amounts but are unable
to predict the outcome of these discussions and their potential impact on our ability to
collect these contractual items either for 2002 or in the future.

Other
income in 2002 consisted of $3.5 million from Siemens Westinghouse relating to their
payment of performance guarantees and $1.3 million from the sale of excess fuel.

Liquidity and
Capital Resources

The
minimum cash flow from Williams Energy under the power purchase agreement is approximately $4.0
million per month. Net operating cash outflows are approximately $1.3 million per month. The
balance left will provide for senior debt interest and principal payments. Additionally,
a  significant monthly expenditure is for payment of our long term service agreement with
Siemens Westinghouse. This agreement provides that we pay approximately $400 per gas
turbine per equivalent operating hour. In the event we are not required to dispatch the
facility, there is no charge. While operating at base load, the estimated monthly payment
for the long term service agreement could be as much

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as $450,000. We
believe that our cash  flows are sufficient to fund our future operations and to satisfy
our outstanding  obligations.

We
believe that cash flows from the sale of electricity under the power purchase agreement
will be sufficient to pay ongoing project costs, including principal and interest on the
senior secured bonds. After the power purchase agreement expires, we will depend on market
sales of electricity.

In
order to provide liquidity in the event of cash flow shortfalls, the debt service reserve
account contains an amount equal to the debt service reserve account required balance
through cash funding, issuance of the debt service reserve letter of credit or a
combination of the two.

| | Concentration
of  Credit Risk in Williams Energy and Affiliates
| | ---------------------------------------------------------------

Williams
Energy currently is our sole customer for purchases of capacity, ancillary services, and
energy, and our sole source for fuel. Williams Energys payments under the power
purchase agreement are expected to provide all of our revenues during the term of the
power purchase agreement. It is uncertain whether we would be able to find another
purchaser or fuel source on similar terms for our facility if Williams Energy were not
performing under the power purchase agreement. Any material failure by Williams Energy to
make capacity and fuel conversion payments or to supply fuel under the power purchase
agreement would have a severe impact on our operations. The payment obligations of
Williams Energy under the power purchase agreement are guaranteed by The Williams
Companies, Inc. The payment obligations of The Williams Companies, Inc. are capped at an
amount equal to 125% of the sum of the principal amount of our senior secured bonds, plus
the maximum debt service reserve account balance. At December 31, 2002, this amount was approximately $400 million.

Under
the power purchase agreement, in the event that S&P or Moodys rate the long-term
senior unsecured debt of The Williams Companies, Inc. lower than investment grade, The
Williams Companies, Inc., or affiliate thereof, is required to replace The Williams
Companies, Inc. guaranty with an alternative security that is acceptable to the Company.
According to published sources, on July 23, 2002, S&P lowered the long term senior
unsecured debt rating of The Williams Companies, Inc. to BB from
BBB-", and further lowered such rating to B on July 25,
2002. According to published sources, on July 24, 2002, Moodys lowered the
long-term senior unsecured debt rating of The Williams Companies, Inc. to
B1 from Baa3. According to published sources, this rating
was further lowered on November 22, 2002 to Caa1 by Moodys. Accordingly,
The Williams Companies, Inc.s long-term senior unsecured debt is currently rated
below investment grade by both S&P and Moodys.

In
an action related to the ratings downgrade of The Williams Companies, Inc., S&P
lowered its ratings on our senior secured bonds to BB- from BBB-
on July 26, 2002, and placed the rating on credit watch. On November 27, 2002,
Moodys lowered its ratings on our senior secured bonds to B2 from
Ba2. We do not believe that such ratings downgrades will have any other direct
or immediate effect on us, as none of the other financing documents or project contracts
have provisions that are triggered by a reduction of the ratings of the bonds.

To
satisfy the requirements of the power purchase agreement, on September 20, 2002,
Citibank,  N.A. issued a $35 million Irrevocable Letter of Credit (the Letter of
Credit)  on behalf of Williams Energy. The Letter of Credit does not alter, modify,
amend or  nullify the guaranty issued by The Williams Companies, Inc. in favor of the
Company and is  considered to be additional security to the security amounts provided by
such guaranty.  The Letter of Credit became effective on September 20, 2002 and shall
expire upon the  close of business on July 10, 2003; except that the Letter of Credit
will be automatically  extended without amendment for successive one year periods from
the present or any future  expiration date hereof, unless Citibank, N.A. provides written
notice of its election not  to renew the Letter of Credit at least thirty days prior to
any such expiration date.  Additionally, in a Letter Agreement dated September 20, 2002,
Williams Energy agreed to  (a) provide Eligible Credit Support prior to the stated
expiration date of the Letter of  Credit and (b) replenish any portion of the Letter of
Credit or Eligible Credit Support  that is drawn, reduced, cashed or redeemed, at any
time, with an equal amount of Eligible  Credit Support. Within twenty days prior to the
expiration of the Letter of Credit and/or  any expiration date of eligible credit support
posted by Williams Energy, Williams Energy  shall post eligible credit support to the
Company in place of the Letter of Credit and/or  any expiring eligible credit support
unless The Williams Companies, Inc. regains and  maintains its

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investment grade
status, in which case the Letter of Credit or eligible  credit support shall
automatically terminate and no additional eligible credit support  shall be required. We
and Williams Energy acknowledge that the posting of such  Letter of Credit and
Williams Energys agreement and performance of the requirements  of (a) and (b) as
set forth in the immediately preceding sentence shall be in full  satisfaction of
Williams Energys obligations contained in Section 19.3 of the power  purchase
agreement to provide replacement security due to the downgrade of The Williams
Companies, Inc. falling below investment grade status.

Our
dependence on The Williams Companies, Inc. and its affiliates under the power purchase
agreement exposes us to possible loss of revenues and fuel supply, which in turn, could
negatively impact our cash flow and financial condition and could result in a default
under our senior secured bonds. There can be no assurance as to our ability to generate
sufficient cash flow to cover operating expenses or our debt service obligations in the
absence of a long term power purchase agreement with Williams Energy.

Business Strategy
and Outlook

Under
our overall business strategy, we are committed to market and sell all of our net
capacity, fuel conversion and ancillary services to Williams Energy during the 20 year
term of the power purchase agreement. After expiration of the power purchase agreement, we
anticipate selling our facilitys capacity, ancillary services and energy under a
power purchase agreement or into the Pennsylvania/New Jersey/Maryland power pool market.
We intend to cause the facility to be managed, operated and maintained in compliance with
the project contracts and all applicable legal requirements.

Recent and New Accounting
Pronouncements

Effective
January 1, 2001, the Company adopted SFAS No. 133, entitled Accounting for
Derivative Instruments and Hedging Activities, which, as amended, establishes new
accounting and reporting standards for derivative instruments and hedging activities. The
Company produces and sells electricity, as well as provides fuel conversion and ancillary
services, solely to Williams Energy under the power purchase agreement. The Company does
not believe that the power purchase agreement meets the definition of a derivative under
SFAS No. 133 and, as such, should not be accounted for as a derivative. The Company has no
other contracts that meet the definition of a derivative or an embedded derivative under
SFAS No. 133. Therefore, there is no impact on the Companys financial statements as
of January 1, 2001, December 31, 2001, or for the period ending December 31, 2002.

In
July 2001, the FASB issued SFAS No. 143, entitled Accounting for Asset Retirement
Obligations. This standard is effective for fiscal years beginning after June 15,
2002, and provides accounting requirements for asset retirement obligations associated
with long-lived assets. Under this Statement, the asset retirement obligation is recorded
at fair value in the period in which it is incurred by increasing the carrying amount of
the related long lived asset. The liability is accreted to its present value in each
subsequent period and the capitalized cost is depreciated over the useful life of the
related asset. We have determined that the effects of the adoption of SFAS No. 143 on our
financial position and results of operations will not be material.

In
August 2001, the FASB issued SFAS No. 144, entitled Accounting for Impairment or
Disposal of Long-Lived Assets. The provisions of this statement are effective for
financial statements issued for fiscal years beginning after December 15, 2001 and
generally are to be applied prospectively. This statement addresses financial accounting
and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 provides
guidance for developing estimates of future flows used to test assets for recoverability
and requires that assets to be disposed of be classified as held for sale when certain
criteria are met. The statement also extends the reporting of discontinued operations to
all components of an entity and provides guidance for recognition of liability for
obligations associated with a disposal activity. The initial adoption of the provisions of
SFAS No. 144 did not have any material impact on its financial position or results of
operations.

In
April 2002, the FASB issued SFAS No. 145, entitled Rescission of FASB Statements
No.  4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections. This
statement eliminates the current requirement that gains and losses on debt extinguishment
must be classified as extraordinary items in the income statement. Instead, such gains
and  losses will be classified as extraordinary items only if they are deemed to be
unusual and  infrequent, in accordance with the current GAAP criteria for extraordinary
classification.  In addition, SFAS eliminates an inconsistency in lease accounting by
requiring that  modifications of capital leases that result in

35

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reclassification as
operating leases be  accounted for consistent with the sale-leaseback accounting rules.
The statement also  contains other nonsubstantive corrections to authoritative accounting
literature. The  changes related to debt extinguishment will be effective for fiscal
years beginning after  May 15, 2002, and the changes related to lease accounting will be
effective for  transactions occurring after May 15, 2002. The adoption of this standard
by the Company  did not have any immediate effect on the Companys consolidated
financial statements.

In
June 2002, the FASB issued SFAS No. 146, entitled Accounting for Costs Associated
with Exit or Disposal Activities, which addresses accounting  for restructuring and
similar costs. SFAS No. 146 supersedes previous accounting guidance, principally Emerging
Issues Task Force (EITF) Issue No. 94-3.  The Company will adopt the provisions of SFAS
No. 146 for restructuring activities initiated after December 31, 2002. SFAS No. 146
requires that the  liability for costs associated with an exit or disposal activity be
recognized when the liability is incurred. Under EITF Issue No. 94-3, a liability for  an
exit cost was recognized at the date of a companys commitment to an exit plan. SFAS No.
146 also establishes that the liability should initially be  measured and recorded at
fair value. Accordingly, SFAS No. 146 may affect the timing of recognizing future
restructuring costs as well as the amount  recognized. This standard will be accounted
for prospectively.

In
November 2002, the FASB issued Interpretation No. 45, entitled Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others. This interpretation establishes new disclosure requirements
for all guarantees, but the measurement criteria are applicable to guarantees issued and
modified after December 31, 2002. The Company has not yet determined the impact that this
standard may have on its financial statements.

