UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K

[x]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934

            For the fiscal year ended December 31, 1999.

                                       OR

[_]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF
      1934

            For the transition period from                 to                 .

                      Commission file number 333-29005-01

                          PANDA GLOBAL HOLDINGS, INC.
             (Exact name of registrant as specified in its charter)


                 Delaware                          75-2697755
      (State or other jurisdiction of            (IRS employer
      incorporation or organization)         Identification Number)

            4100 Spring Valley Road, Suite 1001, Dallas, Texas 75244
          (Address of principal executive offices, including zip code)

                                 (972) 980-7159
              (Registrant's telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:  None

Securities Registered Pursuant to Section 12 (g) of the Act:  None

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

Yes   [X]           No  [ ]

INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. [X]

Aggregate market value of voting stock held by non-affiliates of the registrant
is not reflected herein because all voting stock of the registrant is owned by
an affiliate thereof.

As of March 31, 2000, the registrant had 1,000 shares of Common Stock, $.01 par
value, issued and outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE
                                      None

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                               TABLE OF CONTENTS

                                     PART I

                                                                            PAGE

Item 1. Business ..........................................................    3

Item 2. Properties ........................................................   24

Item 3. Legal Proceedings .................................................   24

Item 4. Submission of Matters to a Vote of Security Holders ...............   26

                                    PART II

Item 5. Market for the Registrant's Equity and Related Stockholder Matters    26

Item 6. Selected Financial Data ...........................................   26

Item 7. Management's Discussion and Analysis of Financial Condition and
          Results of Operations ...........................................   28

Item 7a. Quantitative and Qualitative Disclosures About Market Risk .......   28

Item 8. Financial Statements and Supplementary Data .......................   34

Item 9. Changes in and Disagreements with Accountants on Accounting
          and Financial Disclosure ........................................   34

                                    PART III

Item 10. Directors and Executive Officers of the Registrant ...............   34

Item 11. Executive Compensation ...........................................   36

Item 12. Security Ownership of Certain Beneficial Owners and Management ...   37

Item 13. Certain Relationships and Related Transactions ...................   37

                                    PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K .   37

               DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

      This Annual Report on Form 10-K (as well as previous filings by the
Company with the Securities and Exchange Commission) includes "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. All statements other than
statements of historical fact included in this Annual Report on Form 10-K (as
well as previous filings by the Company with the Securities and Exchange
Commission), including, without limitation, statements regarding financial
position, projects under evaluation or development, construction or other
budgets and plans and objectives for future operations, are forward-looking
statements. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to have been correct. Important factors that could
cause actual results to differ materially from the Company's expectations
("Cautionary Statements") include the impact of geopolitical occurrences
world-wide; the results of financing efforts; risks under contracts and swap
agreements; changes in laws and regulations; unforeseen engineering and
mechanical or technological difficulties; and other risks described in the
Company's filings from time to time with the Securities and Exchange Commission.
All subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by the Cautionary Statements.

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ITEM 1. BUSINESS.

GENERAL

      Panda Global Holdings, Inc. (the "Company") is a wholly-owned subsidiary
of Panda Energy International, Inc., a Delaware corporation ("PEII"), and was
organized in Delaware on March 7, 1997. The Company was organized for the
purposes of (i) investing in and holding direct and indirect interests in
entities engaged in the development, construction, ownership, operation and
management of electric generating facilities, sources of fuel, pipelines and
other infrastructure projects, (ii) the marketing of electric power, thermal
energy and fuel, and (iii) the financing of any of the above, including the
entering into of indentures, contracts and other agreements in connection with
the purposes described in clauses (i) and (ii) above.

      The Company wholly owns one operating energy generation facility and
leases pursuant to a capital lease another operating energy generation facility
located in the United States and owns interests in two energy generation
facilities under construction in the People's Republic of China and the Kingdom
of Nepal, as described below in more detail.

      The principal executive office of the Company is located at 4100 Spring
Valley Road, Suite 1001, Dallas, Texas 75244. The telephone number at such
office is (972) 980-7159.

      The Company operates in only one industry segment: electric power
generation. Financial information regarding the Company's industry segment, its
domestic operations, and the Company's capitalized costs for the construction of
plants which will constitute foreign operations upon completion, is set forth in
the financial statements hereto.

STRATEGY

      The Company and its subsidiaries are primarily engaged in the domestic and
international development, acquisition, construction, ownership and operation of
electric power generation facilities.

      The principal business strategy of the Company and its subsidiaries is to
use their experience in evaluating, developing, constructing, financing and
managing electric power generation facilities to provide low-cost electricity
and electric generating capacity. There is a trend away from regulated and/or
government-owned electricity systems toward deregulated, competitive market
structures, in both domestic and international markets. Many countries have
rewritten their laws and regulations to allow foreign investment and private
ownership of electricity generation, transmission or distribution systems. Some
countries have been or are in the process of privatizing their electricity
systems by selling all or part of such systems to private investors. As a
result, the Company believes that there is demand for both new and more
efficiently operated electric generating capacity in many regions around the
world, including the United States.

      The Company and its subsidiaries are continuously engaged in the
evaluation of opportunities for the development and acquisition of additional
electric power generation facilities. For example, the Company and its
subsidiaries continue to evaluate the development of various merchant plant
facilities in the United States. Such facilities, if fully developed and
constructed, could take advantage of cost effective construction and new
technology, as well as an ability to sell power into markets with growing demand
and aging supplies of energy.

      Substantial risks exist to the successful completion of any domestic or
international projects under development or being considered for acquisition,
including, as the case may be, those relating to political risk, exchange rate
risk, currency inconvertibility, the ability to obtain financing and required
governmental approvals, siting and construction risk, market risk in the case of
projects which do not have long term power sales agreements, as well as possible
termination of any applicable power sales agreement as a result of the failure
to meet certain construction milestones or for other reasons set forth in any
such agreement. No assurance can be given that any projects being evaluated or
developed by the Company or any of its subsidiaries will be completed. Further,
no assurance can be given that any projects developed by PEII or other
affiliates of the Company would be contributed to the Company's portfolio of
projects, depending on the application of various agreements among PEII and
certain of its affiliates.

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PLANTS IN OPERATION

      The Panda-Rosemary Facility

      GENERAL. The Panda-Rosemary Facility (herein so called) is a
combined-cycle cogeneration facility located in Roanoke Rapids, North Carolina,
with a total electric generating capacity of approximately 180 megawatts. The
Panda-Rosemary Facility is owned by the Panda-Rosemary Partnership (herein so
called), an indirect wholly-owned subsidiary of the Company. A cogeneration
facility produces electric energy and forms of useful thermal energy (such as
heat or steam) used for industrial, commercial, heating or cooling purposes
through the sequential use of one or more energy inputs. The Panda-Rosemary
Facility uses natural gas as its primary fuel input to produce electric energy
for sale to Virginia Power Company ("Virginia Power"), and to produce useful
thermal energy in the form of steam and chilled water for sale to The Bibb
Company ("Bibb") pursuant to the Rosemary Steam Agreement (herein so called). On
February 18, 1997, Bibb announced that it would sell the textile facility that
is the user of such steam and chilled water to Westpoint Stevens, Inc.
("Westpoint"). The closing of the sale was reported in the news media on
February 21, 1997. The Rosemary Steam Agreement cannot be assigned without the
Panda-Rosemary Partnership's consent, which has not been given as of the date
hereof and Bibb, Westpoint and a subsidiary of the company are currently
litigating the issues involved. While there has been no resolution to this
matter as of the date hereof, the Panda-Rosemary Partnership has continued to
sell steam and chilled water pursuant to the Rosemary Steam Agreement. See Item
3. "Legal Proceedings - Bibb/Westpoint Stevens Proceedings" below.

      The Panda-Rosemary Facility is certified as a Qualifying Facility ("QF")
under the Public Utility Regulatory Policies Act of 1978 ("PURPA") and thus is
exempt from rate regulation as an electric utility under federal and state law,
provided that it continues to meet the applicable requirements of PURPA.

      The Panda-Rosemary Facility was designed and constructed by Hawker
Siddeley Power Engineering and began commercial operations in December 1990. The
Panda-Rosemary Facility is designed to be operated in a combined-cycle mode. It
uses natural gas or fuel oil to power two General Electric combustion turbine
generators, a GE Frame 6 and a GE Frame 7, each fitted with a heat recovery
steam generator ("HRSG"). The HRSGs use the reject heat from the combustion
turbines that might otherwise dissipate to produce steam which drives a steam
turbine generator. The combustion and steam turbines generate electric energy
for sale to Virginia Power. When the Panda-Rosemary Facility is being
dispatched, some of the steam produced by the HRSGs is sold pursuant to the
Rosemary Steam Agreement and some is used in two absorption chillers to supply
chilled water. The combustion turbines use natural gas as their primary fuel and
can use No. 2 fuel oil as an alternate fuel in the event gas supplies or
transportation are curtailed. When the facility is not being dispatched, two
auxiliary boilers are available to be used to produce steam for direct use and
to produce chilled water for use by the purchaser under the Rosemary Steam
Agreement. The design of the Panda-Rosemary Facility permits flexible operation,
including the production of both electricity and a sufficient amount of thermal
energy to meet QF requirements, using either one or both of the combustion
turbine generators.

      SALE OF CAPACITY AND ELECTRICITY. The Panda-Rosemary Partnership sells
electric capacity and energy to Virginia Power pursuant to a Power Purchase and
Operating Agreement (the "Rosemary Power Purchase Agreement"). The Rosemary
Power Purchase Agreement has an initial term ending December 26, 2015, and may
be extended for periods of up to five years if the parties so agree.

      Virginia Power has the right to dispatch the Panda-Rosemary Facility (that
is, require the Panda-Rosemary Facility to deliver electricity) on a daily basis
within certain guidelines and design limits (which specify load levels, start-up
and shutdown times and minimum run times consistent with prudent utility
practice).

      The Rosemary Power Purchase Agreement provides for two types of payments:
a capacity payment and an energy payment. The capacity payment is a fixed charge
required to be paid regardless of whether the Panda-Rosemary Facility is
dispatched, subject to reductions under certain circumstances as described
below. Energy payments are calculated based on the actual electrical output
transmitted to Virginia Power and are designed

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<PAGE>
to compensate the Panda-Rosemary Partnership for its cost of fuel and its
variable operations and maintenance expense.

      Monthly capacity payments throughout the term of the Rosemary Power
Purchase Agreement are calculated by multiplying the Panda-Rosemary Facility's
"Dependable Capacity" by the following rates: $10.821 per kilowatt per month
through December 2005; and $8.321 per kilowatt per month thereafter through
December 2015. The Panda-Rosemary Facility's Dependable Capacity, which is the
maximum level for which capacity payments must be made under the Rosemary Power
Purchase Agreement, is currently 165 megawatts for the summer period and 198
megawatts for the winter period. Dependable Capacity is determined by
semi-annual tests which may be requested by Virginia Power. Capacity payments
may be reduced in certain circumstances.

      The Panda-Rosemary Partnership is required to maintain the Panda-Rosemary
Facility as a QF. Virginia Power may terminate the Rosemary Power Purchase
Agreement within one year after the loss of QF certification if the
Panda-Rosemary Partnership has not obtained all necessary governmental and
regulatory approvals for the Rosemary Power Purchase Agreement to remain in
effect and for electricity to continue to be sold to Virginia Power.

      Steam and Chilled Water Sales. The Panda-Rosemary Partnership sells steam
and chilled water for use in a textile manufacturing facility, located adjacent
to the Panda-Rosemary Facility, pursuant the Rosemary Steam Agreement. The
Rosemary Steam Agreement has an initial term that expires on December 26, 2015.
Upon expiration of the initial term, the purchaser has the option to (i)
negotiate a 10-year extension of the Rosemary Steam Agreement, (ii) purchase the
Panda-Rosemary Facility with Virginia Power's consent or (iii) terminate the
Rosemary Steam Agreement. Under the terms of the Rosemary Steam Agreement, the
purchaser is obligated to pay $1.00 per 1,000 pounds of steam for the first
45,000 pounds of steam delivered in an hour and $2.50 per 1,000 pounds of steam
for any additional quantities of steam delivered in an hour. Under the Rosemary
Steam Agreement, the purchaser is obligated to pay the following fixed prices
for chilled water: $0.035/ton/hour through December 27, 2000; $0.04/ton/hour
thereafter through December 27, 2005; $0.045/ton/hour thereafter through
December 27, 2010; and $0.05/ton/hour thereafter through December 26, 2015. See
Item 3. "Legal Proceedings - Bibb/Westpoint Stevens Proceedings" below.

      SITE LEASE. The 4.83 acre site on which the Panda-Rosemary Facility is
located is leased to the Panda-Rosemary Partnership pursuant to a Real Property
Lease and Easement Agreement (the "Rosemary Site Lease") in exchange for a
nominal yearly rental payment. The initial term of the Rosemary Site Lease
expires on December 31, 2015 and is automatically extended on the same terms and
conditions for 10 years if the Rosemary Steam Agreement is extended for an
additional 10-year period. At the Panda-Rosemary Partnership's option, the
initial term of the Rosemary Site Lease may also be extended on the same terms
and conditions for a 10-year term if the Panda-Rosemary Partnership gives the
lessor two years' notice prior to December 31, 2015 and for an additional
10-year term if the Panda-Rosemary Partnership gives the lessor two years'
notice prior to December 31, 2025, regardless of whether the Rosemary Steam
Agreement is extended or terminated.

      GAS SUPPLY AND FUEL MANAGEMENT. The Panda-Rosemary Partnership purchases
certain quantities of natural gas on a firm basis from Natural Gas Clearinghouse
("NGC") pursuant to a Gas Purchase Contract (the "Rosemary Gas Supply
Agreement"). The Rosemary Gas Supply Agreement is effective through November 30,
2005, and thereafter from month-to-month until terminated by either NGC or the
Panda-Rosemary Partnership. NGC has agreed to deliver natural gas on a firm
basis to the Panda-Rosemary Partnership, at pipeline points near the Gulf of
Mexico or (at the Panda-Rosemary Partnership's request and using the
Panda-Rosemary Partnership's firm transportation arrangements) to the
Panda-Rosemary Pipeline (as defined below), up to the total contract quantity
under the Firm Gas Transportation Agreements (as defined below), which is
currently the thermal equivalent of 3,075 Mcf (one "Mcf" constitutes one
thousand cubic feet of natural gas) of natural gas per day. The firm natural gas
supplied under the Rosemary Gas Supply Agreement enables the Panda-Rosemary
Partnership to have adequate natural gas supplies available to meet its estimate
of the requirements for steam and chilled water under the Rosemary Steam
Agreement.

      The price paid by the Panda-Rosemary Partnership for natural gas delivered
by NGC is generally equal to an indexed price (based upon monthly market-price
indices determined by reference to the receipt points where NGC delivers gas to
the Panda-Rosemary Partnership) plus $0.04 per MMBtu (one "MMBtu" constitutes
one million

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British thermal units). If natural gas is required in daily volumes that are
greater than those included in monthly estimates delivered to NGC, the price for
the excess volume required is equal to NGC's actual cost incurred in acquiring
such excess plus $0.04 per MMBtu. If the Panda-Rosemary Partnership fails to
purchase the amount included in monthly estimates delivered to NGC, and such
failure is not excused by force majeure, the Panda-Rosemary Partnership must pay
NGC, as liquidated damages for such failure, $0.14 for each MMBtu of natural gas
not purchased below the monthly estimates.

      GAS TRANSPORTATION. The Panda-Rosemary Partnership receives firm
transportation service that provides for delivery to the Panda-Rosemary Pipeline
(as defined below) of up to the thermal equivalent of 3,075 Mcf of natural gas
per day. The rates and most of the significant terms and conditions of service
under these firm gas transportation agreements, are set forth in the respective
pipeline's effective Federal Energy Regulatory Commission ("FERC") gas tariff.
These rates, terms and conditions are subject to review, approval and
modification by FERC.

      PANDA-ROSEMARY PIPELINE. The Panda-Rosemary Partnership owns, and North
Carolina Natural Gas Corporation ("NCNG") operates and maintains for the
Panda-Rosemary Partnership, the Panda-Rosemary Pipeline (herein so called),
which runs for 10.26 miles through portions of Halifax and Northampton Counties,
North Carolina. The Panda-Rosemary Pipeline is located under, over and upon
properties owned, in certain instances, by private landowners and, in other
instances, by the State of North Carolina or the City of Roanoke Rapids,
pursuant to easement agreements or encroachment agreements. The Panda-Rosemary
Pipeline terminates on a 1.26-acre parcel in Pleasant Hill Township, Northampton
County, North Carolina, which is owned by the Panda-Rosemary Partnership. The
meter stations and certain appurtenant facilities interconnecting the
Panda-Rosemary Pipeline and certain interstate pipeline facilities are located
on this parcel.

      The Panda-Rosemary Partnership has entered into a Pipeline Operating
Agreement with NCNG (the "Pipeline Operating Agreement"), pursuant to which NCNG
has agreed to operate the Panda-Rosemary Pipeline and provide certain natural
gas balancing services for the Panda-Rosemary Partnership's gas supplies. The
term of the Pipeline Operating Agreement continues until December 27, 2005, and
may be extended for two additional periods of five years each upon the agreement
of the parties.

      FUEL OIL. The Panda-Rosemary Facility was constructed with the capability
to operate on No. 2 fuel oil and is designed to change fuel sources from natural
gas to fuel oil and back without interrupting the generation of electricity. The
Panda-Rosemary Facility currently has on-site storage for approximately two
million gallons of fuel oil, a supply sufficient to operate the Panda-Rosemary
Facility at full load for approximately 168 hours. The Panda-Rosemary
Partnership purchases fuel oil on a spot-market basis. Since the fuel oil
suppliers either own their own trucks or have contracts with local trucking
firms for regional truck delivery and the purchase price includes delivery to
the Panda-Rosemary Facility, the Panda-Rosemary Partnership does not
independently arrange trucking service from the terminals to the Panda-Rosemary
Facility.

      OPERATIONS AND MAINTENANCE. The Panda-Rosemary Partnership purchases
operations and maintenance services for the Panda-Rosemary Facility from Panda
Global Services, Inc., an affiliate of the Company, pursuant to an Operation and
Maintenance Agreement (the "Rosemary O&M Agreement") which expires on December
31, 2003. Under the Rosemary O&M Agreement, Panda Global Services, Inc. is paid
a fixed monthly fee of approximately $141,000 per month for 2000, with annual
adjustments based on changes in the consumer price index for subsequent years.
In addition, the agreement includes bonus and penalty provisions based on
maintenance of dependable capacity levels, availability of the Panda-Rosemary
Facility for dispatch and the achievement of certain safety and training goals
established by the Panda-Rosemary Partnership.

THE PANDA-BRANDYWINE FACILITY

GENERAL. The Panda-Brandywine Facility (herein so called) is a combined-cycle
cogeneration facility located in Brandywine, Maryland (near Washington, D.C.),
with a total electric generating capacity of 230 megawatts. The Panda-Brandywine
Facility is leased by the Panda-Brandywine Partnership (herein so called), an
indirect wholly-owned subsidiary of the Company, pursuant to a capital lease.
The Panda-Brandywine Facility uses natural gas as its primary fuel input and No.
2 fuel oil as an alternative fuel in the event that gas supplies or
transportation are curtailed. The Panda-Brandywine Facility was constructed by
Raytheon Engineers and

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Constructors, Inc. ("Raytheon") pursuant to an agreement between the
Panda-Brandywine Partnership and Raytheon (the "Brandywine EPC Agreement"). See
Note 10 of Consolidated Financial Statements.

      Pursuant to a power purchase agreement (the "Brandywine Power Purchase
Agreement"), the Panda-Brandywine Partnership sells the capacity of, and energy
produced by, the Panda-Brandywine Facility to Potomac Electric Power Company
("PEPCO"), a utility that serves the District of Columbia and parts of Maryland.
Pursuant to a separate agreement with PEPCO, the Panda-Brandywine Partnership
also is able to sell certain amounts of capacity and energy at market prices to
third party purchasers.

      The Panda-Brandywine Facility is leased by the Panda-Brandywine
Partnership pursuant to the Brandywine Facility Lease (herein so called). The
Brandywine Facility Lease was entered into in connection with a sale-leaseback
transaction with General Electric Capital Corporation and other financing
parties. The initial term of the Brandywine Facility Lease will expire on
October 31, 2016. At the end of the initial lease term, so long as the
Panda-Brandywine Partnership is not in default under the Brandywine Facility
Lease, the Panda-Brandywine Partnership may renew the Brandywine Facility Lease
for up to two consecutive five-year terms. Alternatively, the Panda-Brandywine
Partnership may purchase the Panda-Brandywine Facility at fair sales market
value at the end of the initial lease term or any renewal term. If the
Panda-Brandywine Partnership does not renew the Brandywine Facility Lease or
purchase the Panda-Brandywine Facility, it must surrender possession of the
Panda-Brandywine Facility at the end of the term of the Brandywine Facility
Lease.

      The Panda-Brandywine Facility is certified as a QF under PURPA and thus is
exempt from rate regulation as an electric utility under federal and state law,
provided that it continues to meet the applicable requirements of PURPA. The
Panda-Brandywine Partnership has been informed by PEPCO that PEPCO is pursuing a
strategy of selling all of its generating assets, which the Panda-Brandywine
Partnership believes could include the Brandywine Power Purchase Agreement. The
Company currently cannot determine the effect, if any, of such a transfer of the
Brandywine Power Purchase Agreement on the Company.

      SALE OF CAPACITY, ELECTRICITY AND STEAM. The Panda-Brandywine Partnership
sells electric capacity and energy to PEPCO pursuant to the Brandywine Power
Purchase Agreement. The Brandywine Power Purchase Agreement has an initial term
that expires in October 2021, and may be extended by agreement of the parties.

      The Brandywine Power Purchase Agreement provides for two payments: a
capacity payment and an energy payment. The capacity payment is a fixed charge
to be paid regardless of whether the Panda-Brandywine Facility is dispatched,
subject to reduction in certain circumstances. Monthly capacity payments
throughout the term of the Brandywine Power Purchase Agreement are based on the
Panda-Brandywine Facility's dependable capacity, the capacity rate and other
factors. The capacity rate is a fixed schedule of payments for each of the 25
years of the initial term of the Brandywine Power Purchase Agreement, ranging
from $15.13 per kilowatt hour through October 2000 to $20.32 per kilowatt hour
in 2012, subject to various adjustments.

      The energy payment is determined in accordance with a series of formulas
that reflect specified heat rates, hours of synchronization and operation and a
combination of fixed and market prices for natural gas. The Brandywine Power
Purchase Agreement provides that the energy price will be increased to
compensate the Panda-Brandywine Partnership for its variable costs of fuel oil
if the gas supply is interrupted. In such event, the Brandywine Power Purchase
Agreement specifies a base cost of oil, which is escalated at the annual rate of
change according to an oil index described therein.

      Electric energy produced by the Panda-Brandywine Facility is delivered to
PEPCO via a seven-mile long electric transmission line, owned by PEPCO, that
connects the Panda-Brandywine Facility and the transmission facilities of PEPCO.

      In late 1997, PEPCO agreed to release certain amounts of capacity to the
Panda-Brandywine Partnership for resale of energy to other parties, and to grant
the Panda-Brandywine Partnership the right to sell additional energy, subject to
the availability of the Brandywine Facility.

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      The Panda-Brandywine Partnership sells steam to the Brandywine Water
Company pursuant to a Steam Sales Agreement (the "Brandywine Steam Agreement").
Brandywine Water Company, which is an indirect wholly owned subsidiary of the
Company, uses the steam to generate distilled water which is sold locally. This
production and sale of thermal energy allows the Panda-Brandywine Facility to
achieve QF status. The Brandywine Steam Agreement continues until October 31,
2021 and may be extended by agreement of the parties for additional terms of
five years each.

      GAS SUPPLY AND FUEL MANAGEMENT. The Panda-Brandywine Partnership purchases
both firm and interruptible natural gas supply from Cogen Development Company
("CDC") pursuant to a Gas Sales Agreement between the Panda-Brandywine
Partnership and CDC (the "Brandywine Gas Agreement"). MCN Corporation, the
parent corporation of CDC, has unconditionally guaranteed the payment and
performance obligations of CDC under the Brandywine Gas Agreement. The
Brandywine Gas Agreement continues until October 31, 2011, and thereafter is
automatically renewed for an additional two-year term unless terminated by
either party upon nine months' written notice.

      CDC is obligated to sell and deliver to the Panda-Brandywine Partnership,
at receipt points along the pipeline system of Columbia Gas, up to 24,240 MMBtu
of natural gas per day on a firm basis and up to 24,240 MMBtu of gas per day on
an interruptible basis. Gas delivered by CDC within the firm basis limit falls
within one of three categories. The price for the natural gas delivered by CDC
varies depending upon the category of the natural gas delivered.

      GAS TRANSPORTATION. The Panda-Brandywine Partnership purchases firm
natural gas transportation service from Columbia Gas Transmission Corporation
("Columbia Gas") pursuant to an Amended and Restated FTS Service Agreement (the
"Columbia Gas FT Agreement"). Service under the Columbia Gas FT Agreement
continues until October 31, 2021, and year-to-year thereafter unless terminated
by either party upon six months' notice.

      Pursuant to the Columbia Gas FT Agreement, Columbia Gas is obligated to
provide the Panda-Brandywine Partnership with up to 24,240 Dekatherms ("Dth")
per day of firm natural gas transportation service from a receipt point near
Monclova, Ohio to an interconnection between the facilities of Columbia Gas and
Cove Point LNG Limited Partnership ("Cove Point") in Loudoun County, Virginia.
Columbia Gas provides the firm transportation service pursuant to the terms of
the Columbia Gas FT Agreement rate schedule and the general terms and conditions
of Columbia Gas's effective FERC natural gas tariff.

      The Panda-Brandywine Partnership purchases from Cove Point firm natural
gas transportation service to transport natural gas delivered by Columbia Gas to
the facilities of Cove Point pursuant to a FTS Service Agreement (the "Cove
Point FT Agreement"). The Cove Point FT Agreement continues until October 31,
2021.

      Pursuant to the Cove Point FT Agreement, Cove Point is obligated to
provide the Panda-Brandywine Partnership with up to 24,000 Dth per day of firm
natural gas transportation service from an interconnection between the
facilities of Cove Point and Columbia Gas in Loudoun, Virginia to an
interconnection between the facilities of Cove Point and Washington Gas Light
Company ("WGL") in Charles County, Maryland. Cove Point provides the firm
transportation service pursuant to the Cove Point FT Agreement, and the general
terms and conditions of its effective FERC natural gas tariff.

      The Panda-Brandywine Partnership purchases from WGL natural gas
transportation, natural gas sales and natural gas balancing services pursuant to
a Gas Transportation and Supply Agreement (the "WGL Agreement"). The WGL
Agreement continues until October 31, 2021, and thereafter will continue
year-to-year unless terminated by either party upon six months' written notice.

      Pursuant to the WGL FT Agreement, WGL is obligated to provide the
Panda-Brandywine Partnership with firm transportation service, up to the
quantity of natural gas nominated for such service on a given day, from an
interconnection between the facilities of Cove Point and WGL in Charles County,
Maryland to the interconnection between the WGL facilities and the
Panda-Brandywine Facility, provided that WGL only must use its best efforts to
deliver transportation natural gas to the Panda-Brandywine Facility when the
pressure on the Cove Point pipeline is less than 500 psig. During the months of
January, February and December of any calendar year,

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WGL may, under certain circumstances, request that the Panda-Brandywine
Partnership release to WGL for its system use a quantity of natural gas
purchased by the Panda-Brandywine Partnership under the Brandywine Gas Agreement
and transported to the WGL system.

      FUEL OIL. The Panda-Brandywine Facility was constructed with the
capability to operate on No. 2 fuel oil and has the ability to change fuel
sources from natural gas to fuel oil and back without interrupting the
generation of electricity. The Panda-Brandywine Facility has on-site storage for
approximately two million gallons of fuel oil, a supply sufficient to operate
the Panda-Brandywine Facility at full load for approximately six days.

      The Panda-Brandywine Partnership has also entered into an agreement (the
"Hardesty Transportation Agreement") with Hardesty & Son, Inc. ("Hardesty")
pursuant to which the Panda-Brandywine Partnership has rights to firm
transportation of a minimum of 20 truckloads of fuel oil per day during the
months of December through February and ten truckloads of fuel oil per day
during the months of March through November. Hardesty will use its best efforts
to provide additional transportation upon the request of the Panda-Brandywine
Partnership. If Hardesty is unable to provide such additional transportation
when requested, the Panda-Brandywine Partnership may use other means of
delivery. The Hardesty Transportation Agreement continues until October 1, 2000
and will automatically be renewed for successive one-year terms unless
terminated by either party.

      WATER. The Panda-Brandywine Partnership has entered into a 25-year Treated
Effluent Water Purchase Agreement ("Water Supply Agreement") with the County
Commissioners of Charles County, Maryland to purchase up to 2.7 million gallons
per day of treated effluent from a local sewage treatment plant. Treated
effluent is a byproduct of the sewage treatment process and is used as the
primary cooling water source for the Panda-Brandywine Facility's cooling towers.
The treated effluent is transported from the sewage treatment plant to the
Panda-Brandywine Facility by a buried transmission pipeline that has the
capacity to supply up to 3.0 million gallons per day.

      OPERATIONS AND MAINTENANCE. The Panda-Brandywine Partnership retains
operations and maintenance services from Panda Global Services, Inc., an
affiliate of the Company, pursuant to an Operation and Maintenance Agreement
(the "Brandywine O&M Agreement"). Pursuant to the Brandywine O & M Agreement,
Panda Brandywine, L.P. will be paid a fee of approximately $152,000 per month
during 2000, with annual adjustments based on changes in the consumer price
index for subsequent years. The Brandywine O&M Agreement is effective until
November 1, 2005, and may be extended thereafter by agreement of the parties.

PLANTS UNDER CONSTRUCTION

      THE LUANNAN FACILITY

      GENERAL. The Luannan Facility (herein so called), approximately 83% of
which is indirectly owned by the Company, is located in Luannan County, Tangshan
Municipality, Hebei Province, People's Republic of China. The Luannan Facility
will be comprised of two steam/electric generating units, each nominally rated
at 50 megawatts but with nameplate capability of up to 60 megawatts gross output
under full condensing conditions. Two pulverized coal-fired boilers, each
delivering steam to drive a three-stage extraction/condensing steam turbine
electric generating unit, will be utilized. Electric power generated by the
Luannan Facility will be interconnected to the local electricity grid network at
110 kilovolts. In addition, steam will be extracted from the steam turbines for
distribution by pipeline to local industrial and commercial users and also used
to heat water for district heating use. Both units of the Luannan Facility have
passed performance testing, although the Luannan Facility has not yet been
declared ready for commercial operations (primarily due to the lack of a tariff
under the applicable power purchase agreement, as more fully described below,
and to further unit performance adjustments to be made by the Luannan EPC
Contractor). The site of the Luannan Facility is leased for a term of 23 years
(until 2020) pursuant to several Transfer Contracts for the Right to Use
State-Owned Land with the local Chinese partners, who acquired granted land use
rights from an agency of the PRC.

