Exhibit 10 (b)


                                                                  CONFORMED COPY

                                    AGREEMENT



                             DATED 23rd August, 2000



                               (pound)300,000,000


                            REVOLVING CREDIT FACILITY



                                       FOR


                               TXU EUROPE LIMITED



                                   ARRANGED BY


                               CHASE MANHATTAN plc




                                  ALLEN & OVERY
                                     London


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                                      INDEX

CLAUSE                                                                   PAGE

1.    Interpretation.......................................................1
2.    The Facility........................................................29
3.    Purpose.............................................................29
4.    Conditions Precedent................................................29
5.    Drawdown............................................................30
6.    Repayment...........................................................31
7.    Prepayment and Cancellation.........................................32
8.    Interest Periods....................................................33
9.    Interest............................................................33
10.   Optional Currencies.................................................35
11.   Payments............................................................36
12.   Taxes...............................................................37
13.   Market Disruption...................................................38
14.   Increased Costs.....................................................40
15.   Illegality and Mitigation...........................................41
16.   Representations and Warranties......................................42
17.   Information Undertakings............................................45
18.   General Undertakings................................................47
19.   Events of Default...................................................56
20.   The Agent and the Arranger..........................................61
21.   Fees................................................................66
22.   Expenses............................................................67
23.   Stamp Duties........................................................67
24.   Indemnities.........................................................67
25.   Evidence and Calculations...........................................68
26.   Amendments and Waivers..............................................69
27.   Changes to the Parties..............................................71
28.   Disclosure of Information...........................................74
29.   Set-off.............................................................74
30.   Pro rata Sharing....................................................75
31.   Severability........................................................76
32.   Counterparts........................................................76
33.   Notices.............................................................76
34.   Jurisdiction........................................................77
35.   Governing Law.......................................................77


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SCHEDULES

1.    Banks and Commitments...............................................79
2.    Conditions Precedent Documents......................................80
3.    Calculation of the Mandatory Cost...................................81
4.    Form of Request.....................................................83
5.    Form of Novation Certificate........................................84
6.    Form of legal opinion of Allen & Overy..............................85
7.    Part I Guarantee....................................................88
      Part II Guarantor Accession Agreement...............................91
      Part III To be delivered by a Guarantor.............................92

Signatories...............................................................94


<PAGE>


THIS AGREEMENT is dated 23rd August, 2000 and is made between:

(1)  TXU EUROPE LIMITED (Registered No. 3505836) (the "COMPANY");

(2)  CHASE MANHATTAN plc as arranger (in this capacity the "ARRANGER");

(3)  THE FINANCIAL INSTITUTIONS listed in Schedule 1 as banks (the "BANKS"); and

(4)  CHASE MANHATTAN INTERNATIONAL LIMITED as agent (in this capacity the
     "AGENT").

IT IS AGREED as follows:

1.   INTERPRETATION

1.1  DEFINITIONS

     In this Agreement, unless the context otherwise requires:

     "ACQUISITION"

     means the acquisition by Bidco of the Target Shares;

     "ACT"

     means the Companies Act 1985;

     "ADJUSTED SHARE CAPITAL AND RESERVES"

     means the aggregate of the following items namely:

     (a)  the nominal amount of the share capital of Finco 2 for the time being
          issued and paid up or credited as paid up excluding any Qualifying
          Preference Shares issued by Finco 2;

     (b)  the amounts standing to the credit of the consolidated reserves of the
          Group (including any share premium account and capital redemption
          reserve),

     (c)  but adjusted, to the extent that the following items have not already
          been added, deducted or excluded in arriving at the figures referred
          to in (a) or (b) above:

          (i)  by deducting the amounts standing to the debit of the
               consolidated reserves of the Group;

          (ii) by deducting any amounts attributable to interests of non-Group
               members in Subsidiaries of Finco 2;

          (iii) by deducting any reserves set aside for deferred taxation;

          (iv) by deducting the amount by which the net book value of any fixed
               asset has been written up after 24th March, 1999 (or, in the case
               of a person which has become or becomes a member of the Group
               after that date, the date on which it became or becomes a member


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                                       2


               of the Group) by way of revaluation or on its transfer from one
               member of the Group to another (but no such deduction shall be
               made if the amount of this write up is supported by and does not
               exceed the amount shown by an independent written valuation);

          (v)  by adding back (aa) to capital reserves, goodwill written off by
               reason of the Acquisition and (bb) to cumulative revenue
               reserves, any goodwill arising on the Acquisition and
               subsequently amortised through the profit and loss account;

          (vi) by adding back (aa) to capital reserves, goodwill written off by
               reason of any other acquisition after 24th March, 1999 of all or
               a majority of the equity share capital or business of another
               person and (bb) to cumulative revenue reserves, any goodwill,
               arising on any other such acquisition and subsequently amortised
               through the profit and loss account; and

          (vii) by adding back proceeds (up to a maximum aggregate amount of
               US$500,000,000) from any issue of Equity-Credit Preferred
               Securities,

          but so that no amount to be added, deducted or excluded as a result of
          any of the foregoing shall be added, deducted or excluded more than
          once in the same calculation and, where the calculation is being made
          as at the end of a Test Period or in the context of paragraph (d) of
          the definition of Permitted Security Interest or in the context of
          Clauses 18.1 (Financial ratios) or 18.17 (Project Finance
          Subsidiaries), each such amount shall be determined by reference to
          the most recent financial statements and compliance certificates
          delivered hereunder as adjusted under the provisions of Clause 18.2
          (Change of Accounting policies) and the terms of this definition or
          any relevant Clause of this Agreement;

     "ADVANCE"

     means a Revolving Advance or a Term-out Advance;

     "AFFILIATE"

     means, in relation to any person, any Subsidiary of that person, any
     holding company of that person and any other Subsidiary of that holding
     company;

     "AGENT"

     means Chase Manhattan International Limited of 125 London Wall, London EC2Y
     5AJ or such other person as may be appointed Agent for the Banks under
     Clause 20 (The Agent and the Arranger);

     "AGENT'S SPOT RATE OF EXCHANGE"

     means the Agent's spot rate of exchange for the purchase of the relevant
     Optional Currency in the London foreign exchange market with Sterling at or
     about 11.00 a.m. on a particular day.


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                                       3


     "ANNIVERSARY"

     means an anniversary of the Signing Date;

     "APPLICABLE MARGIN"

     means, at any time, 0.875% per annum or if at the date of this Agreement or
     subsequently the most recent determination of the Leverage Ratio under
     Clause 18.1 (Financial Ratios) shows that the Leverage Ratio is less than
     65%, the rate per annum determined as follows:

      LEVERAGE RATIO          AND NOT LESS THAN:     APPLICABLE MARGIN IS:
      IS LESS THAN:

      65%                             60%                    0.75%

      60%                             55%                   0.625%

      55%                              -                     0.5%

     provided that:

     (a)  any reduction or increase in the Applicable Margin shall have effect
          five Business Days following the date of delivery of any set of
          audited or management accounts for a Quarter under Clause 17.3(a)
          (Annual audited financial statements) and 17.3(b) (Unaudited
          management accounts), together with the financial covenant compliance
          certificate by the Company referred to in Clause 17.3(c) (Compliance
          with Financial Undertakings), until (but excluding) the effective date
          for any subsequent change in the Applicable Margin in accordance with
          this definition;

     (b)  during the continuance of any Default, any margin reduction under this
          definition will not apply, and the Applicable Margin shall be 0.875%;

     "APPROPRIATE ACCOUNTING PRINCIPLES" means:

     (a)  the accounting principles, policies, standards, practices and bases
          (being generally accepted in the United Kingdom), as adopted in the
          Original Group Accounts; or

     (b)  where any change has occurred and (if required) has been agreed under
          Clause 18.2 (Change of Accounting policies), such accounting
          principles, standards, practices and bases as have so occurred and (if
          required) have been so agreed;

     "AUDITORS"

     means PricewaterhouseCoopers or such other internationally recognised firm
     of chartered accountants as may be auditors to the Group for the time
     being;

     "BIDCO"

     means TXU Acquisitions Limited (company no.3455523);

     "BORROWED MONEY"


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                                       4


     means any present or future Indebtedness (whether by way of principal or
     premium) for or in respect of:

     (a)  money borrowed or raised;

     (b)  any recourse arising from the discounting of receivables save for
          recourse for disputed or ineligible debts or similar rights of
          recourse typical in a securitisation transaction;

     (c)  liabilities under or in respect of any acceptance or acceptance credit
          or documentary credit facility or standby credit facility, other than
          (i) any such credit facility relating to the acquisition cost of
          assets or services to the extent that the same involves deferral of
          payment of any sum for one year or less and (ii) exposure under any
          such credit issued to back completion or performance obligations
          (including any obligation to lodge cash margin payments in case of a
          specified decline in a Group Company's rating), except to the extent
          that:

          (i)  such obligations are for the payment of Borrowed Monies, or for
               the payment of liquidated damages the payment of which is
               triggered by an event or circumstance which has (as of the
               relevant date on which any calculation is made) already occurred,
               and, in the case of a decline in rating, if the rating agency
               concerned has reduced the relevant rating, the amount taken into
               account will be the amount which has, or will, become payable by
               reason of such decline; or

          (ii) provision has been made in the accounts of the relevant Group
               Company for an amount due under the underlying obligation or,
               were the relevant Group Company to prepare accounts as of the
               date on which a compliance certificate is issued to the Agent
               under Clause 17.3 (Delivery of financial statements), such a
               provision should be made in accordance with Appropriate
               Accounting Principles;

     (d)  any notes, bonds, debentures, debenture stock, Advance stock or other
          debt security offered, issued or distributed whether by way of public
          offer, private placing, acquisition consideration or otherwise and
          whether issued for cash or in whole or in part for a consideration
          other than cash, other than any bond, note, debenture or other debt
          security referred to in (f) below;

     (e)  any outstanding Qualifying Preference Shares in issue;

     (f)  any outstanding balance of the acquisition cost of assets or services
          to the extent payable on deferred payment terms after the time of
          acquisition or possession thereof by the person liable (but only to
          the extent that the same:

          (i)  involves deferral of payment of any sum for more than one year;

          (ii) is not a cost in respect of the expansion, development or renewal
               of all or part of the "licensee's distribution system" (as
               defined in the PES Licence); and

          (iii)exceeds(pound)25,000,000 in respect of any transaction or series
               of related transactions)


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                                       5


          whether or not any instalments for payment are evidenced by a bond,
          note, debenture or other debt security issued by the obligor;

     (g)  any Finance Lease;

     (h)  any guarantee, indemnity or other legally binding assurance against
          (or other legally binding arrangement intended to prevent or limit)
          loss arising under any Borrowed Money of any person who is not a Group
          Company;

     (i)  for the purpose of Clause 19.1(d) (Cross-default) only, any Derivative
          Transaction (calculated at the mark-to-market value for close-out);

     (j)  any liability which has arisen under any transaction by virtue of
          which:

          (i)  a capital sum is received by a person as consideration for the
               sale or disposal (whether by outright alienation or the grant of
               a lease or other interest or otherwise) of any assets; and

          (ii) a third party making or funding the payment receives a guarantee,
               indemnity or other legally binding assurance from a member of the
               Group against (or other legally binding arrangement intended to
               prevent or limit) loss as a result of the assets not generating
               or being realised for a specific amount or an amount calculated
               in an agreed manner;

     (k)  any amount raised under any other transaction having the commercial
          effect of a borrowing and entered into primarily as a means of raising
          finance;

     (l)  such part (if any) of the amounts made available to any person as a
          result of any securitisation as, in accordance with the Appropriate
          Accounting Principles, is or is to be treated as a creditor rather
          than as a deduction from or reduction in debtors or other assets;

          Provided that:

          (i)  Subordinated Debt shall be excluded;

          (ii) Indebtedness of a member of the Group to another member of the
               Group shall be excluded except that indebtedness of any member of
               the Group to the Company shall (to the extent that any such
               indebtedness would have fallen within the definition of Borrowed
               Money if owed to a third party) be treated as Borrowed Money.
               Where Borrowed Money is incurred by an SPV and on-lent indirectly
               to Finco 2 by the Borrowed Money in question being on-lent by
               such SPV to the Company and then being on-lent by the Company to
               Finco 2, such Borrowed Money shall be counted only once in any
               calculation of the Leverage Ratio or of any other financial
               covenant referred to in Clause 18.1 (financial ratios);

          (iii)Indebtedness of a member of the Group to a Relevant Person shall
               (to the extent that any such Indebtedness would have fallen
               within the definition of Borrowed Money if owed to a third party)
               be treated as Borrowed Money;


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                                       6


          (iv) any interest, dividends, commissions, fees or other like
               financing charges shall be included to the extent that they have
               been capitalised and remain payable but have not been discharged;

          (v)  in respect of paragraph (d) (where the item concerned is a bond,
               note, debenture, debenture stock, loan stock or other debt
               security issued at a discount) and in respect of paragraph (e),
               only the issue price of any such debt security or Qualifying
               Preference Share falling thereunder, together with any applicable
               discount required under the Appropriate Accounting Principles to
               be recognised in the relevant person's most recently published
               financial statements, shall be included;

