<PAGE>

                                                                 EXHIBIT 10.2(a)
                                                                  EXECUTION COPY

     An asterisk ([*]) indicates that confidential information has been
omitted and filed separately with the Securities and Exchange Commission as
part of a Confidential Treatment Request.

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

                                    AGREEMENT

                                       FOR

                            ENGINEERING, PROCUREMENT
                            AND CONSTRUCTION SERVICES

                                     BETWEEN

                                AES RED OAK, LLC

                                    ("OWNER")

                                       AND

                     RAYTHEON ENGINEERS & CONSTRUCTORS, INC.
                                 ("CONTRACTOR")

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


                          Dated as of October 15, 1999

<PAGE>

                                TABLE OF CONTENTS


<TABLE>
<CAPTION>

                                                                                                      PAGE

<S>                                                                                                   <C>
ARTICLE 1  DEFINITIONS..............................................................................     1

         1.1      Definitions.......................................................................     1

ARTICLE 2  CONTRACTOR'S SERVICES AND OTHER OBLIGATIONS..............................................    17

         2.1      Services to be Performed..........................................................    17
         2.2      Commencement of the Services......................................................    35
         2.3      Performance.......................................................................    37
         2.4      Compliance with Applicable Laws, Applicable Permits and the
                  Guaranteed Emissions Limits.......................................................    38
         2.5      Safety Precautions................................................................    39

ARTICLE 3  SUBCONTRACTS.............................................................................    40

         3.1      Major Specialty Consultants, Subcontractors and Equipment Suppliers...............    40
         3.2      Purchase Orders and Subcontracts..................................................    41
         3.3      Payments to Subcontractors........................................................    41
         3.4      Subcontractor Warranties..........................................................    41
         3.5      Subcontractor Insurance...........................................................    42
         3.6      No Privity with Subcontractors....................................................    42
         3.7      Review and Approval not Relief of Contractor's Liability..........................    42
         3.8      Assignability of Subcontracts.....................................................    42
         3.9      Quality Control...................................................................    43

ARTICLE 4  PRICE AND PAYMENT........................................................................    43

         4.1      Contract Price....................................................................    43
         4.2      Payment Schedule..................................................................    43
         4.3      Price Adjustments.................................................................    46
         4.4      Payment upon Termination..........................................................    47
         4.5      No Payment in the Event of Material Breach........................................    49
         4.6      All Payments Subject to Release of Claims.........................................    49
         4.7      Payment or Use Not Acceptance.....................................................    50
         4.8      Set-Off...........................................................................    50

ARTICLE 5  OWNER SERVICES...........................................................................    51

         5.1      Representative....................................................................    51
         5.2      Facility Site.....................................................................    51
         5.3      Permits and Real Estate Rights....................................................    51
</TABLE>


                                                         i
<PAGE>
<TABLE>
<CAPTION>
                                                                                                      PAGE

<S>      <C>                                                                                          <C>
         5.4      Start-Up Personnel................................................................    52
         5.5      Spare Parts, Waste Disposal and Consumables.......................................    52
         5.6      Utilities.........................................................................    53
         5.7      Fuel..............................................................................    53
         5.8      Electrical Interconnection........................................................    54
         5.9      Owner's Failure to Meet Obligations...............................................    54
         5.10     Approvals.........................................................................    54
         5.11     Administration of Third Party Project Agreements..................................    54
         5.12     AES Pre-Financial Closing Guaranty................................................    55

ARTICLE 6  COMPLETION AND ACCEPTANCE OF PROJECT.....................................................    55

         6.1      Project Start-up; Mechanical Completion...........................................    55
         6.2      Performance Tests.................................................................    58
         6.3      Provisional Acceptance............................................................    60
         6.4      Not Used..........................................................................    63
         6.5      Final Acceptance..................................................................    63
         6.6      Reliability Run...................................................................    68
         6.7      Project Completion................................................................    69

ARTICLE 7  COMPLETION DATES.........................................................................    71

         7.1      Guaranteed Completion Dates.......................................................    71
         7.2      Guaranteed Completion Date Price Rebates..........................................    71
         7.3      Early Completion Bonus............................................................    73
         7.4      Rebates Reasonable; Payment of Rebates............................................    74
         7.5      Not Used..........................................................................    74
         7.6      Achievement of Construction Progress Milestones...................................    74

ARTICLE 8  PRICE REBATE FOR FAILURE TO MEET PERFORMANCE GUARANTEES..................................    77

         8.1      Performance Guarantees............................................................    77
         8.2      Rebates Reasonable................................................................    79
         8.3      Payment of Performance Rebates....................................................    80

ARTICLE 9  LIABILITY AND DAMAGES....................................................................    80

         9.1      Limitation of Liability...........................................................    80
         9.2      Consequential Damages.............................................................    81
         9.3      Aggregate Liability of Contractor.................................................    81

ARTICLE 10  WARRANTIES AND GUARANTEES...............................................................    82

         10.1     Warranties and Guarantees.........................................................    82
         10.2     No Liens or Encumbrances..........................................................    84
         10.3     Limitation Of Warranties..........................................................    84


                                                         ii
<PAGE>
<CAPTION>
                                                                                                      PAGE
<S>     <C>                                                                                           <C>
ARTICLE 11  FORCE MAJEURE...........................................................................    85

         11.1     Force Majeure Event...............................................................    85
         11.2     Burden of Proof...................................................................    85
         11.3     Excused Performance...............................................................    86

ARTICLE 12  SCOPE CHANGES...........................................................................    87

         12.1     Further Refinement, Corrections and Detailing not Scope Changes...................    87
         12.2     Scope Changes.....................................................................    87
         12.3     Procedure for Scope Changes.......................................................    87
         12.4     Scope Changes Due to Contractor Error.............................................    88
         12.5     Scope Changes Due to Changes in Law and Permits...................................    89
         12.6     Familiarity with Conditions and Documentation.....................................    89
         12.7     Effect of Force Majeure Event.....................................................    91
         12.8     Price Change......................................................................    91
         12.9     Continued Performance Pending Resolution of Disputes..............................    92
         12.10    Documentation.....................................................................    92
         12.11    Qualitative Engineering...........................................................    92
         12.12    Hazardous Materials...............................................................    93

ARTICLE 13  INDEMNIFICATION.........................................................................    93

         13.1     General Indemnification...........................................................    93
         13.2     Additional Indemnification........................................................    94
         13.3     Patent and Copyright Indemnification..............................................    94
         13.4     Hazardous Materials Liability.....................................................    95
         13.5     Notice and Legal Defense..........................................................    95
         13.6     Failure to Defend Action..........................................................    96
         13.7     Survival..........................................................................    96

ARTICLE 14  INSURANCE...............................................................................    96

         14.1     General...........................................................................    96
         14.2     Worker's Compensation Insurance...................................................    96
         14.3     Commercial General Liability Insurance............................................    96
         14.4     Automobile Liability Insurance....................................................    97
         14.5     Commercial Umbrella and/or Excess Insurance.......................................    97
         14.6     Severability of Interest..........................................................    97
         14.7     Builder's Risk Insurance..........................................................    97
         14.8     Ocean Marine Cargo Insurance......................................................    98
         14.9     Subcontractor Insurance...........................................................    98
         14.10    Waiver of Subrogation.............................................................    98
         14.11    Contractor's Waiver...............................................................    99


                                                         iii
<PAGE>

<CAPTION>
                                                                                                      PAGE
<S>      <C>                                                                                          <C>
         14.12    Evidence of Coverage..............................................................    99
         14.13    Contractor's or Rented Equipment..................................................    99
         14.14    Descriptions not Limitations......................................................   100
         14.15    Cost of Premiums, Risk of Loss and Deductibles....................................   100
         14.16    Additional Insureds...............................................................   101
         14.17    No Limitation of Liability........................................................   101
         14.18    Insurance Primary.................................................................   101

ARTICLE 15  TERMINATION; SUSPENSION.................................................................   102

         15.1     Suspension or Termination for Owner's Convenience.................................   102
         15.2     Suspension or Termination by Contractor Upon Non-Payment by Owner.................   104
         15.3     Consequences of Termination.......................................................   105
         15.4     Surviving Obligations.............................................................   107

ARTICLE 16  DEFAULT AND REMEDIES....................................................................   108

         16.1     Contractor's Default..............................................................   108
         16.2     Owner's Rights and Remedies.......................................................   110

ARTICLE 17  ASSIGNMENT..............................................................................   111

         17.1     Consent Required.................................................................    111
         17.2     Successors and Assigns...........................................................    112

ARTICLE 18  DESIGN DOCUMENTS........................................................................   113

         18.1     Owner Review......................................................................   113
         18.2     Review not Release of Obligations.................................................   113
         18.3     Final Documents...................................................................   113
         18.4     Ownership........................................................................    114

ARTICLE 19  CONFIDENTIAL INFORMATION...............................................................    114

         19.1     Confidentiality...................................................................   114
         19.2     Publicity Releases................................................................   116

ARTICLE 20  INSPECTION..............................................................................   116

         20.1     Project Inspection................................................................   116
         20.2     No Relief for Differing Conditions...............................................    117
         20.3     Owner's Environmental Site Assessment.............................................   119

ARTICLE 21  DISPUTE RESOLUTION......................................................................   120

         21.1     Dispute Resolution................................................................   120
         21.2     Performance During Dispute........................................................   121


                                                         iv
<PAGE>

<CAPTION>
                                                                                                      PAGE
<S>      <C>                                                                                          <C>
ARTICLE 22  COST RECORDS; AUDITS....................................................................   121

         22.1     Maintenance of Records............................................................   121
         22.2     Inspection of Books, Records and Audit Rights.....................................   121
         22.3     Quality Audits....................................................................   122

ARTICLE 23  INDEPENDENT CONTRACTOR..................................................................   122

         23.1     Contractor as Independent Contractor..............................................   122

ARTICLE 24  REPRESENTATIONS AND WARRANTIES..........................................................   122

         24.1     Representations and Warranties of Contractor......................................   122
         24.2     Representations and Warranties of Owner...........................................   124

ARTICLE 25  MISCELLANEOUS...........................................................................   126

         25.1     Past Due Amounts..................................................................   126
         25.2     Delay not Waiver..................................................................   126
         25.3     No Set-Off, Deduction or Counterclaim by Contractor...............................   126
         25.4     Choice of Law.....................................................................   127
         25.5     Severability......................................................................   127
         25.6     Notice............................................................................   127
         25.7     Section Headings..................................................................   129
         25.8     Entire Agreement..................................................................   129
         25.9     Amendments........................................................................   129
         25.10    Conflicting Provisions............................................................   129
         25.11    No Third Party Rights.............................................................   129
         25.12    Owner's Obligations Non-Recourse..................................................   129
         25.13    Survival of Provisions............................................................   129
         25.14    Title to the Project..............................................................   130
         25.15    Counterparts......................................................................   130
</TABLE>


                                                         v
<PAGE>

<TABLE>
<CAPTION>

                                   APPENDICES
                                   ----------

<S>                          <C>
           Appendix A        Scope of Services

           Appendix B        Payment and Milestone Schedule

           Appendix C        Project Schedule

           Appendix D        Performance Test Plan

           Appendix E        Approved Subcontractors List

           Appendix F        Applicable Permits

           Appendix G        Facility Site and Real Estate Rights Description

           Appendix H        PPA Operating Requirements Excerpts

           Appendix I-1      Form of Contractor's Final Waiver and Release

           Appendix I-2      Form of Contractor's Interim Waiver and Release

           Appendix I-3      Form of Subcontractor's Final Waiver and Release

           Appendix J-1      Form of Limited Notice to Proceed

           Appendix J-2      Form of Notice to Proceed

           Appendix K        Quality Assurance Plan

           Appendix L        Form of EPC Guaranty

           Appendix M        Cancellation Schedule

           Appendix N        Construction Progress Milestones

           Appendix O        Scope Options

           Appendix P        Table of Submittals and Approvals

           Appendix Q        List of Key Personnel

           Appendix R        Warranty Data Sheet

           Appendix S        Environmental Requirements

           Appendix T        Form of AES Pre-Financial Closing Guaranty

           Appendix U        Certain Equipment and/or Subcontracts

           Appendix V        Form of Letter of Credit

           Appendix W        Project Procedures Manual
</TABLE>


                                       vi
<PAGE>

           AGREEMENT dated as of October 15, 1999 by and between AES Red Oak,
LLC, a Delaware limited liability company ("OWNER"), and Raytheon Engineers &
Constructors, Inc., a Delaware corporation ("CONTRACTOR").

                              W I T N E S S E T H :

           WHEREAS, Contractor desires to provide and Owner desires to obtain
engineering, design, procurement, construction and related services for the
Project, all of which shall be provided on a lump sum, fixed price, turnkey
contract basis and in accordance with the terms and conditions herein specified;

           NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto, intending to be legally bound,
hereby agree as follows:


                                    ARTICLE 1
                                   DEFINITIONS

           1.1 DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings (such meanings as necessary to be equally applicable
to both the singular and plural forms of the terms defined):

           "AAA" shall have the meaning set forth in Section 21.1 hereof.

           "ACCEPTED ELECTRICAL PRACTICES" means those practices, methods,
standards, and equipment engaged in or approved by a significant portion of the
electric utility industry during the relevant time period, or any of the
practices, methods, standards and equipment which, in exercise of reasonable
judgment in light of the facts known (or which a qualified and prudent
contractor should have known) at the time a decision is made, would have been
expected to accomplish a desired result at reasonable cost consistent with good
business practices, reliability, safety and expedition, in each case in
accordance with the National Electrical Safety Code, the National Electrical
Code and the standards of the Institute of Electrical and Electronic Engineers,
the National Electrical Manufacturers Association, the North American Electric
Reliability Council, the MidAtlantic Area Council, any regional power pool in
which the Transmitting Utility is a participant, and the American National
Standards Institute and any other applicable statutes, codes, regulations and/or
standards. Accepted Electrical Practices are not intended to be limited to the
optimum practices, methods, standards and equipment to the exclusion of others,
but rather refer to those practices, methods, standards and equipment generally
accepted or approved by a significant portion of the electric utility industry
in


                                       1
<PAGE>

the relevant region, during the relevant time period, as described in the
immediately preceding sentence.

           "AES PRE-FINANCIAL CLOSING GUARANTY" shall have the meaning set forth
in Section 5.12 hereof.

           "AGREEMENT" means the Contract Document, all written amendments,
modifications and supplements hereto, all Scope Change Orders, and the
Appendices hereto, all of which by this reference are incorporated herein.

           "APPLICABLE LAWS" means all laws, treaties, ordinances, judgments,
decrees, injunctions, writs and orders of any court or governmental agency or
authority, and rules, regulations, orders, interpretations and Permits of any
federal, state, county, municipal, regional, environmental or other governmental
body, instrumentality, agency, authority, court or other body having
jurisdiction over the Project or any activity conducted at or in connection with
the Project or the Facility Site, including, without limitation, construction of
the Project on the Facility Site, use or disposal of any Hazardous Material,
transportation of all equipment and other items necessary for the Project to and
from the Facility Site, transmission of electricity to the Transmitting Utility,
performance of the Services, or start-up, testing or operation of the Facility,
as may be applicable and in effect from time to time.

           "APPLICABLE PERMITS" means all Permits required to be obtained or
maintained under Applicable Laws in connection with the Project or any activity
conducted at or in connection with the Project or the Facility Site, including,
without limitation, construction of the Project on the Facility Site,
transportation of all equipment and other items necessary for the Project to and
from the Facility Site, transmission of electricity to the Transmitting Utility,
performance of the Services, or start-up, testing or operation of the Facility,
as may be in effect from time to time.

           "APPROVED REMEDIATION PLAN" means any approved remediation plan
between Owner and the appropriate governmental authorities relating to the
remediation of any Hazardous Materials on or about or under the Facility Site
that may be specifically identified and covered by such plan, which Owner
delivers to Contractor prior to the Commencement Date hereunder and which is
mutually satisfactory to Owner and Contractor.

           "APPROVED SUBCONTRACTORS LIST" shall have the meaning set forth in
Section 3.1 hereof.


                                       2
<PAGE>

           "ASME" means the American Society of Mechanical Engineers or any
successor society thereto.

           "AVERAGE EQUIVALENT AVAILABILITY" shall have the meaning set forth in
Appendix D hereto.

           "BASE BID SCOPE CHANGES" shall have the meaning set forth in Section
4.3.1 hereof.

           "BASELINE ENVIRONMENTAL SITE ASSESSMENT" means the Preliminary
Assessment/Site Investigation (PA/SI) Report, 2 Volumes, by TRC, dated April
1999 or any replacement thereof and/or any supplement thereto that Owner
delivers to Contractor prior to the execution of this Agreement.

           "BTU" means one (1) British thermal unit.

           "BUILDING PERMITS" means all Permits required to be obtained or
maintained under Applicable Laws in order for Contractor (or its Subcontractors)
to perform the design, engineering, procurement, site preparation and clearing,
civil works, construction, start-up, training and testing of the Facility
(including, without limitation, the provision of all machinery, materials, labor
and transportation services related thereto) and any other Services, including
without limitation all Permits required to allow Contractor (or its
Subcontractors) to do business in the jurisdictions where the Project is to be
performed; PROVIDED that if any such required Permits need to be obtained in the
name of Owner and not in the Contractor's (or its Subcontractors') name, Owner
shall, at Contractor's cost and expense, cooperate with Contractor as reasonably
necessary to enable Contractor to obtain such Permits in the Owner's name.
Building Permits shall not include Permits pertaining to (a) environmental
regulation of the Facility Site (other than with respect to Contractor's (or its
Subcontractors') activities thereon in its performance of the Services), (b)
remediation of Hazardous Material on the Facility Site (other than with respect
to any Hazardous Materials that (i) were brought to the Facility Site by a
Contractor Responsible Party, (ii) were created as a result of, or in connection
with, the performance by any Contractor Responsible Party of the Services, or
(iii) were covered in any Scope Change Order entered into by Contractor and
Owner pursuant to Section 12.12 or 20.3 hereof ), (c) land use or zoning matters
affecting the Facility Site, (d) environmental regulation of Facility operation
during start-up, testing or commercial operation, or (e) operation and
maintenance of the Facility following the earlier to occur of Provisional
Acceptance or Final Acceptance.


                                       3
<PAGE>

           "COMMENCEMENT DATE" means the date on which Contractor is to commence
performance of the Services pursuant to and as specified in the Notice to
Proceed delivered to Contractor by Owner pursuant to Section 2.2 hereof.

           "COMMERCIAL OPERATION DATE" means, with respect to the Facility, the
date upon which Owner will begin to sell, and the Power Purchaser will begin to
buy, energy and capacity pursuant to the terms of the Power Purchase Agreement
(including the satisfaction of all applicable conditions to the "Commercial
Operation Date" thereunder as specified therein).

           "COMPLETED PERFORMANCE TEST" means any Performance Test established
as a Completed Performance Test in accordance with the provisions of Section
6.2.7 hereof.

           "CONSTRUCTION PROGRESS MILESTONE DATES" means the dates, as specified
in Appendix N hereto, by which the Construction Progress Milestones are required
to have been fully completed in accordance with the standards of performance set
forth herein.

           "CONSTRUCTION PROGRESS MILESTONES" means the construction progress
milestones specified in Appendix N hereto.

           "CONTRACT DOCUMENT" means this document consisting of Articles 1
through 25 hereof, as amended from time to time.

           "CONTRACTOR" means Raytheon Engineers & Constructors, Inc., a
Delaware corporation, and its successors and permitted assigns, as contractor
hereunder.

           "CONTRACTOR INDEMNIFIED PARTIES" shall have the meaning set forth in
Section 13.1.1 hereof.

           "CONTRACTOR PAYMENT REQUEST" shall have the meaning set forth in
Section 4.2.2 hereof.

           "CONTRACTOR RESPONSIBLE PARTY" means Contractor or any of its
Subcontractors or any other Person while such Person is acting on behalf of, or
under the direction or supervision of, Contractor or any of its Subcontractors,
including without limitation, any of their respective employees or agents.

           "CONTRACTOR TAXES" shall have the meaning set forth in Section
2.1.17(a) hereof.


                                       4
<PAGE>

           "CONTRACT PRICE" shall have the meaning set forth in Section 4.1
hereof.

           "CPM SCHEDULE" shall have the meaning set forth in Section 2.1.16
hereof.

           "CTG SERVICES" shall have the meaning set forth in Section 15.3(c)
hereof.

           "CTG SUBCONTRACT" shall mean that certain agreement, to be executed
by and between Contractor and Siemens Westinghouse Power Corporation providing
for Contractor's purchase of three (3) model 501F Econopac combustion turbine
generators and associated equipment and services for the Project, on terms
consistent with that certain Memorandum of Understanding dated as of February
15, 1999 by and between Contractor and Siemens Westinghouse Power Corporation,
as such agreement may be amended, supplemented or modified from time to time;
PROVIDED, HOWEVER, that the CTG Subcontract as defined herein shall not include
any amendment, supplement or modification thereto that has not been consented to
in writing by Owner (which consent shall not be unreasonably withheld or
delayed).

           "DAMAGES" shall have the meaning set forth in Section 13.1 hereof.

           "DESIGN DOCUMENTS" shall have the meaning set forth in Section 2.1.2
hereof.

           "DOCUMENTS FOR APPROVAL" shall have the meaning set forth in Section
18.1 hereof.

           "DOLLARS" or "$" means the legal currency of the United States.

           "ELECTRICAL INTERCONNECTION FACILITIES" means all structures,
facilities, equipment, auxiliary equipment, devices and apparatus up to and
including the "transfer tower" (as more specifically described in Section IV.b.3
of Appendix A hereto) to be constructed and installed by Contractor in
accordance with the Electrical Interconnection Requirements and the terms of
this Agreement for the purpose of interconnecting the Facility with the
Transmitting Utility's transmission system at the Electrical Interconnection
Point in order to enable the transmission thereon of the full electric
generating capacity of the Facility in accordance with Accepted Electrical
Practices, including without limitation all internal breakers, relays, switches,
synchronizing equipment, Electric Metering Equipment, automatic regulation,
communications, safety and other switchyard equipment and facilities, Protective
Apparatus and other protective and control equipment for the Facility described
in Appendix A hereto.


                                       5
<PAGE>

           "ELECTRICAL INTERCONNECTION POINT" means that point (as further
described in Appendix A hereto) at which the Facility is to be interconnected
with the Transmitting Utility's transmission system.

           "ELECTRICAL INTERCONNECTION REQUIREMENTS" means the requirements of
GPU Energy and PJM for the Facility's interconnection with the Transmitting
Utility's transmission system as set forth in the Transmission Interconnection
Agreement, which such drawings and technical requirements are attached in
Appendix A hereto, as such drawings and technical requirements may be amended,
supplemented or modified from time to time; PROVIDED, that if any such
amendment, supplement or modification materially affects the Services to be
performed by Contractor hereunder, and Contractor has not consented in writing
thereto (which consent shall not be unreasonably withheld or delayed or
delayed), the Electrical Interconnection Requirements as defined herein shall
not include such amendment, supplement or modification in the event and only to
the extent the Services are so affected thereby, unless a Scope Change Order has
been issued in accordance with Article 12 with respect thereto.

           "ELECTRIC METERING EQUIPMENT" shall have the meaning set forth in
Appendix A hereto.

           "ELECTRICAL OUTPUT GUARANTEE" shall have the meaning set forth in
Section 8.1.1.1 hereof.

           "ENVIRONMENTAL REQUIREMENTS" means those requirements, standards,
guidelines and policies (including, without limitation, all emission standards
for gaseous, particulate, solid, liquid and noise pollutants) set forth in
Appendix S hereto.

           "EPC GUARANTY" shall have the meaning set forth in Section 2.1.26
hereof.

           "EQUIPMENT" shall mean all of the materials, apparatus, structures,
tools, supplies or other goods provided by Contractor or any Subcontractor which
are incorporated into the Facility or are provided by Contractor as part of the
Services to be retained by Owner after Final Acceptance in accordance with this
Agreement.

           "EQUIVALENT OPERATING HOURS" shall have the meaning specified in Part
A of Appendix D hereto.

           "FACILITY" means the combined cycle electric generating plant with a
designed electric generating capacity of a nominal eight hundred (800) megawatts
(net) to be engineered, designed, constructed, completed, synchronized, tested
and made available for commercial operation by Contractor in accordance with the
requirements of this


                                       6
<PAGE>

Agreement (including without limitation Appendix A hereto) on the Facility Site,
as an integrated whole and including all components thereof and all related
facilities on the Facility Site, including without limitation the Electrical
Interconnection Facilities and all of the appliances, parts, instruments,
appurtenances, accessories and other property that may be incorporated or
installed in or attached to or otherwise become part of such plant or related
facilities (excluding all such items and other property to be furnished by or on
behalf of Owner as specifically set forth herein).

           "FACILITY SITE" means all those parcels of land near Sayreville, New
Jersey, owned or leased, or to be owned or leased, by Owner on which the
Facility will be located, including, without limitation, the areas for
construction laydown and parking, all as more particularly described in Appendix
G hereto.

           "FINAL ACCEPTANCE" means the achievement or deemed achievement of
substantial Project performance pursuant to the provisions of Section 6.5
hereof.

           "FINAL ACCEPTANCE CERTIFICATE" shall have the meaning set forth in
Section 6.5.1.2 hereof.

           "FINANCIAL CLOSING DATE" means the later of (a) the date of the first
closing of the initial construction financing of the Project and (b) the date on
which Owner first has access to such construction financing funds.

           "FINANCING DOCUMENTS" means any and all loan agreements, notes,
indentures, security agreements, pledges, mortgages, subordination agreements,
intercreditor agreements, partnership agreements, subscription agreements,
participation agreements and other documents relating to the construction,
interim or long-term financing of the Project and any refinancing of the Project
(including a leveraged lease), including any and all modifications, extensions,
renewals and replacements of any such financing or refinancing.

           "FINANCING PARTIES" means (a) any and all lenders providing the
construction, interim or long-term financing (including a leveraged lease or any
other refinancing thereof) for the Project, and any trustee or agent acting on
their behalf, (b) any and all equity investors (other than Owner) providing
financing or refinancing for the Project in a leveraged lease or similar
financing arrangement, and any trustee or agent acting on their behalf, and (c)
any and all credit ratings agencies that may provide ratings on debt to be
issued by Owner in connection with financing for the Project.

           "FORCE MAJEURE EVENT" shall have the meaning set forth in Section
11.1 hereof.


                                       7
<PAGE>

           "FUEL SUPPLIER" means any and all suppliers of Gas for the Facility,
and each of their respective successors and permitted assigns.

           "GAS" means natural gas that meets the specifications set forth in
Section V.b. of Appendix A hereto.

           "GAS METERING EQUIPMENT" shall have the meaning set forth in Appendix
A hereto.

           "GUARANTEED COMPLETION DATES" means the Guaranteed Provisional
Acceptance Date and the Guaranteed Final Acceptance Date.

           "GUARANTEED EMISSIONS LIMITS" means all of the standards for emission
by the Facility of gaseous, particulate, liquid and noise pollutants as set
forth in the Warranty Data Sheet attached as Appendix R hereto and in the
Environmental Requirements attached as Appendix S hereto, and such other or more
stringent standards (if any) under all Applicable Laws and Applicable Permits.

           "GUARANTEED FINAL ACCEPTANCE DATE" means thirteen (13) months after
the Guaranteed Provisional Acceptance Date.

           "GUARANTEED PROVISIONAL ACCEPTANCE DATE" means March 1, 2002, which
date is subject to adjustment as expressly provided in this Agreement.

           "HAZARDOUS MATERIAL" means any pollutant, contaminant, solid waste,
hydrocarbon product, toxic or hazardous substance or waste, any flammable,
explosive or radioactive material, or any other substance, material, waste or
constituent, in each case for which any duty is imposed under, cleanup is
authorized pursuant to, or regulation is otherwise imposed by, any Applicable
Law.

           "HEAT RATE GUARANTEE" shall have the meaning set forth in Section
8.1.2.1 hereof.

           "INDEPENDENT ENGINEER" means an independent engineer of recognized
expertise, selected by the Financing Parties and reasonably acceptable to Owner,
and such independent engineer's successors and permitted assigns.

           "INSTRUCTION MANUAL" shall have the meaning set forth in Section
2.1.2.1 hereof.

           "INTERIM PERIOD" shall have the meaning set forth in Section 8.1.1.2
hereof.


                                       8
<PAGE>

           "INTERIM PERIOD ELECTRICAL OUTPUT REBATES" shall have the meaning set
forth in Section 8.1.1.2 hereof.

           "INTERIM PERIOD HEAT RATE REBATES" shall have the meaning set forth
in Section 8.1.2.2 hereof.

           "INTERIM PERIOD REBATES" means Interim Period Electrical Output
Rebates and Interim Period Heat Rate Rebates.

           "INTERIM SCOPE CHANGE ORDER" shall have the meaning set forth in
Section 12.3(b) hereof.

           "kWh" means kilowatt-hour.

           "LD SUBCAP" shall have the meaning set forth in Section 9.1 hereof.

           "LETTER OF CREDIT" shall have the meaning set forth in Section 4.2.4
hereof.

           "LIMITED NOTICE TO PROCEED" shall have the meaning set forth in
Section 2.2.1 hereof.

           "MECHANICAL COMPLETION" means the mechanical completion of the
Facility pursuant to the provisions of Section 6.1.2 hereof.

           "MECHANICAL COMPLETION CERTIFICATE" shall have the meaning set forth
in Section 6.1.2.2 hereof.

           "MONTHLY PROGRESS REPORT" means a progress report containing the
following information: (a) a description of Contractor's and all Subcontractors'
activities and engineering, manufacturing, construction and testing progress as
compared with the Project Schedule (and, at the request of Owner, an updated
schedule), (b) certification that all amounts due to Subcontractors prior to the
date of the Monthly Progress Report have been paid, (c) an identification and
evaluation of problems and deficiencies in the Services performed hereunder
(including but not limited to an explanation and evaluation, in reasonably
sufficient detail, of any factors which have had or are anticipated to have a
material effect on the Project Schedule), (d) a detailed description of the
Services which have been completed as compared with the Payment and Milestone
Schedule, the CPM Schedule and the Project Schedule, and a description of the
Scheduled Payments which have been received as compared with the Payment and
Milestone Schedule, (e) the status of major material and equipment deliveries,
(f) the status of Building Permits, (g) quality assurance reports (i) from the
manufacturing and fabrication facilities of Contractor and,


                                       9
<PAGE>

if requested by Owner, its Subcontractors and (ii) with respect to all
construction activity at the Facility Site, and (h) all other information
requested by Owner and agreed to by Contractor, such agreement not to be
unreasonably withheld or delayed.

           "NOTICE OF FINAL ACCEPTANCE" shall have the meaning set forth in
Section 6.5.1.1 hereof.

           "NOTICE OF MECHANICAL COMPLETION" shall have the meaning set forth in
Section 6.1.2.1 hereof.

           "NOTICE OF PROJECT COMPLETION" shall have the meaning set forth in
Section 6.7.1 hereof.

           "NOTICE OF PROVISIONAL ACCEPTANCE" shall have the meaning set forth
in Section 6.3.1 hereof.

           "NOTICE OF RELIABILITY GUARANTEE ACHIEVEMENT" shall have the meaning
set forth in Section 6.6.2 hereof.

           "NOTICE TO PROCEED" means the written notice to be delivered by Owner
to Contractor pursuant to Section 2.2 hereof setting forth the Commencement
Date.

           "OFFEREES" shall have the meaning set forth in Section 19.1 hereof.

           "OWNER" means AES Red Oak, LLC, a Delaware limited liability company,
and its successors and permitted assigns as owner hereunder.

                  "OWNER INDEMNIFIED PARTIES" shall have the meaning set forth
in Section 13.1 hereof.

           "OWNER RESPONSIBLE PARTY" means Owner or any other Person while such
Person is acting on behalf of, or under the direction or supervision of, Owner,
including without limitation, any of its employees and agents, but specifically
excluding in all cases, any Contractor Responsible Party.

           "PARTY" means Owner or Contractor.

                  "PAYMENT AND MILESTONE SCHEDULE" means the schedule of
payments and milestones as set forth in Appendix B hereto, as adjusted pursuant
to the terms of this Agreement.


                                       10
<PAGE>

           "PERFORMANCE GUARANTEES" shall have the meaning set forth in Section
8.1 hereof.

           "PERFORMANCE GUARANTEE PAYMENTS" shall have the meaning set forth in
Section 8.1 hereof.

           "PERFORMANCE TEST" means the operation of the Facility by or on
behalf of Contractor in accordance with the provisions of Section 6.2 hereof and
in accordance with Applicable Laws, Applicable Permits, the Electrical
Interconnection Requirements and the PPA Operating Requirements, for the purpose
of determining the compliance with the Guaranteed Emissions Limits and the level
of achievement of the Performance Guarantees, as described in greater detail in
Article 6 hereof and Part A of Appendix D hereto.

           "PERMIT" means any valid waiver, exemption, variance, franchise,
permit, authorization, license or similar order of or from any federal,
commonwealth, state, county, municipal, regional, environmental or other
governmental body, instrumentality, agency, authority, court or other body
having jurisdiction over the matter in question.

           "PERMITTED LIENS" shall mean material men's, mechanics', workers',
repairmen's, employees' or other similar liens arising in the ordinary course of
business for amounts either not yet due or being contested in good faith and by
appropriate proceedings, so long as, in the case of a contest, (a) Contractor
shall have deposited with Owner, or the appropriate governmental authorities, a
bond or other security satisfactory to Owner and the Financing Parties in an
amount equal to such contested lien, which security shall have the effect of
either discharging or staying the execution of such lien or, in the judgment of
Owner and the Financing Parties, otherwise not involving any danger of the sale,
forfeiture or loss of any part of the Facility, title thereto or any interest
therein, or (b) such proceedings, in the judgment of Owner and the Financing
Parties, shall not involve any danger of the sale, forfeiture or loss of any
part of the Facility, title thereto or any interest therein and shall not
interfere with the use or disposition of the Facility.

           "PERSON" means any individual, corporation, partnership, association,
joint stock company, trust, unincorporated organization, joint venture,
government or political subdivision or agency thereof.

           "PRE-TERMINATION OBLIGATIONS" shall have the meaning set forth in
Section 15.3(c) hereof.

           "PJM" means the PJM Interconnection, L.L.C., acting in accordance
with the PJM Agreement or the applicable successor entity.


                                       11
<PAGE>

           "PJM AGREEMENT" means that certain Amended and Restated Operating
Agreement of PJM Interconnection, L.L.C., dated as of June 2, 1997, and
applicable PJM operating policies, as further amended, revised or superseded
from time to time.

           "PLAN" shall mean a written plan prepared by Contractor to accelerate
the performance of the Services pursuant to Section 7.2.1 or 7.6.2 hereof.

           "POWER PLANT SITE" means the power plant area of the Facility Site as
shown in the Site Arrangement Drawing in Section V.a of Appendix A hereto.

           "POWER PURCHASE AGREEMENT" means the Power Purchase Agreement dated
as of September 17, 1999 between Williams Energy Marketing & Trading Company and
Owner, as such agreement may be amended, supplemented or modified from time to
time.

           "POWER PURCHASER" means Williams Energy Marketing & Trading Company,
as the purchaser under the Power Purchase Agreement.

           "PPA OPERATING REQUIREMENTS" means those requirements relating to the
testing, operation and maintenance of the Facility that are set forth in those
sections of the Power Purchase Agreement that are attached as Appendix H hereto,
including any amendments, supplements or modifications to such sections of the
Power Purchase Agreement as may be made from time to time and any procedures
that are established by Owner and the Power Purchaser pursuant to such sections
of the Power Purchase Agreement from time to time; PROVIDED, HOWEVER, that if
any such amendments, supplements or modifications or any such subsequently
established procedures or requirements materially affects the Services to be
performed by Contractor hereunder, and such amendments, supplements or
modifications or such procedures or requirements have not been consented to in
writing by Contractor (which consent shall not be unreasonably withheld or
delayed), the PPA Operating Requirements as defined herein shall not include any
such amendments, supplements or modifications or any such
subsequently-established procedures or requirements in the event and only to the
extent that the Services are so affected, unless a Scope Change Order has been
issued in accordance with Article 12 with respect to such required changes.

           "PROJECT" means the Facility and the Services to be furnished by
Contractor hereunder, as an integrated whole, including all equipment, labor and
materials to be furnished to Owner by Contractor hereunder, all as described in
greater detail in Article 2 hereof and in Appendix A hereto.


                                       12
<PAGE>

           "PROJECT COMPLETION" means the acceptance by Owner of the completed
Project from Contractor in accordance with the provisions of Section 6.7 hereof.

           "PROJECT COMPLETION CERTIFICATE" shall have the meaning set forth in
Section 6.7.2 hereof.

           "PROJECT COMPLETION DEADLINE" shall have the meaning set forth in
Section 6.7.3 hereof.

           "PROJECT COMPLETION PAYMENT" shall have the meaning set forth in
Section 4.2.5 hereof.

           "PROJECT DESIGN BOOK" means a detailed description of the design of
the Facility to be prepared by Contractor, which shall initially consist of
Appendix A hereto and, subject to the approval of Owner (and, after the
Financial Closing Date, the Independent Engineer) with respect to any material
change, refinement or detailing (PROVIDED, however, that in determining whether
the change, refinement or detailing is "material" and therefore requires such
approval, such determination shall be consistent with the types of documents,
changes, etc. for which Owner's approval expressly is or is not required
pursuant to Appendix P hereto), such approval not to be unreasonably withheld or
delayed, shall be updated by Contractor to reflect any Scope Changes relating to
the design of the Facility and any material refinement or detailing thereof in
connection with the further development and completion of the engineering and
design of the Facility in a manner consistent with Appendix A hereto and the
other standards of performance required hereunder.

           "PROJECT DUTIES" shall have the meaning set forth in Section 2.1.17
hereof.

           "PROJECT PROCEDURES MANUAL" means the manual attached as Appendix W
hereto, as the same may be revised from time to time pursuant to Section 2.1.2.2
hereof, which manual provides the guidelines by which the normal working
relationships will be conducted between Owner (and its designees or assigns) and
Contractor.

           "PROJECT SCHEDULE" shall have the meaning set forth in Section 2.1.16
hereof.

           "PROJECT TAXES" shall have the meaning set forth in Section 2.1.17(a)
hereof.

           "PROTECTIVE APPARATUS" means electrical interconnection equipment and
apparatus, including without limitation protective relays, circuit breakers and
the like,


                                       13
<PAGE>

necessary or appropriate to isolate the Facility from the Utility's transmission
system consistent with Accepted Electrical Practices.

           "PROVISIONAL ACCEPTANCE" means the achievement of provisional Project
performance pursuant to the provisions of Section 6.3 hereof.

           "PROVISIONAL ACCEPTANCE CERTIFICATE" shall have the meaning set forth
in Section 6.3.2 hereof.

           "PROVISIONAL ACCEPTANCE LATE COMPLETION PAYMENTS" shall have the
meaning set forth in Section 7.2(a) hereof.

           "PRUDENT UTILITY PRACTICES" means the practices, methods, techniques
standards and acts engaged in or approved by a significant portion of the
electric utility industry in the United States or any of the practices, methods,
techniques, standards and acts which, in the exercise of reasonable judgment in
light of the facts known (or which a qualified and prudent contractor should
have known) at the time a decision is made, would have been expected to
accomplish a desired result at reasonable cost consistent with good business
practices, reliability, safety and expedition, in each case for use in
connection with the design, engineering, construction, testing, operation and
maintenance of power stations of the same or similar size and type as the
Facility, that at the particular time of performance of the Services (i) in the
exercise of that degree of skill, diligence, prudence and foresight which would
reasonably be expected from a skilled and experienced contractor employing
generally accepted professional standards with respect to the performance of the
Services hereunder, would have been expected to accomplish the desired result in
a manner consistent with Applicable Laws, Applicable Permits, Accepted
Electrical Practices, reliability, safety, environmental protection, economy and
expediency, and (ii) conform in all material respects to the design,
engineering, construction, testing, operation, maintenance and other
recommendations and guidelines of the equipment suppliers and manufacturers
applicable to the equipment in question. Prudent Utility Practices are not
limited to the optimum practices, methods, techniques, standards and acts to the
exclusion of others, but rather refer to those practices, methods, techniques,
standards and acts that are generally accepted or approved by a significant
portion of the electric utility industry in the relevant region, during the
relevant time period, as described in the immediately preceding sentence.

