EXHIBIT 10.17

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                       OPERATION AND MAINTENANCE AGREEMENT


                                     for the


                          Sayreville Cogeneration Plant


                                       at


                             Sayreville, New Jersey


                                     between


                              Northeast Energy, LP


                                       and


                          ESI Operating Services, Inc.



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                                        1

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                                TABLE OF CONTENTS

                                                                        Page No.
                                                                        --------
                                      ARTICLE I.

                                     DEFINITIONS..........................  1

                                     ARTICLE II.

                                  SCOPE OF SERVICES.......................  2

Section 2.01  Oversight Services..........................................  2
Section 2.02  Transition Services.........................................  2
Section 2.03  Operator Services...........................................  2
Section 2.04  Agency......................................................  2
Section 2.05  Operator Notices............................................  3

                                    ARTICLE III.

                              RESPONSIBILITIES OF OWNER...................  3

Section 3.01  Responsibilities of Owner...................................  3
Section 3.02  Owner Notices...............................................  3

                                     ARTICLE IV.

                            PROCEDURES, PLANS AND RECORDS.................  3

Section 4.01  Plant Manual................................................  3
Section 4.02  Transition Plan.............................................  4
Section 4.03  Annual Plan.................................................  5
Section 4.04  Emergencies.................................................  7
Section 4.05  Right of Owner to Inspect Records...........................  7
Section 4.06  Capital Improvements........................................  7

                                     ARTICLE V.

                       COMPENSATION, COSTS AND REIMBURSEMENTS.............  8

Section 5.01  Costs and Expenses..........................................  8
Section 5.02  Operating Fee...............................................  8
Section 5.03  O&M Operating Account.......................................  9
Section 5.04  Late Payments...............................................  9


                                      (i)
<PAGE>

                                     ARTICLE VI.
                                TERM AND TERMINATION......................  9

Section 6.01  Term........................................................  9
Section 6.02  Termination upon Notice by Owner............................  9
Section 6.03  Termination upon Notice by Operator......................... 10
Section 6.04  Termination for Insolvency.................................. 10
Section 6.05  Termination Upon Certain Other Events....................... 10
Section 6.06  Duties Upon Termination..................................... 10
Section 6.07  Effect of Termination....................................... 11
Section 6.08  Termination Payment......................................... 11

                                    ARTICLE VII.

                               LIMITATION OF LIABILITY.................... 11

Section 7.01  No Consequential Damages.................................... 11
Section 7.02  Limitation of Aggregate Liability........................... 12

                                    ARTICLE VIII.

                       INDEMNIFICATION, INSURANCE BY OPERATOR............. 12

Section 8.01  Indemnification............................................. 12
Section 8.02  Insurance Coverage.......................................... 12

                                     ARTICLE IX.

                         INDEMNIFICATION, INSURANCE BY OWNER.............. 13

Section 9.01  Indemnification............................................. 13
Section 9.02  Procedure................................................... 13
Section 9.03  Insurance Coverage.......................................... 14

                                     ARTICLE X.

                                    FORCE MAJEURE......................... 14

Section 10.01 Force Majeure............................................... 14
Section 10.02 Notice...................................................... 14

                                     ARTICLE XI.

                             RELATIONSHIP OF THE PARTIES.................. 15


                                      (ii)
<PAGE>

                                    ARTICLE XII.

                  REPRESENTATIONS, WARRANTIES AND STANDARD OF CARE........ 15

Section 12.01 Representations and Warranties of Owner..................... 15
Section 12.02 Representations and Warranties of Operator.................. 16
Section 12.03 Standard of Care............................................ 16

                                    ARTICLE XIII.

                                       NOTICES............................ 16

                                    ARTICLE XIV.

                           ASSIGNMENTS AND SUBCONTRACTING................. 17

Section 14.01 Assignments................................................. 17
Section 14.02 Assignment by Owner to NJEA................................. 17
Section 14.03 Security Interest........................................... 18
Section 14.04 Cooperation in Financing.................................... 18
Section 14.05 Subcontracting.............................................. 18

                                     ARTICLE XV.

                  LIMITATIONS OF AUTHORITY; LIENS AND ENCUMBRANCES........ 18

Section 15.01 Limitation on Authority..................................... 18
Section 15.02 No Liens or Encumbrances.................................... 19

                                    ARTICLE XVI.

                         DISPUTE RESOLUTION AND ARBITRATION............... 19

Section 16.01 Dispute Resolution.......................................... 19
Section 16.02 Arbitration................................................. 19
Section 16.03 Survival.................................................... 20

                                     (iii)
<PAGE>

                                    ARTICLE XVII.

                                    MISCELLANEOUS......................... 21

Section 17.01 Severability................................................ 21
Section 17.02 Governing Law............................................... 21
Section 17.03 Entire Agreement............................................ 21
Section 17.04 Captions.................................................... 21
Section 17.05 Counterparts................................................ 21
Section 17.06 No Third Party Beneficiaries................................ 21
Section 17.07 Further Assurances.......................................... 21
Section 17.08 No Implied Waiver........................................... 21
Section 17.09 Amendments.................................................. 22
Section 17.10 Confidentiality............................................. 22
Section 17.11 Decision-Making by Parties.................................. 22
Section 17.12 Schedules................................................... 22



                                      (iv)
<PAGE>


                       OPERATION AND MAINTENANCE AGREEMENT

              This OPERATION AND MAINTENANCE AGREEMENT (this "Agreement") is
made as of the 21st day of November, 1997, between NORTHEAST ENERGY, LP, a
Delaware limited partnership ("Owner"), and ESI OPERATING SERVICES, INC., a
Florida corporation ("Operator"). Owner and Operator are sometimes referred to
individually as a "party," and collectively, the "parties".

                                    RECITALS

              WHEREAS, North Jersey Energy Associates, a Limited Partnership
("NJEA"), is the owner of a 300 megawatt gas-fuel combined cycle cogeneration
plant located in Sayreville, New Jersey (the "Facility");

              WHEREAS, NJEA has entered into that certain Second Amended and
Restated Operation and Maintenance Agreement, dated as of June 28, 1989 (the
"Westinghouse O&M Agreement"), with Westinghouse Electric Corporation, a
corporation organized under the laws of the Commonwealth of Pennsylvania;

              WHEREAS, Owner indirectly holds 100% of the partnership interests
in NJEA;

              WHEREAS, subject to the terms and conditions of this Agreement,
Owner desires to retain, effective as of the expiration or early termination of
the Westinghouse O&M Agreement, Operator to operate and maintain the Facility
and Operator is willing to perform the services described in this Agreement; and

              WHEREAS, until such time, Operator is willing, subject to the
terms and conditions in this Agreement, to perform the Oversight Services and
the Transition Services described herein;

              NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, the receipt and sufficiency of which are hereby
acknowledged, Owner and Operator, intending to be legally bound, agree as
follows:


                                   ARTICLE I.

                                   DEFINITIONS

              As used in this Agreement, capitalized terms shall have the
definitions set forth in Schedule 1.01.



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                                   ARTICLE II.

                                SCOPE OF SERVICES

              Section 2.01 Oversight Services. From the Effective Date through
the day immediately preceding the Transition Period Commencement Date (the
"Oversight Period"), Operator shall provide the services listed on Schedule 2.01
(the "Oversight Services"). Such services shall be conducted in a manner so as
to minimize disruption of operation and maintenance of the Facility. During the
Oversight Period, Operator shall not be responsible for operation or maintenance
of the Facility.

              Section 2.02 Transition Services. From the Transition Period
Commencement Date through the day immediately preceding the Operating Period
Commencement Date (the "Transition Period"), Operator shall review existing
maintenance and operation records and perform all activities necessary to
mobilize its personnel (the "Transition Services"), including without
limitation, the services listed on Schedule 2.02. Such review and mobilization
efforts shall be conducted in a manner so as to minimize disruption of operation
and maintenance of the Facility. During the Transition Period, Operator shall
not be responsible for operation or maintenance of the Facility.

              Section 2.03 Operator Services. From the Operating Period
Commencement Date through the termination, of this Agreement, Operator shall
perform all activities necessary to operate and maintain the Facility (the "O&M
Services"), including without limitation, the services listed on Schedule 2.03.
The O&M Services shall not include, and Operator shall not be responsible for,
supplying water, natural gas or start up electrical power for the Facility,
securing or maintaining Owner Permits, arranging for the sale of steam or
electricity, except as specifically required by this Agreement maintaining the
insurance required by the Indenture, or the services described in Schedule 3.01;
provided, however, that the foregoing shall not limit Operator's obligation to
coordinate and/or arrange for the supply of such services as set forth herein.

              Section 2.04 Agency.

              (a) To the extent expressly set forth in the Approved Transition
Plan, Operator is hereby authorized by Owner to enter into, on behalf of Owner
and as agent of Owner, purchase orders and service agreements in connection with
the Transition Services.

              (b) Subject to the Approved Annual Plan, the administrative
procedures set forth in the Approved Plant Manual and Article XI hereof,
Operator is hereby authorized by Owner to enter into, on behalf of Owner and as
agent of Owner, purchase orders and service agreements in connection with the
O&M Services.

              (c) Operator shall not claim title to any supplies, consumables,
tools, office equipment or furniture acquired on behalf of Owner.
Notwithstanding anything herein to the contrary, title to any software developed
or modified specifically for the Facility, whether by Owner, Operator or a


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third-party contractor, shall vest in Owner. Operator may retain title to any
commercially available software or equipment purchased by Operator or its
Affiliates with its own funds; provided, however, all records with respect to
the operation and maintenance of the Facility maintained with such software
shall be the property of Owner.

              Section 2.05 Operator Notices. Operator shall provide to Owner
copies of all notices from third parties received by Operator in connection with
Operator's performance of its responsibilities under this Article II. Operator
shall designate in writing to Owner an individual who will act on behalf of
Operator with respect to communicating decisions and directions to Owner under
this Agreement. Such individual shall also be available at reasonable times to
receive communications from Owner and provide appropriate responses to Owner.


                                  ARTICLE III.

                            RESPONSIBILITIES OF OWNER

              Section 3.01 Responsibilities of Owner. From the Effective Date to
the end of the term of this Agreement, Owner shall provide, at Owner's sole cost
and expense, and in addition to the other services specifically set forth in
this Agreement, the services listed on Schedule 3.01.

              Section 3.02 Owner Notices. Owner shall give Operator at least 120
days prior written notice of an early termination of the Westinghouse Agreement.
Owner shall also provide to Operator copies of all notices from third parties
received by Owner in connection with Owner's performance of its responsibilities
under this Article III. Owner shall designate in writing to Operator an
individual who will act on behalf of Owner with respect to communicating
decisions and directions to Operator under this Agreement. Such individual shall
also be available at reasonable times to receive communications from Operator
and provide appropriate responses to Operator.


                                   ARTICLE IV.

                          PROCEDURES, PLANS AND RECORDS

              Section 4.01 Plant Manual. During the Transition Period, Operator
shall review the existing plant operating, maintenance and safety procedures
(the "Existing Plant Procedures") currently in use at the Facility and sixty
(60) days before the Operating Period Commencement Date, submit to Owner a
report outlining the proposed scope of and schedule for revision and the
incorporation of the Existing Plant Procedures into a plant manual (the "Plant
Manual"). The Plant Manual shall be consistent with applicable Law, the Project
Documents and the original equipment manufacturers manuals. All safety,
environmental and administrative-related revisions shall be scheduled for
implementation as of the Operating Period Commencement Date. Operator's report
shall address, at a minimum, the following plans and procedures:

              (a) staffing plan;

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              (b) spare parts program;

              (c) administrative procedures;

              (d) operating procedures;

              (e) maintenance program;

              (f) safety and security program;

              (g) accounting procedures;

              (h) environmental procedures;

              (i) record-keeping and reporting procedures;

              (j) procurement procedures; and

              (k) outage planning procedures.