          (vi) in respect of paragraph (g), only the capitalised value
               established in accordance with the Statement of Standard
               Accounting Practice 21 (as supplemented, varied or replaced from
               time to time) of a Finance Lease as shown in the relevant
               person's most recently published financial statements (or as
               would be shown in the next following financial statements, if
               such Finance Lease was entered into in a period for which there
               are not yet statements available) shall be included;

          (vii)Indebtedness for or in respect of Project Finance Borrowings
               shall be excluded;

          (viii)adjustments shall be made to the exchange rate at which such
               Borrowed Monies are converted into Sterling in order to take
               account of the effect of any relevant currency swap; and

          (ix) Indebtedness for or in relation to Equity-Credit Preferred
               Securities up to US$500,000,000 shall be excluded from Borrowed
               Money;

          (and so that no amount shall be included or excluded more than once);

     "BUSINESS DAY"

     means a day (other than a Saturday or a Sunday) on which banks are open for
     general business in London and:

     (a)  in relation to a transaction involving an Optional Currency (other
          than Euros), the principal financial centre of the country of that
          Optional Currency; and

     (b)  in relation to a transaction involving Euros in Frankfurt am Main,
          Germany (or such other principal financial centre(s) of any
          Participating Member State(s) as the Agent may from time to time
          reasonably nominate for this purpose) and, being a day on which
          payments in Euros are settled in the Trans-European Automated
          Real-time Gross settlement Express Transfer (TARGET) system;

     "CAPITALISATION"

     means at any time the aggregate of Adjusted Share Capital and Reserves and
     Consolidated Net Borrowings;

     "CHANGE IN CONTROL"


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                                       7


     shall be deemed to have occurred if:

     (a)  any person or group of related persons (other than the Parent, any
          Subsidiary of the Parent, or any pension, savings or other employee
          benefit plan for the benefit of employees of the Parent and/or any
          Subsidiary of the Parent) shall have acquired beneficial ownership of
          more than 30% of the outstanding Voting Shares of the Parent (within
          the meaning of section 13(d) or 14(d) of the Securities Exchange Act
          of 1934 of the United States of America, as amended, and the
          applicable rules and regulations thereunder); provided that a Change
          in Control shall not be deemed to have occurred if such acquisition
          has been approved, prior to the Parent Acquisition Date and the date
          on which any tender offer for Voting Shares of the Parent was
          commenced, by a majority of the Disinterested Directors of the Parent;
          or

     (b)  during any period of 12 consecutive months, commencing on or after 2
          March 1998, individuals who on the first day of such period were
          directors of the Parent (together with any replacement or additional
          directors who were nominated or elected by a majority of directors
          then in office) cease to constitute a majority of the board of
          directors of the Parent;

     "COMMITMENT" means

     (a)  in relation to a Bank which is a Bank on the Signing Date, the amount
          in Sterling set opposite its name in Schedule 1 and the amount of any
          other Bank's Commitment acquired by it under Clause 27 (Changes to the
          Parties); and

     (b)  in relation to a Bank which becomes a Bank after the Signing Date, the
          amount of any other Bank's Commitment acquired by it under Clause 27
          (Changes to the Parties),

     to the extent not cancelled, transferred or reduced under this Agreement.

     "COMMITMENT PERIOD"

     means the period from the date of this Agreement up to and including the
     Final Maturity Date;

     "CONSOLIDATED NET BORROWINGS"

     means, at any time, in respect of the Group, the aggregate of the Borrowed
     Money of the Group, as shown in the then latest compliance certificate most
     recently delivered to the Agent under Clause 17.3(c) (Compliance with
     Financial Undertakings) (the "RELEVANT BALANCE SHEET"), less the aggregate
     book value of:

     (a)  all Liquid Assets which are in, or are freely transferable to, the
          United Kingdom and which are owned by Finco 2 or a wholly-owned member
          of the Group or (in the case of the Liquid Assets of a member of the
          Group which is a partly-owned member of the Group) the proportion of
          the total amount for the time being of Liquid Assets held by such
          member which corresponds to the proportion of the total nominal amount
          of the issued equity share capital of such member which is
          beneficially owned directly or indirectly by Finco 2 (exclusive of
          Liquid Assets constituting or representing obligations of any member
          or members of the Group); and


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                                       8


     (b)  in the case of a partly-owned member of the Group, the proportion of
          total amounts for the time being outstanding of Borrowed Money owing
          by such partly owned member of the Group otherwise than to another
          member of the Group which corresponds to the proportion of the total
          nominal amount of the issued equity share capital of such partly owned
          member of the Group not beneficially owned directly or indirectly by
          Finco 2 (the "MINORITY PROPORTION"),

     but adding the aggregate book value (as included in the relevant balance
     sheet) of the Minority Proportion of the total amount, if any, for the time
     being outstanding of Borrowed Money owing to a partly-owned member of the
     Group by any other member of the Group;

     "DEFAULT"

     means any Event of Default or any event which with the giving of notice,
     lapse of time, determination of materiality or fulfilment of any other
     applicable condition (or any combination of the foregoing) would, if
     unremedied, constitute an Event of Default;

     "DERIVATIVES TRANSACTION"

     means a contract, agreement or transaction which is:

     (a)  a rate swap, basis swap, forward rate transaction, equity (or equity
          or other index) swap or option, bond option, interest rate option,
          foreign exchange transaction, cap, collar or floor, currency swap,
          currency option or any other similar transaction; and/or

     (b)  any combination of such transactions,

     in each case, whether on-exchange or otherwise;

     "DIRECTOR GENERAL"

     means the person appointed from time to time by the Secretary of State to
     hold office as the Director General of Electricity Supply (or any successor
     to his functions) for the purposes of the Electricity Act;

     "DISINTERESTED DIRECTOR"

     shall mean any member of the Board of Directors of the Parent who:

     (a)  is not affiliated, directly or indirectly, with, or appointed by, a
          person or group of related persons (other than the Parent, any
          Subsidiary of the Parent, or any pension, savings or other employee
          benefit plan for the benefit of employees of the Parent and/or any
          Subsidiary of the Parent) acquiring the beneficial ownership of more
          than 30% of the outstanding Voting Shares of the Parent (within the
          meaning of section 13(d) or 14(d) of the Securities Exchange Act of
          1934 of the United States of America, as amended, and the applicable
          rules and regulations thereunder); and

     (b)  either was a member of the board of directors of the Parent prior to
          the Parent Acquisition Date or was recommended for election by a
          majority of the Disinterested Directors in office prior to the Parent
          Acquisition Date;

     "DISTRIBUTION BUSINESS"


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                                       9


     means the business of REC, or any successor undertaking to that business
     within the Group, in or ancillary to the distribution (whether for its own
     account or that of any other party) of electricity through the Group's
     distribution system and includes any business of providing connections to
     the Group's distribution system;

     "DOUBLE TAXATION TREATY"

     means any convention or agreement between the government of the United
     Kingdom and any other government for the avoidance of double taxation and
     the prevention of fiscal evasion with respect to taxes on income and
     capital gains;

     "DRAWDOWN DATE"

     means the date on which an advance of an Advance is, or is to be, made;

     "EBITDA"

     means, in respect of any Test Period, the total operating profit of the
     Group for continuing operations, acquisitions (as a component of continuing
     operations) and discontinued operations (excluding any share of
     consolidated profits or losses which is attributable to Project Finance
     Subsidiaries or to a business the assets or cash flow of which constitute
     security for Project Finance Borrowings as contemplated in paragraphs
     (c)(i) and (c)(ii) of the definition of Project Finance Borrowings) and
     including dividends received in cash by members of the Group from Project
     Finance Subsidiaries (or any other company not being a member of the
     Group), in each case before taking into account:

     (a)  interest payable and interest receivable;

     (b)  amounts provided for depreciation and amortisation of goodwill;

     (c)  exceptional items;

     (d)  Taxes (other than VAT);

     (e)  the deduction of any costs relating to the Acquisition; and

     (f)  the deduction of costs (not exceeding an aggregate amount of
          (pound)25,000,000) related to any other acquisition after the date of
          this Agreement of all or a majority of the equity share capital or
          business of another person;

     for that Test Period (calculated on a consolidated basis disregarding any
     portion of any item taken into account in that calculation which is
     attributable to any minority interests in Subsidiaries, but for this
     purpose treating Finco 2 as a wholly-owned Subsidiary of the Company) all
     as determined by reference to the most recent financial statements and
     compliance certificates delivered under Clause 17.3 (Delivery of Financial
     Statements), as adjusted under Clause 18.2 (Change of Accounting policies);

     "ELECTRICITY ACT"

     means the Electricity Act 1989 and, unless the context otherwise requires,
     all subordinate legislation made under that Act and all other laws,
     regulations or requirements of any relevant authority (in so far as such
     regulations have the force of law) relating to the transmission,
     distribution or supply of electricity in force in the United Kingdom;


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                                       10


     "EQUITY-CREDIT PREFERRED SECURITIES"

     shall mean securities, however denominated:

     (i)  issued by the Company or any of the Company's Subsidiaries;

     (ii) that are not subject to mandatory redemption or the underlying
          securities, if any, of which are not subject to mandatory redemption
          (save upon acceleration after the occurrence of an event of default
          thereunder);

     (iii) that are perpetual or mature no less than 30 years from the date of
          issuance;

     (iv) the indebtedness incurred by any member of the Group in connection
          with which, including any guarantee, is subordinate in right of
          payment to the unsecured and unsubordinated indebtedness of the issuer
          of such indebtedness or guarantee; and

     (v)  the terms of which permit the deferral of the payment of interest or
          distributions thereon to a date occurring after the Final Maturity
          Date or, if a Term-out Advance is drawn, the second Anniversary;

     and where the proceeds of such securities are on-lent or on-invested into
     the Group or otherwise represented or underlain by one or a series of
     underlying inter-company loans, debentures or other securities, references
     to Equity Credit-Preferred Securities shall where the context admits
     include such loans, debentures or other securities;

     "EURO"

     means the single currency of Participating Member States;

     "EURIBOR"

     means, in relation to any Advance or unpaid sum denominated in Euros, the
     percentage rate per annum determined by the Agent to be equal to:

     (a)  the rate which appears on the page of the Telerate Screen which
          displays for spot value the EURIBOR rate sponsored by the Banking
          Federation of the European Union for deposits in Euros (currently page
          "248") for the specified period; or

     (b)  if such page or such service shall cease to be available or relevant,
          such other page or such other service for the purpose of displaying
          the EURIBOR rate for Euros as the Agent, after consultation with the
          Banks and the Company, shall select; or

     (c)  if no rate can be determined under (b) above, the arithmetic mean
          (rounded upwards, if not already such a multiple, to four decimal
          places) of the rates (as notified to the Agent) at which each of the
          Reference Banks was offering to prime banks in the European inter-bank
          market deposits in Euro and for the specified period,

     at or about 11.00 a.m. on the applicable Rate Fixing Date for the offering
     of deposits in Euro for a period comparable to its Interest Period.

     "EVENT OF DEFAULT"


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                                       11


     means any of the events or circumstances described in Clause 19.1 (Events
     of Default);

     "EXCESS EQUITY FUNDING"

     means the amount owing by Bidco to the Parent under the note issued by
     Bidco to the Parent in consideration of the issue of the Parent's shares,
     which shares constituted a portion of the consideration for the Target
     Shares acquired by Bidco in connection with the Acquisition.

     "FACILITY"

     means the facility to draw cash advances (including Term-out Advances)
     referred to in Clause 2.1;

     "FACILITY OFFICE"

     means the office(s) notified by a Bank to the Agent:

     (a)  on or before the date it becomes a Bank; or

     (b)  by not less than five Business Days' notice,

     as the office(s) through which it will perform all or any of its
     obligations under this Agreement;

     "FEE LETTER"

     means the fee letter(s) referred to in Clause 21 (Fees);

     "FINAL MATURITY DATE"

     means the date falling 364 days from the Signing Date;

     "FINANCE DOCUMENTS"

     means this Agreement, a Novation Certificate, each Request, a Guarantor
     Accession Agreement and the Fee Letter(s) or any other document designated
     as such by the Agent and the Company;

     "FINANCE LEASE"

     means any lease under which a member of the Group is the lessee which is or
     should be treated as a finance or capital lease under the Appropriate
     Accounting Principles (and includes any hire purchase contract or other
     arrangement which is or should be similarly treated);

     "FINANCE PARTIES"

     means the Agent, the Arranger and the Banks and (as the context requires)
     "FINANCE PARTY" means any one of them;

     "FINANCE PERIOD"


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                                       12


     means the period from the Signing Date until the date on which the Agent
     acting reasonably confirms that none of the Obligors and none of the
     Finance Parties has any actual or contingent liabilities or obligations
     under any of the Finance Documents;

     "FINANCIAL DEFINITIONS"

     means the definitions of Adjusted Share Capital and Reserves,
     Capitalisation, Consolidated Net Borrowings, EBITDA, Leverage Ratio, Net
     Interest Costs and Test Period;

     "FINCO 2"

     means TXU Finance (No. 2) Limited (company number 3514100);

     "GAS FRAMEWORK AGREEMENT"

     means the agreement dated 1st March, 1996 between British Gas Transco and
     Eastern Natural Gas (Retail) Limited;

     "GENERATION BUSINESS"

     means the business of the Group in or ancillary to the generation of
     electricity (whether for its own account or that of any other party);