Critical Accounting
Policies

| | General
| | -------

We
prepare our financial statements in accordance with accounting principles generally
accepted in the United States of America. As such, we are required to make certain
estimates, judgments and assumptions that we believe are reasonable based upon the
information available. These estimates and assumptions affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the periods presented. The significant accounting policies
which we believe are most critical to understanding and evaluating our reported financial
results include the following: Revenue Recognition; Property Plant and Equipment
and Contingencies.

| | Revenue
Recognition
| | -------------------

We
generate energy revenues under our power purchase agreement with Williams Energy. During
the 20 year term of the agreement, we expect to sell electric energy and capacity produced
by the facility, as well as ancillary and fuel conversion services. Under the power
purchase agreement, we also generate revenues from meeting (1) base electrical output
guarantees and (2) heat rate rebates through efficient electrical output. Revenues from
the sales of electric energy and capacity are recorded based on output delivered and
capacity provided at rates as specified under contract terms. Revenues for ancillary and
other services are recorded when the services are rendered.

Upon
its expiration, or in the event that the power purchase agreement is terminated prior its
20 year term, we would seek to generate energy revenues from the sale of electric energy
and capacity into the merchant market or under new short- or long-term power purchase or
similar agreements. There can be no assurances as to the whether such efforts would be
successful.

| | Property,
Plant and Equipment
| | -----------------------------

Property,
plant and equipment is recorded at cost and is depreciated over its useful life. The
estimated lives of our generation facilities range from 5 to 40 years. A significant
decrease in the estimated useful life of a material amount of our property, plant or
equipment could have a material adverse impact on our operating results in the period in
which the estimate is revised and subsequent periods.

36

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|**Description
      of Asset**      | **Depreciable
      Life** | **December 31, 2002(in thousands)**
|----------------------------------- | -------------------------- | -----------------------------------
|                                    |                            |                                    
|Plant                               | 40                         | $  230,369                         
|Buildings                           | 40                         | 461                                
|Land
      Improvements             | 40                         | 10,894                             
|Equipment                           | 40                         | 2,921                              
|Rotable
      Turbine Parts         | 28                         | 11,839                             
|Development
      Costs             | 25                         | 23,595                             
|Rotable
      Turbine Parts         | 24                         | 8,541                              
|Rotable
      Turbine Parts         | 20                         | 3,227                              
|Furniture
      & Fixtures          | 15                         | 741                                
|Rotable
      Turbine Parts         | 15                         | 1,805                              
|Rotable
      Turbine Parts         | 12                         | 11,182                             
|Capitalized
      Outage April 2002 | 12                         | 3,552                              
|Rotable
      Turbine Parts         | 7                          | 7,205                              
|Data
      Processing Equipment     | 7                          | 499                                
|Vehicles                            | 5                          | 566                                
|Projects                            | n/a                        | 3,060                              
|Spare
      Parts                   | n/a                        | 2,288                              
|                                    |                            |                                    
|                                    | $  322,745                
|                                    |                            |                                    

Contingencies

We
previously entered into arbitration with Williams Energy to resolve certain disputes
regarding the proper interpretation of certain provisions of the power purchase agreement
relating to amounts claimed by us to be payable by Williams Energy. (See Legal
Proceedings). Additionally, we are in ongoing discussions with Williams Energy
relating to the calculation of certain amounts under the power purchase agreement. Under
the agreement, we have earned an annual availability bonus and an additional capacity payment for 2002. We have
invoiced Williams Energy approximately $1.4 million as an annual availability bonus for
2002 and approximately $0.1 million as a capacity payment for 2002. Because the amounts
are in dispute, we have only recognized the amounts that Williams Energy has paid
us, approximately $0.3 million. We will continue to discuss with Williams Energy the
calculation of these amounts but are unable to predict the outcome of these discussions
and their potential impact on our ability to collect these revenue items either for 2002
or in the future.

Commitments

Interest
on the Bonds is payable quarterly in arrears. Quarterly principal payments on the Bonds
commenced on February 28, 2002. The final maturity date for the Bonds is November 30,
2025.

Principal
and interest is payable as follows at December 31 (in thousands)

| | Year                 |  |  |   | Principal |  |   | Interest |  |   | Total   | 
| | -------------------- |  |  | - | --------- |  | - | -------- |  | - | ------- | 
| | 2003                 |  |  | $ | 4,751     |  | $ | 26,991   |  | $ | 31,742  | 
| | 2004                 |  |  |   | 6,355     |  |   | 26,426   |  |   | 32,781  | 
| | 2005                 |  |  |   | 7,034     |  |   | 26,078   |  |   | 33,112  | 
| | 2006                 |  |  |   | 7,157     |  |   | 25,305   |  |   | 32,462  | 
| | 2007                 |  |  |   | 9,132     |  |   | 24,605   |  |   | 33,737  | 
| | 2008-2025            |  |  |   | 272,095   |  |   | 246,092  |  |   | 518,187 | 
| |                      |  |  |   |           |  |   |          | 
| |                      |  | 
| | Total
      payments |  |  | $ | 306,524   |  | $ | 375,497  |  | $ | 682,021 | 
| |                      |  |  |   |           |  |   |          | 

ITEM 7A.     
Quantitative and Qualitative Disclosure About Market Risk

The
bonds have an aggregate principal amount of $306.5 million at December 31, 2002. The bonds
bear interest at a fixed rate per annum of 8.857% and are due 2025. Interest on these
bonds is payable quarterly in arrears on February 28, May 31, August 31 and November 30 of
each year. The bonds are secured ratably by a lien on and security interest in shared
collateral, which consists of substantially all of our assets. In addition, the indenture
accounts, the debt service reserve account and the debt service reserve letter of credit
(other than to the extent of the debt service reserve letter of credit providers
right to specific proceeds there under) are separate collateral solely for the benefit of
the holders of the bonds. The fair value of these bonds at December 31, 2002 was
approximately $214.0 million. We are not subject to interest rate risk as the interest
rates associated with our outstanding indebtedness are fixed over the life of the bonds.
We currently have no other financial or derivative financial instruments. We do not
believe that we face other material risks requiring disclosure pursuant to Item 305 of
Regulation S-K.

In
an action related to the ratings downgrade of The Williams Companies, Inc., S&P
lowered its ratings on our senior secured bonds to BB- from BBB-
on July 26, 2002, and placed the rating on credit watch. On November 27, 2002,
Moodys lowered its ratings on our senior secured bonds to B2 from
Ba2. We do not believe that such ratings downgrades will have any other direct
or immediate effect on us, as none of the other financing documents or project contracts
have provisions that are triggered by a reduction of the ratings of the bonds.

37

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ITEM 8.     Financial
Statements and Supplemental Data

AES IRONWOOD,
L.L.C.AN INDIRECT WHOLLY OWNED SUBSIDIARYOF THE AES  CORPORATION

Index to Financial
Statements

|Independent Auditors Report              | 
|----------------------------------------- | 
|Balance Sheets                            | 
|Statements of Operations                  | 
|Statements of Changes in Members Capital | 
|Statements of Cash Flows                  | 
|Notes to Financial Statements             | 

38

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INDEPENDENT
AUDITORS REPORT

To the Member ofAES
Ironwood, L.L.C.:

We
have audited the accompanying balance sheets of AES Ironwood, L.L.C. (an indirect wholly
owned subsidiary of The AES Corporation) (the Company) as of December 31, 2002 and 2001
and the related statements of operations, changes in members capital and cash flows
for the year ended December 31, 2002, 2001 and 2000. These financial statements are the
responsibility of the Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the
United States of America. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In
our opinion, such financial statements present fairly, in all material respects, the
financial position of AES Ironwood, L.L.C., as of December 31, 2002 and 2001, and the
results of its operations and its cash flows for the years ended December 31, 2002, 2001
and 2000, in conformity with accounting principles generally accepted in the United States
of America.

As
more fully discussed in Note 6, the Companys dependence upon Williams Energy
Marketing & Trading Company under the Power Purchase Agreement exposes the Company to
possible loss of revenues and fuel supply. There can be no assurances as to the
Companys ability to generate sufficient cash flow to cover operating expenses or
debt service obligations in the absence of a Power Purchase Agreement with Williams Energy
Marketing & Trading Company and related guaranty by The Williams Companies, Inc. or
their affiliates.

/s/ Deloitte & Touche
LLPMcLean, Virginia

February 20, 2003
(March 12, 2003 as to the third paragraph of Note 7)

39

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AES IRONWOOD, L.L.C.
AN INDIRECT WHOLLY OWNED SUBSIDIARYOF THE AES CORPORATION

BALANCE SHEETS,
DECEMBER 31, 2002 AND 2001(DOLLARS IN THOUSANDS)

|                                                                                                            |  | December 31,2002       |   | December 31,2001      |  
|----------------------------------------------------------------------------------------------------------- |  | ---------------------- | - | --------------------- | -
|ASSETS:                                                                                                     |  |                        |   |                       |  
|                                                                                                            |  |                       
|                                                                                                            |  |                        |  
|Current
      assets:                                                                                       |  |                        |  
|Cash
      and cash equivalents                                                                             |  | $                1,088 |   | $               7,594 |  
|Interest
      receivable                                                                                   |  | 8                      |   | 39                    |  
|Accounts
      receivable  net                                                                             |  | 10,135                 |   | 17,863                |  
|Accounts
      receivable  parent and affiliates                                                           |  |                       |   | 365                   |  
|Prepaid
      expenses                                                                                      |  | 2,511                  |   |                      |  
|Inventory  fuel                                                                                            |  | 26                     |   |                      |  
|Restricted
      cash  debt service reserve                                                                |  | 5,803                  |   | 5,413                 |  
|                                                                                                            |  |                        |   |                      
|Total
      current assets                                                                                  |  | 19,571                 |   | 31,274                |  
|                                                                                                            |  |                       
|                                                                                                            |  |                        |   |                       |  
|Land                                                                                                        |  | 1,143                  |   | 1,143                 |  
|Property,
      plant, and equipmentnet of accumulated depreciation of $10,188 and $85,
      respectively |  | 322,745                |   | 332,519               |  
|Restricted
      cashcertificate of deposit                                                                |  | 77                     |   | 77                    |  
|Deferred
      financing costsnet of accumulated amortization of $508 and $363, respectively               |  | 3,127                  |   | 3,272                 |  
|Other
      assets                                                                                          |  | 753                    |   | 268                   |  
|                                                                                                            |  |                        |   |                      
|Total
      assets                                                                                          |  | $            347,416   |   | $            368,553  |  
|                                                                                                            |  |                        |   |                      
|                                                                                                            |  |                       
|LIABILITIES
      AND MEMBERS CAPITAL:                                                                     |  |                        |  
|                                                                                                            |  |                       
|                                                                                                            |  |                        |  
|Current
      liabilities:                                                                                  |  |                        |  
|Accounts
      payable                                                                                      |  | $                2,666 |   | $              16,023 |  
|Accrued
      interest                                                                                      |  | 2,262                  |   | 2,277                 |  
|Payable
      to AES and affiliates                                                                         |  | 2,873                  |   | 1,949                 |  
|Retention
      payable                                                                                     |  |                       |   | 11,941                |  
|Note
      payable                                                                                          |  | 2,328                  |   |                      |  
|Bonds
      payable, current                                                                                |  | 4,751                  |   | 1,974                 |  
|                                                                                                            |  |                        |   |                      
|Total
      current liabilities                                                                             |  | 14,880                 |   | 34,164                |  
|                                                                                                            |  |                       
|                                                                                                            |  |                        |   |                       |  
|Bonds
      payable                                                                                         |  | 301,773                |   | 306,526               |  
|Subordinated
      loan payable to parent                                                                   |  |                       |   | 30,000                |  
|                                                                                                            |  |                        |   |                      
|                                                                                                            |  |                       
|Total
      liabilities                                                                                     |  | 316,653                |   | 370,690               |  
|                                                                                                            |  |                        |   |                      
|                                                                                                            |  |                       
|                                                                                                            |  |                        |  
|Commitments
      and Contingencies (Notes 4, 5, 6 and 7)                                                   |  |                        |  
|                                                                                                            |  |                       
|                                                                                                            |  |                        |  
|Members
      capital:                                                                                     |  |                        |  
|Common
      stock, $1 par value10 shares authorized, none issued or outstanding                           |  |                       |   |                      |  
|Contributed
      capital                                                                                   |  | 38,800                 |   |                      |  
|Members
      deficit                                                                                      |  | (8,037                 | ) | (2,137                | )
|                                                                                                            |  |                        |   |                      
|Total
      members capital                                                                                |  | 30,763                 |   | (2,137                | )
|                                                                                                            |  |                        |   |                      
|                                                                                                            |  |                        |   |                       |  
|Total
      liabilities and members capital                                                                |  | $            347,416   |   | $            368,553  |  
|                                                                                                            |  |                        |   |                      