Thereafter, Owner and Operator shall meet to resolve any differences with
respect to the Existing Plant Procedures and to agree on a Plant Manual and a
plan for revision of the Plant Manual, if necessary; provided, however, that if
Owner and Operator are unable to agree, the decision of Owner shall be binding
on the parties unless patently unreasonable or contrary to this Agreement or
applicable Law. Owner and Operator shall seek diligently to agree on the Plant
Manual and the plan for revision of the Plant Manual, if necessary, no later
than twenty (20) days before the Operating Period Commencement Date. The
approved Plant Manual shall remain in effect for the term of this Agreement,
subject to revision and amendment as may be proposed by Owner or Operator and
consented to in writing by both parties. The Plant Manual and all revisions
approved pursuant to this section shall be the "Approved Plant Manual." Operator
shall be responsible for maintenance and update of the Approved Plant Manual,
shall conduct an annual review of the Approved Plant Manual and shall make such
changes to the Approved Plant Manual as Owner shall reasonably request, except
as required by applicable Law or this Agreement. All costs associated with
developing the Approved Plant Manual and any revisions thereof shall be deemed
O&M Expenses.

              Section 4.02 Transition Plan.

              (a) Eighty (80) days before the Operating Period Commencement
Date, Operator shall prepare and submit to Owner a proposed plan for orderly
transition of the operation and maintenance responsibilities for the Facility to
Operator (the "Transition Plan"). The Transition Plan shall describe, in detail
reasonably acceptable to Owner, anticipated schedule, objectives, staffing
plans, equipment acquisitions, spare parts and Consumables inventories
(including a breakdown of capital items and expense items), schedules of
subcontractor services, and such other matters as Owner may reasonably require.
Any actions proposed under the Transition Plan shall be consistent with Prudent
Industry Practices and this Agreement. The Transition Plan shall contain a
proposed budget for the Transition Period that shall describe, in detail
reasonably acceptable to Owner, the estimated cost, based on time and materials
and all fees, for any anticipated Transition Services to be provided by Operator
during Transition Period and the assumptions used in developing such budget.
When approved pursuant to Section 4.02(b) below, the Transition Plan shall be an
"APPROVED TRANSITION PLAN."

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              (b) Owner shall give its written approval or disapproval of the
Transition Plan no later than 30 days after receipt thereof from Operator. If
Owner disapproves all or any portion of the proposed Transition Plan, Owner and
Operator shall make all reasonable efforts to agree upon the items and
associated costs to be included in the Transition Plan. If Owner and Operator
cannot agree on the Transition Plan, those elements of the Transition Plan that
are in dispute shall be revised in accordance with the reasonable specifications
of Owner, however, in no event shall the Transition Plan require Operator to (i)
deviate from its practices regarding salary administration, compensation and
personnel practices, except as required by Laws or Prudent Industry Practices or
(ii) perform services that might conflict with Operator's duties under this
Agreement or applicable Laws.

              (c) An Approved Transition Plan shall constitute authorization for
Operator to incur costs and expenses as agent on behalf of Owner to the extent
set forth in the budget contained in Approved Transition Plan. Operator shall
notify Owner as soon as reasonably possible of any anticipated monetary
variances in estimated expenses for the Transition Period.

              (d) If either party desires to request an amendment to the
Approved Transition Plan, Owner and Operator shall make all reasonable efforts
to agree upon any proposed changes to the Approved Transition Plan. Once
approved, the revised Transition Plan shall supersede the then current Approved
Transition Plan.

              Section 4.03 Annual Plan.

              (a) Sixty (60) days before the Operating Period Commencement Date
and ninety (90) days before the first day of each Operating Year commencing
thereafter, Operator shall prepare and submit to Owner a proposed operating and
maintenance plan for the upcoming Operating Year (the "OPERATING PLAN"). The
Operating Plan shall describe, in detail reasonably acceptable to Owner,
anticipated maintenance and overhaul schedules, performance objectives,
predictive and preventative maintenance programs or plans, Planned Outages,
staffing plans, equipment acquisitions, spare parts and Consumables inventories
(including a breakdown of capital items and expense items), schedules of
subcontractor services, plant performance data regarding required environmental
performance, and such other matters as Owner may reasonably require. Any actions
proposed under the Operating Plan shall be consistent with the Approved Plant
Manual, Prudent Industry Practices and this Agreement. Together with the
Operating Plan, Operator shall submit to Owner for its review and written
approval a proposed budget for operating and maintaining the Facility during the
upcoming Operating Year pursuant to the Operating Plan and Prudent Industry
Practices (the "OPERATING BUDGET") that shall describe, in detail reasonably
acceptable to Owner, the estimated cost, based on time and materials and all


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fees, for all anticipated O&M Services to be provided by Operator during each
month of the upcoming Operating Year and the assumptions used in developing the
Operating Budget. (The Operating Plan and the Operating Budget for the upcoming
Operating Year are sometimes collectively referred to as the "Annual Plan").
When approved pursuant to Section 4.03(b) below, the Annual Plan shall be an
"APPROVED ANNUAL PLAN" and shall consist of an "APPROVED OPERATING PLAN" and an
"APPROVED OPERATING BUDGET."

              (b) Owner shall give its written approval or disapproval of the
Annual Plan no later than 60 days after receipt thereof from Operator. If the
Annual Plan is not approved or disapproved within such 60-day period, the Annual
Plan for the previous year shall remain in effect until a new Annual Plan has
been approved by Owner. If Owner disapproves all or any portion of the proposed
Annual Plan, Owner shall provide the reasons for such disapproval in writing and
Owner and Operator shall make all reasonable efforts to agree upon the items and
associated costs to be included in the Annual Plan. If Owner and Operator cannot
agree on the Annual Plan, those elements of the Annual Plan that are in dispute
shall be revised on an interim basis in accordance with the reasonable
specifications of Owner. Owner and Operator agree to proceed pursuant to such
revised Annual Plan pending the final resolution of their disagreement. The
Owner-specified Operating Budget or Operating Plan will be deemed an Approved
Operating Budget or an Approved Operating Plan until such resolution. However,
in no event shall such revised Annual Plan require Operator to (i) deviate from
its practices regarding salary administration, compensation and personnel
practices, except as required by Laws or to comply with Prudent Industry
Practices or (ii) perform services that might conflict with Operator's duties
under this Agreement or applicable Laws. Facility staffing levels shall be
adjusted to appropriately respond to any material and sustained changes in the
operation of the Facility required by changes to the Project Documents, or as
mutually agreed upon by Owner and Operator.

              (c) An Approved Annual Plan shall constitute authorization for
Operator to incur costs and expenses as agent on behalf of Owner to operate and
maintain the Facility in accordance with such Approved Operating Budget.
Operator shall notify Owner if Operator reasonably believes that expenses
anticipated to be incurred would exceed the O&M Expenses projected to be
incurred as set forth in the Approved Operating Budget for the applicable
Operating Year. Operator shall follow Owner's instructions regarding further
expenditures on Owner's behalf with respect to such variances. Unless and until
Owner approves additional expenditures, Operator shall, subject to Section 4.04
below, not incur expenses on behalf of Owner in excess of the projected O&M
Expenses in the Approved Operating Budget, and any expenses so incurred shall
not be deemed to be O&M Expenses.

              (d) If either party desires to request an amendment to an Approved
Annual Plan at any time during the Operating Year, such party shall submit a
proposed revised Annual Plan for the other party's consideration, including the
basis for the adjustment, and such other party shall approve or disapprove the
proposed revised Annual Plan in writing within 30 days after submission thereof.
If the proposed revised Annual Plan is not approved within such 30-day period,
it shall be deemed to have been disapproved. If the proposed revised Annual Plan
is disapproved within such 30 day period, the disapproving party shall furnish
the other party with the reasons for such disapproval in writing and shall
immediately begin good faith discussions in an effort to reach a mutually
agreeable revised Annual Plan. Operator shall not, except in an


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emergency as described in Section 4.04 hereof, act outside of the Approved
Annual Plan for such Operating Year without the prior written consent of Owner.
Once approved, the revised Annual Plan shall supersede the then current Approved
Annual Plan.

              Section 4.04 Emergencies. In the event of an emergency involving
the Facility or any adjoining property on or after the Operating Period
Commencement Date and Owner is unavailable or there is insufficient time to
reach Owner, Operator shall be authorized, without the necessity of obtaining
any approvals from Owner that might otherwise be required hereunder, to take any
action (including making payments and incurring expenses on behalf of Owner in
the nature of capital or operating expenses or otherwise) deemed by Operator to
be reasonably necessary or advisable under the circumstances to prevent, avoid
or mitigate injury, damage or loss to persons or property or loss of Owner's
revenue from the Facility; provided, however, that Operator shall not make any
such expenditures if the aggregate amount for any incident is estimated by
Operator to exceed $50,000 unless Owner has approved the same or the same is
made in accordance with the following sentence. If there is an emergency
resulting in, or imminently threatening, injury, damage or loss of life to
persons, or environmental damage and Operator has been unable to contact Owner
notwithstanding its diligent efforts to do so, Operator shall be authorized to
make such emergency expenditures in excess of $50,000, provided that Operator
continues its diligent efforts to contact Owner regarding any such expenditure.
Operator shall notify Owner of any emergency as soon as practicable. If, as a
result of action taken in response to such an emergency, Operator properly
incurs costs or expenses in connection therewith and provides Owner with
justification and invoices therefor, the Approved Annual Plan shall be revised
to properly incorporate and reflect such costs and expenses, and adequate funds
shall be deposited by Owner into the Operating Account in accordance therewith.

              Section 4.05 Right of Owner to Inspect Records. Owner shall have
the right, at its own expense, throughout the term of this Agreement and for a
period of two years following termination of this Agreement, to inspect and/or
audit Operator's records of operation, permit compliance, past maintenance and
scheduled maintenance for the Facility, as well as procurement, expenditure and
cost records and supporting data (excluding the underlying basis for the rates
for Home Office Personnel) and all other books and records maintained by
Operator with respect to the Facility or the operation and maintenance thereof.
Upon reasonable prior notice, Operator hereby agrees to make all such records
maintained by Operator available, subject to Operator's record retention policy
as set forth in the Approved Plant Manual, for inspection or audit by Owner or
any third party reasonably designated by Owner and to cooperate with Owner and
Owner's designated auditor with respect to any audit or review. Neither the
third party nor the auditor shall be a direct competitor of Operator. Any audit
or review shall be conducted in a manner so as to minimize disruption of
Operator's business.

              Section 4.06 Capital Improvements. Owner and Operator shall
develop a capital authorization procedure agreeable to both parties that
provides for proper Owner approval prior to implementation. No capital
expenditures will be made by Operator unless the same is specifically included
in both the Approved Operating Budget and the Approved Operating Plan or have


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otherwise been approved in accordance with procedures adopted by Owner, and any
such capital expenses incurred without Owner's approval shall be at the sole
expense of Operator.

                                   ARTICLE V.