     "GENERATION LICENCE"

     means each of those licences granted by the Secretary of State under
     section 6(1) of the Electricity Act authorising the relevant licensee to
     carry on Generation Business and any activities ancillary thereto, or any
     replacement licence or licences granted from time to time to any member of
     the Group (or, if more than one, the most recent such replacement);

     "GOVERNMENT ENTITY"

     means and includes (whether having a distinct legal personality or not) any
     supra-national, national or local government authority, regulatory body,
     central bank, board, commission, department, division, organ,
     instrumentality, court or agency and any association, organisation or
     institution of which any of the foregoing is a member or to whose
     jurisdiction any of the foregoing is subject or in whose activities any of
     the foregoing is a participant;

     "GROUP"

     means the Company and all its Subsidiaries for the time being (except
     Project Finance Subsidiaries) save that, where the reference to the Group
     is used in respect of the Financial Definitions used in calculating the
     Leverage Ratio, Group shall mean the Company's Subsidiaries (except Project
     Finance Subsidiaries) and shall not include the Company itself, and in
     either case "MEMBER OF THE GROUP" or "GROUP COMPANY" means any one of them;

     "GUARANTEE"

     means the guarantee set out in Part I of Schedule 7 (Guarantee) given by a
     Guarantor;

     "GUARANTOR"


<PAGE>

                                       13


     means any member of the Group which accedes to this Agreement as a
     Guarantor under Clause 27.6 (Guarantors);

     "GUARANTOR ACCESSION AGREEMENT"

     means a deed in the form of Part II of Schedule 7 with such amendments as
     the Agent may approve or reasonably require;

     "INDEBTEDNESS"

     means any obligation of a person for the payment or repayment of money,
     whether as principal or as surety and whether present or future, actual or
     contingent;

     "INFORMATION MEMORANDUM"

     means the Information Memorandum dated July, 2000 and prepared by the
     Company in connection with this Agreement;

     "INTEREST PERIOD"

     means each period for the calculation of interest ascertained in accordance
     with Clause 8 (Interest Periods);

     "LEVERAGE RATIO"

     means, at any relevant date, the percentage which Consolidated Net
     Borrowings is of Capitalisation of the Group;

     "LIBOR"

     means:

     (a)  the rate per annum which appears on page 3750 or page 3740 (as
          appropriate) on the Telerate Screen; or

     (b)  if no such rate appears on the Telerate Screen, the arithmetic mean
          (rounded to four decimal places) of the rates, as supplied to the
          Agent at its request, quoted by the Reference Banks to leading banks
          in the London interbank market,

     at or about 11.00 a.m. on the applicable Rate Fixing Day for the offering
     of deposits in the currency of the relevant Advance for a period comparable
     to its Interest Period.

     "LICENCES"

     means those licences granted by the Secretary of State:

     (a)  under the Electricity Act to the REC or any other Principal Subsidiary
          authorising each relevant licensee to carry on the Distribution
          Business, the Supply Business, a Second-Tier Supply Business or (or
          part of) the Generation Business and any activities ancillary thereto;

     (b)  under section 7 of the Gas Act 1986 to a Principal Subsidiary ; or


<PAGE>

                                       14


     (c)  being a replacement licence or licences, from time to time to REC or
          any other Principal Subsidiary (or, if more than one, the most recent
          such replacement),

     as amended and/or extended from time to time;

     "LICENSEES"

     means REC and any such other Principal Subsidiary as, at any time, is the
     licensee under a Licence and "LICENSEE" means any one of them;

     "LIQUID ASSETS"

     means as at any date, the aggregate (calculated on a consolidated basis)
     of:

     (a)  cash at bank and in hand in a jurisdiction where (if not the United
          Kingdom) such amounts are freely transferable out of that jurisdiction
          and convertible into currencies dealt in on the London foreign
          exchange market;

     (b)  short term deposits (the term of which has twelve months or less
          remaining maturity) and money at call, with a recognised financial
          institution;

     (c)  certificates of deposit, from a recognised financial institution,
          which are negotiable or, if not, the term of which has twelve months
          or less remaining to maturity;

     (d)  gilts or Treasuries or similar securities issued by or guaranteed by
          the Government of any of the United Kingdom, the United States or any
          Participating Member States;

     (e)  deposits made with the Commissioners of Inland Revenue in respect of
          which certificates of tax deposit have been issued by Her Majesty's
          Treasury;

     (f)  Sterling bills of exchange eligible for rediscount at the Bank of
          England;

     (g)  any other negotiable money market instrument with a maximum remaining
          maturity of 12 months or less excluding commercial paper issued by any
          person other than a state entity or a person with a credit rating of
          AAA from Standard & Poor's or equivalent or a short term credit rating
          of A1 or equivalent;

     (h)  any obligation owing to a Group Company in respect of a securities
          repurchase agreement by a counterparty which is rated AAA or
          equivalent or has a short term credit rating of A1 or equivalent, or
          in the absence of such a rating, where such obligation is backed by a
          margin deposit substantially sufficient to make up for any shortfall
          as between the mark-to-market price of the underlying securities and
          the amount owing;

          provided that:

          (i)  where Liquid Assets are deposited subject to restrictions in
               order that they are held as security for a liability or can be
               offset against a liability, such Liquid Assets shall be taken
               into account only to the extent that such liability is taken into
               account under Consolidated Net Borrowings; and

          (ii) when the aggregate amount of Liquid Assets required to be taken
               into account for the purposes of this definition on any
               particular day is being ascertained, any such Liquid Assets


<PAGE>

                                       15


               denominated or repayable or in respect of which monies are
               payable in a currency other than Sterling shall be converted for
               the purposes of calculating the Sterling equivalent at the rate
               of exchange prevailing on that day in London by taking the
               Agent's Spot Rate of Exchange as of 11.00 am on such date for the
               purchase of such currency with Sterling;

     "MAJORITY BANKS"

     means, subject to Clause 26.4 (Notice to Majority Banks), at any relevant
     time, Banks:

     (a)  the aggregate of whose Commitments exceeds 66(2)/3 per cent. of the
          Total Commitments; or

     (b)  (if no principal amounts are outstanding under this Agreement) the
          aggregate of whose Commitments exceeds 66(2)/3 per cent. of the Total
          Commitments but so that if at such time the Total Commitments have
          been reduced to zero references to a Bank's Commitment shall be
          construed as amongst the Finance Parties (and not so as to give any
          rights to any other person) as a reference to that Bank's Commitment
          immediately prior to such reduction to zero;

     "MANDATORY COST"

     means, in relation to any period:

     (a)  a percentage calculated for such period at an annual rate determined
          in accordance with Schedule 3 (Calculation of the Mandatory Cost); and

     (b)  in respect of any Bank, the percentage rate per annum notified by that
          Bank to the Company and the Agent as its cost of complying with the
          minimum reserve requirements of the European Central Bank;

     "MATERIAL ADVERSE EFFECT" is a reference to:

     (a)  something having a material adverse effect on the ability of any
          Obligor to perform its payment or Financial Covenant obligations under
          any of the Finance Documents; or

     (b)  something (other than the Reservations) which results in any of the
          Finance Documents not being legal, valid and binding on, or
          enforceable in accordance with their terms against, any of the
          Obligors in a manner and to an extent reasonably considered by the
          Majority Banks to be materially adverse to the interests of the Banks;

     "MATURITY DATE"

     means:

     (a)  in relation to a Revolving Advance, the last day of the Interest
          Period for that Revolving Advance; and

     (b)  in relation to a Term-out Advance, the date specified as such in the
          Request for that Term-out Advance;


<PAGE>

                                       16


     "MONTH" or "MONTHS"

     means a period beginning in one calendar month and ending in the relevant
     later calendar month on the day numerically corresponding to the day of the
     calendar month in which it started, provided that (a) if the period started
     on the last Business Day in a calendar month or if there is no such
     numerically corresponding day, it shall end on the last Business Day in
     such later calendar month and (b) if such numerically corresponding day is
     not a Business Day, the period shall end on the next following Business Day
     in such later calendar month but if there is no such Business Day it shall
     end on the preceding Business Day and "MONTHLY" shall be construed
     accordingly;

     "MULTI-OPTION FACILITIES AGREEMENT"

     means (pound)1,275,000,000 credit facilities agreement (as amended)
     originally dated 24th March, 1999 between the Company and others.

     "NET INTEREST COSTS"

     means, in respect of any period, the aggregate of

     (a)  the amounts accruing during such period (whether or not paid or
          payable within such period) in respect of interest, guarantee and
          other ancillary facility fees, letter of credit commission and
          fronting fees and commitment fees incurred by the Group (disregarding
          any portion attributable to any minority interests in Subsidiaries,
          other than the minority interest in Finco 2) charged and amortised
          under FRS4, including the interest equivalent element of Finance
          Leases (but excluding any of the foregoing that are attributable to
          Equity-Credit Preferred Securities); and

     (b)  the amounts actually paid by any member of the Group (disregarding any
          portion attributable to any minority interests in Subsidiaries, other
          than the minority interest in Finco 2) during such period by way of:

          (A)  interest or distributions in respect of Equity-Credit Preferred
               Securities and

          (B)  dividends or other distributions in respect of any shares of any
               member of the Group (other than equity share capital)
               beneficially owned by any person other than a member of the Group
               (to the extent paid in respect of that period),

     adjusted in each case by:

     (i)  excluding interest, fees or commission or the interest equivalent
          element of Finance Leases accrued by or to members of the Group from
          or to other members of the Group;

     (ii) deducting credit interest accrued during such period which would be
          shown as interest receivable in the relevant accounts delivered under
          Clause 17.3 (Delivery of Financial Statements), as adjusted under
          Clause 18.2 (Change of Accounting policies);

     (iii) excluding any nominal imputed interest charge that arises only as a
          result of an accounting procedure;


<PAGE>

                                       17


     (iv) adding amounts payable, and deducting amounts receivable, under
          interest rate hedging transactions entered into by the Group from time
          to time; and

     (v)  deducting the amount of income accrued to any member of the Group in
          respect of the actual or prospective repurchase by the counterparty of
          securities under any such securities repurchase agreement as is
          referred to in paragraph (h) of the definition of Liquid Assets
          established by reference to the increase in price as between the
          original sale and the repurchase;

     "NOVATION CERTIFICATE"

     means a certificate substantially in the terms of Schedule 5 (Form of
     Novation Certificate);

     "OBLIGOR"

     means the Company and any Guarantor;

     "OPTIONAL CURRENCY"

     means any currency (other than Sterling) which is freely transferable and
     freely convertible into Sterling and deposits of which are readily
     available in the London interbank market;

     "ORIGINAL FACILITIES AGREEMENT"

     means the agreement dated 2 March 1998 (as subsequently re-stated) made
     between certain joint lead arrangers, the Agent, a certain issuing bank,
     the Company and others providing for facilities of (pound)3,625,000,000 for
     the purposes of the Acquisition;

     "ORIGINAL GROUP ACCOUNTS"

     means the audited consolidated accounts of the Company for the year ended
     31st March, 1998;

     "ORIGINAL STERLING AMOUNT"

     in relation to an Advance, means:

     (a)  if that Advance is denominated in Sterling, the amount of that
          Advance; or

     (b)  if that Advance is denominated in an Optional Currency, the equivalent
          in Sterling of the amount of that Advance at the Agent's Spot Rate of
          Exchange three Business Days before its Drawdown Date.