See notes to
financial  statements.

40

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AES IRONWOOD, L.L.C.
AN INDIRECT WHOLLY OWNED SUBSIDIARYOF THE AES CORPORATION

STATEMENTS OF
OPERATIONS,YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000(DOLLARS IN THOUSANDS)

|                                       |  |  | Year EndedDecember
31, 2002 |         | Year EndedDecember
31, 2001 |   | Year EndedDecember
31, 2000 |  
|-------------------------------------- |  |  | --------------------------- | ------- | --------------------------- | - | --------------------------- | -
|Energy                                 |  |  | $                           | 51,852  |                             | $ | 1,158                       |  
|                                       |  |  |                            
|                                       |  |  |                             |         |                             |   |                             |  
|OPERATING
      EXPENSES               |  |  |                             |         |                             |   |                             |  
|Depreciation                           |  |  |                             | (10,103 | )                           |   | (85                         | )
|Management
      services and fees     |  |  |                             | (8,364  | )                           |   | (20                         | )
|Operating
      fee                    |  |  |                             | (5,042  | )                           |   |                            |  
|Other                                  |  |  |                             | (2,102  | )                           |   |                            |  
|General
      and administrative costs |  |  |                             | (5,508  | )                           |   | (354                        | )
|                                       |  |  |                             |         |                             |  
|Operating
      income (loss)          |  |  |                             | 20,733  |                             |   | 699                         |  
|                                       |  |  |                            
|                                       |  |  |                             |         |                             |   |                             |  
|OTHER
      INCOME/EXPENSE             |  |  |                             |         |                             |   |                             |  
|Other
      income                     |  |  |                             | 4,774   |                             |   |                            |  
|Interest
      income                  |  |  |                             | 138     |                             |   | 489                         |  
|Interest
      expense                 |  |  |                             | (27,244 | )                           |   | (153                        | )
|                                       |  |  |                             |         |                             |  
|NET
      (LOSS) INCOME                |  |  | $                           | (1,599  | )                           | $ | 1,035                       |  
|                                       |  |  |                             |         |                             |  

See notes to
financial statements.

41

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AES IRONWOOD, L.L.C.
AN INDIRECT WHOLLY OWNED SUBSIDIARYOF THE AES CORPORATION

STATEMENTS OF CHANGES
IN MEMBERS CAPITAL,YEARS ENDED DECEMBER 31, 2002, 2001, AND 2000(DOLLARS IN
THOUSANDS)

|                                   |  |  | **Common
      Stock** |            |  |   |            |  |   |                               |      |      |                              
|---------------------------------- |  |  | ---------------------- | ---------- |  | - | ---------- |  | - | ----------------------------- | ---- | ---- | -----------------------------
|                                   |  |  |                        | **Shares** |  |   | **Amount** |  |   | **Contributed
      Capital** | **** | **** | **Accumulated
      Defecit**
|BALANCE
      DECEMBER 31, 1999    |  |  |                        |           |  | $ |           |  | $ |                              |      | $    | (2,641                       
|Net
      loss                     |  |  |                        |           |  |   |           |  |   |                              |      |      | (531                         
|BALANCE
      DECEMBER 31, 2000    |  |  |                        |           |  |   |           |  |   |                              |      |      | (3,172                       
|Net
      income                   |  |  |                        |           |  |   |           |  |   |                              |      |      | 1,035                        
|                                   |  |  |                        |            |  |   |            |  |   |                              
|BALANCE
      DECEMBER 31, 2001    |  |  |                        |           |  |   |           |  |   |                              |      |      | (2,137                       
|Net
      loss                     |  |  |                        |           |  |   |           |  |   |                              |      |      | (1,599                       
|                                   |  |  |                        |            |  |   |            |  |   |                               |     
|Dividends
      paid               |  |  |                        |           |  |   |           |  |   |                              |      |      | (4,301                       
|Contributed
      capital          |  |  |                        |           |  |   |           |  |   | 8,800                         |      |      |                             
|Conversion
      of debt to equity |  |  |                        |           |  |   |           |  |   | 30,000                        |      |      |                             
|                                   |  |  |                        |            |  |   |            |  |   |                              
|BALANCE
      DECEMBER 31, 2002    |  |  |                        |           |  | $ |           |  | $ | 38,800                        |      | $    | (8,037                       
|                                   |  |  |                        |            |  |   |            |  |   |                              

See notes to
financial statements.

42

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AES IRONWOOD, L.L.C.
AN INDIRECT WHOLLY OWNED SUBSIDIARYOF THE AES CORPORATION

STATEMENTS OF CASH
FLOWS,YEARS ENDED DECEMBER 31, 2002, 2001, AND 2000(DOLLARS IN THOUSANDS)

|                                                                                        |  |  |   | Year
      Ended
      December 31, 2002 |   |   | Year
      Ended
      December 31, 2001 |   |   | Year
      Ended
      December 31, 2000 |  
|--------------------------------------------------------------------------------------- |  |  | - | ---------------------------------------- | - | - | ---------------------------------------- | - | - | ---------------------------------------- | -
|OPERATING
      ACTIVITIES:                                                             |  |  |   |                                          |   |   |                                          |   |   |                                          |  
|Net
      (loss) income                                                                 |  |  | $ | (1,599                                   | ) | $ | 1,035                                    |   | $ | (531                                     | )
|Amortization
      of deferred financing costs                                          |  |  |   | 145                                      |   |   | 145                                      |   |   | 174                                      |  
|Depreciation                                                                            |  |  |   | 10,103                                   |   |   | 85                                       |   |   |                                         |  
|Change
      in:                                                                        |  |  |   |                                          |   |   |                                          |   |   |                                          |  
|Interest
      receivable                                                               |  |  |   | 31                                       |   |   | 54                                       |   |   | 344                                      |  
|Accrued
      interest                                                                  |  |  |   | (15                                      | ) |   |                                         |   |   | (152                                     | )
|Accounts
      receivable                                                               |  |  |   | 301                                      |   |   |                                         |   |   |                                         |  
|Accounts
      receivable  parent and affiliates                                       |  |  |   | 365                                      |   |   | (292                                     | ) |   |                                         |  
|Accounts
      payable                                                                  |  |  |   | (1,357                                   | ) |   |                                         |   |   |                                         |  
|Change
      in payable parent and affiliates                                           |  |  |   | 924                                      |   |   |                                         |   |   |                                         |  
|Certificate
      of deposit                                                            |  |  |   |                                         |   |   | 308                                      |   |   |                                         |  
|Other
      assets                                                                      |  |  |   | (485                                     | ) |   | 142                                      |   |   |                                         |  
|Prepaid
      expense                                                                   |  |  |   | (2,511                                   | ) |   |                                         |   |   |                                         |  
|Inventory                                                                               |  |  |   | (26                                      | ) |   |                                         |   |   |                                         |  
|                                                                                        |  |  |   |                                          |   |   |                                          |   |   |                                          |  
|Net
      cash provided by (used in) operating activities                               |  |  |   | 5,876                                    |   |   | 1,477                                    |   |   | (165                                     | )
|                                                                                        |  |  |   |                                          |   |   |                                          |   |   |                                          |  
|INVESTING
      ACTIVITIES:                                                             |  |  |   |                                          |   |   |                                          |   |   |                                          |  
|Payments
      for construction in progress                                             |  |  |   |                                         |   |   | (33,907                                  | ) |   | (54,227                                  | )
|Payments
      for property, plant and equipment                                        |  |  |   | (328                                     | ) |   |                                         |   |   |                                         |  
|Change
      in construction related payables                                           |  |  |   | (12,000                                  | ) |   | 16,908                                   |   |   | (18,730                                  | )
|Payments
      for land                                                                 |  |  |   |                                         |   |   | (615                                     | ) |   |                                         |  
|Change
      in construction related receivables                                        |  |  |   | 7,426                                    |   |   | (17,564                                  | ) |   | (372                                     | )
|Change
      in restricted cash including debt service reserve                          |  |  |   | (390                                     | ) |   | 10,850                                   |   |   | 74,450                                   |  
|Change
      in retention payable                                                       |  |  |   | (11,941                                  | ) |   |                                         |   |   |                                         |  
|Change
      in note payable                                                            |  |  |   | 2,328                                    |   |   |                                         |   |   |                                         |  
|                                                                                        |  |  |   |                                          |   |   |                                          |   |   |                                          |  
|Net cash (used in)
      provided by investing activities                               |  |  |   | (14,905                                  | ) |   | (24,328                                  | ) |   | 1,121                                    |  
|                                                                                        |  |  |   |                                          |   |   |                                          |   |   |                                          |  
|FINANCING
      ACTIVITIES:                                                             |  |  |   |                                          |   |   |                                          |   |   |                                          |  
|Payments
      for project debt                                                         |  |  |   | (1,976                                   | ) |   |                                          |   |   |                                          |  
|Payments
      for deferred financing costs                                             |  |  |   |                                         |   |   |                                         |   |   | (1,144                                   | )
|Loan
      from parent                                                                  |  |  |   |                                         |   |   | 30,000                                   |   |   |                                         |  
|Contributed
      Capital                                                               |  |  |   | 8,800                                    |   |   |                                         |   |   |                                         |  
|Payment
      of dividends                                                              |  |  |   | (4,301                                   | ) |   |                                         |   |   |                                         |  
|                                                                                        |  |  |   |                                          |   |   |                                          |   |   |                                          |  
|Net
      cash provided by (used in) financing activities                               |  |  |   | 2,523                                    |   |   | 30,000                                   |   |   | (1,144                                   | )
|                                                                                        |  |  |   |                                          |   |   |                                          |   |   |                                          |  
|NET
      (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                              |  |  |   | (6,506                                   | ) |   | 7,149                                    |   |   | (188                                     | )
|CASH
      AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                    |  |  |   | 7,594                                    |   |   | 445                                      |   |   | 633                                      |  
|                                                                                        |  |  |   |                                          |   |   |                                          |   |   |                                          |  
|CASH
      AND CASH EQUIVALENTS, END OF PERIOD                                          |  |  | $ | 1,088                                    |   | $ | 7,594                                    |   | $ | 445                                      |  
|                                                                                        |  |  |   |                                          |   |   |                                          |   |   |                                          |  
|SUPPLEMENTAL
      DISCLOSURE:                                                          |  |  |   |                                          |   |   |                                          |   |   |                                          |  
|Reclassification
      of Construction in progress to property, plant     and equipment |  |  | $ |                                         |   | $ | 332,500                                  |   |   |                                         |  
|Interest
      paid (net of amounts capitalized)                                        |  |  | $ | 27,244                                   |   | $ | 153                                      |   | $ | 3,093                                    |  
|Conversion of subordinated
      loan payable to parent to equity                       |  |  | $ | 30,000                                   |   | $ |                                         |   | $ |                                         |  
|                                                                                        |  |  |   |                                          |   |   |                                          |  