           "PUNCH LIST" means the list prepared by Owner, with the full
cooperation of Contractor, which list shall set forth all items of work which
remain to be performed in order to ensure that the Project fully complies with
all of the standards and requirements set forth herein. The Punch List shall not
include any items of work, alone or in the


                                       14
<PAGE>

aggregate, the noncompletion of which prevents the Facility from (i) being used
for the purposes as described in this Agreement in accordance with all
Applicable Laws, Applicable Permits, the Guaranteed Emissions Limits, the
Electrical Interconnection Requirements and the PPA Operating Requirements or
(ii) being safely and reliably placed in commercial operation.

           "QUALITY ASSURANCE PLAN" means the quality assurance plan prepared by
Contractor and attached as Appendix K hereto, as the same may be revised from
time to time pursuant to Section 2.1.2.3 hereof.

           "REAL ESTATE RIGHTS" means all rights in or to real estate (including
rights to use or access the Facility Site), whether arising through fee
ownership, leases, contracts, permits, easements, licenses, private rights of
way, or utility and railroad crossing rights, that are required to be obtained
or maintained in connection with the performance of the Services hereunder,
including, without limitation, the construction of the Facility on the Facility
Site, construction laydown and parking, the transportation of all necessary
materials, labor, equipment and other items to the Facility Site, access for the
construction and use of water intake facilities, and the startup and testing of
the Facility.

           "RELIABILITY CERTIFICATE" shall have the meaning set forth in Section
6.6.3 hereof.

           "RELIABILITY GUARANTEE" shall have the meaning set forth in Section
6.6 hereof.

           "RELIABILITY RUN" means the operation of the Facility for [*] in
accordance with Applicable Laws, Applicable Permits, the Guaranteed Emissions
Limits, the Instruction Manual, the Electrical Interconnection Requirements,
the PPA Operating Requirements and Section 6.6.1 hereof for the purpose of
determining the Facility's reliability, as described in greater detail in
Section 6.6.1 hereof.

           "RETAINAGE" shall have the meaning set forth in Section 4.2.4 hereof.

           "RISK TRANSFER DATE" shall have the meaning set forth in Section
14.15.2 hereof.

           "SCHEDULED PAYMENT" shall have the meaning set forth in Section 4.2
hereof.


                                       15
<PAGE>

           "SCOPE CHANGE" means any material addition to, deletion from,
suspension of or other modification to the Project or to the quality, function
or intent of the Project as described in this Agreement, including without
limitation any such addition, deletion, suspension or other modification which
requires a change in one or more of the Contract Price, the Guaranteed
Completion Dates, the Payment and Milestone Schedule, the Construction Progress
Milestone Dates, the Project Schedule and the Performance Guarantees in
accordance with the terms of Article 12 hereof.

           "SCOPE CHANGE ORDER" means a written order to Contractor issued and
signed by Owner (with the written concurrence of the Independent Engineer in the
event that such concurrence is required under Section 12.2 hereof) after the
execution and delivery of this Agreement authorizing a Scope Change and, if
appropriate, an adjustment in one or more of the Contract Price, the Guaranteed
Completion Dates, the Payment and Milestone Schedule, the Construction Progress
Milestone Dates, the Project Schedule and the Performance Guarantees or any
other amendment of the terms and conditions of this Agreement.

           "SCOPE CHANGE ORDER NOTICE" means a written notice to Owner issued by
Contractor indicating that Contractor believes a Scope Change Order is required
in connection with the performance of the Services.

           "SCOPE CHANGE ORDER REQUEST" means a written proposal issued and
signed by Owner requesting a Scope Change, submitted to Contractor by Owner
pursuant to the terms of Section 12.3 hereof.

           "SEC" shall have the meaning set forth in Section 19.1 hereof.

           "SERVICES" shall have the meaning set forth in Section 2.1 hereof.

           "SUBCONTRACTORS" shall have the meaning set forth in Section 3.1.3
hereof.

           "TAXES" shall have the meaning set forth in Section 2.1.17(a) hereof.

           "TERMINATION DATE" shall have the meaning set forth in Section
15.3(c) hereof.

           "TERMINATION PAYMENT" shall have the meaning set forth in Section 4.4
hereof.

           "THIRD-PARTY BENEFICIARIES" shall have the meaning set forth in
Section 25.11 hereof.


                                       16
<PAGE>

           "TITLE INSURER" means any and all title insurance companies writing
title insurance with respect to any portion of the Facility Site, the Real
Estate Rights, the Project or any interest therein.

           "TRANSMISSION INTERCONNECTION AGREEMENT" means the Generation
Facility Transmission Interconnection Agreement, dated as of April 27, 1999, by
and between Owner and the Transmitting Utility.

           "TRANSMITTING UTILITY" means Jersey Central Power and Light Company,
d/b/a GPU Energy.

           "WARRANTY DATA SHEET" means the warranty data sheet attached as
Appendix R hereto, which sets forth, among other things, (i) the Electrical
Output Guarantee and Heat Rate Guarantee and (ii) certain Guaranteed Emission
Limits, in each case applicable to the Facility.

           "WARRANTY PERIOD" means the period ending:

           (a) except as may be extended under clause (b) hereof, on the earlier
       of (i) the date that is [*] after the earlier to occur of Provisional
       Acceptance and Final Acceptance and (ii) the date on which the Facility
       has operated for [*] following the earlier to occur of Provisional
       Acceptance and Final Acceptance; and

           (b) in the case of any correction, addition, repair or replacement to
       any machinery, equipment, materials, systems, supplies or other items,
       including without limitation the engineering or design thereof, during
       any existing Warranty Period, but only with respect to such corrected,
       added, repaired or replaced machinery, equipment, materials, systems,
       supplies or other items, on the later of (i) the expiration date of the
       initial Warranty Period under clause (a) hereof and (ii) the date that is
       [*] after the date of such correction, addition, repair or replacement,
       PROVIDED that the date under this clause (b)(ii) shall in no event be
       later than [*] after the earlier to occur of Provisional Acceptance
       and Final Acceptance.

                                    ARTICLE 2
                   CONTRACTOR'S SERVICES AND OTHER OBLIGATIONS

           2.1 SERVICES TO BE PERFORMED. Contractor shall complete the Project
by performing or causing to be performed all work and services required or
appropriate in


                                       17
<PAGE>

connection with the design, engineering, procurement, site preparation and
clearing, civil works, construction, start-up, training, and testing of the
Facility, and provide all materials and equipment (excluding operational spare
parts), machinery, tools, construction fuels, chemicals and utilities, labor,
transportation, administration and other services and items required to complete
the Project, all on a lump sum, fixed price, turnkey basis and otherwise in
accordance with this Agreement (the "SERVICES"). Certain details of the Services
are described in this Article 2 and in Appendix A hereto. For the avoidance of
doubt, the Parties hereby acknowledge and agree that the Services shall include
the provision of all equipment, components, systems, materials, documentation
and other services and items necessary or appropriate to complete the Project in
conformity with and as reasonably inferred from the Project Design Book and the
terms and conditions of this Agreement, notwithstanding the fact that each such
necessary or appropriate service or item may not be expressly mentioned in the
Project Design Book or this Agreement, and excluding only such items that are
specifically set forth in Article 5 of this Agreement as being furnished by or
on behalf of Owner. Without limiting the foregoing, Contractor shall provide the
following Services:

                 2.1.1 ENGINEERING, DESIGN, CONSTRUCTION AND CONSTRUCTION
 MANAGEMENT.

                       2.1.1.1 ENGINEERING AND DESIGN. Contractor shall
provide all engineering and design services necessary for completion of the
Project in conformity with this Agreement, including but not limited to (a)
preparation of (i) the Project Design Book which shall form the basis of the
design of the Project, (ii) conceptual design, and (iii) engineering and design
necessary to describe and detail the Project and to optimize the Project heat
balance consistent with the Performance Guarantees, (b) provision of criteria
for the detailed design by suppliers of equipment, materials and systems for
incorporation into the Project, and (c) preparation of drawings, plans, bills of
material, schedules and estimates. Contractor shall comply with the Electrical
Interconnection Requirements and cooperate with the engineering efforts and
otherwise accommodate the interface requirements of the Transmitting Utility,
the Fuel Supplier, all federal, state and local agencies, and all utilities
serving the Project; PROVIDED, HOWEVER, that in the event that such interface
requirements would require Contractor to perform studies or other tasks that
would not reasonably be expected to be required by Prudent Utility Practices and
would be a material addition or change to the Services otherwise contemplated by
this Agreement, Contractor shall not be required to perform such material
additional work hereunder unless a Scope Change Order has been issued by Owner
with respect thereto in accordance with Article 12 hereof.


                                       18
<PAGE>

                       Upon Owner's request, Contractor shall provide Owner
(and, at Owner's request, the Independent Engineer, the Power Purchaser and the
Transmitting Utility) with reasonable access to meetings between Contractor and
its architects, engineers or Subcontractors regarding the construction of the
Project (except in the event and only to the extent such meetings involve
commercial, contractual or proprietary matters that do not substantially affect
or relate to the performance of the Services hereunder). Contractor agrees to
timely provide Owner (and, at Owner's request, the Independent Engineer, the
Power Purchaser and the Transmitting Utility) with such documents and other
information as are reasonably requested by Owner in order to enable Owner (and,
if applicable, the Independent Engineer, the Power Purchaser and the
Transmitting Utility) to review and evaluate the design of the Project. Without
limitation to the foregoing, Contractor agrees to submit to Owner (and, at
Owner's request, the Transmitting Utility) the design for the Electrical
Interconnection Facilities (or any addition, modification or replacement
thereto) in a timely manner in accordance with Section 2.1.8.1 hereof.
Contractor shall review and be fully responsible for all engineering and design
services even if Subcontractors are utilized by Contractor in connection with
the engineering and design of portions of the Project.

                       2.1.1.2 CONSTRUCTION AND CONSTRUCTION MANAGEMENT.
Contractor shall develop a project construction plan for, and oversee the
construction of, the Project in accordance with Appendix A hereto and the other
terms and provisions of this Agreement. Contractor shall inspect or cause to be
inspected all materials and equipment to be incorporated in the Project and
shall reject those items determined not to be in compliance with the
requirements of this Agreement. Any item that is rejected by Contractor pursuant
to the immediately preceding sentence shall be corrected (whether by repair,
replacement or otherwise) so that it is in compliance with the requirements of
this Agreement. Contractor also shall oversee the manner of incorporation of the
materials and equipment in the Project and the workmanship with which such
materials are incorporated and otherwise coordinate the construction of the
Project. Contractor shall require the Subcontractors to perform the subcontracts
in accordance with this Agreement and, in performing the duties incident to such
responsibility, Contractor shall issue to the Subcontractors such directives and
impose such restrictions as may be required in the construction of the Project
to obtain compliance by the Subcontractors with the relevant terms of this
Agreement. Contractor shall review and be fully responsible for all construction
services of the Project, including, without limitation, all construction
services provided by Subcontractors. Contractor shall establish and track
Project management controls systems and provide construction management
services.

                 2.1.2 DOCUMENTATION AND MANUALS. In accordance with and subject
to the terms of Article 18 hereof, Contractor shall submit to Owner (and, at


                                       19
<PAGE>

Owner's request, the Independent Engineer) the specifications, data sheets,
plans and drawings, and other information and documents required to be submitted
to Owner pursuant to Appendix P hereto (together with the Project Design Book
such documents are collectively referred to herein as the "DESIGN DOCUMENTS").
U.S. customary units shall be used as the primary system of units in all
documents prepared by Contractor and its Subcontractors for the Project. In
addition, Contractor shall provide the following:

                       2.1.2.1 INSTRUCTION MANUALS. Contractor will provide ten
(10) sets in English of Instruction Manuals supplied by the vendors for each
equipment purchase package (including any equipment supplied directly by the
Contractor) and for equipment furnished by construction Subcontractors (each, an
"INSTRUCTION MANUAL"). Contractor shall provide all such Instruction Manuals
relevant to the Project not later than six (6) months prior to the Guaranteed
Provisional Acceptance Date. Each Instruction Manual shall be provided to Owner
(with a copy to the Independent Engineer) in time for equipment installation and
startup and shall be bound in a binder suitable for rough usage with equipment
and purchase order or specification noted on the binder edge. Instruction
Manuals with multiple volumes shall have each volume numbered. The Instruction
Manuals shall include (a) Subcontractor-provided equipment operation instruction
books/leaflets, (b) equipment maintenance instruction books/leaflets and (c) all
vendor-provided installation, operation, and maintenance information. The
Instruction Manuals shall be based on generally accepted standards of
professional care, skill, diligence, and competence applicable to engineering
and operating practices and shall be consistent with Prudent Utility Practices.

                       2.1.2.2 PROJECT PROCEDURES MANUAL. Prior to the date
hereof, Contractor shall have prepared and attached in Appendix W hereto the
Project Procedures Manual, which shall, by mutual agreement between Owner and
Contractor (such agreement not to be unreasonably withheld or delayed), be
revised in accordance with any comments relating thereto from Owner. Upon notice
from Owner, Contractor shall deliver to Owner six (6) copies in English of the
final Project Procedures Manual as so revised.

                       2.1.2.3 QUALITY ASSURANCE PLAN. Prior to the date
hereof, Contractor shall have prepared and attached in Appendix K hereto the
Quality Assurance Plan, which will be revised by mutual agreement between Owner
and Contractor (which agreement shall not be unreasonably withheld or delayed)
in accordance with any comments relating thereto received by Owner from the
Independent Engineer, the Power Purchaser or the Transmitting Utility.
Contractor shall adhere to the Quality Assurance Plan in order to ensure that
the construction and engineering methods and standards required to be employed
by Contractor hereunder are achieved.


                                       20
<PAGE>

                 2.1.3 PROCUREMENT. Contractor shall procure and pay for all
materials, equipment and supplies and all Contractor and Subcontractor labor and
manufacturing and related services (whether on or off the Facility Site) for
construction of and incorporation into the Project which are required for
completion of the Project in accordance with this Agreement and are not
explicitly specified in Article 5 of this Agreement to be furnished by or on
behalf of Owner. All such items shall be subject to the warranties and
guarantees in Section 3.4 and Article 10 hereof.

                       2.1.3.1 SPARE PARTS LIST. At a time mutually agreeable
to Owner and Contractor (such agreement not to be unreasonably withheld or
delayed) prior to the scheduled date for Provisional Acceptance of the Facility,
Contractor shall provide to Owner a recommended spare parts list and a price
list covering all spare and replacement parts pertaining to the equipment
specified in Appendix U hereto (including without limitation the combustion
turbine generators, the steam turbine generator, and the auxiliary equipment
associated with each of the foregoing). Contractor shall provide to Owner the
applicable Subcontractor's recommended spare parts lists and price lists
covering all other spare and replacement parts for the Facility not covered by
the preceding sentence sufficiently in advance of Provisional Acceptance so as
to allow Owner a reasonable period of time to evaluate such spare parts lists
and to purchase and obtain such spare parts at the Facility Site prior to the
date of Provisional Acceptance.

                       2.1.4 LABOR AND PERSONNEL. Contractor shall provide all
labor and personnel required in connection with the Services, including without
limitation: (a) licensed professional engineers, in the event and to the extent
required by Applicable Law or otherwise necessary or appropriate in accordance
with Prudent Utility Practices and the other standards of performance required
herein, to perform engineering services in the State of New Jersey; (b) a
Project engineer, a safety engineer and lead structural, mechanical, electrical,
instrumentation and control, civil, cost, schedule, procurement, construction,
start-up and training supervisors, all of whom shall have had extensive power
plant experience in facilities of similar technology and magnitude; (c) a
Project manager or other representative who shall be fully acquainted with the
Project and shall have the authority to administer this Agreement on behalf of
Contractor; and (d) quality assurance personnel, all of whom shall report
directly (but not necessarily immediately) to Contractor's senior management,
and not to the management personnel of Contractor directly responsible for the
Project. Upon Owner's request, Contractor shall provide Owner with the resumes
of, and arrange for the interview by Owner of, any or all key personnel employed
in connection with the Project, and Owner will have the right to approve those
individuals who will hold any of the positions set forth in Appendix Q


                                       21
<PAGE>

hereto, which approval shall not be unreasonably withheld or delayed. Contractor
shall not remove any Project personnel that hold any of the positions set forth
in Appendix Q hereto without the prior consent of Owner, which consent shall not
be unreasonably withheld or delayed. Owner shall have the right at all times to
require for just cause, as reasonably determined by Owner, that any personnel
performing any work in connection with the Project (whether or not previously
approved by Owner) be removed and replaced by other qualified personnel
acceptable to Owner.

                 2.1.5 PERMITTING. (a) Contractor hereby acknowledges and agrees
that Appendix F hereto lists all Building Permits that may be necessary for
performance of the Services and, to the best of its knowledge, Appendix F hereto
also lists all other Applicable Permits necessary for performance of the
Services that Owner is required to obtain hereunder. Contractor shall obtain and
maintain in effect all Building Permits, including without limitation those
Permits designated in Appendix F hereto as Contractor's responsibility. If
Contractor at any time becomes aware of any Building Permit or other Applicable
Permit that is not listed on Appendix F hereto, Contractor shall immediately
give notice thereof to Owner; PROVIDED, HOWEVER, that the giving of any such
notice shall not in any way derogate from Contractor's obligation hereunder to
obtain and maintain in effect all Building Permits, whether or not such Building
Permits are listed on Appendix F hereto.

               (b) Contractor shall provide engineering and other permitting
support services as set forth in Appendix A hereto for the permitting effort of
Owner with respect to, and shall cooperate with Owner and any environmental or
permitting consultants hired by Owner in Owner's efforts to obtain, those
Applicable Permits required to be obtained by Owner hereunder.

               2.1.6 INSPECTION AND EXPEDITING. Contractor shall perform all
inspection, expediting, quality surveillance and traffic services as are
required for performance of the Services. Contractor shall perform such detailed
inspection of all work in progress at intervals appropriate to the stage of
construction or fabrication off the Facility Site as is necessary to ensure that
such work is proceeding in accordance with this Agreement and the Design
Documents and to reasonably protect Owner against defects and deficiencies in
such work. On the basis of such inspections, Contractor shall keep Owner
informed of the progress and quality of all work and shall provide Owner with
written reports of deficiencies revealed through such inspections and of
measures proposed by Contractor to remedy such deficiencies. Owner (and,
commencing with the Financial Closing Date, the Independent Engineer) shall be
given at least five (5) days' advance notice (or, if despite Contractor's use of
reasonable efforts only a shorter period of advance notice is available under
the circumstances, as much advance notice as is so available) of, and shall have
the option of being present at, all inspections and witness points off the
Facility Site as specified in the Quality Assurance Plan, and, in the event


                                       22
<PAGE>

that the progress and quality of the work is not proceeding in accordance with
this Agreement and the Design Documents, shall be entitled to make
recommendations to Contractor for the purpose of remedying such deficiencies. In
the event that Owner (or the Independent Engineer, if applicable) fails to be
present for such inspection or witness point on the date scheduled therefor,
Contractor may proceed with such inspection or witness point in Owner's (or the
Independent Engineer's) absence. No inspection performed or failed to be
performed by Owner (or the Independent Engineer) hereunder shall be construed as
a waiver of any of Contractor's obligations hereunder or be construed as an
approval or acceptance of any of the Services. In addition, Contractor shall
secure for Owner and the Independent Engineer the inspection rights set forth in
Section 2.1.13 hereof.

                       2.1.6.1 TRANSPORTATION. Contractor shall be responsible
for the transportation, shipping, receiving and marshaling of all materials,
supplies, equipment and other items required for the Project (including, without
limitation, materials, supplies, equipment and other items required for
construction activities, but excluding all materials, supplies, equipment and
other items that Owner is required to furnish hereunder), whether such items are
sourced in or outside of the United States. Contractor shall arrange for the
security of any such items while in transport or in storage off or on the
Facility Site.

                 2.1.7 STORAGE, DISPOSAL AND RELATED MATTERS. Contractor shall
warehouse or otherwise provide appropriate storage (in accordance with
manufacturers' recommendations) for all materials, supplies, equipment and other
items required for permanent and temporary construction, and shall provide for
the procurement or disposal of, as appropriate, all soil, gravel and similar
materials required for performance of the Services, PROVIDED that Contractor
shall only be responsible for excavating, stockpiling, storing, handling,
transporting, remediating or disposing of any Hazardous Material in the event
and only to the extent that such Hazardous Material:

        (a) was brought to the Facility Site by a Contractor Responsible Party;

        (b) was created as a result of, or in connection with, the performance
            by any Contractor Responsible Party of the Services;

        (c) is specifically identified in and covered by the Baseline
            Environmental Site Assessment and either:

            (1) is not specifically identified in and covered by the Approved
                Remediation Plan; or


                                       23
<PAGE>

            (2) is specifically identified in and covered by the Approved
                Remediation Plan, has been remediated by Owner in accordance
                with the terms thereof and is subsequently disturbed by any
                Contractor Responsible Party's performance hereunder in such a
                manner that Applicable Laws, Applicable Permits or the standard
                of performance hereunder requires such Hazardous Material to be
                so excavated, handled, transported, remediated or disposed of;

        (d) is specifically identified in and covered by any additional
            environmental site assessment which Owner elects to deliver to
            Contractor prior to the Commencement Date pursuant to Section 20.3
            hereof and either:

            (1) Contractor does not elect to refuse to accept responsibility for
                handling such Hazardous Material pursuant to clause (ii) of
                Section 20.3; or

            (2) Contractor elects to refuse to accept responsibility for the
                handling thereof pursuant to clause (ii) of said Section 20.3,
                it is excavated, handled, transported remediated and/or disposed
                of by Owner in accordance with Section 20.3 hereof and is
                subsequently disturbed by any Contractor Responsible Party's
                performance hereunder in such a manner that Applicable Laws,
                Applicable Permits or the standards of performance hereunder
                requires such Hazardous Material to be so excavated, handled,
                transported, remediated or disposed of; or

        (e) is covered by any Scope Change Order entered into by Contractor and
            Owner pursuant to Section 12.12 or 20.3 hereof.

All materials, supplies, equipment and other items which are stored shall be (i)
stored in a manner consistent with the applicable manufacturer's or supplier's
recommendations and practices with respect thereto and (ii) properly tagged and
identified for the Project and segregated from other goods. Contractor shall
notify Owner in the event that it intends to store any materials, supplies,
equipment and other items in or near the town of Sayreville, New Jersey, and any
such supplies, equipment and other items shall be stored only at locations that
have been approved by Owner, such approval not to be unreasonably withheld or
delayed. Contractor shall notify Owner of the location where it stores any other
major piece of equipment, but such location shall not require the approval of
Owner. All equipment which would reasonably be expected under Prudent Utility
Practices and the standards of performance required hereunder to be permanently
labeled shall be labeled with permanently affixed durable nameplates which will
include the


                                       24
<PAGE>

manufacturer's name, equipment model number, equipment serial number, equipment
tag number and all appropriate design parameters.

                2.1.8 ELECTRICAL INTERCONNECTION FACILITIES, AND OTHER
INTERCONNECTIONS.

                       2.1.8.1 ELECTRICAL INTERCONNECTION FACILITIES.
(a) Contractor shall design, construct and install the Electrical
Interconnection Facilities (including, without limitation, the Electric Metering
Equipment, automatic regulation equipment, Protective Apparatus and control
system equipment) in accordance with the Electrical Interconnection Requirements
and the other terms and conditions hereof. Contractor shall provide to Owner
(and, at Owner's request, the Transmitting Utility), in detail satisfactory to
Owner (and, if applicable, the Transmitting Utility), for prior review and
acceptance (which shall not be unreasonably withheld or delayed) all plans and
specifications relating to the design, construction and installation of the
Electrical Interconnection Facilities (and any additions, modifications or
replacements thereto), including without limitation single-line diagrams and
control and protective relay schemes, not later than twelve (12) months prior to
the commencement of construction of such Electrical Interconnection Facilities
or such other reasonable time as Owner, Contractor and the Transmitting Utility
may agree upon. Owner shall use reasonable efforts to cause the Transmitting
Utility to provide written notification of its comments on and, if applicable,
its acceptance or rejection of) such plans and specifications within sixty (60)
days (or if a shorter period of time is reasonably necessary to maintain
compliance with the Project Schedule, such shorter period of time as is
reasonable under the circumstances) after Owner's receipt of such plans and
specifications. Contractor shall not commence the construction and installation
of the Electrical Interconnection Facilities without having received the prior
written approval of the Owner (and, if required by the Electrical
Interconnection Requirements or otherwise requested by Owner, the Transmitting
Utility); PROVIDED, HOWEVER, that in the event that Owner (or, if applicable,
the Transmitting Utility) were to unreasonably withhold or delay such approval,
and the Contractor were to be materially adversely affected in the performance
of the Services as a direct result thereof despite Contractor's reasonable
efforts to avoid or mitigate such effect, the provisions of Section 5.9 hereof
shall apply. Contractor shall review with Owner and, at Owner's request, the
Transmitting Utility, the design and construction schedule for the Electrical
Interconnection Facilities, and shall coordinate the performance of such
Services with the work to be performed by the Transmitting Utility on its side
of the Electrical Interconnection Point in order to enable the Electrical
Interconnection Facilities to be completed and interconnected with the
Transmitting Utility's transmission system in accordance with the time frames
(including without limitation Section 5.8 hereof) and performance standards as
set forth herein.


                                       25
<PAGE>

                       (b) Contractor shall also be responsible forarranging
for the Transmitting Utility to make its temporary construction power
distribution line available at the Power Plant Site within such period of time
after the date specified for site mobilization in the Notice to Proceed as is
necessary for the performance of the Services hereunder.

                       2.1.8.2 OTHER INTERCONNECTIONS. (a) Contractor shall
review with Owner and each of the Fuel Supplier and any other Person providing
other permanent utility or similar service interconnections to the Facility
(including, without limitation, the interconnections with the Gas Pipeline, the
Duhernal Pipeline, South River Reservoir, MCUA sewer system, and the municipal
potable water pipeline), the design and construction schedule for the
interconnection facilities between the Facility and the systems of such third
parties, and shall coordinate the performance of the Services with such other
work performed by such third parties in order to enable Contractor's
construction of the Facility and such third parties' construction of such other
facilities to be completed in accordance with the time frames and performance
standards as set forth herein.

                       (b) Contractor shall also be responsible for arranging
for the construction-period water supply facilities specified in Appendix A
hereto (or such other facilities as are reasonably satisfactory to Owner and
Contractor) being available at or inside the boundary of the Power Plant Site
within such period of time after the date specified for site mobilization in the
Notice to Proceed as is necessary for the performance of the Services hereunder.

                2.1.9 PERFORMANCE TESTING. Contractor shall perform, and
re-perform if necessary, the Performance Tests in accordance with the provisions
of Section 6.2 hereof in order to demonstrate achievement of Provisional
Acceptance (unless the Contractor proceeds directly to Final Acceptance without
first achieving Provisional Acceptance) and Final Acceptance and the level of
achievement of the Performance Guarantees relating thereto.

                2.1.10 START-UP AND INITIAL OPERATION. The Services shall
include the start-up, commissioning and initial testing of components,
calibration of controls and equipment, initial operation of the Facility and
each portion thereof, function and verification tests, and all other start-up
and initial operation functions pertaining to the Project. At all times during
the performance of the Services, Contractor shall use all reasonable efforts to
minimize (consistent with Prudent Utility Practices and the terms of this
Agreement) the use of fuels, feed materials, utilities, consumables, waste
disposal services, electricity, water and chemicals.


                                       26
<PAGE>

               2.1.11 UTILITIES, CHEMICALS AND SPARE PARTS. Contractor shall
provide, at its expense (unless otherwise specified in this Section 2.1.11):

        (a) all construction and start-up spare parts,

        (b) all lubrication oil and grease required prior to the Risk Transfer
     Date,

        (c) all waste disposal services (including, without limitation, for
     waste water and waste chemicals from boiler cleaning) required in
     connection with the performance of the Services, PROVIDED that
     Contractor shall not be required to provide and pay for such waste
     disposal services with respect to Facility operations after the Risk
     Transfer Date or with respect to any Hazardous Materials on the Facility
     Site other than any Hazardous Materials that Contractor is responsible
     for responding to and handling as set forth in Sections 2.1.7, 2.1.15
     and 12.12 hereof,

        (d) all chemicals and resins, including, without limitation, all
     chemicals required to treat water as required for testing, start-up or
     other operation of the Facility prior to the Risk Transfer Date,

        (e) all electricity required in connection with its performance of the
     Services, PROVIDED that during the period from interconnection of the
     Electrical Interconnection Facilities to the Transmitting Utility's
     transmission system until completion of initial synchronization of the
     steam turbine generator, Contractor shall only be required to pay for
     (or if Owner shall have already made such payment, to promptly reimburse
     Owner for) all electricity used during such period in excess of
     [*], and PROVIDED FURTHER that this clause (e) shall not relieve
     Owner of its obligations under Section 5.8 hereof to arrange for the
     Transmitting Utility's provision of such interconnection facilities as
     are necessary to allow for the Electrical Interconnection Facilities
     to be interconnected with the Transmitting Utility's transmission system
     at the Electrical Interconnection Point at the time specified therein,
     and

        (f) all other consumables and utilities (including without limitation
     sewage),

and all provisions necessary for the delivery of all such items to the Facility
Site, in each case as required to enable Contractor to perform the Services.
Contractor shall not be required to pay for (i) raw water, (ii) operational
spare parts, (iii) Gas required for start-up, testing or operation of the
Facility, or (iv) any re-fills of lubrication oil, grease or


                                       27
<PAGE>

resins or any waste disposal services, chemicals, electricity, consumables and
other utilities required for operation of the Facility following the Risk
Transfer Date.

                       2.1.12 PERSONNEL TRAINING.Commencing six (6) months
prior to the scheduled date for Provisional Acceptance of the Facility,
Contractor shall provide on-site classroom training for Owner's (and, if
requested by Owner, its designee's) personnel in the operation and maintenance
of the Facility including, without limitation, safety training, all as more
fully described in Appendix A hereto. Contractor shall provide on-the-job
training during the start-up, testing and commissioning of the Facility. Such
training shall be provided in its entirety in English and shall be designed to
offer basic instruction and training to reasonably qualified (as determined by
Owner) power plant personnel and shall be of such quality so as to provide such
personnel with a comprehensive understanding of all operational and maintenance
aspects of the Facility and shall include instruction related to the major
components of the Facility, including without limitation the following: the gas
turbine generators, heat recovery steam generators, steam turbine generator,
make-up water and water treatment facilities, air treatment facilities, plant
controls, cooling tower and distributed controls. Contractor will provide a
minimum of thirty (30) copies in English of appropriate manuals and other
written materials as part of the training program. In addition, Contractor's
training of Owner's personnel shall include coordination of any Subcontractor
training sessions in a manner sufficient to provide such personnel with an
adequate understanding of the operation and maintenance aspects of each
dimension of the Facility as an integrated whole, all as more fully described in
Appendix A hereto.

                       2.1.13 FACILITY SITE ACCESS AND OWNER'S ACCOMMODATIONS.
Contractor shall provide Owner (and, at Owner's request, its designees, the
Independent Engineer and the Transmitting Utility) with access to the Facility
Site at all times and shall arrange for reasonable access by Owner (and such
other Persons, if applicable) to those areas of the engineering, manufacturing
and fabricating premises of all facilities of Contractor or its Subcontractors
(in the event and only to the extent such Subcontractor so agrees, which
agreement Contractor shall use all reasonable efforts to obtain) where work is
being performed in connection with the Project, in each case as is sufficient to
permit Owner (and such other Persons, if applicable) to inspect work being
performed and monitor compliance by Contractor and the Subcontractors with the
terms hereof. In connection therewith, Owner (and such other Persons, if
applicable) shall comply with applicable site visitation policies and shall not
unreasonably interfere with progress of the work. Contractor shall make
available to Owner as part of the Contract Price one (1) furnished office
trailer (with temporary utilities) for up to ten (10) people at the Facility
Site and furnished office space (with utilities) for up to five (5) people at or
near the


                                       28
<PAGE>

home office of Contractor for the use by personnel of Owner (or such other
Persons, if applicable).

                       2.1.14 REAL ESTATE RIGHTS. (a) Contractor has reviewed
the Real Estate Rights set forth on Appendix G hereto and hereby acknowledges
and agrees that it does not need any additional Real Estate Rights in order to
perform the Services (PROVIDED, HOWEVER, that such acknowledgment and agreement
by Contractor shall not be construed to extend to the status of title to or the
existence of liens or other similar encumbrances against such Real Estate
Rights). Contractor shall provide all necessary information and documents and
use all reasonable efforts to assist Owner in obtaining all Real Estate Rights
required to be obtained by Owner hereunder. If Contractor at any time becomes
aware of any Real Estate Right that it requires which is not listed in Appendix
G hereto, Contractor shall immediately give notice thereof to Owner.

                       (b) If at any time after the date hereof, performance of
the Services hereunder requires any Real Estate Right not listed on Appendix G
hereto (as such Appendix G may be modified pursuant to any Scope Change Order
issued hereunder), Contractor shall be responsible for obtaining such Real
Estate Right at its own expense; PROVIDED, HOWEVER, that, without limiting the
foregoing, Owner shall apply at Contractor's cost and expense for such Real
Estate Right with the Person from whom such Real Estate Right is to be secured
if such Real Estate Right is of the type customarily obtained by an owner of a
project.

                       2.1.15 CLEAN-UP AND WASTE DISPOSAL. Contractor shall
perform a site clean-up regularly and as necessary (PROVIDED, HOWEVER, that
Owner may in its reasonable discretion request that Contractor perform such site
clean-up on at least a daily basis and Contractor shall not be entitled to a
Change Order in exchange for complying with such a request) in order to keep the
Power Plant Site and such other portions of the Facility Site on which
Contractor performs services hereunder clean, and shall otherwise keep such site
free from accumulation of petroleum, waste materials (including, without
limitation, waste water and waste chemicals from any chemical cleaning, and any
waste Hazardous Materials that were brought to the Facility Site by any
Contractor Responsible Party or were created as a result of, or in connection
with, the performance by any Contractor Responsible Party of the Services),
rubbish and other debris resulting from the


                                       29
<PAGE>


performance of the Services. On or before Project Completion, Contractor shall
remove from the Facility Site and dispose of all petroleum, waste materials
(including, without limitation, waste water and waste chemicals from any
chemical cleaning, and any waste Hazardous Materials that were brought to the
Facility Site by any Contractor Responsible Party or were created as a result
of, or in connection with, the performance by any Contractor Responsible Party
of the Services), rubbish and other debris resulting from the performance of the
Services, as well as all tools, construction equipment, machinery and surplus
material to which Owner does not hold title, and shall leave the Power Plant
Site and such other portions of the Facility Site on which Contractor performed
Services hereunder in a neat, clean and usable condition. All cleanup and
disposal shall be conducted in accordance with all Applicable Laws and
Applicable Permits. Contractor shall notify Owner immediately upon the discovery
of the presence of any Hazardous Material on, or the release of Hazardous
Material on or from, the Facility Site, and shall proceed in accordance with
Sections 2.1.7 and 12.12 hereof in connection therewith.

                       2.1.16 PROJECT SCHEDULE AND PROGRESS REPORTS. No later
than thirty (30) days after the Commencement Date, Contractor shall submit to
Owner (and, upon Owner's request, the Independent Engineer) a detailed
electronic construction schedule that indicates, in a manner consistent with the
overall construction schedule set forth in Appendix C hereto on the date hereof,
the proposed dates for completion of the individual features of the Services set
forth in Appendix C hereto (as such construction schedule may be adjusted
pursuant to Article 12 hereof or in connection with changes to the Payment and
Milestone Schedule that may be agreed upon pursuant to Section 4.3.2 hereof, the
"PROJECT SCHEDULE"), and shall keep and furnish to Owner and the Independent
Engineer, in accordance with the Project Procedures Manual, updated schedules of
the Services and Monthly Progress Reports of actual progress of the Services.
Contractor shall provide five (5) hard copies, and one (1) electronic copy for
each of Owner and the Independent Engineer, of such Monthly Progress Reports in
a format to be mutually and reasonably agreed upon by Contractor and Owner.
Contractor shall be responsible for ensuring that performance of the Services
proceeds in general accordance with the Project Schedule (as updated from time
to time) and for coordinating and incorporating the schedules of all
Subcontractors into the aforementioned schedules and progress reports. In
addition, as soon as it is practicable but in no event later than sixty (60)
days after the Commencement Date, Contractor shall provide Owner and the
Independent Engineer with a critical path method schedule (the "CPM SCHEDULE")
for the Project including activity durations for each major component of the
Services. The CPM Schedule shall be updated on a monthly basis as the Services
progress and shall include delay and acceleration analyses where appropriate.

                       2.1.17 TAXES; CUSTOMS DUTIES.

                       (a) Contractor (and/or its Subcontractors, as the case
may be) shall be responsible for the administration and payment of (i) all
taxes, fees and contributions on or measured by the income, gross receipts or
assets of Contractor or its Subcontractors and all taxes, fees and contributions
on or measured by employees or other labor costs of Contractor or its
Subcontractors, including without limitation all payroll or employment


                                       30
<PAGE>

compensation tax, social security tax or similar taxes for Contractor's or its
Subcontractor's employees (collectively, the "CONTRACTOR TAXES"), (ii) unless
otherwise instructed by Owner that it is contesting such taxes, all excise duty,
license, municipal and other similar taxes, fees and contributions imposed by
the federal or any state government of the United States of America or any of
their respective political subdivisions upon the sale, purchase or use by
Contractor or its Subcontractors of materials, supplies, equipment, services or
labor for the Project (collectively, the "PROJECT TAXES", and together with the
Contractor Taxes, the "TAXES"), and (iii) any and all import, export and other
customs duties, charges, levies and fees imposed or incurred in connection with
the Project, including without limitation in connection with all materials,
supplies, equipment and other items transported to the Facility Site for
incorporation into the Project or for use in performance of the Services
(collectively, the "PROJECT DUTIES").

                       (b) At Contractor's request, Owner shall provide
Contractor all information and documents within Owner's control and possession
that are not reasonably available to Contractor and are reasonably necessary to
enable Contractor to administer and pay the Taxes and Project Duties. Contractor
shall furnish to the appropriate taxing authorities all required information and
reports in connection with the Taxes, and shall promptly furnish copies of all
such information and reports relating to Project Taxes to Owner. In addition,
Contractor shall, to the extent reasonably possible, obtain or take advantage
of, for the benefit of Owner, such tax exemptions, rebates and credits that
Owner has notified Contractor are available with respect to the Facility and,
upon Owner's request, provide breakdowns of the Contract Price by cost
components as may be reasonably required in connection with Owner's efforts to
obtain tax-exempt financing. All subcontracts and purchase orders shall be
written exclusive of any sales or use tax, or, if not so written, shall include
the amount of such tax as a separate line item on the face of such subcontracts
and purchase orders along with adequate supporting documentation.

                       (c) The Contract Price includes all Contractor
Taxes.Notwithstanding Contractor's responsibility for the administration and
payment of Project Taxes andProject Duties as provided herein, the Contract
Price does not include the Project Taxes or the Project Duties. Project Taxes
and Project Duties are for the account of Owner, and Owner agrees to either pay
the Project Taxes and the Project Duties directly to the appropriate
governmental authorities or to reimburse Contractor outside of the Contract
Price (with respect to Project Taxes or Project Duties paid by Contractor
directly to the appropriate governmental authorities), in either case within
thirty (30) days after receipt of Contractor's monthly payment request for such
Project Taxes and Project Duties and appropriate supporting documentation. In
the event Contractor desires that Owner pay any Project Taxes or Project Duties
directly to the


                                       31
<PAGE>


appropriate governmental authorities (rather than Contractor making such payment
to the appropriate governmental authorities and being reimbursed by Owner as set
forth herein), Contractor must submit to Owner the applicable payment request
and supporting documentation at least thirty (30) days prior to the date on
which such Project Taxes and Project Duties are due and payable without any late
payment charges or interest accruals. All information and supporting
documentation relating to Project Taxes and Project Duties shall be made
available by Contractor for inspection and/or audit by Owner at any reasonable
time.

                       (d) Contractor shall use all reasonable efforts to
efficiently manage its provision of the Services and other work hereunder
(including without limitation the sourcing and procurement of equipment) so as
to minimize Project costs on a total cost basis (including not only Contractor's
cost of providing the Services but also Owner's cost of paying or reimbursing
Project Taxes and Project Duties). Contractor will use its reasonable prudence
and diligence in the administration of Taxes and Project Duties, and Contractor
shall confirm with Owner in advance any discretionary action, election or
omission permitted in connection with the Project Taxes.