                     COMPENSATION, COSTS AND REIMBURSEMENTS

              Section 5.01 Costs and Expenses.

              (a) Owner shall pay all properly incurred costs and expenses of
performing the Transitional Services, including without limitation the
applicable costs and expenses listed on Schedule 5.01 to the extent in the
budget contained in the Approved Transition Plan, and all costs and expenses
(whether or not on Schedule 5.01) approved by Owner and incurred during the
Transition Period. Acting on behalf of Owner as agent, Operator shall incur
expenses during the Transition Period only to the extent the nature and amount
of such costs and expenses are included in the Approved Transition Plan or are
otherwise approved by Owner. Payment of such expenses shall be made by Owner
within thirty (30) days of Operator's submission of an invoice therefor;
provided, however, that Owner may defer payment until the Operating Period
Commencement Date set forth in the notice by Owner pursuant to Section 3.02.

              (b) Subject to the provisions of this Section 5.01(b), Owner shall
pay all properly incurred costs and expenses of performing the O&M Services
(collectively, the "O&M Expenses"), including without limitation the costs and
expenses listed on Schedule 5.01. Acting on behalf of Owner as agent, Operator
shall incur O&M Expenses only to the extent the nature and amount of such costs
and expenses (i) are included within the Approved Operating Budget (it being
agreed that Operator may exceed the budget amount for any line item so long as
the overall budget amount has not been exceeded) or are otherwise approved by
Owner, (ii) are incurred in connection with the performance of any Unscheduled
Maintenance as approved in writing by Owner, or (iii) are incurred in connection
with an emergency as provided under Section 4.04 hereof. Operator shall be
responsible for paying all expenses not incurred in accordance with this
Agreement. Payment of O&M Expenses by Owner shall be made from the O&M Operating
Account, which is more particularly described in Section 5.03. Except as
specifically provided herein, Operator shall not incur on Owner's behalf any O&M
Expenses. All O&M Expenses, except the Labor Costs of Operator's personnel, the
cost of services provided by Operator's Affiliates and items purchased with
petty cash, shall be incurred in the name of Owner.

              Section 5.02 Operating Fee.

              (a) From the Effective Date until this Agreement is terminated,
Operator shall receive a fee (the "Operating Fee") of $750,000 per annum, as
adjusted in accordance with this Section 5.02. The Operating Fee shall be paid
in monthly installments and shall be due on the first Business Day of each month


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for the preceding month. The Operating Fee for any partial month shall be pro
rated to cover the actual portion of such month that this Agreement was in
effect.

              (b) As of January 1 of each year, commencing January 1, 1999, the
Operating Fee shall be adjusted upwards or downwards by multiplying the
Operating Fee for the prior year by a fraction the numerator of which will be
the Index for the immediately preceding December and the denominator of which
will be the Index for the month of December one year earlier; provided, that in
no event shall the Operating Fee be decreased below $750,000. This adjusted
Operating Fee shall be the Operating Fee for the current Operating Year and the
basis for calculation of the Operating Fee for the next Operating Year.

              Section 5.03 O&M Operating Account. Owner shall establish and
maintain an O&M operating account ("O&M Operating Account") and will designate
Operator as an additional signatory on the account, subject to the restrictions
set forth in the Approved Plant Manual. Owner will deposit into the O&M
Operating Account on or before the 15th day of each month an amount equal to (a)
the amount of O&M Expenses in the Approved Operating Budget for the next month,
plus (b) any amount reasonably expected by Operator, as communicated to Owner in
writing by the 10th day of the month, to be required for costs and expenses
relating to emergencies or approved Unscheduled Maintenance, plus or minus (c)
the difference between the amounts deposited in the O&M Operating Account in the
preceding month and the actual amount of O&M Expenses incurred in that month. On
or before the 10th day of each month, Operator shall deliver to Owner an
accounting report that reflects all O&M Expenses for the preceding month,
reconciled against the amounts deposited to the O&M Operating Account and
against the amounts projected in the Approved Operating Budget for such
preceding month.

              Section 5.04 Late Payments. If any amounts owing under this
Agreement are not paid to Operator or Owner, as applicable, when due, the same
shall bear interest at the Late Payment Rate from the due date until paid.


                                   ARTICLE VI.

                              TERM AND TERMINATION

              Section 6.01 Term. Unless terminated as provided in Article VI or
Article X, this Agreement shall continue in effect for the period commencing on
the Effective Date and ending on the 18th anniversary of the Effective Date (the
"INITIAL TERM"), unless the parties shall at least six (6) months prior to the
expiration of the Initial Term agree in writing to an extension.

              Section 6.02 Termination upon Notice by Owner. If (a) prior to the
Operating Period Commencement Date an Independent Engineer has not certified
that Operator is capable of operating the Facility in accordance with Prudent
Industry Practices, (b) if the Purchase Agreement terminates in accordance with
Section 15 thereof, or (c) Operator defaults in the performance of any material
term, covenant or obligation contained in this Agreement and does not remedy
such default within 30 days after Operator's receipt of Owner's written notice
thereof to Operator (or as soon as possible thereafter but in any event within
180 days, if it cannot be reasonably accomplished in such 30 day period and
Operator shall have commenced all actions required to remedy such default within
such 30 day period and diligently thereafter pursues the same to completion),


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Owner may, by written notice to Operator, terminate this Agreement and Owner
shall pay to Operator all amounts due and not previously paid to Operator for
services performed in accordance with this Agreement up until the effective date
of such termination. All such amounts will be paid to Operator within 30 days of
the effective termination date or within 30 days of receipt of an invoice from
Operator for any amounts not invoiced prior to the effective termination date,
provided that Owner shall have the right to -------- offset the amounts of any
damages owing by Operator under this Agreement against any such amounts due and
not previously paid to Operator by Owner.

              Section 6.03 Termination upon Notice by Operator. If Owner (a)
fails to make any payment hereunder within 5 days after the same shall have
become due, or (b) defaults in the performance of any material term, covenant or
agreement contained in this Agreement and does not remedy such default within 30
days after Owner's receipt of Operator's written notice thereof to Owner (or as
soon as possible thereafter but in any event within 180 days, if it cannot be
reasonably accomplished in such 30 day period and Owner shall have commenced all
actions required to remedy such default within such 30 day period and diligently
thereafter pursues the same to completion), Operator may, by written notice to
Owner, terminate this Agreement.

              Section 6.04 Termination for Insolvency. Either party may
terminate this Agreement by written notice to the other party (but only with the
concurrence of the Agent in the case of termination by Owner) if: (a) the other
party (i) makes a general assignment for the benefit of creditors, (ii)
institutes proceedings in any court of competent jurisdiction or takes any other
steps to subject itself to the laws of any jurisdiction to which it may be
subject providing for it to be wound up or adjudicating it to be bankrupt or
insolvent or (iii) takes or consents to the institution of any bankruptcy or
insolvency proceedings which relate to any reorganization, arrangement or
compromise of its debts; (b) any proceedings are commenced or steps taken
whether by way of private appointment, seizure, court proceedings or otherwise
for the appointment of a receiver, custodian, liquidator, trustee or similar
person with respect to all or a substantial portion of the other party's
property; or (c) any proceedings are commenced or steps taken by any creditor,
regulatory agency or other person relating to the reorganization, arrangement,
adjustment composition, liquidation, dissolution, winding up, custodianship or
other similar relief with respect to such other party.

              Section 6.05 Termination Upon Certain Other Events. Either party
may terminate this Agreement by written notice to the other party if: (a) the
Facility is destroyed or suffers damage in excess of $100,000,000 and is not
rebuilt and in commercial operation within 24 months after such damage or
destruction, (b) the Facility cannot be operated for a period of at least 18
consecutive months as a result of a Force Majeure event, (c) loss of "qualifying
facility" status, or (d) Owner determines to permanently shut down the Facility.

              Section 6.06 Duties Upon Termination. Upon termination or
expiration of this Agreement:

                            (a) At the request of Owner, and provided that Owner
              is not in default of any material provision of this Agreement,


                                       10
<PAGE>

              Operator shall have the obligation to assist in making, at Owner's
              expense, a smooth transition to a new operator (including training
              new operating personnel);

                            (b) Operator shall provide to Owner all books and
              records relating to the Facility or the operation or maintenance
              thereof (other than Operator's own internal accounting records),
              including, without limitation, the Approved Plant Manual, provided
              that Operator may retain a copy of such records at its own
              expense;

                            (c) Operator shall provide Owner with a current
              inventory record of the assets at the Site and a reconciliation of
              inventory balances of such assets; and

                            (d) Operator shall provide to Owner at the Site all
              tools and Consumables purchased by Operator on behalf of Owner
              pursuant to this Agreement.

              This Section 6.06 shall survive termination of this Agreement.

              Section 6.07 Effect of Termination. On the effective date of
termination, Owner shall assume and become responsible for all operation and
maintenance of the Facility, including, but not limited to, obligations under
outstanding contracts and commitments relating to the operation and maintenance
of the Facility and the purchase of equipment for the Facility. Notwithstanding
such termination, neither party shall be relieved from any obligations or
liabilities that accrued prior to the effective date of termination. The
applicable provisions of this Agreement will continue in effect after
termination of this Agreement to the extent necessary to provide for final
payments, payment adjustments and any other final expense reimbursements, and
with respect to liability and indemnification payments and expense
reimbursements from acts or events that occurred prior to the date of
termination of this Agreement.

              Section 6.08 Termination Payment. In the event of a termination of
this Agreement by Operator other than pursuant to Section 6.02, Operator shall
be entitled, in addition to all other amounts due hereunder as of the date of
termination, to a demobilization and cancellation payment equal to (a) the total
of all costs and expenses incurred by Operator as a direct result of such
termination, including all relocation, severance and outplacement costs incurred
with respect to, and any other termination benefits due, Operator's employees,
which costs Operator is at such time contractually or legally obligated to pay
to its employees, or which are incurred with the prior written approval of Owner
or in accordance with any established cancellation costs incurred with respect
to third parties, plus (b) in the case of a termination by Operator pursuant to
Section 6.03, $1,500,000. Subject to Owner's rights to conduct a subsequent
audit and review pursuant to Section 4.05, such amounts shall be due and payable
by Owner within thirty (30) days of Operator's submission of an invoice
therefor.


                                       11
<PAGE>

                                  ARTICLE VII.

                             LIMITATION OF LIABILITY

              Section 7.01 No Consequential Damages. With respect to claims
arising under this Agreement or out of performance or non-performance of the
services and obligations under this Agreement, neither Operator, its Affiliates
nor their respective employees or agents shall be
liable to Owner, its Affiliates or their respective employees, agents or
subcontractors and neither Owner, its Affiliates nor their respective employees,
agents or subcontractors shall be liable to Operator, whether based in contract,
in tort (including negligence and strict liability), under warranty, or
otherwise, for any special, indirect, incidental, exemplary or consequential
loss or damage whatsoever, including without limitation, loss of use,
opportunity or profits, damages to good will or reputation or punitive damages.

              Section 7.02 Limitation of Aggregate Liability. The total annual
aggregate liability of Operator with respect to this Agreement under any theory
of recovery, whether based in contract, in tort (including negligence and strict
liability), under warranty, or otherwise, and notwithstanding any other
provision of this Agreement, shall be limited in any Operating Year to the
Operating Fee for such Operating Year.