     "PARENT"

     means TXU Corp. whose principal place of business is at 1601 Bryan Street,
     Dallas, Texas, 75201;

     "PARENT ACQUISITION DATE"

     shall mean the date as of which a person or group of related persons first
     acquires more than 30% of the outstanding Voting Shares of the Parent
     (within the meaning of section 13(d) or 14(d) of the Securities Exchange


<PAGE>

                                       18


     Act of 1934 of the United States of America, as amended, and the applicable
     rules and regulations thereunder);

     "PARTICIPATING MEMBER STATE"

     means a member state of the European Communities that adopts the Euro as
     its lawful currency under the legislation of the European Union for
     European Monetary Union;

     "PARTY"

     means a party to this Agreement;

     "PERMITTED SECURITY INTEREST"

     means any of the following, namely a Security Interest;

     (a)  subsisting at the date of this Agreement and notified in writing to
          the Agent on or prior to that date or securing the amounts outstanding
          under the Original Facilities Agreement, or arising whether before, on
          or after the Signing Date by operation of law in the ordinary course
          of business;

     (b)  over goods and/or documents of title thereto arising in the ordinary
          course of letter of credit transactions;

     (c)  arising by way of retention of title to goods by the supplier of those
          goods arising in the ordinary course of business;

     (d)  created after the date of this Agreement provided that the
          Indebtedness secured thereby, when aggregated with any other
          Indebtedness secured by any subsisting Security Interest permitted by
          (and only by) this paragraph (d) whether or not such Indebtedness is
          in respect of any member of the Group, does not at any time exceed an
          amount equal to 15 per cent. of Adjusted Share Capital and Reserves;

     (e)  created after the date of this Agreement securing Borrowed Money which
          is refinanced by a Project Finance Borrowing within six months of the
          date of such Security Interest's creation, provided that:

          (i)  at any one time Borrowed Money permitted to be secured under this
               Clause (e) shall not exceed (pound)200,000,000, or its equivalent
               in any other currency; and

          (ii) the Company shall have notified the Agent on or before the
               creation of such Security Interest that the related Borrowed
               Money is intended to be temporary bridging finance pending
               refinancing by a Project Finance Borrowing;

     (f)  existing on or created after the date of this Agreement (i) to secure
          a Project Finance Borrowing and/or (ii) over an asset and/or the
          shares of a Project Finance Subsidiary;

     (g)  over or affecting any asset acquired by a member of the Group after
          the date of this Agreement and subject to which such asset is
          acquired, provided that:


<PAGE>

                                       19


          (i)  such Security Interest was not created at the request of any
               member of the Group in contemplation of the acquisition of such
               asset by a member of the Group; and

          (ii) the amount thereby secured (or the amount of the facility,
               drawings under which are or would be thereby secured) has not
               been increased at the request of any member of the Group in
               contemplation of, or since the date of, the acquisition of such
               asset by a member of the Group; or

     (h)  over or affecting any assets of any company which became or becomes a
          member of the Group after the date of this Agreement, where such
          Security Interest is created prior to the date on which such company
          became or becomes a member of the Group provided that:

          (i)  such Security Interest was not created at the request of any
               member of the Group in contemplation of such company becoming a
               member of the Group; and

          (ii) the amount thereby secured (or the amount of the facility,
               drawings under which are or would be thereby secured) has not
               been increased at the request of any member of the Group in
               contemplation of, or since the date of, such company becoming a
               member of the Group; or

     (i)  created after the date of this Agreement with the prior written
          consent of the Agent (acting in accordance with the instructions of
          the Majority Banks) provided that the amount thereby secured (or the
          amount of the facility, drawings under which are or would be thereby
          secured) has not been increased beyond the amount so consented to; or

     (j)  any order of a court affecting any asset or assets of a member of the
          Group to the extent that such order is discharged within 28 days after
          it is made and the consequences thereof would not constitute an Event
          of Default; or

     (k)  created or arising to secure any Indebtedness incurred and applied in
          or towards the refinancing of any Indebtedness secured by a Permitted
          Security Interest as permitted by paragraphs (a), (g), (h), (i) or (m)
          of this definition but only to the extent that:

          (i)  the amount of the Indebtedness secured by such Security Interest
               (or, if higher, the amount of the facility, drawings under which
               are or would be thereby secured) does not exceed the amount
               secured by such Permitted Security Interest at the date of the
               refinancing; and

          (ii) the amount secured by such Permitted Security Interest is thereby
               reduced by an amount equal to the amount secured by such Security
               Interest; and

          (iii)the assets on which the Indebtedness secured by the Security
               Interest referred to in sub-paragraph (i) of this paragraph (k)
               are substantially the same as (or only some of) the assets on
               which the refinanced Indebtedness was secured by the Permitted
               Security Interest referred to in sub-paragraph (ii);


<PAGE>

                                       20


     (l)  consisting of a contractual right (in personam and not in rem)
          restricting the payment of:

          (i)  cash deposits made by way of support of counter-indemnity
               obligations of a member of the Group in respect of guarantees
               given or analogous contingent liabilities incurred by the holder
               of such cash deposits for the account of a member of the Group;
               and/or

          (ii) credit balances on bank accounts as part of general Group banking
               arrangements having as their intention or effect the netting of
               exposure of the bank to members of the Group; or

     (m)  over any asset acquired by a member of the Group after the date of
          this Agreement as security for Indebtedness incurred to finance or
          refinance (within six months of the acquisition) all or part of the
          consideration for the acquisition of that asset, provided that the
          Indebtedness secured by Security Interests under this paragraph (m)
          and, to the extent it refinances Indebtedness secured under this
          paragraph (m) or paragraph (k), shall not exceed(pound)1,000,000 in
          aggregate at any time; or

     (n)  arising under the terms of Derivatives Transactions or as a result of
          trading of shares or other securities where such Security Interest
          arises under the rules of the relevant exchange or clearing system;

     (o)  arising as a result of the Company or any of its Subsidiaries, or
          Subsidiary Undertakings acting as a paying agent in respect of any
          Equity-Credit Preferred Securities;

     "PES LICENCE"

     means the licence granted to REC by the Secretary of State under Section 6
     of the Electricity Act authorising REC to distribute and/or supply
     electricity within an authorised area to the public, or any additional or
     replacement licence(s) for the supply and/or distribution of electricity
     granted from time to time to any member of the Group (or, if more than one
     replacement, the most recent such replacement), each as amended or modified
     from time to time;

     "POOLING AND SETTLEMENT AGREEMENT"

     means the pooling and settlement agreement dated 30th March, 1990 made
     between REC and the National Grid Company Plc and others setting out the
     rules and procedures for the operation of an electricity trading pool and
     of a settlement system in England and Wales and any agreement replacing
     such pooling and settlement agreement from time to time;

     "PRINCIPAL SUBSIDIARY"

     means:

     (a)  any member of the Group whose unconsolidated net assets or pre-tax
          profit at the date of, or for, any period ending after the date of
          this Agreement, equals or exceeds 10 per cent of the net assets or
          pre-tax profit of the Group at that time or for that period, and,
          during any financial year, such other members of the Group as may be
          named in the notification provided to the Agent by the Company under
          Clause 17.3(b)(i) (Unaudited management accounts), and for the purpose
          of the above:


<PAGE>

                                       21


          (i)  the net assets or pre-tax profit of the Group shall be
               ascertained by reference to the latest audited consolidated
               accounts of the Group; and

          (ii) the net assets or pre-tax profit of any such member shall be
               ascertained by reference to the latest audited accounts of that
               Subsidiary;

          for the purposes of the above, "NET ASSETS" in respect of the Group or
          any such member means the fixed assets and current assets of the Group
          or that member (as the case may be) but excluding investments in any
          Subsidiary and any loan to another member of the Group; or

     (b)  a member of the Group to which has been transferred (whether by one
          transaction or a series of transactions, related or not) the whole or
          a material part of the business, undertaking or assets of a Subsidiary
          which immediately prior to those transactions was a Principal
          Subsidiary provided that it shall not continue by operation of this
          paragraph (b) to be a Principal Subsidiary after the delivery to the
          Agent of the accounts referred to in (a) above covering the period in
          which the transfer occurred, if:

          (i)  the transferor was and continues to be a Principal Subsidiary by
               virtue of paragraph (a) above or was a Principal Subsidiary only
               by virtue of paragraph (c) below; and

          (ii) where the transferor was a Licensee, it continues to be a
               Licensee; or

     (c)  any member of the Group which is a holding company, directly or
          indirectly, of a Principal Subsidiary;

     "PROJECT"

     means any project or investment (these terms being treated as including a
     series of related projects or investments and any modifications thereto or
     developments or expansions of such projects or investments);

     "PROJECT FINANCE BORROWINGS"

     means, at any date, any Indebtedness to finance or refinance, or in respect
     of the financing or refinancing of, a Project:

     (a)  which is or has been incurred by a single purpose company (whether or
          not a Subsidiary of the Company) whose principal assets and business
          are, at such date, constituted by such Project and whose liabilities
          in respect of such Indebtedness are, at such date, not directly or
          indirectly the subject of a guarantee, indemnity or other form of
          assurance, undertaking or support (having substantially similar effect
          to a guarantee or indemnity) from any member of the Group except as
          expressly referred to in paragraph (c) below (a "PROJECT FINANCE
          SUBSIDIARY"); or

     (b)  which is or has been incurred by a Subsidiary of the Company in its
          capacity as a partner in, and whose only material asset is its
          interest in, a single purpose partnership where the partnership's
          principal assets and business are, at that date, constituted by such
          Project and where the liabilities of such Subsidiary in respect of
          such Indebtedness are not, at that date, directly or indirectly the
          subject of a guarantee, indemnity or other form of assurance,


<PAGE>

                                       22


          undertaking or support (having substantially similar effect to a
          guarantee or indemnity) from any member of the Group except as
          expressly referred to in paragraph (c) below (also a "PROJECT FINANCE
          SUBSIDIARY"); or

     (c)  in respect of which the person or persons to whom such Indebtedness is
          or may be owed by the obligor in respect of such Indebtedness (whether
          or not a Subsidiary of the Company) have no recourse whatsoever to any
          member of the Group (whether or not the obligor) for the repayment of
          or payment of any sum relating to such Indebtedness other than:

          (i)  recourse to such obligor for amounts limited to the aggregate
               cash flow or net cash flow received or receivable by it (other
               than historic cash flow or historic net cash flow) from such
               Project; and/or

          (ii) recourse to such obligor for the purpose only of enabling amounts
               to be claimed in respect of such Indebtedness in an enforcement
               of any Security Interest given by such obligor over the assets
               comprised in such Project (or, where such obligor is a single
               purpose company or a Subsidiary of the Company as described in
               sub-Clause (b), given by any shareholder or the like in the
               obligor over its shares or the like in the capital of the
               obligor) to secure such Indebtedness or any recourse referred to
               in (iii) below, Provided that (A) the extent of such recourse to
               such obligor (or its shareholder or the like) is limited solely
               to the amount of any recoveries made on such enforcement, and (B)
               such person or persons are not entitled, by virtue of any right
               or claim arising out of or in connection with such Indebtedness,
               to commence proceedings for the winding up or dissolution of the
               obligor (or its shareholder or the like) or to appoint or procure
               the appointment of any administrator, receiver, administrative
               receiver, trustee or similar person or official in respect of the
               obligor (or its shareholder or the like) or any of its assets
               (save for the assets the subject of such Security Interest);
               and/or

          (iii)recourse to such obligor generally, or directly or indirectly to
               a member of the Group, under any form of assurance, undertaking
               or support, which recourse is limited to a claim for damages
               (other than liquidated damages and damages required to be
               calculated in a specified way) for breach of an obligation (not
               being a payment obligation or an obligation to procure payment by
               another or an obligation to comply or procure compliance by
               another with any financial ratios or other tests of financial
               condition) by the person against whom such recourse is available.

     (d)  For the purpose of each of paragraphs (a), (b) and (c) of this
          definition:

          (i)  an off-take agreement entered into between a Group Company and a
               Project Finance Subsidiary, or an obligor in respect of Project
               Finance Borrowing described in paragraph (c), which is on arms
               length terms shall not of itself be deemed to be a guarantee,
               indemnity or other form of assurance, undertaking or support or
               to involve liability or recourse; and

          (ii) any right of recourse against a member of the Group as a result
               of its shareholding in an unlimited company, partnership or
               similar entity will be deemed to be a guarantee, indemnity or


<PAGE>

                                       23


               other form of assurance, undertaking or support (having
               substantially similar effect to a guarantee or indemnity);

     "PROJECT FINANCE SUBSIDIARY"

     has the meaning set out in paragraph (a) or (b) of the definition of
     Project Finance Borrowing and also means any Subsidiary of any such person;

     "QUALIFYING BANK"

     means:

     a person which:

     (a)  is a bank within the meaning of Section 840A of the Income and
          Corporation Taxes Act 1988; and

     (b)  is or will (on becoming a Bank) be beneficially entitled to any
          interest paid and to be paid to it (as a Bank) under this Agreement;
          and

     (c)  is within the charge to United Kingdom corporation tax as respects
          such interest,

          except that, if Section 349 or Section 840A of the Income and
          Corporation Taxes Act 1988 is repealed, modified, extended or
          re-enacted, the Agent may at any time and from time to time (after
          consultation with the Company and the Banks) amend this definition of
          Qualifying Bank in such manner as it may determine (acting reasonably)
          to be appropriate by giving notice of the amended definition to the
          Company and the Banks so as, so far as practicable, to put the Banks
          in the same position as they would otherwise have been in; or

     (d)  a Treaty Lender;

     "QUALIFYING PREFERENCE SHARES"

     means on any date preference shares of any member of the Group expressed
     (whether by law, agreement or otherwise) to be redeemable at the option of
     the issuer, any other person or otherwise on or before the Final Maturity
     Date or, if a Term-out Advance is drawn, the second Anniversary;

     "QUARTER"

     means each three-month period ending on the last day in March, June,
     September and December in each year;

     "RATE FIXING DAY"

     means:

     (a)  the Drawdown Date for an Advance denominated in Sterling (or, in the
          case of a Term-out Advance, the first day of each applicable Interest
          Period); or


<PAGE>

                                       24


     (b)  the second Business Day before the Drawdown Date for an Advance
          denominated in an Optional Currency (or such other day as is generally
          treated as the rate fixing day by market practice in the London
          interbank market);

     "REC"

     means Eastern Electricity plc (Company No. 2366906 or any successor as the
     Licensee in respect of the Distribution Business);

     "REFERENCE BANKS"

     means The Chase Manhattan Bank and any two other banks selected by the
     Agent with the consent of the Company (which is not to be unreasonably
     withheld), or if any of them ceases to so act, such other bank or banks as
     shall be selected by the Agent in accordance with Clause 27.4 (Reference
     Banks);

     "RELEVANT COMPANY"

     means any of the Obligors, Finco 2, Bidco, The Energy Group Limited
     (company no. 3613919) and the Principal Subsidiaries;

     "RELEVANT PERSON"

     means the Parent and any Affiliate or Associated Company of the Parent
     which is neither the Company nor a member of the Group nor a Project
     Finance Subsidiary;

     "RESERVATIONS"

     means (a) the principle that equitable remedies may be granted or refused
     at the discretion of the court, (b) the limitation on enforcement by laws
     of general application relating to insolvency, liquidation, reorganisation,
     court schemes or administration, and (c) the time barring of claims under
     the Limitation Act 1980;

     "REQUEST"

     means a request by the Company for an Advance substantially in the form of
     Schedule 4;

     "REVOLVING ADVANCE"

     means the principal amount of each borrowing by the Company under this
     Agreement (other than a Term-out Advance) or the principal amount
     outstanding of that borrowing;

     "SECOND-TIER SUPPLY BUSINESS"

     has the same meaning as in the PES Licence;

     "SECRETARY OF STATE"

     means the Secretary of State for Trade and Industry from time to time or
     his/her successor or such other person as may for the time being be
     fulfilling the functions of the Secretary of State under the Electricity
     Act or the Gas Acts;

     "SECURITY INTEREST"


<PAGE>

                                       25


     means any mortgage, pledge, lien, charge, assignment by way of security,
     deposit of cash subject to contractual restrictions on re-drawing,
     arrangement for retention of title, hypothecation or security interest, or
     any other agreement or arrangement having the effect of conferring security
     or a security interest;

     "SIGNING DATE"

     means the date of this Agreement.