                       2.1.18 EMPLOYEE IDENTIFICATION; SECURITY. Contractor
shall provide and utilize a method, consistent with Prudent Utility Practices
and approved by Owner (which approval shall not be unreasonably withheld or
delayed), of checking the employees of Contractor and the Subcontractors in and
out of the Power Plant Site and such other areas of the Facility Site in which
the Services are to be performed. All employees of Contractor and the
Subcontractors at the Facility Site shall be identified by the use of a
distinctive badge or other proper identification. Contractor shall cause each
such employee to carry such identification so that it can be readily seen at all
times. Contractor shall be fully responsible for the security of the Project,
the Power Plant Site and such other areas of the Facility Site on which the
Services are to be performed.

                       2.1.19 ADJOINING UTILITIES. Contractor shall do all
things necessary or expedient to protect any and all parallel, converging and
intersecting electric lines and poles, telephone lines and poles, highways,
roads, bridges, waterways, railroads, sewer lines, natural gas pipelines,
drainage ditches, culverts and any and all third-party property from damage as a
result of its performance of the Services. In the event that any such property
is so physically damaged or destroyed as a result of the performance by any
Contractor Responsible Party of the Services and either Contractor or Owner is
required (or in its reasonable discretion elects) to repair or replace such
damaged property, then Contractor shall at its own expense promptly rebuild,
restore or replace such damaged or destroyed property or promptly reach a
settlement agreement with the applicable third


                                       32
<PAGE>

party(ies) in full satisfaction of any claims or demands of such third
party(ies) in connection with any such damage or destruction.

                       2.1.20 PROTECTION OF PROPERTY. (a) Contractor shall
provide, and shall ensure that each Subcontractor provides, proper and ample
protection from damage or loss (including, without limitation, theft) to the
Project, the Facility Site, materials, construction equipment and tools (whether
on or off the Facility Site) during its performance of the Services.

                       (b) Where ingress and egress to and from the Facility
Site requires the traverse of public or private lands, Contractor shall limit
the movement of its crews and equipment and of all Subcontractors so as to cause
as little damage as possible to crops or other property and shall use all
reasonable efforts to avoid marring such lands. All fences and walls which must
be opened or moved during construction of the Facility shall be replaced or
repaired by Contractor. Contractor shall not be reimbursed by Owner for costs
associated with loss of or damage to crops, livestock or other property, whether
on or off the Facility Site or rights of way thereto, caused by or arising in
connection with the performance of the Services by Contractor or any
Subcontractor hereunder.

                       2.1.21 ROYALTIES AND LICENSE FEES. Contractor shall pay
all royalties and license fees and shall procure, as required, the appropriate
proprietary rights, licenses, agreements and permissions for materials,
equipment, methods, processes and systems incorporated into the Project or used
in performing the Services. Contractor shall not incorporate into the Project
any materials, equipment, methods, processes or systems which involve the use of
any confidential information, intellectual property or proprietary rights which
Owner does not have the right to use or which may result in legitimate claims or
suits against Owner or Contractor arising out of claims of infringement of any
domestic or foreign patent rights, copyrights or other proprietary or
intellectual property rights, or applications for any such rights, or use of
confidential information, in any such case with respect to the performance of
the Services hereunder or otherwise relating to the engineering, procurement,
construction, ownership, use, operation or maintenance of the Facility at the
Facility Site; PROVIDED, HOWEVER, this Section 2.1.21 shall not in any way limit
or otherwise affect Contractor's obligations under Section 13.3 hereof.

                       2.1.22 FINAL RELEASES AND WAIVERS.

                              2.1.22.1 FINAL RELEASES AND WAIVERS. On or
before (a) the payment of Retainage (or the release of the Letter of Credit
deposited in lieu of Retainage hereunder, if applicable) pursuant to Section
4.2.4 hereof, Contractor shall provide to


                                       33
<PAGE>

Owner releases and waivers in accordance with Section 2.1.22.3 hereof (which
releases and waivers may be conditioned upon Contractor's receipt of such
payment from Owner hereunder).

                              2.1.22.2 FAILURE OF SUBCONTRACTORS TO FURNISH
FINAL WAIVERS. If any Subcontractor fails to furnish a final release and waiver
required pursuant to Section 4.6 hereof, in lieu thereof Contractor shall
furnish a bond or other collateral, in form and substance satisfactory to Owner
and the Financing Parties, to fully indemnify Owner against any loss resulting
from such claims, liens or other interests of such Subcontractor.

                              2.1.22.3 FORMS OF FINAL WAIVERS. The forms of
required final releases and waivers for Contractor and the Subcontractors are
set forth in Appendices I-1 and I-3 hereto, respectively.

                              2.1.23 LABOR RELATIONS AND PROJECT LABOR
AGREEMENTS. Contractor shall be responsible for all labor relations matters
relating to the Project and shall at all times use all reasonable efforts to
maintain harmony among the unions (if any) and other personnel employed in
connection with the Project. Contractor shall at all times use all reasonable
efforts and judgment as a skilled and experienced contractor to adopt and
implement policies and practices designed to avoid work stoppages, slowdowns,
disputes and strikes. Without limiting the foregoing, Contractor shall procure
one or more project labor agreements (containing "no strike clauses" reasonably
satisfactory to Owner) covering all union personnel employed by Contractor or
any Subcontractor at the Facility Site in connection with the Project at the
earliest possible date, but in no event later than one (1) month prior to the
scheduled Commencement Date hereunder, and shall keep such agreements in full
force and effect at all times while such personnel are so employed.

                              2.1.24 FURTHER ASSURANCES. Contractor shall
execute and deliver all further instruments and documents, and take all further
action, including but not limited to providing reasonable assistance to Owner in
filing a notice of completion with the appropriate state and local lien
recording offices, that may be necessary or that Owner may reasonably request in
order to enable Contractor to complete performance of the Services or to
effectuate the purposes or requirements of this Agreement.

                              2.1.25 COORDINATION WITH OTHER CONTRACTORS.
Contractor shall use all reasonable efforts not to interfere with the
performance at the Facility Site of any other contractors designated by Owner
and shall provide any such contractors a reasonable opportunity to introduce and
store materials and perform their services at the Facility


                                       34
<PAGE>

Site. Contractor shall use all reasonable efforts to cooperate with Owner and
any such other contractors to coordinate the performance of Contractor's
Services hereunder with the work of such other contractors, PROVIDED that
Contractor shall not be required pursuant to this sentence to take any actions
that would reasonably be expected to materially interfere with Contractor's
ability to perform the Services in a manner consistent with Contractor's rights
and obligations under this Agreement. Owner, upon the request by Contractor,
shall use all reasonable efforts to cause any such other contractors working for
Owner on the Facility Site to cooperate with Contractor to coordinate the
performance of their work with the performance by Contractor of the Services
hereunder.

                              2.1.26 GUARANTY. Simultaneously with the
execution of this Agreement, Contractor shall cause [*] to guarantee
irrevocably and unconditionally the performance and payment of all of
Contractor's obligations hereunder by executing and delivering to Owner a
guaranty substantially in the form set forth in Appendix L hereto (the "EPC
GUARANTY").

                2.2 COMMENCEMENT OF THE SERVICES. Except for such Services the
performance of which commence prior thereto pursuant to Sections 2.2.1 and 2.2.2
hereof, Contractor shall commence performance of the Services on the date which
Owner specifies (the "COMMENCEMENT DATE") in a written notice delivered to
Contractor in the form set forth in Appendix J-2 hereto (the "NOTICE TO
PROCEED"); PROVIDED, HOWEVER, that the Commencement Date shall not occur more
than fifteen (15) days following the date of issuance of the Notice to Proceed;
PROVIDED, FURTHER, that the Commencement Date shall not occur unless and until
(a) either (i) the Financial Closing Date shall have occurred or (ii) the AES
Pre-Financial Closing Guaranty shall have been issued and is effective, (b)
Owner shall have delivered to Contractor an Approved Remediation Plan, and (c)
Owner (i) has performed any material obligations set forth in Sections 5.1, 5.2,
5.3 and 5.10, the nonperformance of which would prevent Contractor from
commencing performance of the Services, and (ii) has paid any payments due and
owing to Contractor as of such date under this Agreement. In the event that the
Commencement Date does not occur on or prior to March 31, 2000, then (1) the
Guaranteed Completion Dates, the Construction Progress Milestone Dates, the
Payment and Milestone Schedule and the Project Schedule, and, as appropriate,
any other calendar dates set forth in this Agreement that may be affected
thereby, shall each be extended by one (1) day for each day following such date
before the Commencement Date occurs, and (2) there shall be an adjustment to the
Contract Price and the Scheduled Payments in accordance with Note 4 of Appendix
B as a result of any such delay. In the event that the Commencement Date does
not occur on or prior to April 30, 2000, then an equitable adjustment in one or
more of the Contract Price, the Guaranteed Completion Dates, the Construction
Progress


                                       35
<PAGE>

Milestone Dates, the Payment and Milestone Schedule and the Project Schedule,
and, as appropriate, such other provisions of this Agreement that may be
affected by such additional delay, shall be made by agreement of Owner and
Contractor or otherwise pursuant to Article 12 or 21 hereof. In the event that
the Commencement Date does not occur on or prior to September 30, 2000, then
until such time as the Commencement Date occurs, either Party shall have the
right to terminate this Agreement upon written notice to the other Party, in
which event this Agreement shall terminate without any liability of either Party
to the other, except that Owner shall be required to pay Contractor (to the
extent not previously paid) any amounts due and owing to Contractor pursuant to
Section 2.2.1 or 2.2.2 hereof.

                2.2.1 LIMITED NOTICE TO PROCEED. (a) Prior to the Commencement
Date, Contractor shall perform those portions of the Services specified in the
Limited Notice to Proceed Agreement and the letter amendments thereto, which are
set forth in Appendix J-1 hereto (the "LIMITED NOTICE TO PROCEED"), pursuant to
the terms and conditions set forth therein. Payment for Services rendered
pursuant to this Section 2.2.1 shall be guaranteed to be paid in accordance with
the terms and conditions of the Limited Notice to Proceed by the AES
Pre-Financial Closing Guaranty as set forth in Section 5.12 hereof until the
Financial Closing Date occurs.

                (b) Contractor will be paid monthly in arrears in accordance
with the terms of the Limited Notice to Proceed for the pre-Commencement Date
Services actually performed under the Limited Notice to Proceed. In addition,
upon the occurrence of the Commencement Date, Owner shall withhold from the
first Scheduled Payment to be made to Contractor on or after the Commencement
Date under Section 4.2.2 hereof, as Retainage, an amount equal to [*] of all
payments theretofor made to Contractor under the Limited Notice to Proceed,
which Retainage shall be in addition to the [*] of such Scheduled Payment to
be withheld from such payment as Retainage pursuant to Section 4.2.4 hereof.

                2.2.2 PRE-COMMENCEMENT DATE TERMINATION OR SUSPENSION. (a)
Notwithstanding any provision in this Agreement to the contrary, if this
Agreement were to be terminated by Owner pursuant to Section 15.1 or 15.2 hereof
prior to the occurrence of the Commencement Date, the total cancellation costs
that Owner shall be responsible for hereunder in connection with the Services
undertaken by Contractor, if any, shall be equal to the cancellation charges
that are specified to be due and payable pursuant to (and subject to the limits
set forth in) the terms and conditions of the Limited Notice to Proceed;
PROVIDED, HOWEVER, that costs incurred by Contractor in connection with items
procured by Contractor shall not be included in such cancellation charges until
Contractor shall have delivered to Owner (or to Owner's designee, which may be
any


                                       36
<PAGE>

other AES affiliate or any third party purchaser, provided that such assignment
is consistent with the provisions of Article 17 hereof) all documents necessary
to transfer all of Contractor's right, title and interest and to such items to
Owner (or such designee) and, with respect to such items which Contractor has
received possession of, Contractor shall have delivered such items to Owner (or
such designee), in each case free and clear of all liens and encumbrances made
by, through or under Contractor or any Subcontractor (subject to Owner's payment
of the cancellation charges due under the Limited Notice to Proceed). Contractor
shall use all reasonable efforts to minimize any cancellation charges under this
Section 2.2.2.

                (b) Except as set forth in Section 2.2.2(a) hereof, Owner shall
have no other payment or reimbursement obligation to Contractor with respect to
Contractor's performance of Services prior to the Commencement Date hereunder,
and Contractor hereby acknowledges and agrees that all costs and expenses
incurred by Contractor (other than those covered by Section 2.2.2(a) hereof) in
performing Services hereunder prior to the Commencement Date will be at its own
risk and expense and that it hereby waives any and all rights to require any
payment therefor from Owner, whether arising hereunder, at law or in equity,
except as expressly set forth in Section 2.2.2(a) hereof.

        2.3 PERFORMANCE.

                 2.3.1 STANDARD OF PERFORMANCE. Without limiting any other
provision of this Agreement, (a) Contractor shall perform the 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, the
Electrical Interconnection Requirements, the Environmental Requirements set
forth in Appendix S hereto, the safety precautions set forth in Section 2.5
hereof and all of the requirements necessary to maintain the warranties granted
by the Subcontractors pursuant to Section 3.4 hereof, and (b) the Project shall
be constructed and erected (i) in a good workmanlike manner, (ii) using Prudent
Utility Practices for use by a skilled and experienced contractor in connection
with power stations of the same or similar size and type as the Facility, and
(iii) in specific conformity with the Design Documents, including without
limitation Appendix A hereto, and the other requirements of this Agreement
(including without limitation Section 10.1 hereof). All engineering work
requiring certification under Applicable Law shall be certified by professional
engineers licensed and properly qualified to perform such engineering services
in all appropriate jurisdictions, which


                                       37
<PAGE>

engineers and their qualifications shall be subject to the review and approval
procedures set forth in Section 2.1.4 hereof.

                 2.3.2. TIMELINESS OF PERFORMANCE. Contractor shall perform the
Services in accordance with the Project Schedule and shall cause (a) each
Construction Progress Milestone to be achieved on or prior to the applicable
Construction Progress Milestone Date, (b) either Provisional Acceptance or Final
Acceptance of the Facility to occur on or prior to the Guaranteed Provisional
Acceptance Date, and (c) Final Acceptance of the Facility to occur on or before
the Guaranteed Final Acceptance Date; PROVIDED, HOWEVER, that Contractor's
failure to satisfy either of clauses (a) and (b) above shall not constitute an
Event of Default hereunder except as set forth in Section 16.1(i) or (j) hereof.

                 2.3.3 ORDER OF PERFORMANCE. Owner shall have the right to
request that Contractor perform any part or parts of the Services before any
other part or parts of such Services, and Contractor shall use all reasonable
efforts to comply with such request; PROVIDED that Contractor shall not be
obligated to comply with such request if compliance would, in Contractor's
reasonable judgment, materially adversely affect Contractor's ability to meet
the Project Schedule, the Performance Guarantees, the Guaranteed Completion
Dates, the Construction Progress Milestone Dates or the warranties hereunder, or
increase the cost to Contractor of performing the Services. Compliance by
Contractor with such a request shall not relieve Contractor of any obligation
hereunder or affect its liability for failure to perform in accordance with this
Agreement.

                 2.3.4 COMPLIANCE WITH PLAN. In the event thatContractor shall
have submitted a Plan that has been approved and/or modified pursuant to Section
7.2.1 and/or 7.6.2 hereof, Contractor shall perform the Services in accordance
with such Plan.

        2.4 COMPLIANCE WITH APPLICABLE LAWS, APPLICABLE PERMITS AND THE
GUARANTEED EMISSIONS LIMITS. (a) Contractor shall strictly comply with and shall
cause all Subcontractors and the Project and all components thereof (including
without limitation the design, engineering, construction and operability of the
Project) to strictly comply with all Applicable Laws and Applicable Permits as
they may be in effect at the time of Contractor's or such Subcontractor's
performance hereunder. Without limiting the foregoing, the effect of any change
in Applicable Laws or Applicable Permits enacted after the date of this
Agreement shall be determined under Section 12.5 hereof.

        (b) Contractor shall perform the Services such that the Facility, when
operated over the load range in accordance with the Instruction Manual as of
Provisional


                                       38
<PAGE>

Acceptance and Final Acceptance, will comply with all Applicable Laws and
Applicable Permits, the Electrical Interconnection Requirements and the
Guaranteed Emissions Limits in accordance with the Completed Performance Test
requirements set forth in Section 6.2.7 hereof.

        2.5 SAFETY PRECAUTIONS. Contractor shall be solely responsible for
safety precautions and programs in connection with the performance of the
Services, and shall implement and administer a safety and health program for the
Services to be performed at the Facility Site which shall include: (a)
development of a Project safety manual establishing Contractor and Subcontractor
safety guidelines and requirements, (b) conducting of weekly Project safety
meetings with all Subcontractors, (c) development, implementation and
enforcement of procedures for advising Subcontractors of, and correction of,
safety violations and deficiencies, and (d) taking of all other actions
necessary to provide a safe work environment in accordance with Applicable Laws
and Applicable Permits. Contractor shall take all reasonable precautions for the
safety of, and shall provide all reasonable protection to prevent damage, injury
or loss to: (x) all Persons employed by Contractor or Subcontractors in
connection with the Services to be performed and all other Persons who may be
affected thereby, (y) all materials and equipment to be incorporated into the
Project, whether in storage on or off the Facility Site, owned by and/or under
the care, custody or control of Contractor or any Subcontractor, and (z) other
property at the Facility Site or adjacent thereto, including trees, shrubs,
lawns, walks, pavements, roadways, structures and utilities not designated for
removal, relocation or replacement in the course of construction. Contractor
shall require all Subcontractors working on the Facility Site to comply with all
safety requirements in effect at all such times.

                 2.5.1 HAZARDS. When the use or storage of explosives or other
hazardous materials or equipment is necessary for performance of the Services,
or when the conditions under which the Services must be performed are
necessarily hazardous, Contractor shall exercise the utmost care and shall carry
on such activities under the supervision of properly qualified personnel.

                 2.5.2 PUBLIC SAFETY. Contractor shall erect and maintain, as
required by existing conditions and progress of the Project or as otherwise
required by Applicable Law, Applicable Permits or any governmental authority,
all reasonable safeguards (including such reasonable safeguards established by
Owner from time to time) for safety and protection of the public, including
supplying and maintaining in good condition safety equipment, lighting, wire
fences and warning signals, employing guards, posting danger signs and other
warnings against hazards, promulgating safety regulations and notifying owners
and users of adjacent highways, waterways and utilities.


                                       39
<PAGE>

                 2.5.3 OSHA. Contractor shall comply with and shall cause all
Subcontractors to comply with all applicable occupational safety and health
laws, child labor laws and other Applicable Laws relating to safety and health.

                                    ARTICLE 3
                                  SUBCONTRACTS

        3.1 MAJOR SPECIALTY CONSULTANTS, SUBCONTRACTORS AND EQUIPMENT SUPPLIERS.

                 3.1.1 APPROVED SUBCONTRACTORS' LIST. Set forth in Appendix E
hereto is a list of certain equipment vendors, suppliers, materialmen,
consultants and subcontractors (and, if applicable, the permitted countries of
manufacture or fabrication relating thereto) agreed to by the Parties (the
"APPROVED SUBCONTRACTORS LIST") and from which Contractor shall be obligated to
select each vendor, supplier, materialman, consultant and subcontractor who will
be executing a subcontract with an individual aggregate total subcontract price
in excess of $100,000 for the tasks specified on the Approved Subcontractors
List. Contractor and Owner shall each have the right to recommend additions or
deletions to the Approved Subcontractors List from time to time (PROVIDED that
any such recommended addition or deletion shall only be made with the approval
of the other Party, which shall not be unreasonably withheld or delayed), and
shall each have the right to approve any successor or replacement of any Person
listed on such list. Owner shall have the right to approve any other vendor,
supplier, materialman, consultant or subcontractor with an individual aggregate
total subcontract price in excess of $100,000 selected by Contractor (which
approval shall not be unreasonably withheld or delayed).

                 3.1.2 EQUIPMENT STANDARDS. In connection with the purchase of
any items of equipment or machinery from any Subcontractor, Contractor shall
purchase only such models of equipment, machinery or materials for incorporation
into the Project as have attained the standards of reliability and performance
in the electrical generating industry that are consistent with Prudent Utility
Practices and the requirements of Article 10 hereof.

                 3.1.3 SUBCONTRACTORS AND RELATED INFORMATION. All vendors,
suppliers, materialmen, consultants and subcontractors providing equipment,
materials or services directly or indirectly to Contractor in connection with
the Project are herein referred to as "SUBCONTRACTORS". Contractor shall provide
to Owner such information concerning the Subcontractors or the subcontracts and
purchase orders (except in the event and only to the extent such information
involves confidential commercial or


                                       40
<PAGE>

proprietary matters that could not reasonably be expected to substantially
affect or relate to the performance of the Services hereunder) as Owner may
reasonably request from time to time.

                 3.2 PURCHASE ORDERS AND SUBCONTRACTS. Contractor's purchase
orders, subcontracts and similar purchase forms in connection with the Project
shall comply with the applicable requirements of this Agreement (including
without limitation the requirements set forth in Sections 2.4 and 15.3 hereof).
All purchase orders and subcontracts for the Equipment specified in Appendix U
hereto shall contain a recommended spare parts list and a price list (which
shall be binding to the extent reasonably feasible for a period of two years
from the Guaranteed Provisional Acceptance Date) covering all spare and
replacement parts pertaining to the subject matter of such purchase order or
subcontract. Contractor shall use all reasonable efforts to require that any
contract with Subcontractors which is in excess of $250,000 in cost include a
reasonable limitation on the amount of any mark-up which such Subcontractor can
include in Scope Change Orders.

                 3.3 PAYMENTS TO SUBCONTRACTORS. Contractor shall be solely
responsible for paying (or arranging for the payment on its behalf to) each
Subcontractor and any other Person to whom any amount is due from Contractor for
services, equipment, materials or supplies in connection with the Project, and
shall pay (or cause to be paid) each such amount promptly as the same becomes
due. Prior to any such payment, Contractor shall take all reasonable steps to
ensure that such equipment, materials and supplies have been or will be
received, inspected and approved and that such services have been or will be
properly performed in accordance with the requirements of this Agreement.

                 3.4 SUBCONTRACTOR WARRANTIES. Contractor shall, for the
protection of Owner (and its assignees, including the Financing Parties), obtain
guarantees and warranties from all Subcontractors with respect to all material
machinery, equipment, services, materials, supplies and other items used and
installed hereunder on terms and conditions that are consistent with
Contractor's customary practices for projects of similar type and capacity to
the Project, and such guarantees and warranties shall not be amended, modified
or otherwise discharged without the prior written consent of Owner. Contractor
shall use all reasonable efforts to cause such guarantees and warranties
received from Subcontractors with respect to the Equipment specified in Appendix
U hereto to cover a period of not less than the Warranty Period hereunder.
Contractor shall enforce such Subcontractor guarantees and warranties obtained
hereunder (whether or not they exceed the scope or term of any of the guarantees
or warranties provided by Contractor pursuant to Article 10 hereof) to the
fullest extent thereof until such time as


                                       41
<PAGE>

they are transferred to Owner pursuant to this Section 3.4 or Section 15.3
hereof, as the case may be. In the event and only to the extent that any of the
guarantees and warranties obtained under this Section 3.4 extends beyond the
applicable Warranty Period hereunder, Contractor shall transfer to Owner (or its
designee) all interests and rights of Contractor in and to such Subcontractor
guarantees and warranties. Without the consent of Owner, neither Contractor nor
its Subcontractors nor any Person under Contractor's control shall take any
action which releases, voids, impairs or waives any such warranties or
guarantees on equipment, materials or services. Nothing in this Section 3.4
shall detract from or limit any of the obligations of Contractor to provide the
warranties described in, and to comply with the provisions of, Article 10
hereof.

                 3.5 SUBCONTRACTOR INSURANCE. Contractor shall require all
Subcontractors to obtain, maintain and keep in force during the time in which
they are engaged in performing Services, insurance coverages that are consistent
with Contractor's customary practices for such types of subcontracts for
projects of similar type and capacity to the Project and with the requirements
of Section 14.9 hereof, if applicable.

                 3.6 NO PRIVITY WITH SUBCONTRACTORS. Owner shall not be deemed
by virtue of this Agreement or its performance hereunder to have any contractual
obligation to orrelationship with any Subcontractor.

                 3.7 REVIEW AND APPROVAL NOT RELIEF OF CONTRACTOR'S LIABILITY.
The review, approval, consent and selection by Owner as to the Approved
Subcontractors List or as to Contractor's entering into any subcontract or
purchase order (including, without limitation, that for performance of the
Performance Tests) shall not relieve Contractor of any of its duties,
liabilities or obligations under this Agreement, and Contractor shall be liable
hereunder to the same extent as if such subcontract or purchase order had not
been entered into. Any inspection, review, approval or selection by Owner (or
its assignees and designees, including without limitation the Financing Parties
and the Independent Engineer) permitted under this Agreement of any portion of
the Services or of any work in progress by Contractor or Subcontractors shall
not relieve Contractor of any duties, liabilities or obligations under this
Agreement and shall not deprive Owner of any rights or remedies that it may have
under this Agreement.

                 3.8 ASSIGNABILITY OF SUBCONTRACTS. With respect to each
subcontract and purchase order entered into between Contractor and any
Subcontractor in connection with any of the Equipment specified in Appendix U
hereto, Contractor shall ensure that, and, with respect to each other
subcontract and purchase order entered into between Contractor and any
Subcontractor in connection with the Project, Contractor shall use all


                                       42
<PAGE>

reasonable efforts to ensure that, each such subcontract and purchase order is
assignable from Contractor to Owner (and its assignees, including the Financing
Parties).

                 3.9 QUALITY CONTROL. Contractor shall use all reasonable
efforts to ensure that all Subcontractors establish and implement a quality
control system in their work and manufacturing processes which assures that all
goods and services supplied hereunder will comply with the quality assurance
program guidelines required of such Subcontractors as set forth in the Quality
Assurance Plan.

                                    ARTICLE 4
                                PRICE AND PAYMENT

                 4.1 CONTRACT PRICE. As full consideration to Contractor for the
full and complete performance of the Services and all costs incurred in
connection therewith, Owner shall pay, and Contractor shall accept, the sum of
two hundred ninety million four hundred seventeen thousand dollars
($290,417,000), to be paid in installments as set forth in Section 4.2 hereof,
as such sum may be adjusted pursuant to Section 4.3 and Article 12 hereof (such
adjusted amount referred to as the "CONTRACT PRICE").

                 4.2 PAYMENT SCHEDULE. All payments made to Contractor shall be
paid by Owner to Contractor in installments, in accordance with the Payment and
Milestone Schedule ("SCHEDULED PAYMENTS") attached hereto as Appendix B, as
adjusted pursuant to Section 4.3 and Article 12 hereof, which Scheduled Payments
shall be subject to Retainage pursuant to Section 4.2.4 hereof (except in the
event and only to the extent that Contractor has deposited the Letter of Credit
in lieu of Retainage in accordance with said Section 4.2.4). In the event Owner
has retained Retainage pursuant to Section 4.2.4 hereof, such Retainage will be
paid by Owner to Contractor pursuant to Section 4.2.4 hereof, which payments
shall not be subject to any further Retainage.

                        4.2.1 NOT USED.

                        4.2.2 CONDITIONS TO SCHEDULED PAYMENTS. Subject to the
terms of this Article 4, Owner shall, within thirty (30) days after the later of
(i) each successive applicable payment date set forth in the Payment and
Milestone Schedule and (ii) receipt by Owner of an invoice package from
Contractor in which Contractor certifies that (1) all of the milestones set
forth on the Payment and Milestone Schedule required to be achieved prior to
such payment date have been achieved in compliance with the standards of
performance required hereunder and (2) it is performing the Services hereunder
in a timely manner consistent with achieving Final Acceptance of the Facility no
later than the Guaranteed Final Acceptance Date or such later date, if any, that
may have been accepted


                                       43
<PAGE>

by Owner pursuant to a Plan proposed pursuant to the provisions of Sections
7.2.1 or 7.6.2 hereof (the "CONTRACTOR'S PAYMENT REQUEST"), make or cause to be
made the Scheduled Payments to Contractor with respect to the Services
performed; PROVIDED that:

                (a) Owner shall not be obligated to make any Scheduled Payment
        hereunder if the Owner or, at the Owner's election, the Independent
        Engineer fails to confirm the matters so certified to by Contractor in
        the Contractor's Payment Request with respect to such payment; PROVIDED,
        that if Contractor disputes the decision of Owner or the Independent
        Engineer and it is determined pursuant to Article 21 hereof that Owner
        or the Independent Engineer should have confirmed the matters so
        certified by Contractor with respect to such payment, but failed to do
        so, then Contractor shall be entitled to interest on such Scheduled
        Payment in accordance with Section 25.1 hereof to be accrued from the
        date such Scheduled Payment would otherwise have been due to Contractor
        until the date actually paid to Contractor;

                (b) Owner shall not be obligated to make any Scheduled Payment
        hereunder until Contractor has supplied Owner with the certification and
        waivers required pursuant to Section 4.6 hereof; and

                (c) If this Agreement is terminated before the Project
        Completion Payment is made, Owner shall not be obligated to make further
        Scheduled Payments or other payments except in accordance with Section
        4.4 hereof, in the event and only to the extent such Section 4.4 may be
        applicable.

                        4.2.3 DEFERRAL OF SCHEDULED PAYMENTS. Subject to the
following sentence, any Scheduled Payment that Owner is not obligated to, and
does not, make under Section 4.2.2 hereof shall be made, without interest,
following the applicable payment date under Section 4.2 hereof, within thirty
(30) days of the date on which all conditions described in such Section are
satisfied. In no event shall Owner, as a result of deferred Scheduled Payment(s)
or otherwise, be obligated to make more than one payment per month of amounts
due to Contractor under this Agreement (other than any Termination Payment
hereunder); rather, Contractor shall submit to Owner only one invoice package
per month, which invoice package will set forth all amounts then due to
Contractor hereunder (including any deferred Scheduled Payment(s) or other
non-scheduled payments due, as well as the Scheduled Payment for such month).

                        4.2.4 RETAINAGE. Owner shall withhold from each
Scheduled Payment, other than the Project Completion Payment, an amount equal
to [*] of such payment, which shall be held by Owner as retainage
("RETAINAGE");

                                       44
<PAGE>

PROVIDED, HOWEVER, that in the event and only to the extent that Contractor
deposits with or for the account of Owner a letter of credit (i) from a major
New York bank or trust company or a New York branch of a major international
bank, in each case reasonably satisfactory to Owner and its Financing Parties
and whose long-term debt is rated (or in the case of the New York branch of an
international bank, which international bank's long-term debt is rated) "A" or
higher by S&P and "A2" or higher by Moody's and (ii) on terms and conditions
substantially similar to those set forth in Appendix V hereto, in an aggregate
U.S. dollar amount available for draw thereunder by sight demand equal to the
amount of Retainage in lieu of which Contractor seeks to have such letter of
credit held hereunder (the "LETTER OF CREDIT"), then the Retainage to be held by
Owner hereunder shall be reduced (but not below zero) by the amount of the
Letter of Credit so available for draw by Owner (or its assignees). The Letter
of Credit shall be assignable by Owner as security to the Financing Parties.
Subject to Section 4.8 hereof, Retainage shall be paid to Contractor (or the
aggregate amount available under the Letter of Credit deposited in lieu of
Retainage hereunder shall be reduced, if applicable) in accordance with the
following:

                (a) Within ten (10) days after the determination, in accordance
        with the terms of this Agreement, that Final Acceptance of the Facility
        has been achieved (PROVIDED that Contractor shall first have paid in
        full any Performance Guarantee Payments due to Owner hereunder, which
        payment may, at Contractor's election, be made in whole or part by
        Owner's set-off pursuant to Section 4.8 hereof as long as after such
        set-off Owner still holds Retainage in at least the amounts Owner is
        entitled to retain under this clause (a)) and receipt by Owner of
        documentation in the forms specified in Appendix I hereto establishing
        that the requirements of Section 4.6 and 2.1.22 hereof have been met,
        all Retainage shall be paid to Contractor, except for an amount equal to
        the sum of (1) one hundred and fifty percent (150%) of the cost of
        completing all Punch List items as reasonably determined by the
        Independent Engineer, and (2) the lesser of (i) one hundred and fifty
        percent (150%) of the cost (including labor costs), as reasonably
        determined by the Independent Engineer, of repairing or replacing any
        machinery, equipment, materials, systems, supplies or other items that
        have already been corrected, added, repaired or replaced by or on behalf
        of Contractor as of such date pursuant to Section 10.1.1 hereof, and
        (ii) one million dollars ($1,000,000);

                (b) Within thirty (30) days after Project Completion pursuant to
        Section 6.6 hereof, all remaining Retainage, less the amount (if any)
        retained pursuant to clause (2) of Section 4.2.4(a) hereof, shall be
        paid to Contractor in accordance with the terms of Section 4.2.5 hereof;
        and


                                       45
<PAGE>


                (c) Within thirty (30) days after the first anniversary of the
        earlier of Provisional Acceptance and Final Acceptance of the Facility,
        and PROVIDED that Project Completion has occurred, all remaining
        Retainage shall be paid to Contractor.

                        4.2.5 PROJECT COMPLETION PAYMENT. Owner shall make to
Contractor the payment of the sum of the unpaid balance of the Contract Price
(including all Retainage, less the amount (if any) retained pursuant to clause
(2) of Section 4.2.4(a) hereof) (the "PROJECT COMPLETION PAYMENT") within thirty
(30) days after Project Completion.

                4.3 PRICE ADJUSTMENTS.

                        4.3.1 BASE SCOPE CHANGES; SCOPE OPTIONS. (a) Owner and
Contractor hereby agree that as expressly set forth in Section A of Appendix O
hereto, the applicable Scope Changes set forth in said Section A of Appendix O
as identified by Owner (the "BASE BID SCOPE CHANGES") will be made hereunder. On
or before the Commencement Date, Owner shall issue a Scope Change Order setting
forth the adjustments to the Contract Price (as the Contract Price set forth in
Section 4.1 hereof does not include any of the price adjustments for such Base
Bid Scope Changes), as expressly set forth in said Section A of Appendix O
hereto as being applicable to such specified circumstances.

                        (b) In its sole discretion and by delivery of a written
notice to Contractor on or prior to the respective dates provided in Section B
of Appendix O hereto for each scope option listed therein, Owner may add to the
Services one or more of the scope options listed in said Section B of Appendix
O. In the event Owner makes any such election(s), (i) the Contract Price shall
be adjusted in accordance with the respective provisions of Section B of
Appendix O hereto that are expressly set forth therein as being applicable to
such scope option(s), and (ii) corresponding adjustments to the Guaranteed
Completion Dates, the Construction Progress Milestone Dates, the Payment and
Milestone Schedule, the Project Schedule and the Performance Guarantees and such
other provisions of this Agreement that may be affected thereby shall be made as
reasonably agreed upon by Owner and Contractor.

                        4.3.2 OTHER ADJUSTMENTS TO PAYMENT AND MILESTONE
SCHEDULE. Owner and Contractor may agree (which agreement shall not be
unreasonably withheld or delayed) from time to time to revise the Payment and
Milestone Schedule (and, if appropriate, the Cancellation Schedule attached as
Appendix M hereto) to reflect changes in the order of performance of the
Services or in the projected schedule for performance


                                       46
<PAGE>


of the Services if Contractor demonstrates to the satisfaction of Owner and the
Independent Engineer that (i) notwithstanding such changes in the order or the
projected schedule for performance of the Services, Contractor's performance of
the Services will comply with the Construction Progress Milestone Dates, the
Guaranteed Completion Dates and the other requirements of this Agreement and
(ii) the revision to the Payment and Milestone Schedule (and Cancellation
Schedule, if applicable) will not accelerate the cumulative Scheduled Payments
(or Termination Payment, if applicable) to be made by Owner hereunder as of any
date; PROVIDED, HOWEVER, that unless Owner otherwise agrees in its sole
discretion, no such revision shall increase the Contract Price.

                4.4 PAYMENT UPON TERMINATION. (a) Upon termination of this
Agreement at any time after the Commencement Date pursuant to Section 15.1 or
15.2 hereof, Contractor shall be entitled to be paid at the time specified in
Section 4.4.2 hereof an amount (the "TERMINATION PAYMENT") equal to the sum of:

                        (1) any and all Scheduled Payments due and owing to
                Contractor on or prior to the date on which written notice of
                termination is issued to Contractor;

                        (2) any pro-rata portion of the Scheduled Payment due
                for that month in which written notice of such termination is
                issued to Contractor for the Services properly performed by
                Contractor and its Subcontractors in such month;

                        (3) all Retainage (if any) held by Owner at such time;
                and

                        (4) all reasonable, actual termination costs incurred by
                Contractor as a result of terminating and demobilizing all
                aspects of the Services theretofore properly performed by
                Contractor and its Subcontractors hereunder (including, but not
                limited to, the cancellation of subcontracts and purchase
                orders, if any), but excluding any and all costs and expenses
                incurred by Contractor from and after the date of termination
                for those of its employees who are not directly performing
                required termination and demobilization services (whether or not
                Contractor has reassigned such employees to other work following
                Owner's notice of termination), as audited and accepted by an
                independent certified public accounting firm selected by Owner
                and reasonably acceptable to Contractor, and only in the event
                and to the extent such costs are not covered by Scheduled
                Payments previously made hereunder or under clauses (1) and (2)
                directly above;

PROVIDED, HOWEVER, that the Termination Payment due hereunder shall in no event
exceed the amount equal to the difference of (i) the amount set forth for the
month in which such written notice of termination is issued to Contractor (as
measured from the


                                       47
<PAGE>

Commencement Date) in the Cancellation Schedule attached as Appendix M hereto
(as such schedule may have been expressly amended by any Scope Change Order
issued hereunder from time to time), which amount shall be subject to an
equitable adjustment in the event that any Services performed as of such date do
not comply with the standards and warranties required hereunder or have not been
completed in accordance with the Payment and Milestone Schedule, minus (ii) all
Scheduled Payments previously made to Contractor hereunder; and PROVIDED,
FURTHER, that costs incurred by Contractor in connection with items procured by
Contractor shall not be included in the Termination Payment until Contractor
shall have delivered to Owner (or to Owner's designee, which may be any other
AES affiliate or any third party purchaser) all documents necessary to transfer
all of Contractor's right, title and interest in and to such items to Owner (or
such designee) and, with respect to such items which Contractor has received
possession of, Contractor shall have delivered such items to Owner (or such
designee), in each case free and clear of all liens and encumbrances (other than
Permitted Liens) made by, through or under Contractor or any Subcontractor
(subject to Owner's payment of the Termination Payment due hereunder).
Contractor shall use all reasonable efforts to minimize any termination costs
under clause (4) above.

        (b) As conditions precedent to receiving any cancellation charges
pursuant to Section 2.2.2 hereof or any Termination Payment pursuant to Section
4.4 hereof, Contractor shall (x) if Owner so requests, execute and deliver all
such papers and take all such steps, including legal assignments, as required
for the purpose of fully vesting in Owner (or its designee) all contractual
rights of Contractor under all subcontracts, purchase orders, warranties,
guarantees and other agreements and (in the event and only to the extent
permitted under Applicable Law) all rights of Contractor under Applicable
Permits and (y) comply with the requirements of Section 2.1.22 hereof.

                       4.4.1 VERIFICATION OF THE TERMINATION PAYMENT.
Contractor shall, within sixty (60) days of any such termination of all or
part of the Services, make available for review by Owner and the independent
accounting firm referred to in clause (4) of Section 4.4(a) hereof all
invoices and other documentation as are reasonable and sufficient to enable
Owner to verify the performance of the Services and such accounting firm to
verify Contractor's costs associated therewith, in order to determine the
amount of the Termination Payment due thereunder. The Termination Payment
shall not include the costs of future anticipated profit.

                       4.4.2 PAYMENT OF THE TERMINATION PAYMENT. Owner shall
pay the Termination Payment to Contractor within thirty (30) days of the
documentation required under Sections 4.4(b) and 4.4.1 hereof being made
available to Owner.