See notes to
financial statements.

43

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AES IRONWOOD, L.L.C.
AN INDIRECT WHOLLY OWNED SUBSIDIARYOF THE AES CORPORATION

NOTES TO FINANCIAL
STATEMENTSYEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

|1. | ORGANIZATION
|-- | ------------

We
were formed on October 30, 1998, in the state of Delaware to develop, construct, and
operate a 705-megawatt (MW) gas-fired, combined cycle electric generating facility in
South Lebanon Township, Pennsylvania (the Plant). We were considered dormant until June
25, 1999, at which time the Project Financing and certain related agreements were
consummated (hereinafter, Inception). The Plant includes two Westinghouse 501 G combustion
turbines, two heat recovery steam generators, and one steam turbine. The Plant produces
and sells electricity, as well as provides fuel conversion and ancillary services, solely
to Williams Energy Marketing and Trading Company (Williams Energy) under a power purchase
agreement (the PPA) with a term of 20 years. We commenced commercial operations on
December 28, 2001, the commercial operation date. On March 12, 2003, final acceptance
under the agreement was granted and an Officers Certificate was subsequently
submitted to the Collateral Agent indicating that the facility has been fully funded and
no further contribution will be required (see Note 7).

We
are a wholly-owned subsidiary of AES Ironwood, Inc. (Ironwood), which is a wholly owned
subsidiary of The AES Corporation (AES). Ironwood has no assets other than its ownership
interests in us and AES Prescott, L.L.C. (Prescott), another wholly owned subsidiary of
Ironwood (see Note 8). Ironwood has no operations and is not expected to have any
operations. Its only income is distributions it receives from us and Prescott. The
additional equity that Ironwood is required to provide to us pursuant to the Equity
Subscription Agreement (as described below) will be provided to Ironwood by AES, which
owns all of the stock of Ironwood. Ironwoods equity contribution obligations are required to be
supported by either an insurance bond or letter of credit. Currently those obligations are
supported by a letter of credit. (see Note 5).

On
June 25, 1999, we issued $308.5 million in senior secured bonds (see Note 4) for the
purpose of providing financing for the construction of the Plant and to fund, through the
construction period, interest payments to the bondholders. On May 12, 2000, we consummated
an exchange offer whereby the holders of the senior bonds exchanged their privately placed
senior secured bonds for registered senior secured bonds.

Pursuant
to an Equity Subscription Agreement, Ironwood is required to contribute up to $50.1
million to us to fund construction after the bond proceeds had been fully utilized. As of
December 31, 2002, Ironwood had made net contributions of $38.8 million of equity capital.
Upon final acceptance (see Note 7) no further contribution is required.

|2. | SIGNIFICANT
ACCOUNTING POLICIES
|-- | -------------------------------

Basis
of Presentation  These financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America.

Cash
and Cash Equivalents We consider unrestricted cash on hand, deposits in banks,
and investments with original maturities of three months or less to be cash and cash
equivalents for the purpose of the statement of cash flows.

Restricted
Cash Restricted cash in the amount of approximately $5.8 million as of December
31, 2002 and $5.4 million as of December 31, 2001 consists of accounts we are required
under the Collateral Agency Agreement (see Note 4) to maintain for the construction,
maintenance, and debt service of the facility.

Construction
in Progress Costs incurred in developing the Plant, including progress
payments, engineering costs, management and development fees, interest, and other costs
related to construction were capitalized. Total interest capitalized on the project
financing debt was approximately $60.3 million as of December 31, 2002 and December 31,
2001. Certain costs related to construction activities were paid by AES prior to the
issuance of the bonds. These amounts include approximately $105.4 million of construction
progress payments and $20.1 million in other incurred costs. These costs were reflected
within construction in progress, and were reimbursed to AES out of

44

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the bond proceeds.
All  construction in progress was transferred to property, plant, and equipment on
December 28,  2001.

Property,
Plant, andEquipment  Property, plant, and equipment is recorded at cost.
Depreciation, after consideration of salvage value, is computed using the straight-line
method over the estimated useful lives of the assets, which range from five to forty
years. Maintenance and repairs are charged to expense as incurred.

|**Description
      of Asset**      | **Depreciable
      Life** | **December 31, 2002(in thousands)**
|----------------------------------- | -------------------------- | -----------------------------------
|                                    |                            |                                    
|Plant                               | 40                         | $  230,369                         
|Buildings                           | 40                         | 461                                
|Land
      Improvements             | 40                         | 10,894                             
|Equipment                           | 40                         | 2,921                              
|Rotable
      Turbine Parts         | 28                         | 11,839                             
|Development
      Costs             | 25                         | 23,595                             
|Rotable
      Turbine Parts         | 24                         | 8,541                              
|Rotable
      Turbine Parts         | 20                         | 3,227                              
|Furniture
      & Fixtures          | 15                         | 741                                
|Rotable
      Turbine Parts         | 15                         | 1,805                              
|Rotable
      Turbine Parts         | 12                         | 11,182                             
|Capitalized
      Outage April 2002 | 12                         | 3,552                              
|Rotable
      Turbine Parts         | 7                          | 7,205                              
|Data
      Processing Equipment     | 7                          | 499                                
|Vehicles                            | 5                          | 566                                
|Projects                            | n/a                        | 3,060                              
|Spare
      Parts                   | n/a                        | 2,288                              
|                                    |                            |                                    
|                                    | $  322,745                
|                                    |                            |                                    

Long-Lived Assets We evaluate the impairment of our long-lived assets
based on the provisions of SFAS No. 144.

Other
Assets Pursuant to the provisions of 25 Pa. Code Section 123, Nitrogen Oxide
(NOx), Allowance Requirements, which establishes a NOx budget and a NOx allowance trading
program for NOx affected sources for the purpose of achieving air quality standards, we
purchased approximately $1.1 million in NOx allowances in 1999. The NOx allowances were
purchased for NOx emissions during the ozone seasons for the first two full years of
operations. These amounts are reported as other assets and will be amortized as they are
utilized. Approximately $384 thousand in NOx were used during the 2002 NOx season.

Deferred
Financing Costs Financing costs are deferred and are being amortized using the
straight-line method over approximately 26 years, which does not differ materially from
the effective interest method of amortization.

Prepaid
Expenses and Note Payable Prepaid Expenses at December 31, 2002 include
prepaid  insurance in the amount of approximately $2.3 million, prepaid taxes in the
amount of  approximately $161,000, prepaid leases in the amount of approximately $30,000,
and prepaid  rating agency review fees in the amount of $27,000. Premiums for operating insurance on
the facility  increased approximately $2.1 million with the policy year beginning
November 22, 2002.  Instead of paying the full amount we paid a down payment in December
2002 of approximately  $793,000 and

45

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financed the balance
over eight months beginning in January 2003 with the  final payment due August 1, 2003.
The amount financed was $2.3 million with an interest  rate of 3.75%. The payments are
approximately $295,000 per month.

Revenue
Recognition  We generate energy revenues under our power purchase
agreement with Williams Energy. During the 20-year term of the agreement, we expect to
sell electric energy and capacity produced by the facility, as well as ancillary and fuel
conversion services. Under the power purchase agreement, we also generate revenues from
meeting (1) base electrical output guarantees and (2) heat rate rebates through efficient
electrical output. Revenues from the sales of electric energy and capacity are recorded
based on output delivered and capacity provided at rates as specified under contract
terms. Revenues for ancillary and other services are recorded when the services are
rendered. Upon its expiration, or in the event that the power purchase agreement is
terminated prior its 20-year term, we would seek to generate energy revenues from the sale
of electric energy and capacity into the merchant market or under new short- or long-term
power purchase or similar agreements. There can be no assurances as to the whether such
efforts would be successful (see Note 6).

Use
of Estimates The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America requires us to
make estimates and assumptions that affect reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities as of the date of the financial
statements, as well as the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

Income
Taxes We are a limited liability company and are treated as a disregarded
entity for tax purposes. Therefore, we do not pay income taxes, and no provision for
income taxes has been reflected in the accompanying financial statements.

Reclassifications Certain reclassifications have been made to the 2001 amounts to conform to the
2002 presentation.