      SALES OF POWER. The Luannan Facility will sell power to North China Power
Group Company pursuant to the Luannan Power Purchase Agreement (herein so
called). The North China Power Group Company functions as the commercial arm of
the North China Power Administration. The North China Power Group Company, which
reports directly to the State Power Corporation ("SP"), operates the North China
Power Grid. The

                                       9
<PAGE>
service area of North China Power Group Company encompasses four regions,
including the Beijing/Tianjin/Tangshan area. Beijing and Tianjin are among the
largest and most economically developed cities in the PRC. The service area of
North China Power Group Company also includes Hebei Province, Shanxi Province
and western Inner Mongolia. The North China Power Group Company owns most of the
major power plants within its service area. As a commercial entity, the North
China Power Group Company manages and owns most of the power assets in its
territory including generation and distribution facilities. The geographical
extent of its service area makes North China Power Group Company one of the
largest power operating entities in the PRC.

      The Luannan Power Purchase Agreement has an initial term of 20 years from
the date of commercial operation of the Luannan Facility. The electricity price
is to be established through a formula provided in the applicable Pricing
Document (herein so called) which is separate from, but incorporated by
reference in, the Luannan Power Purchase Agreement. According to the formula
contained in the Pricing Document, the power price is to be comprised of fixed
and variable components that may be adjusted, subject to the approval of the
Tangshan Municipal Price Bureau, to reflect changes in coal costs, depreciation
of plant and equipment and financing expenses. Certain components of the power
price calculation may be adjusted to reflect local and U.S. inflation and
foreign exchange rate fluctuation in order to mitigate the Luannan Facility's
exposure to inflation and currency risks. Although it is anticipated that the
Luannan Facility will apply annually for changes in rates, under the Luannan
Power Purchase Agreement it has the right to request a determination of a new
power price whenever it determines that changes in the price components require
a new determination. There are pass-through provisions in the pricing formula
for increases or decreases in the cost of coal against an index cost that is
stipulated in the Pricing Document, and the pricing formula also has provisions
for pass-through or make-whole calculations relating to certain construction
capital cost items. The tariff is to be paid in Renminbi (the currency of the
PRC) and is required to be paid every 30 days by the North China Power Group
Company.

      In May 1999 the owners of the Luannan Facility filed an application with
the Tangshan Municipal Price Bureau for determination of the initial tariff
under the pricing formula contained in the Pricing Document for the Luannan
Power Purchase Agreement. The owners are continuing discussions with the
Tangshan Municipal Price Bureau and other Chinese governmental agencies
concerning the tariff application and the related approval process. The tariff
application is still in process and the owners of the Luannan Facility have not
yet received an approved tariff from the governmental authorities. There can be
no assurance that the requested tariff will be approved, and the approved tariff
may be significantly lower than the amount requested. If the approved tariff
varies from the requested amount, the Company's consolidated financial position,
results of operations and cash flows could be materially adversely affected. See
Item 7. "Management's Discussion and Analysis of Financial Condition and Results
of Operations."

SALES OF STEAM. Upon reaching commercial operations, the Company
currently believes that the Luannan Facility will sell approximately 350,000
tons per year of steam for process and the equivalent of approximately 360,000
gigajoules per year of steam for heating to certain Luannan County enterprises
and local industries. Upon reaching commercial operations, the Company currently
believes that the Luannan Facility will be the single largest centralized heat
supplier in Luannan County.

      ENGINEERING, PROCUREMENT AND CONSTRUCTION CONTRACT. Harbin Power
Engineering Company Limited (the "Luannan EPC Contractor") is the engineering,
procurement and construction contractor for the Luannan Facility.

      OPERATIONS AND MAINTENANCE. The joint venture owners currently intend to
perform operation and maintenance services at the Luannan Facility. A five year
agreement with Jinzhan Power, a local Chinese utility company ("Jinzhan"), has
been entered into whereby Jinzhan has agreed to provide staff personnel to
perform operations and maintenance services under the direction of the joint
venture manager.

      COAL SUPPLY. The Company currently believes that the Luannan Facility,
upon reaching commercial operations, will use approximately 450,000 metric tons
of coal per year. The principal fuel supply for the Luannan Facility will come
from the Qianjiaying Mine, which is owned and operated by Kailuan Coal and is
located 30 kilometers from the Luannan Facility. Kailuan Coal has committed to
supply up to 300,000 metric tons per year of coal from the Qianjiaying Mine to
the Luannan Facility for ten years. The remaining coal requirements for the
Luannan Facility will be supplied by other mines in the region.

                                       10
<PAGE>
      THE NEPAL FACILITY

      GENERAL. The Nepal Facility (herein so called) is located on the upper
Bhote Koshi River in Nepal, approximately 110 kilometers from Kathmandu, Nepal.
The Nepal Facility is currently under construction. It will be comprised of a 36
megawatt run-of-the-river power plant; thus it will not have a large dam and
reservoir, but rather, a small diversion structure, and will produce electricity
in accordance with the river flow. The switchyard and a separate 48 kilometer
transmission line that will transmit the power generated by the Nepal Facility
to a sub-station in Bhaktapur, Nepal, will be built by the Nepal Electricity
Authority (the "NEA"), the state-owned utility prior to completion of the Nepal
Facility. The Company and an investment partner indirectly own 75% of the Nepal
Facility. Cash flow attributable to the Company's and its investment partner's
aggregate interest in the Nepal Facility will be allocated 85% to such partner
and 15% to the Company's wholly-owned subsidiary until such partner achieves a
20% internal rate of return, and 90% to the Company's subsidiary and 10% to such
partner thereafter.

      The Nepalese Government has replaced various taxes with a broad "Value
Added Tax" ("VAT") and has applied the VAT to the Nepal Project with regard to
certain capital items. The Nepal Project participants believe that such
application of the VAT constitutes a "Change in Law" under the force majeure
provisions in the applicable power purchase agreement and accordingly have
delivered a notice to Nepal Electric Authority seeking appropriate price relief
to recover any VAT imposed on the Nepal Project.

      During August, 1998, a major flood occurred in the upper Bhote Koshi River
basin and as a result, the Nepal Facility is currently expected to reach
commercial operation in approximately September 2000, which constitutes a delay
of eight months from the initial projected date of commercial operation,
although this delay may be reduced through implementation of a mitigation
program. The Nepal Project has insurance coverage for a substantial portion of
the loss, including business interruption coverage. The Nepal Project has
provided notice to the Nepalese Government and the Nepal Electricity Authority
that it intends to seek appropriate schedule and cost relief afforded it
pursuant to the applicable force majeure provisions under the applicable power
purchase agreement, in addition to any insurance proceeds received. In this
regard, because the NEA has indicated that it does not agree that the force
majeure provisions in the power purchase agreement support the schedule and cost
relief, a notice of arbitration has been delivered to the NEA to address the
issue.

      The Company does not currently believe that the delay in commercial
operation of the Nepal Facility or the VAT imposed on certain capital items of
the Nepal Facility will cause a material adverse effect on the business,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole. However, in the event that commercial operations
at the Nepal Facility are commenced after December 31, 2000, the applicable
power purchase agreement could be terminated and there could be a material
adverse effect on the business, financial condition or results of operations of
the Company and its subsidiaries, taken as a whole.

      SALES OF POWER. Upon reaching commercial operations, and subject to the
discussion above concerning force majeure, the Nepal Facility will sell power to
the NEA pursuant to the Nepal Power Purchase Agreement (herein so called). The
Nepal Power Purchase Agreement will terminate 25 years from the date of
commercial operation of the Nepal Facility. Upon the termination of the Nepal
Power Purchase Agreement, 50% of the ownership of the Nepal Facility will be
transferred to the NEA for a nominal sum. Payment under the Nepal Power Purchase
Agreement will equal the product of a tariff rate of U.S.$0.060 per kilowatt
hour in 1995 prices escalated by 3% per annum for the first 15 years, and
indexed thereafter to the U.S. Consumer Price Index rate and the total monthly
electrical output delivered by the Nepal Facility subject to monthly deemed
generation levels.

      The NEA will have the ability to dispatch the Nepal Facility at its
discretion. However should the NEA dispatch the Nepal Facility below the monthly
deemed generation level, the NEA will remain obligated to pay for the deemed
generation. During the dry months of the year (mid-November to mid-May), the NEA
has the option to purchase all electric power produced by the Nepal Facility
even if it exceeds the deemed generation level. The NEA will not be required to
purchase electrical output above the deemed generation levels during the wet
months of the year (mid-November to mid-May). Payments under the Nepal Power
Purchase Agreement will be denominated in U.S. dollars and paid in Nepalese
rupees.

                                       11
<PAGE>
      ENGINEERING, PROCUREMENT AND CONSTRUCTION CONTRACT. China Gezhouba
Construction Group Corporation for Water Resources and Hydropower ("China
Gezhouba") is the engineering, procurement and construction contractor for the
Nepal Facility. China Gezhouba has engaged Harbin Electric Machinery Works
("Harbin"), based in Harbin China, to supply the turbine generators for the
Nepal Facility.

      OPERATIONS AND MAINTENANCE. Harza Engineering Company International, L.P.
("Harza") will provide operations and maintenance services for the Nepal
Facility pursuant to a contract with an initial term of five years from
commercial operation, renewable for additional five-year periods. Harza has
extensive experience in the planning, design, construction, and operation of
power plants throughout the world.

      THE SITE. The Bhote Koshi River is a perennial stream fed by glaciers,
snow melt and monsoons. The river drains an area of 2,132 square kilometers,
mostly in the PRC. The mean annual flow at the proposed site was 66.4 cubic
meters per second between 1965 and 1992. The Nepal Facility is located in the
Sindhupalchok zone of central Nepal, close to the PRC-Nepal border. The Bhote
Koshi River rises to an elevation of 5,800 meters at Tang Pu, Tibet, PRC and
flows south with a drop of 4,300 meters before reaching the project site. At the
site, the river's slope is about 10 percent. The land at the site for the Nepal
Facility is owned by the project company formed by the Company and its partners,
and is subject to a mortgage lien as part of the financing for the Nepal
Facility.

COMPETITION

      The business of developing electric generating power plants is intensely
competitive. The Company and its subsidiaries compete with other independent
power producers, including non-regulated affiliates of utilities.

      Development of new power generation projects in foreign markets is
difficult and expensive, and many competitors in these foreign markets have
significantly larger capital resources and greater local market expertise than
the Company.

      In the United States, over the past decade, developing electric generating
power plants has become a progressively more difficult, expensive and
competitive process. Increased competition also has lowered profit margins of
successful projects in the United States and abroad. In addition, due to the
downturn in certain foreign markets, especially Asia, there has been an
increasing number of entrants into the domestic market.

REGULATORY MATTERS

REGULATION OF THE ELECTRIC POWER INDUSTRY IN THE UNITED STATES

      Projects of the Company located in the United States are subject to
complex and stringent energy, environmental and other governmental laws and
regulations at the federal, state and local levels in connection with the
development, ownership and operation of its electricity generation facilities.
Federal laws and regulations govern transactions by electric and gas utility
companies, the types of fuel that may be utilized by an electric generating
facility, the type of energy that may be produced by such a facility and the
ownership of the facility. State utility regulatory commissions must approve the
rates and terms and conditions under which public utilities sell electric power
at retail and, under certain circumstances, purchase electric power from
independent producers. Under certain circumstances where specific exemptions are
otherwise unavailable, state utility regulatory commissions may have broad
jurisdiction over non-utility electric power generation facilities. Energy
producing projects located in the United States also are subject to federal,
state and local laws and administrative regulations governing the emissions and
other substances produced, discharged or disposed of by a facility and the
geographical location, zoning, land use and operation of a facility. Applicable
federal environmental laws typically have state and local enforcement and
implementation provisions. These environmental laws and regulations generally
require that a variety of permits and other approvals be obtained before the
commencement of construction or operation of an energy-producing facility and
that the facility then operate in compliance with those permits and approvals.

                                       12
<PAGE>
FEDERAL AND STATE ENERGY REGULATION

      PURPA. PURPA and the regulations promulgated thereunder provide certain
rate and regulatory incentives to an electric generating facility that is a
qualifying cogeneration or small power production facility (a "QF" or
"Qualifying Facility"). A cogeneration facility is a QF if it (i) sequentially
produces both electricity and useful thermal energy that is used for industrial,
commercial, heating or cooling purposes, (ii) meets certain energy efficiency
and operating standards when oil or natural gas is used as a fuel source and
(iii) is not more than 50%-owned by an electric utility, electric utility
holding company or an entity or person owned by either or any combination
thereof. The Panda-Rosemary Facility and the Panda-Brandywine Facility are
cogeneration QFs.

      Under PURPA and the regulations promulgated thereunder, QFs receive two
primary benefits. First, most types of QFs are exempt from most provisions of
the Public Utility Holding Company Act of 1935, as amended ("PUHCA"), and from
most provisions of the Federal Power Act, as amended (the "FPA"), while all QFs
are exempt from certain state laws relating to organizational, rate and
financial regulation. Second, regulations promulgated by the FERC under PURPA
require that (i) electric utilities purchase electricity generated by QFs,
construction of which commenced on or after November 9, 1978, at a price based
on the purchasing utility's full "avoided costs" and (ii) the utilities sell
supplementary, back-up, maintenance and interruptible power to the QFs on a just
and reasonable and non-discriminatory basis. PURPA and the regulations
promulgated thereunder define "avoided costs" as the "incremental costs to an
electric utility of electric energy or capacity or both which, but for the
purchase from the qualifying facility or qualifying facilities, such utility
would generate itself or purchase from another source." Utilities may also
purchase power from QFs at prices other than "avoided costs" pursuant to
negotiations as provided by FERC regulations.

      Any merchant plant, if developed and constructed by the Company in the
United States, probably would not qualify as a QF, but nonetheless probably
would be exempt from most provisions of PUHCA by virtue of being an "exempt
wholesale generator" "or "EWG" (described below).

      The FERC's regulations also provide that if energy or capacity is provided
pursuant to a legally enforceable obligation over a specified term, avoided
costs may be determined, at the option of the QF, either at the time the energy
or capacity is delivered or as calculated at the time the obligation is
incurred. The FERC's regulations further provide that, in the case of rates
based on estimates of avoided costs over the term of a contract, the rates do
not violate the FERC's rates if the rates for such purchases differ from avoided
costs at the time of delivery.

      In certain instances, payments based upon avoided costs estimated at the
time a contract is entered into have proven to be greater than a utility's
avoided costs at the time of delivery. Many utilities have attempted to minimize
the disparity by implementing strategies designed to reduce avoided cost
payments under such contracts to levels that the utilities believe will be more
competitive in a short-term marginal cost electric energy market. Such
strategies include attempts to renegotiate or buy out power purchase contracts
with QFs. Some utilities have sought rigorously to enforce the terms of such
contracts and to exercise their contractual termination rights if the contracts
are not strictly observed. In addition, some utilities have engaged in
litigation and regulatory action against QFs to achieve these ends.

      The FERC has refused to disturb QF contract rates on two operating
projects where estimates of a utility's avoided costs, calculated at the time
the contracts were signed, were higher than the actual avoided costs at the time
of delivery and the contract rates were not challenged at the time the contracts
were signed and were not the subject of an ongoing challenge to the state's
avoided cost determination. New York State Electric & Gas Corporation, 71 FERC
61,027, reconsideration denied, 72 FERC 61,067 (1995). This decision is
currently the subject of a complaint filed in the United States District Court
for the Northern District of New York.

      Relying in part on the FERC's regulations, a federal court of appeals has
held that once a state commission has approved (by final and nonappealable
order) a QF contract rate as being consistent with avoided costs, just,
reasonable and prudently incurred, any action or order by the state commission
to reconsider its approval or deny the pass-through of the QF's charges to the
utility's retail customers under purported state authority is preempted by PURPA
and the Federal Power Act. FREEHOLD COGENERATION ASSOCS., L.P. V. BOARD OF
REGULATORY

                                       13
<PAGE>
COMM'RS OF NEW JERSEY, 44 F.3D 1178 (3RD CIR.), CERT. DENIED SUB
NOM., JERSEY CENTRAL POWER & LIGHT CO. V. FREEHOLD COGENERATION ASSOCS., L.P.,
116 S. CT. 68 (1995).

      In Independent Energy Producers Assoc. v. California Public Utilities
Comm'n, 36 F.3d 848 (9th Cir. 1994), the U.S. Court of Appeals for the Ninth
Circuit held that states are not preempted by PURPA from instituting a program
that requires QFs to submit operating data, to purchasing utilities for
monitoring compliance with QF status requirements, as long as the monitoring
requirements do not impose an undue burden on the QFs. However, the same court
determined that states and utilities are preempted by federal law from taking
action on their determination that a QF is no longer in compliance with QF
status requirements, other than requesting that the FERC revoke the facility's
QF status, either by filing a request for revocation or by filing a petition for
a declaratory order that the facility is no longer a QF.

      On June 13, 1997, the State Corporation Commission of the Commonwealth of
Virginia ("SSC") granted Virginia Power's request and issued an order
authorizing such a monitoring program. The order states that the monitoring
program would apply to all QFs that have entered into power purchase agreements
with Virginia Power. Under the program, QFs must submit to Virginia Power by
July 1 of each year certain operational data from the previous year and indicate
significant changes from previous years. Virginia Power must report to the SSC
by October 1 of each year the results of Virginia Power's QF compliance
evaluation. Virginia Power may seek a declaration from the FERC that a QF does
not qualify under the FERC rules.

      The North Carolina Utilities Commission ("NCUC") has disallowed the
pass-through to Virginia Power's North Carolina retail rates of a portion of
capacity payments Virginia Power had been making to several non-utility
generation plants. The capacity payment rates for the plants had been determined
by an arbitrator and approved by the SCC. The NCUC found that bids from a 1988
solicitation (the "1988 Virginia Power Solicitation") were available at the time
the contract was approved and should have been used, instead of arbitration, to
determine Virginia Power's avoided costs. The NCUC ruled that rates in excess of
the rates derived from bids received in the 1988 Virginia Power Solicitation
were therefore disallowed in Virginia Power's North Carolina retail rates. The
North Carolina Supreme Court upheld the NCUC's decision, saying that the NCUC
had simply disallowed rates above avoided costs. North Carolina Utilities Comm'n
v. North Carolina Power, 338 N.C 412, 450 S.E.2d 896 (1994). The United States
Supreme Court declined to review that decision.

      While the Rosemary Power Purchase Agreement with Virginia Power was not
specifically approved by the SCC, the SCC did approve the 1988 Virginia Power
Solicitation that resulted in the Rosemary Power Purchase Agreement. Although
the NCUC used the 1988 Virginia Power Solicitation to determine the avoided
costs in the North Carolina decision discussed above, there can be no assurance
that it would not disallow the pass-through of the Rosemary Power Purchase
Agreement rates, which arose from the 1988 Virginia Power Solicitation. If the
NCUC were to disallow such pass-through, and if the courts were to allow the
decision to stand, the Company believes that any such disallowance would affect
only that portion of Virginia Power's rates allocated to its North Carolina
retail customers. The Brandywine Power Purchase Agreement has been approved by
both the Maryland and District of Columbia Public Service Commissions.

      The Company endeavors to develop its U.S. QF projects, monitor compliance
by such U.S. QF projects with applicable regulations and choose its customers in
a manner which minimizes the risks of losing QF status. Certain factors
necessary to maintain QF status are, however, subject to the risk of events
outside the Company's control. For example, loss of a thermal energy customer or
failure of a thermal energy customer to take required amounts of thermal energy
from a cogeneration facility that is a QF could cause the facility to fail to
satisfy the criteria required for QF status regarding the level of useful
thermal energy output. Upon the occurrence of such an event, the Company would
seek to replace the thermal energy customer or find another use for the thermal
energy that meets PURPA's requirements, but no assurance can be given that this
would be possible.

      If one of the U.S. projects which is a QF and in which the Company has an
interest should lose its status as a QF, such project would no longer be
entitled to the exemptions from PUHCA and the FPA. This could subject the U.S.
project to rate regulation as a public utility under the FPA and state law and
could result in the Company or certain of its affiliates inadvertently becoming
a public utility holding company by owning more than 10% of the voting
securities of, or controlling, a facility that would no longer be exempt from
PUHCA. This could cause all of the Company's remaining U.S. projects which are
QFs to lose their QF status, because QFs may not be

                                       14
<PAGE>
controlled, or more than 50%-owned, by public utility holding companies. Loss of
QF status could also trigger defaults under covenants to maintain QF status in
the Company's U.S. project power purchase agreements, steam sales agreements and
financing agreements and result in termination, penalties or acceleration of
indebtedness under such agreements, plus interest. A facility may lose its QF
status on a retroactive or a prospective basis.

      If a U.S. project which is a QF were to lose its QF status (because, for
example, it lost its steam customer), the Company and its affiliates could
attempt to avoid holding company status (and thereby protect the QF status of
its other QF projects) on a prospective basis by restructuring its interests in
such U.S. project. For instance, the Company could change its voting interest in
the entity owning the nonqualifying project to nonvoting or limited partnership
interests and sell the voting interest to an individual or company which could
tolerate the lack of exemption from PUHCA, or by otherwise restructuring
ownership of the project so as not to become a holding company. These actions,
however, would require approval of the Securities and Exchange Commission (the
"SEC") or a no-action letter from the SEC, and would result in a loss of control
over the nonqualifying project, could result in a reduced financial interest
therein and might result in a modification of the operation and maintenance
agreement relating to such project. A reduced financial interest could result in
a gain or loss on the sale of the interest in such project, the removal of the
affiliate through which the ownership interest is held from the consolidated
income tax group or the consolidated financial statements of the Company and its
affiliates, or a change in the results of operations of the Company and its
affiliates. Loss of QF status on a retroactive basis could lead to, among other
things, fines and penalties being levied against the Company and its affiliates,
and its subsidiaries and claims by utilities for refund of payments previously
made, with interest.

      Under the Energy Policy Act of 1992 ("Energy Policy Act"), a company
engaged exclusively in the business of owning and/or operating a facility used
for the generation of electric energy exclusively for sale at wholesale may be
exempted from PUHCA as an "exempt wholesale generator" or "EWG." An exempt
wholesale generator may not make retail sales of electricity in the U.S. If a
project can be qualified as an EWG under Section 32 of PUHCA it will be exempt
from PUHCA even if it does not qualify as a QF. Therefore, if a QF in the
Company's project portfolio were to lose its QF status, the Company could apply
to have the project qualified as an EWG. However, assuming this changed status
would be permissible under the terms of the applicable power purchase agreement,
rate approval from FERC would be required. In addition, the project would be
required to cease selling electricity to any retail customers (such as the
thermal energy customer) and could become subject to state regulation of sales
of thermal energy.

      If EWG status is lost and cannot be regained, this could result in the
Company or certain of its affiliates inadvertently becoming a public utility
holding company by owning more than 10% of the voting securities of, or
controlling, a facility that would no longer be exempt from PUHCA. As noted
above, this could cause all of the Company's remaining U.S. projects which are
QFs to lose their QF status, because QFs may not be controlled, or more than
50%-owned, by public utility holding companies. Loss of exemption from PUHCA
could also trigger defaults under covenants to maintain exemptions from PUHCA.

      PUHCA. PUHCA provides that any corporation, partnership or other entity or
organized group that owns, controls or holds power to vote 10% or more of the
outstanding voting securities of a "public utility company" or a company that is
a "holding company" of a public utility company is subject to regulation under
PUHCA, unless an exemption is established or an SEC order declaring it not to be
a holding company is granted. Registered holding companies under PUHCA are
required to limit their utility operations to a single integrated utility system
and to divest any other operations not functionally related to the operation of
the utility system. In addition, a public utility company that is a subsidiary
of a registered holding company under PUHCA is subject to financial and
organizational regulation, including approval by the SEC of certain of its
financing transactions.

      As discussed above, most types of QFs and all EWGs are exempt from most of
the provisions of PUHCA. A foreign utility company is also exempt from most of
the provisions of PUHCA if certain notice and other requirements are satisfied.

      FPA. Under the FPA, the FERC has exclusive rate-making jurisdiction over
wholesale sales of electricity and transmission in interstate commerce. These
rates may be determined on either a cost-of-service basis or a market-based
approach. If a QF in the Company's project portfolio were to lose its QF status,
the rates set forth

                                       15
<PAGE>
in the applicable power purchase agreement would have to be filed with the FERC
and would be subject to initial and potentially subsequent reviews by the FERC
under the FPA, which could result in reductions to the rates.

      INDUSTRY RESTRUCTURING PROPOSALS. The United States Congress is currently
considering legislation to repeal PURPA entirely, or at least to repeal the
obligation of utilities to purchase from QFs. There is strong Congressional
support for grandfathering contracts of existing QFs if such legislation is
passed, and also support for requiring utilities to conduct competitive bidding
for new electric generation if the PURPA purchase obligation is eliminated.
Congress is also considering legislation to repeal PUHCA. Such repeal would
remove restrictions from the Company, but would also remove restrictions from
its competitors.

      The FERC and many state utility commissions are either studying or have
adopted proposals to restructure the electric utility industry in the United
States to permit utility customers to choose their utility supplier in a
competitive electric energy market. The FERC has issued a final rule requiring
utilities to offer wholesale customers and suppliers open access on their
transmission lines, on a basis comparable to the utilities' own use of the
lines. Although the rule (Order No. 888) is currently the subject of a petition
for review in the Unites States Court of Appeals for the D.C. Circuit, all
"public utilities" have already filed "open access" tariffs. The utilities
contend that they should recover from departing customers their fixed costs that
will be "stranded" if their wholesale customers choose new electric power
suppliers. These stranded costs include the capacity costs utilities are
required to pay under many QF contracts, which the utilities view as excessive
when compared with current market prices for capacity. Many utilities are
therefore seeking ways to lower these contract prices or terminate the contracts
altogether, out of fear that their shareholders will have to bear all or part of
such "stranded" costs. Some utilities have engaged in litigation against QFs to
achieve these ends. The FERC's rule allows full recovery of "legitimate and
verifiable" prudently incurred stranded costs at the wholesale level. However,
the FERC has jurisdiction over only a small percentage of electric rates, and
there is likely to be litigation over whether wholesale stranded costs are
"legitimate and verifiable."

      In addition to restructuring proposals being considered by regulatory
agencies, a number of bills have been introduced in the U.S. Congress to promote
electric utility restructuring and deregulation of electric rates. These bills
differ as to how and to what extent a utility's "stranded" or "transition" costs
would be recoverable if current captive customers left the utility's system. The
existence of this legislation may increase the desire of utilities to
renegotiate, buy out or attempt to terminate existing power purchase agreements
containing prices that the utilities believe will not be competitive in a
short-term marginal cost electric energy market. In addition, if electric energy
prices are deregulated, electric energy producers will have to sell electric
energy at competitive market prices. In Virginia, a new law which took effect on
July 1, 1999, provides for the recovery of "just and reasonable net stranded
costs" (see discussion of stranded costs, above), which include "electric
service contracts." Such recovery may be made only through either capped rates,
established for a transition period, or through wire charges for the use of
transmission lines to reach another supplier. Wire charges will be the sum of
the difference between the utility's capped unbundled rates and projected market
prices for generation, and any transition costs found to be just and reasonable
by the SCC. All deferred wire charges must be paid in full by July 1, 2007.

      STATE REGULATIONS. State public utility commissions ("PUCs") have broad
authority to regulate both the rates charged by and financial activities of
electric utilities, and to promulgate regulations implementing PURPA. Since a
power purchase agreement will become a part of a utility's cost structure (and
therefore generally is reflected in its retail rates), power purchase agreements
from independent power producers are potentially subject to the regulatory
purview of PUCs, particularly the process by which the utility has entered into
the power purchase agreements. If a PUC has approved the process by which a
utility secures its power supply, a PUC generally will be inclined to allow a
utility to "pass through" the expenses associated with an independent power
contract to the utility's retail customers. Moreover, a federal court of appeals
has held in one instance that a PUC may not disallow the full reimbursement to a
utility for the purchase of electricity from a QF once the PUC has approved the
rates as consistent with the requirements of PURPA. See Freehold Cogeneration
Assocs., L.P. v. Board of Regulatory Comm'rs of New Jersey, 44 F.3d 1178 (3rd
Cir.), cert. denied sub nom., Jersey Central Power and Light Co. v. Freehold
Cogeneration Assocs., L.P., 116 S. Ct. 68 (1995). In addition, retail sales of
electricity or thermal energy by an independent power producer may be subject to
PUC regulation, depending on state law.

                                       16
<PAGE>
      Independent power producers that are not QFs under PURPA are considered to
be public utilities in many states and are subject to broad regulation by PUCs
ranging from the requirement that certificates of public convenience and
necessity be obtained to regulation of organizational, accounting, financial and
other corporate matters. However, sales of electricity at wholesale in
interstate commerce (as are currently contemplated by the Company regarding EWG
merchant plants which it might develop in the U.S.), except in the region
regulated by the Electric Reliability Council of Texas ("ERCOT") where FERC
lacks jurisdiction, are subject to the exclusive regulatory jurisdiction of the
FERC. In addition, states may assert jurisdiction over the siting and
construction of such facilities, and over the issuance of securities and the
sale or other transfer of assets by such EWG facilities.

      State PUCs also have jurisdiction over the transportation and retail sale
of natural gas by local distribution companies. Each state's regulatory laws are
somewhat different; however, all generally require a local distribution company
to obtain approval from the PUC to provide services and construct facilities.
The rates of local distribution companies are usually subject to continuing
oversight by the PUC.

      In the case of the Panda-Rosemary Facility, the Panda-Rosemary Partnership
is subject to a number of conditions imposed by the North Carolina Utilities
Commission ("NCUC") pursuant to a Certificate of Public Convenience and
Necessity ("CPCN"), including that the Panda-Rosemary Facility and the Rosemary
Pipeline both be owned by the Panda-Rosemary Partnership, that the
Panda-Rosemary Partnership not transport gas for or sell or deliver gas to any
other entity, that all electricity generated at the Panda-Rosemary Facility be
sold to an electric utility and that all thermal energy produced at the
Panda-Rosemary Facility be sold only to the textile mill to which steam and
chilled water from the Panda-Rosemary Facility are currently delivered. On
February 18, 1997, The Bibb Company ("Bibb") announced that it would sell the
textile mill to Westpoint Stevens, Inc. ("Westpoint"). The closing of the sale
was reported in the news media on February 21, 1997. If, in fact, Bibb is no
longer the owner of the textile mill, the Panda-Rosemary Partnership is
obligated to notify the NCUC and Virginia Power and the NCUC could order such
further proceedings as it deemed appropriate, which proceedings could result in
revocation of the CPCN or the imposition of other conditions. See Item 3. "Legal
Proceedings - Bibb/Westpoint Stevens Proceedings" below.

      NATURAL GAS REGULATION. The Company has an indirect 100% interest in and
operates two natural gas-fired cogeneration projects in the United States, one
of which is owned and one of which is under a long term lease financing
arrangement. The cost of natural gas (other than debt costs) is ordinarily the
largest expense of a gas-fired power project and is critical to the project's
economics. The risks associated with using natural gas can include the need to
arrange transportation of the gas across great distances, including obtaining
removal, export and import authority if the gas is transported from Canada, the
possibility of interruption of the natural gas supply or transportation
(depending on the quality of the natural gas reserves purchased or dedicated to
the project, the financial and operating strength of the gas supplier and
whether firm or non-firm transportation is purchased), and obligations to take a
minimum quantity of gas or pay for it (take-or-pay obligations).