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<PAGE>

                       4.4.3 LIMITATION OF LIABILITY. Payment of the
Termination Payment under this Section 4.4 or payment of the cancellation
charges specified in Section 2.2.2 hereof, as the case maybe, shall be the
sole and exclusive liability of Owner to Contractor, and the sole and
exclusive remedy of Contractor, with respect to termination of this Agreement
pursuant to Section 15.1 or 15.2 hereof. In no event shall Owner have any
further liability to Contractor in any such event, whether based in contract,
in tort (including negligence and strict liability) or otherwise, for any
actual, direct, indirect, incidental, special, consequential or other damages
of any type (including, without limitation, loss of use or loss of profit or
revenue) resulting from such termination, notwithstanding the actual amount
of damages that Contractor may have sustained, and Contractor hereby releases
Owner and its contractors, subcontractors and agents from any such liability.

                4.5 NO PAYMENT IN THE EVENT OF MATERIAL BREACH. Notwithstanding
any other provision to the contrary contained herein, Owner shall have no
obligation to make any payment to Contractor at any time when Contractor is in
material breach of this Agreement; PROVIDED, HOWEVER, that if Owner's
determination that Contractor is in material breach hereof is subsequently found
pursuant to Article 21 hereof to be incorrect, then Contractor shall be entitled
to interest on the unpaid amounts from the date such amounts should have been
paid hereunder until such time such payments are made at the interest rate
specified in Section 25.1 hereof. On the payment date next following the date on
which all material breaches of Contractor have been remedied, Owner shall make
all payments withheld during the continuation of such material breaches without
interest, subject to the provisions of this Article 4, less any amounts due from
Contractor to Owner pursuant to Section 16.2 hereof.

                4.6 ALL PAYMENTS SUBJECT TO RELEASE OF CLAIMS.

                        4.6.1 INTERIM WAIVERS. On or before any payment to
Contractor hereunder (excluding the payment of any Retainage, the Project
Completion Payment and any Termination Payment, as the provisions of Section
2.1.22 hereof shall apply with respect to such excluded payments), Contractor
shall duly execute and deliver to Owner a waiver and release in substantially
the form attached hereto as Appendix I-2. If any lien or claim of lien, other
than a Permitted Lien, is filed against any portion of the Project, Owner may
withhold from any Scheduled Payment or other payment payable to Contractor an
amount sufficient to discharge any or all such liens or claims and, after thirty
(30) days from the time such lien or claim is made (or sooner, if the Applicable
Law would otherwise allow the claimant to proceed to enforce such lien or
claim), may discharge such lien or claim with the moneys withheld, whereupon for
purposes of this Agreement such moneys shall be deemed to have been paid to
Contractor hereunder.


                                       49
<PAGE>

                        4.6.2 FINAL RELEASE FROM SUBCONTRACTORS. In addition to
the interim waivers required under Section 4.6.1 above, on or prior to the
payment date next following the date on which final payment to such
Subcontractor is made, with respect to each Subcontractor providing the services
or equipment listed in Appendix U hereto or otherwise is party to a subcontract
or purchase order with Contractor with a total cost in excess of one hundred
thousand dollars ($100,000), Contractor shall deliver to Owner a copy of a final
release and waiver, in the form of Appendix I-3 hereto. Notwithstanding the
foregoing, if Contractor is unable to deliver a final release and waiver
required under this Section 4.6.2, Contractor may provide to Owner in lieu
thereof a bond or other collateral, in form and substance satisfactory to Owner
and the Financing Parties, to fully indemnify Owner against any loss resulting
from claims of such Subcontractor.

                4.7 PAYMENT OR USE NOT ACCEPTANCE. No Scheduled Payment or other
payment to Contractor or any use of the Facility by Owner shall constitute an
acceptance of any of the Services or shall relieve Contractor of any of its
obligations or liabilities with respect thereto.

                4.8 SET-OFF. Owner may (but shall not be obligated to) deduct
and set-off against any part of the balance due or to become due to Contractor
under this Agreement, and/or may (but shall not be obligated to) apply any
Retainage held by Owner (or draw on the Letter of Credit, if applicable) for
payment of, any amounts due from Contractor to Owner under or in connection with
this Agreement (including, without limitation, any amounts due under Articles 5,
7, 8, 10, 13, 14 or 16 hereof). The application of any Retainage (or any draw
under the Letter of Credit, if applicable) pursuant to this Section 4.8 in
payment of any amounts due from Contractor hereunder shall not constitute a cure
of any such payment default by Contractor hereunder unless after such
application of Retainage (or draw amounts on the Letter of Credit, if
applicable), Owner holds Retainage (and/or available amounts under the Letter of
Credit) in the aggregate amount that Owner would then be entitled to hold as
Retainage under Section 4.2.4 hereof; PROVIDED, HOWEVER, that in the event and
only to the extent that Owner applies any Retainage (or any draws under the
Letter of Credit, if applicable) in payment of any amounts believed by Owner to
be due from Contractor to Owner hereunder, and Contractor in good faith disputes
pursuant to Article 21 hereof whether such amount is due from it hereunder, then
Contractor shall not be required by this sentence to replenish such Retainage
(or Letter of Credit, if applicable) for that portion used by Owner to pay such
disputed amount unless and until it is determined pursuant to Article 21 hereof
that all or a portion of such disputed amount was due from Contractor to Owner
hereunder, in which event Contractor shall replenish the Retainage (or Letter of
Credit, if applicable) by the amount of such disputed amount that is so
determined to have been due from it hereunder. In the event that Owner sets off
pursuant to this Section 4.8 against any


                                       50
<PAGE>

amount due to Contractor hereunder an amount believed by Owner to be due from
Contractor to Owner hereunder, but which is subsequently determined pursuant to
Article 21 hereof not to have been due from Contractor to Owner hereunder, then
Contractor shall be entitled to interest on such set-off amount at the interest
rate specified in Section 25.1 hereof, which interest shall accrue from the date
such set-off amount would otherwise have been due to Contractor until the date
actually paid to Contractor.

                                    ARTICLE 5
                                 OWNER SERVICES

                5.1 REPRESENTATIVE. Owner shall designate a representative who
shall be acquainted with the Project and shall have authority to administer this
Agreement on behalf of Owner, to agree upon procedures for coordinating Owner's
efforts with those of Contractor and to furnish information, when appropriate,
to Contractor.

                5.2 FACILITY SITE. On or prior to the Commencement Date, Owner
shall furnish to Contractor access to the Facility Site, as set forth on
Appendix G hereto. Contractor hereby acknowledges and agrees that the Facility
Site as described in Appendix G hereto, together with the Real Estate Rights
designated in Appendix G hereto, is suitable and sufficient for Contractor to
perform the Services.

                5.3 PERMITS AND REAL ESTATE RIGHTS. (a) Owner shall secure and
maintain at its own expense, in the time periods (if any) indicated therefor,
(i) all Applicable Permits and Real Estate Rights which are listed in Appendices
F and G hereto and designated therein as Owner's responsibility, and (ii) all
other Applicable Permits (other than Building Permits) and Real Estate Rights
(other than those required to be obtained by Contractor pursuant to Section
2.1.14 hereof), if any, required for performance of the Services (including
without limitation all such Applicable Permits and Real Estate Rights required
to be obtained or maintained in connection with the transmission of electricity
to the Transmitting Utility and operation of the Project).

                (b) If any Applicable Permit necessary for performance of the
Services (other than any Building Permit) is not obtained when required under
this Agreement and Contractor was materially adversely affected in the
performance of the Services as a direct result thereof despite Contractor's
reasonable efforts to avoid or mitigate such effect, the provisions of Section
5.9 hereof shall apply.

                (c) If any Real Estate Right listed in Appendix G hereto and
required for the performance of the Services is not obtained when required under
this Agreement and Contractor was materially adversely affected in the
performance of the Services as a


                                       51
<PAGE>


direct result thereof despite Contractor's reasonable efforts to avoid or
mitigate such effect, the provisions of Section 5.9 hereof shall apply.

                (d) Owner shall cooperate with Contractor and shall use all
reasonable efforts to provide all necessary information and documents and
otherwise assist Contractor, at Contractor's cost and expense, in connection
with Contractor's efforts to obtain the Applicable Permits and, if applicable,
any Real Estate Rights required to be obtained by Contractor hereunder pursuant
to Sections 2.1.5 and 2.1.14(b) hereof.

                (e) In the event that the inability of a Party to obtain any
Applicable Permit or Real Estate Right required hereunder is caused by a Force
Majeure Event, the provisions of this Section 5.3 are subject to, and are not
intended to supersede, the provisions of this Agreement relating to Force
Majeure Events (including without limitation Article 11 and Section 12.7
hereof).

                5.4 START-UP PERSONNEL. Owner (or its designee) shall provide at
its own expense operating and maintenance personnel of such number and
qualifications as Owner, in good faith, reasonably determines is appropriate for
the normal, day-to-day, in-service operation and maintenance of the Facility,
which personnel shall be trained by Contractor and assist Contractor by
performing normal operating and maintenance duties in connection with the
start-up of the Facility and the performance of the Performance Tests. Said
personnel will be available to Contractor for such purposes until Final
Acceptance of the Facility. Contractor shall be responsible for providing
technical guidance to, and shall otherwise direct, Owner's operating and
maintenance personnel during the start-up and testing of the Facility.
Contractor shall be responsible for all acts and omissions of such operating and
maintenance personnel of Owner that are so made available to Contractor in
connection with the start-up and testing of the Facility, except for the gross
negligence or intentional misconduct of any of Owner's operating and maintenance
personnel. Any personnel required in addition to those provided by Owner
pursuant to this Section 5.4 will be the responsibility of Contractor. The
provision of personnel by Owner (or its designee) pursuant to this Section 5.4
shall not relieve Contractor of any of its obligations or liabilities hereunder,
except in the event and only to the extent that the gross negligence or
intentional misconduct of Owner's personnel causes Contractor to be unable to
perform its obligations hereunder.

                5.5 SPARE PARTS, WASTE DISPOSAL AND CONSUMABLES. Owner shall
furnish (a) all operational spare parts, (b) all waste disposal services
required with respect to Facility operations after the Risk Transfer Date and
(c) any refills of lubrication oil, grease, resins and other consumables
(including water treatment chemicals) required with respect to Facility
operations after the Risk Transfer Date; PROVIDED that this Section 5.5


                                       52
<PAGE>


shall not relieve Contractor of any of its obligations under Article 2 hereof,
including without limitation Section 2.1.11 hereof.

                5.6 UTILITIES. Owner shall arrange and pay for the provision
of all permanent utilities required for the start-up, testing and operation
of the Facility (other than any excess electricity requirements for which
Contractor is responsible pursuant to Section 2.1.11 hereof), and shall not
be responsible for any other utilities that will be required at the Facility
Site during the construction of the Facility, other than for arranging for
(i) the availability, commencing one (1) month after the Commencement Date,
of raw and potable water at the source identified in Appendix A hereto (or
such other source as may be reasonably agreed upon by Contractor and Owner),
(ii) the availability at the boundary of the Power Plant Site of the Fuel
Supplier's natural gas pipeline facilities as set forth in Section 5.7
hereof, (iii) during the period from completion of interconnection of the
Electrical Interconnection Facilities to the Transmitting Utility's
transmission system until completion of initial synchronization of the steam
turbine generator, the provision of up to [*] of electricity, and (iv) the
availability at the Electrical Interconnection Point of the Transmitting
Utility's electrical interconnection facilities as set forth in Section 5.8
hereof.

                5.7 FUEL. Owner shall arrange for the Fuel Supplier's natural
gas pipeline system to be made available for interconnection with the Facility
at the interconnection point identified in Appendix A hereto, with such
facilities to be scheduled to be so available for such interconnection nine (9)
months prior to the Guaranteed Provisional Acceptance Date, PROVIDED FURTHER
that if Contractor notifies Owner that it requires such facilities be so
available at an earlier date in order for Contractor to be able to maintain
compliance with the Project Schedule, Owner shall use reasonable efforts (at
Contractor's expense) to arrange for such facilities to be so available at such
earlier date as may be reasonably achievable. Owner shall arrange for the
provision of Gas as required for the start-up, testing and operation of the
Facility, with such supply of Gas to be scheduled to be available eight (8)
months prior to the Guaranteed Provisional Acceptance Date, PROVIDED that
Contractor shall have given Owner prior written notice of the Gas requirements
for the commencement of Facility testing, and shall have reconfirmed such
requirements if necessary, on or before the date on which Owner is required to
notify (and, if applicable, reconfirm with) the Fuel Supplier of such
requirements under its fuel supply arrangements (PROVIDED that such notification
requirements are consistent with Prudent Utility Practices and are made known to
Contractor as soon as reasonably possible). Unless Owner and the Fuel Supplier
otherwise agree, the commencement of Facility testing shall not occur prior to
such scheduled date.


                                       53
<PAGE>

                5.8 ELECTRICAL INTERCONNECTION. Owner shall arrange for the
Transmitting Utility to make the relevant portions of its transmission system
available at the Electrical Interconnection Point for interconnection with the
Electrical Interconnection Facilities of the Facility at least nine (9) months
prior to the Guaranteed Provisional Acceptance Date (PROVIDED that Contractor
has made the Electrical Interconnection Facilities available as reasonably
required to permit such interconnection to have been made by such date).

                5.9 OWNER'S FAILURE TO MEET OBLIGATIONS. If Owner fails to meet
any of its material obligations under this Agreement then, in the event and only
to the extent that Contractor was materially adversely affected in the
performance of the Services as a direct result thereof despite Contractor's
reasonable efforts to avoid or mitigate such effect, 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
the Project Schedule, and, as appropriate, such other provisions of this
Agreement that may be affected thereby, shall be made by agreement of Owner and
Contractor or otherwise pursuant to Article 12 or 21 hereof.

                5.10 APPROVALS. Owner shall use all reasonable efforts to
furnish all required review or other appropriate action or information with
respect to all drawings, samples, estimates, schedules, questions and other
items submitted by Contractor and to respond with respect to any matters
hereunder requiring its review and approval, in each case within the time
periods contemplated herein. Owner shall also use all reasonable efforts to
cause the Independent Engineer to respond within the time periods contemplated
herein with respect to its reviews of payment invoices, Performance Test results
and any other matters hereunder requiring its review and approval. If (a) Owner
fails to furnish such required review or other appropriate action or information
within the time periods contemplated in this Agreement, or (b) Owner or the
Independent Engineer (i) fails to respond to the matters requiring its review
and approval within the time periods contemplated in this Agreement or (ii) in
its response does not approve any matters hereunder requiring its review and
approval and it is subsequently determined pursuant to Article 21 hereof that
Owner or the Independent Engineer (as the case may be) should have approved such
matters, then in the event and only to the extent that Contractor was materially
adversely affected in the performance of the Services as a direct result thereof
despite Contractor's reasonable efforts to avoid or mitigate such effect, the
provisions of Section 5.9 hereof shall apply.

                5.11 ADMINISTRATION OF THIRD PARTY PROJECT AGREEMENTS. Owner
shall use all reasonable efforts to administer and coordinate the establishment
of, and upon the reasonable request of Contractor the continued participation by
all third parties other than Contractor Responsible Parties (including, but not
limited to, the Transmitting Utility, the


                                       54
<PAGE>


Fuel Supplier and other third parties supplying permanent utilities to the
Project) in connection with, such meetings and other interactions between
such third parties and Contractor as are reasonably necessary for
Contractor's performance of the Services hereunder. Without limiting the
foregoing, Owner shall be responsible for obtaining any comments of the
Transmitting Utility on (and, if applicable under the Electrical
Interconnection Requirements, its acceptance or rejection of) Contractor's
plans and specifications relating to the design, construction and
installation of the Electrical Interconnection Facilities as set forth in
Section 2.1.8.1 hereof.

                5.12 AES PRE-FINANCIAL CLOSING GUARANTY. Simultaneously with the
execution of this Agreement, Owner shall cause The AES Corporation to guarantee
irrevocably and unconditionally all of Owner's payment obligations hereunder
arising prior to the Financial Closing Date by executing and delivering to
Contractor a guaranty in substantially the form set forth in Appendix T (the
"AES PRE-FINANCIAL CLOSING GUARANTY").

                                    ARTICLE 6
                      COMPLETION AND ACCEPTANCE OF PROJECT

        6.1 PROJECT START-UP; MECHANICAL COMPLETION.

                6.1.1 PROJECT START-UP. (a) Contractor shall be responsible for
the start-up and synchronization of the Facility with the transmission system of
the Transmitting Utility in accordance with Applicable Laws, Applicable Permits,
Prudent Utility Practices, the Electrical Interconnection Requirements, the PPA
Operating Requirements (in the event and only to the extent applicable to
start-up and synchronization) and the Instruction Manual. Contractor shall
provide Owner, the Independent Engineer and the Transmitting Utility with at
least fifty (50) days' (or if a shorter period of time is reasonably necessary
to maintain compliance with the Project Schedule, such shorter period of time as
may be reasonably acceptable to Owner, the Independent Engineer and the
Transmitting Utility) prior written notice of the expected start-up,
commissioning and testing of the Facility and shall make all reasonable efforts
to keep Owner, the Independent Engineer and the Transmitting Utility duly
advised of any changes in the expected dates. Contractor shall (1) no later than
thirty (30) days (or if a shorter period of time is reasonably necessary to
maintain compliance with the Project Schedule, such shorter period of time as
may be reasonably acceptable to Owner, the Independent Engineer and the
Transmitting Utility) prior to expected initial operation of the Facility in
parallel with the Transmitting Utility's system, provide record plans and
specifications reasonably acceptable to the Transmitting Utility for the
Electrical


                                       55
<PAGE>

Interconnection Facilities (including Protective Apparatus), and (2) prior to
interconnection and parallel operation of the Facility with the Transmitting
Utility's system, provide a written certification, in form and substance
reasonably satisfactory to the Transmitting Utility, from the licensed
inspection agency or registered professional engineer engaged by Contractor with
respect to the Electrical Interconnection Facilities and who is reasonably
acceptable to the Transmitting Utility, to the effect that the Electrical
Interconnection Facilities (including the Protective Apparatus) have been
inspected, are satisfactory and are in compliance with applicable Accepted
Electrical Practices, in each case in accordance with the requirements of the
PPA Operating Requirements. Contractor shall not commence any start-up or
testing of the Facility for operation in parallel with the Transmitting Utility
system without the prior consent of the Transmitting Utility pursuant to the
Electrical Interconnection Requirements and/or the PPA Operating Requirements;
PROVIDED, HOWEVER, that in the event that the Transmitting Utility unreasonably
withholds or delays its consent to such operation despite the Facility and its
Electrical Interconnection Facilities being consistent with the Electrical
Interconnection Requirements, the PPA Operating Requirements, Prudent Utility
Practices and the other standards of performance required hereunder (including
without limitation Appendix A hereto), then, in the event and only to the extent
that Contractor was delayed in the performance of the Services as a direct
result thereof despite Contractor's reasonable efforts to avoid or mitigate such
delay, the provisions of Section 5.9 hereof shall apply.

                (b) Owner and, at Owner's request, the Transmitting Utility, the
Financing Parties and the Independent Engineer shall be permitted to have their
own or their designee's personnel on the Facility Site to observe and verify all
synchronization procedures and Performance Tests. Subject to Section 2.3.1
hereof, Contractor shall, until the occurrence of Provisional Acceptance of the
Facility, manage the operation of the Facility in the course of performing any
start-up, commissioning and testing activities, in consultation with Owner and
its operating personnel in a manner consistent with Applicable Laws, Applicable
Permits, Prudent Utility Practices, the Electrical Interconnection Requirements
(including any required approvals by the Transmitting Utility), the PPA
Operating Requirements (in the event and only to the extent applicable to
start-up, commissioning and testing activities) and the Instruction Manual.

                6.1.2 MECHANICAL COMPLETION. Mechanical Completion shall be
achieved hereunder with respect to the Facility if the following conditions have
been met:

                (a) All equipment and facilities necessary for the full, safe
        and reliable operation of the Facility have been properly constructed,
        installed, insulated and protected where required, and correctly
        adjusted, and can be safely used for their


                                       56
<PAGE>

        intended purposes in accordance with the Instruction Manual and all
        Applicable Laws and Applicable Permits;

                (b) The tests required for Mechanical Completion that are
        identified in Appendix D hereto have been successfully completed;

                (c) The Facility is fully and properly interconnected and ready
        for synchronization with the electrical system of the Transmitting
        Utility in accordance with the Electrical Interconnection Requirements,
        and all features and equipment of the Facility are capable of operating
        simultaneously to the extent necessary to perform the Performance Tests
        pursuant to Section 6.2 hereof; and

                (d) The complete performance by Contractor of all the Services
        relating to the Facility under this Agreement, except for any remaining
        Punch List items, Performance Tests and Reliability Run applicable
        thereto, in compliance with the standards of performance set forth in
        this Agreement, such that the Facility meets all of the requirements set
        forth in this Agreement applicable thereto (including, without
        limitation, Appendix A hereto, but excluding the achievement of the
        Guaranteed Emissions Limits and the Performance Guarantees).

                        6.1.2.1 NOTICE AND REPORT OF MECHANICAL COMPLETION. When
Contractor believes that it has achieved Mechanical Completion, it shall deliver
to Owner and the Independent Engineer a notice thereof (the "NOTICE OF
MECHANICAL COMPLETION "). The Notice of Mechanical Completion shall contain a
report in a form mutually and reasonably agreeable to Contractor and Owner (with
the written concurrence of the Independent Engineer) with sufficient detail to
enable Owner and the Independent Engineer to determine whether Mechanical
Completion has been achieved.

                        6.1.2.2 ACHIEVEMENT OF MECHANICAL COMPLETION. Within
five (5) days following receipt of the Notice of Mechanical Completion, (a)
Owner and the Independent Engineer shall inspect the Facility and review the
report submitted by Contractor, and (b) Owner shall either (i) deliver to
Contractor a certificate stating, with the written concurrence of the
Independent Engineer, that the requirements under Section 6.1.2 have been
satisfied (the "MECHANICAL COMPLETION CERTIFICATE") or (ii) if reasonable cause
exists for doing so, notify Contractor in writing that Mechanical Completion has
not been achieved, stating the reasons therefor. In the event Owner so
determines that Mechanical Completion has not been achieved in accordance with
the provisions of this Section 6.1.2, Contractor shall promptly take such action
or perform such additional Services as will achieve Mechanical Completion of the
Facility and shall issue to Owner and the Independent Engineer another Notice of
Mechanical Completion


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<PAGE>

pursuant to Section 6.1.2.1 hereof. Such procedure shall be repeated as
necessary until Mechanical Completion of the Facility has been achieved. For all
purposes of this Agreement, the date of achievement of Mechanical Completion
shall be the date on which Owner delivers to Contractor the Mechanical
Completion Certificate corresponding to the actual achievement of Mechanical
Completion pursuant to this Section 6.1.2.2.

        6.2 PERFORMANCE TESTS. Once Mechanical Completion has been achieved and
subject to the provisions of Section 6.2.1 hereof, Contractor shall perform the
Performance Tests of the Facility in accordance with Appendix D hereto. Owner
shall designate and make available qualified and authorized representatives to
observe the Performance Tests and monitor the taking of measurements to
determine the level of achievement of the Performance Guarantees, all in
accordance with Appendix D hereto. The Independent Engineer and, upon Owner's
request, the Power Purchaser and the Transmitting Utility shall be permitted to
observe the Performance Tests. Subject to Section 6.3.4 hereof, until Final
Acceptance of the Facility has occurred, Contractor may undertake efforts to
improve the performance of the Facility and may cause additional Performance
Tests to be performed and re-performed in order to improve the performance
results to reduce Contractor's liability for amounts payable as Performance
Guarantee Payments with respect to the Facility. Contractor shall keep Owner and
the Independent Engineer apprised of the specific schedule, and changes therein,
for the commencement and re-performance of Performance Tests. Contractor, at its
discretion, may prematurely terminate any Performance Test in a manner
consistent with Appendix D hereto, the Electrical Interconnection Requirements,
the PPA Operating Requirements, Applicable Laws, Applicable Permits and Prudent
Utility Practices. Prior to commencing any Performance Tests hereunder, Owner
and Contractor shall mutually and reasonably agree upon more detailed procedures
and notice requirements regarding rescheduling or restarting any such tests,
which procedures and notice requirements shall be subject to the approval of the
Independent Engineer and, if applicable, the Power Purchaser and the
Transmitting Utility, such approval not to be unreasonably withheld or delayed.

                6.2.1 PERFORMANCE TEST CRITERIA. Each Performance Test which is
used in connection with achievement of Provisional Acceptance or Final
Acceptance shall consist of the operation of the Facility as a whole in
accordance with the performance test terms and conditions set forth in Appendix
D hereto while using Gas for fuel.


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<PAGE>

                6.2.2 NOT USED.

                6.2.3 NOTICE OF PERFORMANCE TESTING. Contractor shall use all
reasonable efforts to give Owner and the Independent Engineer (i) Contractor's
schedule for Performance Tests and their projected commencement dates at least
thirty (30) days (or if a shorter period of time is reasonably necessary to
maintain compliance with the Project Schedule, such shorter period of time as
may be reasonably acceptable to Owner, the Independent Engineer and the
Transmitting Utility) prior thereto, and (ii) at least fourteen (14) days' (or
if a shorter period of time is reasonably necessary to maintain compliance with
the Project Schedule, such shorter period of time as may be reasonably
acceptable to Owner, the Independent Engineer and the Transmitting Utility)
written notice in advance of the date on which Contractor intends to commence
such testing of the Facility under this Agreement. Within five (5) days of
receipt of any such notice of testing, Owner shall either (a) instruct
Contractor to proceed with such testing, or (b) instruct Contractor to delay
such testing if Mechanical Completion has not been achieved by such date.
Contractor shall not cause such testing to be performed if any aspect of the
Project has not been completed by Contractor, the completion of which is
required for the safe operation of the Facility during a Performance Test in
accordance with Applicable Laws, Applicable Permits, Prudent Utility Practices,
the Instruction Manual, the Electrical Interconnection Requirements and the PPA
Operating Requirements (in the event and only to the extent applicable to such
testing operations).

                6.2.4 DISPOSITION OF OUTPUT. At all times when Contractor
desires to conduct start-up, testing (including Performance Tests ), or other
operations of any portion of the Facility in furtherance of Performance Tests
or repair and maintenance, Owner shall, at no expense to Contractor, arrange
for the disposition of the Project's output of electricity (in accordance
with the requirements set forth in Appendix A hereto) in such manner as Owner
shall determine. All output of electricity from the Project and all proceeds
from the sale thereof shall be the property of Owner.

                6.2.5 NOT USED.

                6.2.6 RECONFIGURATION. After each Performance Test
conducted or attempted hereunder, Contractor shall leave the Project in, or
return the Project to, the best operating control settings and configurations
for the Project for those periods during which Contractor is not causing any
Performance Tests to be conducted.

                6.2.7 COMPLETED PERFORMANCE TESTS. By the report described
in Section 6.3.1, 6.5.1.1 or 6.6.2 hereof, Contractor may declare any
Performance Test completed in accordance with Section 6.2.1 above to be a
Completed Performance Test if

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<PAGE>

and only if during such tests the operation of the Facility complies with all
Applicable Laws, Applicable Permits, the Electrical Interconnection
Requirements, the PPA Operating Requirements (in the event and to the extent
applicable to such testing operations) and the Guaranteed Emissions Limits
(which compliance with Applicable Laws, Applicable Permits or Guaranteed
Emissions Limits may be based upon a permanent waiver, the terms and conditions
of which are acceptable to Owner in its reasonable discretion, PROVIDED that
Contractor obtains (at Contractor's sole expense and effort, but with Owner's
reasonable assistance) such permanent waiver); PROVIDED, FURTHER, that unless
otherwise approved by Owner as set forth in the following sentence, the
operation of the Facility shall not constitute a Completed Performance Test
hereunder if such compliance with Applicable Laws, Applicable Permits and other
required emission standards is based upon a temporary waiver or variance or
other temporary grace period, rather than based on demonstrated compliance with
all such Applicable Laws, Applicable Permits and other required emission
standards that the Facility will have to be capable of complying with on a long
term basis. Owner shall not unreasonably withhold or delay its approval of a
Completed Performance Test being based upon a temporary waiver, variance or
grace period as set forth in the second proviso to the preceding sentence in the
event that Contractor demonstrates to the satisfaction of Owner and the
Independent Engineer that the Facility will be capable of complying with such
long-term requirements prior to the time at which such temporary waiver,
variance or grace period may expire; PROVIDED, FURTHER, that Owner may require
as a condition to any approval under such proviso that, among other things, (i)
Final Acceptance shall not be deemed to be achieved hereunder until such time as
such long term compliance is demonstrated and (ii) Provisional Acceptance Late
Completion Payments under Section 7.2 hereof shall recommence if and for so long
as the operation of the Facility is restricted below its demonstrated
Performance Guarantee levels as a result of the expiration of or other change in
any such temporary waiver or variance or other temporary grace period.

        6.3 PROVISIONAL ACCEPTANCE. Provisional Acceptance shall be achieved
hereunder with respect to the Facility upon the earlier to occur of (i) Final
Acceptance and(ii) satisfaction of the following conditions:

        (a) Contractor has caused a Completed Performance Test in accordance
     with Section 6.2 hereof to be concluded in which the Facility, while
     operating on Gas, demonstrates during such Performance Test an average
     net electrical output and a net heat rate (each as measured and
     corrected to the design operating conditions, all in accordance with the
     procedures set forth in Appendix D hereto) of [*] (or higher) of the
     Electrical Output Guarantee and [*] (or lower) of the Heat Rate
     Guarantee (PROVIDED that each such level of achievement shall be


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<PAGE>

      calculated in the manner described in Sections 8.1.1 and 8.1.2
      hereof, respectively); PROVIDED, HOWEVER, that if Contractor has made
      any modifications or repairs to the Facility since the date of such
      Completed Performance Test, which modifications or repairs could
      reasonably be expected to adversely affect the performance of the
      Facility, and Contractor has not reversed such modifications or repairs
      to Owner's (and the Independent Engineer's) satisfaction, then Owner
      may require Contractor to conduct another Completed Performance Test on
      the Facility in accordance with Section 6.2 hereof, which Completed
      Performance Test shall be utilized for purposes of this Section 6.3(a);
      and

        (b) The Facility has achieved Mechanical Completion, and Contractor has
      not made any modification or repair following the date of achievement of
      Mechanical Completion that could reasonably be expected, in the judgment
      of Owner and the Independent Engineer, to adversely affect the
      performance of the Facility unless Contractor has reversed such
      modification or repair to Owner's (and the Independent Engineer's)
      satisfaction.

                6.3.1 NOTICE AND REPORT OF PROVISIONAL ACCEPTANCE. When
Contractor believes that it has achieved Provisional Acceptance of the Facility,
it shall deliver to Owner and the Independent Engineer a notice thereof (the
"NOTICE OF PROVISIONAL ACCEPTANCE"). The Notice of Provisional Acceptance shall
contain a report of the results of the Performance Test and a report of the
Services completed, in each case in a form mutually and reasonably agreeable to
Contractor and Owner (with the written concurrence of the Independent Engineer)
and with sufficient detail to enable Owner and the Independent Engineer to
determine whether Provisional Acceptance of the Facility has been achieved.

                6.3.2 ACHIEVEMENT OF PROVISIONAL ACCEPTANCE. (a) Owner and the
Independent Engineer shall inspect all Services completed by Contractor and
review the results of the Performance Test and the reports submitted by
Contractor, and (b) Owner shall either (i) deliver to Contractor a certificate
stating, with the written concurrence of the Independent Engineer, that the
requirements under Section 6.3 hereof have been satisfied (the "PROVISIONAL
ACCEPTANCE CERTIFICATE"), or (ii) if reasonable cause exists for doing so,
notify Contractor in writing that Provisional Acceptance of the Facility has not
been achieved, stating the reasons therefor; PROVIDED that Owner shall deliver
such certificate or notice within seven (7) days (or such shorter period as may
be reasonably achieved with Owner's use of reasonable efforts) following receipt
of the Notice of Provisional Acceptance.


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<PAGE>

                        6.3.2.1 RE-SUBMISSION. In the event Owner determines in
accordance with Section 6.3.2 hereof that Provisional Acceptance has not been
achieved, Contractor shall promptly take such action or perform such additional
Services as will achieve Provisional Acceptance and, if Contractor believes that
Provisional Acceptance has been achieved, shall issue to Owner and the
Independent Engineer another Notice of Provisional Acceptance pursuant to
Section 6.3.1 hereof. Unless Final Acceptance shall have previously occurred,
such procedure shall be repeated as necessary until Provisional Acceptance has
been achieved.

                        6.3.2.2 DATE OF ACHIEVEMENT. For all purposes of this
Agreement, the date of achievement of Provisional Acceptance shall be the date
on which Owner delivers to Contractor the Provisional Acceptance Certificate
corresponding to the actual achievement of Provisional Acceptance of the
Facility pursuant to Section 6.3.2 hereof.

                6.3.3 OPERATION OF THE FACILITY. Upon the earlier to occur of
Provisional Acceptance and Final Acceptance, Owner shall take possession and
control of the Facility and shall thereafter be solely responsible for the
operation and maintenance thereof, except as otherwise set forth herein. Prior
to such possession and control by Owner, Contractor shall, in the course of
performing any start-up, commissioning and testing activities, in consultation
with Owner and its operating personnel, operate the Facility in a manner
consistent with Applicable Laws, Applicable Permits, Prudent Utility Practices,
the Electrical Interconnection Requirements, the PPA Operating Requirements (in
the event and to the extent applicable to such start-up, commissioning and
testing activities), the Instruction Manual, and the other requirements set
forth in this Agreement.

                6.3.4 ACCESS FOLLOWING OWNER'S TAKING POSSESSION AND CONTROL OF
THE FACILITY.

                        6.3.4.1 ACCESS FOLLOWING OWNER'S TAKING POSSESSION AND
CONTROL OF THE FACILITY. After Owner takes possession and control of the
Facility pursuant to Section 6.3.3 hereof, Contractor (i) shall have reasonable
access to the Facility and the reasonable cooperation of Owner so as to complete
the Services (including without limitation making reasonable repair and
replacement alternatives to minimize any Performance Guarantee Payments under
Article 8 hereof if Final Acceptance has not yet occurred) and to perform its
obligations pursuant to Article 10 hereof, and (ii) to the extent necessary to
so complete the Services and perform its obligations under Article 10 hereof,
shall have reasonable access to plant operating data and records. Contractor
shall complete the Services and shall perform its obligations under Article 10
with minimal


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<PAGE>

interference to operations of the Facility, in the event and only to the extent
any such interference is necessary and consistent with Owner's rights and
obligations under the PPA Operating Requirements.

                        6.3.4.2 NO INTERFERENCE WITH OPERATIONS. Notwithstanding
anything to the contrary in this Section 6.3.4, following the earlier to occur
of (a) Provisional Acceptance and (b) Final Acceptance, Owner shall not be
obligated hereunder to shutdown, reduce or otherwise interfere with its
operation of the Facility as a direct or indirect result of allowing Contractor
access pursuant to this Section 6.3.4 (unless, in the event and only to the
extent that, Owner determines that such outage or reduced operation would not
conflict with the PPA Operating Requirements and would be mutually beneficial to
both Parties, which determination shall not be unreasonably withheld or
delayed). Owner will provide Contractor with reasonable advance notice of any
extended scheduled outages of the Facility and the expected duration thereof.

        6.4 NOT USED.

        6.5 FINAL ACCEPTANCE. Final Acceptance of the Facility may be achieved
hereunder only pursuant to any of Sections 6.5.1, 6.5.2, 6.5.3 or 6.5.4.


                6.5.1 DEMONSTRATION OF FINAL ACCEPTANCE. Final Acceptance of the
Facility shall be achieved hereunder if the following conditions have been met:

                (a) Contractor has caused a Completed Performance Test in
        accordance with Section 6.2 hereof to be concluded in which the
        Facility, while operating on Gas, demonstrates during such Performance
        Test an average net electrical output and a net heat rate (each as
        measured and corrected to the design operating conditions, all in
        accordance with the procedures set forth in Appendix D hereto) of [*]
        (or higher) of the Electrical Output Guarantee and [*] (or lower) of
        the Heat Rate Guarantee (PROVIDED that each such level of achievement
        shall be calculated in the manner described in Sections 8.1.1 and 8.1.2
        hereof, respectively); PROVIDED, HOWEVER, that if Contractor has made
        any modifications or repairs to the Facility since the date of such
        Completed Performance Test, which modifications or repairs could
        reasonably be expected to adversely affect the performance of the
        Facility, and Contractor has not reversed such modifications or repairs
        to Owner's (and the Independent Engineer's) satisfaction, then Owner may
        require Contractor to conduct another Completed Performance Test on the
        Facility in accordance with Section 6.2 hereof, which Completed
        Performance Test shall be utilized for purposes of this Section
        6.5.1(a). For the avoidance of doubt, the Parties acknowledge and agree
        that if Contractor shall


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<PAGE>


        have already achieved Provisional Acceptance and subsequent thereto
        shall have made modifications or repairs that could not reasonably be
        expected to adversely affect the performance of the Facility, this
        Section 6.5.1(a) shall not require Contractor to reperform a Completed
        Performance Test in order to maintain its already-demonstrated
        Provisional Acceptance; however, Contractor shall not be entitled to
        claim improved performance levels at Final Acceptance pursuant to this
        Section 6.5.1(a) after such modifications or repairs have been made
        without demonstrating such improved performance pursuant to a Completed
        Performance Test;

                (b) The Facility has achieved Mechanical Completion, and
        Contractor has not made any modification or repair following the date of
        achievement of Mechanical Completion that could reasonably be expected,
        in the judgment of Owner and the Independent Engineer, to adversely
        affect the performance of the Facility unless Contractor has reversed
        such modification or repair to Owner's (and the Independent Engineer's)
        satisfaction;

                (c) The Reliability Guarantee has been achieved pursuant to
        Section 6.6 hereof; and

                (d) Contractor has completed performance of the Services except
        for (i) any remaining Punch List items and (ii) Services that are
        required by the terms of this Agreement to be completed after the
        achievement of Final Acceptance (such as Contractor's warranty
        obligations under Article 10 hereof).

                        6.5.1.1 NOTICE AND REPORT OF FINAL ACCEPTANCE. When
Contractor believes that it has achieved Final Acceptance of the Facility, it
shall deliver to Owner and the Independent Engineer a notice thereof (the
"NOTICE OF FINAL ACCEPTANCE"). The Notice of Final Acceptance shall contain a
report of the results of the Performance Test and a report of the Services
completed, in each case in a form mutually and reasonably agreeable to
Contractor and Owner (with the written concurrence of the Independent Engineer)
and with sufficient detail to enable Owner and the Independent Engineer to
determine whether Final Acceptance of the Facility has been achieved.

                        6.5.1.2 ACHIEVEMENT OF FINAL ACCEPTANCE. (a) Owner and
the Independent Engineer shall inspect the Facility and all Services performed
hereunder with respect thereto and review the results of the Performance Test
and the reports submitted by Contractor, and (b) Owner shall either (i) deliver
to Contractor a certificate stating, with the written concurrence of the
Independent Engineer, that the requirements under Section 6.5.1 have been
satisfied (the "FINAL ACCEPTANCE CERTIFICATE") or (ii) if


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<PAGE>

reasonable cause exists for doing so, notify Contractor in writing that Final
Acceptance has not been achieved, stating the reasons therefor; PROVIDED that
Owner shall deliver such certificate or notice within ten (10) days (or such
shorter period as may be reasonably achieved with Owner's use of reasonable
efforts) following receipt of the Notice of Final Acceptance.

                                6.5.1.2.1 RE-SUBMISSION. In the event that Owner
                        determines in accordance with Section 6.5.1.2 that Final
                        Acceptance has not been achieved, Contractor shall
                        promptly take such action or perform such additional
                        Services as will achieve Final Acceptance and shall
                        issue to Owner and the Independent Engineer another
                        Notice of Final Acceptance pursuant to Section 6.5.1.1
                        hereof. Such procedure shall be repeated as necessary
                        until Final Acceptance has been achieved or deemed to
                        have occurred.