              Section 7.03 NonRecourse Obligations. Notwithstanding any other
provision of this Agreement to the contrary, the obligations of Owner hereunder
are recourse only to the assets of Owner and neither the partners of Owner nor
any shareholder, director, officer, agent or affiliate of Owner or any partner
of Owner, shall have any personal responsibility or liability for any payment
obligations of Owner hereunder, or otherwise for any breach in performance or
observance of the covenants, representations, or obligations of Owner hereunder.


                                  ARTICLE VIII.

                     INDEMNIFICATION, INSURANCE BY OPERATOR

              Section 8.01 Indemnification. Subject to the limitations set forth
in Article VII hereof, Operator hereby agrees to indemnify, defend and hold
harmless Owner, all partners of Owner, Lender and each of their respective
officers, directors, shareholders, agents, Affiliates and employees
(collectively, "Owner's Indemnitee") from and against all losses, liabilities
(including environmental liabilities), damages, demands, claims, suits, actions,
judgments or causes of action, assessments, interest, penalties, costs and
expenses (including the costs of reperforming any services or work), including,
without limitation, attorneys' fees, and expenses (whether suit is instituted or
not and, if instituted, whether at trial or appellate levels) (collectively
"Damages") asserted against, resulting to, imposed upon, or incurred or suffered
by Owner's Indemnitee, directly or indirectly, whether raised by Owner's
Indemnitee or a third party, arising out of, caused by or resulting from the
performance by Operator of Operator's duties hereunder to the extent that any
such Damages are caused in whole or in part by (i) Operator's failure to perform


                                       12
<PAGE>

under this Agreement in accordance with the terms of this Agreement, including
Section 12.03 hereof, or (ii) the negligence or willful misconduct of Operator
or its agents, any subcontractor of Operator, anyone employed by any of them or
anyone for whose acts any of them is liable. Section 9.02 shall apply to any
claim for indemnity pursuant to this Section 8.01.

              Section 8.02 Insurance Coverage. During the term of this
Agreement, Operator shall maintain the insurance coverage listed on Schedule
8.02. Operator shall deliver certificates of insurance evidencing such coverages
to Owner on or before the Operating Period Commencement Date and shall
thereafter deliver to Owner evidence of appropriate renewal and continuance of
such policies on an annual basis.


                                   ARTICLE IX.

                       INDEMNIFICATION, INSURANCE BY OWNER

              Section 9.01 Indemnification. Subject to the limitations set forth
in Article VII hereof, Owner shall indemnify, defend and hold harmless Operator,
and its officers, directors, shareholders, agents, Affiliates and employees
(collectively, "OPERATOR'S INDEMNITEE") from and against all Damages asserted
against, resulting to, imposed upon, or incurred or suffered by Operator's
Indemnitee, directly or indirectly, whether raised by Operator's Indemnitee or a
third party, arising out of or resulting from (a) Owner's ownership or use of
the Facility or the Site, (b) the performance by Owner of Owner's duties
hereunder, or (c) matters relating to any environmental laws, regulations or
orders ("ENVIRONMENTAL LAWS"), provided that such environmental indemnification
does not apply to the extent that the Damages arise from (i) Operator's
violation of Environmental Laws or (ii) Operator's negligence or willful
misconduct in its activities at the Facility or the Site. Owner waives and
releases and will require its insurers waive and release Operator from damage to
or risk of loss of Owner's property or property for which Owner or Operator has
assumed liability (but excluding Operator's property), howsoever such damage or
loss is caused.

              Section 9.02 Procedure. If any person or entity not a party to
this Agreement shall make any demand or claim or file or threaten to file or
continue any lawsuit, which demand, claim or lawsuit may result in Damages to
any party pursuant to the indemnification provisions of this Agreement, then, in
any such event, within 10 days after notice by the indemnified party (the
"NOTICE") to the indemnifying party of such demand, claim or lawsuit (provided,
however, that the failure to give the Notice shall not relieve the indemnifying
party of its obligations under this Agreement unless, and only to the extent
that, such failure caused the Damages for which the indemnifying party is
obligated to be greater than they would otherwise have been had the indemnified
party given prompt notice under this Agreement), the indemnifying party shall
have the option, at its sole cost and expense, to retain counsel for the
indemnified party (which counsel shall be selected by or be reasonably
satisfactory to the indemnified party), to defend any such demand, claim or
lawsuit. Thereafter, the indemnified party shall be permitted to participate in
such defense at its own expense, provided that, if the named parties to any such
proceeding (including any impleaded parties) include both the indemnifying party


                                       13
<PAGE>

and the indemnified party or if the indemnifying party proposes that the same
counsel represent both the indemnified party and the indemnifying party and
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them, then the indemnified party
shall have the right to retain its own counsel at the cost and expense of the
indemnifying party. If the indemnifying party shall fail to respond within 10
days after receipt of the Notice, the indemnified party may retain counsel and
conduct the defense of such demand, claim or lawsuit, as it may in its sole
discretion deem proper, at the sole cost and expense of the indemnifying party.

              (a) The indemnified party shall provide reasonable assistance to
the indemnifying party and provide access to its books, records and personnel as
the indemnifying party reasonably requests in connection with the investigation
or defense of the indemnified Damage. The indemnifying party shall promptly upon
receipt of reasonable supporting documentation reimburse the indemnified party
for out-of-pocket costs and expenses incurred by the latter in providing the
requested assistance.

              (b) With regard to claims for which indemnification is payable
under this Agreement, such indemnification shall be paid by the indemnifying
party upon: (i) the entry of a judgment against the indemnified party and the
expiration of any applicable appeal period; (ii) the entry of an unappealable
judgment or final appellate decision against the indemnified party; or (iii) a
settlement with the consent of the indemnifying party, which consent shall not
be unreasonably withheld, provided that no such consent need be obtained if the
indemnifying party fails to respond to the Notice as provided in this Section
9.02. Notwithstanding the foregoing, provided that there is no dispute as to the
applicability of indemnification, expenses of counsel to the indemnified party
shall be reimbursed on a current basis by the indemnifying party if such
expenses are a liability of the indemnifying party.

              Section 9.03 Insurance Coverage. During the term of this
Agreement, Owner shall maintain at least the insurance coverage listed on
Schedule 9.03. Owner shall deliver certificates of insurance evidencing such
coverages to Operator on or before the Effective Date and shall thereafter
deliver to Operator evidence of appropriate renewal and continuance of such
policies on an annual basis.


                                   ARTICLE X.

                                  FORCE MAJEURE

              Section 10.01 Force Majeure. Any delay in or failure of
performance of either party (other than delay or failure to pay a monetary
obligation when due) shall not constitute a default hereunder or give rise to
any claim for damage if and to the extent such delay or failure is caused by
"Force Majeure," and the party claiming the benefit of Force Majeure shall use
all reasonable efforts to minimize the period of such delay or failure and the
effects thereof.

              Section 10.02 Notice. Either party claiming Force Majeure shall
give the other party (a) notice of such Force Majeure event as soon as
practicable, but in any event within three days after its occurrence and (b) a
complete description of such Force Majeure event within fourteen days after its
occurrence.


                                       14
<PAGE>



                                   ARTICLE XI.

                           RELATIONSHIP OF THE PARTIES

              Owner hereby engages Operator, as an independent contractor, to
maintain and operate the Facility according to the terms of this Agreement.
Subject to the terms of this Agreement, Operator shall determine the means,
manner and methods by which Operator shall perform its services under this
Agreement. Operator and Owner acknowledge that, except as otherwise expressly
provided in this Agreement, Owner shall not have any control over Operator or
the means, manner or methods of its performance under this Agreement. All
personnel involved in the operation of the Facility shall be employees of
Operator or its Affiliates or independent contractors that have contracted with
Operator or its Affiliates and shall not for any purposes be deemed employees or
independent contractors of Owner. Nothing in this Agreement or the arrangement
for which it is written shall constitute or create a joint venture, partnership,
or any other similar arrangement between Owner and Operator. Neither party is
authorized to act as agent for the other party, except as expressly stated in
this Agreement.


                                  ARTICLE XII.

                REPRESENTATIONS, WARRANTIES AND STANDARD OF CARE

              Section 12.01 Representations and Warranties of Owner. Owner
hereby represents and warrants as of the Effective Date that:

                            (a) It is duly formed, validly existing and in good
              standing under the laws of the State of Delaware, with full power
              and authority to enter into and perform its obligations under this
              Agreement and has duly authorized the execution, delivery and
              performance of this Agreement;

                            (b) It has validly executed this Agreement, and upon
              delivery this Agreement shall be a binding obligation of such
              party, enforceable against such party in accordance with its terms
              except insofar as enforcement may be limited by bankruptcy,
              insolvency or other similar laws affecting the enforcement of
              creditors' rights generally or by general equitable principles;

                            (c) Its entry into this Agreement and the
              performance of its obligations hereunder will not require the
              approval of any governmental body or regulatory authority and will
              not violate, conflict with, or cause a default under any of its
              organizational documents, any contractual covenant or restriction
              by which such party is bound, or any applicable Law, order,
              judgment or decree; and

                                       15
<PAGE>

                            (d) There is no pending or, to the knowledge of
              Owner, threatened actions, suit, investigation or proceeding
              against Owner before any governmental authority which, if
              determined adverse to it, would materially adversely affect
              Owner's ability to perform its obligations under this Agreement.

              Section 12.02 Representations and Warranties of Operator. Operator
hereby represents and warrants as of the Effective Date that:

                            (a) It is duly formed, validly existing and in good
              standing under the laws of the State of Florida, with full power
              and authority to enter into and perform its obligations under this
              Agreement and has duly authorized the execution, delivery and
              performance of this Agreement;

                            (b) It has validly executed this Agreement, and upon
              delivery this Agreement shall be a binding obligation of such
              party, enforceable against such party in accordance with its terms
              except insofar as enforcement may be limited by bankruptcy,
              insolvency or other similar laws affecting the enforcement of
              creditors' rights generally or by general equitable principles;

                            (c) Its entry into this Agreement and the
              performance of its obligations hereunder will not require the
              approval of any governmental body or regulatory authority and will
              not violate, conflict with, or cause a default under any of its
              organizational documents, any contractual covenant or restriction
              by which such party is bound, or any applicable Law, order,
              judgment or decree;

                            (d) There is no pending or, to the knowledge of
              Operator, threatened actions, suit, investigation or proceeding
              against Operator before any governmental authority which, if
              determined adverse to it, would materially adversely affect
              Operator's ability to perform its obligations under this
              Agreement;

                            (e) It has the necessary training, experience and
              capability to operate and maintain the Facility and to perform its
              obligations under this Agreement; and

                            (f) It has or will, as of the Operating Period
              Commencement Date, have all permits and licenses required by
              applicable Law (other than Owner's Permits or permits and licenses
              relating to the Facility) for the performance by Operator of the
              Operating Services and its other obligations under this Agreement.

              Section 12.03 Standard of Care. Operator covenants and agrees that
it will perform its duties hereunder in accordance with the Approved Operating
Budget, the Approved Operating Plan and Prudent Industry Practice.

                                       16
<PAGE>


                                  ARTICLE XIII.