      Pursuant to the Natural Gas Act, FERC has regulatory jurisdiction over the
transportation, storage, and sale for resale of natural gas in interstate
commerce. FERC's statutory authority requires FERC to approve the construction
and abandonment of facilities used to transport and store gas in interstate
commerce and to regulate the transportation and storage services provided
through these facilities. FERC's rules and regulations require regulated
"natural-gas companies" to provide equal and non-discriminatory transportation
and storage services to third parties requesting this service, to the extent
capacity is available to provide the service. Terms and conditions of service,
including rates, for these interstate services are approved by FERC. FERC's
current policy regarding rates is to require the regulated natural-gas companies
to charge no more than a maximum, cost-based rate approved by FERC for its
various services. However, FERC will allow the natural-gas companies to
negotiate, on a non-discriminatory basis, special rates with their customers.
Under current FERC policy, any transportation or storage customer receiving
service pursuant to a contract exceeding one year in duration and requiring the
customer to pay the maximum, cost-based rate for the service can maintain rights
to the capacity subscribed under the contract at the end of the contract term by
agreeing to pay the highest rate (up to the maximum, cost-based rate) and
longest term (up to five years) bid by a third party for the customer's
capacity. FERC no longer exercises regulatory oversight regarding sales of
natural gas for resale in interstate commerce.

                                       17
<PAGE>
      In a rulemaking issued on February 9, 2000 (Order No. 637), FERC
implemented changes to its ratemaking policies. Among other things, FERC will
(i) allow natural-gas companies to design rates that vary depending on the term
of the transportation or storage service contract executed by the natural-gas
company and its customers and, for short-term (i.e., less than one year) firm
and interruptible transportation and storage services, that vary by season, and
(ii) allow customers that hold firm transportation or storage capacity and that
"release" (or assign) this capacity to a third party for less than one year to
charge a rate that exceeds the maximum, cost-based rate that the customer pays
to the pipeline for the released service.

      ENVIRONMENTAL REGULATIONS. The development, construction and operation of
power projects in the United States is subject to extensive federal, state and
local laws and regulations adopted for the protection of the environment and to
regulate land use. The laws and regulations applicable to the Company and its
subsidiaries primarily involve the discharge of emissions into the water and air
and the use of water, but can also include wetlands preservation, endangered
species, waste disposal and noise regulations. These laws and regulations in
many cases require a lengthy and complex process of obtaining licenses, permits
and approvals from federal, state and local agencies.

      Noncompliance with environmental laws and regulations can result in the
imposition of civil or criminal fines or penalties. In some instances,
environmental laws also may impose clean-up or other remedial obligations in the
event of a release of pollutants or contaminants into the environment. The
following federal laws are among the more significant environmental laws that
may apply to the Company and its domestic subsidiaries. In most cases, analogous
state laws also exist that may impose similar, and in some cases more stringent,
requirements on the Company and its subsidiaries.

      CLEAN AIR ACT. The Federal Clean Air Act, as amended (the "Clean Air
Act"), provides for the regulation, largely through state implementation of
federal requirements, of ambient air quality and emissions of air pollutants
from certain facilities and operations. As originally enacted, the Clean Air Act
set guidelines for emissions standards for major pollutants (e.g., sulfur
dioxide and nitrogen oxide) from new sources. The 1990 Clean Air Act Amendments
tightened regulations on emissions from existing sources, particularly
previously exempted older power plants.

      CLEAN WATER ACT. The Federal Clean Water Act, as amended (the "Clean Water
Act"), also provides for the regulation, largely through state implementation of
federal requirements, of the quality of surface waters and imposes limitations
on discharges to those waters from point sources, including certain facilities
and operations. The water quality standards established under the Clean Water
Act are used as the basis for developing specific pollutant discharge
limitations from point sources. The discharge limitations are incorporated into
permits called National Pollutant Discharge Elimination System ("NPDES")
permits. The Clean Water Act also imposes requirements with respect to the
discharge of stormwater runoff from industrial sites. Those requirements are
implemented through state stormwater discharge permits. The Clean Water Act also
restricts discharges of fill materials to wetlands.

      RESOURCE CONSERVATION AND RECOVERY ACT. The Resource Conservation and
Recovery Act of 1976 ("RCRA") regulates the generation, treatment, storage,
handling, transportation and disposal of solid and hazardous waste.

      COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION, AND LIABILITY ACT. The
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended ("CERCLA" or "Superfund"), requires the remediation of sites from
which there has been a release or threatened release of hazardous substances and
authorizes the United States Environmental Protection Agency to take any
necessary response action at Superfund sites, including ordering potentially
responsible parties liable for the release to take or pay for such actions.
Potentially Responsible Parties are broadly defined under CERCLA to include past
and present owners and operators of such sites, as well as generators, arrangers
and transporters of wastes sent to a site.

REGULATION OF THE ELECTRIC POWER INDUSTRY IN THE PRC.

                                       18
<PAGE>
      GENERAL. The PRC's electric power industry is regulated primarily by the
State Economic and Trade Commission ("SETC") in conjunction with the State
Development and Planning Commission ("SDPC") and other governmental agencies.
The SETC, as the successor to the governmental and administrative functions
formerly exercised by the Ministry of Electric Power (the "MOEP"), began
performing such functions following the dissolution of the MOEP in March 1998.
Pursuant to resolutions of the Ninth National People's Congress introduced in
March 1998, the governmental functions of the MOEP were officially transferred
to the SETC and MOEP was dissolved. National grid management, ownership of
state-funded electric generating assets and development planning
responsibilities will remain with the State Power Corporation (the "SP"). The
reorganization of the power industry in the PRC is still in process and will be
accomplished over a period of time.

      Foreign investments in electric power projects in the PRC are regulated by
the Ministry of Foreign Trade and Economic Cooperation of the PRC ("MOFTEC"),
the SDPC (in the case of investments in new projects) or the SETC (in the case
of investments in existing projects), the State Administration of Foreign
Exchange ("SAFE"), the State Administration of Industry and Commerce of the PRC
(the "SAIC") and certain other agencies. With respect to foreign-invested
projects where the total amount invested is below certain thresholds expressed
in US Dollars, certain regulatory and approval authority of the Central
Government (herein so called) agencies are delegated to local, provincial, or
city governmental agencies performing similar functions, although regulations
promulgated by the MOEP in late 1997 and early 1998 (before its replacement by
SETC) would base approval authority on a power project's unit size. However, it
is unclear whether the provincial planning commissions and the SDPC are bound by
or, if not, will follow these regulations.

      STATE ECONOMIC AND TRADE COMMISSION. As the governmental department
responsible for the electric power industry, the SETC has assumed responsibility
previously exercised by the MOEP and is responsible for formulating development
strategies and policies for the electric power industry in the PRC, including
investment, technical, and major production and consumption policies. The SETC
has also assumed the government functions in respect of hydro-powered
electricity construction previously held by the Ministry of Water Resources. In
addition to formulating electric power industry planning in collaboration with
the SDPC and other governmental agencies, the SETC (i) coordinates the
development of the electric power industry, (ii) supervises the implementation
of related national policies, decrees and plans and (iii) formulates industrial
regulations, rules and policies for the electric power industry (except power
price, which is regulated by SDPC). The SETC shares certain of its
administrative responsibilities with the China Nuclear Industry Corporation with
respect to nuclear-powered electricity generating facilities.

      STATE POWER CORPORATION. In an attempt to separate the regulatory and
commercial functions of the electric power industry, the PRC State Council
formally approved the establishment of the SP in January 1997. The SP is a
state-owned legal entity with funds provided directly by the State Council (a
body of the central government of the PRC). The SP serves as the PRC's principal
investor in and/or operator of wholly or partially state-owned facilities in the
PRC. It is also responsible for the operation of the inter-regional transmission
facilities and the development of a national power grid. After the establishment
of the SP, the MOEP continued (and the SETC now continues) to exercise the
regulatory function over the Chinese electricity industry, but the MOEP's
enterprise management function and its function to operate state assets were
turned over to the SP. As part of the reform of the PRC power industry, the key
policy of which is separation of regulatory functions from enterprise
management, it is expected that provincial power bureaus will eventually be
dissolved and their regulatory function will be handed over to comprehensive
economic administrative departments of provincial governments, while provincial
power companies will be restructured to be independent legal entities
responsible for their own profit and loss. This restructuring is already under
way in Northeast China, and it is expected that it will eventually be
implemented nationwide.

      STATE ADMINISTRATION OF FOREIGN EXCHANGE. The SAFE is principally
responsible for the administration of foreign exchange in the PRC. It formulates
and oversees the implementation of foreign exchange regulations applicable to
foreign investment enterprises ("FIEs"). The relevant approval authorities
consult the SAFE in respect of foreign exchange matters relating to FIEs. The
SAFE is also responsible for monitoring the interbank foreign exchange system.

                                       19
<PAGE>
      REGIONAL, PROVINCIAL AND LOCAL POWER COMPANIES. The SETC directly oversees
the five interprovincial power groups (the "Regional Power Groups"), eight
independent provincial and two special administrative region power companies
("Provincial Power Companies") in the PRC, all of which are subsidiaries of the
SP. Each Regional Power Group (i) manages its regional power grids, (ii)
dispatches the power plants connected to such grids either directly or
indirectly through lower level power companies, and (iii) supervises the power
companies at lower administrative levels. The Regional Power Groups also act
through power companies which develop, construct, own and operate certain power
plants and transmission facilities within their respective territories. The key
personnel of the Regional Power Groups are appointed by the SP and the key
personnel of the Provincial Power Companies are appointed by the provincial
governments in consultation with the SP.

      A similar structure exists for the Provincial Power Companies under the
Regional Power Groups and the Provincial Power Companies directly owned and
managed by the SP. Each Provincial Power Company manages its provincial power
grid and dispatches the power plants connected to such grid to meet local
demand. The Provincial Power Companies operate certain power plants and certain
transmission facilities within their respective provinces. Cities and counties
directly under the administration of the provinces may have power companies
(together with the Regional Power Groups and the Provincial Power Companies, the
"Power Companies") which perform, under the administration of the Power Company
at the next higher level of government, similar functions within their
respective jurisdictions.

      PRC ELECTRIC POWER LAW. Given the importance of the continued rapid
expansion of the PRC's power industry, the National People's Congress adopted
the Law of Electric Power on December 28, 1995 (the "Power Law"). The Power Law,
which became effective on April 1, 1996, provides the legislative basis for the
regulation of China's electric power sector. It contains guidelines in areas
such as the generation, supply and use of electric power, pricing and tariffs
and regulatory supervision.

      Under the Power Law, the appropriate administrative department of the
State Council is authorized within the scope of its authority to supervise the
electric power industry throughout the country, and relevant departments of the
State Council are authorized within the scope of their respective authority to
supervise the electric power enterprises. While electric power development
planning will be carried out according to the needs of the national economy, the
Power Law also provides that each administrative department of the local
government at or above the county level will be responsible for the supervision
and control of the electric power industry within its administrative region.

      The Power Law states that independent power companies shall be granted
grid access upon their request, and provides that the on-grid price of
electricity shall be implemented on the basis of "the same price for the same
quality on the same grid." The law delineates the approval process for on-grid
tariffs and makes a distinction between the approvals required for
regional/provincial grids. The Power Law reiterates the position of the Central
Government of the PRC that entities involved in the construction of power
plants, power generation and grid operation are autonomous and assume sole
responsibility for their own profits and losses. Although these are the
objectives of reform for China's power industry, it takes time and effort to
implement them. To this end, the Power Law authorizes the State Council to
establish implementation regulations and rules for these purposes.

      RATE SETTING MECHANISMS. There are no regulations or governmental decrees
that regulate tariff formulas. The Power Law, however, does provide general
principles for determining tariffs paid by electric power grids to electricity
producers. Electricity prices, according to the Power Law, shall be determined
in accordance with the principles of uniform policy, unified pricing and
regulation at different levels, and the formulation of electricity prices shall
be based on the principles of reasonably compensating for costs incurred,
reasonably determining profits, legally computing taxes and equitably dividing
the cost in order to promote power construction. The Power Law also authorizes
the State Council to work out concrete rules for those power generating
enterprises that need to formulate a different on-grid power price due to
special circumstances. Rates for electricity produced by power plants that the
SP directly or indirectly owns and manages are generally set by the Central
Government, thus most electricity has historically been purchased from power
plants at such rates. For certain power plants with local government, China
Huaneng Group or foreign investment, such as the Luannan Facility, tariffs are
negotiated between the power plant, the operator of the grid (i.e., currently a
certain Regional Power Group) and the relevant provincial pricing bureau, and,
except in the case of power to be dispatched to an independent grid or to be

                                       20
<PAGE>
consumed within the same province of the power generation, the proposed tariff
is then submitted to the pricing department at the SDPC for final approval.

      In the case of power plants owned and managed directly or indirectly by
the SP, customers purchase electricity from the Power Companies at each level of
the administration of the PRC at rates determined by the Central Government,
which vary according to the category and location of the user. The rates set by
the Central Government have traditionally been maintained at a low level,
requiring the subsidization of the electric power industry by the Central
Government. One of the stated goals of the Power Law (as described above) is to
reform power pricing to be consistent with the development of the market
economy. Trial implementation has commenced in several cities of a time-sharing
pricing policy which charges consumers higher rates for peak load periods and
lower rates for off-peak load periods. North China Power Group Company has
adopted a similar program in its service area. Allowing the market to influence
the setting of power rates is intended to provide incentives for greater
efficiency in energy production, reduction of energy use per unit of industrial
output and promotion of conservation technologies.

      TRANSMISSION AND DISPATCH. The main system for the dispatch, transmission
and distribution of electric power in the PRC consists of the five
interprovincial power grids managed by their respective Regional Power Groups
and the eight provincial and two autonomous region power grids managed by the
Provincial Power Companies.

      The PRC's energy sources, such as coal and potential hydroelectric
resources, are principally located in the western, northern and central inland
provinces, but its high electricity consumption regions are located in the
eastern and southern coastal areas. As a result of plans to develop large power
plants in areas with significant energy sources, the expansion of China's
electricity transmission capabilities is of major importance. The PRC plans to
interconnect the North China Power Grid with the Northeast Power Grid around
2000. In 2003, with the expected completion of the first phase of the Three
Gorges project and the commercial operation of the first group of generation
units, the Central China Power Grid is expected to be interconnected on the east
with the East China Power Grid and on the west with the Sichuan Power Grid. A
unified national power grid is planned for completion sometime between 2010 and
2020.

      All electricity produced in the PRC is dispatched by the Regional Power
Groups (for interprovincial regional grids), except for that generated by units
not connected to a grid. The grids and the electric power dispatch to each grid
are administered by dispatch centers ("Dispatch Centers") operated by the
Regional Power Groups or Power Companies. Prior to November 1993, dispatch had
been carried out pursuant to MOEP guidelines. In order to achieve more efficient
and rational dispatch of electric power, the State Council issued, with effect
from November 1, 1993, the Regulations on the Administration of Electric Power
Dispatch to Networks and Grids (the "Dispatch Regulations"). Under the Dispatch
Regulations, Dispatch Centers were established at five levels: the National
Dispatch Center, the Dispatch Centers of the Regional Power Groups, the Dispatch
Centers of the Provincial Power Companies, the Dispatch Centers of the Power
Companies of cities under provinces and the Dispatch Centers of the county Power
Companies. Dispatch Centers are charged with setting production levels for the
various power plants connected to the grid. To effect this determination, each
power plant receives on a daily basis from its local Dispatch Center an expected
hour-by-hour output schedule for the following day, based on expected demand,
the weather and other factors.

      The Dispatch Regulations provide that the Dispatch Centers must dispatch
electric power according to, among other things, (i) power supply agreements
entered into between a Power Company and certain large or primary electricity
customers, where such agreements take into account the electric power generation
and consumption plans formulated annually by the Central Government and set
forth in the applicable State Plan, (ii) agreements entered into between a
Dispatch Center and each power plant subject to its dispatch, (iii)
interconnection agreements between Power Companies and (iv) actual conditions of
the grid, including equipment capabilities and safety reserve margins.

REGULATION OF ELECTRIC POWER INDUSTRY IN NEPAL

      GENERAL. The regulatory framework for private sector power generation in
Nepal primarily is based on legislation enacted by its Parliament in 1992 and
1993. The legislation provides for the licensing of

                                       21
<PAGE>
private parties to construct, own, and operate hydroelectric power projects for
a time period of up to 50 years. Projects that are more than 50% owned by
foreign companies will be automatically transferred, without compensation, to
His Majesty's Government of Nepal ("HMGN"), after the expiration of the license.

      Nepal's electric power industry is primarily regulated by the Ministry of
Water Resources ("MOWR") in conjunction with the NEA. NEA was established in
1985 as a commercial entity with responsibilities for generation, transmission
and distribution of electricity throughout Nepal. Decisions regarding the
operation and management of the NEA were made, historically, without taking into
account considerations such as efficiency and profitability. However, NEA's
overall operating performance and financial position recently have improved
following tariff increases and technical assistance from various multinational
institutions, including the World Bank.

      Tariff rates are subject to regulation. In August 1994, a newly
implemented Tariff Fixation Committee ("TFC"), which includes representatives
from HMGN and consumers and which is responsible for setting electricity tariffs
in accordance with certain financial covenants, became operational.

      The Ministry of Water Resources has the authority to issue licenses for
plant construction, water rights and to provide financial guarantees. All
hydroelectric projects with a capacity of greater than 1,000 kilowatts require a
license. Within the Ministry, the Hydroelectricity Development Unit of the
Electricity Development Center (the "EDC") promotes the private sector's
participation in the industry, approves projects with a capacity of more than
1,000 killowatts, and provides necessary assistance to the private sector in the
startup and operation of projects. The EDC also may arrange for economic
incentives to private participants, including tax concessions and assistance in
importing goods, obtaining land and obtaining necessary government
authorizations.

      TRANSMISSION SYSTEM. The transmission system in Nepal consists of 33
kilovolt, 66 kilovolt and 132 kilovolt transmission lines. The 132 kilovolt,
single-circuited 1,178-mile Integrated Nepal Electric Power System is Nepal's
most extensive transmission mechanism, and is connected to India. Nepal also has
a 33 kilovolt, single-circuit system that measures 1,216 kilometers; a 66
kilovolt, single-circuit system of 179 kilometers; a 66 kilovolt double-circuit
system of 153 kilometers; and a 132 kilovolt, double-circuit system of 27
kilometers. Under the applicable project agreements, the NEA has the
responsibility of building a 48 kilometer transmission line connecting the Nepal
Facility to an NEA substation.

      FOREIGN EXCHANGE. The Ministry of Finance has primary responsibility for
the regulation of foreign exchange in Nepal. Nepal increased its foreign
exchange reserves from approximately US$ 270 million in the early 1980s to
approximately US$ 600 million in 1996. The Nepalese rupee exchange rate is
pegged against the Indian rupee - a reflection of the high degree of integration
between the two economies.

FOREIGN ENVIRONMENTAL REGULATION

      GENERAL. The Company and its subsidiaries have ownership interests in
power plants under construction in the PRC and Nepal. Each of these countries
and the localities therein have separate laws and regulations governing the
siting, permitting, ownership and power sales from the Company's plants. These
laws and regulations are often quite different than those in effect in the
United States.

      Based on current trends, the Company expects that environmental and land
use regulations affecting its plants under construction outside the U.S. will
likely become more stringent over time. This appears to be due in part to a
greater participation by local citizenry in the monitoring and enforcement of
environmental laws, better enforcement of applicable environmental laws by the
regulatory agencies, and the adoption of more sophisticated environmental
requirements. If foreign environmental and land use regulations were to change
in the future, the Company may be required to make significant capital or other
expenditures in order to comply. There can be no assurance that the Company
would be able to recover all or any increased costs from its customers or that
its business, financial condition or results of operations would not be
materially and adversely affected by future changes in foreign environmental and
land use regulations.

      PRC ENVIRONMENTAL REGULATIONS. The Luannan Facility is subject to various
PRC environmental laws and regulations which are administered by both Central
Government of the PRC and local government

                                       22
<PAGE>
environmental protection bureaus. Approval or review by the relevant
environmental protection bureaus is required at each of the project proposal,
feasibility study, design and commissioning stages of a project. Filing of an
environmental impact statement or, in some cases, an environmental impact
assessment outline is required before the planning commission for the same level
of government can issue its approval. The filing must demonstrate that the
project conforms to applicable environmental standards. Approvals and permits
generally have been issued for projects utilizing modern pollution control
technology. Pollution sources are also required to report their pollution
discharges in terms of types and amounts of pollutants discharged into the water
and air, and to secure discharge permits for their wastewater discharges,
airborne emissions and solid waste shipments to ensure compliance with relevant
emissions standards.

      The PRC's environmental laws and regulations establish standards for the
discharge of emissions into the air and water. The rules set forth schedules of
base-level discharge fees for various polluting substances and specify that, if
such levels are exceeded, the polluting entity will be required to pay an excess
discharge fee to the local government. The local environmental rules do not make
it a violation to exceed these limits, but rather set forth a set of graduated
scale of fees that are required for each incremental unit of excess discharge.
Up to a certain level, as the discharge levels increase, the fee per unit also
increases. Above a certain limit, local governments may issue orders to cease or
reduce such discharge levels which, if not complied with, will after three years
from the date of the order, result in an annual increase of 5% in the pollution
fees assessed. Where pollution is causing environmental damage, the local
governments also have the authority to issue orders requiring the polluting
entities to cure the problem within a certain period of time.

      MOEP previously established technical standards for environmental
monitoring and exercised certain disciplinary functions with regard to
environmental compliance in connection with the construction and operation of
power plants. Environmental protection equipment is required to be designed,
installed and commissioned in tandem with the design, construction and
commissioning of the generator or plant. Before commencing operations, each
plant or generator must be tested and qualified with regard to emissions levels
and abatement equipment.

      NEPAL ENVIRONMENTAL REGULATIONS. The Nepal Facility is subject to certain
environmental laws and regulations which are administered by HMGN. For example,
the Environmental Impact Assessment Guidelines for the Forestry Sector, 1995,
applies to the Company's construction efforts in Nepal. Among other things, an
independent environmental impact assessment was required pursuant thereto, as
well as other ongoing compliance actions. In addition, the Nepal Facility is
subject to the Water Resources Act, which establishes certain pollution
tolerance limits for water resources as well as quality standards for various
uses of water resources. As part of the financing of the Nepal Facility, the
Company is required to comply with World Bank environmental standards.

EMPLOYEES

      At December 31, 1999, the Company and its subsidiaries had no employees.

      Robert W. Carter is Chairman of the Board, Chief Executive Officer and one
of two directors of the Company. Janice Carter is Executive Vice President,
Secretary and Treasurer of the Company, and is married to Robert W. Carter. Todd
Carter is Senior Vice President - Corporate Finance of the Company, and is the
son of Robert W. and Janice Carter. Otherwise, no family relationships exist
among the directors and executive officers of the Company.

      All executive officers of the Company are elected annually by the Board of
Directors of the Company to serve in such capacities until their successors are
duly elected and qualified.

YEAR 2000

      The Company and its subsidiaries have experienced no material year 2000
failures or problems. The Company is, however, continuing to monitor its systems
for any problems that may occur, especially in the initial months of the year
2000.

                                       23
<PAGE>
Item 2. PROPERTIES.

      The information regarding the properties of the Company is set forth under
Item 1. Business above and in the Notes to Consolidated Financial Statements
included in Part II hereof. The Company's principal office, located at 4100
Spring Valley, Suite 1001, Dallas, Texas 75244, is leased by PEII, which lease
expires May 2001.

Item 3. LEGAL PROCEEDINGS.

      The Company and certain of its subsidiaries are claimants or defendants in
various legal proceedings which have arisen in the ordinary course of business.

HEARD PROCEEDINGS

      Panda Energy Corporation, a Texas corporation and a subsidiary of the
Company ("PEC"), is a party to a lawsuit captioned Panda ENERGY CORPORATION,
PLAINTIFF V. HEARD ENERGY CORPORATION, CLF ENERGIA Y ELECTRICIDAD, S.A., ROBERT
A. WOLF, ARMIN ALEXANDER BUDZINSKY, EDWARD R. GWYNN, DONALD L. KINNEY, MORGAN
STANLEY & CO., INC., ALLSTATE INSURANCE COMPANY, ALLSTATE LIFE INSURANCE
COMPANY, ENTERGY CORPORATION, ENTERGY ENTERPRISES, INC., ENTERGY POWER, INC.,
ENTERGY POWER DEVELOPMENT CORPORATION, ANIL DESAI, DRS. IR. POERWANTO P., AND PT
PANCA SERODJA PRADHANA, DEFENDANTS, (NO. 94~0672-J), District Court of Dallas
County, Texas (191st Judicial District). PEC initiated this litigation in April
1994 and alleges that defendants Wolf, Gwynn and Kinney, former PEC employees,
formed a competing company (Heard Energy Corporation) and misappropriated
certain of PEC's international power project opportunities. PEC alleges that the
other defendants knowingly participated, collaborated and/or conspired in the
misappropriation of these opportunities. PEC's legal claims include causes of
action for misappropriation, conspiracy, fraud, breach of contract and breach of
fiduciary duty against one or more of the defendants and alleges damages in an
unspecified amount.

      Defendant Morgan Stanley filed a counterclaim on September 14, 1995
against PEC, alleging that it had performed services for PEC pursuant to an
engagement agreement relating to the Brandywine Project. PEC's claims against
Morgan Stanley, however, and Morgan Stanley's counterclaims have all been
dismissed from the action pursuant to a confidential settlement that the parties
entered into in February 2000.

      Defendants Heard Energy Corporation, Wolf, Gwynn, Kinney and Budzinsky
(the "Heard Defendants") also filed a counterclaim during November 1994 against
PEC and a third-party claim against Robert Carter and Janice Carter, alleging
that PEC, Robert Carter and Janice Carter negligently made certain
misrepresentations and that they incurred damages in the amount of approximately
$5.0 million as a result of these misrepresentations. In both the counterclaim
and the third-party claim, the Heard Defendants further alleged that PEC, Robert
Carter and Janice Carter violated a confidentiality order relating to certain
documents produced by the Heard Defendants during the discovery phase of this
action by misappropriating confidential information in these documents for the
purpose of gaining a competitive advantage over Heard Energy Corporation. The
Heard Defendants seek $5.0 million in damages as well as unspecified "exemplary"
damages based on this alleged violation. PEC believes that the Heard Defendants'
claim is without merit.

      On March 15, 1996, all of the defendants filed motions for summary
judgment, and by letter dated April 30, 1996, the court advised all counsel that
it intended to grant the defendants' motions for summary judgment. This order
was entered on June 19, 1996. The Heard Defendants and Morgan Stanley then
dismissed their counterclaims against PEC in May 1996 to permit the summary
judgment to become a final, appealable order, and PEC promptly appealed from
that summary judgment. On October 22, 1998, the Court of Appeals Fifth District
Court of Texas ruled in favor of PEC and reversed the trial court's summary
judgment and remanded the case back to the trial court. The Heard Defendants
appealed this ruling to the Texas Supreme Court. On February 25, 1999, the Texas
Supreme Court denied such appeal.

                                       24
<PAGE>
      The Company has settled this matter with certain of the defendants,
including all issues relating to Morgan Stanley & Co., Inc., and further
discovery is ongoing with the remaining defendants, including, but not limited
to, Allstate Insurance Company and certain of the former employees. Discovery
remains ongoing in the case, which is now set for jury trial in Dallas in
January 2001. The Allstate defendants asserted a counterclaim against PEC on
March 27, 2000, in which these defendants seek a declaratory judgment that they
are not liable to PEC for a default judgment that PEC previously obtained
against one of the former defendants.

      The Company and PEC do not believe that the counterclaims or third-party
claims have any merit, nor does the Company believe that these claims, if
eventually decided adversely to PEC, would have a material adverse effect on the
business, financial condition or results of operations of the Company and its
subsidiaries, taken as a whole.

BIBB/WESTPOINT STEVENS PROCEEDINGS

      In April 1998, Panda-Rosemary Corporation, the general partner of the
Panda-Rosemary Partnership and a wholly-owned subsidiary of the Company, filed
suit in federal court charging the Bibb Company ("Bibb") and Westpoint Stevens,
Inc. ("Westpoint") with violating a contractual agreement in the sale of a
textile mill in 1997 and in the operation of the mill since that time. The
Rosemary facility supplies steam and chilled water to the textile mill under a
contract originally signed with Bibb. Westpoint acquired the textile mill from
Bibb in 1997. The suit asked the court to determine and clarify the rights of
the parties to the contract. The federal court dismissed this action in June
1998 and Westpoint and Bibb filed a separate suit in state court in Halifax
County, North Carolina shortly thereafter, claiming, among other things, breach
of contract in regard to the delivery of steam. On October 27, 1998, an
affiliate of Panda-Rosemary Corporation filed suit in state court in Dallas
County, Texas against Westpoint and Bibb seeking various damages regarding the
contract. The case has since been transferred to Special Business Court in
Winston-Salem, North Carolina, by agreement of the parties. Thereafter, all
parties filed motions for partial summary judgment, and on December 16, 1999,
the Court issued an Order and Opinion wherein the Court granted in part and
denied in part each party's cross motion. Both parties have appealed the Court's
Order, and the trial court has stayed all proceedings pending the appeal.
Panda-Rosemary Corporation and its affiliates intend to vigorously pursue their
claims against Bibb and Westpoint in these court actions. Panda-Rosemary
Corporation continues to provide steam and chilled water to the mill.

      The Company does not believe that an adverse result in this case would
have a material adverse effect on the business, financial condition or results
of operations of the Company and its subsidiaries, taken as a whole.

NATIONAL DEVELOPMENT AND RESEARCH CORPORATION PROCEEDING

      On October 14, 1997, Panda Global Energy Company, a wholly-owned
subsidiary of the Company ("PGE"), commenced a proceeding in the District Court
of Dallas County, 101st Judicial District captioned Panda Global Energy Company
v. National Development and Research Corporation and Robert E. Tang, Case No.
97-9315-E. PGE's petition sought a declaratory judgment for the termination of
various agreements between PGE and National Development and Research Corporation
("NDR") regarding the development of power projects in the PRC. On December 9,
1997 NDR filed a counter-claim against PGE and Robert W. Carter asserting that,
among other things, such agreements are still in effect and that NDR is entitled
to certain payments thereunder.

      A trial on this matter was held in August 1999 and on September 13, 1999,
PGE filed a motion for judgment on the jury's verdict, contending that NDR take
nothing and that PGE be awarded its attorney's fees. NDR also filed a motion for
judgment, which included claims for increased ownership in the Luannan Facility,
additional cash compensation and that PGE be required to buy out its interest at
appraised value. The judge in the trial court recently ruled that PGE has no
liability to NDR and that NDR reimburse PGE for its attorneys' fees. Various
post-trial motions have been filed and PGE understands that NDR may appeal the
judge's rulings.

      The Company does not believe that an adverse result in this proceeding
would have a material adverse effect on the business, financial condition or
results of operations of the Company and its subsidiaries, taken as a whole.

                                       25
<PAGE>
PROCEEDINGS RELATED TO TRUST INDENTURE

      The Company understands that on or about February 18, 2000, a letter (the
"CSFB Letter") was sent to Bankers Trust Company in its capacity as trustee
("Trustee") under a Trust Indenture, dated as of April 22, 1997, between the
Company and the Trustee (the "Company Indenture"), by or on behalf of Credit
Suisse First Boston (Hong Kong) Limited ("CSFB"), as the holder of not less than
25% of the outstanding 12 1/2% Senior Secured Notes due 2004 (the "Senior
Secured Notes") issued by Panda Global Energy Company ("PGE"), a wholly owned
subsidiary of the Company, pursuant to a separate Trust Indenture, dated as of
April 22, 1997, between PGE and the Trustee (the "PGE Indenture"). The Company
understands that the CSFB Letter alleges certain covenant defaults (not related
to payment obligations) under the PGE Indenture and/or the Company Indenture
relating to the sale of certain assets by the Company and whether fair market
value was received in exchange for such assets. The Company is the guarantor of
the Senior Secured Notes and the terms of the Company Indenture and the PGE
Indenture are, in material respects, parallel.