Accounts
Receivable  As of December 31, 2002, accounts receivable of approximately $10.1
million consists of unpaid invoices from Williams Energy of approximately $5.8 million,
from Siemens Westinghouse of approximately $4.8 million, from sales of excess fuel
inventory of approximately $717,000, less allowance for doubtful accounts of approximately
$1.2 million. As of December 31, 2001, accounts receivable was approximately $17.9 million
and consisted of unpaid invoices from Williams Energy for operations and related services
of $3.0 million, from Siemens Westinghouse for fuel and electricity reimbursables and
related services of $11.5 million, from the construction contract of $3.0 million, and
from other sources of $400,000.

Other
Income For the year ended December 31, 2002, other income of approximately $4.8
million consists of interim heat rate and output rebates of $3.5 million as a result of performance
guarantees by Siemens Westinghouse, $1.3 million from the sales of excess
fuel inventory and $7,000 from the rental of property on the facilitys site.

|3. | RECENT AND NEW
ACCOUNTING PRONOUNCEMENTS
|-- | ----------------------------------------

Effective
January 1, 2001, the Company adopted SFAS No. 133, entitled Accounting for
Derivative Instruments and Hedging Activities, which, as amended, establishes new
accounting and reporting standards for derivative instruments and hedging activities. The
Company produces and sells electricity, as well as provides fuel conversion and ancillary
services, solely to Williams Energy under the power purchase agreement. The Company does
not believe that the power purchase agreement. The Company does not believe that the power
purchase agreement meets the definition of a derivative under SFAS No. 133 and as such,
should not be accounted for as a derivative. The Company has no other contracts that meet
the definition of a derivative or an embedded derivative under SFAS No. 133. Therefore,
there is no impact on the Companys financial statements as of January 1, 2001,
December 31, 2001, or for the period ending December 31, 2002.

In
July 2001, the FASB issued SFAS No. 143, entitled Accounting for Asset Retirement
Obligations. This standard is effective for fiscal years beginning after June 15,
2002, and provides accounting requirements for asset retirement obligations associated
with long-lived assets. Under this Statement, the asset retirement obligation is recorded
at fair value in the period in which it is incurred by increasing the carrying amount of
the related long lived

45

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asset. The liability
is accreted to its present value in each  subsequent period and the capitalized cost is
depreciated over the useful life of the  related asset. We have determined that the effects
of the adoption of SFAS No. 143 on our financial position and results of operations will
not be material.

In
August 2001, the FASB issued SFAS No. 144, entitled Accounting for Impairment or
Disposal of Long-Lived Assets. The provisions of this statement are effective for
financial statements issued for fiscal years beginning after December 15, 2001 and
generally are to be applied prospectively. This statement addresses financial accounting
and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 provides
guidance for developing estimates of future flows used to test assets for recoverability
and requires that assets to be disposed of be classified as held for sale when certain
criteria are met. The statement also extends the reporting of discontinued operations to
all components of an entity and provides guidance for recognition of liability for
obligations associated with a disposal activity. The initial adoption of the provisions of
SFAS No. 144 did not have any material impact on its financial position or results of
operations.

In
April 2002, the FASB issued SFAS No. 145, entitled Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections. This
statement eliminates the current requirement that gains and losses on debt extinguishment
must be classified as extraordinary items in the income statement. Instead, such gains and
losses will be classified as extraordinary items only if they are deemed to be unusual and
infrequent, in accordance with the current GAAP criteria for extraordinary classification.
In addition, SFAS eliminates an inconsistency in lease accounting by requiring that
modifications of capital leases that result in reclassification as operating leases be
accounted for consistent with the sale-leaseback accounting rules. The statement also
contains other nonsubstantive corrections to authoritative accounting literature. The
changes related to debt extinguishment will be effective for fiscal years beginning after
May 15, 2002, and the changes related to lease accounting will be effective for
transactions occurring after May 15, 2002. The adoption of this standard by us
did not have any immediate effect on our consolidated financial statements.

In
June 2002, the FASB issued SFAS No. 146, entitled Accounting for Costs Associated
with Exit or Disposal Activities, which  addresses accounting for restructuring and
similar costs. SFAS No. 146 supersedes previous accounting guidance, principally Emerging
Issues Task Force (EITF) Issue No. 94-3. The Company will adopt the provisions of SFAS
No. 146 for restructuring activities  initiated after December 31, 2002. SFAS No. 146
requires that the liability for costs associated with an exit or disposal activity  be
recognized when the liability is incurred. Under EITF Issue No. 94-3, a liability for an
exit cost was recognized at the date of  a companys commitment to an exit plan. SFAS No.
146 also establishes that the liability should initially be measured and recorded  at
fair value. Accordingly, SFAS No. 146 may affect the timing of recognizing future
restructuring costs as well as the amount  recognized. This standard will be accounted
for prospectively.

In
November 2002, the FASB issued Interpretation No. 45, entitled Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others. This interpretation establishes new disclosure requirements
for all guarantees, but the measurement criteria are applicable to guarantees issued and
modified after December 31, 2002. The Company has not yet determined the impact that this
standard may have on its financial statements.

|4. | BONDS
PAYABLE
|-- | -------------

On
June 25, 1999, we issued $308.5 million of 8.857% senior secured bonds due in 2025 (the
Bonds) to qualified institutional buyers and/or institutional accredited investors,
pursuant to a transaction exempt from registration under the Securities Act of 1933 (the
Act) in accordance with Rule 144A under the Act. On May 12, 2000, we consummated an
exchange offer whereby the holders of the senior secured bonds exchanged their privately
placed senior secured bonds for registered senior secured bonds.

In
an action related to a ratings downgrade of The Williams Companies, Inc., S&P lowered
its ratings on our senior secured bonds to BB- from BBB- on July
26, 2002, and placed the rating on credit watch. On November 27, 2002, Moodys
lowered its ratings on our senior secured bonds to B2 from Ba2.

Registration
Rights  We were obligated to register the Bonds under the Act with the
Securities and Exchange Commission within 220 days of the initial sale of the Bonds. The
registration was not completed within the required time frame. As a result, effective
January 30, 2000, the interest rate payable on the Bonds, previously fixed at 8.857%,
increased by 50 basis points until the consummation of the exchange offer on May 12, 2000,
when such interest rate was reduced back to 8.857%.

The
net proceeds of the bonds (after deferred financing costs), approximately $305.2 million,
were used to fund the construction of the Plant and, during the construction period, for
interest payments to bondholders.

47

---

Interest
on the Bonds is payable quarterly in arrears. Quarterly principal payments on the Bonds
commenced on February 28, 2002. The final maturity date for the Bonds is November 30,
2025.

Principal
and interest is payable as follows at December 31 (in thousands)

| | Year                 |  |  |   | Principal |  |   | Interest |  |   | Total   | 
| | -------------------- |  |  | - | --------- |  | - | -------- |  | - | ------- | 
| | 2003                 |  |  | $ | 4,751     |  | $ | 26,991   |  | $ | 31,742  | 
| | 2004                 |  |  |   | 6,355     |  |   | 26,426   |  |   | 32,781  | 
| | 2005                 |  |  |   | 7,034     |  |   | 26,078   |  |   | 33,112  | 
| | 2006                 |  |  |   | 7,157     |  |   | 25,305   |  |   | 32,462  | 
| | 2007                 |  |  |   | 9,132     |  |   | 24,605   |  |   | 33,737  | 
| | 2008-2025            |  |  |   | 272,095   |  |   | 246,092  |  |   | 518,187 | 
| |                      |  |  |   |           |  |   |          | 
| |                      |  | 
| | Total
      payments |  |  | $ | 306,524   |  | $ | 375,497  |  | $ | 682,021 | 
| |                      |  |  |   |           |  |   |          | 

Optional
Redemption  The Bonds are subject to optional redemption by us, in whole or in
part, at any time at a redemption price equal to 100% of the principal amount plus accrued
interest, together with a premium calculated using a discount rate equal to the interest
rate on comparable U.S. Treasury securities plus 50 basis points.

Mandatory
Redemption  The Bonds are subject to mandatory redemption by us, in whole or in
part, at a redemption price equivalent to 100% of the principal amount plus accrued
interest under certain situations pursuant to receiving insurance proceeds or liquidated
damages from certain failures related to the performance of the facility under the EPC
with the Contractor, or in certain instances in which payments are received under the PPA
with Williams Energy under the event of default, at which time we have terminated the PPA.

Collateral
for the Bonds consists of the Plant and related facilities, all agreements relating to the
operation of the project, our bank and investment accounts, and all ownership interests in
our company as prescribed under the trust indenture (the Indenture). We are also bound by
a collateral agency agreement (the Collateral Agency Agreement) and an equity subscription
agreement (the Equity Subscription Agreement) (see Note 5).

Indenture The Indenture contains limitations on our company incurring additional
indebtedness; granting liens on our property; distributing equity and paying subordinated
indebtedness issued by affiliates; entering into transactions with affiliates; and
amending, terminating, or assigning any of the contracts and fundamental changes or
disposition of assets.

Collateral
Agency Agreement The Collateral Agency Agreement requires us to fund or provide
the funding for a debt service reserve fund. We have therefore entered into a Debt
Service Reserve Letter of Credit Agreement dated June 1, 1999, which commenced on December
28, 2001. The amount required for funding the debt service reserve fund is equal to six
months scheduled payments of principal and interest on the Bonds plus interest on the Debt
Service Reserve Letter of Credit. A Letter of Credit in the amount $17.3 million has been
obtained from Dresdner Bank AG to fulfill our requirement under the Collateral Agency
Agreement.

Covenants The Indenture, Collateral Agency Agreement, and Equity Subscription Agreement
contain specific covenants and requirements that we must meet. These covenants primarily
entail the restriction of payments, reporting requirements, and the creation and
maintenance of debt service reserve and construction related accounts.

|5. | EQUITY
SUBSCRIPTION AGREEMENT
|-- | -----------------------------

We,
along with Ironwood, have entered into an Equity Subscription Agreement, pursuant to
which  Ironwood, has agreed to contribute up to approximately $50.1 million to us to fund
project  costs. This amount is secured by an acceptable bond issued by Ironwood. Ironwood
will fund  these amounts as they come due upon the earlier of (a) expenditure of all
funds that have  been established for construction or (b) the occurrence, and during the
continuation of,  an event of default, as defined under the indenture governing its
senior secured bonds. A  portion of

48

---

this equity
requirement may be made in the form of affiliate debt, between us  and Ironwood, which
would be subordinate to the senior secured bonds.

In
2001, Ironwood provided $30.0 million in the form of subordinated debt to us under the
equity subscription agreement. In January of 2002, this $30 million payable to Ironwood
was converted to an equity contribution. On February 26, 2002, Ironwood contributed an
additional $8.8 million in equity to us.