                                     NOTICES

              Any notice to either party required or permitted hereunder shall
be in writing and shall be given by personal delivery or by commercial courier
or by certified mail, return receipt requested, postage prepaid, or by
telecopier with confirmed receipt, addressed as follows:

           If to Owner:                   Northeast Energy, LP
           -----------
                                          c/o  ESI Energy, Inc.
                                          11760 U.S. Highway One, Suite 600
                                          North Palm Beach, Florida  33408
                                          Telecopier: (561) 691-3615
                                          Attention:  President

           with a copy to:                Tractebel Power, Inc.
                                          1177 West Loop South, Suite 900
                                          Houston, Texas  77027
                                          Telecopier: (713) 552-2364
                                          Attention:  General Counsel

           If to Operator:                ESI Operating Services, Inc.
           ---------------
                                          11760 U.S. Highway One, Suite 600
                                          North Palm Beach, Florida  33408
                                          Telecopy:  (561) 691-3615
                                          Attention: President

or to such other address as Owner or Operator may have specified in a notice
duly given as provided herein to the other party. All notices given in the
foregoing manner shall be effective when received, except that a notice sent by
telecopier and received after normal business hours shall be deemed to be
received the following Business Day.


                                  ARTICLE XIV.

                         ASSIGNMENTS AND SUBCONTRACTING

              Section 14.01  Assignments.

              (a) This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns.

              (b) Except as otherwise provided in this Agreement, neither party
may assign or otherwise convey any of its rights, title or interest under this
Agreement, without the prior written consent of the other party hereto (which
consent shall not be unreasonably withheld).

              Section 14.02 Assignment by Owner to NJEA. Upon the later to occur
of (i) the Operating Period Commencement Date and (ii) the execution and
delivery by NJEA of a counterpart hereof to Owner and Operator (such later date


                                       17
<PAGE>

being the "Dropdown Date"), but without any further action by any Person, all
rights, title and interest of Owner hereunder shall be assigned to, and all of
Owner's obligations, liabilities and duties whether past, present or future,
arising under, in or in connection with this Agreement shall be assumed by NJEA.
By executing and delivering the counterpart hereof, NJEA shall be deemed, as of
the Dropdown Date, to be making the representations and warranties in Section
12.01 of this Agreement as if such representations and warranties related to
NJEA.

              Section 14.03 Security Interest. Operator acknowledges that
Owner's interest in and to this Agreement will be subject to the security
interest in favor of the Trustee and the Agent pursuant to the Security
Documents and agrees that the Trustee and the Agent may assign such interest in
and to this Agreement to any subsequent assignee in connection with the sale,
transfer, or exchange of its rights in this Agreement or for the purpose of
operating the Facility pursuant to such assignment upon and after the exercise
of its rights and enforcement of its remedies against the Facility under any
deed of trust or other security instrument creating a lien in its favor.

              Section 14.04 Cooperation in Financing. Operator agrees to
cooperate with Owner in negotiation and execution of any reasonable amendment or
addition to this Agreement required by the Trustee or the Agent, which does not
result in a material adverse change in Operator's rights or obligations
hereunder. For avoidance of doubt, Operator will, if required by the Trustee or
the Agent, enter into consents typical for project financings, or substantially
similar to those required of the project parties under the existing financing
for the Facility.

              Section 14.05 Subcontracting. Operator may subcontract any of its
duties or obligations hereunder to a non-affiliate with the prior written
consent (which may be in the Approved Annual Plan) of Owner to the subcontractor
and subcontract, which consent shall not be unreasonably withheld; provided,
that no such written consent of Owner shall be required for subcontracting to
any Affiliate of Operator which is qualified to or capable of operating in
accordance with Prudent Industry Practice. Owner shall not direct Operator to,
and Operator shall not, enter into any subcontract with any contractor if
entering into such contract will result in loss of "qualifying facility" status
for the Facility. No subcontract shall relieve Operator of its duties and
obligations hereunder.


                                   ARTICLE XV.

                LIMITATIONS OF AUTHORITY; LIENS AND ENCUMBRANCES

              Section 15.01 Limitation on Authority. Unless specifically
approved in the Annual Plan or approved in writing by Owner, Operator shall not
have the authority to take the following actions:

              (a) The sale, lease, pledge, mortgage, conveyance, license,
exchange or other transfer or disposition of any property or assets of Owner,
including any tangible personal property acquired by Operator under this


                                       18
<PAGE>

Agreement. The proceeds of any sales of scrap shall inure to the benefit of
Owner and Operator shall hold the proceeds in trust for Owner and immediately
forward such proceeds to Owner;

              (b) Subject to Section 2.03, making, entering into, executing,
amending, waiving any rights under, modifying or supplementing any contract or
agreement on behalf of, binding upon, or in the name of Owner, including the
Project Documents;

              (c) The settling, compromising, assigning, pledging, transferring,
releasing or consenting to the same of any claim, suit, debt, demand or judgment
against or due by Owner, or submitting any such claim, dispute or controversy to
arbitration or judicial process or stipulating to a judgment, or consent to do
same. Operator agrees that Owner shall retain control of any such claim suit,
debt or demand and any other litigation regarding the Facility, except as to
Operator's individual liability;

              (d) Agreeing to any penalty for violation of any governmental
license or permit;

              (e) Make any expenditures or use any of Owner's funds, or make
commitments of same, except in accordance with Articles IV and V of this
Agreement;

              (f) Commit Owner to be liable for obligations of others as
guarantor, surety, or otherwise; and

              (g) Enter into, without the consent of Owner (which may be in the
Approved Annual Plan), any agreement with any Affiliate of Operator in
connection with the performance of its obligations under this Agreement, which
is on the whole less favorable to Owner than similar agreements reasonably
available from unrelated third parties or if not so available, other than on an
arm's length basis.

              Section 15.02 No Liens or Encumbrances. Operator shall keep and
maintain the Facility free and clear of all liens and encumbrances resulting
from the acts or omissions of Operator or work done at request of Operator,
except such liens or encumbrances resulting directly from nonpayment of any
amount due and owing to Operator under this Agreement.


                                  ARTICLE XVI.

                       DISPUTE RESOLUTION AND ARBITRATION

              Section 16.01 Dispute Resolution. If a dispute arises between the
parties regarding the application or interpretation of any provision of this
Agreement, the aggrieved party shall give a notice of such dispute (a "Dispute
Notice") to the other parties. Within fifteen (15) days after such Dispute
Notice, the President or an Executive Vice President of each of the parties
shall confer with each other to seek with diligence and in good faith to resolve
such dispute. If such officers are unable to resolve such dispute within
forty-five days after such Dispute Notice, then the parties shall be bound to
arbitrate such dispute in accordance with Section 16.02.

                                       19
<PAGE>

              Section 16.02 Arbitration. To the fullest extent permitted by law,
any dispute between the parties regarding the application or interpretation of
any provision of this Agreement, if not resolved by negotiation by the parties
within 45 days after the Dispute Notice, shall be resolved exclusively by
binding arbitration between the parties pursuant to the Rules of the American
Arbitration Association for Commercial Disputes (the "Arbitration Rules").
Arbitration shall be administered by the American Arbitration Association.
Either party may institute arbitration proceedings at any time by delivering
written notice demanding arbitration to the other party in the manner described
in Article XIII.

              (a) Within 20 days after receipt of a written demand for
arbitration, the parties shall each appoint one arbitrator. Within 15 days of
the expiration of that 20 day period, the two arbitrators so appointed shall
appoint a third arbitrator. If any party shall fail to appoint an arbitrator, or
if the two arbitrators shall fail to appoint a third arbitrator, the American
Arbitration Association shall make that selection within 10 days of a party's
request. The arbitrators shall meet the qualifications and abide by the Code of
Ethics for arbitrators in commercial disputes of the American Arbitration
Association. The arbitrators shall have knowledge of and experience in the power
generation and project financing business.

              (b) To the fullest extent permitted by law, the arbitration shall
be conducted in accordance with the procedures set forth in the Arbitration
Rules. In determining any question, matter or dispute before them, the
arbitrators shall apply the provisions of this Agreement without varying
therefrom in any respect. They shall not have the power to add to, modify or
change any of the provisions of this Agreement. The parties shall exercise all
commercially reasonable efforts in good faith to cause a hearing to be held
within 90 days after the date upon which the last arbitrator is appointed and to
conclude all hearings within 30 days after the first hearing date. The
arbitrators shall only grant a party's request for postponement of the hearing
upon a showing of good cause as determined by the arbitrators. Within 30 days of
the last hearing date, the arbitrators shall issue a written decision setting
forth their analysis and ruling. The arbitrators shall determine in what
proportion the parties shall bear the fees and expenses of the arbitrators. Each
party shall bear the fees and expenses of its own counsel and other consultants.
All arbitration proceedings shall be subject to the choice of law provisions set
forth in Section 17.02, and shall be held at a location agreed to by the
parties, or if the parties cannot agree, then in Atlanta, Georgia.

              (c) The parties acknowledge and agree that any arbitral award
shall be final, binding and conclusive upon the parties and may be confirmed or
embodied in any order of any court having jurisdiction.

              (d) To the fullest extent permitted by law, service of any matters
referenced in this Article XVI shall be given in the manner described in Article
XIII or as permitted by the rules of the American Arbitration Association.

              Section 16.03 Survival. This Article XVI shall survive expiration
or termination of this Agreement.


                                       20
<PAGE>

                                  ARTICLE XVII.

                                  MISCELLANEOUS

              Section 17.01 Severability. If any provision of this Agreement
shall be held or deemed to be invalid, inoperative or unenforceable, such
circumstances shall not affect the validity of any other provision of this
Agreement, but this Agreement shall be reformed and construed as if such
invalid, inoperative or unenforceable provision had never been contained herein
and such provision reformed so that it would be valid, operative and enforceable
to the maximum extent permitted.

              Section 17.02 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of New York without regard to
principles of conflicts of laws.

              Section 17.03 Entire Agreement. This Agreement constitutes the
entire final understanding and agreement of the parties with respect to its
subject matter, and there are no agreements, understandings, restrictions,
representations or warranties among the parties other than those set forth in
this Agreement. By execution of this Agreement, each of the parties represents
and warrants that it has relied on no oral or written statements, promises,
inducements, representations or warranties to enter into this Agreement except
for those expressly set forth herein. The parties agree that the inclusion of
this provision evidences the intent of the parties that no parole evidence shall
be admissible to alter or vary the terms of this Agreement.

              Section 17.04 Captions. The captions or headings of the sections
and paragraphs of this Agreement have been inserted for convenience of reference
only and shall have no effect upon the construction or interpretation of any
part of this Agreement.

              Section 17.05 Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original, and all of
which taken together shall constitute one and the same agreement.

              Section 17.06 No Third Party Beneficiaries. Except as expressly
set forth herein, the terms of this Agreement are for the sole benefit of Owner
and Operator and their respective successors and permitted assigns and not for
any third party whatsoever.

              Section 17.07 Further Assurances. If either party reasonably
determines or is reasonably advised that any further instruments or any other
things are necessary or desirable to carry out the terms of this Agreement, the
other party shall execute and deliver all such instruments and assurances and do
all things reasonably necessary and proper to carry out the terms of this
Agreement.

              Section 17.08 No Implied Waiver. Failure of either party to
exercise any right to enforce any provision, or to require strict performance by
the other party of any provision, shall not release the other party from any of
its obligations under this Agreement and shall not operate as a waiver of any
right to insist upon strict performance, or of either party's rights or remedies
under this Agreement or at law.

                                       21
<PAGE>

              Section 17.09 Amendments. No amendment, waiver or modification of
any provision of this Agreement shall be effective unless made in writing and
signed by both parties.