      The Company and PGE have brought legal actions against CSFB and others, in
both United States federal district court and state court in Dallas, Texas. The
action brought by PGE in state court was removed to federal court and
consolidated with the action brought by the Company. PGE has filed a motion to
remand the removed case back to state court. The motion has not yet been ruled
upon. In the actions, PGE and the Company seek injunctive relief precluding an
acceleration of the Senior Secured Notes on the basis of the alleged defaults,
declaratory relief to the effect that no event of default exists under the
Company and/or PGE Indentures and also seek damages for conspiracy, tortious
interference with contractual relationships and/or business and trade
disparagement. CSFB has moved to have venue transferred to federal district
court in New York. That motion has not yet been ruled upon. As of April 7, 2000,
these legal actions remain pending.

      If a result adverse to the Company occurs in this proceeding, there could
be a material adverse effect on the business, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

      No matters were submitted to a vote of security holders during the fourth
quarter of the Company's fiscal year ended December 31, 1999.

PART II

Item 5. MARKET FOR THE REGISTRANT'S EQUITY AND RELATED STOCKHOLDER MATTERS.

There is no established market for the Company's Common Stock, $.01 par value,
all of which is owned by PEII. The Company has not paid cash dividends on shares
of its capital stock since its inception, and currently does not believe that it
will pay any such dividends in the foreseeable future. The indenture governing
the Company's Guarantee of the 12 1/2% Senior Secured Notes due 2004 of Panda
Global Energy Company imposes certain restrictions on the Company's ability to
declare or pay cash dividends to PEII and make certain distributions on its
capital stock. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Liquidity and Capital Resources."

Item 6. SELECTED FINANCIAL DATA.

                            SELECTED FINANCIAL DATA
                         (in thousands, except ratios)

      Presented below are selected consolidated financial data for the Company
as of and for each of the years in the five-year period ended December 31, 1999,
which have been derived from the Company's financial statements. The selected
financial data should be read in conjunction with the information contained
under the caption "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements of the
Company, including the notes thereto, included elsewhere herein.

                                       26
<PAGE>
<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                             -------------------------------------------------------------
                                                1995         1996         1997         1998         1999
                                             ---------    ---------    ---------    ---------    ---------
<S>                                          <C>          <C>          <C>          <C>          <C>
REVENUE:
Electric capacity and energy sales: ......   $  29,859    $  32,274    $  65,005    $  78,252    $  92,392
Steam and chilled water sales ............         473          502          624          695          559
Interest income ..........................         895        1,518        8,050        7,698        5,940
Other income-gain on sale of project .....        --           --           --           --         86,698
                                             ---------    ---------    ---------    ---------    ---------
      Total revenue ......................      31,227       34,294       73,679       86,645      185,589

EXPENSES:
Plant operating expenses .................   $   9,348    $  12,050    $  26,245    $  25,583    $  29,029
Development and administrative expenses ..       2,550        5,187       11,580       16,909       18,848
Interest expense .........................      11,716       19,414       55,329       57,199       50,997
Depreciation .............................       4,210        5,532       11,575       12,201       12,287
Amortization-- Debt issuance costs .......         554          494        1,418        1,656        1,646
Amortization-- Partnership formation costs         533          533         --           --           --
                                             ---------    ---------    ---------    ---------    ---------
      Total expenses .....................      28,911       43,210      106,147      113,548      112,807

Income (loss) before taxes and minority
   interest ..............................       2,316       (8,916)     (32,468)     (26,903)      72,782
Minority interest ........................      (5,048)      (2,405)        --           --           --
Deferred tax benefit .....................        --           --           --         25,000      (38,000)
                                             ---------    ---------    ---------    ---------    ---------
Income (loss) before extraordinary items .      (2,732)     (11,321)     (32,468)      (1,903)      34,782

Extraordinary loss, net(1) ...............        --        (21,336)        --           --           --
                                             ---------    ---------    ---------    ---------    ---------
      Net income (loss) ..................   $  (2,732)   $ (32,657)   $ (32,468)   $  (1,903)   $  34,782
                                             =========    =========    =========    =========    =========
OTHER DATA:
Ratio of earnings to fixed charges(2) ....          (2)          (2)          (2)          (2)        1.89
<CAPTION>
                                                                      DECEMBER 31,
                                             -------------------------------------------------------------
                                                1995         1996         1997         1998         1999
                                             ---------    ---------    ---------    ---------    ---------

BALANCE SHEET DATA:
Cash and other current assets ............   $  11,339    $  36,626    $ 112,067    $  91,175    $  74,639
Power plant and equipment (net) ..........     220,145      268,725      293,008      391,867      383,427
Reserves and escrow deposits,
   and other assets ......................      15,471       40,119       86,807       58,100       64,438
                                             ---------    ---------    ---------    ---------    ---------
      Total assets .......................   $ 246,955    $ 345,470    $ 491,882    $ 541,142    $ 522,504
                                             ---------    ---------    ---------    ---------    ---------
Current liabilities ......................   $  18,457    $  19,667    $  25,994    $  64,783    $  29,336
Deferred revenue .........................        --           --         13,140       12,670       23,280
Long-term debt (including capital lease
   obligation), less current portion .....     234,608      427,319      580,947      590,819      584,753
Minority interest ........................      36,836         --          5,741        5,741        5,741
Shareholder's deficit ....................     (42,946)    (101,516)    (133,940)    (132,871)    (120,606)
                                             ---------    ---------    ---------    ---------    ---------
      Total liabilities and
         shareholder's deficit ...........   $ 246,955    $ 345,470    $ 491,882    $ 541,142    $ 522,504
                                             =========    =========    =========    =========    =========
</TABLE>
Notes (in thousands):

(1) In 1996, there was an extraordinary loss from early extinguishment of debt
$21,336.

                                       27
<PAGE>
(2) For purposes of computing the ratio of earnings to fixed charges, earnings
represent income (loss) before minority interest, taxes and extraordinary items
plus fixed charges exclusive of capitalized interest. Fixed charges consist of
interest expense, capitalized interest and amortization of debt issuance costs.
Earnings were insufficient to cover fixed charges in 1995 by $3,477, in 1996 by
$19,971, in 1997 by $34,525 and in 1998 by $34,247. In 1995, 1996, 1997, 1998
and 1999 fixed charges included capitalized interest of $5,793, $11,055, $2,057,
$7,344 and $13,641, respectively.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

Item 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

            (DOLLAR AMOUNTS ARE IN THOUSANDS UNLESS OTHERWISE NOTED)

GENERAL

      The Company has interests in two completed electric power generation
facilities in the United States: a 100% equity ownership interest in the
Rosemary Facility, which began commercial operations in December 1990, and a
100% leasehold interest (through a capital lease arrangement) in the Brandywine
Facility, which began commercial operations in October 1996. Prior to July 31,
1996, the Company owned a 10% equity interest in the Rosemary Facility. The
Company also owns an approximately 83% indirect interest in the Luannan Facility
currently under construction in China, financing for which was completed in
April 1997. Additionally, the Company owns an indirect equity interest in the
Nepal Facility currently under construction in Nepal, financing for which was
completed in December 1997. The Company also has other projects under
development. As discussed in Note 5 to the consolidated financial statements,
the Company entered into a partnership concerning the Paris project in February
1999 and retained a 1% limited partnership interest in the project.

RESULTS OF OPERATIONS

      The Company's current revenues from electric power generation are
primarily derived from long-term contracts which include both a fixed capacity
payment and a variable energy payment. The capacity payments, which are based
upon the specified power generating capacity of a project, are designed to cover
fixed costs and to provide an acceptable return on equity. The energy payments,
which are based on actual electricity output, are designed to cover variable
costs including fuel costs and variable operating expenses incurred in
connection with electricity output. Accordingly, the impact of price
fluctuations on the results of operations is generally not material. The extent
to which a facility is dispatched (i.e., required to deliver electricity), and
therefore the actual electricity output for a given period, are subject to the
discretion of the power purchaser, with certain limitations. The capacity
payments are currently the predominant source of revenue for the Company at the
project entity level. See "Liquidity and Capital Resources."

      1999 COMPARED TO 1998

      The Company recorded net income of $34,782 in 1999 on revenues of $185,589
compared to a net loss of $1,903 on revenues of $86,645 in 1998. The increase in
revenues in the 1999 period was primarily caused by a gain of $86.7 million on
the sale of a 99% interest in the Paris project, as discussed in Note 5 to the
consolidated financial statements, and by increased operating revenues at the
Brandywine facility.

      Capacity revenues for the Rosemary Facility were $23,547 and $25,382 for
1999 and 1998, respectively. The lower capacity revenues in 1999 resulted from a
scheduled decrease in capacity payments under the power purchase agreement.
Energy revenues for the Rosemary Facility for 1999 and 1998 were $3,768 and
$3,234, respectively. The increase in energy revenues for the Rosemary Facility
is attributable to higher dispatch levels at that facility compared to 1998.
Capacity revenues from Potomac Electric Power Company ("PEPCO") for the
Brandywine Facility for 1999 and 1998 were $43,703 and $31,884, respectively.
The increase in capacity revenues for 1999 compared to 1998 results from a
scheduled increase in capacity payments under the power purchase agreement.
Additionally, as discussed in Note 5 to the consolidated financial statements,
the Company and PEPCO reached an agreement in October 1997 (which was finalized
in July 1998) under which PEPCO paid approximately $3.8 million to the Company
for the retroactive effect of higher capacity payments for the first nine months
of 1997. The retroactive capacity

                                       28
<PAGE>
payment, which was received in July 1998, is included in capacity revenues in
1998. Energy revenues from PEPCO for the Brandywine Facility for 1999 and 1998
were $16,072 and $12,068, respectively. The increase in energy revenues for the
Brandywine Facility is attributable to higher dispatch levels at that facility
compared to 1998. In addition to capacity and energy revenues from PEPCO, the
Company earned revenues of $5,248 in 1999 and $5,576 in 1998 from excess
capacity and energy sales on a merchant basis from the Brandywine Facility as
allowed under the PEPCO agreement. Also, in 1999 and 1998, the Company had
energy revenues of $54 and $108, respectively, from the sale of natural gas and
fuel oil to other purchasers.

      Plant operating expenses, which included fuel cost, operation and
maintenance expense, insurance and property taxes, increased to $29,029 (31% of
electricity revenues) in 1999 from $25,583 (33% of electricity revenues) in
1998. The increase in 1999 was attributable to higher dispatch levels at the
Rosemary and Brandywine facilities.

      Project development and administrative expenses were $18,848 (20% of
electricity revenues) and $16,909 (22% of electricity revenues) for 1999 and
1998, respectively. The increase from 1998 was primarily attributable to a
contract termination payment of $2.2 million in 1999 related to the Luannan
Facility.

      Interest expense decreased to $50,997 (55% of electricity revenues) in
1999 from $57,199 (73% of electricity revenues) in 1998 primarily as a result of
an increase in the capitalized portion of the interest cost on the Senior
Secured Notes as the Luannan Facility approaches completion.

      Depreciation and amortization of debt issue costs amounted to $13,933 (15%
of electricity revenues) in 1999 and $13,857 (18% of electricity revenues) in
1998. The increase in 1999 was primarily attributable to capital improvements at
the Rosemary and Brandywine Facilities.

      As previously disclosed, the Company filed the initial tariff application
for the Luannan Facility with the Chinese government in the second quarter of
1999. The Company is continuing discussions with the Chinese government
concerning the tariff application and the related approval process. The tariff
application is still in process and the Company has not yet received an approved
tariff from the government. There can be no assurance that the Company will
receive the requested tariff, and the approved tariff may be significantly lower
than the amount requested. If the approved tariff varies from the requested
amount, the Company's consolidated financial position, results of operations and
cash flows could be materially affected.

      The provision for income taxes, which relates to the Company's domestic
operations and was primarily attributable to the gain on the sale of the Paris
project, amounted to $38,000 in 1999. Losses incurred in the Company's offshore
operations are not deductible from the Company's domestic taxable income. In
1998, the Company recognized a deferred tax benefit of $25,000. The benefit,
which resulted from a reduction in the valuation allowance against deferred tax
assets, was recognized in 1998 because the subsequent sale of the Paris project
in 1999 validated the likely future realization of a portion of the deferred tax
assets.

      As a result of the various factors discussed above, the Company recorded
net income of $34,782 and a net loss of $1,903 for 1999 and 1998, respectively.

      1998 COMPARED TO 1997

      The Company recorded a net loss of $1,903 in 1998 on revenues of $86,645
compared to a net loss of $32,468 on revenues of $73,679 in 1997. The increase
in revenues in the 1998 period was primarily caused by increased operating
revenues at the Rosemary and Brandywine facilities.

      Capacity revenues for the Rosemary Facility were $25,382 and $25,361 for
1998 and 1997, respectively. Energy revenues for the Rosemary Facility for 1998
and 1997 were $3,234 and $2,355, respectively. The increase in energy revenues
for the Rosemary Facility is attributable to higher dispatch levels at that
facility compared to 1997. Capacity revenues from Potomac Electric Power Company
("PEPCO") for the Brandywine Facility for 1998 and 1997 were $31,884 and
$21,612, respectively. Capacity revenues for the Brandywine Facility for 1997
were lower than originally anticipated due to a disagreement with PEPCO over the
calculation of the capacity payments. As discussed in Note 5 to the consolidated
financial statements, the Company and PEPCO reached an agreement in October 1997
(which was finalized in July 1998) under which PEPCO paid approximately $3.8
million to the Company for the

                                       29
<PAGE>
retroactive effect of higher capacity payments for the first nine months of
1997. The retroactive capacity payment, which was received in July 1998, is
included in capacity revenues in 1998. In October 1997, PEPCO commenced
increased capacity payments to the Company under the terms of the agreement.
Additionally, capacity revenues for 1998 are higher compared to 1997 as a result
of excess capacity sales allowed under the PEPCO agreement and higher capacity
ratings. Energy revenues from PEPCO for the Brandywine Facility for 1998 and
1997 were $12,068 and $11,905, respectively. The increase in energy revenues for
the Brandywine Facility is attributable to higher dispatch levels at that
facility compared to 1997. In addition to capacity and energy revenues from
PEPCO, the Company earned revenues of $5,576 in 1998 from excess capacity and
energy sales on a merchant basis from the Brandywine Facility as allowed under
the PEPCO agreement. Also, in 1998 and 1997, the Company had energy revenues of
$108 and $3,771, respectively, from the sale of natural gas and fuel oil to
other purchasers.

      Plant operating expenses, which included fuel cost, operation and
maintenance expense, insurance and property taxes, decreased to $25,583 (30% of
revenues) in 1998 from $26,245 (36% of revenues) in 1997. The higher level of
1997 expenses was primarily due to additional fuel costs related to low-margin
sales of natural gas and fuel oil to other purchasers.

      Project development and administrative expenses were $16,909 (20% of
revenues) and $11,580 (16% of revenues) for 1998 and 1997, respectively. The
increase in 1998 was primarily attributable to legal expenses related to the
PEPCO agreement, the write-off of deposits and development costs of $3.7 million
related to the Kathleen project, and higher administrative costs required to
support the Company's expanding operations.

      Interest expense increased to $57,199 (66% of revenues) in 1998 from
$55,329 (75% of revenues) in 1997 primarily as a result of the increase in
outstanding indebtedness from the issuance of $145.0 million discounted
principal amount of Senior Secured Notes in April 1997 for the Luannan Facility.

      Depreciation and amortization of debt issue costs amounted to $13,857 (16%
of revenues) in 1998 and $12,993 (18% of revenues) in 1997. The increase in 1998
was attributable to capital improvements at the Rosemary and Brandywine
Facilities and amortization of debt issue costs for the Senior Secured Notes
issued in April 1997.

      In 1998, the Company recognized a deferred tax benefit of $25,000. The
benefit, which resulted from a reduction in the valuation allowance against
deferred tax assets, was recognized because the subsequent sale of the Paris
project validated the likely future realization of a portion of the deferred tax
assets.

      As a result of the various factors discussed above, the Company recorded
net losses of $1,903 and $32,468 for 1998 and 1997, respectively.

LIQUIDITY AND CAPITAL RESOURCES

      In 1999, the Company obtained cash from the sale of a 99% interest in the
Paris project as discussed above. The Company utilized this cash to fund project
development and administrative activities, including reimbursement to its parent
of costs previously incurred on behalf of the Company, and for income taxes. In
1999, 1998 and 1997, the Company also obtained cash from operations of the
Rosemary Facility and the Brandywine Facility. The Company utilized this cash to
fund operations at the Rosemary and Brandywine facilities, to service the
respective debt and capital lease obligations of the project entities for these
facilities, and also to service the debt of Panda Funding Corporation
("PFC")(see Note 8 to Consolidated Financial Statements). The Company
experienced losses during the years ended December 31, 1997 and 1998, and has a
shareholder's deficit of $120.6 million at December 31, 1999.

      THE ROSEMARY FACILITY, BRANDYWINE FACILITY AND NEPAL FACILITY

      The Company's project entities for the Rosemary Facility, Brandywine
Facility and Nepal Facility will be required to make payments for their
respective operating expenses and debt service and capital lease obligations, as
the case may be. The project entities' ability to make such payments will depend
upon the financial performance of the Rosemary Facility, the Brandywine Facility
and the Nepal Facility, respectively. The project entities for the Rosemary
Facility and the Brandywine Facility are dependent on capacity payments under
their respective power purchase agreements to meet their fixed obligations,
including payment of project-level debt service. Such capacity

                                       30
<PAGE>
payments can be adversely affected by a major equipment failure, resulting in a
facility being unavailable for dispatch for an extended period of time. Such
capacity payments can also be subject to reduction pursuant to regulatory
disallowance and, under contractual provisions, as a result of events outside
the Company's control. In 2006, the capacity payments for the Rosemary Facility
are scheduled to decrease by approximately $5.4 million ($23.1%) based on the
facility's current capacity rating. Also, each of the electric energy purchasers
under the power purchase agreements for the Rosemary Facility and the Brandywine
Facility has a contractual right to schedule the facility for dispatch largely
at the purchaser's discretion. Thus, revenues from such energy payments may vary
depending on the hours these facilities are dispatched by such purchasers.

      In regard to the Nepal Facility, as stated above, in the event that
commercial operations are not commenced by December 31, 2000, and no force
majeure extension is obtained pursuant to the applicable power purchase
agreement (which issue currently is in the arbitration process), then under the
provisions of the power purchase agreement, such agreement may be terminated by
the NEA. Although the Company currently believes that commercial operations will
commence in September 2000, there can be no assurance that this will occur nor
that the power purchase agreement will not be terminated in this regard. See
"Item 1. - Business - Plants Under Construction - The Nepal Facility."

      Payments on the indebtedness of PFC will need to be funded almost
exclusively with distributions from the project entities for the Rosemary
Facility and the Brandywine Facility (after payment of project-level
indebtedness related to such facilities). The amount of these distributions, if
any, will be determined by the financial performance of the Rosemary Facility
and the Brandywine Facility, and will be subject to a number of limitations on
distributions contained in project-level debt agreements. There can be no
assurance that there will be any excess funds available from such distributions
to assist in the Company's obligations with respect to the Senior Secured Notes
(discussed below) during the foreseeable future.

      SENIOR SECURED NOTES

      The Company currently believes that it may not be able to meet its
interest and principal obligations (totaling $11.35 million) on the Senior
Secured Notes due in October 2000, as well as subsequent obligations on the
Senior Secured Notes.

The Senior Secured Notes were issued by PGE (and guaranteed by the Company) to
finance the development and construction of the Luannan Facility (see Note 8 to
Consolidated Financial Statements for a discussion of the Senior Secured Notes).
The Company filed its initial tariff application for the Luannan Facility with
the Chinese government in May 1999. The Company is continuing discussions with
the Chinese government concerning its tariff application and the related
approval process. The tariff application is still in process and the Company has
not yet received an approved tariff from the Chinese government. The Luannan
Facility has passed performance testing, although it has not yet been declared
ready for commercial operations (primarily due to the lack of a tariff under the
applicable power purchase agreement, and to further unit performance adjustments
to be made by the Luannan EPC Contractor). There can be no assurance that the
requested tariff will be approved, and the approved tariff may be significantly
lower than the amount requested. If the approved tariff varies from the
requested amount, the Company's consolidated financial position, results of
operations and cash flows could be materially adversely affected. See "Item 1.
Business - Plants Under Construction - The Luannan Facility."

      The Company understands that on or about February 18, 2000, a letter (the
"CSFB Letter") was sent to Bankers Trust Company in its capacity as trustee
("Trustee") under a Trust Indenture, dated as of April 22, 1997, between the
Company and the Trustee ("Company Indenture"), by or on behalf of Credit Suisse
First Boston (Hong Kong) Limited ("CSFB"), as the holder of not less than 25% of
the outstanding 12 1/2% Senior Secured Notes issued by PGE pursuant to a
separate Trust Indenture, dated as of April 22, 1997, between PGE and the
Trustee (the "PGE Indenture"). The Company understands that the CSFB Letter
alleges certain covenant defaults (not related to payment obligations) under the
PGE Indenture and/or the Company Indenture relating to the sale of certain
assets by the Company and whether fair market value was received in exchange for
such assets. The Company is the guarantor under the Senior Secured Notes and the
terms of the Company Indenture and the PGE Indenture are, in material respects,
parallel.

                                       31
<PAGE>
      The Company and PGE have brought legal actions against CSFB and others, in
both United States federal district court and state court in Dallas, Texas. The
action brought by PGE in state court was removed to federal court and
consolidated with the action brought by the Company. PGE has filed a motion to
remand the removed case back to state court. The motion has not yet been ruled
upon. In the actions, PGE and the Company seek injunctive relief precluding an
acceleration of the Senior Secured Notes on the basis of the alleged defaults
and declaratory relief to the effect that no event of default exists under the
Company and/or PGE Indentures and also seek damages for conspiracy, tortious
interference with contractual relationships and/or business and trade
disparagement. CSFB has moved to have venue transferred to federal district
court in New York. That motion has not yet been ruled upon. As of April 7, 2000,
these legal actions remain pending. If a result adverse to the Company occurs in
this proceeding, there could be a material adverse effect on the Company's
consolidated financial condition, results of operations and cash flows. See Item
3. "Legal Proceedings - Proceedings Related to Trust Indenture."

      GOING CONCERN ISSUES

      The matters discussed above raise substantial doubt about the Company's
ability to continue as a going concern. In this regard, the Company has retained
financial and legal advisors to review the financial and legal alternatives
available to the Company, including without limitation a possible debt
restructuring of the Senior Secured Notes, the raising of additional equity or
debt financing for the Company.

      To continue its development activities (including but not limited to the
Company's purchase commitments totaling approximately $325 million for
equipment), the Company will require external financing. Its financial and legal
advisors currently are pursuing several debt and equity financing alternatives
in this regard as well. The Company's restricted cash balances are available
only for specific uses as stated in the relevant indentures (including but not
limited to the indentures related to the Senior Secured Notes), such as the
payment of debt obligations, project development, construction and maintenance,
and are not available for general corporate purposes.

      There can be no assurance that the possible debt restructuring or
financings referred to above will be successfully completed. In such instance,
there could be a material adverse effect on the business, financial position,
results of operations and cash flows of the Company and its subsidiaries taken
as a whole which, among other things, could cause the Company to seek protection
under applicable federal bankruptcy laws.

NEW ACCOUNTING PRONOUNCEMENTS

      Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities", is effective for fiscal years
beginning after June 15, 2000. This standard requires that all derivative
financial instruments be recognized as either assets or liabilities on the
balance sheet at their fair values and that accounting for the changes in the
fair values is dependent upon the intended use of the derivatives and their
resulting designations. The new standard will supercede or amend existing
standards that deal with hedge accounting and derivatives. The Company has not
yet determined the effect adopting this standard will have on its financial
statements.

IMPACT OF INFLATION

      Inflationary increases in the Company's costs, primarily project
development costs, energy costs, and capital costs, may be offset by increases
in revenue as provided in the various purchase agreements, although competition
may limit the Company's ability to fully recover all such increases. The Company
attempts, where possible, to obtain provisions in its power purchase agreements
whereby certain revenue components, such as energy payments, may be adjusted
with inflationary increases. The Company currently believes that inflation will
not have a material adverse effect on the Company's financial position, results
of operations or cash flows in the foreseeable future.

MARKET RISK DISCLOSURES

                                       32
<PAGE>
      The Company has limited exposure to financial market risks. The Company
attempts, whenever possible, to hedge certain aspects of its projects against
the effects of fluctuations in inflation, interest rates, foreign currency
exchange rates and energy prices. Because of the complexity of hedging
strategies and the nature of the Company's operations, its results, although
significantly hedged, will likely be somewhat affected, and in certain cases may
be materially affected, by fluctuations in these variables and such fluctuations
may result in material improvement of deterioration of operating results.

      The Company has generally structured the energy payments under its power
generation sales contracts to adjust with similar price indices as do its
contracts with the fuel suppliers for the corresponding power plants. The
Company currently consists primarily of businesses with long-term contracts.
While the contract-based portfolio is expected to be an effective hedge against
future energy and electricity market price risks, a significant portion of the
Company's currently expected future revenues is anticipated to be derived from
businesses without significant long-term revenue contracts. Increasing reliance
on non-contract businesses in the Company's portfolio may subject the Company to
potentially increasing electricity market price volatility.

      The Company has also used a hedging strategy in an attempt to insulate
each plant's financial performance, where appropriate, against the risk of
fluctuations in interest rates. Because the capacity payments at the Company's
facilities are essentially fixed, the Company has attempted to hedge against
interest rate fluctuations by arranging fixed rate financing. The Company's
borrowings currently consist entirely of fixed rate obligations. There are no
interest rate swaps or other hedging facilities related to these borrowings. The
Company has no derivative financial instruments in place as of December 31,
1999. The Company estimates that the fair value of its long-term debt securities
would decrease in the aggregate by approximately 5% if interest rate levels
increased by 10%. See Notes 7, 8 and 12 of the consolidated financial statements
for additional information regarding the Company's borrowings.

      The Company has certain exposure to changes in the foreign currency
exchange rate for the Chinese renminbi. This exposure is limited during the
construction phase of the Luannan Facility because the related debt and most
construction expenditures are denominated in U.S. dollars. After the project
commences commercial operations, the exposure will increase because the
project's operating revenues and expenses will be primarily denominated in the
renminbi. However, certain components of the power price calculation may be
adjusted to reflect local and U.S. inflation and foreign exchange rate
fluctuations in order to mitigate the Luannan Facility's exposure to inflation
and currency risks, and the operation and maintenance contract for the facility
is denominated in dollars. Management currently believes that potential losses
due to fluctuations in the Chinese currency will not have a material impact on
the Company's consolidated financial position, results of operations or cash
flows.

      The Company has an investment, in a joint venture in Nepal which has debt
at both fixed and variable interest rates. The joint venture has interest rate
derivative agreements, consisting of interest rate swaps, which serve as hedges
against a portion of the variable interest rate exposure. Most of the debt is
denominated in U.S. dollars; however, a portion of the debt is denominated in
the German mark. The joint venture has no hedging facilities relating to the
mark-denominated debt. After commercial operations commence, the joint venture's
foreign currency risk exposure will increase because a significant portion of
the project's operating expenses will be primarily denominated in the Nepalese
rupee. The project's operating revenues under the power purchase agreement are
denominated in U.S. dollars. The Company uses the equity method of accounting
for the joint venture. Management currently believes that potential losses to
the joint venture due to fluctuations in interest rates and foreign currency
exchange rates will not have a material impact on the Company's consolidated
financial position, results of operations or cash flows.

YEAR 2000 COMPLIANCE

      The inability of computers, software and other equipment utilizing
microprocessors to recognize and properly process data fields containing a
two-digit year is commonly referred to as the Year 2000 problem. The Year 2000
problem arises from the way dates are recorded and computed in most
applications, operating systems, hardware and embedded chips. If the problem had
not been corrected, systems that use a date in its prescribed function could
have failed or produced erroneous results before, on and after the year 2000.

                                       33
<PAGE>
      All Year 2000 remediation efforts for the Company's businesses were
completed on time and within budget estimates without any material adverse
effect on operations. The costs incurred by the Company in connection with the
Year 2000 compliance project were not material.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

      The Financial Statements and Supplementary Data filed herewith begin on
page F-1 hereof.

Item 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

         None

                                    PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

      The number of members of the Board of Directors of Company has been set at
two, but the number may be increased or decreased by the Board of Directors or
the stockholders. Directors of the Company are elected annually and each elected
director holds office until a successor is elected. Robert W. Carter and Brian
G. Trueblood are the current directors of the Company. All executive officers of
the Company are elected annually by the Board of Directors of the Company to
serve in such capacities until their respective successors are duly elected and
qualified.

      The Certificate of Incorporation of the Company provides that the Company
shall always have an individual serving as an "Independent Director" who shall
have the right to vote or consent only on, and whose affirmative vote or consent
shall be required with respect to, any decision by the Company or the Board of
Directors of the Company to (i) file a bankruptcy petition, make an assignment
for the benefit of creditors, apply for the appointment of a custodian, receiver
or trustee for it or its property, consent to the filing of such proceeding or
admit in writing to its inability to pay its debts generally as they become due;
(ii) commence the dissolution, liquidation, consolidation, merger or sale of all
or substantially all of its assets; (iii) amend the Certificate of Incorporation
to broaden the purposes of the Company and in other respects; (iv) authorize the
Company to engage in any activity other than those set forth in the Certificate
of Incorporation; or (v) authorize any subsidiary with an Independent Director
to take any action set forth in (i) through (iv). The Certificate of
Incorporation of the Company provides that the Independent Director shall be a
person who is not and has not been, for the five years preceding his election,
(i) a direct or indirect legal or beneficial owner of the Company or its
affiliates (or a member of the immediate family of such owner), (ii) a creditor,
supplier, officer, director, promoter, underwriter, manager or contractor of the
Company or any of its affiliates (or a member of the immediate family of any
such officer or director) or (iii) a person (or a member of the immediate family
of a person) employed by the Company or any of its affiliates or by any
creditor, supplier, employee, stockholder, officer, director, promoter,
underwriter, manager or contractor thereof. The Independent Director may,
however, serve in such capacity for other affiliates of the Company. In
March1999, Brian G. Trueblood was re-elected as the Independent Director of the
Company.

      The following table sets forth the names and ages of the directors and the
executive officers of the Company and their positions with the Company. Since
the formation of the Company, each executive officer of the Company has held the
same office(s) with the Company that he or she has held with each other
corporation that is currently affiliated with the Company.