                                6.5.1.2.2 DATE OF ACHIEVEMENT. For all purposes
                        of this Agreement: (i) if Provisional Acceptance of the
                        Facility has not theretofore occurred hereunder, the
                        date of achievement of Final Acceptance shall be deemed
                        to be the date on which Owner delivers to Contractor the
                        Final Acceptance Certificate corresponding to the actual
                        achievement of Final Performance Acceptance pursuant to
                        this Section 6.5.1.2; and (ii) if Provisional Acceptance
                        of the Facility has theretofore occurred hereunder, the
                        date of achievement of Final Performance Acceptance
                        shall be deemed to be the later of (A) the date on which
                        Provisional Acceptance of the Facility occurred
                        hereunder and (B) the date on which Contractor delivers
                        to Owner pursuant to Section 6.5.1.1 hereof the Notice
                        of Final Acceptance corresponding to the actual
                        achievement of Final Acceptance pursuant to this Section
                        6.5.1.2.

             6.5.2 OWNER'S ELECTION OF FINAL ACCEPTANCE. At any time, by
giving notice to Contractor, Owner in its sole discretion may elect, with the
written concurrence of the Independent Engineer, to effect Final Acceptance,
in which case Final Acceptance shall be deemed effective as of the date of
such notice, and Contractor shall have no liability to Owner for any amounts
thereafter arising as Performance Guarantee Payments for failure of the
Facility to achieve any or all of the Performance Guarantees applicable
thereto (it being understood that in such event Contractor shall not be
liable to Owner for any Performance Guarantee payments hereunder other than
those Interim Period Rebates that arose prior to such election by Owner).

                                       65
<PAGE>

             6.5.3 CONTRACTOR'S ELECTION OF FINAL ACCEPTANCE. (a) At any time
after Provisional Acceptance of the Facility has been achieved, Contractor
may, after exercising all reasonable repair and replacement alternatives, if
any, that could reasonably be expected to improve for Final Acceptance the
level of achievement of the Performance Guarantees demonstrated at
Provisional Acceptance and PROVIDED that the Reliability Guarantee shall have
been achieved pursuant to Section 6.6 hereof, give to Owner six (6) days'
(but not more than fifteen (15) days') notice of its intention to elect to
declare Final Acceptance. In such event, PROVIDED that Contractor has not
made any modifications or repairs to the Facility since the date of its most
recent Completed Performance Test, which work or modifications could
reasonably be expected to adversely affect the performance of the Facility
and which have not been reversed by Contractor to Owner's (and the
Independent Engineer's) satisfaction, Contractor may elect to use the results
of the most recent Completed Performance Test for the purpose of determining
the Facility's level of achievement of the Performance Guarantees. If (i)
Contractor does not so elect or (ii) any such modifications or repairs have
been made to the Facility by Contractor after the date of the most recent
Completed Performance Test and Owner requests that Contractor conduct another
Completed Performance Test, then Contractor shall conduct a final Completed
Performance Test on the Facility in accordance with Section 6.2 hereof that
demonstrates a level of achievement of [*] (or higher) of the Electrical
Output Guarantee and [*] (or lower) of the Heat Rate Guarantee in accordance
with the performance test procedures set forth in Appendix D hereto. For the
avoidance of doubt, the Parties acknowledge and agree that if Contractor
shall have already achieved Provisional Acceptance and subsequent thereto
shall have made modifications or repairs that could not reasonably be
expected to adversely affect the performance of the Facility, this Section
6.5.3(a) shall not require Contractor to reperform a Completed Performance
Test in order to achieve Final Acceptance at the levels of achievement of the
Performance Guarantees already demonstrated at Provisional Acceptance;
however, Contractor shall not be entitled to claim improved performance
levels at Final Acceptance pursuant to this Section 6.5.3(a) after such
modifications or repairs have been made without demonstrating such improved
performance pursuant to a Completed Performance Test. Contractor will be
obligated to pay all Performance Guarantee Payments as determined by the
final or most recent Completed Performance Test, as applicable, pursuant to
Article 8 hereof, which payment shall be a condition precedent to the
effectiveness of Contractor's election of Final Acceptance under this Section
6.5.3; PROVIDED that this Section 6.5.3 in no way detracts from or limits any
of Contractor's obligations hereunder to comply and cause the Project to
comply with all Applicable Laws, all Applicable Permits, the Electrical
Interconnection Requirements, the PPA Operating Requirements and the
Guaranteed Emissions Limits, to pay any Provisional Acceptance Late
Completion Payments required hereunder and to perform its

                                       66
<PAGE>

other obligations hereunder following Final Acceptance (including without
limitation its obligation to achieve Project Completion).

                        (b) In the event Contractor elects to declare Final
Acceptance under this Section 6.5.3, Final Acceptance shall be deemed effective
as of the last to occur of (i) the date of Owner's receipt of the declaration
and report of the final Completed Performance Test, or, as applicable, the most
recent Completed Performance Test, referred to in this Section 6.5.3, and (ii)
the effective date of the achievement of the Reliability Guarantee pursuant to
Section 6.6.4 hereof.

                        6.5.4 DEEMED FINAL ACCEPTANCE. In the event that on or
before the Guaranteed Final Acceptance Date (i) the Facility has achieved
Provisional Acceptance and (ii) the Reliability Guarantee has been achieved,
then Final Acceptance of the Facility shall be deemed to occur hereunder on the
Guaranteed Final Acceptance Date; PROVIDED that this Section 6.5.4 in no way
detracts from or limits any of Contractor's obligations hereunder to comply, and
to cause the Project to comply, with all Applicable Laws, all Applicable
Permits, the Electrical Interconnection Requirements, the PPA Operating
Requirements and the Guaranteed Emissions Limits, to pay any Provisional
Acceptance Late Completion Payments and Performance Guarantee Payments required
hereunder and to perform its other obligations hereunder following such deemed
Final Acceptance (including without limitation its obligation to achieve Project
Completion). In the event that Final Acceptance is deemed to have occurred
pursuant to this Section 6.5.4, except as may be otherwise provided pursuant to
the following sentence, the most recent Completed Performance Test of the
Facility performed before the date of such deemed achievement shall be used for
the purpose of determining the Facility's level of achievement of the applicable
Performance Guarantees pursuant to Article 8 hereof, and Contractor will be
obligated to pay all Performance Guarantee Payments as determined by such
Completed Performance Test, which payment shall be a condition precedent to the
deemed achievement of Final Performance Acceptance under this Section 6.5.4. If
Contractor has made any modifications or repairs to the Facility after the date
of such most recent Completed Performance Test, which modifications or repairs
could reasonably be expected to adversely affect the performance of the
Facility, and Contractor has not reversed such modifications or repairs to
Owner's (and the Independent Engineer's) satisfaction, then Owner may require
Contractor to conduct another Completed Performance Test of the Facility in
accordance with Section 6.2 hereof that demonstrates a level of achievement of
[*] (or higher) of the Electrical Output Guarantee and [*] (or lower) of the
Heat Rate Guarantee in accordance with the performance test procedures set forth
in Appendix D hereto, which Completed Performance Test shall be used for the
purpose of determining the Facility's level of achievement of the applicable
Performance Guarantees pursuant to Section 8.1 hereof.


                                       67
<PAGE>

For the avoidance of doubt, the Parties acknowledge and agree that if Contractor
shall have already achieved Provisional Acceptance and subsequent thereto shall
have made modifications or repairs that could not reasonably be expected to
adversely affect the performance of the Facility, this Section 6.5.3(a) shall
not require Contractor to reperform a Completed Performance Test in order to
achieve Final Acceptance at the levels of achievement of the Performance
Guarantees already demonstrated at Provisional Acceptance; however, Contractor
shall not be entitled to claim improved performance levels at Final Acceptance
pursuant to this Section 6.5.3(a) after such modifications or repairs have been
made without demonstrating such improved performance pursuant to a Completed
Performance Test.

        6.6 RELIABILITY RUN. Contractor guarantees that, in no event later than
the occurrence of Final Acceptance of the Facility hereunder, the Facility shall
have successfully completed the Reliability Run (the "RELIABILITY GUARANTEE").

                6.6.1 RELIABILITY GUARANTEE. The Reliability Guarantee shall
have been achieved hereunder if and only if the Facility demonstrates an
Average Equivalent Availability of not less than [*] while operating over a
period of [*] in accordance with Applicable Laws, Applicable Permits, the
Electrical Interconnection Requirements, the PPA Operating Requirements, the
Guaranteed Emissions Limits and the Instruction Manual, and with Contractor
electing which period of [*] should comprise the Reliability Run.

                6.6.2 NOTICE AND REPORT OF RELIABILITY GUARANTEE ACHIEVEMENTS.
When Contractor believes that it has achieved the Reliability Guarantee, it
shall deliver to Owner and the Independent Engineer a written notice thereof
(the "NOTICE OF RELIABILITY GUARANTEE ACHIEVEMENT"). The Notice of Reliability
Guarantee Achievement shall contain a report of the results of the Reliability
Run in a form mutually and reasonably agreeable to Contractor and Owner (with
the written concurrence of the Independent Engineer) and with sufficient detail
to enable Owner and the Independent Engineer to determine whether the
Reliability Guarantee has been achieved.

                6.6.3 ACHIEVEMENT OF THE RELIABILITY GUARANTEE. Within fifteen
(15) days (or such shorter period as may be reasonably achieved with Owner's use
of reasonable efforts) following receipt of the Notice of Reliability Guarantee
Achievement, (a) Owner and the Independent Engineer shall review the results of
the Reliability Run, and (b) Owner shall either (i) deliver to Contractor a
certificate stating, with the written concurrence of the Independent Engineer,
that the requirements in Section 6.6.1 hereof have been satisfied (the
"RELIABILITY CERTIFICATE"), or (ii) if reasonable cause exists for doing so,
notify Contractor in writing that the Reliability Guarantee has not been


                                       68
<PAGE>

achieved, stating in detail the reasons therefor. In the event that Owner so
determines that the Reliability Guarantee has not been achieved, Contractor
shall consult with Owner as to the reasons for such failure and thereafter shall
take such action or perform such additional Services as will allow the
Reliability Run to be re-run as promptly as is practicable. Such procedure shall
be repeated as necessary until the Reliability Guarantee has been achieved.

                6.6.4 DATE OF ACHIEVEMENT. For all purposes of this Agreement,
the date of achievement of the Reliability Guarantee shall be deemed to be the
date on which Contractor delivers to Owner the Notice of Reliability Guarantee
Achievement relating to the Reliability Run that Owner subsequently delivered
the Reliability Certificate pursuant to Section 6.6.3 hereof.

        6.7 PROJECT COMPLETION. Project Completion shall be achieved
hereunder if and only if:

                (a) Final Acceptance of the Facility shall have occurred, and
        the Performance Guarantees with respect to the Facility shall have been
        achieved (or in lieu of achievement of the Performance Guarantees,
        applicable rebates under Article 8 shall have been paid, or Owner shall
        have elected Final Acceptance under Section 6.5.2 hereof);

                (b) The Reliability Guarantee shall have been achieved;

                (c) Contractor shall have demonstrated during the Completed
        Performance Test that the operation of the Facility does not exceed the
        Guaranteed Emissions Limits;

                (d) The Facility has achieved Mechanical Completion, and
        Contractor has not made any modification or repair following the date of
        achievement of Mechanical Completion that could reasonably be expected,
        in the judgment of Owner and the Independent Engineer, to adversely
        affect the performance of the Facility unless Contractor has reversed
        such modification or repair to Owner's (and the Independent Engineer's)
        satisfaction;

                (e) The Punch List items shall have been completed in accordance
        with this Agreement; and

                (f) Contractor shall have performed all of the Services, other
        than those Services (such as Contractor's warranty obligations under
        Article 10 hereof) which by their nature are intended to be performed
        after Project Completion.


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<PAGE>

                6.7.1 NOTICE AND REPORT OF PROJECT COMPLETION. When Contractor
believes that it has achieved Project Completion, it shall deliver to Owner and
the Independent Engineer a written notice thereof (the "NOTICE OF PROJECT
COMPLETION"). The Notice of Project Completion shall contain a report in a form
mutually and reasonably agreeable to Contractor and Owner (with the written
concurrence of the Independent Engineer) and with sufficient detail to enable
Owner and the Independent Engineer to determine the achievement by Contractor of
the Punch List items and such other information as Owner or the Independent
Engineer may require to determine whether Project Completion has been achieved.

                6.7.2 ACHIEVEMENT OF PROJECT COMPLETION. (a) Within fifteen (15)
days (or such shorter period as may be reasonably achieved with Owner's use of
reasonable efforts) following receipt of the Notice of Project Completion, Owner
and the Independent Engineer shall inspect all work and review the report
submitted by Contractor, and (b) Owner shall either (i) deliver to Contractor a
certificate stating, with the concurrence of the Independent Engineer, that the
requirements under clauses (a) through (f) of Section 6.7 have been satisfied
(the "PROJECT COMPLETION CERTIFICATE") or (ii) if reasonable cause exists for
doing so, notify Contractor in writing that Project Completion has not been
achieved, stating the reasons therefor. In the event that Owner so determines
that Project Completion has not been achieved, Contractor shall promptly take
such action or perform such additional work as will achieve Project Completion
and shall issue to Owner and the Independent Engineer another Notice of Project
Completion pursuant to Section 6.7.1 hereof. Such procedure shall be repeated as
necessary until Project Completion is achieved. For all purposes of this
Agreement, the date of achievement of Project Completion shall be the date on
which Owner delivers to Contractor the Project Completion Certificate
corresponding to the actual achievement of Project Completion pursuant to this
Section 6.7.2.

                6.7.3 PROJECT COMPLETION DEADLINE . Contractor shall be
obligated hereunder to achieve Project Completion not later than ninety (90)
days after Final Acceptance of the Facility (the "PROJECT COMPLETION DEADLINE").
If Contractor does not achieve Project Completion on or before the Project
Completion Deadline or if Contractor is not proceeding with all due diligence to
complete the Services in order to achieve Project Completion by such deadline,
Owner may retain another contractor to complete such work and Contractor shall
pay to Owner upon demand any and all costs reasonably incurred by Owner in
completing the Services in the event and only to the extent such costs exceed
the remaining unpaid portion of the Contract Price that would have been payable
to Contractor hereunder to complete the Services had this Agreement been
performed.


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<PAGE>

                                    ARTICLE 7
                                COMPLETION DATES

        7.1 GUARANTEED COMPLETION DATES. Contractor guarantees that: (i) the
earlier to occur of Provisional Acceptance and Final Acceptance of the Facility
shall be achieved on or before the Guaranteed Provisional Acceptance Date; and
(ii) Final Acceptance of the Facility shall be achieved on or before the
Guaranteed Final Acceptance Date.

        7.2 GUARANTEED COMPLETION DATE PRICE REBATES. (a) If neither Provisional
Acceptance nor Final Acceptance of the Facility occurs on or before the thirty
fifth (35th) day following the Guaranteed Provisional Acceptance Date,
Contractor hereby agrees to pay to Owner, as a rebate and not as a penalty and
as part of the consideration for awarding the contract, as follows:

                (i) For each calendar day by which the earlier to occur of
        Provisional Acceptance and Final Acceptance of the Facility is later
        than thirty five (35) calendar days after the Guaranteed Provisional
        Acceptance Date, an amount equal to [*] per day (the "PROVISIONAL
        ACCEPTANCE LATE COMPLETION PAYMENTS"); PROVIDED, HOWEVER, that any
        Provisional Acceptance Late Completion Payments due hereunder shall
        be reduced (but in no event to less than zero) by the sum of all
        gross revenue received by Owner from such Facility operations until
        the earlier to occur of Provisional Acceptance and Final Acceptance
        minus all fuel, labor and other fixed and variable operation and
        maintenance costs, all debt service and other costs and all taxes
        incurred or accrued by Owner during such period.

                  (b) Notwithstanding anything to the contrary in Section 7.2(a)
hereof, the aggregate of the Provisional Acceptance Late Completion Payments
required to be made by Contractor pursuant to this Section 7.2 shall be equal to
the lesser of: (i) the aggregate of the Provisional Acceptance Late Completion
Payments due pursuant to the terms of Section 7.2(a) hereof; and (ii) the
maximum aggregate value of the Provisional Acceptance Late Completion Payments
as a percentage of the Contract Price set forth in Section 9.1 hereof.

                        7.2.1 PLAN TO ACHIEVE PROVISIONAL AND FINAL
ACCEPTANCE. (a) If neither Provisional Acceptance nor Final Acceptance of the
Facility occurs on or before the date that is seventy five (75) days after the
Guaranteed Provisional Acceptance Date, Contractor shall, on such date, submit
for approval by Owner and the Independent Engineer a Plan to accelerate the
performance of the Services as necessary in order to


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<PAGE>

achieve Final Acceptance of the Facility by the Guaranteed Final Acceptance
Date. Upon receipt of such a Plan, Owner (and, at Owner's request, the
Independent Engineer) shall promptly review the Plan and, within ten (10) days
after receipt thereof, shall provide Contractor with written approval or
disapproval of the Plan, such approval not to be unreasonably withheld or
delayed. If the Plan is not approved by Owner, Contractor shall revise the Plan
and resubmit a revised Plan for approval by Owner (and, at Owner's request, the
Independent Engineer). This procedure shall be repeated until (i) Provisional
Acceptance or Final Acceptance of the Facility is achieved or (ii) a Plan
relating to the Facility is approved by Owner and the Independent Engineer.

                (b) Notwithstanding anything to the contrary in Section 7.2.1(a)
hereof, if neither Provisional Acceptance nor Final Acceptance of the Facility
occurs on or before the date that is seventy five (75) days after the Guaranteed
Provisional Acceptance Date and Contractor determines that the Services cannot,
despite its best efforts, be accelerated to achieve Final Acceptance of the
Facility by the Guaranteed Final Acceptance Date, then Contractor shall, on such
date, submit a Plan to accelerate the performance of the Services as necessary
in order to achieve Final Acceptance of the Facility as soon as possible.
Following receipt of such a Plan, Owner shall have the right in its sole
discretion to require Contractor to proceed in accordance with such Plan (as it
may be modified by Owner or the Independent Engineer as set forth in the
following sentence) or , upon fifteen (15) days prior notice to Contractor, to
declare an Event of Default pursuant to Section 16.1(i) hereof; PROVIDED,
HOWEVER, that if Contractor shall have demonstrated to the reasonable
satisfaction of Owner and the Independent Engineer that (x) the primary reason
for Contractor's inability to so achieve Final Acceptance by the Guaranteed
Final Acceptance Date is a defect or a delivery failure with respect to one or
more of the major equipment components in the Facility's power island or
transformer being provided by Subcontractors, and (y) such defect or delivery
failure, or the consequent extended delay in Contractor's ability to achieve
Final Acceptance as a result thereof, would not have been avoided by
Contractor's compliance with the Quality Assurance Plan and the other standards
of performance as specified in Section 2.3.1 hereof, then Owner and the
Independent Engineer shall not unreasonably withhold approval of a Plan (as it
may be modified by Owner or the Independent Engineer as set forth in the
following sentence) that accelerates the performance of the Services in such a
manner as to achieve Final Acceptance as soon as possible (it being understood
and acknowledged that such a Plan may require the replacement of such
SUBCONTRACTORS). With respect to a Plan submitted under this Section 7.2.1(b),
if Owner or the Independent Engineer in good faith believe such Plan does not
accelerate the performance of the Services in such a manner as to achieve Final
Acceptance as soon as possible, Owner shall have the right to modify such Plan
(with the written concurrence of the Independent Engineer) as reasonably
necessary to cause it to do so. In the event any Plan is so


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<PAGE>

approved or modified by Owner (with the written concurrence of the Independent
Engineer), Contractor shall thereafter perform the Services in accordance with
such approved or modified Plan.

                (c) For the avoidance of doubt, all costs and expenses incurred
by Contractor and its Subcontractors in connection with the development and
performance of any Plan pursuant to this Section 7.2.1, including without
limitation any overtime or other acceleration costs and expenses, shall be
solely the responsibility of Contractor, and Owner shall have no responsibility
or liability with respect thereto.

        7.3 EARLY COMPLETION BONUS. In the event that either Provisional
Acceptance or Final Acceptance occurs hereunder pursuant to Sections 6.3.1 or
6.5.1, respectively, prior to the Guaranteed Provisional Acceptance Date,
Owner shall pay Contractor an amount equal to [*] for each day before the
Guaranteed Provisional Acceptance Date that either Provisional Acceptance has
been achieved pursuant to Section 6.3.1 hereof or Final Acceptance has been
achieved pursuant to Section 6.5.1 hereof; PROVIDED, HOWEVER, that such
payment by Owner pursuant to this sentence shall not exceed a maximum
aggregate amount equal to [*], and such payment shall be due and payable to
Contractor (subject to Section 7.3.1 hereof) thirty (30) days after the date
of achievement of Final Acceptance. Owner's obligation to pay any such bonus
payments shall not be secured by any lien or security interest on the
Facility or any other assets of Owner.

                7.3.1 PAYMENT OF BONUS. In the event and to the extent that
Owner does not have sufficient funds available to make any bonus payments
pursuant to this Section 7.3 at the time such payment would otherwise be due and
payable (after the payment of or reservation for all Retainage hereunder, all
then-current operating and maintenance expenses, taxes, debt service and
required contributions to reserves under the Financing Documents, and
then-current reasonable working capital requirements), such unpaid bonus
payments (i) shall accrue interest from such otherwise applicable payment date
until paid at the rate set forth in Section 25.1 hereof and (ii) shall be
payable by Owner at the times and to the extent of fifty percent (50%) of the
first after-tax net cash flows from Facility operations that are distributable
to Owner in accordance with the provisions of the Financing Documents until paid
in full (including all applicable interest accrued thereon).


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<PAGE>

        7.4 REBATES REASONABLE; PAYMENT OF REBATES.

                7.4.1 REBATES REASONABLE. Owner and Contractor hereby
acknowledge and agree that the terms, conditions and amounts fixed pursuant to
Section 7.2 for Provisional Acceptance Late Completion Payments are reasonable,
considering the reduction in value of the Project and the increased costs that
it is anticipated Owner will incur in the event of Contractor's failure to
achieve at least one of Provisional Acceptance or Final Acceptance of the
Facility by the Guaranteed Provisional Acceptance Date. The amounts of these
rebates are agreed upon and fixed hereunder by the Parties because of the
difficulty of ascertaining on the date hereof the exact amount of reduction in
value of the Project and increased costs that will be actually incurred by Owner
in such event, and the Parties hereby agree that the rebate amounts specified
herein (a) shall be applicable regardless of the amount of such reduction in
value actually occurring and such increased costs actually incurred by Owner and
(b) shall be the sole and exclusive remedy of Owner and the sole liability of
Contractor under this Agreement for Contractor's delay in meeting the Guaranteed
Provisional Acceptance Date. Solely for clarification and for the avoidance of
doubt, the Parties hereby agree that this Section 7.4.1 shall not be construed
in any way to limit, extend or otherwise affect Contractor's obligations and
liabilities, or Owner's remedies, under this Agreement arising as a result of or
in connection with (i) an Event of Default under Section 16.1(i) or (j) hereof
or (ii) Contractor's obligation to achieve Final Acceptance and Project
Completion and to cause the Project to comply with all Applicable Laws, all
Applicable Permits and the Guaranteed Emission Limits. The payment of any such
rebates hereunder shall not affect Owner's rights under Articles 15 and 16
hereof or Owner's rights to receive price rebates pursuant to Article 8 hereof.

                7.4.2 PAYMENT OF REBATES. Contractor shall pay the rebates
required under Section 7.2 hereof monthly in arrears on the tenth (10th) day of
each month, with the last such payment to occur within ten days of the
determination that the first to occur of Provisional Acceptance or Final
Acceptance of the Facility has been achieved.

        7.5 NOT USED.

        7.6 ACHIEVEMENT OF CONSTRUCTION PROGRESS MILESTONES. Contractor is
obligated to achieve each Construction Progress Milestone on or before the
corresponding Construction Progress Milestone Date.

                7.6.1 EVIDENCE OF ACHIEVEMENT. At Owner's request,
Contractor shall be obligated to demonstrate, in a manner reasonably
satisfactory to Owner and


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<PAGE>

Independent Engineer, that each Construction Progress Milestone has been
achieved on or prior to the applicable Construction Progress Milestone Date.

                7.6.2 PLAN TO ACHIEVE CONSTRUCTION PROGRESS MILESTONES. (a) If
any Construction Progress Milestone has not been achieved on or before the
corresponding Construction Progress Milestone Date, Contractor shall promptly
prepare and submit to Owner and Independent Engineer, within thirty (30) days of
such Construction Progress Milestone Date, a Plan (which Plan may revise the
order of the milestones set forth in the Payment and Milestone Schedule, but
shall not increase the Contract Price or accelerate the timing of the Scheduled
Payments hereunder) to accelerate the performance of the Services that
reasonably demonstrates that Contractor will achieve Final Acceptance of the
Facility by the Guaranteed Final Acceptance Date. Upon receipt of such a Plan,
Owner (and, at Owner's request, the Independent Engineer) shall promptly review
the Plan and provide Contractor, within ten (10) days of receipt of such Plan,
with written notice of either (1) approval of the Plan, which approval will not
be unreasonably withheld or delayed, or (2) proposed revisions to or disapproval
of (with a summary of the perceived deficiencies therein) the Plan. Upon receipt
of any such notice from Owner under clause (2) of the preceding sentence,
Contractor shall promptly take one of the following actions: (x) revise the Plan
in accordance with the comments received pursuant to said clause (2) or in
accordance with such other changes as Contractor reasonably determines are
appropriate, and submit the revised Plan to Owner (and, at Owner's request, the
Independent Engineer), whereupon the procedure set forth in the preceding
sentence will be repeated; or (y) if Contractor in good faith believes that its
Plan as proposed reasonably demonstrates that Final Acceptance will be achieved
by the Guaranteed Final Acceptance Date, submit the issue for dispute resolution
pursuant to Article 21 hereof, in which event if the final decision thereunder
finds that the Contractor's proposed Plan does reasonably demonstrate the
likelihood of such achievement, such Plan shall be deemed approved by Owner. In
the event that (A) such a dispute on a Plan is submitted to dispute resolution
pursuant to clause (y) above and a final resolution thereof is not obtained
thereunder by the date that is ninety (90) days after the missed Construction
Progress Milestone Date, or (B) a Plan is otherwise not approved by Owner
pursuant to the review and resubmittal procedure set forth above by the date
that is ninety (90) days after the missed Construction Progress Milestone Date,
then either (I) Contractor shall thereafter proceed to perform the Services in
accordance with the Plan as revised in accordance with the most recent comments
submitted by Owner and Independent Engineer pursuant to clause (2) above
(PROVIDED that if a final decision subsequently received under clause (y) above
finds that Contractor's proposed Plan should have been approved by Owner,
Contractor shall be entitled hereunder to a Scope Change to reflect the
additional costs reasonably incurred by Contractor solely as a result


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<PAGE>

of proceeding in accordance with provisions of this clause (I) instead of its
proposed Plan), or (II) Contractor shall be in default hereunder pursuant to
Section 16.1(j) hereof.

                (b) Notwithstanding anything to the contrary in
Section 7.6.2(a) hereof, if any Construction Progress Milestone has not been
achieved on or before the corresponding Construction Progress Milestone Date and
Contractor determines that the Services cannot, despite its best efforts, be
accelerated to achieve Final Acceptance of the Facility by the Guaranteed Final
Acceptance Date, then Contractor shall promptly prepare and submit for approval
to Owner (and, at Owner's request, the Independent Engineer) within thirty (30)
days of such Construction Progress Milestone Date a Plan (which Plan may revise
the order of the milestones set forth in the Payment and Milestone Schedule, but
shall not increase the Contract Price or accelerate the timing of the Scheduled
Payments hereunder) to accelerate the performance of the Services as necessary
in order to achieve Final Acceptance of the Facility as soon as possible. Upon
receipt of such a Plan, Owner shall have the right in its sole discretion to
require Contractor to proceed in accordance with such Plan (as it may be
modified by Owner or the Independent Engineer as set forth in the following
sentence) or, upon fifteen (15) days prior notice to Contractor, to declare an
Event of Default pursuant to Section 16.1(j) hereof; PROVIDED, HOWEVER, that if
Contractor shall have demonstrated to the reasonable satisfaction of Owner and
the Independent Engineer that (x) the primary reason for Contractor's inability
to so achieve Final Acceptance by the Guaranteed Final Acceptance Date is a
defect or a delivery failure with respect to one or more of the major equipment
components in the Facility's power island or transformer being provided by
Subcontractors, and (y) such defect or delivery failure, or the consequent
extended delay in Contractor's ability to achieve Final Acceptance as a result
thereof, would not have been avoided by Contractor's compliance with the Quality
Assurance Plan and the other standards of performance as specified in Section
2.3.1 hereof, then Owner and the Independent Engineer shall not unreasonably
withhold approval of a Plan (as it may be modified by Owner or the Independent
Engineer as set forth in the following sentence) that accelerates the
performance of the Services in such a manner as to achieve Final Acceptance as
soon as possible (it being understood and acknowledged that such a Plan may
require the replacement of such Subcontractors). With respect to a Plan
submitted under this Section 7.6.2(b), if Owner or the Independent Engineer in
good faith believe such Plan does not accelerate the performance of the Services
in such a manner as to achieve Final Acceptance as soon as possible, Owner shall
have the right to modify such Plan (with the written concurrence of the
Independent Engineer) as reasonably necessary to cause it to do so. In the event
any Plan is so approved or modified by Owner (with the written concurrence of
the Independent Engineer), Contractor shall thereafter perform the Services in
accordance with such approved or modified Plan.


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<PAGE>

                (c) For the avoidance of doubt, except in the circumstances and
to the extent expressly set forth in the parenthetical in clause (I) of the last
sentence of Section 7.6.2(a) hereof, all costs and expenses incurred by
Contractor and its Subcontractors in connection with the development and
performance of any Plan pursuant to this Section 7.6.2, including without
limitation any overtime or other acceleration costs and expenses, shall be
solely the responsibility of Contractor, and Owner shall have no responsibility
or liability with respect thereto.

                                    ARTICLE 8
                           PRICE REBATE FOR FAILURE TO
                           MEET PERFORMANCE GUARANTEES

        8.1 PERFORMANCE GUARANTEES. Contractor guarantees that the Facility will
be capable of achieving all the applicable performance specifications referred
to in this Section 8.1 during a Completed Performance Test (a) at Provisional
Acceptance of the Facility, if Provisional Acceptance were to occur prior to
Final Acceptance hereunder and (b) at Final Acceptance of the Facility (the
"PERFORMANCE GUARANTEES"). Without limiting the foregoing, Contractor agrees to
exercise all reasonable repair and replacement alternatives, if any, that could
reasonably be expected to improve for Final Acceptance the level of achievement
of the Performance Guarantees demonstrated at Provisional Acceptance. Contractor
agrees that, if (i) the Facility fails to achieve the Heat Rate Guarantee during
the period, if any, commencing with Provisional Acceptance of the Facility and
continuing until Final Acceptance of the Facility, (ii) the Facility fails to
achieve the Electrical Output Guarantee during the period, if any, commencing
with Provisional Acceptance and continuing until Final Acceptance of the
Facility, or (iii) the Facility fails to achieve any of the applicable
Performance Guarantees at Final Acceptance of the Facility, as the case may be,
Contractor shall pay Owner as rebates and not as penalties the amounts
calculated in accordance with the terms set forth in Sections 8.1.1 and 8.1.2
hereof (the "PERFORMANCE GUARANTEE PAYMENTS").

                8.1.1 ELECTRICAL OUTPUT GUARANTEE AND REBATES.

                        8.1.1.1 ELECTRICAL OUTPUT GUARANTEE. Contractor
guarantees to Owner that, with respect to the Completed Performance Test used
pursuant to Section 6.2 hereof to determine the level of achievement of the
Performance Guarantees (i) at Provisional Acceptance of the Facility, if
Provisional Acceptance were to occur prior to Final Acceptance, and (ii) at
Final Acceptance of the Facility, the average net electrical output of the
Facility as measured during the most recent Completed Performance Test as of
such day (as such average net electrical output is measured and


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<PAGE>

corrected to the design operating conditions, all in accordance with the
procedures set forth in Appendix D hereto) will be [*] the electrical output
guarantee as set forth in the Warranty Data Sheet attached as Appendix R
hereto (the "ELECTRICAL OUTPUT GUARANTEE").

                        8.1.1.2 INTERIM PERIOD REBATES. If (1) Contractor
achieves Provisional Acceptance of the Facility prior to Final Acceptance of
the Facility (the period of time between Provisional Acceptance and Final
Acceptance being referred to as the "INTERIM PERIOD") and (2) the average net
electrical output of the Facility as demonstrated by the Completed
Performance Test used pursuant to Section 6.3(a) hereof to determine the
level of achievement of the Performance Guarantees at Provisional Acceptance
(as measured and corrected to the design operating conditions, all in
accordance with the procedures set forth in Appendix D hereto) is [*] than
the Electrical Output Guarantee, then Contractor shall pay to Owner, as a
rebate and not as a penalty and as part of the consideration for awarding the
contract, for each day during the Interim Period, an amount equal to [*] for
each kilowatt by which such average net electrical output (as measured during
the most recent Completed Performance Test as of such day) of the Facility is
[*] than such Electrical Output Guarantee (the "INTERIM PERIOD ELECTRICAL
OUTPUT REBATES").

                        8.1.1.3 FINAL ACCEPTANCE REBATES. Upon Final
Acceptance of the Facility, if, with respect to the Completed Performance
Test used pursuant to Section 6.2 hereof to determine the level of
achievement of the Performance Guarantees at Final Acceptance, the average
net electrical output of the Facility during such Completed Performance Test
(as such average net electrical output is measured and corrected to design
operating conditions, all in accordance with the procedures set forth in
Appendix D hereto) is [*] than the Electrical Output Guarantee, then
Contractor shall pay to Owner, as a rebate and not as a penalty and as part
of the consideration for awarding the contract, an amount equal to the sum of
(i) [*] for each kilowatt by which such average net electrical output of the
Facility is [*] than the Electrical Output Guarantee minus (ii) the amount of
any Interim Period Electrical Output Rebates paid or to be paid by Contractor
to Owner hereunder.

                8.1.2 HEAT RATE GUARANTEE, REBATES.

                        8.1.2.1 HEAT RATE GUARANTEE. Contractor guarantees to
Owner that, with respect to the Completed Performance Test used pursuant to
Section 6.2 hereof to determine the level of achievement of the Performance
Guarantees (i) at Provisional Acceptance of the Facility, if Provisional
Acceptance occurs prior to Final Acceptance, and (ii) at Final Acceptance of the
Facility, the net heat rate of the Facility


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<PAGE>

during such Completed Performance Test, calculated in BTUs per kilowatt-hour
(as measured and corrected to design operating conditions, all in accordance
with the procedures set forth in such Appendix D hereto), shall be [*] the
heat rate guarantee as set forth in the Warranty Data Sheet attached as
Appendix R hereto (the "HEAT RATE GUARANTEE").

                        8.1.2.2 INTERIM PERIOD REBATES. (a) If (1) Contractor
achieves Provisional Acceptance of the Facility before Final Acceptance of
the Facility, and (2) the average net heat rate of the Facility as
demonstrated by the Completed Performance Test used pursuant to Section
6.3(a) to determine the level of achievement of the Performance Guarantees at
Provisional Acceptance (as measured and corrected to the design operating
conditions, all in accordance with the procedures set forth in Appendix D
hereto) [*] the Heat Rate Guarantee, then Contractor shall pay to Owner, as a
rebate and not as a penalty and as part of the consideration for awarding the
contract, for each day during the Interim Period, an amount equal to [*] for
each BTU/kWh by which such measured net heat rate of the Facility (as
measured during the most recent Completed Performance Test as of such day) [*]
 the Heat Rate Guarantee (the "Interim Period Heat Rate Rebates").

                        8.1.2.3 FINAL ACCEPTANCE REBATES. Upon Final
Acceptance of the Facility, if, with respect to the Completed Performance
Test used pursuant to Section 6.5 hereof to determine the level of
achievement of the Performance Guarantees at Final Acceptance, the net heat
rate of the Facility during such Completed Performance Test (as measured and
corrected to design operating conditions, all in accordance with the
procedures set forth in Appendix D hereto) [*] the Heat Rate Guarantee, then
Contractor shall pay to Owner, as a rebate and not as a penalty and as part
of the consideration for awarding the contract, an amount equal to the sum of
(i) [*] for each BTU/kWh by which such measured heat rate [*] such Heat Rate
Guarantee minus (ii) the amount of any Interim Period Heat Rate Rebates paid
or to be paid by Contractor to Owner hereunder.

        8.2 REBATES REASONABLE. Owner and Contractor hereby acknowledge and
agree that the terms, conditions and amounts fixed pursuant to this Article 8
for Performance Guarantee Payments are reasonable, considering the reduction
in the value of the Facility and the increased costs that it is anticipated
Owner will sustain in the event of Contractor's failure to achieve [*]. The
amounts of these rebates are agreed upon and fixed hereunder by the Parties
because of the difficulty of ascertaining on the date hereof the exact amount
of such reduction in value and increased costs that will be actually
sustained by Owner in the event of any such failure by Contractor, and the
Parties hereby agree that the rebate

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<PAGE>

amounts specified herein (a) shall be applicable regardless of the amount of
such reduction in value and increased costs actually sustained by Owner and (b)
shall be the sole and exclusive remedy of Owner and the sole liability of
Contractor under this Agreement for the failure of the Facility to achieve one
hundred percent (100%) of the Performance Guarantees. Solely for clarification
and for the avoidance of doubt, the Parties hereby agree that this Section 8.2
shall not be construed in any way to limit, extend or otherwise affect
Contractor's obligations and liabilities, or Owner's remedies, under this
Agreement arising as a result of or in connection with (i) an Event of Default
under Section 16.1(i) or (j) hereof or (ii) Contractor's obligation to achieve
Final Acceptance and Project Completion and to cause the Project to comply with
all Applicable Laws, all Applicable Permits and the Guaranteed Emission Limits.
The payment of any such rebates hereunder shall not affect Owner's rights under
Articles 15 and 16 hereof or Owner's rights to receive price rebates pursuant to
Article 7 hereof.

                8.2.1 FINANCIAL CAP ON PERFORMANCE REBATES. Notwithstanding
anything to the contrary in this Article 8, the total aggregate Performance
Guarantee Payments required to be made by Contractor pursuant to this Article 8
shall be equal to the lesser of (i) the aggregate total of the Performance
Guarantee Payments due pursuant to the terms of Sections 8.1.1 and 8.1.2, and
(ii) the maximum aggregate value of the Performance Guarantee Payments as a
percentage of the Contract Price set forth in Section 9.1 hereof.

        8.3 PAYMENT OF PERFORMANCE REBATES. Contractor shall pay to Owner all
rebate amounts required under Sections 8.1.1.3 and 8.1.2.3 hereof within fifteen
(15) days after the determination that the conditions (other than the payment of
these rebate amounts) to Final Acceptance have been achieved. All rebate amounts
required under Sections 8.1.1.2 and 8.1.2.2 hereof shall be due and payable by
Contractor to Owner monthly in arrears on the tenth (10th) day of each month,
with the last such payment to occur no later than fifteen (15) days after the
determination that Final Acceptance has been achieved.


                                    ARTICLE 9
                              LIABILITY AND DAMAGES

        9.1 LIMITATION OF LIABILITY. Notwithstanding any other provision in
this Agreement, in no event shall Contractor's liability under this Agreement
(a) for Provisional Acceptance Late Completion Payments exceed in the
aggregate an amount equal to [*], (b) for Performance Guarantee Payments
under Section 8.1.1 hereof exceed in the aggregate an amount equal to [*]

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<PAGE>


[*], (c) for Performance Guarantee Payments under Section 8.1.2 hereof exceed
in the aggregate an amount equal to [*], and (d) for all Provisional
Acceptance Late Completion Payments and Performance Guarantee Payments exceed
in the aggregate an amount equal to [*] (which amount set forth in this
clause (d) is referred to as the "LD SUBCAP"). Solely for clarification and
for the avoidance of doubt, the Parties hereby agree that this Section 9.1
shall not be construed in any way to limit, extend or otherwise affect
Contractor's other obligations or liabilities arising under or in connection
with this Agreement, including without limitation (i) its liability for an
Event of Default under Section 16.1(i) or (j) hereof or (ii) its obligation
to achieve Final Acceptance of the Facility and Project Completion and to
cause the Project to comply with all Applicable Laws, all Applicable Permits,
and the Guaranteed Emissions Limits.