              Section 17.10 Confidentiality. Except to the extent expressly
authorized herein including, without limitation, in connection with a proposed
assignment of this Agreement or a proposed financing transaction entered into by
Owner, in which case disclosure of the terms hereof shall be limited to the
extent reasonably practicable, each of the parties agree that neither it nor its
attorneys, agents or representatives shall reveal to anyone any of the terms of
this Agreement or any of the terms of the documents executed pursuant hereto,
including, without limitation, the amount, terms or conditions of payment
hereunder, other than (i) as may be hereafter mutually agreed to in writing,
(ii) as ordered by a judicial tribunal, (iii) to any of such parties' directors,
officers, employees, representatives, advisors, consultants and attorneys, and
the directors, officers, employees, representatives, advisors, consultants and
attorneys of affiliated companies who need to know such information, and (iv) to
the extent required to be disclosed by applicable law or legal process.

              Section 17.11 Decision-Making by Parties. Except where this
Agreement expressly provides for a different standard and/or time period,
whenever this Agreement provides for a determination, decision, permission,
consent or approval of a party, the party shall promptly make such
determination, decision, grant or withholding of consent or approval in a
commercially reasonable manner and without unreasonable delay. Any denial of
consent required to be made in a commercially reasonable manner shall include in
reasonable detail the reason for denial or aspect of the request that was not
acceptable.

              Section 17.12 Schedules. The attached Schedules that are referred
to in this Agreement are incorporated by reference and made a part of this
Agreement.


                  [Remainder of Page Intentionally Left Blank]



                                       22
<PAGE>



                  IN WITNESS WHEREOF, the parties have executed multiple
originals of this Agreement as of the date first written above.


OWNER:
                                       NORTHEAST ENERGY, LP,
                                       a Delaware limited partnership


                                       By: ESI NORTHEAST ENERGY GP, INC.,
                                           a Florida corporation,
                                           a general partner


                                       By: /s/ Glenn E. Smith
                                           ----------------------
                                           Name: Glenn E. Smith
                                           Title: Vice President

                                       By: TRACTEBEL NORTHEAST
                                           GENERATION GP, INC.,
                                           a Delaware corporation,
                                           a general partner

                                       By: /s/ Charles Vetters
                                           ----------------------
                                           Name: Charles Vetters
                                           Title: Vice President

OPERATOR:                              ESI OPERATING SERVICES, INC.,
                                       a Florida corporation

                                       By:    /s/ Glenn E. Smith
                                             Name: Glenn E. Smith
                                             Title: Vice President


                  [Signature Page to Sayreville O&M Agreement]





                                       23
<PAGE>





ASSIGNEE:
                                       NORTH JERSEY ENERGY ASSOCIATES,
                                       A LIMITED PARTNERSHIP,
                                       a New Jersey limited partnership


                                       By: NORTHEAST ENERGY, LP,
                                           a Delaware limited partnership,
                                           a general partner

                                       By: ESI NORTHEAST ENERGY GP, INC.,
                                           a Florida corporation,
                                           a general partner

                                       By: /s/ Glenn E. Smith
                                           ----------------------
                                           Name: Glenn E. Smith
                                           Title: Vice President

                                       By: TRACTEBEL NORTHEAST
                                           GENERATION GP, INC.,
                                           a Delaware corporation,
                                           a general partner

                                       By: /s/ Charles Vetters
                                           ----------------------
                                           Name: Charles Vetters
                                           Title: Vice President



                  [Signature Page to Sayreville O&M Agreement]






                                       24
<PAGE>



                                  SCHEDULE 1.01

                                   DEFINITIONS

              "Acquisition Date" shall have the meaning set forth in the
Partnership Agreement.

              "Affiliate" shall mean any Person that, directly or indirectly,
controls, is controlled by, or is under common control with, another Person. For
the purposes of this definition, "control" (including with correlative meanings,
the terms "controlled by" and "under common control with"), as used with respect
to any Person, means the power to direct or cause the direction of the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities or by contract or otherwise.

              "Agent" shall mean Sanwa Bank, Limited, New York Branch, as agent
for the Lenders under the Credit Agreement, together with its successors in such
capacity.

              "Agreement" shall have the meaning set forth in the preamble
hereof.

              "Annual Plan" shall have the meaning set forth in Section 4.03 of
the Agreement.

              "Approved Annual Plan" shall have the meaning set forth in Section
4.03 of the Agreement.

              "Approved Operating Budget" shall have the meaning set forth in
Section 4.03 of the Agreement.

              "Approved Operating Plan" shall have the meaning set forth in
Section 4.03 of the Agreement.

              "Approved Plant Manual" shall have the meaning set forth in
Section 4.01 of the Agreement.

              "Arbitration Rules" shall have the meaning set forth in Section
16.02 of the Agreement.

              "Bondholders" shall mean the holder of bonds issued by Owner under
the Indenture.

              "Business Day" shall mean a calendar day other than Saturday,
Sunday or a statutory holiday in the Commonwealth of New Jersey.

              "Carbon Dioxide Facility" shall mean the carbon dioxide facility
owned by NJEA and located adjacent to the Facility, and all equipment and
facilities ancillary thereto.


<PAGE>

              "Consumables" shall mean collectively all chemicals, water, fuel,
lubricants, laboratory supplies, office supplies and other items to be used up
during the normal operation of the Facility.

              "Credit Agreement" means the Credit Agreement dated as of December
1, 1994 among NJEA, NEA, the Lenders and Agent, as amended, modified and
supplemented and in effect from time to time.

              "Debt Agreements" shall mean the Indenture, the Credit Agreement
and the Rule 144A Indenture.

              "Debt Holders" shall mean the Lenders, Bondholders and the Rule
144A Bondholders.

              "Dispute Notice" shall have the meaning set forth in Section 16.01
of the Agreement.

              "Dropdown Date" shall have the meaning set forth in Section 14.02
of the Agreement.

              "Effective Date" shall mean the later to occur of (i) the date the
Agreement shall be executed and delivered and (ii) the Acquisition Date.

              "Existing Plant Procedures" shall have the meaning set forth in
Section 4.01 of the Agreement.

              "Facility" shall have the meaning set forth in recitals to the
Agreement.

              "Force Majeure" shall mean any cause beyond the reasonable control
of and without the fault, negligence, or willful misconduct of the party
claiming Force Majeure. Such causes shall include, but not be limited to, acts
of God, fires, floods, storms, earthquakes, strikes, labor disputes, riots,
insurrections, acts of war, actions or inactions of any government or
governmental agency or a material change in applicable statutory, regulatory,
administrative or other relevant law that prohibits the operation of the
Facility; provided, however, that lack of money or changes in operating costs
shall not constitute Force Majeure.

              "Home Office Personnel" means personnel based in Operator's home
office, whether employees of Operator or its parent compan(ies).

              "IEC" shall mean International Energy Corporation, a Massachusetts
corporation and its successors and permitted assigns.

              "Indenture" shall mean the Trust Indenture dated as of November
15, 1994 among IEC, NJEA, NEA and the Trustee, as amended, modified and
supplemented and in effect from time to time.



                                       2
<PAGE>

              "Independent Engineer" shall have the meaning set forth in the
Appendix A to the Indenture.

              "Initial Term" shall have the meaning set forth in Section 6.01 of
the Agreement.

              "Index" shall mean the Department of Labor, Bureau of Labor
Statistics, Producer Price Index for All Commodities (1982=100). If the Index
ceases to be published or is otherwise unavailable, Index shall mean an index
that Owner and Operator shall mutually determine in good faith to be most nearly
comparable to the foregoing.

              "Labor Costs" means all fully burdened labor costs, including
overtime, bonuses, vacation, holidays, sick leave, approved paid leave of
absence, insurance, retirement benefits, taxes, recruiting costs, relocation
costs and all other benefits.

              "Late Payment Rate" shall mean a per annum rate of interest equal
to the rate announced from time to time in the Wall Street Journal as the prime
commercial lending rate of national commercial banks plus two percent (2%), but
in no event more than the maximum rate permitted under applicable law.

              "Laws" shall mean any applicable federal, state or local statute,
law, ordinance, rule or regulation.

              "Lenders" shall mean the lenders under the Credit Agreement.

              "NEA" shall mean Northeast Energy Associates, A Limited
Partnership, a Massachusetts limited partnership, and its successors and
permitted assigns.

              "NJEA" shall have the meaning set forth in the first recital to
the Agreement.

              "O&M Expenses" shall have the meaning set forth in Section 5.01(b)
of the Agreement.

              "O&M Operating Account" shall have the meaning set forth in
Section 5.03 of the Agreement.

              "O&M Services" shall have the meaning set forth in Section 2.03 of
the Agreement.

              "On-Site Personnel" means all personnel regularly on-Site,
including the plant manager and the administrative supervisor, although some
On-Site Personnel may be employees or Affiliates of Operator.

              "Operating Budget" shall have the meaning set forth in Section
4.03 of the Agreement.

              "Operating Fee" shall have the meaning set forth in Section 5.02
of the Agreement.



                                       3
<PAGE>

              "Operating Period Commencement Date" shall mean the day following
the day on which the Westinghouse Agreement shall terminate or expire.

              "Operating Plan" shall have the meaning set forth in Section 4.03
of the Agreement.

              "Operating Year" shall mean the twelve (12) month period beginning
on the Commencement Date and each successive twelve (12) month period beginning
on the consecutive dates thereof.

              "Operator" shall have the meaning set forth in the preamble
hereof.

              "Oversight Services" shall have the meaning set forth in Section
2.01 of the Agreement.

              "Oversight Period" shall have the meaning set forth in Section
2.01 of the Agreement.

              "Owner" shall have the meaning set forth in the preamble hereof.

              "Owner Permits" shall mean those approvals, certificates, permits
and licenses required for Owner to operate the Facility, including, without
limitation, any permits required for disposal of waste generated by the
Facility.

              "Partnership Agreement" shall mean that certain Agreement of
Limited Partnership of Northeast Energy, LP, a Delaware limited partnership,
dated as of November 21, 1997, by and among ESI Northeast Energy GP, Inc.,
Tractebel Northeast Generation GP, Inc., ESI Northeast Energy LP, Inc., and
Tractebel Associates Northeast LP, Inc.

              "Person" shall mean any individual, partnership, corporation,
trust, unincorporated association, joint venture or any other entity.

              "Planned Outage" shall mean the cessation of operation of the
Facility for Scheduled Maintenance or any other scheduled outage.

              "Plant Manual" shall have the meaning set forth in Section 4.01 of
the Agreement.

              "Power Purchase Agreement" shall mean the Power Purchase Agreement
dated October 22, 1987 between NJEA and Jersey Central Power & Light Company, as
amended.

              "Project Documents" shall mean the Agreement, the Power Purchase
Agreement, any additional power purchase agreements between NJEA and any
Purchasing Utility entered into after the execution of the Agreement, any gas
purchase, storage and transportation agreements entered into by or on behalf of
NJEA for the acquisition, storage or transportation of gas to be used at the
Facility, any steam and energy agreements entered into by NJEA with the
purchasers of steam generated at the Facility and any other agreements, in all
cases as amended, affecting the maintenance or operation of the Facility and
reasonably designated by Owner in writing to Operator as a Project Document.

                                       4
<PAGE>

              "Prudent Industry Practices" shall mean the practices, methods and
standards generally followed by the independent power industry with respect to
the design, construction, operation and maintenance of electric generating
equipment of the type applicable to the Facility, and which practices, methods
and standards generally conform to operation and maintenance standards
recommended by the Facility's equipment suppliers and manufacturers.