     NAME                      AGE         POSITION WITH THE COMPANY
     ----                      ---         -------------------------
     Robert W. Carter          61          Director, Chairman of the Board
                                           and Chief Executive Officer
     Darol S. Lindloff         61          President
     Janice Carter             58          Executive Vice President,
                                           Secretary and Treasurer
     Ralph T. Killian          53          Executive Vice President
     Todd W. Carter            32          Senior Vice President, Corporate
                                           Finance
     Ted C. Hollon             49          Senior Vice President, Project
                                           Development and Construction
     L. Stephen Rizzieri       44          Senior Vice President and General
                                           Counsel

                                       34
<PAGE>
     Bryan Urban               35          Senior Vice President -- Project
                                           Finance
     Jerry Thurmond            48          Senior Vice President and Controller
     Garry Hubbard             44          Senior Vice President -- Power
                                           Ventures
     Brian G. Trueblood        38          Independent Director

      ROBERT W. CARTER has been the Chairman of the Board and Chief Executive
Officer of the Company since its formation and of PEII, an affiliate of the
Company, since January 1995. Mr. Carter has held similar chief executive
positions with PEC, a subsidiary of the Company, and PEC's subsidiaries since he
founded PEC in 1982. Mr. Carter also is President of Robert Carter Oil & Gas,
Inc., an oil and gas exploration company, which he founded in 1980. From 1978 to
1980, Mr. Carter was Vice President of oil and gas lease sales for Reserve
Energy Corporation (an oil and gas exploration company). From 1974 to 1978, he
served as a marketing consultant to Forward Products, Inc. (a petrochemical
company). Mr. Carter was Executive Vice President of Blasco Industries (a
chemical and textile manufacturer) from 1970 to 1974. He served as a sales
representative and sales manager for Olin Mathieson Chemical Corporation (a
petrochemical, pulp and paper company) from 1965 to 1970. From 1960 to 1965, he
was a sales representative for Inland, Mead Paper Company in Atlanta. Mr. Carter
attended the University of Georgia. Mr. Carter is married to Janice Carter and
the father of Todd Carter.

      DAROL S. LINDLOFF has been the President of the Company since its
formation and was appointed President of PEII in February 1997. Prior thereto,
he served as Senior Vice President, Project Development of PEII from January
1996. He served as Vice President of PEII from January 1993 to January 1996 in
the capacities of Business Development, Technical Director and project
Development. Mr. Lindloff served as Marketing Manager for PEC from October 1989
until January 1993. From December 1987 to October 1989, Mr. Lindloff established
a regional office in Dallas for Southwest Research Institute (a research and
development company) and served as Regional Director. From January 1986 to
December 1987, Mr. Lindloff worked on the development of cogeneration facilities
for Hawker Siddeley Power Engineering, Inc. (a British engineering company).
During 1984 and 1985, he worked in the development of cogeneration facilities
for Central & Southwest Corporation's subsidiary, C&SW Energy, Inc. (an energy
company). Mr. Lindloff graduated from Southwestern University with a Bachelor of
Science degree in organic chemistry.

      JANICE CARTER has been the Executive Vice President, Secretary and the
Treasurer of the Company since its formation, has been the Executive Vice
President, Secretary, Treasurer and a Director of PEII since January 1995 and
has served in such capacities with PEC since its inception in 1982. From 1975 to
1980, Mrs. Carter was office manager of Reserve Energy Corporation. >From 1969
to 1972, Mrs. Carter worked for University Computing, and from 1962 to 1968 she
directed administration for the engineering department of Otis Engineering, a
division of Halliburton International. Mrs. Carter also serves as Vice President
and Secretary/Treasurer of Robert Carter Oil & Gas, Inc. Mrs. Carter attended
Texas Tech University. Mrs. Carter is married to Robert W. Carter and the mother
of Todd Carter.

      RALPH T. KILLIAN has served as Executive Vice President of the Company and
PEII since March 1998 and served as Senior Vice President of the Company from
its inception until March 1998 and of PEII from May 1994 until March 1998. Mr.
Killian has overall responsibility for asset management which includes
operations & maintenance, fuel, procurement and management, and power marketing
for facilities. Between November 1989 and April 1994, Mr. Killian served as Vice
President of Natural Resources for PEC. From 1988 to 1989, he was Senior Vice
President of Texas Eastern Corporation (an energy company). From 1969 to 1988,
he held various natural gas marketing and engineering management positions with
Amoco Corporation (an energy company) including Regional Natural Gas Marketing
Manager for Amoco Production Company's Denver region. Mr. Killian graduated from
the University of Florida with a Bachelor of Science degree in chemical
engineering.

      TODD W. CARTER has served as Senior Vice President - Corporate Finance of
the Company since March 1999, and previously served as Senior Vice President,
International Business Development since October 1998. Prior to such date, Mr.
Carter served in various capacities in the project development, finance and
acquisition departments of PEII during the last eight years. Mr. Carter
graduated from the University of Texas in 1990 with a Bachelor of Business
Administration degree. Mr. Carter also serves as an officer of several
significant subsidiaries of PEII.

                                       35
<PAGE>
      TED C. HOLLON has served as Senior Vice President, Project Development and
Construction of the Company and PEII since March 1999, and previously served as
Senior Vice President, Project Development of the Company and PEII since August
1997. Prior to such date, he served as Vice President of Construction for the
Company from its inception until August 1997 and for PEII from March 1995 until
August 1997. Mr. Hollon served as project manager for the Company's 230 megawatt
Panda-Brandywine Facility from March 1993 until March 1995. Mr. Hollon
previously held various positions with several prominent international
engineering and construction companies such as Brown & Root International and
CSR Serrine. Mr. Hollon has over 25 years of international construction
experience. He earned a Bachelor of Science degree from Texas A&M University.

      L. STEPHEN RIZZIERI has been Senior Vice President and General Counsel of
the Company and of PEII since March 1998. He was Vice President and General
Counsel of the Company from its inception until March 1998 and of PEII from
February 1997 until March 1998. Prior thereto, he served as Deputy General
Counsel to PEII from April 1996 until February 1997. From 1993 until he joined
PEII, he was Assistant General Counsel of ENSERCH Development Corporation, the
independent power development affiliate of ENSERCH Corporation. From 1985 to
1993, Mr. Rizzieri served in various capacities with Sunshine Mining Company and
its affiliated companies, most recently as Assistant General Counsel and
Secretary. From 1981 to 1985, he served in various capacities with Woods
Petroleum Corporation (which was purchased by Sunshine Mining Company in 1985)
and its affiliates, most recently as President of Woods Securities Corporation.
In 1980, Mr. Rizzieri served as Deputy General Counsel - Enforcement Division,
Oklahoma Securities Commission. Mr. Rizzieri earned a Bachelor of Arts degree
from the State University of New York at Geneseo and a Juris Doctor degree from
the University of Oklahoma.

      BRYAN J. URBAN has been Senior Vice President, Project Finance of the
Company and PEII since March 1999. He was Vice President, Finance of the Company
from its inception until March 1999 and of PEII from July, 1996 until March
1999. Prior thereto, he served as Vice President and Controller of PEII from
January 1994 until July, 1996. Mr. Urban has worked in various capacities in the
finance department at PEII since 1992. Prior to joining PEII, he spent five
years in the Audit and Financial Consulting Division at Arthur Andersen and
Company. Mr. Urban is a Certified Public Accountant and earned a Bachelor of
Science degree from Indiana University.

      JERRY D. THURMOND has been Senior Vice President and Controller of the
Company and PEII since March 1999. He was Vice President and Controller of the
Company and PEII from March 1998 to March 1999. Prior thereto, Mr. Thurmond
served as Vice President of Business Development and Finance for various
companies owned and operated by Nelson Bunker Hunt. From 1991 to 1996, Mr.
Thurmond served in various capacities with companies owned by the Garvey family,
including as Vice President and General Manager of Garvey Industries. From 1980
to 1991, Mr. Thurmond served as Vice President in charge of Finance,
Acquisitions and Exploration for Burnett Oil, Inc. Mr. Thurmond began his career
at Arthur Andersen and Company in Dallas, Texas. He is a Certified Public
Accountant and earned a Bachelor of Business Administration degree from the
University of Texas at Arlington.

      GARRY N. HUBBARD has been Senior Vice President, Power Ventures of the
Company and PEII since March 1999. Prior thereto, from 1994 to 1999, he served
as President of Global Operations Management, Inc., a worldwide consulting
company. Mr. Hubbard was director in charge of business development for North
American Energy Services Corporation from 1989 to 1994. Previously, Mr. Hubbard
worked in the energy industry with direct experience in the development,
construction and operations of power generating facilities both internationally
and within the United States. He graduated from Southampton University, England
in 1978 with a Bachelor of Science degree in Mechanical Engineering.

      BRIAN G. TRUEBLOOD became the Independent Director of the Company in March
1997. He has served since February 1997, and also from September 1989 through
August 1994, as a senior partner in the Dallas office of Lucas Associates (an
Atlanta-based executive search firm). From August 1994 to February 1997, Mr.
Trueblood served as Vice President of TNS Partners, Inc. (a Dallas-based
retained executive search firm). Mr. Trueblood received a Bachelor of Science
degree in general engineering from the United States Military Academy. Mr.
Trueblood also serves as the Independent Director of various other subsidiaries
of PEII.

Item 11. EXECUTIVE COMPENSATION.

      No cash, stock options or other non-cash compensation has been paid or is
proposed to be paid in the current calendar year, or in the last completed
fiscal year, to any of the officers and directors listed under

                                       36
<PAGE>
Item 10, Directors and Executive Officers of the Company, for their services to
the Company. Mr. Trueblood is currently paid $1,000 annually by the Company for
serving as the Independent Director of the Company.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

      PEII owned beneficially, at March 25, 2000, one hundred percent (100%) of
the issued and outstanding shares of the Company's common stock, $.01 par value,
which is the only security entitled to vote for the election of the Company's
directors. No director or officer of the Company owns any shares of any class of
the Company's equity securities.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

      In March 1999, the Company sold its Guadalupe, Texas project (which was in
the initial stage of development) to a subsidiary of PEII for $8.0 million,
which was the fair market value of the project as determined by an independent
engineering firm. Each of the officers and directors of the Company (except
Brian Trueblood), which is a wholly owned subsidiary of PEII, is also an officer
and/or director, as the case may be, of PEII. In addition, it is noted that
under certain agreements PEII has incurred administrative expenses and other
third party costs on behalf of the Company in order to assist the Company in its
business affairs. In this regard, the Company has reimbursed PEII for such
expenses solely at cost and with no profit margin, as funds have been able
available to do so. These reimbursements, while not transactions which
materially benefit PEII or its officers or directors, are reflected in Footnote
3 to Consolidated Financial Statements.

      PEII has entered into certain relationships with various project
subsidiaries of the Company in regard to operations and maintenance of some of
the power generation facilities owned by such project subsidiaries. These
relationships, while not transactions which materially benefit PEII or its
officers or directors, are reflected in Footnote 11 to Consolidated Financial
Statements.

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

      (a) The following documents are filed as a part of this Annual Report on
Form 10-K:

      1.    CONSOLIDATED FINANCIAL STATEMENTS.

            See Index to Financial Statements and Financial Statement Schedules
on page F-1 hereof.

      2.    CONSOLIDATED FINANCIAL STATEMENT SCHEDULES.

            See Index to Financial Statements and Financial Statement Schedules
on page F-1 hereof.

            Schedules other than those listed on the accompanying Index to
Financial Statements and Financial Statement Schedules are omitted for the
reason that they are either not required, not applicable or the required
information is included in the consolidated financial statements or notes
thereto.

      3.    EXHIBITS.

EXHIBIT
NUMBER            EXHIBIT DESCRIPTION

3.01        Certificate of Incorporation of Panda Global Holdings, Inc. (2)

3.02        Bylaws of Panda Global Holdings, Inc. (2)

4.01        Trust Indenture, dated April 22, 1997, between Panda Global Energy
            Company and Bankers Trust Company as Trustee, (2)

                                       37
<PAGE>
4.02        First Supplemental Indenture between Panda Global Energy Company and
            Bankers Trust Company, as Trustee, dated April 22, 1997. (2)

4.03        Registration Rights Agreement among Panda Global Energy Company,
            Panda Global Holdings, Inc. and Donaldson, Lufkin & Jenrette
            Securities Corporation, dated April 22, 1997. (2)

4.04        Form of 12-1/2% Senior Secured Notes due 2004 of Panda Global Energy
            Company. (2)

4.05        Form of 12-1/2% Registered Senior Secured Note due 2004 of Panda
            Global Energy Company. (2)

4.06        Trust Indenture, dated April 22, 1997, between Panda Global
            Holdings, Inc. and Bankers Trust Company, as Trustee. (2)

4.07        First Supplemental Indenture, dated April 22, 1997, between Panda
            Global Holdings, Inc. and Bankers Trust Company, as Trustee. (2)

4.08        Trust Indenture dated July 31, 1996, among Panda Funding
            Corporation, Panda Interfunding Corporation and Bankers Trust
            Company, as Trustee. (1)

4.09        First Supplemental Indenture to Trust Indenture, dated July 31,
            1996, among Panda Funding Corporation, Panda Interfunding
            Corporation and Bankers Trust Company, as Trustee. (1)

4.10        Second Supplemental Indenture to Trust Indenture, dated January 6,
            1997, among Panda Funding Corporation, Panda Interfunding
            Corporation and Bankers Trust Company, as Trustee. (1)

4.11        Form of 11-5/8% Pooled Project Bonds, Series A due 2012 of Panda
            Funding Corporation. (1)

4.12        Form of 11-5/8% Pooled Project Bonds, Series A-1 due 2012 of Panda
            Funding Corporation. (1)

4.13        Registration Rights Agreement, dated July 31, 1996, among Panda
            Funding Corporation, Panda Interfunding Corporation and Jefferies &
            Company Inc. (1)

4.14        Collateral Agency Agreement, dated July 31, 1996, among Panda
            Interfunding Corporation, Panda Funding Corporation and Bankers
            Trust Company, as Trustee and Collateral Agent. (1)

4.15        Subrogation and Contribution Agreement, dated July 31, 1996, among
            Panda Interfunding Corporation, Panda Funding Corporation and Panda
            Interholding Corporation and each PIC U.S. Entity that is a
            signatory thereto. (1)

4.16        Guaranty Agreement (PIC U.S. Entity Subsidiaries), dated July 31,
            1996 by Panda Interholding Corporation in favor of Bankers Trust
            Company, as Collateral Agent for the benefit of the Secured Parties.
            (1)

10.01       PIC Loan Agreement, dated July 31, 1996, between Panda Funding
            Corporation, as Lender, and Panda Interfunding Corporation, as
            Borrower. (1)

10.02       Loan Agreement, dated July 31, 1996, between Panda Interfunding
            Corporation, as Lender, and Panda Cayman Interfunding Company, as
            Borrower. (1)

10.03       Promissory Note issued by Panda Interfunding Corporation on July 31,
            1996 to Panda Funding Corporation in the original principal amount
            of $105,525,000, endorsed to Bankers Trust Company, as Collateral
            Agent. (1)

                                       38
<PAGE>
10.04       Security Agreement, dated July 31, 1996, between Panda Interfunding
            Corporation and Bankers Trust Company, as Collateral Agent. (1)

10.05       Security Agreement, dated July 31, 1996, between Panda Funding
            Corporation and Bankers Trust Company, as Collateral Agent. (1)

10.06       Security Agreement, dated July 31, 1996, between Panda Cayman
            Interfunding Company, as Debtor, and Panda Interfunding Corporation,
            as Secured Party. (1)

10.07       Stock Pledge Agreement (Panda Interfunding Corporation Stock), dated
            July 31, 1996, between Panda Energy Corporation and Bankers Trust
            Company, as Collateral Agent. (1)

10.08       Stock Pledge Agreement (Panda Funding Corporation and PIC Entity
            Stock), dated July 31, 1996, between Panda Interfunding Corporation
            and Bankers Trust Company, as Collateral Agent. (1)

10.09       Trust Indenture, dated July 31, 1996, among Panda-Rosemary Funding
            Corporation, Panda-Rosemary, L.P. and Fleet National Bank, as
            Trustee. (1)

10.10       First Supplemental Indenture to Trust Indenture, dated July 31,
            1996, among Panda-Rosemary Funding Corporation, Panda-Rosemary, L.P.
            and Fleet National Bank, as Trustee. (1)

10.10.1     Second Supplemental Indenture to Trust Indenture, dated January 15,
            1997, among Panda-Rosemary Funding Corporation, Panda-Rosemary, L.P.
            and Fleet National Bank, as Trustee. (1)

10.11       Form of 8-5/8% First Mortgage Bonds due 2016 of Panda-Rosemary
            Funding Corporation. (1)

10.12       Deposit and Disbursement Agreement, dated July 31, 1996, among
            Panda-Rosemary Funding Corporation, Panda-Rosemary, L.P., Fleet
            National Bank, as Collateral Agent, and Fleet National Bank, as
            Depositary Agent. (1)

10.13       Collateral Agency and Intercreditor Agreement, dated July 31, 1996,
            among Panda-Rosemary Funding Corporation, Panda-Rosemary, L.P., The
            L/C Issuer, The Trustee Under The Trust Indenture, The Depositary
            Agent, The Collateral Agent and The Other Secured Parties, all as
            named therein. (1)

10.14       Deed of Trust and Security Agreement, dated July 31, 1996, by
            Panda-Rosemary, L.P., Grantor, Ross J. Smyth, Trustee, and Fleet
            National Bank, as Collateral Agent, the Beneficiary. (1)

10.15       Security Agreement, dated July 31, 1996, by Panda-Rosemary, L.P. to
            Fleet National Bank, as Collateral Agent. (1)

10.16       Security Agreement, dated July 31, 1996, by Panda-Rosemary Funding
            Corporation to Fleet National Bank, as Collateral Agent. (1)

10.17       General Partner Pledge and Security Agreement, dated July 31, 1996,
            by Panda-Rosemary Corporation to Fleet National Bank, as Collateral
            Agent. (1)

10.18       Limited Partner Pledge and Security Agreement, dated July 31, 1996,
            by PRC II Corporation to Fleet National Bank, as Collateral Agent.
            (1)

10.19       Stock Pledge and Security Agreement, dated July 31, 1996, by Panda
            Interholding Corporation to Fleet National Bank, as Collateral
            Agent. (1)

10.20       Stock Pledge and Security Agreement, dated July 31, 1996, by
            Panda-Rosemary, L.P. to Fleet National Bank, as Collateral Agent.
            (1)

                                       39
<PAGE>
10.21       Partnership Guaranty, dated July 31, 1996, by Panda-Rosemary, L.P.
            in favor of Fleet National Bank, as Trustee. (1)

10.22       Reimbursement Agreement, dated July 31, 1996, between
            Panda-Rosemary, L.P., Panda-Rosemary Funding Corporation and
            Bayerische Vereinsbank AG, New York Branch. (1)

10.23       Irrevocable Direct Pay Letter of Credit issued by Bayerische
            Vereinsbank AG. (1)

10.24       Construction Loan Agreement and Lease Commitment, dated March 30,
            1996, between Panda-Brandywine, L.P. and General Electric Capital
            Corporation. (1)

10.24.1     Participation Agreement, dated December 18, 1996, among
            Panda-Brandywine, L.P., Panda-Brandywine Corporation, General
            Electric Capital Corporation, Fleet National Bank, First Security
            Bank, National Association, and Credit Suisse. (1)

10.24.2     Letter of Credit Reimbursement Agreement, dated December 18, 1996,
            among Panda-Brandywine, L.P., Panda-Brandywine Corporation and
            General Electric Capital Corporation. (1)

10.24.3     Equity Loan Facility Letter Agreement, dated December 18, 1996,
            among Panda-Brandywine Corporation, Panda Energy Corporation and
            General Electric Capital Corporation. (1)

10.24.4     Operations and Maintenance Agreement, dated June 17, 1999, between
            Panda-Brandywine, L.P. and Panda Global Services, Inc. (11)

10.25       Bill of Sale and Severance Agreement, dated December 30, 1996,
            between Panda-Brandywine, L.P., as Seller, and Fleet National Bank,
            Owner Trustee, as Buyer. (1)

10.26       Facility Lease, dated December 18, 1996, between Fleet National
            Bank, as Owner Trustee, and Panda-Brandywine, L.P. (1)

10.27       Steam Lease, dated as of December 18, 1996, between
            Panda-Brandywine, L.P. and Brandywine Water Company. (1)

10.28       Amended and Restated Security Deposit Agreement, dated December 18,
            1996, among Panda-Brandywine, L.P., Panda-Brandywine Corporation,
            General Electric Capital Corporation, Fleet National Bank, Credit
            Suisse and First Security Bank, National Association. (1)

10.28.1     First Amendment to Amended and Restated Security Deposit Agreement,
            dated February 21, 1997, among Panda-Brandywine, L.P., General
            Electric Capital Corporation, Fleet National Bank, Credit Suisse and
            First Security Bank, National Association. (1)

10.29       Amended and Restated Deed of Trust and Security Agreement, dated
            December 18, 1996, by Panda-Brandywine, L.P. to Chicago Title
            Insurance Company, Trustee for the benefit of Fleet National Bank,
            as Security Agent, Beneficiary. (1)

10.30       Amended and Restated Steam Lessee Security Agreement, dated December
            18, 1996, by Brandywine Water Company in favor of Fleet National
            Bank, as Security Agent. (1)

10.31       Amended and Restated Security Agreement, dated December 18, 1996, by
            Panda-Brandywine, L.P. in favor of Fleet National Bank, as Security
            Agent. (1)

10.32       Amended and Restated Trust Agreement, dated December 18, 1996,
            between General Electric Capital Corporation, as Owner Participant,
            and Fleet National Bank, as Owner Trustee. (1)

10.33       Amended and Restated General Partner Pledge Agreement, dated
            December 18, 1996, by Panda-Brandywine Corporation to Fleet National
            Bank, as Security Agent. (1)

                                       40
<PAGE>
10.34       Amended and Restated Limited Partner Pledge Agreement, dated
            December 18, 1996, by Panda Energy Corporation to Fleet National
            Bank, as Security Agent. (1)

10.35       Amended and Restated Stock Pledge Agreement, dated December 18,
            1996, by Panda Interholding Corporation to Fleet National Bank, as
            Security Agent. (1)

10.36       Assumption Agreement and Release, dated July 31, 1996, by Panda
            Interholding Corporation in favor of General Electric Capital
            Corporation and Fleet National Bank. (1)

10.37       Power Purchase and Operating Agreement, dated January 24, 1989,
            between Panda Energy Corporation and Virginia Electric and Power
            Company. (1)

10.38       Amendment No. 1 to Power Purchase and Operating Agreement, dated
            October 24, 1989, between Panda Energy Corporation and Virginia
            Electric and Power Company. (1)

10.39       Amendment No. 2 to Power Purchase and Operating Agreement, dated
            July 30, 1993, between Panda-Rosemary, L.P. and Virginia Electric
            and Power Company. (1)

10.40       Fuel Supply Management Agreement, dated October 10, 1990, between
            Panda-Rosemary Corporation and Natural Gas Clearinghouse. (1)

10.41       Amendment No. 1 to Fuel Supply Management Agreement, dated March 5,
            1991, between Panda-Rosemary Corporation and Natural Gas
            Clearinghouse. (1)

10.42       Gas Purchase Contract, dated April 12, 1990, between Panda-Rosemary
            Corporation and Natural Gas Clearinghouse. (1)

10.43       Amendment of Gas Purchase Contract between Panda-Rosemary
            Corporation and Natural Gas Clearinghouse. (1)

10.44       Pipeline Operating Agreement, dated February 14, 1990, between Panda
            Energy Corporation, Panda-Rosemary Corporation and North Carolina
            Natural Gas Corporation. (1)

10.45       Amendment No. 1 to Pipeline Operating Agreement, dated May 7, 1990,
            between Panda Energy Corporation, Panda-Rosemary Corporation and
            North Carolina Natural Gas Corporation. (1)

10.46       Assignment Agreement, dated June 15, 1990, between Panda Energy
            Corporation and Panda-Rosemary Corporation. (1)

10.46.1     Operations and Maintenance Agreement, dated January 1, 1997, between
            Panda Brandywine, L.P. and Panda Global Services, Inc.

10.47       Amendment No. 2 to Pipeline Operating Agreement, dated November 19,
            1991, among Panda Energy Corporation, Panda-Rosemary Corporation and
            North Carolina Natural Gas Corporation. (1)

10.48       Real Property Lease and Easement Agreement, dated June 9, 1989,
            between The Bibb Company and Panda-Rosemary Corporation. (1)

10.49       First Amendment to Real Property Lease and Easement Agreement, dated
            October 1, 1989, between The Bibb Company and Panda-Rosemary
            Corporation. (1)

10.50       Second Amendment to Real Property Lease and Easement Agreement,
            dated January 31, 1990, between The Bibb Company and Panda-Rosemary
            Corporation. (1)

                                       41
<PAGE>
10.51       Leasehold and Real Property Assignment and Assumption Agreement,
            dated January 6, 1992, between Panda-Rosemary Corporation and
            Panda-Rosemary, L.P. (1)

10.52       Third Amendment to Real Property Lease and Easement Agreement, dated
            March 15, 1996, between The Bibb Company and Panda-Rosemary, L.P.
            (1)

10.53       Cogeneration Energy Supply Agreement, dated January 12, 1989,
            between Panda Energy Corporation and The Bibb Company. (1)

10.54       First Amendment to Cogeneration Energy Supply Agreement, dated
            October 1, 1989, between Panda Energy Corporation, Panda-Rosemary
            Corporation and The Bibb Company. (1)

10.55       Service Agreement, dated July 26, 1996, between Transcontinental Gas
            Pipe Line Corporation and Panda-Rosemary, L.P. (1)

10.55.1     Form of Amendment to Service Agreement, effective January 1, 1997,
            between Transcontinental Gas Pipe Line Corporation and
            Panda-Rosemary, L.P. (1)

10.56       Service Agreement Applicable to Transportation of Natural Gas Under
            Rate Schedule FT, dated August 20, 1996, between CNG Transmission
            Corporation and Panda-Rosemary, L.P. (1)

10.57       Gas Transportation Agreement, dated August 1, 1996, between Texas
            Gas Transmission Corporation and Panda-Rosemary, L.P. (1)

10.58       Assignment and Assumption Agreement, dated May 15, 1989, between
            Panda Energy Corporation and Panda-Rosemary Corporation. (1)

10.59       Bill of Sale and Assignment and Assumption Agreement, dated January
            6, 1992, between Panda-Rosemary Corporation and Panda-Rosemary, L.P.
            (1)

10.60       Assignment and Assumption Agreement, dated January 6, 1992, between
            Panda Energy Corporation and Panda-Rosemary Corporation. (1)

10.61       Power Purchase Agreement, dated August 9, 1991, between
            Panda-Brandywine, L.P. and Potomac Electric Power Company. (1)

10.62       First Amendment to Power Purchase Agreement, dated September 16,
            1994, between Panda-Brandywine, L.P. and Potomac Electric Power
            Company. (1)

10.62.1     Present Assignment of Power Purchase Agreement, dated December 18,
            1996, by Panda-Brandywine, L.P. to Fleet National Bank, as Owner
            Trustee, for the benefit of General Electric Capital Corporation, as
            Owner Participant. (1)

10.62.2     Amended and Restated Consent and Agreement, dated December 30, 1996,
            among Potomac Electric Power Company, Panda-Brandywine, L.P., Fleet
            National Bank, as Security Agent and Owner Trustee, General Electric
            Capital Corporation, as the issuer of the Letters of Credit, the
            Interest Hedging Counterparty and Owner Participant, First Security
            Bank, National Association, as Indenture Trustee, and Credit Suisse,
            as Administrative Agent. (1)

10.63       Amended and Restated Turnkey Cogeneration Facility Agreement, dated
            March 30, 1995, between Panda-Brandywine, L.P. and Raytheon
            Engineers & Constructors, Inc. (1)

10.64       Raytheon Parent Guaranty, dated May 18, 1994, between Raytheon
            Company and Panda-Brandywine, L.P. (1)

                                       42
<PAGE>
10.65       Steam Sales Agreement, dated March 30, 1995, between
            Panda-Brandywine, L.P. and Brandywine Water Company. (1)

10.66       Gas Sales Agreement, dated March 30, 1995, between Cogen Development
            Company and Panda-Brandywine, L.P. (1)

10.67       Precedent Agreement, dated February 25, 1994, between Columbia Gas
            Transmission Corporation and Panda-Brandywine, L.P. (1)

10.68       Amending Agreement, dated March 24, 1995, between Columbia Gas
            Transmission Corporation and Panda-Brandywine, L.P. (1)

10.69       Amended and Restated FTS Service Agreement, dated March 23, 1995,
            between Columbia Gas Transmission Corporation and Panda-Brandywine,
            L.P. (1)

10.70       FTS Service Agreement, dated of as March 30, 1995, between Cove
            Point LNG Limited Partnership and Panda-Brandywine, L.P. (1)

10.71       Gas Transportation and Supply Agreement, dated November 10, 1994,
            between Panda-Brandywine, L.P. and Washington Gas Light Company. (1)

10.72       Amended and Restated Site Lease, dated December 18, 1996, between
            Panda-Brandywine, L.P. and Fleet National Bank, as Owner Trustee.
            (1)

10.73       Amended and Restated Site Sublease, dated December 18, 1996, between
            Fleet National Bank, Owner Trustee, as Sublessor, and
            Panda-Brandywine, L.P., as Sublessee. (1)

10.74       Purchase Agreement, dated July 26, 1996, between Panda Funding
            Corporation and Jefferies & Company, Inc. (1)

10.75       Additional Projects Contract, dated July 31, 1996, among Panda
            Energy International, Inc., Panda Energy Corporation, and Panda
            Interfunding Corporation. (1)

10.76       Non-Petition Agreement, dated July 31, 1996, among Panda
            Interfunding Corporation, Panda Interholding Corporation,
            Panda-Rosemary Corporation, PRC II Corporation, Panda-Rosemary
            Funding Corporation and Panda-Rosemary, L.P. (1)

10.77       Non-Petition Agreement, dated July 31, 1996, among Panda Funding
            Corporation, Panda Interholding Corporation, Panda Interfunding
            Corporation and Panda (Cayman) Interfunding Company. (1)

10.78       Joint Venture Contract for Tangshan Panda Heat and Power Co., Ltd.,
            dated September 4, 1994, between Luannan County Heat & Power Plant
            and Pan-Western Energy Corp., LLC, as amended July 19, 1996 and
            November 18, 1996, respectively. (2)

10.79       Joint Venture Contract for Tangshan Pan-Western Heat and Power Co.,
            Ltd., dated September 3, 1994, between Tangshan Luanhua Co. (Group)
            and Pan-Western Energy Corp., LLC, as amended July 19, 1996 and
            November 18, 1996, respectively. (2)

10.80       Joint Venture Contract for Tangshan Cayman Heat and Power Co., Ltd.,
            dated May 11, 1996, between Luannan County Heat & Power Plant and
            Pan-Western Energy Corp., LLC, as amended July 19, 1996 and November
            18, 1996, respectively. (2)

10.81       Joint Venture Contract for Tangshan Pan-Sino Heat Co., Ltd., dated
            May 28, 1996, between Luannan County Heat Company and Pan-Western
            Energy Corp., LLC, as amended July 19, 1996 and November 18, 1996,
            respectively. (2)

                                       43
<PAGE>
10.82       Coal Supply Agreement between Tangshan Panda Heat and Power Co.,
            Ltd. and Kailuan Coal Mining Administration, dated February 3, 1996.
            (2)

10.83       General Interconnection Agreement between North China Power Group
            Company, Tangshan Panda Heat and Power Co., Ltd. and Tangshan
            Pan-Western Heat and Power Co., Ltd., dated September 22, 1995. (2)

10.84       Electric Energy Purchase and Sales Agreement between North China
            Power Group Company, Tangshan Panda Heat and Power Co., Ltd. and
            Tangshan Pan-Western Heat and Power Co., Ltd., dated September 22,
            1995. (2)