     "SPV"

     means any company or other entity directly or indirectly wholly-owned by
     the Company, incorporated or otherwise established, and used, solely for
     the purpose of issuing one or more capital market instruments or other
     securities for the purpose of raising finance on behalf of the Group, and,
     if applicable, carrying out all functions falling to be carried out by it
     under a securitisation or other financing arrangement for which it was
     established;

     "STERLING" and "(POUND)"

     mean the lawful currency for the time being of the United Kingdom and in
     respect of all payments to be made under this Agreement in Sterling mean
     immediately available, freely transferable cleared funds;

     "SUBORDINATED DEBT"

     means Indebtedness incurred on terms which to the reasonable satisfaction
     of the Agent:

     (a)  prohibit repayment or prepayment of any principal amounts (including
          capitalised interest) during the Finance Period;

     (b)  prohibit the holder of that Indebtedness from exercising any rights or
          remedies which it might otherwise have to recover such Indebtedness
          during the Finance Period; and

     (c)  provide that in the event of insolvency, dissolution, liquidation or
          other insolvency proceedings such Indebtedness shall be effectively
          subordinated in right of payment to all liabilities of the Obligors
          under the Finance Documents;

     "SUBSIDIARY"

     means:

     (a)  a subsidiary within the meaning of section 736 of the Act; and

     (b)  where the context requires or admits, and without limitation for the
          purposes of the definitions of "AFFILIATE", "EQUITY CREDIT PREFERRED
          SECURITIES" and "GROUP" and Clauses 17.2 (Preparation of Financial
          Statements), 18.1 (Financial Ratios), 18.2 (Change of Accounting
          policies), a subsidiary undertaking within the meaning of section 258
          of the Act (a "SUBSIDIARY UNDERTAKING");

     "SUBSTITUTE"

     has the meaning given to that term in Clause 13.3 (Substitute basis);


<PAGE>

                                       26


     "SUPPLY BUSINESS"

     means, in the case of a Licensee under the PES Licence, its authorised
     business as a public electricity supplier in the authorised area as such
     terms are used in its PES Licence from time to time;

     "TARGET"

     means the company formerly known as The Energy Group PLC (company no.
     3257256) and subsequently re-named as Energy Holdings (No.3) Limited;

     "TARGET SHARES"

     means the issued and to be issued shares in the capital of the Target;

     "TAXES"

     includes all present and future taxes, levies, imposts, duties, fees or
     charges of whatever nature including without limitation any interest or
     penalties payable in connection with any failure or delay in paying any of
     the same and "TAXATION" shall be construed accordingly;

     "TERM-OUT ADVANCE"

     means the principal amount of each borrowing by the Company drawn under
     Clause 6.1(b) (Repayment) or the principal amount outstanding of that
     borrowing;

     "TEST PERIOD" means:

     (a)  each twelve-month period ending on the last day of each Quarter; and

     (b)  each accounting reference period (as defined in Part VIII of the
          Companies Act 1985) of the Company or, where it applies to the
          Leverage Ratio, Finco 2, ending on 31st December in each year;

     "TOTAL COMMITMENTS"

     means the aggregate for the time being of the Commitments, being
     (pound)300,000,000 at the Signing Date;

     "TREATY LENDER"

     means a person which (a) is resident (as such term is defined in the
     appropriate double taxation treaty) in a country with which the United
     Kingdom has a double taxation treaty giving residents of that country
     complete exemption from the imposition of any withholding or deduction for
     or on account of United Kingdom Taxes on interest; and (b) does not carry
     on business in the United Kingdom through a permanent establishment with
     which the Indebtedness under this Agreement in respect of which the
     interest is paid is effectively connected;

     "VOTING SHARES"


<PAGE>

                                       27


     means outstanding shares of capital stock of any class of the Parent
     entitled to vote in the election of directors, excluding shares entitled so
     to vote only upon the happening of some contingency.

1.2  HEADINGS

     Clause headings and the table of contents are inserted for convenience of
     reference only and shall be ignored in the interpretation of this
     Agreement.

1.3  CONSTRUCTION OF CERTAIN TERMS

     In this Agreement, unless the context otherwise requires:

     (a)  references to Clauses and Schedules are to be construed as references
          to the clauses of, and schedules to, this Agreement and references to
          this Agreement include its schedules;

     (b)  references to (or to any specified provision of) this Agreement or any
          other document shall be construed as references to this Agreement
          (including any Guarantor Accession Agreement and Novation
          Certificate), that provision or that document as in force for the time
          being and as from time to time amended, novated or supplemented in
          accordance with its terms, or, as the case may be, with the agreement
          of the relevant parties and (where such consent is, by the terms of
          this Agreement or the relevant document, required to be obtained as a
          condition to such amendment being permitted) the prior written consent
          of the Agent;

     (c)  references to a "REGULATION" include any present or future regulation,
          rule, directive, requirement, request or guideline (whether or not
          having the force of law) of any Government Entity;

     (d)  references to an "AUTHORISATION" mean and include any consent,
          authorisation, licence, approval and permit;

     (e)  words importing the plural shall include the singular and vice versa;

     (f)  references to a time of day are to London time;

     (g)  references to a "PERSON" includes any individual, firm, company,
          corporation, government, state or agency of a state or any
          unincorporated body of persons, undertaking (within the meaning of
          Section 259(1) of the Act) or other joint venture, organisation or
          association (whether or not having separate legal personality) or any
          two or more of the foregoing;

     (h)  references to "ASSETS" include all or part of any business,
          undertaking, real property, personal property, shareholdings, assets,
          revenues, uncalled capital and any rights (whether actual or
          contingent, present or future) to receive, or require delivery of, any
          of the foregoing;

     (i)  references to the "EQUIVALENT" of an amount specified in a particular
          currency (the "SPECIFIED CURRENCY AMOUNT") shall be construed as a
          reference to the amount of the other relevant currency which can be
          purchased with the specified currency amount at the Agent's Spot Rate


<PAGE>

                                       28


          of Exchange on the day on which the calculation falls to be made for
          spot delivery, as conclusively determined by the Agent;

     (j)  references to any enactment shall be deemed to include references to
          such enactment as re-enacted, amended or extended;

     (k)  references to documents being in the "AGREED FORM" mean documents
          initialled on behalf of the Agent and the Arranger and on behalf of
          the Obligors, or if there is no such document, the form reasonably
          required by the Agent;

     (l)  references to "VAT" are to be construed as including references to any
          similar Tax;

     (m)  "INCLUDING" and "IN PARTICULAR" shall not be construed restrictively
          but shall mean "including, without prejudice to the generality of the
          foregoing" and "in particular, but without prejudice to the generality
          of the foregoing" respectively;

     (n)  references to documents being "CERTIFIED COPIES" mean copies certified
          as being true, complete and up-to-date copies as of a date no earlier
          than the date of this Agreement by an officer of the Company who is at
          such time duly authorised to execute or certify such documents on
          behalf of the Company;

     (o)  "ARMS LENGTH TERMS" means on terms which are no more or less
          favourable to the other party to the relevant transaction than could
          reasonably be expected to be obtained in a comparable transaction with
          a person unconnected with the Group;

     (p)  references to "HOLDING COMPANY", save as otherwise defined, shall bear
          the same meaning as in section 736 of the Act, as if extended to
          bodies corporate wherever incorporated;

     (q)  a Default is "OUTSTANDING" if it has not been remedied or waived;

     (r)  any provision of this Agreement stated to have effect on, after, or as
          from, 1 January 1999 will, to the extent that the provision relates to
          any currency of a state which is not a Participating Member State on 1
          January 1999, have effect in relation to that currency on the date on
          which it becomes a Participating Member State;

     (s)  unless the context requires otherwise, expressions defined in the Act
          shall have the same meanings in this Agreement, except that the
          expression "COMPANY" shall include a body corporate established
          outside Great Britain;

     (t)  "ASSOCIATED COMPANY" shall have the meaning given to it in the
          Appropriate Accounting Principles;

     (u)  references to a "WHOLLY-OWNED" or "PARTLY-OWNED" member of the Group
          or Subsidiary of the Company shall be construed: (i) to refer to
          Subsidiaries whether directly or indirectly owned by the Company; and
          (ii) on the assumption that the Company owns 100% of Finco 2; and

     (v)  for the avoidance of doubt, neither a lease nor a Finance Lease
          entered into on arm's length terms shall be regarded as an agreement
          or arrangement having the effect of conferring security or a security
          interest.


<PAGE>

                                       29


     (w)  (i)  Unless expressly provided to the contrary in a Finance
               Document, a person who is not a party to a Finance Document may
               not enforce its terms under the Contracts (Rights of Third
               Parties) Act 1999; and

          (ii) Notwithstanding any term of any Finance Document, the consent of
               any third party is not required for any variation (including any
               release or compromise of any liability under) or termination of
               that Finance Document.

2.   THE FACILITY

2.1  FACILITY

(a)  Subject to the terms of this Agreement, the Banks agree to make available
     to the Company a 364 day multi-currency revolving credit facility, with an
     option to draw Term-out Advances, under which they will make cash advances
     during the Commitment Period to the Company.

(b)  The aggregate Original Sterling Amount of all outstanding Advances shall
     not exceed the Total Commitments.

(c)  No Bank is obliged to lend if it would cause the Original Sterling Amount
     of its participation in the Advances to exceed its Commitment.

2.2  NATURE OF A FINANCE PARTY'S RIGHTS AND OBLIGATIONS

(a)  The obligations of a Finance Party under the Finance Documents are several.
     Failure of a Finance Party to carry out those obligations does not relieve
     any other Party of its obligations under the Finance Documents. No Finance
     Party is responsible for the obligations of any other Finance Party under
     the Finance Documents.

(b)  The rights of a Finance Party under the Finance Documents are divided
     rights. A Finance Party may, except as otherwise stated in the Finance
     Documents, separately enforce those rights.

3.   PURPOSE

     The Company shall apply each Advance towards the general corporate purposes
     of the Group (including future acquisitions). Without affecting the
     obligations of any Obligor in any way, no Finance Party is bound to monitor
     or verify the application of any Advance.

4.   CONDITIONS PRECEDENT

4.1  DOCUMENTARY CONDITIONS PRECEDENT

     The Company may not deliver the first Request until the Agent has notified
     the Company and the Banks that it has received all of the documents set out
     in Schedule 2 in form and substance satisfactory to the Agent.

4.2  FURTHER CONDITIONS PRECEDENT

     The obligations of each Bank to participate in an Advance are subject to
     the further conditions precedent that:


<PAGE>

                                       30


     (a)  on both the date of the Request and the Drawdown Date for that
          Advance:

          (i)  the representations and warranties in Clause 16 (Representations
               and Warranties) to be repeated on those dates are correct and
               will be correct immediately after the Advance is made; and

          (ii) no Default is outstanding or would result from the making of the
               Advance, but this Clause 4.2(a)(ii) shall not prevent the
               rollover of an existing Advance for a period of up to one month
               at any time when no Event of Default has occurred and is
               outstanding; and

     (b)  the making of the Advance would not cause Clause 2.1 (Facility) to be
          contravened.

5.   DRAWDOWN

5.1  COMMITMENT PERIOD

     The Company may borrow an Advance during the Commitment Period if the Agent
     receives, not later than 11.00 a.m. two Business Days (in the case of an
     Advance to be denominated in Sterling) or three Business Days (in any other
     case) before the proposed Drawdown Date, a duly completed Request. Each
     Request is irrevocable.