        9.2 CONSEQUENTIAL DAMAGES. Notwithstanding anything stated to the
contrary in this Agreement, except as otherwise provided in this Section 9.2,
neither Party nor any of its contractors, subcontractors or other agents
providing equipment, material or services for the Project shall be liable under
this Agreement, whether based in contract, in tort (including negligence and
strict liability), warranty or otherwise, for any indirect, incidental, special,
exemplary, punitive or consequential loss or damage of any type, including but
not limited to loss of use or loss of profit or revenue, and each Party hereby
releases the other Party and its contractors, subcontractors and agents from any
such liability; PROVIDED, HOWEVER, that the provisions of this Section 9.2 shall
not limit Contractor's obligations (i) to pay to Owner the Provisional
Acceptance Late Completion Payments and Performance Guarantee Payments pursuant
to Articles 7 and 8 hereof, and (ii) to pay any excess completion costs pursuant
to Sections 6.7.3 or 15.3(b) hereof.

        9.3 AGGREGATE LIABILITY OF CONTRACTOR. Notwithstanding anything to
the contrary herein, the total aggregate liability of Contractor (including,
without limitation, liabilities covered by the LD SubCap) to Owner arising
out of the performance or nonperformance of any or all obligations in
connection with this Agreement, whether based in contract, tort, negligence,
strict liability, warranty, error or omission or otherwise, shall not in any
event exceed an amount equal to (a) [*] for liability due to events occurring
prior to the date of Provisional Acceptance (or, if Provisional Acceptance
was achieved on the basis of a temporary waiver, variance or grace period
pursuant to Section 6.2.7 hereof, such later date on which the Facility's
long-term compliance with Applicable Laws, Applicable Permits and other
required emission standards is demonstrated), and (b) [*] for liability due
to events occurring from and after the date of Provisional Acceptance (or, if
applicable under clause (a) above, such later date on which such long-term
compliance of the Facility is demonstrated); [*]

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[*]

                                   ARTICLE 10
                            WARRANTIES AND GUARANTEES

        10.1 WARRANTIES AND GUARANTEES. Contractor warrants and guarantees
that (i) all machinery, equipment, materials, systems, supplies and other
items comprising the Project will be new and unused (except computer cards)
and of first-rate quality in accordance with Prudent Utility Practices and
will be in specific conformity with the Design Documents (including without
limitation Appendix A hereto) and the other requirements of this Agreement,
will be suitable for use in generating electric energy and capacity under the
climatic and normal operating conditions described in this Agreement and will
be free from defective workmanship or materials, (ii) it will perform all of
its design, construction, engineering and other Services hereunder in
accordance with the provisions of Section 2.3 hereof, (iii) the Project and
its components will be free from all defects caused by errors or omissions in
engineering and design, as determined by reference to Prudent Utility
Practices and the standard of performance required under Section 2.3 hereof,
and will comply with all Applicable Laws, all Applicable Permits, the
Electrical Interconnection Requirements, the PPA Operating Requirements and
the Guaranteed Emissions Limits in accordance with the provisions of Section
2.4 hereof, and (iv) the completed Project will perform its intended
functions of generating electric energy and capacity as a complete,
integrated operating system as contemplated in this Agreement, it being
understood that the design of the Facility (including, without limitation,
the Electrical Interconnection Facilities and the Protective Apparatus) is
based upon a useful life design objective of [*] from the Commercial
Operation Date.

                10.1.1 CORRECTION OF NONCONFORMING OR DEFECTIVE SERVICES.

                (a) If Owner notifies Contractor in writing no later than thirty
(30) days after the expiration of the applicable Warranty Period of any defects
or deficiencies in the Project discovered during the applicable Warranty Period,
Contractor promptly (i) shall re-perform the Services at Contractor's expense as
necessary or appropriate in order to correct any errors, omissions, defects or
deficiencies in the Project and (ii) in the case of any defective or otherwise
deficient machinery, equipment, materials, systems, supplies or other items
(including without limitation the engineering or design thereof),


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shall replace or, at Contractor's option, repair the same at Contractor's
expense such that it is in compliance with the standards warranted and
guaranteed in this Section 10.1; PROVIDED, HOWEVER, that Contractor's obligation
to correct such defective or deficient items (x) shall not extend to any
re-performance, repairs or replacements in the event and only to the extent
required as a result of normal corrosion, erosion, noise level or wear and tear
in the operation of the Facility (other than as caused by the negligence of any
Contractor Responsible Party or the acts or omissions of any Contractor
Responsible Party that are not in compliance with Contractor's obligations
hereunder) and (y) shall not apply in the event and only to the extent such
obligation arises directly from Owner's failure to operate and maintain the
Facility in accordance with the Instruction Manual and otherwise in accordance
with Applicable Laws, Applicable Permits, the Electrical Interconnection
Requirements, the PPA Operating Requirements and Prudent Utility Practices.
Contractor shall bear all costs and expenses associated with re-performing or
repairing or replacing any Services, including, without limitation, necessary
disassembly, transportation, reassembly and re-testing, as well as reworking,
repair or replacement of such Services, and disassembly and reassembly of
adjacent facilities that are included in the Services or indicated in the
Project Design Book or in the Real Estate Rights when necessary to give access
to the defective or deficient work. In the event that such adjacent facilities
are not included in the Services or indicated in the Project Design Book or in
the Real Estate Rights, all such costs and expenses associated with such
disassembly and reassembly of such adjacent facilities shall be borne by Owner.
In no event shall the Contractor have any obligation to undertake any corrective
work as described in this Section 10.1.1 if Owner fails to provide notice on or
before the date occurring thirty (30) days after the expiration of the Warranty
Period. After investigation by Contractor, should Contractor and Owner mutually
and reasonably agree (or, in the event Owner and Contractor are unable to agree,
should it be determined pursuant to Article 21 hereof) that any of the errors,
omissions, defects or deficiencies in the Project reported by Owner do not
exist, Owner shall reimburse Contractor for all reasonable out-of-pocket costs
in the event and only to the extent such costs were incurred by Contractor in
connection with the investigation of such reported errors, omissions, defects or
deficiencies that did not exist.

                (b) In the course of re-performing or repairing or
replacing any Services pursuant to this Article 10, Contractor shall coordinate
its performance of such work with Owner in accordance with Section 6.3.4 hereof.

                (c) Contractor shall promptly notify Owner after any defective
or otherwise deficient work with respect to the Project is discovered by
Contractor or should have been discovered by or been apparent to a skilled and
experienced contractor in Contractor's position. Owner shall use its reasonable
efforts to promptly notify


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Contractor after any defective or otherwise deficient work becomes apparent to
Owner; PROVIDED, HOWEVER, that the failure of Owner to so notify Contractor
shall not relieve Contractor from any of its obligations under this Article 10.

        10.2 NO LIENS OR ENCUMBRANCES. Contractor warrants and guarantees that,
in the event and only to the extent Owner has made all payments then due to
Contractor under this Agreement, title to the Facility and all work, materials,
supplies and equipment provided hereunder shall pass to Owner free and clear of,
and the Facility, the Facility Site and any and all interests and estates
therein and any and all improvements and materials placed on the Facility Site
shall be free and clear of, all liens, claims, security interests and other
encumbrances made by, through or under Contractor or any Subcontractor, other
than any Permitted Liens that are being contested in good faith by Contractor
and comply with the requirements set forth in clause (a) or (b) of the
definition thereof. In the event of any nonconformity to the requirements of
this Section, Contractor promptly (i) shall defend Owner's title to the Facility
and such work, materials, supplies and equipment or to the Facility Site and
such interests, estates, improvements and materials, as the case may be, and
(ii) shall remove and discharge any such lien, claim, security interest or other
encumbrance; PROVIDED that if Contractor is unable to so promptly remove and
discharge any such encumbrance, Contractor may provide to Owner in lieu thereof
a bond or other collateral, in form and substance satisfactory to Owner and the
Financing Parties, to fully indemnify Owner against any loss resulting from such
liens, claims, security interests or other encumbrances.

        10.3 LIMITATION OF WARRANTIES. EXCEPT AS EXPRESSLY PROVIDED IN ARTICLES
7 AND 8 HEREOF, THE WARRANTIES AND GUARANTEES PROVIDED IN THIS ARTICLE 10 ARE
EXCLUSIVE AND THERE ARE NO OTHER WARRANTIES OR GUARANTEES OF ANY KIND, WHETHER
EXPRESS OR IMPLIED (INCLUDING ALL WARRANTIES OF MERCHANTABILITY AND FITNESS FOR
A PARTICULAR PURPOSE), RELATING TO THE SERVICES (AS DEFINED IN SECTION 2.1
HEREOF). SOLELY FOR CLARIFICATION AND FOR THE AVOIDANCE OF DOUBT, THE PARTIES
HEREBY AGREE THAT NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS SECTION 10.3
SHALL IN ANY WAY LIMIT, EXTEND OR OTHERWISE AFFECT CONTRACTOR'S OTHER
OBLIGATIONS AND LIABILITIES HEREUNDER, INCLUDING WITHOUT LIMITATION (I)
CONTRACTOR'S OBLIGATION TO ACHIEVE FINAL ACCEPTANCE (AS DEFINED HEREIN) OF THE
FACILITY AND PROJECT COMPLETION (AS DEFINED HEREIN) AND TO CAUSE THE PROJECT TO
COMPLY WITH ALL APPLICABLE LAWS, ALL APPLICABLE PERMITS AND THE GUARANTEED
EMISSIONS LIMITS (AS DEFINED HEREIN), (II) CONTRACTOR'S LIABILITY


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FOR WILLFUL BREACH OF ITS OBLIGATIONS UNDER THIS ARTICLE 10, AND (III)
CONTRACTOR'S OBLIGATIONS UNDER ARTICLES 7, 8 AND 13 HEREOF.

                                   ARTICLE 11
                                  FORCE MAJEURE

        11.1 FORCE MAJEURE EVENT. As used in this Agreement, a "FORCE MAJEURE
EVENT" shall mean any act or event that prevents the affected Party from
performing any obligations (other than the payment of money) under this
Agreement or complying with any conditions required to be complied with under
this Agreement if such act or event is beyond the reasonable control of and
without the fault or negligence of the affected Party and such Party has been
unable by the exercise of all reasonable efforts to overcome or mitigate the
effects of such 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, act of God or the public enemy, any unreasonable delay or
failure to act of a court or public authority with respect to a requested action
necessary for the performance of the Services (PROVIDED that such requested
action is legal, customary and within such authority's jurisdiction and
application therefor was made in a proper and timely manner (taking into account
all circumstances known or that should have been known with the exercise of due
diligence) and was diligently pursued), transportation accidents in the event
and only to the extent that they cause physical damage to Equipment, or strikes
or other labor disputes of a regional or national character that are not limited
to only the employees of Contractor or its affiliates and that are not due to
the breach of a labor contract or Applicable Law by the Party claiming Force
Majeure or its affiliates). Force Majeure Events do not include (i) late
delivery of materials or equipment (except in the event and only to the extent
caused by a Force Majeure Event, including but not limited to those listed
above), (ii) the acts or omissions of any Contractor Responsible Party (except
in the event and only to the extent that such act or omission of such Contractor
Responsible Party would itself be excused hereunder by virtue of a Force Majeure
Event, including but not limited to those listed above), and (iii) in the event
and only to the extent the claiming Party's act, failure to perform or event was
caused by lack of funds or other mere economic hardship.

        11.2 BURDEN OF PROOF. In the event that the Parties are unable in good
faith to agree that a Force Majeure Event has occurred, the Parties shall submit
the dispute to dispute resolution pursuant to Section 21.1 hereof, PROVIDED that
the burden of proof as to (a) whether a Force Majeure Event has occurred and (b)
whether performance


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was excused in accordance with Section 11.3 hereof, shall be upon the Party
claiming a Force Majeure Event.

        11.3 EXCUSED PERFORMANCE. If either Party is rendered wholly or partly
unable to perform its obligations under this Agreement because of a Force
Majeure Event, that Party will be excused from whatever performance is affected
by the Force Majeure Event to the extent so affected, PROVIDED that:

        (a) the non-performing Party gives the other Party notice describing the
     nature (in such detail as is reasonable under the circumstances) of the
     occurrence, including an estimation of its expected duration and
     probable impact on the performance of such Party's obligations
     hereunder, such notice to be delivered as promptly as practicable (but
     in no event more than five (5) days following the later to occur of (i)
     the date of the occurrence of the Force Majeure Event and (ii) with
     respect to the CTG Subcontract only, the date on which the
     non-performing Party learns of such Force Majeure Event) and the
     non-performing Party thereafter continues to furnish timely regular
     reports with respect thereto during the continuation of the Force
     Majeure Event;

        (b) the suspension of performance is of no greater scope and of no
     longer duration than is reasonably required by the Force Majeure Event;

        (c) no liability of either Party which arose due to events that occurred
     before the occurrence of the Force Majeure Event causing the suspension
     of performance shall be excused as a result of such occurrence;

        (d) the non-performing Party exercises all reasonable efforts to
     mitigate or limit damages to the other Party;

        (e) the non-performing Party uses all reasonable efforts to continue to
     perform its obligations hereunder and to correct or cure the event or
     condition excusing performance; and

        (f) as soon as the non-performing Party is able to resume performance of
     its obligations under this Agreement excused as a result of the Force
     Majeure Event, that Party shall give the other Party written notice to
     that effect and shall promptly resume performance hereunder.


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                                   ARTICLE 12
                                  SCOPE CHANGES

        12.1 FURTHER REFINEMENT, CORRECTIONS AND DETAILING NOT SCOPE CHANGES. It
is understood and agreed that the Project shall be subject to further
refinement, correction and detailing by Contractor from time to time in a manner
consistent with Appendix A hereto and the other standards of performance
required hereunder, and that Contractor shall receive no additional compensation
for any such refinement, correction, or detailing that is contemplated to be a
part of, or would reasonably be inferred to be a part of, the Services under
this Agreement (including without limitation any refinement, correction or
detailing in connection with the engineering development or completion of the
design in accordance with Appendix A) hereto, and any such refinements,
corrections and detailing shall not constitute Scope Changes. A material
addition to, deletion from, suspension of or other modification to the
requirements or provisions of this Agreement pursuant to a Scope Change Order
issued by Owner hereunder shall constitute a Scope Change rather than a
refinement, correction or detailing.

        12.2 SCOPE CHANGES. Owner, without invalidating this Agreement, 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, the Project Schedule and the
Performance Guarantees shall be equitably adjusted accordingly, if necessary.
All Scope Changes shall be authorized by a Scope Change Order and only the Owner
may issue Scope Change Orders; PROVIDED that no Scope Change Order issued by
Owner on or after the Financial Closing Date shall be valid hereunder without
the written concurrence of the Independent Engineer unless such Scope Change
Order (i) does not extend the Guaranteed Completion Dates under this Agreement,
does not result in a material change in the design of the Project (as determined
in accordance with the definition of Project Design Book herein), that has not
been expressly approved by the Independent Engineer, and does not increase the
Contract Price either individually or in the aggregate with all previous
non-Independent Engineer-authorized Scope Change Orders by more than the
applicable dollar thresholds to be set forth in the acknowledgment and consent
agreement to be entered into among Owner, Contractor and the Financing Parties
pursuant to Section 17.1 hereof, or (ii) is required pursuant to the terms of
the Agreement as a result of circumstances not in the control of Owner or as a
result of Owner's failure to perform its obligations hereunder.

        12.3 PROCEDURE FOR SCOPE CHANGES. (a) As soon as Contractor becomes
aware of any circumstances which Contractor has reason to believe may
necessitate a Scope Change, Contractor shall issue to Owner a Scope Change Order
Notice at


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Contractor's expense. All Scope Change Order Notices shall include documentation
sufficient to enable Owner to determine (i) the factors necessitating a Scope
Change; (ii) the impact which the Scope Change is likely to have on the Contract
Price and the Payment and Milestone Schedule; (iii) the impact which the Scope
Change is likely to have on the Project Schedule, the Construction Progress
Milestone Dates and the Guaranteed Completion Dates; (iv) the impact which the
Scope Change is likely to have on the Performance Guarantees; and (v) such other
information which Owner may reasonably request in connection with such Scope
Change in order to determine the above factors and impacts (including, with
respect to Scope Changes involving price changes under the provisions of Section
12.8(c) or (d) hereof, material and labor cost information).

        (b) If Owner desires or is required to make a Scope Change, in response
to a Scope Change Order Notice or otherwise, it shall submit a Scope Change
Order Request to Contractor. Contractor shall promptly review the Scope Change
Order Request and notify Owner in writing of the options for implementing the
proposed Scope Change (including, if possible, any option that does not involve
an extension of time) and the effect, if any, each such option would have on the
Contract Price, the Guaranteed Completion Dates, the Construction Progress
Milestone Dates, the Payment and Milestone Schedule, the Project Schedule and
the Performance Guarantees. Contractor shall provide cost, schedule and
performance level guarantee impacts to Owner for Scope Changes proposed by
Owner, including furnishing to Owner a statement, setting forth in detail, a
breakdown by trades and work classifications. Owner may, but shall not be
obligated to (except and only as specifically provided in Sections 12.2(ii) and
12.12 hereof), issue a Scope Change Order covering such proposed Scope Change,
in which event the contents of Contractor's notice described in this Section
12.3 shall be binding on Owner (except as otherwise provided in the following
sentence) and Contractor. In the event Owner disagrees with Contractor's
statement of the effect of such Scope Change on the Contract Price, the
Guaranteed Completion Dates, the Construction Progress Milestone Dates, the
Project Schedule or the Performance Guarantees, Owner may (and with respect to
matters addressed in Sections 12.2(ii), 12.5 and 12.12 hereof, shall) proceed
with issuance of an interim Scope Change Order (an "INTERIM SCOPE CHANGE ORDER")
on such terms and conditions as Owner deems to be warranted, in which case
Contractor shall proceed in accordance therewith, and the dispute as to the
effect of such Scope Change shall be resolved as provided in Article 21 hereof.

        12.4 SCOPE CHANGES DUE TO CONTRACTOR ERROR. Notwithstanding anything in
this Article 12 to the contrary, no Scope Change Order shall be issued and no
adjustment of the Contract Price, the Guaranteed Completion Dates, the
Construction Progress Milestone Dates, the Payment and Milestone Schedule, the
Project Schedule or


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the Performance Guarantees shall be made for or as a result of any correction of
errors, omissions, deficiencies, or improper or defective work on the part of
Contractor or any Subcontractors in the performance of the Services.

        12.5 SCOPE CHANGES DUE TO CHANGES IN LAW AND PERMITS. In the event and
only to the extent that:

        (a) any Applicable Permit is obtained after the date of this Agreement
     and either (1) neither the application for nor a draft of such
     Applicable Permit is identified in Section 12.6.2 hereof (and thus
     neither was provided to Contractor prior to the date of this Agreement)
     and Contractor's compliance with the terms of such Applicable Permit
     constitutes a material change to the Scope of Services to be performed
     by Contractor as set forth in Appendix A hereto, or (2) the application
     for, or a draft of, such Applicable Permit was provided to Contractor
     prior to the date of this Agreement (as indicated in Section 12.6.2
     hereof) and such Applicable Permit contains requirements that are
     materially more stringent than the corresponding requirements set forth
     in the Guaranteed Emission Limits (or, if such requirements do not have
     corresponding requirements in the Guaranteed Emission Limits, they are
     materially more stringent than indicated in the application for, or
     draft of, as the case may be, such Applicable Permit); or

        (b) any changes in Applicable Laws or Applicable Permits occur after the
     date of this Agreement, and such more stringent requirements or changes
     necessitate a Scope Change;

     then, in any such case, such requirements or changes shall be treated as
a Scope Change pursuant to clause (ii) of Section 12.2 hereof; PROVIDED,
HOWEVER, that this Section 12.5 shall not apply to (1) any change in
Applicable Laws relating to Contractor Taxes or (2) any change in Applicable
Permits in the event and only to the extent resulting directly or indirectly
from the acts or omissions of any Contractor Responsible Party that are
wrongful or otherwise not in compliance with the Contractor's obligations
hereunder.

        12.6 FAMILIARITY WITH CONDITIONS AND DOCUMENTATION.

                12.6.1 FAMILIARITY WITH CONDITIONS. As more fully set forth in
Article 20 hereof, Contractor acknowledges and accepts the risk of mistake or
error relating to all matters within the scope of Section 20.1 hereof and
further acknowledges and agrees that no increase or adjustment in the Contract
Price, the Guaranteed Completion Dates, the Construction Progress Milestone
Dates, the Payment and Milestone Schedule, the Project Schedule, the Performance
Guarantees or any other


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provision which may be affected thereby will be made as a result of any such
mistake or error.

                12.6.2 FAMILIARITY WITH DOCUMENTATION. Prior to the date of this
Agreement, Contractor has reviewed: (a) all documentation which is attached as
an Appendix hereto or which Contractor is required to perform as set forth
herein or in any such Appendix, (b) the Baseline Environmental Site Assessment,
(c) the wetlands delineation established pursuant to the Letter of
Interpretation/Line Verification, LURP File No. 1219-90-0002.4 issued by the New
Jersey Department of Environmental Protection on March 22, 1999, with the
attached Survey by Carr Engineering Associates as last revised April 5, 1999,
(d) the Land Development Application (including the EIS, Drawings and Reports
referred to therein) prepared by Maser and TRC, dated September 1999, as amended
pursuant to the Sayreville Planning Board Final Resolution dated as of October
12, 1999 (subject to Contractor's comments as set forth in its letter ARPAC/0055
dated October 25, 1999), (e) the Topographic Survey Sketch No. 71599 (consisting
of 5 sheets) provided to Contractor prior to the date hereof, undated but based
on July 1999 survey, and (f) the draft MCUA Wastewater Discharge Permit
Application dated October 11, 1999 (subject to Contractor's comments as set
forth in its letter RA/0093 dated November 8, 1999), and Contractor confirms
that it will be able to perform the Services consistent with such documentation,
subject to the comments set forth in the letters identified above and assuming
Owner implements the Approved Remediation Plan in accordance with the terms
thereof and such implementation has the effect of remediating Hazardous
Materials as specifically intended and set forth in the Approved Remediation
Plan. Contractor has further reviewed: (g) the Draft Air Permit/Compliance Plan
issued by the New Jersey Department of Environmental Protection to Owner under
date of November 12, 1999 (subject to Owner's final comments thereon sent to
NJDEP by letter dated November 18, 1999) and Contractor confirms that it will be
able to perform the Services consistent with such draft (i) with respect to the
emissions limits set forth therein, to the extent such draft is consistent with
and limited by the technical considerations and conditions for emissions limits
and guarantees set forth in Appendix R and (ii) with respect to any other
technical requirements set forth therein, to the extent such draft is consistent
with and no more stringent than the technical requirements of Appendix A.
Contractor acknowledges and agrees that any difficulty or extra cost it may
encounter in performing the Services consistent with such documentation will not
entitle Contractor to any increase or adjustment in the Contract Price, the
Guaranteed Completion Dates, the Construction Progress Milestone Dates, the
Payment and Milestone Schedule, the Project Schedule, the Performance Guarantees
or any other provision which may be affected thereby. For the avoidance of
doubt, the Parties hereby acknowledge and agree that this Article 12 does not
impose on Contractor the risk of mistake or error in the documentation attached


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hereto constituting the Electrical Interconnection Requirements, the PPA
Operating Requirements or the Real Estate Rights or in the documentation
referred to in clauses (b) through (g) of this Section 12.6.2.

        12.7 EFFECT OF FORCE MAJEURE EVENT. (a) In the event and only to the
extent that any Force Majeure Event affects Contractor's ability to meet the
Guaranteed Completion Dates or the Construction Progress Milestone Dates, then
an equitable adjustment in one or more of such dates and in the Payment and
Milestone Schedule and the Project Schedule shall be made by agreement of Owner
and Contractor or otherwise pursuant to Article 21 hereof.

        (b) No adjustment to the Performance Guarantees shall be made as a
result of a Force Majeure Event unless, and in the event and only to the extent
that, the Performance Guarantees are impossible to achieve as a practical matter
as a direct result of such Force Majeure Event.

        (c) Except as otherwise expressly set forth below in this Section 12.7,
no adjustment to the Contract Price shall be made as a result of a Force Majeure
Event. In the event that Contractor is delayed in the performance of the
Services by a Force Majeure Event, then:

        (i) to the extent that the delay(s) are, [*]

        (ii) to the extent that the delay(s) are, [*]

        12.8 PRICE CHANGE. An increase or decrease in Contract Price, if any,
resulting from a Scope Change requested by Owner or made pursuant to this
Article 12 shall be determined, upon the mutual agreement of the Parties, as
follows:

        (a) By lump sum payment, in an amount proposed by Contractor (properly
     itemized and supported by sufficient substantiating data to permit
     evaluation) and accepted by Owner; or

        (b) By unit pricing; or


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        (c) By cost and percentage or by cost and fixed fee; or

        (d) If none of the methods set forth in Section 12.8(a), 12.8(b) or
     12.8(c) hereof is agreed upon after good faith negotiation by the
     Parties, Contractor shall provide Owner with such purchase orders,
     invoices, subcontractor quotes and other documents and records as may
     enable Owner to verify, to its reasonable satisfaction, the costs or
     savings reasonably incurred by Contractor in effecting such Scope
     Change. All equipment, materials, labor, equipment rental and other
     items required as a result of such Scope Change shall be purchased by
     Contractor at competitive market prices. Owner shall, upon verifying
     Contractor's costs or savings associated with such Scope Change, adjust
     the Contract Price by the amount thereof plus [*] and appropriate
     adjustments shall be made to the corresponding Scheduled Payments.

        12.9 CONTINUED PERFORMANCE PENDING RESOLUTION OF DISPUTES.
Notwithstanding a dispute regarding the amount of any increase or decrease in
Contractor's costs with respect to a Scope Change, Contractor shall proceed with
the performance of such Scope Change promptly following Owner's execution of the
corresponding Interim Scope Change Order.

        12.10 DOCUMENTATION. All claims by Contractor for adjustments to one or
more of the Contract Price, the Guaranteed Completion Dates, the Construction
Progress Milestone Dates, the Payment and Milestone Schedule, the Project
Schedule and the Performance Guarantees as a result of Scope Changes under this
Article 12 shall be supported by such documentation as is reasonably sufficient
for Owner to determine the accuracy thereof, including, as applicable, invoices
from Subcontractors and Contractor's man-hour breakdowns in the event and only
to the extent such invoices and man-hour breakdowns are relevant to the method
utilized by the Parties pursuant to Section 12.8 hereof for adjusting the
Contract Price.

        12.11 QUALITATIVE ENGINEERING. If Contractor identifies an opportunity
for a cost beneficial non-necessary improvement of the Facility, Contractor may
issue a Scope Change Notice to notify Owner of the existence of such
opportunity. After evaluating the information presented in the Scope Change
Notice issued by Contractor pursuant to this Section 12.11 in good faith, Owner
may submit a Scope Change Order Request. Contractor shall review such Scope
Change Order Request and notify Owner in writing of the options for implementing
the proposed Scope Change, the effect of such Scope Change and any such other
information as Owner may request; PROVIDED that Contractor shall be reimbursed
by Owner for all reasonable costs incurred by Contractor


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in responding to any Scope Change Order Request submitted by Owner pursuant to
this Section 12.11. Owner may, but shall not be obligated to, issue a Scope
Change Order covering such proposed Scope Change in the manner provided by
Section 12.3 hereof.

        12.12 HAZARDOUS MATERIALS. In the event a Hazardous Material is
discovered to exist at the Facility Site, Contractor shall be responsible for
responding to and handling such Hazardous Material (including but not limited to
the condition resulting from the presence thereof) in compliance with the
requirements of all Applicable Laws and Applicable Permits and Sections 2.1.7
and 2.1.15 hereof, provided, however, that if such Hazardous Material is not one
for which Contractor is responsible pursuant to clauses (a) through (e) of
Section 2.1.7 hereof or Section 2.1.15 hereof, then Contractor shall be entitled
to a Scope Change hereunder as required for such response and handling, except
that if any Contractor Responsible Party has negligently aggravated the
condition resulting from the presence of such Hazardous Material at the Facility
Site, any such Scope Change shall be equitably adjusted to account for the
impact on Owner's costs and/or liability (actual or contingent) arising from,
and directly attributable to, such conduct . Notwithstanding the foregoing, (i)
Contractor shall have the right, upon written notice delivered to Owner within
thirty (30) days (or such shorter period of time as is practicable with the
exercise of all reasonable efforts) of its discovery of the presence of any such
Hazardous Material not covered by any of clauses (a) through (e) of Section
2.1.7 or Section 2.1.15 hereof), to refuse to accept responsibility for
responding to and handling such Hazardous Material (including but not limited to
the condition resulting from the presence thereof) if Contractor determines, in
its reasonable discretion, that the potential liabilities and difficulties
associated with such response and handling would materially and adversely affect
the risks to Contractor in performing the Services hereunder, and (ii) Owner
shall retain the right to contract directly with a third party contractor to
perform any such response and handling work instead of the Contractor hereunder,
PROVIDED that any such work shall be performed in such a manner as not to
adversely affect any Contractor Responsible Party's performance of the Services
in any material way.

                                   ARTICLE 13
                                 INDEMNIFICATION

        13.1 GENERAL INDEMNIFICATION. Contractor shall fully indemnify, save
harmless and defend Owner, its parents, subsidiaries and other affiliates, the
Financing Parties, and the directors, officers, agents, employees, successors
and assigns of each of them (the "OWNER INDEMNIFIED PARTIES"), from and against
any and all third-party losses, costs, damages, injuries, liabilities, claims,
demands, penalties, interest and causes of


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action, including without limitation reasonable attorney's fees (collectively,
the "DAMAGES"), arising out of, resulting from or related to this Agreement
(including without limitation any damage to or destruction of property of, or
death of or bodily injury to, Persons (whether they are employees of the Owner
Indemnified Parties, Contractor or any Subcontractor, or are Persons
unaffiliated with the Project)) in the event and only to the extent such Damages
are caused or contributed to (i) by the fault, intentional misconduct,
negligence, strict liability or omission in the performance of the Services or
otherwise relating to this Agreement or the Project by Contractor or any
Subcontractor, or any of their respective employees, agents, representatives,
invitees or other Contractor Responsible Parties or (ii) by the failure of
Contractor or any Subcontractor to comply with the terms of this Agreement,
whether or not any of the Owner Indemnified Parties are contributorily
negligent; PROVIDED, HOWEVER, that the foregoing indemnification shall not apply
(i) in the event and only to the extent the Damages are caused by or contributed
to by the negligence or willful misconduct of any of the Owner Indemnified
Parties, or (ii) with respect to Damages resulting from Hazardous Materials, as
Contractor's indemnity obligations with respect thereto are solely as provided
in Section 13.4 hereof.

        13.2 ADDITIONAL INDEMNIFICATION. Without limiting the generality of
Section 13.1 hereof, Contractor shall fully indemnify, save harmless and defend
the Owner Indemnified Parties from and against any and all Damages in favor of
any governmental authority or other third party in the event and to the extent
such Damages are caused by (i) failure of Contractor or any Subcontractor to
comply with Applicable Laws and Applicable Permits as required by this
Agreement, (ii) failure of Contractor or any Subcontractor to properly
administer and pay the Taxes or Project Duties as required hereunder (including
without limitation the Contractor Taxes) or any other taxes, fees and
contributions required to be paid by Contractor or any Subcontractor under
Applicable Laws, or (iii) nonpayment of amounts due as a result of furnishing
materials or services to Contractor or any Subcontractor which are payable by
Contractor or any Subcontractor in connection with the Services.

        13.3 PATENT AND COPYRIGHT INDEMNIFICATION. Without limiting the
generality of Section 13.1 hereof, Contractor shall fully indemnify, save
harmless and defend the Owner Indemnified Parties from and against any and all
Damages which the Owner Indemnified Parties may hereafter suffer or pay by
reason of any claims or suits arising out of claims of infringement of any
domestic or foreign patent rights, copyrights or other intellectual property,
proprietary or confidentiality rights with respect to the performance by
Contractor or any Subcontractor of the Services, including without limitation,
with respect to materials or information in any way incorporated in or related
to the engineering, procurement, construction, ownership, use, operation or
maintenance


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of the Facility at the Facility Site. If, in any such suit or claim, a temporary
restraining order or preliminary injunction is granted, Contractor shall make
every reasonable effort, by giving a satisfactory bond or otherwise, to secure
the suspension of the injunction or restraining order. If, in any such suit or
claim, the Project, or any part, combination or process thereof, is held to
constitute an infringement and its use is permanently enjoined, Contractor shall
promptly make every reasonable effort to secure for Owner a license, at no cost
to Owner, authorizing continued use of the infringing work. If Contractor is
unable to secure such suspension or such license within a reasonable time,
Contractor shall, at its own expense and without impairing performance
requirements, either replace the affected work, or part, combination or process
thereof, with non-infringing components or parts or modify the same so that they
become non-infringing.

        13.4 HAZARDOUS MATERIALS LIABILITY. (a) Owner shall fully indemnify,
save harmless and defend the Contractor Indemnified Parties from and against all
Damages in the event and only to the extent such Damages are caused or
contributed to by the presence of any Hazardous Material on, or the release of
any Hazardous Material on or from, the Facility Site, other than any Hazardous
Material for which Contractor is responsible pursuant to Section 2.1.7 hereof;
PROVIDED, HOWEVER, that the foregoing indemnification shall not apply in the
event and only to the extent that the Damages are caused by or contributed to by
(x) the negligence or willful misconduct of any Contractor Responsible Party.

        (b) Contractor shall fully indemnify, save harmless and defend the Owner
Indemnified Parties from and against all Damages in the event and only to the
extent such Damages are caused or contributed to by (i) any Hazardous Material
for which Contractor is responsible pursuant to Section 2.1.7 hereof, or (ii)
the negligence or willful misconduct of any Contractor Responsible Party in
connection with the presence of any Hazardous Material on, or the release of any
Hazardous Material on or from, the Facility Site; PROVIDED, HOWEVER, that the
foregoing indemnification shall not apply in the event and only to the extent
that the Damages are caused by or contributed to by the negligence or willful
misconduct of any Owner Indemnified Party.

        13.5 NOTICE AND LEGAL DEFENSE. Promptly after receipt by a Party of any
claim or notice of the commencement of any action, administrative or legal
proceeding, or investigation as to which the indemnity provided for in Section
13.1, 13.2, 13.3 or 13.4 hereof may apply, such Party shall notify the other
Party in writing of such fact. Contractor or Owner, as the case may be, shall
assume on behalf of the indemnified party and conduct with due diligence and in
good faith the defense thereof with counsel reasonably satisfactory to the
indemnified party; PROVIDED that the indemnified party shall have the right to
be represented therein by advisory counsel of its own selection and at its


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own expense; and PROVIDED FURTHER, that if the defendants in any such action
include both Contractor or Owner and any indemnified party and the indemnified
party shall have reasonably concluded that there may be legal defenses available
to it which are different from or additional to, or inconsistent with, those
available to Contractor or Owner, the indemnified party shall have the right to
select separate counsel to participate in the defense of such action on its own
behalf at the expense of the indemnified party.

        13.6 FAILURE TO DEFEND ACTION. If any claim, action, proceeding or
investigation arises as to which the indemnity provided for in Section 13.1,
13.2, 13.3 or 13.4 hereof may apply, and Contractor or Owner, as the case may
be, fails to assume the defense of such claim, action, proceeding or
investigation, then the indemnified party may at the expense of Contractor or
Owner, as the case may be, contest (or, with the prior written consent of
Contractor or Owner, settle) such claim.

        13.7 SURVIVAL. The provisions of this Article 13 shall survive Project
Completion and the termination of this Agreement.


                                   ARTICLE 14
                                    INSURANCE

        14.1 GENERAL. Except as otherwise expressly provided in this Article 14,
Contractor shall provide and maintain the types and amounts of insurance set
forth in this Article 14 at all times while Contractor or any Subcontractor is
performing the Services. The insurance carriers providing insurance as described
in this Article 14 shall have an A.M. Best Financial Rating of A-VII or a
comparable international rating from an international rating institute, or if
unrated, then such carriers shall be acceptable to both Parties, which
acceptance shall not be unreasonably withheld or delayed. The capitalized terms
used in this Article 14 and not otherwise defined in this Agreement shall have
the meaning generally ascribed to such terms in the commercial insurance
industry in the United States.

        14.2 WORKER'S COMPENSATION INSURANCE. Contractor shall maintain Worker's
Compensation Insurance and Employers' Liability Insurance (including
occupational disease) to cover statutory benefits and limits of the Worker's
Compensation laws of any applicable jurisdiction in which any work is to be
performed hereunder, and with such Employers' Liability Insurance to have a
coverage limit of one million dollars ($1,000,000) per occurrence.

        14.3 COMMERCIAL GENERAL LIABILITY INSURANCE. Contractor shall maintain
Commercial General Liability Insurance for Hazards of (a) Construction
Operation, (b)


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Elevators and Escalators, (c) Subcontractors and Independent Contractors, (d)
Products and Completed Operations (with Completed Operations coverage to remain
in force for two years following Final Acceptance), (e) Explosion Collapse and
Underground Hazards, (f) Contractual Liability, (g) Personal Injury Liability
(with the standard contractual and employee exclusions deleted) and (h) Sudden
and Accidental Pollution. The insurance required by this Section 14.3 shall have
the following limits of liability:

        Third Party Bodily Injury and Property Damage Liability

        $1,000,000 Combined Single Limit per occurrence and $2,000,000 annual
    aggregate issued on an occurrence basis, with such limits available to the
    Project.

        14.4 AUTOMOBILE LIABILITY INSURANCE. $1,000,000 Combined Single Limit
per occurrence. Each Party shall obtain its own Business Automobile liability
insurance to cover all owned, leased and non-owned vehicles in connection with
construction, services, and/or other associated work hereunder.

        14.5 COMMERCIAL UMBRELLA AND/OR EXCESS INSURANCE. Commencing on or
prior to the earlier of (i) the date that Contractor commences shipment of
any equipment to be provided hereunder and (ii) the Financial Closing Date,
Contractor shall maintain Commercial Umbrella and/or Excess Insurance
Policies for Bodily Injury and Property Damage Liability [*] over Primary
Employer's Liability, Commercial General Liability, and Business Automobile
Liability Limits.

        14.6 SEVERABILITY OF INTEREST. All insurance carried in accordance with
Section 14.3, 14.4 and/or 14.5 hereof shall be endorsed to provide that,
inasmuch as the policy is written to cover more than one insured, all terms,
conditions, insuring agreements and endorsements, with the exception of limits
of liability, shall operate in the same manner as if there were a separate
policy covering each insured.

        14.7 BUILDER'S RISK INSURANCE. On or prior to the earlier of (i) the
commencement of performance of the Services at the Facility Site and (ii) the
Financial Closing Date, Contractor shall provide, for the benefit of Owner, the
Financing Parties, Contractor and all Subcontractors, "All-Risk" Builder's Risk
Insurance in form reasonably acceptable to Owner and the Financing Parties
covering direct physical loss or damage to the Facility for perils including but
not limited to fire, lightning, hail, explosion, riot and civil commotion,
vandalism and malicious mischief, theft, damage from aircraft (and other falling
objects), inland transportation, vehicles, smoke, fire, flood, earthquake,
landslide, Tsunami, windstorm, collapse, start-up and testing of the Facility
and to any and all materials, supplies or equipment comprising the Facility or


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intended for installation into the Facility and covering all such materials,
supplies or equipment during temporary storage and transit to or from the
Facility Site during erection and otherwise. Insurance maintained shall be
written on a full replacement cost basis. This insurance shall include "Delay
in Start-up" Coverage equal to the defined Business Interruption amount
(including construction financing costs, fixed operating and maintenance
costs and extension payments under the Power Purchase Agreement) equal to the
initial eighteen (18) months of commercial operation. Policy Deductible
amounts shall be based on a "per occurrence" basis not to exceed [*] for
Equipment Start-up Testing, [*] for earthquake, [*] for windstorm, [*] for
flood, and [*] for all other property damage losses. The "Delay in Start-up"
Deductible shall also be based on a "per occurrence" basis with Waiting
Period Deductibles not to exceed [*]. Contractor shall maintain such All-Risk
Builder's Risk Insurance until the Risk Transfer Date. Thereafter and until
Final Acceptance, Contractor shall maintain the Visits Maintenance Coverage
Extension thereof.