10.85       Supplemental Agreement for General Interconnection and Electric
            Energy Purchase and Sales Agreement Between North China Power Group
            Company, Tangshan Panda Heat and Power Co., Ltd. and Tangshan
            Pan-Western Heat and Power Co., Ltd. dated February 10, 1996. (2)

10.86       Construction Agreement between North China Power Group Company,
            Tangshan Panda Heat and Power Co., Ltd. and Tangshan Pan-Western
            Heat and Power Co., Ltd., dated February 10, 1996. (2)

10.87       Loan Agreement between North China Power Group Company, Tangshan
            Panda Heat and Power Co., Ltd. and Tangshan Pan-Western Heat and
            Power Co., Ltd., dated February 10, 1996, as amended June 18, 1996.
            (2)

10.88       Agency Contract for Entrusted Loan between China Information Trust
            and Investment Corporation, Tangshan Panda Heat and Power Co., Ltd.
            and Tangshan Pan-Western Heat and Power Co. Ltd., dated June 18,
            1996, as amended July 17, 1996. (2) (4)

10.89       Transfer of Loan Agreement among Tangshan Panda Heat and Power Co.,
            Ltd., Tangshan Pan-Western Heat and Power Co., Ltd. and Tangshan
            Pan-Sino Heat Co., Ltd. (2)

10.90       Engineering, Procurement and Construction Contract among Tangshan
            Panda Heat and Power Co., Ltd., Tangshan Pan-Western Heat and Power
            Co., Ltd. and Harbin Power Engineering Company Limited, dated April
            24, 1996, as amended July 4, 1996, September 14, 1996 and December
            17, 1996, respectively. (2) (4)

10.91       Engineering and Design Contract among Hebei Electric Power Survey
            and Design Institute, Tangshan Panda Heat and Power Company, Ltd.
            and Tangshan Pan-Western Heat and Power Company, Ltd., dated
            December 21, 1995, as amended June 21, 1996. (2)

10.92       Guaranty by China Harbin Power Equipment Group Company, dated July
            16, 1996. (2)

10.93       Performance Guarantee by The Export-Import Bank of China, dated
            January 3, 1997. (2)

10.94       Amended and Restated Operation and Maintenance Agreement between
            Tangshan Heat and Power Co., Ltd., Tangshan Pan-Western Heat and
            Power Co., Ltd., Tangshan Cayman Heat and Power Co., Ltd., Tangshan
            Pan-Sino Heat Co., Ltd. and Duke/Fluor Daniel International
            Services, dated March 6, 1997. (2) (4)

10.94.01    Second Amended and Restated On-Shore Operation and Maintenance
            Agreement, Commercial Operations Phase, By and Between Tangshan
            Panda Heat and Power Co., LTD., Tangshan Pan-Western Heat and Power
            Co., LTD., Tangshan Cayman Heat and Power Co., LTD., Tangshan
            Pan-Sino Heat Co., LTD. and Duke/Fluor Daniel International
            Services, January 1, 1998. (6)

10.94.02    Second Amended and Restated On-Shore Operation and Maintenance
            Agreement, Construction Phase, By and Between Tangshan Panda Heat
            and Power Co., LTD, Tangshan Pan-Western Heat and Power Co., LTD,
            Tangshan Cayman Heat

                                       44
<PAGE>
            and Power Co., LTD, Tangshan Pan-Sino Heat Co., LTD and Duke/Fluor
            Daniel International Services, January 1, 1998. (6)

10.94.03    Offshore Services Agreement, Commercial Operation Phase, By and
            Between Tangshan Panda Heat and Power Co., LTD, Tangshan Pan-Western
            Heat and Power Co., LTD, Tangshan Cayman Heat and Power Co., LTD,
            Tangshan Pan-Sino Heat Co., LTD and Duke/Fluor Daniel International
            Services, January 1, 1998. (6)

10.94.04    Offshore Services Agreement, Construction Phase, By and Between
            Tangshan Panda Heat and Power Co., LTD, Tangshan Pan-Western Heat
            and Power Co., LTD, Tangshan Cayman Heat and Power Co., LTD,
            Tangshan Pan-Sino Heat Co., LTD and Duke/Fluor Daniel International
            Services, January 1, 1998. (6)

10.94.05    Full Settlement and Release Agreement by and between Tangshan Panda
            Heat and Power, Ltd., Tangshan Pan-Western Heat and Power Co., Ltd.,
            Tangshan Cayman Heat and Power, Ltd., Tangshan Pan-Sino Heat Co.
            Ltd., Duke/Fluor Daniel International and Duke/Fluor Daniel
            International Services, dated June 30, 1999. (9)

10.94.06    Personnel Services Agreement between Tangshan Panda Heat and Power,
            Ltd., Tangshan Pan-Western Heat and Power Co., Ltd., Tangshan Cayman
            Heat and Power, Ltd., Tangshan Pan-Sino Heat Co. Ltd. and Jinzhou
            Power Plant, dated September 11, 1999. (11)

10.95       Construction Agreement of Heat and Steam Network between Tangshan
            Pan-Sino Heat Co., Ltd. and Tangshan Heat and Engineering Company,
            dated June 20, 1996. (2)

10.96       Amended and Restated Shareholder Loan Agreement between Pan-Western
            Energy Corporation, LLC and Tangshan Panda Heat and Power Co., Ltd.,
            April 1, 1997 (2) (4)

10.97       Amended and Restated Shareholder Loan Agreement between Pan-Western
            Energy Corporation, LLC and Tangshan Pan-Western Heat and Power Co.,
            Ltd., April 1, 1997 (2) (4)

10.98       Amended and Restated Shareholder Loan Agreement between Pan-Western
            Energy Corporation, LLC and Tangshan Cayman Heat and Power Co.,
            Ltd., April 1, 1997 (2) (4)

10.99       Amended and Restated Shareholder Loan Agreement between Pan-Western
            Energy Corporation, LLC and Tangshan Pan-Sino Heat and Power Co.,
            Ltd., April 1, 1997 (2) (4)

10.100      Water, Heat, Steam and Hot Water Supply and Usage Agreement between
            Tangshan Cayman Heat and Power Company, Ltd., and Tangshan Panda
            Heat and Power Company, Ltd., dated October 3, 1996. (2) (4)

10.101      Water, Heat, Steam and Hot Water Supply and Usage Agreement between
            Tangshan Cayman Heat and Power Company, Ltd. and Tangshan
            Pan-Western Heat and Power Company, Ltd., dated October 3, 1996. (2)
            (4)

10.102      Steam for Process and Heating Water Sales Agreement between Tangshan
            Cayman Heat and Power Company, Ltd., and Tangshan Pan-Sino Heat
            Company, Ltd., dated October 16, 1996. (2)

10.103      Articles of Association of Tangshan Panda Heat and Power Co., Ltd.
            between Luannan County Heat & Power Plant and Pan-Western Energy
            Corp., LLC dated September 4, 1994. (2)

10.104      Articles of Association for Tangshan Pan-Western Heat and Power Co.,
            Ltd., between Tangshan Luanhua Co. (Group) and Pan-Western Energy
            Corp., LLC, dated September 3, 1994. (2)

10.105      Articles of Association for Tangshan Cayman Heat and Power Co.,
            Ltd., between Luannan County Heat & Power Plant and Pan-Western
            Energy Corp., LLC, dated May 11, 1996. (2)

                                       45
<PAGE>
10.106      Articles of Association for Tangshan Pan-Sino Heat Co., Ltd.,
            between Luannan County Heat Company and Pan-Western Energy Corp.,
            LLC, dated May 28, 1996. (2)

10.107      Application Regarding Power Price among Tangshan Panda Heat and
            Power Co., Ltd., Tangshan Pan-Western Heat and Power Co., Ltd., and
            Tangshan Municipal Price Bureau dated October 17, 1995, as amended
            October 18, 1995 and May 8, 1996, respectively. (2) (4)

10.108      Administrative Services Agreement between Panda Energy
            International, Inc. and Panda Global Holdings, Inc., dated April 22,
            1997. (2)

10.109      Development Services Agreement between Panda Energy International,
            Inc. and Panda Global Holdings, Inc., dated April 22, 1997. (2)

10.110      Form of Purchase Agreement among Donaldson, Lufkin & Jenrette
            Securities Corporation, Panda Global Energy Company, Panda Global
            Holdings, Inc. and Panda Energy International, Inc., dated April 11,
            1997. (2)

10.111      Form of Issuer Loan Agreement between Panda Global Energy Company
            and Pan-Western Energy Corporation, LLC, dated April 22, 1997. (2)

10.112      Form of Issuer Note of Pan-Western Energy Corporation, LLC, dated
            April 22, 1997. (2)

10.113      Registered Capital Contribution and Agency Agreement among Tangshan
            Panda Heat and Power Company, Ltd., Tangshan Pan-Western Heat and
            Power Company, Ltd., Tangshan Cayman Heat and Power Company, Ltd.,
            Tangshan Pan-Sino Heat Company, Ltd., Luannan County Heat and Power
            Plant, Tangshan Luanhua (Group) Co., Luannan County Heat Company and
            Pan-Western Energy Corporation, LLC, dated March 26, 1997. (2)

10.114      Form of Account Agreement among Panda Interfunding Corporation,
            Panda Energy Corporation and Panda Global Holdings, Inc., dated
            April 22, 1997. (2)

10.115      Form of Pledge Agreement between Panda Global Energy Company and
            Bankers Trust Company, as Trustee, dated April 22, 1997. (2)

10.116      Form of Pledge Agreement between Pan-Sino Energy Development
            Company, LLC and Bankers Trust Company, as Trustee, dated April 22,
            1997. (2)

10.117      Form of Pledge Agreement between Pan-Western Energy Corporation, LLC
            and Bankers Trust Company, as Trustee, dated April 22, 1997. (2)

10.118      Form of Pledge Agreement between Panda Global Holdings, Inc. and
            Bankers Trust Company, as Trustee, dated April 22, 1997. (2)

10.119      Form of Cash Collateral Agreement between Panda Global Energy
            Company and Bankers Trust Company, as Trustee, dated April 22, 1997.
            (2)

10.120      Form of Cash Collateral Agreement between Pan-Western Energy
            Corporation, LLC and Bankers Trust Company, as Trustee, dated April
            22, 1997. (2)

10.121      Form of Cash Collateral Agreement between Pan-Sino Energy
            Development Company, LLC and Bankers Trust Company, as Trustee,
            dated April 22, 1997. (2)

10.122      Form of Pledge Agreement between Panda Energy International, Inc.
            and Bankers Trust Company, as Trustee, dated April 22, 1997. (2)

                                       46
<PAGE>
10.123      Form of Cash Collateral between Panda Global Holdings, Inc. and
            Bankers Trust Company, as Trustee, dated April 22, 1997. (2)

10.124      Form of Cash Collateral Agreement between Panda Energy Corporation
            and Bankers Trust Company, as Trustee, dated April 22, 1997. (2)

10.125      Form of Guarantee between Pan-Western Energy Corporation, LLC,
            Tangshan Panda Heat and Power Co., Ltd. and Tangshan Cayman Heat and
            Power Co., Ltd., dated September 24, 1996. (2)

10.126      Form of Guarantee between Pan-Western Energy Corporation, LLC,
            Tangshan Panda Heat and Power Co., Ltd. and Tangshan Pan-Western
            Heat and Power Co., Ltd., dated September 24, 1996. (2)

10.127      Form of Guarantee between Pan-Western Energy Corporation, LLC,
            Tangshan Panda Heat and Power Co., Ltd. and Tangshan Pan-Sino Heat
            Co., Ltd., dated September 24, 1996. (2)

10.128      Form of Guarantee between Pan-Western Energy Corporation, LLC,
            Tangshan Pan-Western Heat and Power Co., Ltd. and Tangshan Pan-Sino
            Heat Co., Ltd., dated September 24, 1996. (2)

10.129      Form of Guarantee between Pan-Western Energy Corporation, LLC,
            Tangshan Pan-Western Heat and Power Co., Ltd. and Tangshan Panda
            Heat and Power Co., Ltd., dated September 24, 1996. (2)

10.130      Form of Guarantee between Pan-Western Energy Corporation, LLC,
            Tangshan Pan-Western Heat and Power Co., Ltd. and Tangshan Cayman
            Heat and Power Co., Ltd., dated September 24, 1996. (2)

10.131      Form of Guarantee between Pan-Western Energy Corporation, LLC,
            Tangshan Cayman Heat and Power Co., Ltd. and Tangshan Panda Heat and
            Power Co., Ltd., dated September 24, 1996. (2)

10.132      Form of Guarantee between Pan-Western Energy Corporation, LLC,
            Tangshan Cayman Heat and Power Co., Ltd. and Tangshan Pan-Sino Heat
            Co. Ltd., dated September 24, 1996. (2)

10.133      Form of Guarantee between Pan-Western Energy Corporation, LLC,
            Tangshan Cayman Heat and Power Co., Ltd. and Tangshan Pan-Western
            Heat and Power Co., Ltd., dated September 24, 1996. (2)

10.134      Form of Guarantee between Pan-Western Energy Corporation, LLC,
            Tangshan Pan-Sino Heat Co., Ltd. and Tangshan Cayman Heat and Power
            Co., Ltd., dated September 24, 1996. (2)

10.135      Form of Guarantee between Pan-Western Energy Corporation, LLC,
            Tangshan Pan-Sino Heat Co., Ltd. and Tangshan Pan-Western Heat and
            Power Co., Ltd., dated September 24, 1996. (2)

10.136      Form of Guarantee between Pan-Western Energy Corporation, LLC,
            Tangshan Pan-Sino Heat Co., Ltd. and Tangshan Panda Heat and Power
            Co., Ltd., dated September 24, 1996. (2)

10.137      Operation and Maintenance Agreement between Bhote Koshi Power
            Company Private Limited and Harza Engineering Company International
            L.P. dated April 24, 1997. (2)

10.138      Amended and Restated Contract for the Engineering, Procurement and
            Construction of the Upper Bhote Koshi Hydroelectric project between
            China Gezhouba Construction Group Corporation and Bhote Koshi Power
            Company Private Limited dated December 19, 1996 ("EPC Contract").
            (2)

10.138.01   Change Order No. 001 to EPC Contract, dated February 1, 1997. (3)

10.138.02   Change Order No. 002 to EPC Contract, dated April 26, 1997. (3)

                                       47
<PAGE>
10.138.03   Change Order No. 003 to EPC Contract, dated September 4, 1997. (3)

10.138.04   Change Order No. 004 to EPC Contract, dated September 5, 1997. (3)

10.138.05   Change Order No. 005 to EPC Contract, dated November 12, 1997. (3)

10.138.06   Change Order No. 006 to EPC Contract, dated April 21, 1998. (6)

10.138.07   Change Order No. 007 to EPC Contract, dated September 30, 1998. (9)

10.138.08   Change Order No. 008 to EPC Contract, dated July 19, 1998. (9)

10.138.09   Change Order No. 009 to EPC Contract, dated December 27, 1999. (11)

10.138.10   Change Order No. 010 to EPC Contract, dated March 2, 2000. (11)

10.139      Project Agreement between His Majesty's Government of Nepal and
            Bhote Koshi Power Company Private Limited dated July 21, 1996. (2)

10.140      Power Purchase Agreement between His Majesty's Government of Nepal
            and Bhote Koshi Power Company Private Limited dated July 21, 1996.
            (2)

10.141      Services Agreement between Panda of Nepal and Harza Engineering
            Company International L.P. (for services provided outside of Nepal)
            dated July 11, 1997. (2)

10.142      Services Agreement between Panda of Nepal and Harza Engineering
            Company International L.P. (for services provided in Nepal) dated
            July 11, 1997. (2)

10.143      Investment Agreement, General Conditions between Bhote Koshi Power
            Company Private Limited, International Finance Corporation and
            DEG-Deutsche Investitions-und Entwicklungsgesellschaft mbH dated
            December 18, 1997. (3)

10.143.01   Investment Agreement, Special Conditions between Bhote Koshi Power
            Company Private Limited and DEG-Deutsche Investitions-und
            Entwicklungsgesellschaft mbH dated December 18, 1997. (3)

10.143.02   Investment Agreement, Special Conditions between Bhote Koshi Power
            Company Private Limited and International Finance Corporation dated
            December 18, 1997. (3)

10.143.03   Investment Agreement, Definitions (Schedule A) dated December 18,
            1997. (3)

10.143.04   Adjustment to Loan Agreement between Bhote Koshi Power Company
            Private Limited and DEG, dated September 8, 1999. (10)

10.144      Participation Agreement in respect of B Loan to Bhote Koshi Power
            Company Private Limited between Dresdner Bank AG, New York and Grand
            Cayman Branches and International Finance Corporation dated December
            18, 1997. (3)

10.145      Participation Agreement in respect of B Loan to Bhote Koshi Power
            Company Private Limited between Bayerische Vereinsbank AG and
            International Finance Corporation dated December 18, 1997. (3)

10.146      Participation Agreement in respect of B Loan to Bhote Koshi Power
            Company Private Limited between Nederlandse
            Financierings-Maatschappij Voor Ontwikkelingslanden N.V. and
            International Finance Corporation dated December 18, 1997. (3)

                                       48
<PAGE>
10.147      Share Retention and Project Funds Agreement between Bhote Koshi
            Power Company Private Limited, Panda Energy International, Inc.,
            Panda Bhote Koshi, Panda of Nepal, Harza Engineering Company
            International, a Limited Liability Company, Harza Engineering
            Company International, L.P., Resource Development Consultants, a
            Limited Liability Company, RDC of Nepal, Soaltee Enterprises Private
            Ltd., Soaltee Hotel Ltd., Surya Enterprises Private Ltd., Himal
            International Power Corporation Pvt. Ltd., International Finance
            Corporation, and DEG-Deutsche Investitions-und
            Entwicklungsgesellschaft mbH dated December 18, 1997. (3)

10.148      Equity Subscription Agreement between Bhote Koshi Power Company
            Private Limited, Himal International Power Corporation Ltd., and
            Wilmington Trust Company dated December 18, 1997. (3)

10.149      Equity Subscription Agreement between Bhote Koshi Power Company
            Private Limited, Panda of Nepal and Wilmington Trust Company dated
            December 18, 1997. (3)

10.150      Equity Subscription Agreement between Bhote Koshi Power Company
            Private Limited, RDC of Nepal and Wilmington Trust Company dated
            December 18, 1997. (3)

10.151      Shareholder's Agreement between Bhote Koshi Power Company Private
            Limited, Himal International Power Corporation Pvt. Ltd., Panda of
            Nepal, RDC of Nepal, and International Finance Corporation dated
            December 18, 1997. (3)

10.152      Shareholder's Agreement between Panda Bhote Koshi, a Cayman Islands
            exempted company, Panda of Nepal, a Cayman Islands exempted company
            and Panda Global Energy Company and MCNIC Nepal Limited, as the
            Shareholders of Panda Bhote Koshi, dated December 18, 1997. (3).

10.152.01   Guarantee Agreement of MCN Investment Corporation, dated December
            18, 1997. (3)

10.152.02   Guarantee Agreement of Panda Energy International, Inc., dated
            December 18, 1997. (3)

10.153      Master Agreement between Bhote Koshi Power Company Private Limited
            and International Finance Corporation, dated December 12, 1997. (3)

10.153.01   Schedule and Annexes to Master Agreement between Bhote Koshi Power
            Company Private Limited and International Finance Corporation, dated
            December 12, 1997. (3)

10.154      HMGN Letter Approval of Financing Documents addressed to
            International Finance Corporation, DEG-Deutsche Investitions-und
            Entwicklungsgesellschaft mbH and Wilmington Trust Company dated
            December 8, 1997. (3)

10.155      Risk Management Facility Agreement between Bhote Koshi Power Company
            Private Limited and International Finance Corporation dated December
            18, 1997. (3)

10.156      Trust and Retention Agreement between Bhote Koshi Power Company
            Private Limited, International Finance Corporation, DEG-Deutsche
            Investitions-und Entwicklungsgesellschaft mbH and Wilmington Trust
            Company dated December 18, 1997. (3)

10.157      Nepal Agency and Retention Agreement between Bhote Koshi Power
            Company Private Limited, International Finance Corporation,
            DEG-Deutsche Investitions-und Entwicklungsgesellschaft mbH,
            Wilmington Trust Company, as Trustee, and Nepal Grindlays Bank
            Limited dated December 18, 1997. (3)

10.158      Mortgage Deed between Bhote Koshi Power Company Private Limited,
            DEG-Deutsche Investitions-und Entwicklungsgesellschaft mbH and
            International Finance Corporation dated December 19, 1997. (3)

                                       49
<PAGE>
10.159      Security Agreement and Assignment between Bhote Koshi Power Company
            Private Limited, International Finance Corporation, DEG-Deutsche
            Investitions-und Entwicklungsgesellschaft mbH and Wilmington Trust
            Company, as Trustee, dated December 18, 1997. (3)

10.160      Security Agreement and Assignment between Panda of Nepal,
            International Finance Corporation, DEG-Deutsche Investitions-und
            Entwicklungsgesellschaft mbH and Wilmington Trust Company, as
            Trustee, dated December 18, 1997. (3)

10.161      Share Pledge Agreement between Himal International Power Corporation
            Pvt. Ltd., Wilmington Trust Company, as Trustee, and Bhote Koshi
            Power Company Private Limited dated December 18, 1997. (3)

10.162      Share Pledge Agreement between RDC of Nepal, Wilmington Trust
            Company, as Trustee, and Bhote Koshi Power Company Private Limited
            dated December 18, 1997. (3)

10.163      Share Pledge Agreement between Panda Bhote Koshi, Wilmington Trust
            Company, as Trustee, and Panda of Nepal, dated December 18, 1997.
            (3)

10.164      Share Pledge Agreement between Panda of Nepal, Wilmington Trust
            Company, as Trustee, and Bhote Koshi Power Company Private Limited,
            dated December 18, 1997. (3)

10.165      Performance Guarantee by Industrial and Commercial Bank of China
            dated December 10, 1997. (3)

10.166      Equity Letter of Credit by The Northern Trust Company for the
            account of RDC of Nepal, dated December 16, 1997. (3)

10.167      Equity Letter of Credit by The First National Bank of Chicago for
            the account of Panda of Nepal, dated December 17, 1997. (3)

10.168      Bhote Koshi Power Company Private Limited Amended and Restated Joint
            Venture Agreement between Himal International Power Corporation
            Ltd., Panda of Nepal, RDC of Nepal and International Finance
            Corporation, dated December 12, 1997. (3)

10.169      Articles of Association of Bhote Koshi Power Company Private
            Limited, dated August 22, 1997. (3)

10.170      Memorandum of Association of Bhote Koshi Power Company Private
            Limited, dated August 22, 1997. (3)

10.171      Engineering Services Agreement between Bhote Koshi Power Company
            Private Limited and Harza Engineering Company International L.P.,
            dated December 1, 1997. (3)

10.172      Consent and Amendment Agreement, dated July 17, 1998 by and between
            Panda-Brandywine, L.P., General Electric Capital Corporation, and
            the other parties set forth therein. (7)

10.173      Letter Agreement, orginally dated October 24, 1997, by and between
            Panda-Brandywine, L.P. Potomac Electric Power Company. (7)(4)

10.174      Letter of Intent, dated July 2, 1998, by and between GE Power
            Systems and Sales and Panda Paris Power, LLC. (7)

10.175      Turnkey, Engineering, Procurement and Construction Agreement by and
            between Panda Paris Power, L.P. and Duke/Fluor Daniel, dated as of
            October 3, 1998. (8)(4)

                                       50
<PAGE>
10.176      Purchase Order by and between GE Power Systems and Sales and Panda
            Paris Power, L.P., dated October 16, 1998. (8)

10.177      Partnership Interest Purchase Agreement, dated February 17, 1999, by
            and between FPL Energy Paris GP, LLC, FPL Energy Paris LP, LLC,
            Panda Paris I, LLC and Panda Paris II, LLC. (5)

10.178      Letter of Intent between Panda Development Corporation and GE Power
            Systems and Sales, dated March 4, 1999. (9)

10.179      Letter of Intent between Pan-Turbo Co., LLC and GE Power Systems and
            Sales, dated March 18, 1999. (9)

10.180      Interconnection Disopatch Agreement between North China Power Group
            Corporation and Tangshan Panda Heat and Power Co., Ltd. and Tangshan
            Pan-Western Heat and Power Co., Ltd., dated September 2, 1999. (10)

12.00       Computation of Ratio of Earnings to Fixed Charges. (11)

21.00       Subsidiaries of Company. (11)

24.00       Powers of Attorney, included on signature page hereof (11)

27.00       Financial Data Schedule (11)

---------------
(1)   Previously filed as an exhibit to the Registration Statement on Form S-1
      (Registration No. 333-19445) of Panda Funding Corporation, Panda
      Interfunding Corporation and Panda Interholding Corporation (affiliates of
      the Company), and incorporated herein by reference.
(2)   Previously filed as an exhibit to the Registration Statement on Form S-1
      (Registration No. 333-29005) of Panda Global Holdings, Inc. and Panda
      Global Energy Company, and incorporated herein by reference.
(3)   Previously filed as an exhibit to the Company's Form 10-K for the year
      ended December 31, 1997.
(4)   Confidential treatment of certain information identified in these exhibits
      has been applied for or granted by the Securities and Exchange Commission.
(5)   Previously filed as an exhibit to the Company's Form 8-K filed with the
      Securities and Exchange Commission February 18, 1999.
(6)   Previously filed as an exhibit to the Company's Form 10-Q for the quarter
      ended March 31, 1998.
(7)   Previously filed as an exhibit to the Company's Form 10-Q for the quarter
      ended June 30, 1998.
(8)   Previously filed as an exhibit to the Company's Form 10-Q for the quarter
      ended September 30, 1998.
(9)   Previously filed as an exhibit to the Company's Form 10-Q for the quarter
      ended June 30, 1999.
(10)  Previously filed as an exhibit to the Company's Form 10-Q for the quarter
      ended September 30, 1999.
(11)  Filed herewith.

      (b) REPORTS ON FORM 8-K.  None

            SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT
TO SECTION 15(D) OF THE ACT BY REGISTRANT WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT.

      No annual report or proxy statement or other proxy soliciting material was
sent to security holders of the Company during the Company's last fiscal year.

                                       51
<PAGE>
                         INDEX TO FINANCIAL STATEMENTS

Panda Global Holdings, Inc. and Subsidiaries Consolidated Financial
 Statements:

   Independent Auditors' Report......................................    F-2

   Consolidated Balance Sheets as of December 31, 1998 and 1999......    F-3

   Consolidated Statements of Operations for the years ended
     December 31, 1997, 1998 and 1999................................    F-5

   Consolidated Statements of Shareholder's Deficit for the years
     ended December 31, 1997, 1998 and 1999..........................    F-6

   Consolidated Statements of Cash Flows for the years ended
     December 31, 1997, 1998 and 1999................................    F-7

   Notes to Consolidated Financial Statements for the years ended
     December 31, 1997, 1998 and 1999................................    F-8

                                      F-1
<PAGE>
                         INDEPENDENT AUDITORS' REPORT

To the Board of Directors
of Panda Energy International, Inc.:

We have audited the accompanying consolidated balance sheets of Panda Global
Holdings, Inc. and subsidiaries (the "Company") as of December 31, 1998 and
1999, and the related consolidated statements of operations, shareholder's
deficit and cash flows for each of the three years in the period ended December
31, 1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Panda Global Holdings, Inc. and
subsidiaries at December 31, 1998 and 1999, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1999, in conformity with accounting principles generally accepted in the
United States of America.

The accompanying financial statements for the year ended December 31, 1999 have
been prepared assuming that the Company will continue as a going concern. As
discussed in Note 14 to the consolidated financial statements, the Company's
losses during 1997 and 1998, accumulation of shareholder's deficit and its
difficulty in generating sufficient cash flow to meet its interest and principal
obligations under certain agreements, raise substantial doubt about its ability
to continue as a going concern. Management's plans concerning these matters are
also described in Note 14. The consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

DELOITTE & TOUCHE LLP

Dallas, Texas
April 7, 2000

                                      F-2
<PAGE>
                           PANDA GLOBAL HOLDINGS, INC.
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1998 AND 1999

                                     ASSETS

                                                   1998              1999
                                               -------------     -------------
Current assets:
  Cash and cash equivalents ...............    $   2,056,317     $   1,393,486
  Restricted cash - current ...............       52,668,167        54,138,294
  Accounts receivable .....................        9,582,815         9,551,539
  Fuel oil, spare parts and supplies ......        6,324,191         6,263,271
  Deferred taxes ..........................       18,609,000              --
  Other current assets ....................        1,934,610         3,292,187
                                               -------------     -------------
    Total current assets ..................       91,175,100        74,638,777

Plant and equipment:
  Electric generating facilities ..........      301,411,796       301,670,924
  Furniture and fixtures ..................          542,989         1,232,590
  Less: accumulated depreciation ..........      (50,314,383)      (62,601,105)
  Construction in progress ................       81,475,023       108,493,449
  Development costs and equipment deposits        58,751,189        34,631,215
                                               -------------     -------------
    Total plant and equipment, net ........      391,866,614       383,427,073

Investments in joint ventures .............          793,880         1,044,542

Restricted cash - debt service reserves and
  escrow deposits .........................       39,022,048        53,146,295

Deferred taxes ............................        6,391,000              --

Debt issuance costs, net of accumulated
  amortization of $3,239,618 and
  $4,885,812, respectively ................       11,893,362        10,247,168
                                               -------------     -------------
                                               $ 541,142,004     $ 522,503,855
                                               -------------     -------------

          See accompanying notes to consolidated financial statements.