              "Purchasing Utilities" shall mean Jersey Central Power & Light
Company, as purchasers of electricity generated by the Facility pursuant to the
Power Purchase Agreement and any other purchasers of electricity generated by
the Facility.

              "Rule 144A Bondholders" shall mean the holders of the bonds issued
under the Rule 144A Indenture.


              "Rule 144A Indenture" shall mean the indenture to be entered into
by the Partnership and certain other parties in connection with the financing of
the acquisition of NJEA and NEA.

              "Security Documents" shall have the meaning set forth in the
Credit Agreement.

              "Scheduled Maintenance" shall mean those maintenance and repair
activities contemplated, either generally or specifically, in the Approved
Annual Plan, or any approved revision thereof, for such Operating Year.

              "Site" shall mean the tract of land on which the Facility is
located, and all easements of Owner or easements held for the benefit of Owner
appurtenant thereto.

              "Steam Purchasers" shall mean the purchaser(s) of export steam
generated by the Facility pursuant to a steam purchase agreement or agreements.

              "Technical Support Service" shall have the meaning set forth in
Section 7 of Schedule 2.03.

              "Transaction Documents" shall mean, collectively, the Project
Documents and each of the documents entered into by NJEA, Owner or Operator in
connection with NJEA's debt financing of its assets.

              "Transition Period" shall have the meaning set forth in Section
2.02 of the Agreement.

              "Transition Plan" shall have the meaning set forth in Section 4.02
of the Agreement.

              "Transition Services" shall have the meaning set forth in Section
2.02 of the Agreement.



                                       5
<PAGE>

              "Transition Period Commencement Date" shall mean the day ninety
(90) days prior to the scheduled Operating Period Commencement Date.

              "Trustee" shall mean State Street Bank and Trust Company as
trustee under the Indenture.

              "Unscheduled Maintenance" shall mean any and all maintenance,
repair and replacement requirements of the Facility during a Operating Year,
other than Scheduled Maintenance.

              "Westinghouse O&M Agreement" shall have the meaning set forth in
the second recital hereto.



                                       6
<PAGE>



                                  SCHEDULE 2.01

                               OVERSIGHT SERVICES

              1. Review quarterly reports delivered pursuant to Section 4.5 of
the Westinghouse O&M Agreement;

              2. Assess general Site condition on a quarterly basis;

              3. Review all changes in procedures proposed by the operator under
the Westinghouse O&M Agreements;

              4. Review annual generation forecast pursuant to Section 4.8 of
the Westinghouse O&M Agreement;

              5. Assess operators' personnel, policies, and procedures yearly;

              6. Analyze all proposed capital expenditures at the Facility;

              7. Review facility performance data;

              8. Review of operating logs and records of unplanned outages;

              9. Provide such technical support as Owner may reasonably request;

              10. Review environmental and safety performance and compliance
reports by the operator on a quarterly basis; and

              11. Monitor operator's activities during major scheduled outages
and major equipment overhauls.

              12. Report to the Management Committee with respect to the
foregoing.




<PAGE>



                                  SCHEDULE 2.02

                               TRANSITION SERVICES


              1. Mobilizing Personnel. Operator shall provide the necessary
staff to operate and maintain the Facility on the Operating Period Commencement
Date. In connection therewith, Operator will, in accordance with the Agreement,
the Transition Plan and the budget included therein:

                            (a) Continue to provide the Oversight Services set
              forth on Schedule 2.01;

                            (b) Review qualifications and fitness for duty
              testing of personnel;

                            (c) Relocate personnel, as necessary;

                            (d) Recruit, hire and train personnel to meet the
              applicable staffing requirements; and

                            (e) Train personnel on Operator's policies and
              benefits.

Hiring will be completed and personnel relocated five (5) days prior to the
Operating Period Commencement Date.

              2. Reporting and Coordination. Operator shall:

                            (a) Review Existing Plant Procedures, prior
              operation and maintenance records and other relevant material to
              prepare the report required by Section 4.01 of the Agreement;

                            (b) Develop the Transition Plan and budget contained
              therein for submission to Owner pursuant to Section 4.02 of the
              Agreement;

                            (c) Develop the initial Operating Plan and the
              initial Operating Budget for submission to Owner pursuant to
              Section 4.03 of the Agreement; and

                            (d) Develop and submit for Owner's approval format
              of monthly reports to be delivered by Operator pursuant to
              paragraph 4(g) of Schedule 2.03 of the Agreement. The draft
              monthly report shall be submitted to Owner for approval not less
              than 20 days prior to the Operating Period Commencement Date.

              3. Other Transition Services. Operator shall, in accordance with
the Agreement, the Transition Plan and the budget included therein:


                                       2

<PAGE>


                            (a) Develop the necessary programs and procedures to
              perform the operation and maintenance of the Facility in
              accordance with the initial Operating Plan and the initial
              Operating Budget;

                            (b) Identify and procure as Owner's agent necessary
              tools, equipment, goods, and other items and materials that are
              necessary to operate and maintain the Facility in accordance with
              the initial Operating Plan and the initial Operating Budget; and

                            (c) Review regulatory and legal filings (EPA, FERC,
              etc.), and complete regulatory filings (other than Owner Permits)
              as required by law, or if not specified, 30 days prior to the
              Operating Period Commencement Date.


                                        3

<PAGE>


                                  SCHEDULE 2.03

                                  O&M SERVICES

              1. Personnel. Operator shall make available qualified labor and
professional, supervisory and managerial personnel reasonably necessary to
perform the O&M Services. To the extent set forth in the Approved Operating Plan
and the Approved Operating Budget, personnel shall be available 24 hours a day,
7 days a week, 365 days a year. Except for subcontractors pursuant to Section
13.04 of the Agreement, all individuals providing the O&M Services shall be
employees or independent contractors of Operator or its Affiliates. Operator
shall comply with all applicable federal and state labor and employment laws and
shall exercise control over labor relations in a reasonable manner consistent
with the intent and purpose of the Agreement. Operator shall appoint the plant
manager which shall be reasonably acceptable to Owner. Operator may replace such
plan manager for any reason provided the replacement plant manager is reasonably
acceptable to Owner. Operator shall, at the request of Owner, replace the plant
manager for cause. Operator shall have sole authority, control, and
responsibility with respect to labor matters in connection with the performance
of the services hereunder. Notwithstanding the foregoing, Operator acknowledges
and agrees that Operator shall not enter into any contracts or collective
bargaining agreements with respect to labor matters that purport to bind or
otherwise obligate Owner, and Operator shall seek advice of Owner in the event
Operator is notified of any effort to establish collective bargaining or labor
representation at the Facility.

              2. Compliance. Operator shall:

                            (a) Operate and maintain the Facility in compliance
              with all present and future (once enacted and operative) Laws and
              permits applicable to the operation and maintenance of the
              Facility and the Site (including monitoring and sampling) and
              shall assist Owner in securing and maintaining all permits
              necessary to perform its obligations under the Agreement and in
              filing all reports relating to the Facility;

                            (b) Operate and maintain the Facility in accordance
              with Prudent Industry Practices, the Approved Annual Plan, the
              Project Documents (including the Power Purchase Agreement) and the
              Approved Plant Manual, and in such a manner as to cause the
              Facility to supply steam and electricity requested by Owner and
              Owner's customers or required to be delivered by Owner from time
              to time, in all cases within the rated design and test capacity of
              the Facility and subject to the production targets set forth in
              the Approved Annual Plan; provided, that the foregoing shall not
              constitute a covenant or guarantee of electricity production and
              delivery;

                            (c) Operate and maintain the Facility in compliance
              with the efficiency requirements set forth in 18 C.F.R. ss.
              292.205 (assuming steam is used in the manner required by 18
              C.F.R. ss. 292.205); provided, that the foregoing shall not
              constitute a guaranty thereof;
<PAGE>

                            (d) Seek appropriate warranties from vendors and
              maintain all vendor's warranties in effect; and

                            (e) Procure and maintain the insurance required by
              Section 8.02 of the Agreement.

              3. Operations and Maintenance. Operator shall:

                            (a) Perform yearly capability audits under the power
              purchase agreements;

                            (b) Dispose of waste products from the Facility in
              compliance with all applicable Laws and permits and the Approved
              Plant Manual;

                            (c) Respond to emergencies pertaining to the
              Facility or the Site promptly and effectively, in accordance with
              Section 4.04 of the Agreement;

                            (d) Perform or cause to be performed all services
              and make or cause to be made all repairs and replacements at the
              Facility as are required due to Unscheduled Maintenance. Operator
              shall promptly notify Owner of the need for such Unscheduled
              Maintenance and thereupon request an adjustment to the Approved
              Annual Plan in accordance with Section 4.03(d). Operator shall
              perform any such Unscheduled Maintenance in a timely and cost
              effective fashion upon satisfaction of the requirements of Section
              5.01;

                            (e) Establish and maintain a proactive maintenance
              program;

                            (f) Perform operations and maintenance accounting
              functions, including the processing and paying of bills at the
              home office, and to the extent set forth in the Approved Annual
              Budget maintain a bookkeeper part time at the Facility to perform
              day-to-day bookkeeping, processing of purchase orders and similar
              matters;

                            (g) Perform all project purchasing functions
              pursuant to the Annual Plan;

                            (h) Design, document, implement and periodically
              evaluate a system of internal control; and

                            (i) Prepare and document accounting policies and
              procedures.

                  4. Reporting and Coordination. Operator shall:

                            (a) Coordinate with Owner, affected parties, and
              Purchasing Utilities as required when generation of electricity or
              steam is to be initiated, interrupted or curtailed. Operator shall
              make all reasonable efforts to schedule any outages at the

                                       2
<PAGE>

              Facility having the effect of reducing the electricity or steam
              output of the Facility in advance and at the most appropriate
              times for Owner, Operator, and Purchasing Utilities in accordance
              with the Project Documents, and in a manner that will minimize any
              profit loss to Owner;

                            (b) Coordinate with Owner, Purchasing Utilities and
              Steam Purchasers regarding the various activities and duties
              related to the operation of the Facility to be performed under the
              provisions of the Power Purchase Agreement and under the
              provisions of any steam purchase agreement then in effect;

                            (c) In the case of unplanned interruptions or
              curtailments of electric power production or delivery, provide
              Owner or Purchasing Utilities, as applicable, with notice thereof
              as soon as practicable, which notice shall state the reason
              therefor and the probable duration thereof and shall also contain
              any other information necessary for the notice to conform to the
              requirements of the Power Purchase Agreement;

                            (d) Prepare, in accordance with Section 4.03 of the
              Agreement, the Annual Plan;

                            (e) Report to Owner promptly any (i) material
              failure or reasonably anticipated material failure to operate and
              maintain the Facility in accordance with any Laws or permits
              applicable to the operation and maintenance of the Facility, (ii)
              actual or reasonably anticipated material disruption in supplies
              to the Facility, (iii) actual or reasonably anticipated disputes
              with Purchasing Utilities, regulatory agencies, local officials or
              parties to the Project Documents, (iv) actual or reasonably
              anticipated labor disorders, (v) actual or threatened litigation
              relative to the Facility of which Operator becomes aware, (vi)
              actual or reasonably anticipated lien filings made against the
              Facility of which Operator becomes aware, and (vii) actual or
              reasonably anticipated lapse of, modification to or refusal to
              renew any permit for the Facility of which Operator becomes aware;

                            (f) Coordinate on-Site actions with regard to and
              document support for any and all warranty and other claims against
              suppliers of materials and equipment to the Facility, and any
              claims against any insurance carriers for payment of claims,
              liabilities or losses in connection with the Facility or its
              operation covered by such insurance, all as may be from time to
              time requested by Owner;

                            (g) Provide a monthly report to Owner by the 10th
              Business Day of each month, reporting in reasonably specific
              detail and in a form reasonably acceptable to Owner the results of
              operations for the preceding month, calendar quarter and Operating
              Year. Such reports shall address the following issues as
              appropriate: safety; environmental; instances of Force Majeure, if
              any; availability; staffing changes and community relations
              activities; outage summary; compliance with requirements for

                                       3
<PAGE>

             "qualifying facilities"; electric production; operations summary;
              maintenance summary; production summary; variance from
              year-to-date budget by more than +/-5% of total budget, +/-20% by
              category or +/-50% by line item over $5,000, if any; projected
              schedule for the current month; evaluations of key plant
              performance and financial indicators with recommendations for
              improvement, if any; and a forecast of key upcoming events at the
              Site; and

                            (h) Perform physical inventories of all Consumables,
              equipment, furniture and fixtures in accordance with the Approved
              Plant Manual and deliver copies of the inventory reports to Owner.