AES
Ironwood, Inc. has a Letter of Credit agreement in relation to its equity subscription
agreement. The initial amount of the bond under this agreement was $50.1 million. On July
10, 2002, the surety bond was replaced by an acceptable letter of credit in the amount of
$9.1 million. As a result of the Siemens Westinghouse settlement (see Note 7) and final acceptance of
the facility, the need for the letter of credit ceased.  We have notified the collateral agent and
have requested they release AES Ironwood, Inc. of this requirement.

|6. | POWER
PURCHASE AGREEMENT
|-- | ------------------------

We
have entered into a power purchase agreement with Williams Energy for the sale of all electric
energy and capacity produced by the facility, as well as ancillary and fuel conversion
services. The term of the power purchase agreement is 20 years, commencing on December 28,
2001, the commercial operation date. Payment obligations to us are guaranteed by The
Williams Companies, Inc. Such payment obligations under the guarantee are capped at an
amount equal to 125% of the sum of the principal amount of the senior secured bonds plus
the maximum debt service reserve account required balance.

Fuel
Conversion and Other Services Williams Energy has the obligation to deliver, on an
exclusive basis, all quantities of natural gas required by the Plant to generate
electricity or ancillary services, to start up or shut down the Plant, and to operate the
Plant during any period other than a start-up, shut-down, or required dispatch by Williams Energy
for any reason.

Concentration
of Credit Risk Williams Energy currently is our sole customer for purchases of
capacity, ancillary services, and energy, and our sole source for fuel. Williams
Energys payments under the power purchase agreement are expected to provide all of
our revenues during the term of the power purchase agreement. It is uncertain whether we
would be able to find another purchaser or fuel source on similar terms for our facility
if Williams Energy were not performing under the power purchase agreement. Any material
failure by Williams Energy to make capacity and fuel conversion payments or to supply fuel
under the power purchase agreement would have a severe impact on our operations. The
payment obligations of Williams Energy under the power purchase agreement are guaranteed
by The Williams Companies, Inc. The payment obligations of The Williams Companies, Inc.
are capped at an amount equal to 125% of the sum of the principal amount of our senior
secured bonds, plus the maximum debt service reserve account balance. At December 31, 2002,
this amount was approximately $400 million.

Under
the power purchase agreement, in the event that S&P or Moodys rate the long-term
senior unsecured debt of The Williams Companies, Inc. lower than investment grade, The
Williams Companies, Inc., or affiliate thereof, is required to replace The Williams
Companies, Inc. guaranty with an alternative security that is acceptable to us after the
loss of such investment grade rating. According to published sources, on July 23, 2002,
S&P lowered the long term senior unsecured debt rating of The Williams Companies,
Inc. to BB from BBB-", and further lowered such rating to
B on July 25, 2002. According to published sources, on July 24, 2002,
Moodys lowered the long-term senior unsecured debt rating of The Williams Companies,
Inc. to B1 from Baa3. According to published
sources, this rating was further lowered on November 22, 2002 to Caa1 by
Moodys. Accordingly, The Williams Companies, Inc.s long-term senior unsecured
debt is currently rated below investment grade by both S&P and Moodys, and is
subject to further downgrade by both ratings agencies.

In
an action related to the ratings downgrade of The Williams Companies, Inc., S&P
lowered its ratings on our senior secured bonds to BB- from BBB-
on July 26, 2002, and placed the rating on credit watch. On November 27, 2002,
Moodys lowered its ratings on our senior secured bonds to B2 from
Ba2. We do not believe that such ratings downgrades will have any other direct
or immediate effect on us, as none of the other financing documents or project contracts
have provisions that are triggered by a reduction of the ratings of the bonds.

49

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To
satisfy the requirements of the power purchase agreement, on September 20, 2002, Citibank,
N.A., issued a $35 million Irrevocable Standby Letter of Credit (the Letter of
Credit) on behalf of Williams Energy. The Letter of Credit does not alter, modify,
amend or nullify the guaranty issued by The Williams Companies, Inc. in favor of the
Company and is considered to be additional security to the security amounts provided by
such guaranty. The Letter of Credit became effective on September 20, 2002 and shall
expire upon the close of business on July 10, 2003; except that the Letter of Credit will
be automatically extended without amendment for successive one year periods from the
present or any future expiration date hereof, unless Citibank, N.A. provides written
notice of its election not to renew the Letter of Credit at least thirty days prior to any
such expiration date. Additionally, in a Letter Agreement dated September 20, 2002,
Williams Energy agreed to (a) provide eligible credit support prior to the stated
expiration date of the Letter of Credit and (b) replenish any portion of the Letter of
Credit or eligible credit support that is drawn, reduced, cashed or redeemed, at any time,
with an equal amount of eligible credit support. Within twenty days prior to the
expiration of the Letter of Credit and/or any expiration date of eligible credit support
posted by Williams Energy, Williams Energy shall post eligible credit support to the
Company in place of the Letter of Credit and/or any expiring eligible credit support
unless The Williams Companies, Inc. regains and maintains its investment grade status, in
which case the Letter of Credit or eligible credit support shall automatically terminate
and no additional eligible credit support shall be required. We and Williams
Energy acknowledge that the posting of such Letter of Credit and Williams Energys
agreement and performance of the requirements of (a) and (b) as set forth in the
immediately preceding sentence shall be in full satisfaction of Williams Energys
obligations contained in Section 19.3 of the power purchase agreement to provide
replacement security due to the downgrade of The Williams Companies, Inc. falling below
investment grade status.

We
believe that our sources of liquidity will be adequate to meet our needs through the end of
2003. This belief is based on a number of assumptions, including, without limitation, the
financial condition and continued performance of third parties on which we depend, and in
particular Williams Energy, as the fuel supplier under the power purchase agreement we
entered into with Williams Energy for the sale of all electric energy and capacity
produced by the facility, and The Williams Companies, Inc., as the ultimate guarantor of
Williams Energys performance under the Power Purchase Agreement. Known and unknown
risks, uncertainties and other factors outside our control may cause actual results to
differ materially from our current expectations, including, but not limited to, risks and
uncertainties related to the financial condition and continued performance of the third
parties on which we depend, including Williams Energy, The Williams Companies, Inc. and their
affiliates, the possibility of unexpected problems related to the performance of the
facility, the possibility of unexpected expenses or lower than expected revenues and
additional factors that are unknown to us or beyond our control.

Since
we depend on The Williams Companies, Inc. and its affiliates for both revenues and fuel
supply under the power purchase agreement, if The Williams Companies, Inc. and its
affiliates were to terminate or default under the power purchase agreement, there would be
a severe negative impact to our cash flow and financial condition which could result in a
default on our senior secured bonds. Due to recent declines in pool prices, we would
expect that if we were required to seek alternative purchasers of our power as a result of
a default by The Williams Companies, Inc. and its affiliates, that any such alternate
revenues would be substantially below the amounts that would have been otherwise payable
pursuant to the power purchase agreement. There can be no assurance as to our ability to
generate sufficient cash flow to cover operating expenses or our debt service obligations
in the absence of a long-term power purchase agreement with Williams Energy or its
affiliates.

We
previously entered into arbitration with Williams Energy to resolve certain disputes
regarding the proper interpretation of certain provisions of the power purchase agreement
relating to amounts claimed by us to be payable by Williams Energy. On February 5, 2003
the arbitration panel handed their award to the parties. The arbitration decision covered
both revenue and non-revenue items. The revenue items were mainly concerned with the
interpretation the power purchase agreement regarding the calculation of revenue. The
net effect of these items was a reduction of revenues for 2002 of approximately $320,000.

Additionally,
we are in ongoing discussions with Williams Energy relating to the calculation of certain
amounts under the power purchase agreement.  Under the agreement, we have earned an annual
availability bonus and an additional capacity payment for 2002. We have invoiced Williams Energy
approximately $1.4 million as an annual availability bonus for 2002 and approximately $0.1
million as a capacity payment for 2002. Because the amounts are in dispute, we have only
recognized the amounts that Williams Energy has paid us of approximately $0.3 million. We
will continue to discuss with Williams Energy the calculation of these amounts but are
unable to predict the outcome of these discussions and their potential impact on our
ability to collect these contractual items either for 2002 or in the future.

|7. | COMMITMENTS
AND CONTINGENCIES
|-- | -----------------------------

Construction We entered into a fixed-price turnkey agreement with Siemens Westinghouse (the
Contractor) for the design, engineering, procurement, and construction of the Plant. As of
December 31, 2002 and 2001, we were liable to the Contractor for a retention payment as
part of the total contract price due at the completion of the contract for approximately
$0 and $11.9 million, respectively.

Since
provisional acceptance, interim acceptance or final acceptance did not occur prior to the
guaranteed provisional acceptance date, Siemens Westinghouse began paying liquidated
damages of $110,000 per day beginning 45 days after the guaranteed provisional acceptance
date of May 22, 2001. The liquidated damages ceased to accrue on December 27, 2001, the
date upon which provisional acceptance was granted. At December 31, 2001

50

---

we had invoiced
Siemens Westinghouse approximately $19.1 million. At December 31, 2001 Siemens
Westinghouse had paid all but $2.97 million, the amount accrued for twenty-seven days in
December. Siemens Westinghouse paid this amount in January 2002.

We
previously had a dispute with Siemens Westinghouse over which party was responsible for
the payment of the cost of electricity and natural gas used by the project during certain
periods prior to the December 28, 2001 commercial acceptance. On March 12, 2003, we
entered into a settlement agreement with Siemens Westinghouse entitled Agreement Change
Order No. 71 concerning final acceptance. This agreement became effective as of that date
and final acceptance was granted by us as of that date. The effects of the settlement have
been recorded in our financial statements as of December 31, 2002. As a result of the
settlement agreement, we have agreed, among other things, not to pursue the cost of
electricity and natural gas used by the project during certain periods prior to the
December 28, 2001 commercial acceptance date.

Maintenance We, as assignee of AES Ironwood, Inc., have entered into the Maintenance
Program Parts, Shop Repairs and Scheduled Outage TFA Services Contract, dated as of
September 23, 1998, with Siemens Westinghouse by which Siemens Westinghouse will provide
us with, among other things, combustion turbine parts, shop repairs and scheduled outage
technical field assistance services. The Contractor provided us with specific combustion
turbine maintenance services and spare parts for an initial term of between eight and ten
years under a maintenance service agreement. The fees assessed by Siemens Westinghouse
will be based on the number of Equivalent Base Load Hours accumulated by the applicable
Combustion Turbine as adjusted for inflation. The fees to Siemens Westinghouse are
capitalized when paid. Each outage is analyzed and the cumulative fees and other costs
related to the outage are capitalized as part of the facility or expensed accordingly.