                                       F-3
<PAGE>
                           PANDA GLOBAL HOLDINGS, INC.
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                           DECEMBER 31, 1998 AND 1999

                      LIABILITIES AND SHAREHOLDER'S DEFICIT


                                                    1998               1999
                                                -------------     -------------
Current liabilities:
  Accounts payable and accrued expenses:
    Construction costs ......................   $   9,106,941     $   7,873,568
    Interest and letter of credit fees ......       9,770,768         9,415,662
    Operating expenses and other ............       6,980,241         3,018,900
  Short-term debt ...........................      33,000,000              --
  Current portion of long-term debt .........       5,924,989         7,674,598
  Current portion of capital lease obligation            --           1,352,826
                                                -------------     -------------
      Total current liabilities .............      64,782,939        29,335,554

Deferred revenue ............................      12,669,811        23,280,218

Long term debt, less current portion ........     344,740,630       338,195,989

Capital lease obligation ....................     246,078,324       246,557,267

Minority interest ...........................       5,741,166         5,741,166

Commitments and contingencies (Note 10)

Shareholder's deficit:
  Common stock, $.01 par value; 1,000 shares
    authorized, issued and outstanding ......              10                10
  Advances to parent ........................     (49,765,758)      (72,283,157)
  Accumulated deficit .......................     (83,105,118)      (48,323,192)
                                                -------------     -------------
                                                 (132,870,866)     (120,606,339)
                                                -------------     -------------
                                                $ 541,142,004     $ 522,503,855
                                                -------------     -------------

          See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>
                           PANDA GLOBAL HOLDINGS, INC.
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999


<TABLE>
<CAPTION>
                                                     1997             1998              1999
                                                -------------     -------------     -------------
<S>                                             <C>               <C>               <C>
REVENUE:
  Electric capacity and energy sales .......    $  65,004,373     $  78,252,477     $  92,392,224
  Steam and chilled water sales ............          623,934           694,548           558,528
  Interest income ..........................        8,050,356         7,698,177         5,939,834
  Other income - gain on sale of project ...             --                --          86,698,331
                                                -------------     -------------     -------------
                                                   73,678,663        86,645,202       185,588,917
                                                -------------     -------------     -------------

EXPENSES:
  Plant operating expenses .................       26,245,012        25,583,482        29,029,332
  Project development and administrative ...       11,579,911        16,908,950        18,847,814
  Interest expense and letter of credit fees       55,329,157        57,199,458        50,996,929
  Depreciation .............................       11,574,519        12,200,326        12,286,722
  Amortization of debt issuance costs ......        1,418,353         1,656,250         1,646,194
                                                -------------     -------------     -------------
                                                  106,146,952       113,548,466       112,806,991
                                                -------------     -------------     -------------

INCOME (LOSS) BEFORE INCOME TAXES ..........      (32,468,289)      (26,903,264)       72,781,926

  Income taxes:

    Current ................................             --                --         (13,000,000)
    Deferred ...............................             --          25,000,000       (25,000,000)
                                                -------------     -------------     -------------
       Total income tax benefit (expense) ..             --          25,000,000       (38,000,000)
                                                -------------     -------------     -------------

NET INCOME (LOSS) ..........................    $ (32,468,289)    $  (1,903,264)    $  34,781,926
                                                -------------     -------------     -------------
</TABLE>
          See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>
                           PANDA GLOBAL HOLDINGS, INC.
                                AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF SHAREHOLDER'S DEFICIT
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999



<TABLE>
<CAPTION>
                                            COMMON STOCK                                                      TOTAL
                                    ------------------------------      ADVANCES          ACCUMULATED      SHAREHOLDER'S
                                       SHARES           AMOUNT      (TO) FROM PARENT        DEFICIT           DEFICIT
                                    -------------    -------------  ----------------     -------------     -------------
<S>               <C>                       <C>                 <C>     <C>               <C>              <C>
BALANCE,  January 1, 1997 ......            1,000               10      (52,782,940)      (48,733,565)     (101,516,495)

  Advances (to) from parent, net             --               --             44,559              --              44,559

  Net loss .....................             --               --               --         (32,468,289)      (32,468,289)
                                    -------------    -------------    -------------     -------------     -------------

BALANCE,  December 31, 1997 ....            1,000               10      (52,738,381)      (81,201,854)     (133,940,225)

  Advances (to) from parent, net             --               --          2,972,623              --           2,972,623

  Net loss .....................             --               --               --          (1,903,264)       (1,903,264)

                                    -------------    -------------    -------------     -------------     -------------
BALANCE, December 31, 1998 .....            1,000               10      (49,765,758)      (83,105,118)     (132,870,866)

  Advances (to) from parent, net             --               --        (22,517,399)             --         (22,517,399)

  Net income ...................             --               --               --          34,781,926        34,781,926

                                    -------------    -------------    -------------     -------------     -------------
BALANCE, December 31, 1999 .....            1,000    $          10    $ (72,283,157)    $ (48,323,192)    $(120,606,339)
                                    -------------    -------------    -------------     -------------     -------------
</TABLE>
          See accompanying notes to consolidated financial statements.

                                       F-6
<PAGE>
                           PANDA GLOBAL HOLDINGS, INC.
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
                                                        1997              1998              1999
                                                    -------------     -------------     -------------
<S>                                                 <C>               <C>               <C>
OPERATING ACTIVITIES:
  Net income (loss) ............................    $ (32,468,289)    $  (1,903,264)    $  34,781,926
  Adjustments to reconcile net income (loss) to
    net cash provided by operating activities:
      Gain on sale of development project ......             --                --         (86,698,331)
      Deferred tax (benefit) expense ...........             --         (25,000,000)       25,000,000
      Depreciation .............................       11,574,519        12,200,326        12,286,722
      Amortization of debt issuance costs ......        1,418,353         1,656,250         1,646,194
      Amortization of loan discount and deferred
        interest on capital lease obligation ...       22,250,146        23,851,078        24,746,248
      Write-off of project development costs ...             --           2,941,040              --
      Deferred revenue .........................             --            (470,576)         (889,593)
      Equity in (income) loss of joint venture .             --              42,774           (96,419)
  Changes in assets and liabilities:
    Accounts receivable ........................         (384,152)          204,022            31,276
    Fuel oil, spare parts and supplies .........        1,649,228           (59,642)           60,920
    Other current assets .......................          (92,972)       (1,676,733)       (1,357,577)
    Accounts payable and accrued expenses ......        1,287,815         2,173,839        (4,316,447)
                                                    -------------     -------------     -------------
      Net cash provided (used) by operating
        activities .............................        5,234,648        13,959,114         5,194,919
                                                    -------------     -------------     -------------

INVESTING ACTIVITIES:
  Restricted cash - current ....................      (75,018,161)       40,159,915        (1,470,127)
  Additions to property, plant and equipment ...      (30,918,077)     (105,679,687)      (77,039,525)
  Investment in joint venture ..................         (836,654)             --                --
  Sale of development projects .................             --                --         168,503,059
  Restricted cash - debt service reserves and
    escrow deposits ............................      (39,882,161)       33,408,479       (14,124,247)
                                                    -------------     -------------     -------------
      Net cash provided (used) by investing
        activities .............................     (146,655,053)      (32,111,293)       75,869,160
                                                    -------------     -------------     -------------

FINANCING ACTIVITIES:
  Contributions from minority interest owners ..        5,741,166              --                --
  Advances (to) from parent ....................           44,559         2,972,623       (22,517,399)
  Deferred revenue .............................       13,140,387              --           1,500,000
  Proceeds from short-term debt ................             --          33,000,000        15,534,633
  Repayment of short-term debt .................             --                --         (48,534,633)
  Proceeds from long-term debt .................      145,025,088              --                --
  Repayment of long-term debt ..................       (5,717,621)       (5,816,974)       (5,926,268)
  Repayment of capital lease obligation ........       (7,831,527)      (12,866,442)      (21,783,243)
  Debt issuance costs ..........................       (7,387,444)          (10,000)             --
                                                    -------------     -------------     -------------
      Net cash provided (used) by financing
        activities .............................      143,014,608        17,279,207       (81,726,910)
                                                    -------------     -------------     -------------

Increase (decrease) in cash and cash equivalents        1,594,203          (872,972)         (662,831)

Cash and cash equivalents, beginning of period .        1,335,086         2,929,289         2,056,317
                                                    -------------     -------------     -------------

Cash and cash equivalents, end of period .......    $   2,929,289     $   2,056,317     $   1,393,486
                                                    -------------     -------------     -------------

SUPPLEMENTAL CASH FLOW INFORMATION:

  Interest paid, net of amounts capitalized ....    $  29,678,921     $  33,275,260     $  26,605,787

NONCASH OPERATING, INVESTING AND
  FINANCING ACTIVITIES:

  Investment in joint venture ..................    $        --       $        --       $     154,243
  Accrued construction costs ...................        5,600,000         9,106,941         7,873,568
  Interest expense on capital lease obligation .       21,621,411        22,853,229        23,615,012
  Adjustment of capital lease ..................             --           4,813,009              --
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-7
<PAGE>
                PANDA GLOBAL HOLDINGS, INC. AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

1. ORGANIZATION AND BASIS OF PRESENTATION

   Panda Global Holdings, Inc. ("Panda Global", or collectively with its
subsidiaries the "Company"), a wholly owned subsidiary of Panda Energy
International, Inc. ("PEII"), was formed in March 1997 to hold the ownership
interests in certain independent power projects which were formerly owned by
other wholly owned subsidiaries of PEII. The ownership interests were
transferred to the Company at PEII's historical cost. Because the transfers
occurred between entities under common control, the transactions have been
accounted for in a manner similar to a pooling of interests. The Company
operates primarily through three direct wholly owned subsidiaries: Panda Energy
Corporation ("PEC")( a Texas corporation) which indirectly holds the Company's
ownership and leasehold interests in two domestic projects currently in
operation; Panda Global Energy Company ("PGE")(a Cayman Islands company), which
indirectly holds the Company's ownership interests in two international projects
currently under construction; and Panda Merchant Power Holding, LLC ("Merchant
Holding")(a Delaware limited liability company), which indirectly holds the
Company's ownership interests in any domestic projects which might be developed.

   PEC, through its wholly owned subsidiary Panda Interfunding Corporation
("PIC") and PIC's wholly owned subsidiary Panda Interholding Corporation
("Interholding"), holds the Company's ownership interest in the Rosemary project
and leasehold interest in the Brandywine project. The entities holding such
interests include the following: Panda Rosemary Corporation ("PRC"), the general
partner in Panda-Rosemary, L.P. ("Panda-Rosemary"); PRC II Corporation ("PRC
II"), the limited partner in Panda-Rosemary; Panda Brandywine Corporation, the
general partner in Panda-Brandywine, L.P. ("Panda-Brandywine"); and Panda Energy
Corporation (a Delaware corporation), the limited partner in Panda-Brandywine.
The Company, through its general and limited partnership interests, owns 100% of
Panda-Brandywine and Panda-Rosemary. The Rosemary and Brandywine projects are
located in the United States. Other direct or indirect wholly owned subsidiaries
of PIC include Panda Funding Corporation ("PFC"), Panda-Rosemary Funding
Corporation ("PRFC") and Panda Cayman Interfunding Corporation ("PIC Cayman"),
which have been formed to facilitate the financing of the development and
acquisition of independent power projects.

   Additionally, PEC holds the Company's 100% ownership interest in the Kathleen
project through its wholly owned subsidiaries.

   PGE (which collectively with its subsidiaries is a development stage
enterprise having no operating revenues) holds a 95.5% ownership interest in
Pan-Sino Energy Development Company LLC ("Pan-Sino")(a Cayman Islands company),
which in turn holds a 99% ownership interest in Pan-Western Energy Corporation
LLC ("Pan-Western")(a Cayman Islands company), which in turn owns an
approximately 88% interest in four joint venture companies (the "Joint Venture
Companies") organized under the laws of the People's Republic of China ("China")
to develop and construct an independent power project located in China ("Luannan
Project"). The Joint Venture Companies are: Tangshan Panda Heat and Power
Company, Ltd. ("Tangshan Panda"), Tangshan Pan-Western Heat and Power Company,
Ltd. ("Tangshan Pan-Western"), Tangshan Cayman Heat and Power Company, Ltd.
("Tangshan Cayman") and Tangshan Pan-Sino Heat Company, Ltd. ("Tangshan
Pan-Sino"). Additionally, Global Cayman indirectly holds an equity investment in
Bhote Koshi Power Company Pvt. Ltd. (a Nepal company), which was organized under
the laws of Nepal to develop and construct an independent power project in
Nepal.

   Merchant Holding (which collectively with its subsidiaries is a development
stage enterprise having no operating revenues), through wholly owned
subsidiaries, has been established to hold the Company's ownership interests in
any domestic projects which might be developed.

   Additionally, the Company conducts other development activities through
various subsidiaries.

   See Note 14 regarding going concern considerations of the Company.

2.   SIGNIFICANT ACCOUNTING POLICIES

   The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. Any differences from those estimates are
recorded in the period in which they are identified.

   CASH -- Included in cash and cash equivalents are highly liquid investments
with original maturities of three months or less.

                                      F-8
<PAGE>
   RESTRICTED CASH - CURRENT -- Restricted cash-current represents escrowed cash
which may be used to pay operating expenses and make debt payments and
distributions to partners pursuant to the trust indenture agreements.

   RESTRICTED CASH - DEBT SERVICE RESERVES AND ESCROW DEPOSITS -- Debt service
reserves and escrow deposits include cash held by the bank to pay debt service
and capital improvements pursuant to the trust indenture agreements.

   FUEL OIL, SPARE PARTS AND SUPPLIES -- These items include fuel oil stored
on-site and various spare parts and supplies necessary for plant maintenance.
The items are valued at cost using the weighted average method, and are
expensed, as plant operating expenses, when used.

   PLANT AND EQUIPMENT -- Electric generating facility assets are recorded at
cost and depreciated using the straight-line method over the estimated useful
lives of the assets, generally twenty-five years. Depreciation of office
furniture, equipment, and leasehold improvements is provided using the
straight-line method over the estimated useful lives of the assets, generally
three to five years. Costs, including interest on funds borrowed to finance the
construction of facilities, related to projects under construction are
capitalized as construction in progress. Construction in progress balances are
transferred to electric generating facilities when the assets are ready for
their intended use. Capitalized interest was $2,057,000, $7,344,000 and
$13,641,000 during 1997, 1998 and 1999, respectively. Maintenance and repair
costs, including major overhaul projects, are charged to expense as incurred.

   DEVELOPMENT COSTS -- The Company capitalizes the costs of developing new
projects after achieving certain project-related milestones which indicate that
completion of the project is probable. Such costs include direct incremental
amounts incurred for professional services (primarily legal, engineering and
consulting services), permits, options and deposits on land and equipment
purchase commitments, capitalized interest and other related costs. The
continued capitalization is subject to on-going risks related to successful
completion, including legal, political, siting, financing, construction,
permitting and contract compliance. Development costs are transferred to
construction in progress when financing has been obtained and construction
activity has commenced, or are expensed at the time the Company determines that
a particular project will no longer be developed.

   DEBT ISSUANCE COSTS -- The costs related to the issuance of debt are
capitalized and amortized using the effective interest method over the term of
the related debt.

   START-UP COSTS -- In 1999, the Company adopted Statement of Position 98-5,
"Reporting on the Costs of Start-Up Activities", which requires the costs of
start-up activities and organization costs to be expensed as incurred. Such
adoption had no material impact on its financial position or results of
operations.

   DEFERRED REVENUE -- Revenue from the sale of rights to future interest income
from certain of the Company's restricted cash accounts (debt service reserves
and escrow deposits) is deferred and recognized as interest revenue over the
lives of the related debt obligations.

   ENVIRONMENTAL MATTERS -- The operations of the Company are subject to
federal, state and local laws and regulations relating to protection of the
environment. Although the Company believes that its operations are in compliance
with applicable environmental regulation, risks of additional costs and
liabilities are inherent in cogeneration operations, and there can be no
assurance that significant costs and liabilities will not be incurred by the
Company. Management is not aware of any contingent liabilities that currently
exist with respect to environmental matters.

   Environmental expenditures are expensed or capitalized as appropriate.
Expenditures that relate to an existing condition caused by past operations, and
which do not contribute to current or future revenue generation, are expensed.
Liabilities are recorded if environmental assessments and/or remedial efforts
become probable, and the costs reasonably estimable.

   REVENUE RECOGNITION -- Revenue generated from the sale of electric capacity
and energy from the Rosemary project is recognized based on the amount billed
under the power purchase agreements. The revenue generated from the sale of
electric capacity and energy from the Brandywine project is recognized based on
the lesser of the amount billable under the power purchase agreement or an
amount determined by the annual kilowatts made available multiplied by the
estimated average revenue per kilowatt over the term of the power purchase
agreement. Revenue from the sale of steam and chilled water is recognized based
on the output delivered at rates specified under contract terms.

   INCOME TAXES -- The Company records income taxes according to Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes" (SFAS 109)
which requires deferred tax liabilities or assets to be recognized for the
anticipated future tax effects of temporary differences that arise as a result
of the differences in the carrying amounts and the tax bases of assets and
liabilities. SFAS 109 also requires a valuation allowance for deferred tax
assets in certain circumstances.

                                      F-9
<PAGE>
   The Company is included in the consolidated federal income tax return of
PEII. PEII's policy is to allocate income tax expense or benefits to the Company
as if it filed a separate tax return.

   ALLOCATION OF ADMINISTRATIVE COSTS -- PEII performs certain accounting,
legal, insurance, and consulting services for the Company. These general and
administrative costs are generally allocated to the Company using the percentage
of time PEII personnel spent performing these services. The expenses allocated
were $5,975,000, $7,200,000 and $9,300,000 in 1997, 1998 and 1999, respectively,
and are included in project development and administrative expenses in the
statement of operations. Management believes the method used to allocate these
costs is reasonable.

   ASSET IMPAIRMENT -- In accordance with Statement of Financial Accounting
Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of" (SFAS 121), the Company evaluates the
impairment of long-lived assets if circumstances indicate that the carrying
value of those assets may not be recoverable.

   INTEREST COST -- Total interest cost incurred, including capitalized
interest, was $57,386,157, $64,543,458 and $64,637,929 in 1997, 1998 and 1999,
respectively.

   CHANGE IN ACCOUNTING STANDARDS -- Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities", is
effective for fiscal years beginning after June 15, 2000. This standard requires
that all derivative financial instruments be recognized as either assets or
liabilities on the balance sheet at their fair values and that accounting for
the changes in the fair values is dependent upon the intended use of the
derivatives and their resulting designations. The new standard will supercede or
amend existing standards that deal with hedge accounting and derivatives. The
Company has not yet determined the effect adopting this standard will have on
its financial statements.

   CONSOLIDATION -- The consolidated financial statements include the accounts
of all subsidiaries in which the Company has a controlling financial interest.
All material intercompany accounts and transactions are eliminated in
consolidation. For the years ended December 31, 1997, 1998 and 1999, the
consolidated financial statements include all subsidiaries with the exception of
a project in Nepal (see Note 6). The Company uses the equity method of
accounting for the Nepal project.

   RECLASSIFICATIONS -- Certain reclassifications have been made to the 1997 and
1998 financial statements to conform to the 1999 presentation.

3.  ADVANCES TO PARENT

   Advances to parent represent cash advances to or from the parent, including
costs incurred by the parent on the Company's behalf or transferred to the
Company, allocations of administrative and certain other expenses (such as
income taxes) from the parent, and the excess of liabilities assumed over the
assets contributed on projects owned by the parent and contributed in connection
with the formation of the Company.

   The advances to parent for the years ended December 31, 1997, 1998 and 1999
consist of the following:


         Balance, January 1, 1997 ..........................       $ 52,782,940
         Cash advanced to parent, net ......................          5,930,441
         Administrative expenses allocated from parent .....         (5,975,000)
                                                                   ------------
         Balance, December 31, 1997 ........................         52,738,381
         Cash advanced to parent, net ......................          4,227,377
         Administrative expenses allocated from parent .....         (7,200,000)
                                                                   ------------
         Balance, December 31, 1998 ........................         49,765,758
         Cash advanced to parent, net ......................         44,817,399
         Income taxes allocated from parent ................        (13,000,000)
         Administrative expenses allocated from parent .....         (9,300,000)
                                                                   ------------
         Balance, December 31, 1999 ........................       $ 72,283,157
                                                                   ------------

                                      F-10
<PAGE>
   The average balance of advances to parent was $52,760,000, $51,252,000 and
$61,024,000 during 1997, 1998 and 1999, respectively.

4.  FUEL OIL, SPARE PARTS AND SUPPLIES

   Fuel oil, spare parts and supplies are comprised of the following amounts:

                                                       1998               1999
                                                   ----------         ----------
            Fuel oil .....................         $3,095,299         $3,003,158
            Spare parts and supplies .....          3,228,892          3,260,113
                                                   ----------         ----------
                      Total ..............         $6,324,191         $6,263,271
                                                   ----------         ----------

5.  POWER PROJECTS

   ROSEMARY PROJECT -- Effective May 5, 1989, PEII formed a wholly-owned
subsidiary, now a wholly-owned subsidiary of the Company, to develop, construct,
and operate the 180 megawatt gas-fired Rosemary cogeneration facility in Roanoke
Rapids, North Carolina ("Rosemary Project"). Construction on the Rosemary
Project began in September 1989, and commercial operation of the facility began
on December 27, 1990.

   The Rosemary Project produces both electricity and useful thermal energy in
the form of steam. Electric capacity and energy sales are based on the terms of
the power purchase agreement between Panda-Rosemary and Virginia Electric Power
Company ("VEPCO") dated January 24, 1989, as amended. The agreement requires
Panda-Rosemary to provide VEPCO with all the available capacity of the Rosemary
Project on an as-needed basis with VEPCO obligated to pay for the power
delivered and dependable capacity of the facility at a rate per kilowatt which
decreases in certain periods as defined by the agreement. The term of the
agreement is 25 years and expires December 2015. A financial institution has
provided a letter of credit for approximately $5 million guaranteeing
Panda-Rosemary's performance under the power purchase agreement. Steam and
chilled water are sold to a third party under a separate agreement which also
has a term of 25 years and expires December 2015. The Rosemary Project is
managed by PRC, the general partner, and is operated by a subsidiary of PEII.
The Company incurred management fees related to the Rosemary Project of
$1,675,142, $1,709,368 and $1,756,056 to the affiliated management company for
the years ended December 31, 1997, 1998 and 1999, respectively.

   BRANDYWINE PROJECT -- On August 9, 1991, Panda-Brandywine entered into a
power purchase agreement ("PPA") with Potomac Electric Power Company ("PEPCO")
to build a 230 megawatt gas-fired facility in Brandywine, Maryland ("Brandywine
Project"). The Brandywine Project, constructed by Raytheon Engineers and
Constructors, Inc. ("Raytheon") under a fixed fee, turnkey contract, was
substantially completed and commenced commercial operations in October, 1996.

   In late 1997, Panda-Brandywine and PEPCO reached an agreement, which was
finalized in July 1998, for modification of the PPA. Under the agreement, the
amount of capacity payments will be increased (as compared with the capacity
payments originally anticipated) during the early years, and will be reduced
during the later years, of the Brandywine Power Purchase Agreement. In July
1998, PEPCO paid to Panda-Brandywine an additional capacity payment of
approximately $3.8 million, which represents the difference between the
originally scheduled capacity payments and the capacity payments due under the
agreement for the first nine months of 1997. In October 1997, PEPCO commenced
increased capacity payments to the Company under the terms of the agreement.
Additionally, PEPCO agreed to release certain amounts of capacity to
Panda-Brandywine for resale of energy to other parties, and to grant
Panda-Brandywine the right to sell additional energy to other parties subject to
the availability of the facility. The agreement with PEPCO required the consent
of the financing parties, including General Electric Capital Corporation
("GECC"), under the capital lease financing arrangements for the facility. In
this regard, in July 1998 Panda-Brandywine also executed an agreement with GECC
which, among other things, provides for the revision of the lease payment
schedule to GECC in order to match the revised capacity payment schedule with
PEPCO. See Note 8.

   Effective November 1, 1999, the Brandywine Project is operated by a
subsidiary of PEII. The Company incurred management fees related to the
Brandywine Project of $297,000 to the affiliated management company for the two
months ended December 31, 1999. An unaffiliated third party managed the
Brandywine Project through October 31, 1999.

                                      F-11
<PAGE>
   A construction loan commitment in the amount of $215 million was provided by
GECC in April, 1995. On December 30, 1996 the loan converted to a capital lease
with GECC in the amount of $217.5 million with a twenty year term and two five
year renewal options (see Note 8). GECC has committed to provide letters of
credit up to a maximum of approximately $7.0 million (under certain
circumstances) guaranteeing Panda-Brandywine's performance under the power
purchase agreement.

   KATHLEEN PROJECT -- In 1991, through a wholly-owned subsidiary, the Company
entered into a 30-year power purchase agreement with Florida Power Corporation
("Florida Power") to build a 75 megawatt gas-fired facility near Lakeland,
Florida ("Kathleen Project"). The Company and Florida Power were engaged in
litigation for several years over issues relating to the term of the power
purchase agreement and whether the Kathleen Project, as designed, complied with
the terms of the power purchase agreement and the regulations of the Florida
Public Service Commission ("Florida PSC"). In 1998, after the Florida Supreme
Court and the U.S. Supreme Court declined to review certain adverse rulings of
the Florida PSC relating to the Kathleen Project, the Company discontinued
development of the Kathleen Project. Accordingly, the development costs of $2.9
million and certain related deposits of $0.8 million were expensed in 1998.

   LUANNAN PROJECT -- In 1994, PEII entered into a preliminary letter of intent
with a subsidiary of the North China Power Group Company ("NCPGC") for the
purchase and sale of electric energy from two 50 megawatt coal-fired
cogeneration plants to be located in Luannan County, Tangshan Municipality,
Hebei Province, China. On September 22, 1995, Tangshan Panda and Tangshan
Pan-Western entered into a Power Purchase Agreement with NCPGC for the purchase
and sale of electric energy from the Luannan Project. Under the terms of the
20-year agreement, all electrical output of the project will be sold to NCPGC.
The steam and hot water generated by Tangshan-Cayman's facility within the
project will be sold to the domestic Chinese industrial and commercial markets
by Tangshan Pan-Sino. Financing for the project was completed in April 1997 (see
Note 8). The Luannan Project is being constructed pursuant to a fixed-price,
turnkey contract with Harbin Power Engineering Company Limited ("Luannan EPC
Contractor"), subject to escalation under certain circumstances. The functional
currency for the Luannan Project is the U.S. dollar. The Company has incurred
costs for the Luannan Project of $81.5 million and $108.5 million as of December
31, 1998 and 1999, respectively, which are included in plant and equipment under
construction in progress in the accompanying balance sheet.

   In May 1999, the Company filed an application with the Chinese government for
determination of the initial tariff under the Luannan Power Purchase Agreement.
The Company is continuing discussions with the Chinese government concerning the
tariff application and the related approval process. The tariff application is
still in process and the Company has not yet received an approved tariff from
the government. The Luannan Facility has passed performance testing, although it
has not yet been declared ready for commercial operations (primarily due to the
lack of a tariff under the power purchase agreement, and to further performance
adjustments to be made by the Luannan EPC Contractor). There can be no assurance
that the Company will receive the requested tariff, and the approved tariff may
be significantly lower than the amount requested. If the approved tariff varies
from the requested amount, the Company's consolidated financial position,
results of operations and cash flows could be materially adversely affected.

   The Luannan Project is subject to political, regulatory and economic
uncertainties, risks of expropriation of property and cancellation or
modification of contract rights, foreign exchange restrictions, construction
risk, dependence on limited number of customers and other risks arising from
foreign governmental sovereignty.

   TEXAS PROJECTS - At December 31, 1998, the Company was developing two
"merchant plant" projects in Texas. The projects will sell electric energy to
power purchasers and power marketers in the Electric Reliability Council of
Texas ("ERCOT") on the basis of negotiated prices. Because the projects will be
merchant plants, it is expected that the power purchasers will change from time
to time over the lives of the projects.

   The first Texas project was a 1,000 megawatt ("MW") natural gas-fired
electric generating facility located near the city of Paris, Lamar County, Texas
(the "Paris Project"). Preliminary engineering work and equipment purchases for
the project began in July 1998. The Company had incurred costs on the Paris
Project of $51.3 million as of December 31, 1998. Such costs are included in the
accompanying balance sheet in plant and equipment under development costs. The
Company incurred certain short-term debt in connection with equipment purchases
for the project (see Note 7). In February 1999, the Company sold the Paris
Project to a third party for a price of approximately $160.5 million. The
Company retained a 1% limited partnership interest in the project. Of the sale
price, $10 million is being held in escrow pending the resolution of certain
contingencies regarding the completion of the project. After the project
commences commercial operations, any funds remaining in escrow will be
distributed to the Company. In connection with the sale, the Company repaid the
borrowings and accrued interest under the Bridge Financing Agreement of
approximately $48.5 million (see Note 7). The Company realized a gain of
approximately $86.7 million on the sale. Gain recognition will be deferred on
the $10 million held in escrow pending final disposition of the escrowed funds.

                                      F-12
<PAGE>
   The second Texas project was a proposed 1,000 MW natural gas-fired electric
generating facility to be located in Guadalupe County, Texas (the "Guadalupe
Project"). Preliminary engineering work and equipment purchases for the Project
began in July 1998. The Company had incurred costs on the Guadalupe Project of
$7.4 million as of December 31, 1998. Such costs are included in the
accompanying balance sheets in plant and equipment under development costs. In
March 1999, the Company sold the Guadalupe Project (which was in the initial
stage of development) to PEII for $8.0 million, which was the fair market value
of the project as determined by an independent engineering firm. The proceeds in
excess of the Company's capitalized costs of approximately $7.6 million on the
project have been included in advances to parent in the accompanying financial
statements.

   OTHER DOMESTIC PROJECTS - At December 31, 1999, the Company has two domestic
merchant plant projects under development, one in Pennsylvania and the other in
Florida.

   The Pennsylvania project is a 1,000 MW natural gas-fired electric generating
facility to be located near Upper Hanover Township, Pennsylvania (the "Perkiomen
Project"). Preliminary engineering work and other development activities for the
project began in early 1999. The Company has incurred costs on the Perkiomen
Project of approximately $789,000 as of December 31, 1999. Such costs are
included in the accompanying balance sheet in plant and equipment under
development costs.

   The Florida project is a 1,000 MW natural gas-fired electric generating
facility to be located in St. Lucie County, Florida (the "Midway Project").
Preliminary engineering work and other development activities for the project
began in early 1999. The Company has incurred costs on the Midway Project of
approximately $249,000 as of December 31, 1999. Such costs are included in the
accompanying balance sheet in plant and equipment under development costs.

   EQUIPMENT DEPOSITS -- The Company has paid deposits of $31.7 million on
equipment orders at December 31, 1999. A portion of such deposits is
nonrefundable.

   NEPAL PROJECT -- The Company has an equity  investment in a hydroelectric
power project in Nepal.  See Note 6.

6. INVESTMENT IN JOINT VENTURE

   The Company has an investment in a joint venture (Bhote Koshi Power Company,
Pvt. Ltd., referred to as "BKPC" ) with a major hydroelectric engineering
company, a unit of the World Bank and a local Nepalese party to build a 36
megawatt hydroelectric facility on the upper Bhote Koshi River in Nepal ("Nepal
Project"). The investment is accounted for under the equity method. The
Company's ownership interest was transferred from a subsidiary of PEII to the
Company at historical cost in June 1997. The functional currency of the Nepal
Project is the U.S. dollar. A 25-year power purchase agreement with the Nepal
Electricity Authority ("NEA") was signed in July 1996. The Nepal Project is
being constructed pursuant to a fixed-price, turnkey contract with China
Gezhouba Construction Group Corporation. Commercial operations are scheduled to
commence in late 2000.

   On December 29, 1997 financial closing occurred with respect to the Nepal
Project. BKPC received commitments for (i) up to approximately $68.8 million in
nonrecourse debt financing from a group of international lenders and (ii) up to
approximately $29.5 million in equity from the Company and a group of
third-party investors which includes one of the lenders. At December 31, 1998
and 1999, approximately $28.9 million and $39.0 million, respectively, of the
debt commitments had been funded and were outstanding. The interest rates on the
loans are a combination of fixed and variable rates, generally at the annual
rate of 325 to 350 basis points above the London Interbank Offered Rate.
Semiannual interest and principal payments on the loans commence in March 1998
and March 2001, respectively. Final maturity of the loans occurs at dates
ranging from 2008 through 2011. Commitment fees of 1% to 2% are payable on
undisbursed portions of the loan commitments.

   The equity commitments of up to approximately $29.5 million referred to above
include approximately $3.1 million in project development and administrative
expenses previously incurred by PEII and the investors which cannot be
capitalized under generally accepted accounting principles and which therefore
are not reflected in BKPC's balance sheet. At December 31, 1998 and 1999,
approximately $9.2 million and $13.9 million, respectively, of the equity
commitment (in addition to the $3.1 million of project development and
administrative expenses referred to above) had been contributed. The Company had
contributed $10.8 million in capitalized development costs (in addition to $1.2
million in project development and administrative expenses) and received cash
reimbursement from BKPC at financial closing for $10.0 million of those costs.
The Company has satisfied its equity commitment of $2 million as of December 31,
1997. In addition to the basic equity commitment, the Company and the investors
are required to contribute up to $10 million on a pro-rata basis in the event of
cost overruns.