        14.8 OCEAN MARINE CARGO INSURANCE. Contractor shall provide on or prior
to the earlier of (i) the commencement of shipment of any equipment to be
provided hereunder and (ii) Financial Closing Date, and shall maintain until the
Risk Transfer Date of the Facility Ocean Marine Cargo Insurance covering any and
all materials and equipment while they are in transit to the Facility Site by
wet marine bottoms or by air transportation and/or connecting conveyances, with
a policy limit not less than the value of the largest single cargo shipment.
Such insurance shall include Project "Delay in Start-up" coverage equal to the
defined Business Interruption amount (including construction financing costs,
operating and maintenance costs and extension payments under the Power Purchase
Agreement) equal to the initial eighteen (18) months of commercial operation,
with the same deductible and coverage amounts as are applicable to the "Delay in
Start-up" insurance under Section 14.7 hereof.

        14.9 SUBCONTRACTOR INSURANCE. Before permitting any of its
Subcontractors to perform any Services at the Facility Site, Contractor shall
obtain a certificate of insurance from each such Subcontractor evidencing that
such Subcontractor has obtained insurance in such amounts and against such risks
as is consistent with Contractor's customary practices for such types of
subcontracts for projects of similar type and capacity to the Project, PROVIDED
that such insurance shall at least be in such amounts and against such risks as
is customarily carried by persons engaged in similar businesses in the same
geographic area.

        14.10 WAIVER OF SUBROGATION. All insurance policies obtained or carried
by the Parties shall include a waiver of any right of subrogation of the
insurers thereunder against Owner, Contractor, the Subcontractors, the Financing
Parties, the Power


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Purchaser, the Transmitting Utility and all their assigns, subsidiaries,
affiliates, employees, insurers and underwriters and of any right of the
insurers to any set-off or counterclaim or any other deduction, whether by
attachment or otherwise, in respect of any liability of any such person insured
under any such policy.

        14.11 CONTRACTOR'S WAIVER. Contractor further releases, assigns and
waives any and all rights of recovery against Owner, the Financing Parties, the
Power Purchaser, the Transmitting Utility and all their affiliates,
subsidiaries, employees, successors, permitted assigns, insurers and
underwriters, which Contractor may otherwise have or acquire, in or from or in
any way connected with any loss covered by policies of insurance maintained or
required to be maintained by Contractor pursuant to this Agreement (other than
third party liability insurance policies) or because of deductible clauses
(except as otherwise provided in Section 14.15.3 hereof) in or inadequacy of
limits of any such policies of insurance.

        14.12 EVIDENCE OF COVERAGE. Prior to the Financial Closing Date (or, if
earlier, on or prior to the time such insurance policies under Sections 14.5,
14.7 and 14.8 hereof are required to be in effect), Contractor shall furnish to
the Financing Parties and Owner certificates of insurance from each insurance
carrier showing that the above required insurance is in force, the amount of the
carrier's liability thereunder, and further providing that the insurance will
not be canceled until the expiration of at least thirty (30) days (or ten (10)
days in the case of cancellation due to non-payment of premiums) after written
notice of such cancellation, change or non-renewal has been received by Owner
and the Financing Parties. All copies of certificates of insurance submitted
under this Section 14.12 shall be in form and content reasonably acceptable to
Owner and the Financing Parties. Copies of all insurance policies required under
this Article 14 to be obtained by each Party shall be available at such Party's
address indicated in Section 25.6 hereof for review by the other Party or the
Financing Parties.

                14.12.1 STANDARDS. All insurance described herein
shall be written by a company or companies authorized to do business in the
State of New Jersey and reasonably satisfactory to Owner and the Financing
Parties. Contractor and all Subcontractors shall not violate or knowingly permit
any violation of any conditions or terms of the policies of insurance described
herein.

        14.13 CONTRACTOR'S OR RENTED EQUIPMENT. All construction tools and
equipment belonging to Contractor or any Subcontractor used by or on behalf of
Contractor or any Subcontractor for its performance hereunder shall be brought
to and kept at the Facility Site at the sole cost, risk and expense of
Contractor or such Subcontractor and Owner shall not be liable for loss or
damage thereto, and any insurance


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<PAGE>

policies carried by Contractor, any Subcontractor or any third party on said
equipment, supplies and materials shall provide for a waiver of the
underwriters' right to subrogation against Owner, the Financing Parties, the
Transmitting Utility and all their assignees, subsidiaries, affiliates,
employees, insurers and underwriters. Contractor shall obtain adequate insurance
to cover any construction tools and equipment leased from third parties.

        14.14 DESCRIPTIONS NOT LIMITATIONS. The coverages referred to above
shall be set forth in full in the respective policy forms, and the foregoing
descriptions of such policies are not intended to be complete, nor to alter or
amend any provision of the actual policies; PROVIDED, HOWEVER, that neither the
content of any insurance policy or certificate, nor Owner's approval thereof,
shall relieve Contractor of any of its obligations under this Agreement.

        14.15 COST OF PREMIUMS, RISK OF LOSS AND DEDUCTIBLES.

                14.15.1 COST OF PREMIUMS. Contractor shall bear responsibility
for payment of all premiums for all insurance coverages required pursuant to
this Article 14.

                14.15.2 RISK OF LOSS. With respect to the Facility,
until (i) delivery by Owner of the Provisional Acceptance Certificate or the
Final Acceptance Certificate pursuant to Section 6.3.2 or 6.5.1.2 hereof,
whichever occurs earlier, or (ii) any earlier transfer of control of the
Facility to Owner upon termination of this Agreement (the earlier of clause (i)
or clause (ii) above, the "RISK TRANSFER DATE"), Contractor (not Owner) shall
bear the risk of loss and full responsibility for the costs of replacement,
repair or reconstruction resulting from any damage to or destruction of the
Facility or any materials, equipment, tools and supplies which are purchased for
permanent installation in or for use during construction of the Facility,
regardless of whether Owner has title thereto under this Agreement, except in
the event and only to the extent such loss or damage (other than to any tools
and equipment covered by Section 14.13 hereof) is a result of the negligence or
intentional misconduct of Owner, its employees or agents, in which event Owner
shall be responsible for up to the permitted deductible applicable thereto as
set forth in Section 14.15.3 hereof. After the Risk Transfer Date with respect
to the Facility, the Owner shall bear all risk of loss and full responsibility
for repair, replacement or reconstruction with respect to any loss, damage or
destruction to the Facility which occurs after such Risk Transfer Date, except
in the event and only to the extent such loss or damage is a result of (x) the
continuing performance of the Services by any Contractor Responsible Party or
(y) the negligence or intentional misconduct of any Contractor Responsible
Party, in either of which events


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Contractor shall be responsible for up to the lesser of the insurance deductible
applicable thereto and [*].

                14.15.3 DEDUCTIBLES. Contractor shall be responsible
for deductibles for any losses covered by insurance required to be provided by
Contractor under this Article 14; PROVIDED, HOWEVER, that Owner shall be
responsible for the following: (a) deductibles in connection with any such
Project losses that are covered by Builder's Risk insurance required under
Section 14.7 hereof and Ocean Marine Cargo insurance required under Section 14.8
hereof, in each case only up to the permitted deductibles hereunder and only in
the event and to the extent that the deductibles are in respect of losses caused
by the negligence or intentional misconduct of any Owner Responsible Party; and
(b) deductibles in connection with any Project losses that are (i) caused as a
direct result of an event of Force Majeure pursuant to Article 11 hereof and
(ii) covered by the "Delay in Start-Up" insurance required under Sections 14.7
and 14.8 hereof.

        14.16 ADDITIONAL INSUREDS. All Contractor and Owner furnished insurance
coverages required by this Article 14 (with the exception of the insurance
required under Sections 14.2, 14.7 and 14.8) shall, to the extent of their
respective indemnity obligations hereunder, include Owner, Contractor, the
Financing Parties, the Power Purchaser, the Transmitting Utility and all their
assignees, subsidiaries and affiliates as additional insureds. The insurance
coverages required by Sections 14.7 and 14.8 hereof (a) shall designate the
Financing Parties (as identified by Owner) as loss payees for losses in excess
of $1 million and (b) shall name Owner, the Financing Parties, the Power
Purchaser, the Transmitting Utility and their assignees, subsidiaries and
affiliates as additional insureds as their interests may appear.

        14.17 NO LIMITATION OF LIABILITY. The required coverages referred to and
set forth in this Article 14 shall in no way affect, nor are they intended as a
limitation of, Contractor's liability with respect to its performance of the
Services except as expressly provided elsewhere.

        14.18 INSURANCE PRIMARY. All policies of insurance provided by
Contractor pursuant to this Article 14 shall be written as primary and
noncontributing with respect to any other similar coverage that Owner, the
Financing Parties, the Power Purchaser, the Transmitting Utility and their
assignees, subsidiaries and affiliates may carry.


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                                   ARTICLE 15
                             TERMINATION; SUSPENSION

        15.1 SUSPENSION OR TERMINATION FOR OWNER'S CONVENIENCE. Owner may for
its convenience terminate any part of the Services or all remaining Services at
any time upon thirty (30) days' prior written notice to Contractor specifying
the part of the Services to be terminated and the effective date of termination.
Promptly upon receipt of such notice, Contractor shall stop performance of the
terminated Services and shall promptly order and commence demobilization with
regard to the terminated Services. Contractor shall continue to prosecute the
part of the Services not terminated. In case of such partial termination, 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, the Project Schedule, the Performance Guarantees and, as
appropriate, such other provisions of this Agreement which may be affected
thereby shall be made by agreement of Owner and Contractor or otherwise pursuant
to Article 12 or 21 hereof. In the event of termination by Owner under this
Section 15.1 at any time prior to the Commencement Date, Owner shall pay to
Contractor such amounts, if any, as are required pursuant to Section 2.2 hereof.
In the event of termination by Owner under this Section 15.1 at any time on or
after the Commencement Date, Owner shall pay to Contractor such amounts as are
required pursuant to Section 4.4 hereof (PROVIDED that if such termination is
only of part of the Services, the provisions of said Section 4.4 shall be
applied only with respect to the terminated Services); PROVIDED that Contractor
shall mitigate all damages or expenses to be borne by Owner under Section 4.4
hereof; and PROVIDED, FURTHER, that if Owner so requests, Contractor shall
execute and deliver all documents and take all other steps, including legal
assignments, as necessary to transfer to Owner (or to Owner's designee, which
may be any other AES affiliate or any third party purchaser) all of Contractor's
right, title and interest in and to all items procured by Contractor for the
Project and all contractual rights of Contractor under all subcontracts,
purchase orders, warranties, guarantees and other agreements for the Project, in
each case in accordance with the provisions set forth in Section 4.4(a) and (b)
hereof, as applicable.

                15.1.1 OWNER'S RIGHT TO SUSPEND COMPLETION OF THE SERVICES. (a)
Owner may elect to suspend completion of all or any part of the Services upon
ten (10) days' prior written notice to Contractor (or, in emergency situations,
upon such prior notice as circumstances permit) indicating (i) the portion of
the Services the completion of which Owner has elected to defer; (ii) Owner's
estimate of the duration of such suspension; and (iii) the effective date of
such suspension of the Services. Upon receipt of and consistent with the
effective date of such notice, Contractor shall stop performance of the Services
which Owner has elected to defer and shall continue to complete performance of
the balance of the Services. In the event of a suspension of the Services


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pursuant to this Section 15.1.1, Owner shall (A) within thirty (30) days after
receipt from Contractor of an invoice and such supporting documentation as Owner
reasonably requires to verify the invoiced amounts, pay to Contractor the sum of
(1) such amount, if any, of the unpaid Contract Price that is representative of
the actual stage of completion of the Services being deferred that have been
performed to date and not previously compensated for through Contract Price
payments made through such date (as reasonably determined based upon the
percentage completion of applicable milestones relating to such deferred work as
set forth in the Payment and Milestone Schedule or as otherwise mutually and
reasonably agreed upon by the Parties), plus (2) in the event and only to the
extent appropriate based upon the duration and scope of the suspension, such
reasonable demobilization costs incurred by Contractor as a result of such
suspension, including any reasonable payments that Contractor is required to
make to Subcontractors due to such suspension (PROVIDED that Contractor shall
use all reasonable efforts to minimize such payments), and (B) authorize a Scope
Change Order making equitable adjustments to one or more of the Contract Price,
the Guaranteed Completion Dates, the Construction Progress Milestone Dates, the
Payment and Milestone Schedule, the Project Schedule, the Performance Guarantees
and such other provisions of this Agreement which may be affected thereby, as
appropriate. Contractor shall use all reasonable efforts to mitigate expenses to
be borne by Owner as a result of suspension of the Services pursuant to this
Section 15.1.1. Contractor shall promptly resume the suspended portion of the
Services upon receipt of a written notice from Owner authorizing reinstatement
of such portion and specifying the effective date of resumption.

                (b) Notwithstanding anything to the contrary in this
Agreement, in the event that (i) Owner desires to suspend completion of all the
Services hereunder or any portion of the CTG Services for its convenience in
accordance with Section 15.1.1(a) hereof, and (ii) despite its use of all
reasonable efforts Contractor is unable to obtain a corresponding suspension
under the CTG Subcontract (it being understood that Contractor has no right or
power under the CTG Subcontract to require Siemens Westinghouse Power
Corporation to accept a suspension thereunder), then Owner shall thereafter for
the duration of such suspension pay to Contractor all amounts (other than any
that are caused by Contractor's failure to perform its obligations thereunder)
which become due and payable from Contractor under the CTG Subcontract on or
before the corresponding payment date under the CTG Subcontract. In the event
Owner elects to resume performance of the CTG Services hereunder, (i) its
payment of such suspension period CTG-related payments (exclusive of any accrued
interest paid thereon) shall be credited against the Contract Price, and (ii)
the continued performance by Contractor and Siemens Westinghouse Power
Corporation under the CTG Subcontract during such suspension period shall be
taken into account in determining the appropriate equitable adjustments to be
made to one or more of the Contract Price, the Guaranteed Completion


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Dates, the Construction Progress Milestone Dates, the Payment and Milestone
Schedule, the Project Schedule, the Performance Guarantees and any other
provisions of this Agreement as a result of such suspension.

                15.1.2 TERMINATION UPON EXTENDED SUSPENSION OF SERVICES. (a)
If all or substantially all of the Services have been suspended by Owner for
its convenience pursuant to Section 15.1.1 hereof, and the aggregate number
of days of all such discretionary suspensions exceeds [*], Contractor may, at
its option, at any time thereafter so long as such suspension continues, give
written notice to Owner that Contractor desires to terminate the Agreement.
Unless Owner orders Contractor to resume performance of the Services within
fifteen (15) days after the receipt of such notice from Contractor, this
Agreement shall terminate upon the end of such fifteenth (15th) day. In the
event of such termination, the Contractor shall be paid a Termination Payment
in accordance with Section 4.4 hereof as though the termination was made by
Owner pursuant to Section 15.1 hereof.

        (b) If all or substantially all of the Services have been suspended
as a result of Force Majeure Events hereunder and the aggregate number of
days of all such suspensions exceeds [*], either Party may, at its option, at
any time thereafter so long as such suspension continues, terminate this
Agreement upon written notice to the other Party. In the event of such
termination, Contractor shall be paid a Termination Payment in accordance
with Section 4.4 hereof as though the termination was made by Owner pursuant
to Section 15.1 hereof.

        15.2 SUSPENSION OR TERMINATION BY CONTRACTOR UPON NON-PAYMENT BY
OWNER. If Owner fails to pay to Contractor any payment as required hereunder
and such failure continues for [*], then (a) Contractor may suspend its
performance of the Services hereunder upon [*] prior written notice to Owner,
which suspension may continue until such time as such payment (plus accrued
interest thereon pursuant to Section 25.1 hereof) is paid to Contractor,
and/or (b) if such payment has not been made prior to the commencement of a
suspension by Contractor under clause (a) above, Contractor may terminate
this Agreement upon [*] prior written notice to Owner, PROVIDED that such
termination shall not become effective if such payment (plus accrued interest
thereon pursuant to Section 25.1 hereof) is made to Contractor prior to the
end of such notice period. In the event of such a suspension by Contractor
pursuant to clause (a) above, 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 the Project Schedule,
and, as appropriate, such other provisions of this Agreement that may be
affected thereby, shall be made by agreement between Owner and Contractor or
otherwise pursuant to Article 12

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or 21 hereof. In the event of such a termination by Contractor pursuant to
clause (b) above, Owner shall pay to Contractor such amounts as are required
pursuant to Section 4.4 hereof; PROVIDED that Contractor shall use all
reasonable efforts to mitigate all damages or expenses to be borne by Owner
under Section 4.4 hereof. Notwithstanding the foregoing, Owner shall not be
deemed to be in breach hereof, nor shall Contractor be entitled to suspend its
performance hereunder or to terminate this Agreement, by reason of the
withholding of any payment (or portion thereof) which is the subject of a bona
fide dispute.

        15.3 CONSEQUENCES OF TERMINATION. (a) Upon any termination pursuant to
this Article 15 or Article 16 hereof, Owner may, PROVIDED that if such
termination is pursuant to Article 15 hereof Contractor shall have been paid all
amounts due and owing to it under this Agreement, at its option elect to have
itself (or its designee, which may include any other affiliate of The AES
Corporation or any third party purchaser) (i) assume responsibility for and take
title to and possession of the Project and any or all work, materials or
equipment remaining at the Facility Site, and (ii) succeed automatically (upon
delivery of written notification by Owner (or its designee) to all third parties
concerned), without the necessity of any further action by Contractor, to the
interests of Contractor in any or all items procured by Contractor for the
Project and in any and all contracts and subcontracts entered into between
Contractor and any Subcontractor with respect to the Project, in each case as
selected by Owner (or its designee). With respect to all such contracts and
subcontracts that Owner (or its designee) so succeeds to, it shall be required,
as between Contractor and Owner (or its designee), to compensate such
Subcontractors only for compensation becoming due and payable to such
Subcontractors under the terms of their respective contracts and subcontracts
with Contractor for Services performed from and after the date Owner (or its
designee) elects to succeed to the interests of Contractor in such contracts and
subcontracts. All sums claimed by such Subcontractors to be due and owing for
Services performed prior to such date shall constitute debts between Contractor
and the affected Subcontractors, and Owner (or its designee) shall in no way be
liable for such sums. Contractor shall include in all contracts and subcontracts
entered into with Subcontractors a provision providing for the foregoing.

        (b) In the event of any termination hereof, Owner may, without prejudice
to any other right or remedy it may have, at its option, finish the Services by
whatever method Owner may deem expedient. If such termination was by Owner
pursuant to Section 16.2 hereof, then, in addition to any Provisional Acceptance
Late Completion Payments and any Performance Guarantee Payments due under
Articles 7 and 8 hereof, Owner shall be entitled (i) to recover from Contractor,
and Contractor shall pay to Owner upon demand, any costs reasonably incurred by
Owner in completing the Services


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(including without limitation any construction, professional services and
financing costs) in the event and only to the extent such costs exceed the
remaining unpaid portion of the Contract Price that would have been payable
to Contractor hereunder to complete the Services if this Agreement had been
fully performed, and [*]. In the case of such a termination by Owner pursuant
to Section 16.2 hereof, Contractor shall not be entitled to any further
payment hereunder, other than any amounts for Services duly performed in
accordance with the standards of performance required under this Agreement
prior to such termination; PROVIDED that any such amounts shall not be
payable to Contractor unless and until Contractor has paid any and all
amounts that are due or may become due from it to Owner hereunder (including
without limitation any payments due under Section 16.2 hereof).

        (c) Notwithstanding anything to the contrary in this Agreement, in the
event that either (i) Owner desires to terminate for its convenience pursuant to
Section 15.1 hereof either all of the Services hereunder or that part of the
Services involving Contractor's purchase of three (3) model 501F Econopac
combustion turbine generators and associated equipment and services pursuant to
the CTG Subcontract (the "CTG SERVICES") or (ii) this Agreement is terminated
pursuant to Section 15.1.2 or 15.2 hereof (the effective date of such
termination, the "TERMINATION DATE"), then, in either such case, Contractor
shall assign and delegate to Owner, and Owner shall assume by way of an
assignment and delegation from Contractor pursuant to documentation reasonably
satisfactory to Owner, all of Contractor's outstanding rights, benefits,
entitlements, duties, liabilities and obligations under the CTG Subcontract;
PROVIDED, HOWEVER, that either (x) Owner shall not be obligated hereunder to
assume any duty, liability or obligation, the responsibility for which accrued
prior to the Termination Date (the "PRE-TERMINATION OBLIGATIONS"), and
Contractor shall cause Siemens Westinghouse Power Corporation (or its successor
or permitted assigns as seller under the CTG Subcontract) to acknowledge and
agree to the assumption by Owner of all of Contractor's outstanding rights,
benefits, entitlements, duties, liabilities and obligations under the CTG
Subcontract, excluding the Pre-Termination Obligations, or (y) as a condition
precedent to the assumption by Owner of all of Contractor's outstanding rights,
benefits, entitlements, duties, liabilities and obligations under the CTG
Subcontract, Owner may request, and, in such event, Contractor shall provide to
Owner, an indemnity agreement from Contractor's parent, Raytheon Company, in
form and substance reasonably acceptable to Owner, fully indemnifying Owner from
and against any and all claims, liabilities, damages, costs and expenses,
including attorneys' fees and legal costs, arising out of or in connection with
the Pre-Termination Obligations; PROVIDED, FURTHER, that


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(1) for all purposes of this Section 15.3(c), the Pre-Termination Obligations
shall not include (and Owner shall assume) any payment obligation under the CTG
Subcontract that was due from Contractor prior to the Termination Date but was
withheld by Contractor as a result of Owner's withholding of the corresponding
portion from any Scheduled Payment hereunder, unless such withholding by Owner
was due to Contractor's failure to have properly performed its obligations under
the CTG Subcontract and (2) if Contractor satisfied a payment obligation under
the CTG Subcontract prior to the Termination Date and prior to its receipt of a
corresponding payment from Owner, but does not receive reimbursement for such
payment from Owner by a corresponding portion of a Scheduled Payment,
Termination Payment or otherwise, then within thirty (30) days following the
Termination Date Owner shall make such payment to Contractor (PROVIDED, HOWEVER,
that Section 4.4 hereof sets forth the full amounts that may be due to
Contractor pursuant to the terms thereof and in no event is any amount described
in this Section 15.3(c) intended to supplement amounts described in Section 4.4
hereof). It shall be a condition precedent to Contractor's obligation to assign
the CTG Subcontract hereunder, and such assignment shall not be effective, until
(A) Contractor has received all payments which are due and payable to Contractor
in accordance with this Section 15.3(c) and (B) Owner furnishes to Siemens
Westinghouse Power Corporation a financial guaranty or other security reasonably
acceptable to Siemens Westinghouse Power Corporation as may be required pursuant
to the terms of the CTG Subcontract as a condition to such assignment.

        15.4 SURVIVING OBLIGATIONS. Termination of this Agreement pursuant to
this Article 15 or Article 16 hereof (a) shall not relieve Contractor or Owner
of its obligations with respect to the confidentiality of the other Party's
information as set forth in Article 19 hereof, (b) shall not relieve Contractor
or Owner of any obligation hereunder which expressly or by implication survives
termination hereof, and (c) except as otherwise provided in any provision of
this Agreement expressly limiting the liability of either Party, shall not
relieve either Party of any obligations or liabilities for loss or damage to the
other Party arising out of or caused by acts or omissions of such Party prior to
the effectiveness of such termination or arising out of such termination, and
shall not relieve Contractor of its obligations as to portions of the Services
already performed or as to obligations assumed by Contractor or Owner prior to
the date of termination. For the avoidance of doubt, the warranty obligations of
Contractor pursuant to Article 10 hereof with respect to all Services performed
hereunder prior to the termination of this Agreement shall survive termination
of this Agreement; PROVIDED that such warranty obligations shall be equitably
modified by agreement of the Parties, or otherwise pursuant to Article 21
hereof, to account for any material adverse effect such termination may have on
Contractor's ability to perform Services meeting the warranty and guarantee
standards contained in Article 10 hereof.


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                                   ARTICLE 16
                              DEFAULT AND REMEDIES

        16.1 CONTRACTOR'S DEFAULT. Contractor shall be immediately in default of
its obligations hereunder upon the occurrence of any one or more of the
following events, acts or conditions:

        (a) Contractor shall commence a voluntary case or other proceeding
     seeking liquidation, reorganization or other relief with respect to
     itself or its debts under any bankruptcy, insolvency or other similar
     law now or hereafter in effect, or seeking the appointment of a trustee,
     receiver, liquidator, custodian or other similar official of it or any
     substantial part of its property, or shall consent to any such relief or
     the appointment of or taking of possession by any such official in an
     involuntary case or other proceeding commenced against it, or shall
     generally not pay its debts as they become due, or shall make a general
     assignment for the benefit of creditors, or shall take any corporate
     action to authorize any of the foregoing;

        (b) An involuntary case or other proceeding shall be commenced against
     Contractor seeking liquidation, reorganization or other relief with
     respect to it or its debts under any bankruptcy, insolvency or other
     similar law now or hereafter in effect or seeking the appointment of a
     trustee, receiver, liquidator, custodian or other similar official of it
     or any substantial part of its property, and such involuntary case or
     other proceeding shall remain undismissed or unstayed for a period of
     sixty (60) days;

        (c) Any representation or warranty made by Contractor under Article 24
     hereof was false or materially misleading when made, and Contractor
     fails to remedy such false or materially misleading representation or
     warranty within thirty (30) days after Contractor receives a written
     notice from Owner with respect thereto;

        (d) Contractor assigns or transfers this Agreement (or any right or
     interest herein) in breach of Section 17.1 hereof without the express
     written consent of Owner;

        (e) Contractor (i) knowingly fails to maintain any insurance coverages
     required of it pursuant to Article 14 hereof, or (ii) otherwise fails to
     maintain and, within two business days of receiving actual knowledge of
     such failure, fails to correct its failure to maintain any such required
     insurance coverages;


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<PAGE>

        (f) Contractor or any Subcontractor fails to comply with any provision
     of any Applicable Law or Applicable Permit, and such failure is not
     remedied within (i) ten (10) days after Contractor receives actual
     knowledge thereof, or (ii) such longer period as may be necessary for
     Contractor to cure such failure, not to exceed one hundred twenty (120)
     days, PROVIDED that Contractor diligently pursues the cure of such
     failure and such cure is effected in such a manner and within such time
     that such failure to comply could not reasonably be expected to have a
     material adverse effect on Owner or the Project;

        (g) The cessation (other than as expressly permitted by Article 15
     hereof) or abandonment by Contractor of the performance of the Services,
     and Contractor fails to recommence the Services within ten (10) days
     after Contractor receives a written notice from Owner with respect
     thereto, unless due to an emergency (PROVIDED that Contractor shall have
     furnished Owner with a reasonable justification for its course of action
     within twenty four (24) hours of declaring the emergency in question,
     which course of action is consistent with the standards of performance
     required hereunder);

        (h) Contractor (1) fails to supply sufficient skilled workers or
     suitable materials or equipment to perform the Services, or (2) fails to
     make prompt payments when due to Subcontractors (unless such payment is
     the subject of a bona fide dispute, and PROVIDED that Contractor is in
     compliance with its requirements under Sections 2.1.22, 4.6 and 10.2
     hereof) or for labor, materials or equipment, and does not remedy any
     such failure within thirty (30) days of receipt of written notice
     thereof from Owner (with respect to clause (1) above) or within thirty
     (30) days of receiving actual knowledge thereof (with respect to clause
     (2) above);

        (i) Either of the following events or conditions shall have occurred or
     exist:

                (1) On the date that is [*] after the Guaranteed Provisional
        Acceptance Date, (i) neither Provisional Acceptance nor Final
        Acceptance of the Facility shall have occurred, and (ii) Contractor
        shall have failed to provide Owner with a Plan relating thereto in
        accordance with Section 7.2.1 hereof; or

                (2) Final Acceptance of the Facility shall not have occurred by
        the Guaranteed Final Acceptance Date; and Contractor is not proceeding
        in


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        accordance with a Plan that has been approved and/or modified by Owner
        in accordance with Section 7.2.1(b) or 7.6.2(b) hereof;

        (j) Contractor (i) fails to achieve any Construction Progress
     Milestone, and (ii) fails, by the date that is [*] after such
     Construction Progress Milestone Date, to be proceeding in accordance
     with a Plan that has been approved and/or modified by Owner pursuant
     to Section 7.6.2 hereof;

        (k) Contractor fails to perform or observe in any material
     respect any provision of this Agreement not otherwise addressed in this
     Section 16.1 and fails to remedy any such failure within (i) thirty
     (30) days after Contractor receives a written notice from Owner with
     respect thereto, or (ii) such longer period as may be necessary for
     Contractor to cure such failure, PROVIDED that Contractor diligently
     pursues the cure of such failure and such cure is effected in such a
     manner and within such time that such failure to comply could not
     reasonably be expected to have a material adverse effect on Owner or
     the Project; or

        (l) The EPC Guaranty issued by Raytheon Corporation pursuant
     to Section 2.1.26 hereof is terminated or repudiated or an event of
     default (as defined therein) exists thereunder.

        16.2 OWNER'S RIGHTS AND REMEDIES. In the event that Contractor is in
default of its obligations hereunder pursuant to Section 16.1 hereof, Owner
shall have any or all of the following rights and remedies [*] and Contractor
shall have the following obligations:

                  (a) Owner may, [*], terminate this Agreement in whole or in
         part immediately upon delivery of notice to Contractor. In case of
         such partial termination, an equitable adjustment (including the
         reduction and/or deletion of obligations of the Parties commensurate
         with the reduced scope Contractor shall have after taking into account
         such partial termination) to one or more of the Contract Price, the
         Guaranteed Completion Dates, the Construction Progress Milestone
         Dates, the Payment and Milestone Schedule, the Project Schedule,
         the Performance Guarantees and such other provisions of this Agreement
         which may be affected thereby, as appropriate, shall be made by
         agreement of Owner and Contractor or otherwise pursuant to Article 12
         or 21 hereof.

                  (b) If requested by Owner, Contractor shall withdraw from the
         Facility Site, shall assign to Owner such of Contractor's subcontracts
         as Owner may


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         request, and shall remove such materials, equipment, tools
         and instruments used by, and any debris and waste materials generated
         by, Contractor in the performance of the Services as Owner may direct,
         and Owner, without incurring any liability to Contractor (other than
         the obligation to return to Contractor at the completion of the Project
         such materials that are not consumed or incorporated into the 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, drawings, materials, equipment, tools, instruments, purchase
         orders, schedules and facilities of Contractor at the Facility Site
         that Owner deems necessary to complete the Services;

                  (c) Owner, without incurring any liability to Contractor,
         shall have the right (either with or without the use of Contractor's
         materials, equipment, tools and instruments) to have the Services
         finished and to exercise any rights or remedies available to it
         hereunder or at law or in equity (including without limitation
         demanding the payments from Contractor pursuant to Section 15.3
         hereof); and

                  (d) Owner may [*], including seeking the recovery of damages
         subject to any applicable limitations on Owner's remedies and/or
         Contractor's obligations and liabilities that are expressly set forth
         in this Agreement.

                                   ARTICLE 17
                                   ASSIGNMENT

        17.1 CONSENT REQUIRED. (a) It is expressly understood and agreed that
this Agreement is personal to Contractor and Owner, and that Contractor and
Owner shall have no right, power or authority to assign or delegate any of their
respective rights or obligations under this Agreement or any portion thereof,
either voluntarily or involuntarily, or by operation of law. (For the avoidance
of doubt, the Parties acknowledge and agree that Contractor's entry into
subcontracts in accordance with the provisions of Article 3 hereof shall not
release or qualify any of Contractor's obligations hereunder and shall not be
deemed to constitute an assignment or delegation of any of Contractor's rights
or obligations hereunder; PROVIDED, that Contractor does not grant or otherwise
convey to any Subcontractor any lien or other encumbrance on Contractor's rights
under this Agreement.) Notwithstanding the foregoing, Owner may, without
Contractor's approval, (i) assign any or all of its rights under this Agreement
as collateral security to the Financing Parties, and (ii) assign any or all of
its rights under this


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Agreement to any transferee of the Project or a substantial portion thereof,
PROVIDED that such assignee has financial and operational capabilities that
either are substantially similar to those of Owner at such time or otherwise are
such that the assignment could not reasonably be expected to have a material
adverse effect on Contractor's rights and obligations hereunder.

                  (b) If in connection with any assignment permitted pursuant to
clause (a)(i) of this Section 17.1 any Financing Party requests Contractor to
consent in writing to such an assignment even though such consent is not
required hereunder, Contractor shall do so promptly, with such acknowledgment
and consent agreement to include such terms and conditions as are mutually and
reasonably agreed upon by Contractor, Owner and the Financing Parties. If either
Party reasonably determines or is reasonably advised that any further
instruments are necessary or desirable to carry out the intent of this Section
17.1, the other Party will execute and deliver all such instruments and take any
action reasonable to effectuate the intent of this Section 17.1. The Parties
recognize that this Agreement is subject to review by financial institutions for
purposes of the project financing of the Project. At Owner's request, Contractor
shall provide to any Financing Party a certificate from Contractor and/or an
opinion of counsel addressed to any such Financing Party concerning such matters
as such Financing Party reasonably requests from Contractor, including that (v)
Contractor is duly organized, validly existing and in good standing under the
laws of the state or commonwealth of its formation or incorporation, as the case
may be, and is qualified to do business in the State of New Jersey, (w) the
execution, delivery and performance of this Agreement is within the power and
authority of Contractor and this Agreement is not in conflict with its
organizational documents or any agreement to which Contractor is a party or by
which it is bound or affected, (x) there is no law, rule or regulation, nor is
there any judgment, decree or order of any court or governmental entity binding
on Contractor which would be contravened by the execution, delivery, performance
or enforcement of the Agreement, (y) no consent, approval, authorization, order,
registration or qualification under any Applicable Law is required for the
execution, delivery or performance by the Contractor of the Agreement, except
those that have already been obtained and are in full force and effect or those
that can be obtained in the ordinary course of business upon due application
therefor (and there is no reason to believe that they will not be so obtained),
and (z) the Agreement is a legal, valid and binding obligation enforceable
against Contractor in accordance with its terms, subject to usual and customary
qualifications.

        17.2 SUCCESSORS AND ASSIGNS. All of the rights, benefits, duties,
liabilities and obligations of the Parties hereto shall inure to the benefit of
and be binding upon their respective permitted successors and permitted assigns.


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                                   ARTICLE 18
                                DESIGN DOCUMENTS

        18.1 OWNER REVIEW. It is expressly understood and agreed that the Design
Documents and other related design information which are prepared in connection
with the Services and which have been identified in Appendix P hereto as being
subject to the review, comment and/or approval of Owner (such design information
together with the Design Documents, the "DOCUMENTS FOR APPROVAL"), shall be made
available to Owner and (commencing on the Financial Closing Date) the
Independent Engineer for their review, comment and/or approval, as the case may
be, in order to monitor compliance with this Agreement as such documents are
prepared and completed. Owner and, if applicable, the Independent Engineer shall
review the Documents for Approval as set forth in Appendix P hereto within
twenty (20) days of receipt thereof (or such other period of time as may be
specified in Appendix P with respect thereto, as the case may be). In the event
Owner or the Independent Engineer, as applicable, fails to provide notice of
approval or disapproval of the Documents for Approval within such period, and
such failure continues for twenty-four (24) hours after Owner's receipt of a
written request from Contractor (which request shall expressly state that it is
being delivered pursuant to this Section 18.1), then, in the event and only to
the extent that Contractor was delayed in the performance of the Services as a
direct result thereof despite Contractor's reasonable efforts to avoid or
mitigate such delay, 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 the Project Schedule, and, as
appropriate, such other provisions of this Agreement that may be affected
thereby, shall be made by agreement of Owner and Contractor or otherwise
pursuant to Article 12 or 21 hereof.

        18.2 REVIEW NOT RELEASE OF OBLIGATIONS. Review, comment and/or approval
by Owner or the Independent Engineer of any documents or submittals that
Contractor is required to submit to Owner or the Independent Engineer hereunder
for its review, comment and/or approval (including without limitation the
Documents for Approval pursuant to Section 18.1 hereof) shall not relieve or
release Contractor from any of its duties, obligations or liabilities provided
for under the terms of this Agreement. Prior to the Commencement Date, the
Parties shall mutually agree upon and set forth in Appendix P hereto the timing
requirements for submittal, review, approval and return of such Documents for
Approval.

        18.3 FINAL DOCUMENTS. Within ninety (90) days after the occurrence of
the earlier to occur of Provisional Acceptance and Final Acceptance, Contractor
shall furnish Owner with the Record design documents listed in Appendix P
hereto, in form


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and substance reasonably satisfactory to Owner, reflecting the Facility as
actually constructed, including without limitation a "record" survey
illustrating the boundaries of the Facility Site, and the established building
setback lines, if any.

        18.4 OWNERSHIP. Contractor agrees that all Design Documents and other
documents prepared by Contractor in the performance of the Services shall be the
sole and exclusive property of Owner, except that Contractor shall retain the
right to utilize such documents for reference in its general practice.
Contractor agrees that all such documents, as well as any drawings, tracings,
specifications, calculations, memoranda, data, notes and other materials which
are supplied by Owner and come into the possession of Contractor, shall be used
solely with respect to this Project and shall, except for Contractor's file
copy, be delivered to Owner at the first to occur of Provisional Acceptance,
Final Acceptance and termination of the Services.

                                   ARTICLE 19
                            CONFIDENTIAL INFORMATION

        19.1 CONFIDENTIALITY. Each Party agrees to hold in confidence for a
period commencing with the date hereof and ending five years from the date of
Project Completion, except as may be necessary to perform its obligations
hereunder, any information supplied to it by the other Party and designated in
writing as confidential. Contractor further agrees to require its Subcontractors
to enter into appropriate non-disclosure agreements relative to such
confidential information as may be communicated to them by Contractor or Owner.
The provisions of this Section 19.1 shall not apply to information within any
one of the following categories: (a) information which was in the public domain
prior to receipt thereof from the other Party or which subsequently becomes part
of the public domain by publication or otherwise, except by the receiving
Party's wrongful act; (b) information which the receiving Party can show was in
its possession prior to its receipt thereof from the other Party; (c)
information received by a Party from a third party without a confidentiality
obligation with respect thereto; (d) information which the receiving Party
developed independently; or (e) information which a Party is required by law to
disclose; PROVIDED, HOWEVER, that prior to making any such disclosure under
clause (e) of this Section 19.1, such disclosing Party shall: (i) provide the
other Party with timely advance written notice of the confidential information
requested by such government authority and such disclosing Party's intent to so
disclose; (ii) minimize the amount of confidential information to be provided
consonant with the interests of the non-disclosing Party and the requirements of
the government authority involved; and (iii) at the request and expense of the
non-disclosing Party make every reasonable effort (which shall include, to the
extent possible,


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participation by the non-disclosing Party in discussions with the government
authority involved) to secure confidential treatment and minimization of the
confidential information to be provided. Neither Party shall publish the terms
and conditions of this Agreement or Project technical information, unless the
other Party provides its express prior written consent thereto; PROVIDED,
HOWEVER, that (x) Owner shall be permitted to disclose such terms and provisions
to the Independent Engineer, the Financing Parties, the Power Purchaser and the
Transmitting Utility to the extent such disclosure is required to obtain
financing for the Facility or to perform its obligations under the Power
Purchase Agreement or the Transmission Interconnection Agreement or, upon the
termination of this Agreement pursuant to Section 16.2 hereof, in the event and
only to the extent Owner reasonably deems such disclosure is necessary to
complete the Services, and (y) Contractor shall be permitted to disclose such
terms and provisions to its Subcontractors in the event and only to the extent
such disclosure is reasonably necessary to provide for the performance of the
Services hereunder; PROVIDED FURTHER, HOWEVER, that each such recipient shall
agree in writing that such information will be subject to the confidentiality
requirements of this Section 19.1. Notwithstanding any other provision of this
Section 19.1, Owner shall be permitted to summarize the material terms and
conditions of this Agreement for purposes of including such summary in any
offering document associated with the issuance of debt by the Owner for the
purpose of obtaining financing for the Facility, which offering document will be
made available only to the Financing Parties or to prospective purchasers of
such debt ("OFFEREES"); PROVIDED, HOWEVER, that prior to the distribution of
such summary, Owner shall provide Contractor a reasonable period of time (not to
exceed ten (10) days) to review and provide comments thereon and Owner shall
give due consideration to such comments in finalizing the summary in light of
both Contractor's interest in protecting its proprietary information and Owner's
disclosure obligations under applicable securities laws, and the Parties shall
attempt in good faith to resolve any disagreement concerning the information to
be included in such summary. Contractor recognizes that to obtain financing for
the Project, Owner may be requested to provide a copy of this Agreement to an
Offeree and Owner agrees that, prior to providing a copy of this Agreement to
any such Offeree, Owner shall use its commercially reasonable efforts to have
such Offeree execute a confidentiality agreement consistent with the terms of
this Section 19.1. In the event that Owner is unable to secure such a
confidentiality agreement from such Offeree, Owner shall not provide a copy of
this Agreement to such Offeree (but may make a summary of the material terms and
conditions of this Agreement available to such Offeree in accordance with the
provisions of this Section 19.1). Contractor further recognizes that in the
event that Owner files a registration statement with the Securities and Exchange
Commission (including any replacement or successor agency thereof, the "SEC") in
respect of any debt offering, it will be required to submit a copy of this
Agreement to the SEC. In the event that this Agreement is submitted to the SEC
in accordance with SEC rules,


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Contractor may designate portions of this Agreement with respect to which
Contractor wishes Owner to obtain confidential treatment in any filing with the
SEC, and Owner shall provide Contractor a reasonable opportunity (not to exceed
ten (10) days) prior to such submission to deliver such designations to Owner,
accompanied by a written explanation of such designations. Owner shall comply
with Contractor's designations regarding confidential treatment in connection
with any such filing, PROVIDED that Contractor recognizes that any decision
regarding the confidential treatment of any portion of this Agreement shall be
made by the SEC in its sole discretion and Owner (provided that Owner has
complied with the provisions of this Section 19.1) shall have no obligation
under this Section 19.1 with respect to any portion of this Agreement for which
the SEC elects not to grant confidential treatment. No Person shall be permitted
access to the Facility or the Facility Site, except as provided in this
Agreement or as otherwise agreed by the Parties.