The
maintenance services agreement became effective on the date of execution and unless
terminated early, must terminate upon completion of shop repairs performed by Siemens
Westinghouse following the eighth scheduled outage of the applicable combustion turbine or
10 years from initial synchronization of the applicable combustion turbine, whichever
occurs first.

Additionally,
a significant monthly expenditure is for payment of our long term service agreement with
Siemens Westinghouse. This agreement provides that we pay approximately $400 per gas
turbine per equivalent operating hour. In the event we are not required to dispatch the
facility, there is no charge. While operating at base load, the monthly payment
for the long term service agreement could be as much as $450,000.

Water
Supply We entered into a contract with the City of Lebanon Authority (the
Authority) for the purchase of 50 percent of the water use of the Plant. The contract has
a term of 25 years. Costs associated with the use of water by the Plant under this
contract are based on gallons used per day at prices specified under the contract terms.
We also entered into an agreement with Pennsy Supply, Inc. (Pennsy), which will provide
the remaining 50 percent of the water use of the Plant.

Interconnection
Agreement We entered into an interconnection agreement with GPU Energy (GPU) to
transmit the electricity generated by the Plant to the transmission grid so that it may be
sold as prescribed under the PPA. The agreement is in effect for the life of the Plant,
yet may be terminated by mutual consent of both GPU and us under certain circumstances as
detailed in the agreement. Costs associated with the agreement are based on electricity
transmitted via GPU at a variable price, the PJM (Pennsylvania/New Jersey/Maryland)
Tariff, as charged by GPU to the Company, which is comprised of both service cost and
asset recovery cost, as determined by GPU and approved by the Federal Energy Regulatory
Committee (FERC). We are obligated to pay approximately $204,000 per year as a maintenance
fee for the interconnection equipment. The term of this agreement is twenty-five years.

Power
Purchase Agreement  We have entered into a power purchase agreement for a term of
twenty years with Williams Energy, our sole customer for purchases of capacity,
ancillary services and our sole source for fuel. (See Note 6)

51

---

|8. | RELATED
PARTY TRANSACTIONS
|-- | --------------------------

Effective
June 1999, we entered into a 27-year development and construction management agreement
with Prescott to provide certain support services required by us for the development and
construction of the Plant. Under this agreement Prescott will also provide operations
management services for the Plant once commercial operation is attained. Payments for
operations management services are approximately $400,000 per month.

During
the construction period, the construction management fees were paid to Prescott from the
investment balances or from parent funding. For the year ended December 31, 2002, $5.0
million in management fees were incurred and charged to operating expenses, and $421,000
was payable to Prescott. For the year ended December 31, 2001, $3.9 million in
construction management fees were incurred and charged to construction in progress, and
$327,500 was payable to Prescott.

Accounts
receivable from parent and affiliates generally represents charges for certain AES
projects that we have paid for and invoiced to our parent and affiliates. Accounts payable
are generally amounts owed for shared services to our parent and affiliates. Accounts
receivable from parent and affiliates were in the amount of $0 and $365,000 as of December
31, 2002 and 2001, respectively. Accounts payable to AES and affiliates as of December 31,
2002 and 2001 amounted to $2.9 million and $1.9 million, respectively.

|9. | FAIR
VALUE OF FINANCIAL INSTRUMENTS
|-- | -----------------------------------

The
estimated fair values of our financial instruments have been determined using available
market information. The estimates are not necessarily indicative of the amounts we could
realize in a current market exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair value amounts.

The
Bonds had a carrying amount of $306.5 million with a fair value of approximately $214.0
million at December 31, 2002 versus a carrying amount of $308.5 million with a fair value
of approximately $290.1 million at December 31, 2001. The estimated fair value of the
Bonds at December 31, 2002 is based on quoted market prices of similarly rated bonds with
similar maturities.

|10. | SEGMENT
INFORMATION
|--- | -------------------

Under
the provisions of Statement of Financial Accounting Standards No. 131, Disclosure About
Segments of an Enterprise and Related Information, our business is expected to be
operated as one reportable segment, with operating income or loss being the measure of
performance evaluated by the chief operating decision-maker. As described in Notes 1 and
5, our primary customer is Williams Energy, which provides all of our operating revenues during
the term of the PPA.

52

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SELECTED QUARTERLY
FINANCIAL DATA  (UNAUDITED)

The following table
summarizes the unaudited quarterly statements of operations for the Company for the years
ended December 31, 2002 and 2001. Operations began on December 28, 2001; therefore 3 days
of the quarter ended December 31, included operations and 87 days represented the
development stage.

AES Ironwood, LLC
Quarters Ended December 31, 2002, September 30, 2002, June 30, 2002, March 31, 2002
(dollars in thousands)

|OPERATING
      REVENUES               |  |  |   | December
      31, 2002 |   |   | September
      30, 2002 |   |   | June
      30, 2002 |   |   | March
      31, 2002 |  
|-------------------------------------- |  |  | - | ----------------------- | - | - | ------------------------ | - | - | ------------------- | - | - | -------------------- | -
|Energy                                 |  |  | $ | 11,983                  |   | $ | 14,528                   |   | $ | 12,809              |   | $ | 12,532               |  
|OPERATING
      EXPENSES               |  |  |   |                         |   |   |                          |   |   |                     |   |   |                      |  
|Operating
      expenses               |  |  |   | (5,748                  | ) |   | (7,557                   | ) |   | (6,593              | ) |   | (5,713               | )
|General
      and administrative costs |  |  |   | (3,524                  | ) |   | (852                     | ) |   | (675                | ) |   | (457                 | )
|                                       | 
|OPERATING
      INCOME                 |  |  |   | 2,711                   |   |   | 6,119                    |   |   | 5,541               |   |   | 6,362                |  
|                                       |  |  |   |                         |   |   |                          |   |   |                     |   |   |                      |  
|OTHER
      INCOME/EXPENSE             |  |  |   |                         |   |   |                          |   |   |                     |   |   |                      |  
|Other
      Income                     |  |  |   | 1,531                   |   |   | 489                      |   |   | 1,300               |   |   | 1,454                |  
|Interest
      income                  |  |  |   | 41                      |   |   | 45                       |   |   | 19                  |   |   | 33                   |  
|Interest
      expense                 |  |  |   | (6,795                  | ) |   | (6,805                   | ) |   | (6,813              | ) |   | (6,831               | )
|                                       | 
|NET (LOSS)
      INCOME                |  |  | $ | (2,512                  | ) | $ | (152                     | ) | $ | 47                  |   | $ | 1,018                |  
|                                       | 

AES Ironwood, LLC
Quarters Ended December 31, 2001, September 30, 2001, June 30, 2001, March 31, 2001
(dollars in thousands)

|OPERATING
      REVENUES               |  |  |   | December
      31, 2001 |   |   | September
      30, 2001 |   |   | June
      30, 2001 |   |   | March
      31, 2001 |  
|-------------------------------------- |  |  | - | ----------------------- | - | - | ------------------------ | - | - | ------------------- | - | - | -------------------- | -
|Energy                                 |  |  | $ | 1,158                   |   | $ |                         |   | $ |                    |   | $ |                     |  
|OPERATING
      EXPENSES               |  |  |   |                         |   |   |                          |   |   |                     |   |   |                      |  
|Operating
      expenses               |  |  |   | (105                    | ) |   |                         |   |   |                    |   |   |                     |  
|General
      and administrative costs |  |  |   | (99                     | ) |   | (111                     | ) |   | (47                 | ) |   | (97                  | )
|                                       | 
|OPERATING
      INCOME (LOSS)          |  |  |   | 954                     |   |   | (111                     | ) |   | (47                 | ) |   | (97                  | )
|                                       |  |  |   |                         |   |   |                          |   |   |                     |   |   |                      |  
|OTHER
      INCOME/EXPENSE             |  |  |   |                         |   |   |                          |   |   |                     |   |   |                      |  
|Other
      Income                     |  |  |   |                        |   |   |                         |   |   |                    |   |   |                     |  
|Interest
      income                  |  |  |   | 89                      |   |   | 50                       |   |   | 89                  |   |   | 261                  |  
|Interest
      expense                 |  |  |   | (139                    | ) |   |                         |   |   | (8                  | ) |   | (6                   | )
|                                       | 
|NET
      INCOME (LOSS)                |  |  | $ | 904                     |   | $ | (61                      | ) | $ | 34                  |   | $ | 158                  |  
|                                       | 

53

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ITEM 9.     Changes in
and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

PART III

ITEM 10.     Directors
and Executive Officers of the Registrant

Not
applicable pursuant to General Instruction I of Form 10-K.

ITEM 11.     Executive
Compensation

Not
applicable pursuant to General Instruction I of Form 10-K.

ITEM 12.     Security
Ownership of Certain Beneficial Owners and Management

Not
applicable pursuant to General Instruction I of Form 10-K.

ITEM 13.     Certain
Relationships And Related Transactions

Not
applicable pursuant to General Instruction I of Form 10-K.

ITEM 14.     Controls
and Procedures

Evaluation
of Disclosure Controls and Procedures. Our President and our Chief Financial Officer,
after evaluating the effectiveness of our disclosure controls and procedures
(as defined in the Securities Exchange Act of 1934 Rules 13a-14c) as of a date (the
Evaluation Date) within 90 days before the filing date of this annual report,
have concluded that as of the Evaluation Date, our disclosure controls and procedures were
effective to ensure that material information relating to us is recorded, processed,
summarized, and reported in a timely manner.

Changes
in Internal Controls. There were no significant changes in our internal controls or,
to our knowledge, in other factors that could significantly affect such controls
subsequent to the Evaluation Date.