                                      F-13
<PAGE>
   The Company and an outside investor ("Investor") jointly own a 75% interest
in BKPC and other investors, including one of the lenders, own the remaining
25%. Based on the agreement with the Investor, cash flow attributable to the
Company's and the Investor's combined 75% ownership interest will be allocated
85% to the Investor and 15% to the Company until the Investor achieves a 20%
internal rate of return on its investment (the "Flip Date"), and then 90% to the
Company and 10% to the Investor thereafter.

   During August 1998, a flood occurred in the upper Bhote Koshi River basin and
as a result, the Nepal Project is currently expected to commence commercial
operations in approximately September 2000, which constitutes a delay of eight
months from the initial projected date of commercial operation, although this
delay may be reduced through implementation of a mitigation program. The total
cost of property damage was approximately $800,000. BKPC has insurance coverage
for a substantial portion of the loss, including business interruption coverage,
subject to a $100,000 deductible on property damage and a 60-day uncovered
period on business interruption coverage. In January 1999, BKPC received
insurance proceeds of $1.7 million, consisting of approximately $700,000 for
property damage and an advance of $1 million for an acceleration program to
mitigate the delay caused by the flood. BKPC has provided notice to the Nepalese
Government and the NEA that it intends to seek appropriate schedule and cost
relief afforded it pursuant to the applicable force majeure provisions under the
applicable power purchase agreement, in addition to any insurance proceeds
received. In this regard, because the NEA has indicated that it does not agree
that the force majeure provisions in the power purchase agreement support the
schedule and cost relief, a notice of arbitration has been delivered to the NEA
to address the issue.

   The Nepalese Government has recently replaced various taxes with a broad
"Value Added Tax" ("VAT") and has applied the VAT to the Nepal Project. BKPC
management believes that application of the VAT amounts to a "Change in Law"
under the force majeure provisions in the applicable power purchase agreement
and, accordingly, has delivered notice to the NEA that it intends to seek
appropriate price relief to recover any VAT imposed on the Nepal Project.

   The Company does not currently believe that the delay in commercial operation
of the Nepal Facility or the VAT imposed on certain capital items of the Nepal
Facility will cause a material adverse effect on the consolidated financial
position or results of operations of the Company. However, in the event that
commercial operations at the Nepal Facility are commenced after December 31,
2000, the applicable power purchase agreement could be terminated and there
could be a material adverse effect on the Company's consolidated financial
position or results of operations.

   The Nepal Project is subject to political, regulatory and economic
uncertainties, risks of expropriation of property and cancellation or
modification of contract rights, foreign exchange restrictions, construction
risk, dependence on limited number of customers and other risks arising from
foreign governmental sovereignty.

   BKPC is a development stage enterprise. All development and construction
costs incurred to date have been capitalized.

   Summarized financial information for BKPC at December 31, 1998 and 1999 and
for the years then ended is as follows:

                                                       1998              1999
                                                   -----------       -----------
Balance Sheet:

Cash .......................................       $   224,954       $   196,984
Restricted cash - current ..................         2,675,625         5,786,638
Insurance proceeds receivable ..............         1,719,272              --
Construction in progress and
    other noncurrent assets ................        39,073,422        57,905,323
                                                   -----------       -----------
Total assets ...............................       $43,693,273       $63,888,946
                                                   -----------       -----------
Current liabilities ........................       $ 5,898,601       $10,495,202
Long-term debt .............................        28,929,809        39,034,483

Stockholders' equity .......................         8,864,863        14,359,261
                                                   -----------       -----------
Total liabilities and equity ...............       $43,693,273       $63,888,946
                                                   -----------       -----------

                                      F-14
<PAGE>
Statement of operations:
Flood damage deductible ...................         $(100,000)         $    --

Foreign exchange gain (loss) ..............          (280,213)           857,054
                                                    ---------          ---------
Net income (loss) .........................         $(380,213)         $ 857,054
                                                    ---------          ---------

7. SHORT-TERM DEBT

   In December 1998, the Company entered into a Bridge Financing Agreement
("BFA") with a lender to borrow an aggregate principal amount of approximately
$47.9 million at an annual interest rate of 10% for the purpose of making
payments required under certain agreements for the Paris Project (see Note 5).
In December 1998, the Company borrowed $33 million under the BFA. Borrowings
under the BFA were collateralized by the assets of the Paris Project and by the
general and limited partnership interests therein. During January and February
1999, the Company borrowed the remaining available principal amount of
approximately $14.9 million. In February 1999, the total principal amount and
accrued interest thereon was repaid in connection with the sale of the Paris
Project.

8.   LONG-TERM DEBT AND CAPITAL LEASE OBLIGATION

   Long-term debt and capital lease obligation of the Company as of December 31,
1998 and 1999 are summarized as follows:
<TABLE>
<CAPTION>
                                                                            1998             1999
                                                                       -------------    -------------
<S>                                                                    <C>              <C>
First Mortgage Bonds for Rosemary Project ..........................   $  98,704,744    $  93,404,555
Series A Bonds .....................................................     105,309,201      104,683,122
Senior Secured Notes ...............................................     146,651,674      147,782,910
                                                                       -------------    -------------
   Total long-term debt ............................................     350,665,619      345,870,587
      Less current portion .........................................      (5,924,989)      (7,674,598)
                                                                       -------------    -------------
                                                                       $ 344,740,630    $ 338,195,989

Capital lease obligation for Brandywine Project - current portion ..   $        --      $   1,352,826
Capital lease obligation for Brandywine Project - noncurrent portion     246,078,324      246,557,267
                                                                       -------------    -------------
   Total Capital lease obligation for Brandywine Project ...........   $ 246,078,324    $ 247,910,093
                                                                       -------------    -------------
</TABLE>
   FIRST MORTGAGE BONDS -- In July 1996, Panda-Rosemary Funding Corporation
("PRFC"), a wholly-owned subsidiary of Panda-Rosemary, issued $111,400,000 of
first mortgage bonds ("Rosemary Bonds"). The Rosemary Bonds bear interest at a
fixed rate of 8-5/8% payable quarterly commencing November 15, 1996. Scheduled
principal payments are required quarterly commencing November 15, 1996, and will
continue through maturity on February 15, 2016. The Rosemary Bonds are subject
to mandatory redemption prior to maturity under certain conditions. The Rosemary
Bonds are unconditionally guaranteed by Panda-Rosemary but are non-recourse to
the Company, and are secured by substantially all of the assets of
Panda-Rosemary as well as all of the outstanding capital stock of PRC, PRC II
and PRFC. The indenture contains certain covenants, including limitations on
distributions, additional debt and certain other transactions.

   While amounts are outstanding under the Rosemary Bonds, all revenues of
Panda-Rosemary are remitted to a collateral agent. Funds held by the collateral
agent are included in the accompanying consolidated balance sheets as restricted
cash-current. On a monthly basis, the collateral agent remits to Panda-Rosemary
remaining funds available after payment of all expenditures relating to the
Rosemary project, including debt service, provided that Panda-Rosemary is in
compliance with the

                                      F-15
<PAGE>
debt covenants. Additionally, the collateral agent withholds funds to meet
future debt service, maintenance and pollution control requirements, as required
under the indenture. These amounts are included in the accompanying consolidated
balance sheets as restricted cash-current and restricted cash-debt service
reserves and escrow deposits.

   SERIES A BONDS -- In July 1996, Panda Funding Corporation ("PFC"), a
wholly-owned subsidiary of the Company, issued $105,525,000 of pooled project
bonds ("Series A Bonds"). The Series A Bonds bear interest at a fixed rate of
11-5/8% payable semiannually commencing February 20, 1997. Scheduled principal
payments are required semiannually, with certain exceptions, commencing August
20, 1999 and will continue through maturity on August 20, 2012. The Series A
Bonds are subject to mandatory redemption prior to maturity under certain
conditions. The Series A Bonds are fully and unconditionally guaranteed by PIC
and are guaranteed on a limited basis by Interholding up to a maximum amount
specified by the guarantee agreement which approximates $25.1 million at
December 31, 1999. Additionally, the Series A Bonds are secured by (i) all of
the capital stock of PFC, PIC and Interholding, (ii) 60% of the capital stock of
PIC Cayman, (iii) PIC's interest in distributions from Interholding, and (iv)
certain other collateral. The Series A Bonds are effectively subordinated to the
obligations of PIC's subsidiaries under project-level financing arrangements.
The indenture contains certain covenants, including limitations on
distributions, additional debt and certain other transactions.

   While amounts are outstanding under the Series A Bonds, all distributions to
PIC from Interholding and certain proceeds received from PIC Cayman are remitted
to a collateral agent. On a monthly basis, the collateral agent remits to PIC
remaining funds available after satisfaction of PIC's debt service obligations
(including amounts withheld, if necessary, to meet future debt service and
reserve fund requirements as required by the indenture) provided that PIC is in
compliance with the debt covenants.

   SENIOR SECURED NOTES FOR LUANNAN PROJECT -- In April 1997, PGE issued $155.2
million original principal amount of senior secured notes ("Senior Secured
Notes") to finance the development and construction of the Luannan Project. The
Senior Secured Notes, which were issued at a discount for gross proceeds of
$145.0 million, bear interest at a fixed rate of 12 1/2% payable semiannually
commencing October 15, 1997. Scheduled principal payments are required
semiannually commencing October 15, 2000 and will continue through maturity on
April 15, 2004. The Senior Secured Notes are subject to mandatory redemption
prior to maturity under certain conditions. The Senior Secured Notes are secured
by (i) a pledge of 100% of the capital stock of PGE, 99% of the capital stock of
Pan-Western and at least 90% of the capital stock of Pan-Sino, and (ii) a
security interest in certain funds of PGE and its subsidiaries established under
the indenture. Additionally, the Senior Secured Notes are fully and
unconditionally guaranteed by Panda Global, whose guarantee (the "Senior Secured
Notes Guarantee") is secured by (i) a pledge of 100% of the capital stock of
Panda Global and PEC and (ii) a security interest in certain funds of Panda
Global established under the indenture. The Senior Secured Notes Guarantee is
effectively subordinated to the obligations of PIC and its subsidiaries under
the Series A Bonds and project-level financing arrangements. The indenture
contains certain covenants, including limitations on distributions, additional
debt and certain other transactions.

      The Company understands that on or about February 18, 2000, a letter (the
"CSFB Letter") was sent to Bankers Trust Company in its capacity as trustee
("Trustee") under a Trust Indenture, dated as of April 22, 1997, between Panda
Global and the Trustee ("Company Indenture"), by or on behalf of Credit Suisse
First Boston (Hong Kong) Limited ("CSFB"), as the holder of not less than 25% of
the outstanding 12 1/2% Senior Secured Notes issued bY PGE pursuant to a
separate Trust Indenture, dated as of April 22, 1997, between PGE and the
Trustee (the "PGE Indenture"). The Company understands that the CSFB Letter
alleges certain covenant defaults (not related to payment obligations) under the
PGE Indenture and/or the Company Indenture relating to the sale of certain
assets by the Company and whether fair market value was received in exchange for
such assets. Panda Global is the guarantor under the Senior Secured Notes and
the terms of the Company Indenture and the PGE Indenture are, in material
respects, parallel.

   Panda Global and PGE have brought legal actions against CSFB and others, in
both United States federal district court and state court in Dallas, Texas. The
action brought by PGE in state court was removed to federal court and
consolidated with the action brought by the Company. PGE has filed a motion to
remand the removed case back to state court. The motion has not yet been ruled
upon. In the actions, PGE and Panda Global seek injunctive relief precluding an
acceleration of the Senior Secured Notes on the basis of the alleged defaults
and declaratory relief to the effect that no event of default exists under the
Company and/or PGE Indentures and also seek damages for conspiracy, tortious
interference with contractual relationships and/or business and trade
disparagement. CSFB has moved to have venue transferred to federal district
court in New York. That motion has not yet been ruled upon. As of April 7, 2000,
these legal actions remain pending. If a result adverse to the Company occurs in
this proceeding, there could be a material adverse effect on the Company's
consolidated financial condition, results of operations and cash flows.

   CONSTRUCTION LOAN AND CAPITAL LEASE -- On April 10, 1995, Panda-Brandywine
closed the initial funding of a $215 million construction loan commitment with
GECC. The construction loan bore an interest rate of the Eurodollar rate plus
2.5%.

                                      F-16
<PAGE>
   The Brandywine Project commenced commercial operations on October 31, 1996.
The construction loan was converted to long-term non-recourse financing of
$217.5 million in the form of a capital lease on December 30, 1996. To effect
the lease financing, title to the Brandywine Project was transferred to a third
party trustee and leased back to Panda-Brandywine. The Brandywine facility lease
is a net lease with an initial term of 20 years and two five-year renewal
options. At December 31, 1999, the property covered by the Brandywine facility
lease had a gross book value of approximately $207.5 million and accumulated
depreciation of approximately $25.9 million. In connection with the revision of
the PPA in 1998, the payment schedule of the capital lease was revised in order
to match the revised capacity payment schedule from PEPCO under the PPA (see
Note 5). The modification of lease terms resulted in an increase to the capital
lease asset (electric generating facilities) and the related capital lease
obligation in the amount of $4.8 million. The minimum lease payments through
1999 are less than the interest expense on the capital lease obligation,
resulting in increases in the principal amount of the capital lease obligation.
Amortization of the principal amount of the capital lease obligation begins in
2000. The documents governing the lease financing contain various affirmative
and negative covenants, including limitations on the ability of Panda-Brandywine
to make distributions to its partners.

   The future minimum lease commitments under the capital lease for the
Brandywine Project are as follows:

2000 ....................................................         $  24,887,466
2001 ....................................................            28,642,520
2002 ....................................................            30,057,397
2003 ....................................................            30,215,606
2004 ....................................................            30,245,907
Thereafter ..............................................           361,993,341
                                                                  -------------
Total minimum lease payments ............................           506,042,237
Amounts representing interest ...........................          (258,132,144)
                                                                  -------------
Present value of net minimum payments ...................         $ 247,910,093
                                                                  =============


   LONG-TERM DEBT MATURITIES -- The principal maturities of long-term
obligations, excluding the capital lease relating to the Brandywine Project, for
each of the five years succeeding December 31, 1999 and thereafter are as
follows:

2000 ..............................................               $   7,674,598
2001 ..............................................                  11,629,603
2002 ..............................................                  18,081,509
2003 ..............................................                  22,107,717
2004 ..............................................                 145,080,967
Thereafter ........................................                 148,713,283
                                                                  -------------
Total .............................................                 353,287,677
Less discount .....................................                  (7,417,090)
                                                                  -------------
                                                                  $ 345,870,587
                                                                  =============

9. INCOME TAXES

   A provision for income taxes for 1997 was not recorded since operating losses
were incurred for that year. The Company recognized a deferred tax benefit of
$25,000,000 for 1998 and a tax provision of $38,000,000 for 1999 as discussed
below.

   The tax provision for 1999 relates to the Company's domestic operations and
was primarily attributable to the gain on the sale of the Paris project (see
Note 5). Losses incurred in the Company's offshore operations are not deductible
from the Company's domestic taxable income. The 1998 deferred tax benefit, which
resulted from a reduction in the valuation allowance against deferred tax
assets, was recognized because the subsequent sale of the Paris project in 1999
validated the likely future realization of a portion of the deferred tax assets.

   As a result of the gain on the sale of the Paris project, the Company's
domestic net operating loss carryforwards of approximately $53 million at
December 31, 1998 were utilized in 1999. Accordingly, at December 31, 1999, the
Company has no remaining domestic net operating loss carryforwards. The
Company's foreign subsidiaries have approximately $31 million of net operating
loss carryforwards at December 31, 1999, which are considered to be permanently
invested outside the United States and are not currently available to offset
U.S. taxable income.

                                      F-17
<PAGE>
   The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities as of December 31, 1998 and 1999
were as follows:
<TABLE>
<CAPTION>
                                                                      1998             1999
                                                                 -------------    -------------
<S>                                                              <C>              <C>
            Deferred tax assets:
               Capital lease obligation ......................   $  86,127,000    $  86,769,000

               Domestic net operating loss carry forward .....      18,609,000             --
               Foreign net operating loss carry forward ......       5,281,000        8,608,000
                                                                 -------------    -------------
                                                                   110,017,000       95,377,000
                                                                 -------------    -------------

            Deferred tax liabilities:
               Plant and equipment ...........................      60,402,000       60,481,000
               Other .........................................      14,373,000       12,880,000
                                                                 -------------    -------------
                                                                    74,775,000       73,361,000
                                                                 -------------    -------------
            Net deferred tax assets ..........................      35,242,000       22,016,000
            Valuation allowance ..............................     (10,242,000)     (22,016,000)
                                                                 -------------    -------------
            Net deferred tax asset ...........................   $  25,000,000    $        --
                                                                 =============    =============
</TABLE>
   SFAS No. 109 requires that a valuation allowance be recorded against tax
assets which are not likely to be realized. Prior to their utilization in 1999,
the Company's carryforwards would have expired at specific future dates and
utilization of certain carryforwards would have been limited to specific amounts
each year. However, due to the uncertain nature of their ultimate realization
based upon past performance and expiration dates, prior to 1998 the Company had
established a full valuation allowance against these carryforward benefits. The
Company's policy is to recognize the benefits only when it is determined that it
is more likely than not that such benefits will be realized. Realization is
entirely dependent upon future earnings in specific tax jurisdictions. In 1998,
the Company reduced the valuation allowance, recognizing a deferred tax benefit,
because the $86.7 million gain on the subsequent sale of the Paris Project (see
Note 5) validated the likely future realization of a portion of the domestic
deferred tax assets. In 1999, the domestic loss carryforwards were utilized. At
December 31, 1999, the valuation allowance was increased to fully offset the
remaining net deferred tax assets. While the need for this valuation allowance
is subject to periodic review, if the allowance is reduced, the tax benefits
will be recorded in future operations as a reduction of the Company's income tax
expense or as an income tax benefit.

   The provision (benefit) for income taxes differs from the amount of income
tax determined by applying the applicable U.S. statutory federal income tax rate
to pre-tax income or losses as a result of the following differences:

                                         1997            1998            1999
                                    ------------    ------------    ------------


Income tax at statutory
    U.S. tax rate ...............   $(11,364,000)   $ (9,416,000)   $ 25,474,000
State income taxes and other ....           --              --           752,000
Change in valuation allowance ...     11,364,000     (15,584,000)     11,774,000
                                    ------------    ------------    ------------
Provision (benefit)
   for income taxes .............   $       --      $(25,000,000)   $ 38,000,000
                                    ============    ============    ============


10.  COMMITMENTS AND CONTINGENCIES

   The Rosemary and Brandywine projects operate as qualifying facilities, and
the related power contracts are subject to the rules and regulations under the
Public Utilities Regulatory Policies Act of 1978 ("PURPA"). In order to promote
open competition in the industry, proposed legislation in the U.S. Congress has
called for either a repeal of PURPA or a complete restructuring of the
regulations governing the electric industry including PURPA. These federal
initiatives are generally not yet effective, but many states are implementing or
considering regulatory initiatives designed to increase competition in the
domestic power generation industry. In most cases, any initiatives discussed
have indicated that power sales agreements of existing qualifying facilities
would be honored. The Company cannot predict the final form or timing of the
proposed restructuring on a

                                      F-18
<PAGE>
federal or individual state level or the impact, if any, that such restructuring
would have on the Company's existing business or results of operations. The
Company cannot currently determine whether any such restructuring would have a
material effect on

its power sales agreements and, accordingly, cannot predict whether its
financial position, results of operations or cash flows would be materially
affected.

   The Company has been informed by PEPCO that PEPCO is pursuing a strategy of
selling all of its generating assets, which the Company believes could include
the Brandywine Power Purchase Agreement. The Company currently cannot determine
the effect on the Company, if any, of such a transfer of the Brandywine Power
Purchase Agreement.

   As discussed in Note 5, Raytheon constructed the Brandywine Project pursuant
to a fixed-price, turnkey engineering, procurement and construction contract
(the "Brandywine EPC Agreement") with Panda-Brandywine. Raytheon completed the
construction and start-up of the Brandywine Project and has met the requirements
for commercial operations and substantial completion under the Brandywine EPC
Agreement. The date on which commercial operations were achieved and the
entitlement of Raytheon to certain early completion bonuses under the Brandywine
EPC Agreement have been the subject of a dispute between Panda-Brandywine and
Raytheon. Panda-Brandywine and Raytheon have reached an agreement under which
payment of the disputed amount will not be required, subject to payment of
Panda-Brandywine's undisputed obligation to Raytheon of approximately $3 million
in accordance with the terms of the agreement. As of December 31, 1999,
Panda-Brandywine had paid all amounts due under the agreement.

   In April 1998, the Company filed suit in federal court charging the Bibb
Company ("Bibb") and Westpoint Stevens, Inc. ("Westpoint") with violating a
contractual agreement in the sale of a textile mill in 1997 and in the operation
of the mill since that time. The Rosemary Facility supplies steam and chilled
water to the textile mill under a contract originally signed with Bibb.
Westpoint acquired the textile mill from Bibb in 1997. The suit asked the court
to determine and clarify the rights of the parties to the contract. The federal
court dismissed this action in June 1998. Shortly thereafter, Bibb and Westpoint
filed a separate suit in state court in Halifax County, North Carolina claiming,
among other things, breach of contract in regard to delivery of steam. In
October 1998, the Company filed suit against Bibb and Westpoint in state court
in Dallas County, Texas regarding the contract. The case has since been removed
to Special Business Court in Winston-Salem, North Carolina, by agreement of the
parties. The Company intends to vigorously pursue its claims against Bibb and
Westpoint in these court actions. The Company continues to provide steam and
chilled water to the mill pursuant to the contract. The Company believes that
the resolution of this contractual dispute will not have a material adverse
effect upon the financial position, results of operations or cash flows of the
Company.

   As of December 31, 1999, the Company has entered into purchase commitments
totaling approximately $325 million for equipment. The Company is pursuing
external financing with respect to funding these commitments.

   The Company has entered into various long-term contracts for the purchase and
transportation of fuel subject to termination only in certain limited
circumstances. These contracts have remaining terms of 10 to 25 years. The
Company's minimum purchase commitment under these contracts is 2.3 million
British thermal units of gas annually from October 31, 1996 through October 31,
2011. In the aggregate, such commitments are not at prices in excess of the
current market.

   PEII is also involved in other legal and administrative proceedings in the
ordinary course of business, which are not disclosed in these consolidated
financial statements. Management believes that the amount of ultimate liability
allocable to the Company with respect to these matters will not have a material
impact on the financial position, results of operations or cash flows of the
Company.

11. RELATED PARTY TRANSACTIONS

   The Company purchases insurance coverage through an agency owned by a major
shareholder of PEII who is also a member of the board of directors of PEII and a
relative of PEII's chairman. The Company believes such coverage is on terms that
are no less favorable than reasonably available from unaffiliated third parties.
Total insurance purchases through this agency were $1,666,623, $994,810 and
$985,584 for the years ended December 31, 1997, 1998 and 1999, respectively.

   The Rosemary and Brandywine projects are operated by an affiliated management
company which is a subsidiary of PEII (see Note 5). Additionally, in 1998, the
Luannan Project, the Nepal Project and the Brandywine Project paid management
fees to PEII of $1,632,800, $300,000 and $180,000, respectively. In 1999, the
Luannan Project, the Nepal Project and the Brandywine Project paid management
fees to PEII of $653,000, $380,000, and $180,000, respectively. Also, in 1999
the Luannan Project paid management fees of approximately $314,000 to the
project's minority interest owners.

                                      F-19
<PAGE>
12.   FAIR VALUE OF FINANCIAL INSTRUMENTS

   The estimated fair values of the Company's assets and liabilities have been
determined using available market information. The estimates are not necessarily
indicative of the amounts the Company could realize in a current market
exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on their estimated fair value amounts.
The fair value of current financial assets, current financial liabilities, and
debt service reserves and escrow deposits, are estimated to be equal to their
reported carrying amounts. The Company's debt securities have limited trading.
The fair value of these securities at December 31, 1998 and 1999 is estimated
based on a third party quotation.

   The estimated fair values of the Company's debt securities as of December 31,
1998 and 1999 are as follows:
<TABLE>
<CAPTION>
                                                                 CARRYING VALUE         FAIR VALUE
                                                               ------------------   ------------------
<S>                                                            <C>                  <C>
        1998: Long-term debt, including current portion ....   $      350,665,619   $      260,400,000
        1999: Long-term debt, including current portion ....          345,870,587          291,200,000
</TABLE>
   The Company is also a party to letters of credit. Historically, no claims
have been made against these financial instruments and management does not
expect any material losses to result from these off-balance-sheet instruments
because performance is not expected to be required. Therefore, management is of
the opinion that the fair value of these instruments is zero.

13.   SIGNIFICANT CUSTOMERS AND GEOGRAPHIC INFORMATION

   The Company's electric capacity and energy sales are derived primarily from
two power sales contracts with two domestic customers. The failure of these
customers to fulfill their contractual obligations could have a substantial
negative impact on the Company's revenue. However, the Company does not
anticipate non-performance by the customers under these contracts. The portion
of electric capacity and energy sales attributable to the two power sales
contracts were as follows:

                                                       1997      1998      1999
                                                       ----      ----      ----
VEPCO (Panda-Rosemary) ...........................       43%       37%       30%
PEPCO (Panda-Brandywine) .........................       52%       56%       65%

   The Company operates in a single industry, the independent power industry.
All of the Company's operating revenues are derived from domestic operations.
The Company's long-lived assets are located in the United States, except for the
Luannan Project in China (see Note 5) and the Nepal Project in Nepal (see Note
6).

14.   GOING CONCERN CONSIDERATIONS

    The Company experienced losses during the years ended December 31, 1997 and
1998 and has a shareholder's deficit of $120.6 million at December 31, 1999.
Management currently believes that the Company may not be able to meet the
interest and principal obligations totalling $11.35 million due in October 2000
on the Senior Secured Notes, as well as subsequent payment obligations with
respect to such notes. As discussed in Note 8, in April 1997, PGE issued $155.2
million original principal amount of Senior Secured Notes to finance the
development and construction of the Luannan Project.

   As discussed in Note 5, the Company filed its initial tariff application with
the Chinese government in May, 1999. The Company is continuing discussions with
the Chinese government concerning its tariff application and the related
approval process. The tariff application is still in process and the Company has
not yet received an approved tariff from the government. The Luannan Facility
has passed performance testing, although it has not yet been declared ready for
commercial operations (primarily due to the lack of a tariff under the power
purchase agreement, and to further performance adjustments to be made by the
Luannan EPC Contractor). There can be no assurance that the Company will receive
the requested tariff, or that the approved tariff will not be significantly
lower than the amount requested. If the approved tariff varies from the
requested amount, the Company's consolidated financial position, results or
operations and cash flows may be materially adversely affected.

                                      F-20
<PAGE>
   The Company understands that on or about February 18, 2000, a letter (the
"CSFB Letter") was sent to Bankers Trust Company in its capacity as trustee
("Trustee") under a Trust Indenture, dated as of April 22, 1997, between Panda
Global and the Trustee ("Company Indenture"), by or on behalf of Credit Suisse
First Boston (Hong Kong) Limited ("CSFB"), as the holder of not less than 25% of
the outstanding 12 1/2% Senior Secured Notes issued by PGE pursuant to a
separate Trust Indenture, dated as of April 22, 1997, between PGE and the
Trustee (the "PGE Indenture"). The Company understands that the CSFB Letter
alleges certain covenant defaults (not related to payment obligations) under the
PGE Indenture and/or the Company Indenture relating to the sale of certain
assets by the Company and whether fair market value was received in exchange for
such assets. Panda Global is the guarantor under the Senior Secured Notes and
the terms of the Company Indenture and the PGE Indenture are, in material
respects, parallel.

   Panda Global and PGE have brought legal actions against CSFB and others, in
both United States federal district court and state court in Dallas, Texas. The
action brought by PGE in state court was removed to federal court and
consolidated with the action brought by the Company. PGE has filed a motion to
remand the removed case back to state court. The motion has not yet been ruled
upon. In the actions, PGE and Panda Global seek injunctive relief precluding an
acceleration of the Senior Secured Notes on the basis of the alleged defaults
and declaratory relief to the effect that no event of default exists under the
Company and/or PGE Indentures and also seek damages for conspiracy, tortious
interference with contractual relationships and/or business and trade
disparagement. CSFB has moved to have venue transferred to federal district
court in New York. That motion has not yet been ruled upon. As of April 7, 2000,
these legal actions remain pending. If a result adverse to the Company occurs in
this proceeding, there could be a material adverse effect on the Company's
consolidated financial condition, results of operations and cash flows.

   These matters raise substantial doubt about the Company's ability to continue
as a going concern. In this regard, the Company has retained financial and legal
advisors to review the financial and legal alternatives available to the
Company, including without limitation a possible debt restructuring of the
Senior Secured Notes, the raising of additional equity or debt financing for the
Company and its affiliates.

   To continue its development activities (including but not limited to the
Company's purchase commitments totaling approximately $325 million for
equipment), the Company will require external financing. Its financial and legal
advisors currently are pursuing several debt and equity financing alternatives
in this regard as well. The Company's restricted cash balances are available
only for specific uses as stated in the relevant indentures (including but not
limited to the indentures related to the Senior Secured Notes), such as the
payment of debt obligations, project development, construction and maintenance,
and are not available for general corporate purposes.

   There can be no assurance that the possible debt restructuring or financings
referred to above will be successfully completed. In such instance, there could
be a material adverse effect on the consolidated financial position, results of
operations and cash flows of the Company which, among other things, could cause
the Company to seek protection under applicable federal bankruptcy laws.

   The accompanying consolidated financial statements do not include adjustments
relating to the recoverability and classification of asset carrying amounts or
the amount and classification of liabilities that might result should the
Company be unable to continue as a going concern.


                                      F-21
<PAGE>
SIGNATURES

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

PANDA GLOBAL HOLDINGS, INC.


Date: April 12, 2000                              By:  /s/
                                                           Robert W. Carter,
                                                       Chairman of the Board and
                                                       Chief Executive Officer

                               POWER OF ATTORNEY

      KNOW ALL PEOPLE BY THESE PRESENTS, that each of the undersigned officers
and directors of Panda Global Holdings, Inc. (the "Company") hereby constitutes
and appoints Robert W. Carter or Janice Carter or any of them (with full power
to each of them to act along), his or her true and lawful attorney-in-fact and
agent, with full power of substitution, for him or her and on his or her behalf
and in his or her name, place and stead, in any and all capacities, to sign,
execute, and file any and all documents relating to the Company's Form 10-K for
the year ending December 31, 1999, including any and all amendments and
supplements hereto, with any regulatory authority, granting said attorneys and
each of them; full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as he himself, or she
herself, might or could do if personally present, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either of them, or
their or his or her substitute or substitutes, may lawfully do or cause to be
done.

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

Signature                     Title                                   Date

/s/                     Chairman of the Board,                    April 12, 2000
Robert W. Carter        Chief Executive Officer and Director
                        (Principal Executive Officer)

/s/                     Executive Vice President,                 April 12, 2000
Janice Carter           Secretary and Treasurer
                        (Principal Financial
                        and Accounting Officer)