5.2  COMPLETION OF REQUESTS

     A Request will not be regarded as having been duly completed unless:

     (a)  the Drawdown Date is a Business Day falling before the Final Maturity
          Date;

     (b)  if the currency selected is Sterling, the amount of the Advance is:

          (i)  a minimum of(pound)10,000,000 and an integral multiple of
               (pound)5,000,000; or

          (ii) the balance of the undrawn Total Commitments; or

          (iii) such other amount as the Agent may agree;

     (c)  if the currency selected is an Optional Currency, the amount of the
          Advance is:

          (i)  an integral multiple of 1,000,000 of the largest currency unit of
               that Optional Currency but at least the equivalent of
               (pound)5,000,000; or

          (ii) the balance of the undrawn Total Commitments; or

          (iii) such other amount as the Agent may agree;

     (d)  the amount selected under paragraph (b) or (c) above does not cause
          Clause 2.1 (Facility) to be contravened;

     (e)  the currency selected is Sterling or, in the case of a Revolving
          Advance, complies with Clause 10 (Optional Currencies);


<PAGE>

                                       31


     (f)  the Interest Period selected complies with Clause 8 (Interest Periods)
          and (i) in the case of a Revolving Advance does not extend beyond the
          Final Maturity Date or (ii) in the case of a Term-out Advance does not
          extend beyond the second Anniversary; and

     (g)  the payment instructions comply with Clause 11 (Payments).

     Each Request must specify one Advance only, but the Company may, subject to
     the other terms of this Agreement, deliver more than one Request on any one
     day. Unless otherwise agreed by the Agent, no more than ten Advances may be
     outstanding at any time and no more than one Advance may be made in any
     period of five consecutive Business Days.

5.3  ADVANCES

(a)  The Agent shall promptly notify each Bank of the details of the requested
     Advance and the amount of its participation in the Advance.

(b)  Subject to the terms of this Agreement, each Bank shall make its
     participation in the Advance available to the Agent for the Company in the
     currency in which it is to be borrowed, on the relevant Drawdown Date.

(c)  The amount of each Bank's participation in the Advance will be the
     proportion of the Advance which its Commitment bears to the Total
     Commitments on the proposed Drawdown Date.

6.   REPAYMENT

6.1  REPAYMENT

(a)  The Company shall repay each Advance in full on its Maturity Date to the
     Agent for the relevant Bank(s).

(b)  At any time prior to the Final Maturity Date, the Company may, by delivery
     of a duly completed Request to the Agent under Clause 5 (Drawdown) (who
     shall send a copy of the same to the Banks), elect to draw up to five cash
     advances under the Facility ("TERM-OUT ADVANCES") with a Maturity Date
     after the Final Maturity Date, but no later than the second Anniversary. No
     Term-out Advance, once repaid or prepaid, may be reborrowed.

(c)  No Advance, other than a Term-out Advance, may be outstanding after the
     Final Maturity Date. No Term-out Advance may be outstanding after the date
     falling on the second Anniversary.

6.2  RE-BORROWING

     Subject to the other terms of this Agreement, any amounts repaid under
     Clause 6.1 may be re-borrowed.


<PAGE>

                                       32


7.   PREPAYMENT AND CANCELLATION

7.1  AUTOMATIC CANCELLATION

      The Commitment of each Bank shall be automatically cancelled at close of
      business in London on the Final Maturity Date.

7.2  VOLUNTARY CANCELLATION

(a)  The Company may, by giving not less than ten Business Days' prior notice
     (or such shorter period as the Majority Banks may agree) to the Agent,
     cancel the unutilised portion of the Total Commitments in whole or in part
     (but, if in part, in a minimum of (pound)10,000,000 and an integral
     multiple of (pound)5,000,000).

(b)  Any cancellation in part shall be applied against the Commitment of each
     Bank pro rata.

7.3  VOLUNTARY PREPAYMENT

     The Company may, on giving not less than five Business Days' prior notice
     to the Agent specifying the amount and date for prepayment, prepay an
     Advance without penalty (subject to Clause 24.2 (Other indemnities)) in
     whole or in part, provided that any prepayment in part must be in a minimum
     principal amount of (pound)10,000,000 and an integral multiple of
     (pound)5,000,000 (or its equivalent).

7.4  ADDITIONAL RIGHT OF PREPAYMENT AND CANCELLATION

     If:

     (a)  any Obligor is required to pay to a Bank any additional amounts under
          Clause 12 (Taxes); or

     (b)  the Company is required to pay to a Bank any amount under Clause 14
          (Increased costs),

     then, without prejudice to the obligations of any Obligor under those
     Clauses, the Company may, whilst the circumstances giving rise to the
     requirement continue, serve a notice of prepayment and cancellation on that
     Bank through the Agent. On the date falling five Business Days after the
     date of service of the notice:

     (a)  the Company shall prepay that Bank's participation in any Advances;
          and

     (b)  the Commitment of that Bank shall be cancelled.

7.5  MISCELLANEOUS PROVISIONS

(a)  Any notice of prepayment and/or cancellation under this Agreement is
     irrevocable. The Agent shall notify the Banks promptly of receipt of any
     such notice.

(b)  All prepayments under this Agreement shall be made together with accrued
     interest on the amount prepaid and, subject to Clause 24.2 (Other
     indemnities) without premium or penalty.


<PAGE>

                                       33


(c)  Without prejudice to the right of the Company to re-borrow under Clause 6.2
     (Re-borrowing), no amount prepaid under this Agreement may subsequently be
     re-borrowed.

(d)  No amount of the Total Commitments cancelled under this Agreement may
     subsequently be reinstated.

8.   INTEREST PERIODS

8.1  GENERAL

(a)  Each Revolving Advance has one Interest Period only.

(b)  The life of each Term-out Advance is divided into successive Interest
     Periods.

8.2  SELECTION

(a)  The Company may select an Interest Period for an Advance in the relevant
     Request. Each Interest Period for a Revolving Advance and the first
     Interest Period for a Term-out Advance will commence on its Drawdown Date.

(b)  Each subsequent Interest Period for a Term-out Advance will be the period
     selected by the Company by notice to the Agent received not later than
     11.00 a.m. on the Business Day before the end of the then current Interest
     Period

(c)  Subject to the following provisions of this Clause 8, each Interest Period
     will be one, two, three or six months or any other period agreed by the
     Company and the Majority Banks.

8.3  NON-BUSINESS DAYS

     If an Interest Period would otherwise end on a day which is not a Business
     Day, that Interest Period shall instead end on the next Business Day in
     that calendar month (if there is one) or the preceding Business Day (if
     there is not).

8.4  NO OVERRUNNING OF THE FINAL MATURITY DATE OR SECOND ANNIVERSARY

(a)  If an Interest Period for a Revolving Advance would otherwise overrun the
     Final Maturity Date, it shall be shortened so that it ends on the Final
     Maturity Date.

(b)  If an Interest Period for a Term-out Advance would otherwise overrun the
     second Anniversary, it shall be shortened so that it ends on the second
     Anniversary.

8.5  NOTIFICATION

     The Agent shall notify each relevant Party of the duration of each Interest
     Period promptly after ascertaining its duration.

9.   INTEREST

9.1  INTEREST RATE

     The rate of interest on each Advance for each of its Interest Periods is
     the rate per annum determined by the Agent to be the aggregate of the
     applicable:


<PAGE>

                                       34


     (a)  Applicable Margin;

     (b)  (ii) LIBOR (in the case of an Advance denominated in a currency other
               than Euros);

          (ii) EURIBOR (in the case of an Advance denominated in Euros); and

     (c)  Mandatory Cost.

9.2  DUE DATES

     Except as otherwise provided in this Agreement, accrued interest on each
     Advance is payable by the Company:

     (a)  in the case of a Revolving Advance, on its Maturity Date; and

     (b)  in the case of a Term-out Advance, on the last day of each Interest
          Period applicable to that Term-out Advance,

     and also, in the case of any Advance with an Interest Period longer than
     six months, at six monthly intervals after the Drawdown Date (or, if
     different, the first day of the relevant Interest Period) for so long as
     the Interest Period is outstanding.

9.3  DEFAULT INTEREST

(a)  If an Obligor fails to pay any amount payable by it under the Finance
     Documents, it shall forthwith on demand by the Agent pay interest on the
     overdue amount from the due date up to the date of actual payment, as well
     after as before judgment, at a rate (the "DEFAULT RATE") determined by the
     Agent to be one per cent. per annum above:

     (i)  subject to sub-paragraph (ii) below, the rate which would have been
          payable if the overdue amount had, during the period of non-payment,
          constituted an Advance in the currency of the overdue amount for such
          successive Interest Periods of such duration as the Agent may
          determine (each a "DESIGNATED INTEREST PERIOD"); or

     (ii) for the first Designated Interest Period in respect of any overdue
          amount of principal, the rate on the overdue amount under Clause 9.1
          (Interest rate) immediately before the due date.

(b)  The default rate will be determined by the Agent on each Business Day or
     the first day of, or two Business Days before the first day of, the
     relevant Designated Interest Period, as appropriate.

(c)  If the Agent determines that deposits in the currency of the overdue amount
     are not at the relevant time being made available by the Reference Banks to
     leading banks in the London interbank market, the default rate will be
     determined by reference to the cost of funds to the Agent from whatever
     sources it selects.

(d)  Default interest will be compounded at the end of each Designated Interest
     Period.


<PAGE>

                                       35


9.4  NOTIFICATION OF RATES OF INTEREST

     The Agent shall promptly notify each relevant Party of the determination of
     a rate of interest under this Agreement.

10.  OPTIONAL CURRENCIES

10.1 SELECTION

(a)  The Company shall select the currency of a Revolving Advance in the
     relevant Request.

(b)  The currency of each Revolving Advance must be Sterling or an Optional
     Currency.

(c)  The Company may not choose a currency if as a result the Advances would be
     denominated at any one time in more than four Optional Currencies.

(d)  The Agent shall notify each Bank of the currency and the Original Sterling
     Amount of each Revolving Advance and the applicable Agent's Spot Rate of
     Exchange promptly after they are ascertained.

10.2 REVOCATION OF CURRENCY

     If before 9.30 a.m. on any Rate Fixing Day, the Agent receives notice from
     a Bank that:

     (a)  it is impracticable for the Bank to fund its participation in the
          relevant Revolving Advance in the relevant Optional Currency during
          its Interest Period in the ordinary course of business in the London
          interbank market; and/or

     (b)  the use of the proposed Optional Currency might contravene any law or
          regulation,

     the Agent shall give notice to the Company and to the Banks to that effect
     before 11.00 a.m. on that day. In this event:

     (i)  the Company and the Banks may agree that the drawdown will not be
          made; or

     (ii) in the absence of agreement:

          (1)  that Bank's participation in the Revolving Advance (or, if more
               than one Bank is similarly affected, those Bank's participations
               in the Revolving Advance) shall be treated as a separate
               Revolving Advance denominated in Sterling during the relevant
               Interest Period; and

          (2)  in the definition of "LIBOR" (insofar as it applies to that
               Revolving Advance) in Clause 1.1 (Definitions):

               (A)  there shall be substituted for the time "11.00 a.m." the
                    time "1.00 p.m."; and

               (B)  paragraph (b) of that definition shall apply


<PAGE>

                                       36


11.  PAYMENTS

11.1 PLACE

     All payments by an Obligor or a Bank under this Agreement shall be made to
     the Agent to its account at such office or bank in the principal financial
     centre of the country of the relevant currency (or in the case of Euros,
     the financial centre of such of the Participating Member States or London)
     as it may notify to that Obligor or Bank for this purpose. Notwithstanding
     the above, all payments by the Company to the Arranger under Clauses 21
     (Fees) and 22 (Expenses) shall be made direct to the Arranger in the manner
     agreed by the Arranger and the Company.

11.2 FUNDS

     Payments under the Finance Documents to the Agent shall be made for value
     on the due date at such times and in such funds as the Agent may specify to
     the Party concerned as being customary at the time for the settlement of
     transactions in the relevant currency in the place for payment.

11.3 DISTRIBUTION

(a)  Each payment received by the Agent under the Finance Documents for another
     Party shall, subject to paragraphs (b) and (c) below, be made available by
     the Agent to that Party by payment (on the date and in the currency and
     funds of receipt) to its account with such bank in the principal financial
     centre of the country of the relevant currency (or in the case of Euros,
     the financial centre of such of the Participating Member States or London)
     as it may notify to the Agent for this purpose by not less than five
     Business Days' prior notice.

(b)  The Agent may apply any amount received by it for an Obligor in or towards
     payment (on the date and in the currency and funds of receipt) of any
     amount due from an Obligor under this Agreement or in or towards the
     purchase of any amount of any currency to be so applied.

(c)  Where a sum is to be paid under this Agreement to the Agent for the account
     of another Party, the Agent is not obliged to pay that sum to that Party
     until it has established that it has actually received that sum. The Agent
     may, however, assume that the sum has been paid to it in accordance with
     this Agreement and, in reliance on that assumption, make available to that
     Party a corresponding amount. If the sum has not been made available but
     the Agent has paid a corresponding amount to another Party, that Party
     shall forthwith on demand refund the corresponding amount to the Agent
     together with interest on that amount from the date of payment to the date
     of receipt, calculated at a rate determined by the Agent to reflect its
     cost of funds.

11.4 CURRENCY

(a)  A repayment or prepayment of an Advance or any part of an Advance is
     payable in the currency in which the Advance is denominated on its due
     date.

(b)  Interest is payable in the currency in which the relevant amount in respect
     of which it is payable is denominated.

(c)  Amounts payable in respect of costs, expenses, taxes and the like are
     payable in the currency in which they are incurred.


<PAGE>

                                       37


(d)  Any other amount payable under the Finance Documents is, except as
     otherwise provided in this Agreement, payable in Sterling.