54

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PART IV

ITEM 15.     Exhibits,
Financial Statement Schedules, and Reports on Form 8-K

| | a) | The
following documents are filed as part of this report:
| | -- | ---------------------------------------------------------

| | 1. | Financial
Statements Filed:
| | -- | ---------------------------

| | Please
refer to Item 8 - Financial Statements and Supplementary Data.
| | ---------------------------------------------------------------------

| | 2. | Financial
Statement Schedules Filed:
| | -- | ------------------------------------

| | Please
refer to Item 8 - Financial Statements and Supplementary Data.
| | ---------------------------------------------------------------------

| | 3. | Exhibits
Filed:
| | -- | ---------------

Unless
otherwise indicated, all exhibits to this Form 10-K are incorporated herein by reference
from the identically numbered exhibit of AES Ironwood, L.L.C.s Registration
Statement on Form S-4 (333-91391).

|ExhibitNumber | Description
|------------- | -----------

|3 | Amended
and Restated Limited Liability Company Agreement, dated as of October 4, 1999, of our
Company.
|- | ------------------------------------------------------------------------------------------------------

|4.1 | Indenture
and the First Supplemental Indenture, dated as of June 1, 1999, by and among our
Company, the Trustee and the Depositary Bank.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------

|4.2 | Collateral
Agency and Intercreditor Agreement, dated as of June 1, 1999, by and among our  Company,
the Trustee, the Collateral Agent, the DSR LOC Provider, the CP LOC Provider and  the
Depositary Bank.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.3 | Debt
Service Reserve Letter of Credit and Reimbursement Agreement, dated as of June 1,  1999,
by and among our Company, the DSR LOC Provider and the Banks named therein.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.4 | Construction
Period Letter of Credit and Reimbursement Agreement, dated as of June 1,  1999, by and
among our Company, the CP LOC Provider and the Banks named therein.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.5 | Global
Bonds, dated June 25, 1999, evidencing 8.857% Senior Secured Bonds of our Company  due
2025 in the principal amount of $308,500,000.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------

|4.6 | Equity
Subscription Agreement, dated as of June 1, 1999, by and among our Company, AES  Ironwood
and the Collateral Agent.
|--- | --------------------------------------------------------------------------------------------------------------------------

|4.7 | Security
Agreement, dated as of June 1, 1999, by and between our Company and the Collateral Agent.
|--- | --------------------------------------------------------------------------------------------------

|4.8 | Pledge
and  Security Agreement, dated as of June 1, 1999, by and between AES Ironwood and the
Collateral Agent.
|--- | ---------------------------------------------------------------------------------------------------------------

|4.9 | Consent
to Assignment, dated as of June 1, 1999, by and between the Power Purchaser and  the
Collateral Agent, and consented to by our Company.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------

|4.10 | Consent
to Assignment, dated as of June 1, 1999, by and between the PPA Guarantor and our
Company, and consented  to by our Company.
|---- | ------------------------------------------------------------------------------------------------------------------------------------

55

---

|4.11 | Consent
to Assignment, dated as of June 1, 1999, by and between the Contractor and the
Collateral Agent, and consented to by our Company (with respect to the construction
agreement).
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.12 | Consent
to Assignment, dated as of June 1, 1999, by and between the Contractor and the
Collateral Agent, and consented to by our Company (with respect to the Maintenance
Services Agreement).
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.13 | Consent
to Assignment, dated as of June 1, 1999, by and between Siemens Corporation and  the
Collateral Agent, and consented to by our Company.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------

|4.14 | Consent
to Assignment, dated as of June 1, 1999, by and between Prescott and the Collateral
Agent, and consented  to by our Company.
|---- | ------------------------------------------------------------------------------------------------------------------------------------

|4.15 | Consent
to Assignment, dated as of June 1, 1999, by and between Metropolitan Edison  Company
d/b/a GPU Energy and the Collateral Agent, and consented to by our Company.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.16 | Consent
to Assignment, dated as of June 1, 1999, by and between City of Lebanon Authority  and
the Collateral Agent, and consented to by our Company.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------

|4.17 | Consent
to Assignment, dated as of June 1, 1999, by and between Pennsy Supply, Inc. and the
Collateral Agent,  and consented to by our Company.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------

|4.18 | Assignment
and Assumption Agreement, dated June 25, 1999, by and between AES Ironwood, Inc. and AES
Ironwood,  L.L.C. (with respect to the construction agreement).
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.19 | Assignment
and Assumption Agreement, dated June 25, 1999, by and between AES Ironwood, Inc. and AES
Ironwood,  L.L.C. (with respect to the Maintenance Services Agreement).
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.1 | Guaranty,
dated as of June 18, 1999, by and between the PPA Guarantor and our Company.
|---- | --------------------------------------------------------------------------------------

|10.2 | Amended
and Restated Power Purchase Agreement, dated as of February 5, 1999, and Amendment  No. 1
to Amended and Restated Power Purchase Agreement, dated as of June 18, 1999, between  our
Company and the Power Purchaser. (Portions of this exhibit have been omitted pursuant  to
a request for confidential treatment.)
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.3 | Engineering,
Procurement and Construction Services Agreement, dated as of September 23,  1998 (the
EPC Contract), as amended, by and between our Company and the  Contractor.
(Portions of this exhibit have been omitted pursuant to a request for  confidential
treatment.)
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.4 | Guaranty,
dated as of September 23, 1998, by and between Siemens Corporation and our Company.
|---- | ---------------------------------------------------------------------------------------------

|10.5 | Maintenance
Program Parts, Shop Repairs and Scheduled Outage TFA Services Contract, dated  as of
September 23, 1998, and Amendment No. 1 to Maintenance Program Parts, Shop Repairs  and
Scheduled Outage TFA Services Contract, dated as of January 13, 1999 (the  Maintenance
Services Agreement), by and between our Company and the  Contractor. (Portions of
this exhibit have been omitted pursuant to a request for  confidential treatment.)
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.6 | Development
and Operations Services Agreement, dated as of June 1, 1999, by and between our Company
and Prescott.
|---- | -----------------------------------------------------------------------------------------------------------------

|10.7 | Effluent
Supply  Agreement, dated as of March 3, 1998, by and between our Company and City of
Lebanon  Authority.
|---- | -----------------------------------------------------------------------------------------------------------------

56

---

|10.8 | Generation
Facility Transmission Interconnection Agreement, dated as of March 23, 1999, by  and
between our Company and Metropolitan Edison Company d/b/a GPU Energy.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.9 | Agreement
Relating to Real Estate, dated as of October 23, 1998, by and between our  Company and
Pennsy Supply, Inc.
|---- | --------------------------------------------------------------------------------------------------------------------

|10.10 | Easements
and Right of Access Agreement, dated as of April 15, 1999, by and between our  Company
and Pennsy Supply, Inc.
|----- | ------------------------------------------------------------------------------------------------------------------------

|10.11 | Letter
Agreement, dated September 20, 2002 between the Company and Williams Energy Marketing and
Trading  Company. **
|----- | ---------------------------------------------------------------------------------------------------------------------

|10.12 | Irrevocable
Standby Letter of Credit Issued by Citibank N.A. **
|----- | ---------------------------------------------------------------

|12* | Computation
of Ratios of Earnings/(Deficiency) to Fixed Charges
|--- | ---------------------------------------------------------------

---

|* | Filed
herewith.
|- | ---------------

|** | Previously
filed as  an exhibit to the Companys current report on Form 8-K filed in September
20, 2002  and incorporated by reference herein.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------

b)
Reports on Form 8-K. No current reports on Form 8-K were filed by the registrant
during the fourth quarter of the fiscal year ended December 31, 2002.

Supplementary
Information to be Furnished With Reports filed Pursuant toSection 15(d) of the Act by
Registrants Which Have Not RegisteredSecurities Pursuant to Section 12 of the Act.

No
annual report or proxy materials have been sent to security holders during the fiscal year
ended December 31, 2002. No annual report or proxy materials will be sent to security
holders subsequent to the filing of this annual report on Form 10-K.

57

---

SIGNATURES

Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

| | AES
IRONWOOD, L.L.C.
| | --------------------

| | /s/
Peter  Norgeot
| | ------------------

| | By:
Peter NorgeotTitle:  President
| | ----------------------------------

| | /s/
Michael  Carlson
| | --------------------

| | By:
Michael CarlsonTitle:  Vice-President and Chief Financial Officer
| | ---------------------------------------------------------------------

Date: March 31, 2003

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed by
the following persons on behalf of the registrant and in the capacities and on the dates
indicated.

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

|/s/ Barry J. Sharp

Barry J. Sharp | Director | March 31, 2003
|---------------------------------- | -------- | --------------

|/s/ John R. Ruggirello

John R. Ruggirello | Director | March 31, 2003
|------------------------------------------ | -------- | --------------

|/s/ Edward C. Hall III

Edward C. Hall III | Director | March 31, 2003
|------------------------------------------ | -------- | --------------

58

---

CERTIFICATION

I, Peter Norgeot,
certify that:

1.  I have reviewed
this annual report on Form 10-K of AES Ironwood, LLC;

2. Based on my
knowledge, this annual report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the
period covered by this annual report;

3. Based on my
knowledge, the financial statements, and other financial information included in this
annual report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
annual report;

4. The
registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14
and 15d-14) for the registrant and have:

a) designed such
disclosure controls and procedures to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual report is being
prepared;

b) evaluated the
effectiveness of the registrants disclosure controls and procedures as of a date
within 90 days prior to the filing date of this annual report (the Evaluation
Date); and

c)  presented in this
annual report our conclusions about the effectiveness of the disclosure controls and
procedures based on  our evaluation as of the Evaluation Date;

5. The
registrants other certifying officer and I have disclosed, based on our most recent
evaluation, to the registrants auditors and the audit committee of registrants
board of directors (or persons performing the equivalent functions):

a) all significant
deficiencies in the design or operation of internal controls which could adversely affect
the registrants ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material weaknesses in internal
controls; and

b)  any fraud,
whether or not material, that involves management or other employees who have a
significant role in the  registrants internal controls; and

6. The
registrants other certifying officer and I have indicated in this annual report
whether there were significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to significant deficiencies and
material weaknesses.

Date:  March 31, 2003

| | /s/
Peter Norgeot
| | -----------------

| | By:
Peter NorgeotTitle: President
| | ---------------------------------

59

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CERTIFICATION

I, Michael Carlson,
certify that:

1.  I have reviewed
this annual report on Form 10-K of AES Ironwood, LLC;

2. Based on my
knowledge, this annual report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the
period covered by this annual report;

3. Based on my
knowledge, the financial statements, and other financial information included in this
annual report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
annual report;

4. The
registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14
and 15d-14) for the registrant and have:

a) designed such
disclosure controls and procedures to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual report is being
prepared;

b) evaluated the
effectiveness of the registrants disclosure controls and procedures as of a date
within 90 days prior to the filing date of this annual report (the Evaluation
Date); and

c)  presented in this
annual report our conclusions about the effectiveness of the disclosure controls and
procedures based on  our evaluation as of the Evaluation Date;

5. The
registrants other certifying officer and I have disclosed, based on our most recent
evaluation, to the registrants auditors and the audit committee of registrants
board of directors (or persons performing the equivalent functions):

a) all significant
deficiencies in the design or operation of internal controls which could adversely affect
the registrants ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material weaknesses in internal
controls; and

b)  any fraud,
whether or not material, that involves management or other employees who have a
significant role in the  registrants internal controls; and

6. The
registrants other certifying officer and I have indicated in this annual report
whether there were significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to significant deficiencies and
material weaknesses.

Date:  March 31, 2003

| | /s/
Michael Carlson
| | -------------------

| | By:
Michael CarlsonTitle: Vice President and Chief Financial Officer
| | --------------------------------------------------------------------

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