        19.2 PUBLICITY RELEASES. Contractor shall not (other than in
Contractor's internal publications and corporate resumes), nor shall it permit
any Subcontractor to, issue any press or publicity release or any advertisement,
or publish or otherwise disclose any photograph or other information, concerning
this Agreement or the Project without the express prior written consent of
Owner, which consent shall not be unreasonably withheld or delayed.

                                   ARTICLE 20
                                   INSPECTION

        20.1 PROJECT INSPECTION. Contractor acknowledges and agrees that, prior
to the execution of this Agreement, Contractor:

        (a) has made a complete and careful examination of the Facility Site and
     the surrounding areas, the Design Documents and the drawings and
     specifications and other information set forth in Appendix A hereto;

        (b) has made a complete and careful geotechnical survey and analysis of
     the nature, character and condition of the soil and terrain of and under
     the Facility Site in order to determine any material difficulties,
     hazards or conditions on or about or under the Facility Site (including
     without limitation topography (but only as identified in the documents
     referenced in clause (e) of Section 12.6.2 hereof and shown on the
     drawing contained in Appendix A hereto entitled "Site Plan Existing
     Topography," drawing number 78812-E-120001, dated September 12 1999) and
     ground surface conditions, subsurface geology and conditions, wetlands
     (but only to the extent identified in the documents referenced in


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     clause (c) of Section 12.6.2 hereof) and the location of any underground
     utilities (including as such conditions will be affected by Owner's
     implementation, in accordance with the terms thereof, of the Approved
     Remediation Plan, but excluding any Hazardous Materials existing on or
     about or under the Facility Site that were not specifically identified
     in and covered by the Baseline Environmental Site Assessment));

        (c) has made a complete and careful examination to determine the
     difficulties and hazards incident to the performance of the Services,
     including without limitation (i) the location of the Project, (ii) the
     condition of the Facility Site and the surrounding areas (including as
     such conditions will be affected by Owner's implementation of the
     Approved Remediation Plan in accordance with the terms thereof), (iii)
     the proximity of the Project to adjacent facilities and structures, (iv)
     the conditions of the roads, waterways, bridges, railroads, airports and
     other transportation facilities in the vicinity of the Facility Site,
     including the conditions affecting shipping and transportation, access,
     disposal, handling and storage of materials, (v) the labor conditions in
     the region of the Facility Site, (vi) performance in accordance with
     Applicable Laws, Applicable Permits, the Electrical Interconnection
     Requirements, the PPA Operating Requirements (as in effect on the date
     of execution of this Agreement), the Guaranteed Emissions Limits and
     Real Estate Rights, (vii) the local weather conditions based upon
     previous weather data, and (viii) all other matters that might affect
     Contractor's performance hereunder or the construction of the Facility
     (but excluding any Hazardous Materials existing on or about or under the
     Facility Site that were not specifically identified in and covered by
     the Baseline Environmental Site Assessment); and

        (d) has determined to Contractor's satisfaction the nature and extent of
     such difficulties, hazards and conditions.

        20.2 NO RELIEF FOR DIFFERING CONDITIONS. (a) Contractor specifically
acknowledges and accepts the risk of mistake or error relating to all matters
within the scope of Section 20.1 hereof (PROVIDED that for the avoidance of
doubt the Parties hereby acknowledge and agree that this Article 20 does not
impose on Contractor the risk of mistake or error in the documentation attached
hereto constituting the Electrical Interconnection Requirements, the PPA
Operating Requirements or the Real Estate Rights), and agrees that, except as
expressly set forth in Section 20.3 hereof, no adjustment shall be made to any
of the Contract Price, the Guaranteed Completion Dates, the Construction
Progress Milestone Dates, the Payment and Milestone Schedule, the Performance
Guarantees, the Project Schedule or any other provisions of this Agreement


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which may be affected thereby should any difficulties, hazards or conditions on,
about or under the Facility Site be different from or in addition to those
identified by Contractor through its inspections and examinations referenced in
Section 20.1 hereof, except in the event and only to the extent directly caused
by any archaeological or other manmade subsurface condition that was not known
to Contractor prior to its execution of this Agreement and is not a condition
which would have been identified by a contractor exercising the degree of skill,
diligence, prudence and foresight regularly exercised by a skilled and
experienced professional contractor in Contractor's position. In the event and
only to the extent Contractor is delayed or incurs costs or expenses as a direct
result of any such unknown archaeological or other manmade subsurface condition
despite Contractor's reasonable efforts to avoid or mitigate such delay, costs
or expenses, Contractor shall be entitled to a Scope Change hereunder; PROVIDED,
HOWEVER, that Contractor shall not be entitled to a Scope Change in the event
and only to the extent Contractor fails to act reasonably under the prevailing
conditions upon discovering such unknown archaeological or manmade subsurface
condition.

        (b) Contractor further agrees that, other than with respect to (i)
unknown archaeological or other manmade subsurface conditions covered by the
preceding sentence (and not excluded by the proviso thereto), and (ii) any
Hazardous Materials existing on or about or under the Facility Site (A) that
were not specifically identified in and covered by the Baseline Environmental
Site Assessment or (B) that were so identified and covered by the Baseline
Environmental Site Assessment and were also specifically identified in and
covered by the Approved Remediation Plan, in which event they shall also be
excluded by this clause (ii) (except in the event and only to the extent that
such Hazardous Materials had previously been remediated by Owner in accordance
with the terms of said plan and are subsequently disturbed by any Contractor
Responsible Party's performance hereunder), no claim by the Contractor of any
nature whatsoever, whether based in contract, in tort (including negligence and
strict liability), warranty or otherwise, will be allowed on the ground of any
misunderstanding or misapprehension or other error or mistake in respect of the
matters referred to in Section 20.1 hereof or on the ground of any allegation or
fact that incorrect or insufficient information with respect to the matters
referred to in Section 20.1 hereof (other than with respect to any material
inaccuracy or omission in the documentation attached hereto constituting the
Electrical Interconnection Requirements, the PPA Operating Requirements, the
Real Estate Rights or the Approved Remediation Plan or the documentation
referred to in clauses (b), (c), (d) or (e) of Section 12.6.2 hereof provided to
Contractor by Owner prior to the date thereof) was given to it by any Person
whether or not such Person is an Owner Responsible Party or of any failure on
Contractor's part to obtain correct and sufficient information, nor shall the
Contractor be relieved from any risks or obligations imposed on or undertaken by
it under the Agreement on any such ground or on the ground that it did not or
could


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not foresee any such matter which may in fact affect or have affected the
performance of the Services.

        20.3 OWNER'S ENVIRONMENTAL SITE ASSESSMENT. Prior to execution hereof,
Owner delivered to Contractor for its review and analysis the Baseline
Environmental Site Assessment, and Contractor hereby acknowledges and agrees
that, assuming the Approved Remediation Plan is implemented by Owner in
accordance with the terms thereof and such implementation has the effect of
remediating the Hazardous Materials as specifically intended and set forth in
the Approved Remediation Plan, no adjustment shall be made to any of the
Contract Price, the Guaranteed Completion Dates, the Construction Progress
Milestone Dates, the Payment and Milestone Schedule or any other provision of
this Agreement as a result of or in connection with any Hazardous Materials
specifically identified in and covered by any of such Baseline Environmental
Site Assessment (unless such Hazardous Materials were also specifically
identified in and covered by the Approved Remediation Plan, in which event they
shall not be covered by this sentence except in the event and only to the extent
that such Hazardous Materials are subsequently disturbed by any Contractor
Responsible Party's performance hereunder). In addition, Owner shall have the
right, in its sole discretion, to prepare and deliver to Contractor after the
execution of this Agreement, but no later than thirty (30) days prior to the
Commencement Date, an additional environmental assessment report of the Facility
Site, which report shall also reflect the provisions of any Approved Remediation
Plan delivered to Contractor prior to the execution hereof. If any such
additional environmental report reveals any material environmental difficulties,
hazards or conditions at or near or under the Facility Site incident to the
performance of the Services that are not to be remediated by Owner pursuant to
the terms of the Approved Remediation Plan delivered by Owner to Contractor
prior to the execution hereof and were not specifically identified in and
covered by the Baseline Environmental Site Assessment, then Contractor shall
have the right, to be exercised no later than thirty (30) days after receipt of
such report, to: (i) request a Scope Change providing for such equitable
adjustments (if any) in one or more of the Contract Price, the Guaranteed
Completion Dates, the Construction Progress Milestone Dates, the Payment and
Milestone Schedule, the Performance Guarantees, the Project Schedule and, as
appropriate, such other provisions of this Agreement which may be affected
thereby, in each case as may be reasonably warranted by such material
environmental difficulties, hazards or conditions, or (ii) refuse to accept
responsibility for handling such material environmental difficulties, hazards or
conditions if Contractor determines, in its reasonable discretion, that the
potential liabilities and difficulties associated therewith would materially and
adversely affect the risks to Contractor in performing the Services hereunder,
in either of which events Owner shall have the option of (x) granting such a
Scope Change on terms mutually and reasonably agreeable to Owner and Contractor
(but


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only in the circumstances under clause (i) above), (y) contracting directly
with a third party contractor to perform any such work relating to such material
environmental differences or additions PROVIDED that any such work shall be
performed in such a manner as not to adversely affect any Contractor Responsible
Party's performance of the Services in any material way, or (z) terminating this
Agreement without any liability of either Party to the other, subject to the
provisions of Section 15.1 hereof.

                                   ARTICLE 21
                               DISPUTE RESOLUTION

        21.1 DISPUTE RESOLUTION. In the event a dispute arises between Owner
and Contractor regarding the application or interpretation of any provision
of this Agreement, the aggrieved Party shall promptly give notice in writing
to the other Party invoking the provisions of this Section 21.1 and the
Parties shall negotiate in good faith and attempt to resolve such dispute. If
the Parties fail to resolve the dispute within thirty (30) days after
delivery of such notice, each Party shall have the right to require, by
written notice to the other Party containing a brief description of the
dispute, that each Party nominate and have a senior officer of its management
meet with the other Party's nominated senior officer at the Facility Site, or
at any other mutually agreed location, within fifteen (15) days of such
request, in order to attempt to resolve the dispute. Should the Parties be
unable to resolve the dispute to their mutual satisfaction within fifteen
(15) days after such meeting, each Party shall have the right to pursue any
and all remedies available to it hereunder or available to it at law or in
equity; PROVIDED, that if such unresolved dispute involves a sum not to
exceed [*], then either Party may serve upon the other a demand that such
matter be arbitrated (including a brief description of said dispute or
disputes), in which case the same shall be resolved by arbitration conducted
by three (3) arbitrators in accordance with the rules of the American
Arbitration Association (the "AAA"). Concurrently with making such a demand,
the demanding Party shall specify the name and address of an arbitrator
selected by it. The other Party shall within twenty (20) days of receipt of
the arbitration demand select its arbitrator; PROVIDED, that if it fails to
do so, the demanding Party may request the AAA to appoint within fifteen (15)
days a member in good standing of such association as the arbitrator for the
other Party. The two (2) arbitrators thus selected shall within fifteen (15)
days of the selection of the second (2nd) arbitrator select the third (3rd)
arbitrator; failing to do so, they shall request the AAA promptly to appoint
a member in good standing of such association as the third arbitrator. The
decision of any two (2) of the three (3) arbitrators on any issue shall be
final. Unless the Parties otherwise agree, the arbitration shall be conducted
in the English language and shall be held in New York, New York. The Parties
shall proceed with the arbitration expeditiously and shall use best

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efforts to conclude all proceedings thereunder, including any hearing, in order
that a decision may be rendered within one hundred twenty (120) days from the
filing of the demand for arbitration by the initiating Party. The award of the
arbitrators will be final and binding on both Parties and may be enforced in any
court having jurisdiction over the Party against which enforcement is sought.
Each Party shall bear its own expenses, including but not limited to counsel
fees, except that all expenses of the arbitration shall be apportioned in the
award of the arbitrators based upon the respective merit of the positions of the
Parties. The provisions of this Section 21.1 shall survive the termination or
expiration of this Agreement.

                21.1.1 INDEPENDENT EXPERT. If any dispute hereunder involves
technical issues (including, without limitation, as to the adequacy of any Plan
submitted by Contractor under Section 7.2.1 or 7.6.2 hereof), either Party could
request that such matter be referred to a mutually acceptable independent expert
for resolution in an expedited manner pursuant to procedures and timing to be
mutually agreed upon by the Parties; PROVIDED that if the other Party does not
agree to such request or the Parties are unable to reach an agreement on such an
independent expert or such governing procedures (in each case in the sole
discretion of each Party) in any case within thirty (30) days after the initial
request, then either Party may require that the dispute be submitted to
resolution pursuant to Section 21.1 hereof. The findings of any such independent
expert with respect to any technical issues so presented to it for resolution
hereunder shall be binding upon the Parties.

        21.2 PERFORMANCE DURING DISPUTE. Notwithstanding the existence of a
dispute between Owner and Contractor and regardless of whether such dispute is
the subject of dispute resolution pursuant to Section 21.1 hereof, Contractor
shall not be entitled to suspend or otherwise delay the performance of the
Services; PROVIDED, HOWEVER, that all undisputed amounts, and all undisputed
portions of disputed amounts, shall be paid to Contractor when due and payable
pursuant to the terms of this Agreement.

                                   ARTICLE 22
                              COST RECORDS; AUDITS

        22.1 MAINTENANCE OF RECORDS. Contractor shall maintain fiscal records
and books of account pertaining to the Project in accordance with U.S. generally
accepted accounting principles consistently applied.

        22.2 INSPECTION OF BOOKS, RECORDS AND AUDIT RIGHTS. Contractor covenants
and agrees to keep and maintain full, complete and detailed records of all of
its


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costs and allowances incurred in connection with Scope Changes priced at cost
plus fee. Contractor authorizes independent third parties designated by Owner
and subject to Contractor's approval (not to be unreasonably withheld or
delayed) to inspect and audit, during business hours, all such records. Such
records, books and accounts shall be preserved by Contractor and shall be
available for audit for a period of three (3) years after Project Completion, at
no additional cost to Owner.

        22.3 QUALITY AUDITS. Owner may perform periodic audits of the Project,
or of documents related to the Project, in the event and only to the extent such
audits are necessary (in Owner's reasonable judgment) to verify the application
of the Quality Assurance Plan set forth in Appendix K hereto and its results. In
the event that, as a result of an audit, Owner detects a failure to adhere to or
to properly apply such Quality Assurance Plan, upon the receipt of notice
thereof from Owner, Contractor shall take all actions necessary to correct such
failure.

                                   ARTICLE 23
                             INDEPENDENT CONTRACTOR

        23.1 CONTRACTOR AS INDEPENDENT CONTRACTOR. Contractor shall be an
independent contractor with respect to the Project, each part thereof and the
Services, and neither Contractor nor its Subcontractors nor the employees of
either shall be deemed to be agents, representatives, employees or servants of
Owner in the performance of the Services, or any part thereof, or in any manner
dealt with herein. Contractor covenants and agrees that in the performance of
the Services, the Contractor Responsible Parties shall not perform any act or
make any representation to any Person to the effect that Contractor, or any of
its agents, representatives, Subcontractors or other Contractor Responsible
Parties, is the agent or agents of Owner.

                                   ARTICLE 24
                         REPRESENTATIONS AND WARRANTIES

        24.1 REPRESENTATIONS AND WARRANTIES OF CONTRACTOR. Contractor represents
and warrants to Owner that:

                24.1.1 ORGANIZATION AND QUALIFICATION. Contractor is
a corporation duly organized, validly existing and in good standing under the
laws of Delaware, has the lawful power to engage in the business it presently
conducts and contemplates conducting, and is duly licensed or qualified and in
good standing as a corporation in


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each jurisdiction wherein the nature of the business transacted by it makes such
licensing or qualification necessary.

                24.1.2 POWER AND AUTHORITY. Contractor has the power to enter
into this Agreement and to perform its obligations hereunder and all such
actions have been duly authorized by all necessary proceedings on its part.

                24.1.3 NO CONFLICT. The execution, delivery and performance of
this Agreement will not conflict with, result in the breach of, constitute a
default under or accelerate performance required by any of the terms of the
organizational documents of Contractor or any Applicable Laws or any covenant,
agreement, understanding, decree or order to which Contractor is a party or by
which Contractor or any of its properties or assets is bound or affected.

                24.1.4 VALIDITY AND BINDING EFFECT; GOVERNMENTAL APPROVALS. This
Agreement has been duly and validly executed and delivered by Contractor. This
Agreement constitutes a legal, valid and binding obligation of Contractor,
enforceable in accordance with its terms, except to the extent that its
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the rights of creditors generally or
by general principles of equity. To the best knowledge of Contractor after due
inquiry, no consent, approval, authorization, order, registration or
qualification by or with any governmental or public body or authority (other
than the Building Permits listed in Appendix F hereto) is required under
Applicable Law in connection with the authorization, execution, delivery and
carrying out of the terms of this Agreement by Contractor, and each such
Building Permit either: (i) is not yet required, and Contractor has no reason to
believe that the same will not be readily obtainable in the ordinary course of
business upon due application therefor, or (ii) has been duly obtained and is in
full force and effect.

                24.1.5 LITIGATION. There are no actions, suits, proceedings or
investigations pending or, to the best knowledge of Contractor or its officers
after due inquiry, threatened against it at law or in equity before any court or
before any federal, commonwealth, state, municipal or other governmental
department, commission, board, agency or instrumentality, whether or not covered
by insurance, which individually or in the aggregate could reasonably be
anticipated to result in any material impairment of Contractor's ability to
perform its obligations under this Agreement, other than those that have been
disclosed to Owner in writing prior to the execution hereof. Neither Contractor
nor any of its officers has knowledge of any violation or default with respect
to any order, writ, injunction or any decree of any court or any Federal,
commonwealth, state, municipal or other governmental department, commission,
board, agency or


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instrumentality which could reasonably be anticipated to result in any such
material impairment, other than those that have been disclosed to Owner in
writing prior to the execution hereof.

                24.1.6 PATENTS, LICENSES, FRANCHISES. Contractor owns or
possesses, or, with respect to those rights that customarily are not obtained by
a reasonably prudent contractor until a later stage of construction, will obtain
in the ordinary course of business and without causing any delay in the
Services, all the patents, trademarks, service marks, tradenames, copyrights,
licenses, franchises, permits and other rights with respect to the foregoing
necessary to perform the Services and to carry on its business as presently
conducted and presently planned to be conducted without conflict with the rights
of others.

                24.1.7 COMPLIANCE WITH LAWS. Contractor has complied
with all Applicable Laws such that it has not been subject to any fines,
penalties, injunctive relief or criminal liabilities which in the aggregate have
materially adversely affected or could reasonably be anticipated to materially
adversely affect the business operations or financial condition of Contractor or
its ability to perform the Services, other than those that have been disclosed
to Owner in writing prior to the execution hereof.

                24.1.8 PROFESSIONAL SKILLS. Contractor has all the required
skills and capacity necessary to perform, and shall diligently perform, the
Services in a timely and professional manner, utilizing sound engineering
principles, project management procedures and supervisory procedures, all in
accordance with Prudent Utility Practices and the standards of performance
required hereunder.

                24.1.9 DISCLOSURE. No representation or warranty by
Contractor contained herein or in any other document furnished by Contractor to
Owner contains or will contain any untrue statement of material fact or omits or
will omit to state a material fact necessary to make such representation or
warranty not misleading in light of the circumstances under which it was made.

        24.2 REPRESENTATIONS AND WARRANTIES OF OWNER. Owner represents and
warrants to Contractor that:

                24.2.1 ORGANIZATION AND QUALIFICATION. Owner is a
limited liability company duly organized, validly existing and in good standing
under the laws of New Jersey, has the lawful power to engage in the business it
presently conducts and contemplates conducting, and is duly licensed or
qualified and in good standing as a corporation in each jurisdiction wherein the
nature of the business transacted by it makes such licensing or qualification
necessary.


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<PAGE>

                24.2.2 POWER AND AUTHORITY. Owner has the power to enter into
this Agreement and to perform its obligations hereunder and all such actions
have been duly authorized by all necessary proceedings on its part.

                24.2.3 NO CONFLICT. The execution, delivery and performance of
this Agreement will not conflict with, result in the breach of, constitute a
default under or accelerate performance required by any of the terms of the
organizational documents of Owner or any Applicable Laws or any covenant,
agreement, understanding, decree or order to which Owner is a party or by which
Owner or any of its properties or assets is bound or affected.

                24.2.4 VALIDITY AND BINDING EFFECT; GOVERNMENTAL APPROVALS. This
Agreement has been duly and validly executed and delivered by Owner. This
Agreement constitutes a legal, valid and binding obligation of Owner,
enforceable in accordance with its terms, except to the extent that its
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the rights of creditors generally or
by general principles of equity. To the best knowledge of Owner after due
inquiry, no authorization, approval, exemption or consent by any governmental or
public body or authority (other than the Applicable Permits listed in Appendix F
hereto) is required in connection with the authorization, execution, delivery
and carrying out of the terms of this Agreement by Owner.

                24.2.5 LITIGATION. There are no actions, suits, proceedings or
investigations pending or, to the best knowledge of Owner or its officers after
due inquiry, threatened against it at law or in equity before any court or
before any federal, state, municipal or other governmental department,
commission, board, agency or instrumentality, whether or not covered by
insurance, which individually or in the aggregate could reasonably be
anticipated to result in any material impairment of Owner's ability to perform
its obligations under this Agreement, other than those that have been disclosed
in writing to Contractor prior to the execution hereof. Neither Owner nor any of
its officers has knowledge of any violation or default with respect to any
order, writ, injunction or any decree of any court or any federal, commonwealth,
state, municipal or other governmental department, commission, board, agency or
instrumentality which could reasonably be anticipated to result in any such
material impairment, other than those that have been disclosed in writing to
Contractor prior to the execution hereof.


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<PAGE>

                24.2.6 COMPLIANCE WITH LAWS. Owner has complied with all
Applicable Laws such that it has not been subject to any fines, penalties,
injunctive relief or criminal liabilities which in the aggregate have materially
adversely affected or could reasonably be anticipated to materially adversely
affect the business operations or financial condition of Owner, other than those
that have been disclosed in writing to Contractor prior to the execution hereof.

                24.2.7 DISCLOSURE. No representation or warranty by Owner
contained herein or in any other document furnished by Owner to Contractor
contains or will contain any untrue statement of material fact or omits or will
omit to state a material fact necessary to make such representation or warranty
not misleading in light of the circumstances under which it was made.

                                   ARTICLE 25
                                  MISCELLANEOUS

        25.1 PAST DUE AMOUNTS. Any amount owed to either Party hereunder
which is not paid by the owing Party [*] after the date such amount is
originally due under this Agreement shall accrue interest each day such
amount is not paid at the lesser of (a) an annual rate equal to [*], and (b)
the maximum rate permitted by Applicable Laws.

        25.2 DELAY NOT WAIVER. It is understood and agreed that any delay,
waiver or omission by Owner or Contractor to exercise any right or power arising
from any breach or default by Contractor or Owner in any of the terms,
provisions or covenants of this Agreement shall not be construed to be a waiver
by Owner or Contractor of any subsequent breach or default of the same or other
terms, provisions or covenants on the part of Contractor or Owner.

        25.3 NO SET-OFF, DEDUCTION OR COUNTERCLAIM BY CONTRACTOR. Any amounts
due from Contractor to Owner under this Agreement shall not be subject to any
reduction for any set-off, deduction, counterclaim or otherwise based upon any
claim against Owner. Neither Party shall assert any claim it may have by reason
of the other Party's default under this Agreement as a defense to performance of
its obligations under any other agreement with that Party or any of its
affiliates, nor shall either Party assert any claim it may have by reason of the
other Party's default under any other agreement


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<PAGE>

with that Party or any of its affiliates as a defense to performance of its
obligations under this Agreement.

        25.4 CHOICE OF LAW. This Agreement shall in all respects be governed by
and construed in accordance with the laws of the State of New York, including
with respect to all matters of construction, validity and performance, without
giving effect to any choice of law rules thereof which may direct the
application of the laws of another jurisdiction.

        25.5 SEVERABILITY. In the event that any of the provisions, or portions
or applications thereof of this Agreement are held to be unenforceable or
invalid by any court of competent jurisdiction, Owner and Contractor shall
negotiate an equitable adjustment in the provisions of this Agreement with a
view toward effecting the purpose of this Agreement, and the validity and
enforceability of the remaining provisions, or portions or applications thereof,
shall not be affected thereby.

        25.6 NOTICE. Any notice required to be given by Owner to Contractor
hereunder respecting breach, consent to settlement of claims, termination or
indemnification, shall be in writing and shall be addressed to:

                  Raytheon Engineers &
                  Constructors, Inc.
                  510 Carnegie Center
                  Princeton, NJ  08540
                  Attention:  Kevin T. Colby
                  Telecopy #:  (609) 720-2980

with a copy to:

                  Raytheon Engineers &
                  Constructors, Inc.
                  510 Carnegie Center
                  Princeton, NJ  08540
                  Attention:  J. Jeffry Brightman
                  Telecopy #:  (609) 720-3303


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<PAGE>

and a copy to:

                  Raytheon Company
                  141 Spring Street
                  Lexington, Massachusetts  02421-9107

                  Attention:  General Counsel
                  Telecopy #:  781-860-2924

Any notice required to be given by Contractor to Owner hereunder respecting
breach, consent to settlement of claims, termination or indemnification, shall
be in writing and shall be addressed to:

                  AES Red Oak, LLC
                  1001 North 19th Street
                  Arlington, Virginia  22209

                  Attention: Bart Rossi
                  Telecopy #:  (703) 528-4510

with a copy to:

                  AES Red Oak, LLC
                  1001 North 19th Street
                  Arlington, Virginia  22209

                  Attention:  John Ruggirello
                  Telecopy #:  (703) 528-4510

                  All other notices required or permitted to be given by either
Party hereunder shall be in accordance with the requirements of the Project
Procedures Manual.

                25.6.1 DELIVERY. All notices under Section 25.6 hereof shall be
delivered in person to the company above mentioned, sent via registered mail
with a return receipt requested in a securely sealed envelope or sent via
telecopy and shall be effective when received at the address specified above.
The Parties hereto, by like notice in writing, may designate, from time to time,
another address or office to which notices may be given pursuant to this
Agreement.


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        25.7 SECTION HEADINGS. The Article and Section headings herein have been
inserted for convenience of reference only and shall not in any manner affect
the construction, meaning or effect of anything herein contained nor govern the
rights and liabilities of the Parties hereto.

        25.8 ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the Parties hereto and supersedes any and all prior written and oral
agreements, proposals, negotiations, understandings and representations
pertaining to the subject matter hereof.

        25.9 AMENDMENTS. No amendments or modifications of this Agreement shall
be valid unless evidenced in writing and signed by a duly authorized
representative of the Party against which enforcement is sought.

        25.10 CONFLICTING PROVISIONS. In the event of any conflict, variation or
inconsistency between any provision of this Contract Document, as it may be
amended from time to time, and any other provision of this Agreement, the
provision of this Contract Document shall control.

        25.11 NO THIRD PARTY RIGHTS. This Agreement and all rights hereunder are
intended for the sole benefit of the Parties and shall not imply or create any
rights on the part of, or obligations to, any other Person, except as otherwise
expressly provided herein with respect to the Financing Parties, the
Transmitting Utility and the Indemnified Parties (in the event and only to the
extent any such rights or obligations may be expressly provided herein, if any,
the "THIRD PARTY BENEFICIARIES").

        25.12 OWNER'S OBLIGATIONS NON-RECOURSE. The Parties acknowledge that
Owner has entered into this Agreement entirely on its own behalf, and in no
manner on behalf of The AES Corporation, and that Contractor shall have no
recourse against The AES Corporation (except in the event and only to the extent
such recourse may be expressly provided under the AES Pre-Financial Closing
Guaranty) or any of its affiliates (other than Owner), partners, joint ventures,
officers, directors, successors or assigns for any reason.

        25.13 SURVIVAL OF PROVISIONS. All provisions of this Agreement which are
expressly or by implication to come into or continue in force and effect after
the expiration or termination of this Agreement, including but not limited to
Articles 9, 10 and 13 and Section 21.1 hereof, shall remain in effect and be
enforceable following such expiration or termination.


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                  25.14 TITLE TO THE PROJECT. Title to all materials, supplies,
equipment and machinery used in connection with the Services and which become,
or are scheduled to become, a part of the Project shall vest in Owner upon the
earlier of (i) the time at which Owner has made payment to Contractor for such
items and (ii) incorporation of such items into the Project at the Facility
Site. Title to water, soil, rock, gravel, sand, minerals, timber and any other
resources developed or obtained in the excavation or the performance by
Contractor of the Services or other work hereunder and the right to use said
items or dispose of the same is hereby expressly vested in and reserved by
Owner. Contractor shall not have any right, title or interest in or to said
resources.

                  25.15 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute the same agreement.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


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<PAGE>


                  IN WITNESS WHEREOF, the Parties, intending to be legally
bound, have caused this Agreement for Engineering, Procurement and Construction
Services to be executed by their duly authorized signatories as of the date
indicated below and to be effective as of the day and year first above written.

                                   AES RED OAK, LLC

                                   By: /s/ BART R. ROSSI
                                       ---------------------------------------
                                       Name:  Bart R. Rossi
                                       Title: Vice President
                                       Date:  12-7-99

                                   RAYTHEON ENGINEERS & CONSTRUCTORS, INC.

                                   By: /s/ GEORGE N. LEMMON
                                       ---------------------------------------
                                       Name:  George N. Lemmon
                                       Title: Vice President
                                       Date:  12-7-99


                                       131

<PAGE>

                                                                 Exhibit 10.2(a)

                                 AMENDMENT NO. 1

                                       TO

               ENGINEERING, PROCUREMENT AND CONSTRUCTION SERVICES
                          DATED AS OF OCTOBER 15, 1999

         This Amendment No. 1, dated as of February 23, 2000, be and is hereby
made by and between AES Red Oak, L.L.C. ("Owner") and Raytheon Engineers &
Constructors, Inc. ("Contractor") (hereinafter each individually a "Party" and
collectively "the Parties"). Capitalized terms used herein and not defined shall
have the meanings assigned thereto in the Agreement.

                                   WITNESSETH

         WHEREAS, Owner and Contractor entered into the Agreement for
Engineering, Procurement and Construction Services dated as of October 15, 1999
("Agreement") in connection with the AES Red Oak Project, Sayreville, New
Jersey; and

         WHEREAS, Owner and Contractor have agreed to amend and revise certain
terms and conditions of the Agreement.

         NOW THEREFORE, in consideration of the mutual covenants contained
herein and for other good and valuable consideration, it is understood and
agreed as follows:

         1.  Section 1.1 of the Agreement is hereby amended and revised as
             follows:

         (a) the definition of Guaranteed Provisional Acceptance Date is amended
             and revised so as to be deleted in its entirety and replaced by the
             following definition:

             ""GUARANTEED PROVISIONAL ACCEPTANCE DATE" means February 14, 2002,
             which date is subject to adjustment as expressly provided in this
             Agreement";

         (b) the definition of Guaranteed Final Acceptance Date is amended and
             revised so as to be deleted in its entirety and replaced by the
             following definition:

             [*]

         2.  Section 2.2.1 of the Agreement and the Limited Notice to Proceed
annexed as Appendix J-1 to the Agreement are hereby amended and revised:

                                       1
<PAGE>

         (a) to include the (i) clearing and grubbing and (ii) site surface
             preparation Services, both as described in Section IV.b.2 of
             Appendix A to the Agreement (hereinafter the "Pre-Commencement Date
             Site Related Work"), the performance of which Contractor shall be
             entitled to commence at the Facility Site no later than March 1,
             2000; PROVIDED, HOWEVER, the Pre-Commencement Date Site Related
             Work shall not include Services which require access to the
             Conrail/CSX right-of-way under the "License Agreement to Cross
             Railroad with access Roadway and for Underground Structure"
             required to be obtained by Owner from Conrail/CSX pursuant to
             Section 5.3 of the Agreement and Appendix F thereto ("Contrail
             License Agreement"), the access to such right-of-way required in
             connection with the Pre-Commencement Site Related Work being as set
             forth in Section 7(a) hereof; and

         (b) [*]

         3.  Section 7.2 of the Agreement is hereby amended and revised as
             follows:

         (a) [*]

         (b) [*]

         4.  Section 7.2.1 of the Agreement is hereby amended and revised as
             follows:

         (a) [*]

         (b) [*]

         5.  Section 7.3 of the Agreement is hereby amended and revised as
             follows:

                                       2
<PAGE>

             [*]

         6.  Section 16.1 of the Agreement is hereby amended and revised as
             follows:

             [*]

         7. Owner and Contractor hereby acknowledge and agree that except as
expressly provided in subsection (d) of this Section 7, Owner" fulfillment of
each of the requirements set forth in subsections (a), (b), (c) and (d) of this
Section 7 shall be a condition precedent to the effectiveness of the Parties'
agreement to amend and revise the Agreement as set forth in Sections 1 through 6
hereof, and that such amendments and revisions shall be null and void and of no
effect should Owner fail to fulfill one or more of such requirements, unless the
Parties subsequently and mutually agree to equitable adjustments in those
provisions of the Agreement affected by Owner's failure to fulfill such
requirements as set forth herein. Subject to the foregoing, Owner agrees that it
shall:

         (a) obtain for the benefit of Contractor and its Subcontractors all
             Applicable Permits (including for the avoidance of doubt all
             approvals required by local authorities) and Real Estate Rights
             required for Contractor and its Subcontractors to have full and
             unrestricted access to the Facility Site in order to commence
             performance of the Pre-Commencement Date Site Related Work no later
             than March 1, 2000 and to continue the performance thereof from and
             after said date; PROVIDED, HOWEVER, that (i) Owner shall not be
             required to obtain the New Jersey Department of Environmental
             Protection Stream Encroachment permit for the Red Oak Lane
             easement and laydown areas, including the Hercules property,
             until March 8, 2000 and (ii) Owner shall only be required to
             ensure that Contractor and its Subcontractors have full and
             unrestricted access by no later than March 1, 2000 to traverse
             the Conrail/CSX right-of-way by way of a private at-grade
             crossing in order to perform the Pre-Commencement Date Site
             Related Work (PROVIDED FURTHER, HOWEVER, and for the avoidance
             of doubt, the Parties acknowledge and agree that the limitation
             in this Section 7(a) on Owner's obligations with respect to the
             Conrail License Agreement shall pertain to the Pre-Commencement
             Site Related Work only, and shall not be construed in any way to
             limit Owner's obligations pursuant to Section 5.3 of the
             Agreement with respect to the Conrail

                                       3
<PAGE>

             License Agreement and the performance of the Services by
             Contractor, which obligations Owner shall fully perform by no later
             than March 31, 2000);

         (b) ensure that Contractor and its Subcontractors have full and
             unrestricted access to, and the unencumbered use of, Jernee Mill
             Road as a means of ingress and egress to and from the Facility Site
             in order to commence performance of the Pre-Commencement Date Site
             Related Work no later than March 1, 2000 and to continue the
             performance thereof from and after said date;

         (c) confirm initial interconnections and alternate routes for raw water
             and natural gas and specify provisions for the alternate routes no
             later than March 15, 2000;

         (d) meet all of the conditions required in Section 2.2 of the Agreement
             for the Commencement Date to occur no later than March 15, 2000;
             PROVIDED, HOWEVER, that should Owner meet all of the conditions
             required in Section 2.2 of the Agreement such that the Commencement
             Date occurs on March 15, 2000, but in no event later than March 31,
             2000, then in such case each of the dates and time periods amended
             and revised pursuant to Sections 1, 3, 4, 5 and 6 hereof shall be
             adjusted by one (1) day for each day after March 15, 2000 on which
             the Commencement Date occurs, as follows:

             (i)    the "Guaranteed Provisional Acceptance Date" shall be
                    adjusted ahead by one (1) day for each day after March 15,
                    2000 the Commencement Date occurs (e.g., in the event
                    Commencement Date occurs on March 16, 2000, the definition
                    of "Guaranteed Provisional Acceptance Date" in Section 1.1
                    of the Agreement shall be amended and revised so as to be
                    deleted in its entirety and replaced by the following
                    definition: ""GUARANTEED PROVISIONAL ACCEPTANCE DATE" means
                    February 15, 2002, which date is subject to adjustment as
                    expressly provided in this Agreement";

             (ii)   the "Guaranteed Final Acceptance Date" shall be adjusted
                    backward by one (1) day for each day after March 15, 2000
                    the Commencement Date occurs (e.g., in the event
                    Commencement Date occurs on March 16, 2000, the definition
                    of "Guaranteed Final Acceptance Date" in Section 1.1 of the
                    Agreement shall be amended and revised so as to be deleted
                    in its entirety and replaced by the following definition:
                    ""GUARANTEED FINAL ACCEPTANCE DATE" means thirteen (13)
                    months and fourteen (14) days after the Guaranteed
                    Provisional Acceptance Date"; and

                                       4
<PAGE>

             (iii)  all time periods amended and revised in Sections 3, 4, 5 and
                    6 hereof shall be shortened by one (1) day for each day
                    after March 15, 2000 the Commencement Date occurs (e.g., in
                    the event Commencement Date occurs on March 16, 2000, the
                    second and third lines of subsection (a) of Section 7.2 of
                    the Agreement shall be amended and revised to delete the
                    language, "on or before the thirty fifth (35th) day
                    following", and to substitute therefor the language, "on or
                    before the forth-ninth (49th) day following".

         8. Owner and Contractor agree that in the event Contractor or its
Subcontractor proceeds with the Pre-Commencement Date Site Related Work, and
Owner fails to fulfill any of the requirements set forth in subsections (a),
(b), (c) and (d) of Section 7 hereof, any reasonable costs and expenses
incurred by Contractor (or for which Contractor is responsible) for any such
work, including preparatory, mobilization and/or demobilization and related
costs and expenses, shall be payable and guaranteed (and considered as part
of) those portions of the Services to be performed by Contractor under the
Limited Notice to Proceed pursuant to Section 2.2.1 of the Agreement, and
that the funding limit set forth in the Limited Notice to Proceed shall be
increased from [*] to [*] to cover such reasonable costs and expenses.

                                       5
<PAGE>

IN WITNESS WHEREOF, the Parties hereto have caused this Amendment No. 1 to the
Agreement to be executed by their respective duly authorized officers effective
the day and year first written above.

AES RED OAK LLC

By:   /s/ Patty Rollin
     ----------------------------------
      Name: Patty Rollin
      Title:   VP
      Date:    Feb. 28, 2000

RAYTHEON ENGINEERS & CONSTRUCTORS, INC.

By:   /s/ George N. Lemmon
     ----------------------------------
      Name: George N. Lemmon
      Title:   Vice President
      Date:    Feb. 28, 2000

                                       6