11.5 SET-OFF AND COUNTERCLAIM

     All payments made by an Obligor under the Finance Documents shall be made
     without set-off or counterclaim.

11.6 NON-BUSINESS DAYS

(a)  If a payment under the Finance Documents is due on a day which is not a
     Business Day, the due date for that payment shall instead be the next
     Business Day in the same calendar month (if there is one) or the preceding
     Business Day (if there is not).

(b)  During any extension of the due date for payment of any principal under
     this Agreement interest is payable on the principal at the rate payable on
     the original due date.

11.7 PARTIAL PAYMENTS

(a)  If the Agent receives a payment insufficient to discharge all the amounts
     then due and payable by an Obligor under the Finance Documents, the Agent
     shall apply that payment towards the obligations of the Obligors under this
     Agreement in the following order:

     (i)  FIRST, in or towards payment pro rata of any unpaid fees, costs and
          expenses of the Agent under the Finance Documents;

     (ii) SECONDLY, in or towards payment pro rata of any accrued interest due
          but unpaid under this Agreement;

     (iii) THIRDLY, in or towards payment pro rata of any principal due but
          unpaid under this Agreement; and

     (iv) FOURTHLY, in or towards payment pro rata of any other sum due but
          unpaid under the Finance Documents.

(b)  The Agent shall, if so directed by all the Banks, vary the order set out in
     sub-paragraphs (a)(ii) to (iv) above.

(c)  Paragraphs (a) and (b) above will override any appropriation made by an
     Obligor.

12.  TAXES

12.1 GROSS-UP

     All payments by an Obligor under the Finance Documents shall be made
     without any deduction and free and clear of and without any deduction for
     or on account of any Taxes, except to the extent that the Obligor is
     required by law to make payment subject to any Taxes. Subject to Clause
     12.4, if any Tax or amounts in respect of Tax must be deducted, or any
     other deductions must be made, from any amounts payable or paid by an
     Obligor, or paid or payable by the Agent to a Bank, under the Finance
     Documents, the Obligor shall pay such additional amounts as may be
     necessary to ensure that the relevant Bank receives a net amount equal to


<PAGE>

                                       38


     the full amount which it would have received had payment not been made
     subject to Tax or any other deduction.

12.2 TAX RECEIPTS

     All taxes required by law to be deducted or withheld by an Obligor from any
     amounts paid or payable under the Finance Documents shall be paid by the
     relevant Obligor when due and the Obligor shall, within 15 days of the
     payment being made, deliver to the Agent for the relevant Bank evidence
     satisfactory to that Bank (including all relevant tax receipts) that the
     payment has been duly remitted to the appropriate authority.

12.3 TAX CREDITS

     If:

     (a)  an Obligor makes a payment under Clause 12.1 (a "TAX PAYMENT") in
          respect of any fund paid to a Bank under this Agreement; and

     (b)  that Bank determines in its absolute discretion that it has obtained a
          refund of tax or obtained a credit against tax (a "TAX CREDIT") which
          the Bank in its absolute discretion is able to identify as
          attributable to that Tax Payment,

     then, if in its absolute discretion it decides that it can do so without
     adverse consequences for that Bank, that Bank shall reimburse that Obligor
     such amount as the Bank in its absolute discretion determines to be such
     proportion of that Tax Credit as will leave that Bank (after that
     reimbursement) in no better or worse position than it would have been if no
     Tax Payment had been required. The Bank shall have an absolute discretion
     as to whether to claim any Tax Credit and, if it does claim, the extent,
     order and manner in which it does so, and whether any amount is due from it
     under this Clause 12.3, and if so, what amount and when. The Bank shall not
     be obliged to disclose any information regarding its tax affairs and
     computation.

12.4 QUALIFYING BANKS

(a)  Subject to paragraph (b) below, if a Bank is not or ceases to be a
     Qualifying Bank, no Obligor will be liable to pay to that Bank under Clause
     12.1 any amount in respect of taxes levied or imposed by the U.K. or any
     taxing authority of or in the U.K. in excess of the amount it would have
     been obliged to pay if that Bank had been or had not ceased to be a
     Qualifying Bank.

(b)  Paragraph (a) above does not apply if a Bank ceases to be a Qualifying Bank
     as a result of the introduction of, change in, or any change in the
     interpretation, administration or application of, any law or regulation or
     any practice or concession of the U.K. Inland Revenue occurring after the
     date of this Agreement.

13.  MARKET DISRUPTION

13.1 ABSENCE OF QUOTATIONS

     If LIBOR is to be determined by reference to the Reference Banks but a
     Reference Bank does not supply an offered rate by 11.30 a.m. on the Rate
     Fixing Day, the applicable LIBOR shall, subject to Clause 13.2 (Market


<PAGE>

                                       39


     disruption) below, be determined on the basis of the quotations of the
     remaining Reference Banks.

13.2 MARKET DISRUPTION

     If:

     (a)  LIBOR is to be determined by reference to the Reference Banks but no,
          or only one, Reference Bank supplies a rate by 11.30 a.m. on the Rate
          Fixing Day or the Agent otherwise determines that adequate and fair
          means do not exist for ascertaining LIBOR; or

     (b)  the Agent receives notification from Banks whose participations in an
          Advance exceed 35 per cent. of that Advance that, in their opinion:

          (1)  matching deposits may not be available to them in the London
               interbank market in the ordinary course of business to fund their
               participations in that Advance for the relevant Interest Period;
               or

          (2)  the cost to them of matching deposits in the London interbank
               market would be in excess of LIBOR for the relevant Interest
               Period,

     the Agent shall promptly notify the Company and the relevant Banks of the
     fact and that this Clause 13 is in operation.

13.3 SUBSTITUTE BASIS

(a)  After any notification under Clause 13.2 (Market disruption) the Company
     and the Agent may agree that the relevant Advance shall not be made or, in
     the absence of such agreement that the Interest Periods of the Advance
     should be one month and, in the case of an event or circumstance referred
     to in Clause 13.2(b), the Advance shall be made or confirmed (as
     applicable) in Sterling and the rate of interest on each Bank's share in
     the affected Advance for the relevant Interest Period will be the aggregate
     of the applicable:

     (i)  Applicable Margin; and

     (ii) rate notified to the Agent by that Bank as soon as practicable to be
          that which expresses as a percentage rate per annum the cost to that
          Bank of funding its share in that Advance from whatever source it may
          reasonably select.

(b)  Within three Business Days of receipt of the notification in paragraph (a)
     above, the Company and the Agent shall enter into negotiations for a period
     of not more than 30 days with a view to agreeing a substitute basis for
     determining the rate of interest and/or funding applicable to that and (to
     the extent required) any future Advance. Any substitute basis agreed shall
     be, with the prior consent of all the Banks, binding on all the Parties.


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                                       40


14.  INCREASED COSTS

14.1 INCREASED COSTS

(a)  Subject to Clause 14.2 (Exceptions), the Company shall forthwith on demand
     by a Finance Party pay that Finance Party the amount of any increased cost
     incurred by it or any of its Affiliates as a result of:

     (i)  the introduction of, or any change in, or any change in the
          interpretation or application of, any law or regulation (in each case
          occurring after the date of this Agreement); or

     (ii) compliance with any regulation made after the date of this Agreement,

     (including any law or regulation relating to taxation, change in currency
     of a country, or reserve asset, special deposit, cash ratio, liquidity or
     capital adequacy requirements or any other form of banking or monetary
     control).

(b)  In this Agreement "INCREASED COST" means:

     (i)  an additional cost incurred by a Finance Party or any of its
          Affiliates as a result of it having entered into, or performing,
          maintaining or funding its obligations under, any Finance Document; or

     (ii) that portion of an additional cost incurred by a Finance Party or any
          of its Affiliates in making, funding or maintaining all or any
          Advances comprised in a class of Advances formed by or including that
          Finance Party's participations in the Advances made or to be made
          under this Agreement as is attributable to that Finance Party's
          making, funding or maintaining those participations; or

     (iii) a reduction in any amount payable to a Finance Party or any of its
          Affiliates or the effective return to a Finance Party or any of its
          Affiliates under this Agreement or (to the extent that it is
          attributable to this Agreement) on its capital; or

     (iv) the amount of any payment made by a Finance Party or any of its
          Affiliates, or the amount of interest or other return foregone by a
          Finance Party or any of its Affiliates, calculated by reference to any
          amount received or receivable by a Finance Party or any of its
          Affiliates from any other Party under this Agreement.

14.2 EXCEPTIONS

     Clause 14.1 (Increased costs) does not apply to any increased cost:

     (a)  compensated for under any other Clause, or which would have been but
          for an exception to that Clause;

     (b)  attributable to a Finance Party or its Affiliate wilfully failing to
          comply with any law or regulation;

     (c)  attributable to any change in the rate of, or change in the basis of
          calculating, tax on the overall net income of a Bank (or the overall
          net income of a division or branch of the Bank) imposed in the


<PAGE>

                                       41


          jurisdiction in which its principal office or Facility Office is
          situate.

15.  ILLEGALITY AND MITIGATION

15.1 ILLEGALITY

     If it is or becomes unlawful in any jurisdiction for a Bank to give effect
     to any of its obligations as contemplated by this Agreement or to fund or
     maintain its participation in any Advance, then:

     (a)  the Bank may notify the Company through the Agent accordingly; and

     (b)  (i)  the Company shall forthwith or, if later, by the latest date the
               relevant law allows, prepay the participations of that Bank in
               all Advances; and

          (ii) the Commitment of that Bank shall forthwith be cancelled.

15.2 MITIGATION

     Notwithstanding the provisions of Clauses 12 (Taxes), 14 (Increased Costs)
     and 15.1 (Illegality), if in relation to a Bank or (as the case may be) the
     Agent circumstances arise which would result in:

     (a)  any deduction, withholding or payment of the nature referred to in
          Clause 12 (Taxes); or

     (b)  any increased cost of the nature referred to in Clause 14 (Increased
          Costs); or

     (c)  a notification under Clause 15.1 (Illegality),

     then without in any way limiting, reducing or otherwise qualifying the
     rights of such Bank or the Agent, such Bank shall promptly upon becoming
     aware of the same notify the Agent thereof (whereupon the Agent shall
     promptly notify the Company) and such Bank shall use reasonable endeavours
     to transfer its participation in the Facility and its rights under this
     Agreement and under the Finance Documents to another financial institution
     or Facility Office not affected by the circumstances having the results set
     out in (a), (b) or (c) above and shall otherwise take such reasonable steps
     as may be open to it to mitigate the effects of such circumstances provided
     that such Bank shall not be under any obligation to take any such action
     if, in its good faith opinion, to do so would or would be likely to have a
     material adverse effect upon its business, operations or financial
     condition or would involve it in any unlawful activity or any activity that
     is contrary to its policies or any request, guidance or directive of any
     competent authority (whether or not having the force of law) or (unless
     indemnified to its satisfaction) would involve it in any significant
     expense or Tax disadvantage.


<PAGE>

                                       42


16.  REPRESENTATIONS AND WARRANTIES

16.1 REPRESENTATIONS AND WARRANTIES

     Each Obligor for itself makes the representations and warranties set out in
     this Clause 16 to each Finance Party.

16.2 STATUS

(a)  It and each Principal Subsidiary is duly incorporated under the laws of the
     jurisdiction of its incorporation and has power and is able lawfully to own
     its respective property and assets and carry on its respective businesses.

(b)  It has power and is able lawfully to execute and deliver each Finance
     Document and to exercise its respective rights and perform its respective
     obligations under this Agreement and the transactions contemplated hereby
     and all corporate or other action required to be taken by it in order to
     authorise the execution and delivery by it of each Finance Document and the
     performance by it of its respective obligations has been duly taken.

16.3 LEGAL VALIDITY

     The Finance Documents to which it is a party constitute its legal, valid
     and binding obligations.

16.4 NON-CONTRAVENTION

     The execution and delivery by it of the Finance Documents to which it is a
     party and the performance by it of its obligations under the Finance
     Documents will not:

     (a)  contravene any provision of any law, statute (including the
          Electricity Act), decree, rule, regulation or code of practice to
          which it or any of its assets or revenues is subject, or of any order,
          judgement, injunction, decree, resolution, determination or award of
          any court or any judicial, administrative or Governmental Entity or
          organisation having applicability to it or any of its assets or
          revenues; or

     (b)  result in any breach of any of the terms, covenants, conditions or
          provisions of, or constitute a default under, any indenture, mortgage,
          deed of trust, bond, agreement or other instrument or obligation to
          which it is a party or by which it or any of its assets or revenues
          may be bound or affected; or

     (c)  violate any provision of its constitutive documents.

16.5 NO DEFAULT

     No Default has occurred which is continuing.

16.6 CONSENTS

     All consents, approvals, authorisations, exemptions, registrations and
     filings and all acts, conditions and things required to be obtained, done,
     fulfilled and performed in order to:

     (a)  enable it to enter into and exercise its rights and perform its
          obligations under each Finance Document to which it is party; and

     (b)  make the Finance Documents legal, valid and binding and admissible in
          evidence in England and Wales,


<PAGE>

                                       43


     have been obtained and are in full force and effect or have been done,
     fulfilled or performed (as the case may be).