              5. Records. Operator shall:

                            (a) Maintain records of electricity delivered to
              Purchasing Utilities and steam delivered to Steam Purchasers;

                            (b) Maintain records of all maintenance that has
              been performed and is scheduled to be performed, subject to
              Operator's record retention policy set forth in the Approved Plant
              Manual;

                            (c) Maintain appropriate records for, and with
              Owner's approval, prepare, present and prosecute applications for
              all permits, licenses and approvals (or renewals thereof) required
              for operation and maintenance of the Facility;

                            (d) Maintain adequate records of any accidents that
              occur at the Facility or the Site, including the frequency, cause,
              severity and corrective action taken with respect thereto;

                            (e) Maintain adequate records of emissions data for
              the Facility as required by environmental control agencies and the
              Approved Plant Manual and furnish to Owner and any applicable
              governmental agencies (if so directed by Owner and on behalf of
              Owner) any reports and other information required to comply with
              applicable Laws and permits, with any such reports and information
              maintained by Operator being the property of Owner and being
              transferred to Owner upon termination of the Agreement;

                            (f) Maintain financial records sufficient to enable
              Owner to verify the accuracy of costs and expenses incurred in the
              operation and maintenance of the Facility in accordance with the
              terms hereof;

                            (g) Maintain and update, as needed, as-built
              drawings of the Facility; and

                            (h) Maintain all records required by Laws, under any
              of the Project Documents or as reasonably requested by Owner.



                                        4
<PAGE>

              6. Procurement. Subject to the limitations of the Approved
Operating Budget, Operator shall maintain an inventory of tools, equipment,
goods, and other items and materials owned by Owner that are necessary to
operate and maintain the Facility in accordance with Prudent Industry Practices
and the Project Documents.

              7. Technical Support Services. Operator will provide the following
technical support services ("Technical Support Services") with respect to the
Facility:

                            (a) Strategic planning reviews to include evaluation
              of the Operating Plan, performance indicator targets, and
              long-range planning.

                            (b) O&M reviews to include general assessment of
              power generating equipment, recommendations to improve equipment
              reliability and availability, and review of the preventive and
              routine maintenance program.

                            (c) Safety reviews to include evaluation and update
              of the safety program to ensure compliance with latest rules and
              regulations and plant inspection.

                            (d) Environmental reviews to include evaluation and
              update of the environmental compliance program to ensure latest
              regulatory requirements are incorporated and review of
              noncompliance.

                            (e) Human Resources support including benefits
              assistance, merit review, and incidental support as required.

                            (f) Home office support including evaluation of
              special projects, projects benefit analysis, and other support
              activities as required.

                            (g) Review condition of power generating equipment.
              Make recommendations to improve equipment reliability and
              availability. Establish preventive and routine maintenance
              program.

                            (h) Review outage plans for scope, schedule and cost
              justification. Make recommendations pertaining to pre-outage,
              outage and start-up schedules.

                            (i) Perform services described in Section 4.01 of
              the Agreement with respect to the Existing Plant Procedures and
              plant manual, including implementing revision plan.



                                        5
<PAGE>



                                  SCHEDULE 3.01

                                 OWNER SERVICES


              1. From the Effective Date through the Transition Period
Commencement Date, Owner shall:

                            (a) Provide to Operator current copies of all
              existing regulatory and governmental permits, operating licenses
              and authorizations (including such permits, licenses and
              authorizations required by additional regulations or changes to
              regulations);

                            (b) To the extent available to Owner, provide to
              Operator (i) the most up to date as-built drawings of the
              Facility, (ii) copies of all quarterly reports delivered pursuant
              to Section 4.5 of the Westinghouse O&M Agreement, (iii) current
              copies of all Project Documents (except the Agreement), as amended
              from time to time, (iv) the most recent inventory list provided by
              the operator under the Westinghouse O&M Agreement, (v) the
              Existing Plant Procedures, and (vi) such other information with
              respect to the operation and maintenance of the Facility as
              Operator may reasonably request;

                            (c) Provide rights of ingress to and egress from the
              Site and access to the Facility and all components thereof, to the
              extent reasonably necessary for the performance by Operator of the
              Oversight Services; and

                            (d) At the request of Operator, cooperate with
              Operator in its efforts to obtain certification from an
              Independent Engineer that Operator is capable of operating the
              Facility.

              2. During the Transition Period, Owner shall:

                            (a) Provide to Operator current copies of all
              existing regulatory and governmental permits, operating licenses
              and authorizations (including such permits, licenses and
              authorizations required by additional regulations or changes to
              regulations);

                            (b) To the extent available to Owner, provide to
              Operator (i) the most up to date as-built drawings of the
              Facility, (ii) copies of all quarterly reports delivered pursuant
              to Section 4.5 of the Westinghouse O&M Agreement, (iii) current
              copies of all Project Documents (except the Agreement), as amended
              from time to time, (iv) the most recent inventory list provided by
              the operator under the Westinghouse O&M Agreement, (v) the
              Existing Plant Procedures, and (vi) such other information with
              respect to the operation and maintenance of the Facility as
              Operator may reasonably request;




<PAGE>

                            (c) Provide rights of ingress to and egress from the
              Site and access to the Facility and all components thereof, to the
              extent reasonably necessary for the performance by Operator of the
              Transition Services;

                            (d) Coordinate and arrange the turnover of the
              Facility to Operator in a timely manner on the Operating Period
              Commencement Date;

                            (e) Reimburse Operator for costs and expenses in
              accordance with Section 5.01(a); and

                            (f) At the request of Operator, cooperate with
              Operator in its efforts to obtain certification from an
              Independent Engineer that Operator is capable of operating the
              Facility.

              3. From the Operating Period Commencement Date through the
termination of the Agreement, Owner shall:

                            (a) Provide Operator rights of ingress to and egress
              from the Site and full access to the Facility and all components
              thereof;

                            (b) Investigate, determine, and seek to secure and
              maintain and pay for all Owner Permits, and any renewal and
              updating thereof; provided that Operator shall prepare and submit
              to Owner (or to such other party as Owner may designate on behalf
              of Owner) such existing pertinent data and information as Owner or
              such other party may reasonably request in order to obtain, renew
              and update the Owner Permits;

                            (c) Provide an O&M Operating Account that shall
              contain adequate funds to pay Operator in full and in a timely
              fashion for all costs and expenses, as more particularly described
              in Section 5.03 of the Agreement;

                            (d) Manage and control accounting functions and cash
              flow of Owner;

                            (e) Review and approve or disapprove the Annual Plan
              as provided in Section 4.03 of the Agreement;

                            (f) Approve disposal of all regulated (hazardous
              waste) from the Facility;

                            (g) Procure and maintain insurance for the Facility
              as provided in Section 9.03 of the Agreement;

                            (h) Pay all taxes relating to the Facility and the
              maintenance and operation of the Facility, except for Operator's
              income tax; and

                                       2
<PAGE>

                           (i) At the request of Operator, take reasonable steps
                  to allow the Facility to meet the operating standards set
                  forth under 18 C.F.R. ss. 292.205.













                                       3
<PAGE>



                                  SCHEDULE 5.01

                                  O&M EXPENSES

              The following, to the extent properly incurred pursuant to the
terms of the Agreement:

              1. The Labor Costs for all On-Site Personnel. The Labor Cost for
On-Site Personnel will be charged based on actual costs.

              2. Operator will be reimbursed for reasonable out-of-pocket
expenses of Home Office Personnel incurred in accordance with the Approved
Annual Plan.

              3. Costs of training On-Site Personnel, including travel.

              4. Reasonable travel costs and related expenses for On-Site
Personnel.

              5. The delivered costs, including any air freight or expediting
fee, of special order parts, rental equipment, tools, office equipment, and
furniture.

              6. The costs of suppliers, subcontractors, attorneys, certified
public accountants and other third party advisors to the extent of work
performed specifically for the Facility.

              7. All utility costs.

              8. Waste disposal costs.

              9. Costs and expenses incurred pursuant to Section 6.08(c) of the
Agreement.

              10. The cost and expenses of services requested or approved in
writing by Owner (whether or not included within the scope of services provided
by Operator pursuant to the Agreement).



<PAGE>



                                  SCHEDULE 8.02

                               OPERATOR INSURANCE

              1. Statutory Workers's Compensation Insurance, including coverage
for Longshoremen's and Federal Harbor Workers Act and with minimum Employer
Liability limits of One Million Dollars ($1,000,000) with "all states"
endorsements.

              2. Comprehensive Automobile Liability Insurance for bodily injury
and death or property damage arising out of the use of all owned, non-owned and
hired motor vehicles, including loading and unloading in a minimum amount of
$1,000,000 per occurrence.

              3. Comprehensive General Liability Insurance with minimum limits
of $1,000,000 per occurrence.



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*    Operator hereby waives and agrees to require the issuers of the insurance
     policies required by the Agreement to waive any rights of subrogation
     against Owner for any loss or damage however caused.


<PAGE>


                                  SCHEDULE 9.03

                                 OWNER INSURANCE

              1. Comprehensive General Liability Insurance with minimum limits
of $10,000,000 per occurrence including premises/operations, explosion, collapse
and underground hazards, broad form contractual, products/completed operations
and personal injury. The policies for the foregoing coverage shall include
Operator as an additional named insured with respect to the performance by
Operator of its obligations under this Agreement and be endorsed to be primary
to any coverage maintained by or on behalf of Operator. Any deductible shall be
the responsibility of Owner.

              2. Comprehensive Automobile Liability Insurance for bodily injury
and death or property damage arising out of the use of all owned, non-owned and
hired vehicles in a minimum amount of $1,000,000 per occurrence. The policy
shall name Owner and Operator as named insureds in connection with the
performance by Operator of its obligations under the Agreement and be primary to
any other coverage which might be maintained by Operator. Any deductible shall
be the responsibility of Owner.

              3. The Physical Damage Insurance (as defined in Section 7.4(v) of
the Indenture) for the Facility required by Section 7.4(v) of the Indenture.

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*    Owner hereby waives and agrees to require the issuers of the insurance
     policies required by the Agreement to waive any rights of subrogation
     against the Operator for any loss or damage however caused.

**   Operator acknowledges that the Physical Damage Insurance provided by Owner
     does not cover personal property belonging to Operator located at the Site.