16.7 ACCOUNTS

     The Original Group Accounts, and thereafter, the most recent consolidated
     audited financial statements of the Group, were prepared in accordance with
     the Appropriate Accounting Principles and consistently applied from one
     period to the next (except as shown in those financial statements) and give
     a true and fair view of the financial condition of the Group, as at the
     date as of which the same were prepared.

16.8 NO MATERIAL ADVERSE EFFECT

     Since 31 March 1998 there has been no change in the business, assets or
     financial condition of itself, or the Group taken as a whole, having a
     Material Adverse Effect.

16.9 LITIGATION

     No action or proceeding of or before any court, administrative tribunal,
     government body or regulatory authority (including, without limitation, the
     Competition Commission or the Office of Electricity Regulation) has been
     commenced, or (to the best of its knowledge) is threatened against any
     member of the Group which, in each case, has a Material Adverse Effect.

16.10 INDEBTEDNESS

     Its Indebtedness under the Finance Documents to which it is a party will
     rank at least pari passu with all its other unsubordinated and unsecured
     Indebtedness with the exception of that which is preferred by operation of
     law.

16.11 NO BREACH

     No member of the Group is in breach of or default under any agreement to
     which it is party or which is binding on it or any of its assets to an
     extent or in a manner which has a Material Adverse Effect.

16.12 NO SECURITY INTEREST

     No Security Interest exists over all or any of the present or future
     revenues or assets of any member of the Group, save for Permitted Security
     Interests.

16.13 NO OBLIGATION TO CREATE SECURITY INTEREST

     The execution of the Finance Documents and the exercise of its rights and
     performance of its obligations thereunder will not result in the existence
     of nor oblige it to create any Security Interest over all or any of its
     present and future revenues or assets.

16.14 LICENCES

     Each Licensee has been duly licensed to conduct its business as presently
     conducted, no notice has been given to revoke any Licence and no
     modification of or amendment to any of the terms of any Licence has been
     made or proposed by the Secretary of State or any other person having a
     right to do so which has a Material Adverse Effect.

16.15 NO CONTRAVENTION OF LICENCES

     No Licensee is in contravention of any term or condition of its Licence(s)
     or any requirement of the Electricity Act or any regulations made
     thereunder or any other statutory requirement or any final order or


<PAGE>

                                       44


     confirmed provisional order made under the Electricity Act or any
     undertaking given by it to the Director General or the Secretary of State
     in relation to the conduct of its business as a generator or Public
     Electricity Supplier (as detailed in the Electricity Act), which
     contravention and/or any consequence thereof has a Material Adverse Effect.

16.16 ELECTRICITY SUPPLY

     REC or the relevant Licensee has been duly licensed by the Secretary of
     State as the Public Electricity Supplier (as defined in the Electricity
     Act) to supply electricity to any premises in the area designated in the
     PES Licence and is duly licensed to conduct its business as presently
     conducted and the PES Licence is in full force and effect and neither the
     Director General nor the Secretary of State has given notice to it to
     revoke the PES Licence except in circumstances where a replacement Licence
     for the distribution and/or supply of electricity is or is to be granted to
     any other member of the Group.

16.17 NO MODIFICATION OF PES LICENCE

     No modification or amendment of any of the terms of the PES Licence has
     been made or proposed by way of consideration with interested parties by
     the Director General or the Secretary of State under Section 11, 14 or 15
     of the Electricity Act or in accordance with the conditions set out in the
     PES Licence or otherwise which has a Material Adverse Effect.

16.18 NO VARIATION OF AUTHORISED AREA

     No variation of the authorised area in respect of which the PES Licence has
     been granted has been made under Section 6(1)(c) of the Electricity Act
     which has a Material Adverse Effect.

16.19 ENVIRONMENTAL LAW

     There has been no non-compliance by any member of the Group with any
     applicable environmental or safety law applicable to it which has a
     Material Adverse Effect.

16.20 INFORMATION MEMORANDUM

(a)  The factual information relating to the Group contained in the Information
     Memorandum was true in all material respects as at its date;

(b)  the Information Memorandum did not omit as at its date any information
     which is necessary to make the statements therein not misleading in a
     material respect;

(c)  as at the date of this Agreement, nothing has occurred since the date of
     the Information Memorandum which renders the information contained in it
     untrue or misleading in any material respect; and

(d)  the opinions expressed in the Information Memorandum are honestly held and
     have been provided in good faith and after reasonable enquiry.

16.21 NO DISPUTE

     There is no dispute subsisting between any Obligor and any other party to
     any of the Finance Documents and no material amendments have been made to
     any of the Finance Documents without the consent of the Agent.


<PAGE>

                                       45


16.22 WHOLLY-OWNED SUBSIDIARY

     Each of REC, TXU Europe Group plc and each Guarantor, if any, is a
     wholly-owned subsidiary of Finco 2.

16.23 TIMES FOR MAKING REPRESENTATIONS AND WARRANTIES The representations and
     warranties set out in this Clause 16:

     (a)  are made by each Obligor on the Signing Date; and

     (b)  are deemed to be repeated by each Obligor on the date of delivery of
          each Request, each Drawdown Date and the first day of each Interest
          Period with reference to the facts and circumstances then existing
          (other than in the case of any representation and warranty as to the
          Group's audited financial statements where such representation and
          warranty shall be read and construed as referring to the Group's then
          most recent audited financial statements, including notes to such
          statements) save that the following representations shall not be
          repeated: Clauses 16.5 (No default), 16.8 (No Material Adverse
          Effect), 16.9 (Litigation), 16.12 (No Security Interest,) 16.13 (No
          obligation to create Security Interest), and 16.20 (Information
          Memorandum) 16.21 (No dispute).


16.24 OBLIGORS' ACKNOWLEDGEMENT

     Each of the Obligors acknowledges that the Finance Parties are relying on
     the representations and warranties but not on any other information
     contradictory to them or varying them of which the Finance Parties or any
     of them or their respective agents or advisers may have actual or
     constructive knowledge.

17.  INFORMATION UNDERTAKINGS

17.1 UNDERTAKINGS

     Each of the Obligors (for itself) or as applicable the specified Obligor
     gives the undertakings in this Clause 17 and Clause 18 (General
     Undertakings) to each Finance Party (such undertakings to remain in force
     throughout the Finance Period).

17.2 PREPARATION OF FINANCIAL STATEMENTS

     The Company will:

     (A)  ANNUAL AUDITED FINANCIAL STATEMENTS: beginning with the financial year
          ending 31st December 1998, prepare financial statements (which shall
          in any event include a balance sheet, profit and loss account,
          statement of total recognised gains and losses, cash flow statement,
          and notes to such statements) in respect of:

          (i)  itself and consolidated financial statements in respect of the
               Group; and

          (ii) consolidated financial statements of Finco 2;


<PAGE>

                                       46


            in accordance with the Appropriate Accounting Principles
            (consistently applied) in respect of each financial year and cause
            the same to be reported on by the Auditors; and

     (B)  QUARTERLY FINANCIAL STATEMENTS: prepare:

          (i)  unaudited consolidated financial statements (which shall in any
               event include a balance sheet, profit and loss account and cash
               flow statement) of the Group; and

          (ii) consolidated financial statements (which shall in any event
               include a balance sheet, profit and loss account and cash flow
               statement) of Finco 2 (together with (aa) a pro forma
               consolidation of the balance sheet of Finco 2 with the balance
               sheets of those Subsidiaries of the Company which are not Finco 2
               or its Subsidiaries and (bb) a notification setting out any
               changes in the identity of the Principal Subsidiaries (or, if
               there are no changes, so stating),

          in respect of each Quarter in each financial year (on a cumulative
          basis for each financial year) in accordance with the Appropriate
          Accounting Principles (consistently applied) in a form reasonably
          agreed with the Agent.

17.3 DELIVERY OF FINANCIAL STATEMENTS

     The Company will deliver, or will procure delivery, to the Agent sufficient
     copies for all the Banks of each of the following documents:

     (A)  ANNUAL AUDITED FINANCIAL STATEMENTS: (i) within fifteen days of issue
          thereof to the shareholders of the Company and Finco 2, but in any
          event not later than 180 days after the end of the financial year to
          which they relate, the audited financial statements referred to in
          Clause 17.2(a) (Annual audited financial statements) for each
          financial year together, in each case, with the report of the Auditors
          thereon, the notes thereto, the directors' report thereon and the
          certificate referred to in Clause 17.3(c) (Compliance with Financial
          Undertakings) and (ii), in respect of the Parent, its annual accounts
          most recently filed with the US Securities and Exchange Commission;

     (B)  UNAUDITED MANAGEMENT ACCOUNTS: (i) within 60 days after the end of
          each Quarter in each financial year, the financial statements and
          notification referred to in Clause 17.2(b) (Quarterly financial
          statements)) in respect of such Quarter prepared in accordance with
          the requirements of Clause 17.2(b) (Quarterly financial statements)
          together with (in relation to the Quarter ending December 1998 and
          thereafter) the certificate referred to in Clause 17.3(c) (Compliance
          with Financial Undertakings) and, (ii) in the case of the Parent, its
          quarterly accounts most recently filed with the US Securities and
          Exchange Commission from time to time;

     (C)  COMPLIANCE WITH FINANCIAL UNDERTAKINGS: with each set of accounts
          delivered by it under Clauses 17.3(a) (Annual audited financial
          statements) and (b) (Unaudited management accounts) above the Company
          will deliver to the Agent a certificate signed by a director of the
          Company:

          (i)  confirming compliance or otherwise with the financial
               undertakings in Clause 18.1 (Financial ratios) as at the end of
               the relevant Test Period; and


<PAGE>

                                       47


          (ii) setting out in reasonable detail and in a form satisfactory to
               the Agent the computations (including for the purpose of the
               Leverage Ratio a detailed statement of the calculation of
               Adjusted Share Capital and Reserves and Consolidated Net
               Borrowings) necessary to demonstrate such compliance or
               otherwise.

          The Agent may from time to time request a further director's
          certificate setting out in reasonable detail the calculation of the
          Leverage Ratio (including a detailed statement of the calculation of
          Adjusted Share Capital and Reserves and Consolidated Net Borrowings)
          if the Agent is requested to do so by the Majority Banks or if, acting
          reasonably, the Agent determines that the amount of Adjusted Share
          Capital and Reserves and Consolidated Net Borrowings may have changed
          materially since the date as at which the last compliance certificate
          was prepared. The Company shall provide such a certificate within ten
          Business Days of any such request.

     (D)  PES REGULATORY ACCOUNTS: as soon as practicable after their issue to
          the relevant Government Entity or regulator, all accounts and other
          financial statements or financial information required under any law
          or regulation to be provided to any Government Entity, industry
          regulator or similar body or person and which are thereby placed in
          the public domain;

     (E)  REPORTS AND NOTICES TO SHAREHOLDERS AND CREDITORS: as soon as
          practicable after the issue thereof every report, circular, notice or
          like document issued by the Company, Finco 2 and/or Bidco to its
          shareholders or creditors generally and every notice convening a
          meeting of its shareholders or any class of its shareholders; and

     (F)  FURTHER INFORMATION: promptly upon request, such further information
          concerning the financial position of the Group (or any member of it)
          as the Agent shall reasonably require.

17.4 NOTICE OF DEFAULT

     Each Obligor will inform the Agent promptly upon becoming aware of the
     occurrence of any material Default or any actual Event of Default and, upon
     receipt of a request to that effect from the Agent, confirm to the Agent
     and the Banks that, save as previously notified to the Agent or as notified
     in such confirmation, no Default has occurred which is continuing.

17.5 NOTICE OF LITIGATION

     Each Obligor will, upon becoming aware that the same is threatened or
     pending and in any case promptly after the commencement thereof, give to
     the Agent notice in writing of any litigation, alternative dispute
     resolution, arbitration or administrative proceedings or any dispute
     affecting any member of the Group or any of their respective assets, rights
     or revenues which if determined against it could reasonably be expected to
     result in a liability (including costs) of more than (pound)10,000,000 or
     otherwise have a Material Adverse Effect.

18.  GENERAL UNDERTAKINGS

18.1 FINANCIAL RATIOS

     The Company will procure that, throughout the Finance Period:


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                                       48


     (a)  for each Test Period, the ratio of EBITDA to Net Interest Costs is not
          less than 2:1;

     (b)  at all times the Leverage Ratio is not more than 70% although the
          Leverage Ratio shall be tested only by reference to the compliance
          certificate provided quarterly with the unaudited management accounts
          unless the Agent shall at any time exercise the right to request a
          further certificate in accordance with Clause 17.3(c) (Compliance with
          Financial Undertakings).

18.2 CHANGE OF ACCOUNTING POLICIES

(a)  The Company and the Agent hereby undertake that, in the event that:

     (i)  there is, or the Company intends to make, a change in the manner in
          which the financial statements in Clause 17.2 (Preparation of
          financial statements) are prepared or in the accounting principles or
          standards applied in the preparation of those financial statements
          (including without limitation a change from UK GAAP to US GAAP); and

     (ii) such change affects the amounts utilised for the purposes of
          determining whether or not an Obligor has complied with the covenants
          contained in Clause 18.1 (Financial ratios);

     they will either (aa) renegotiate each of the covenants affected by such
     change with a view to putting in place covenants that fairly reflect that
     change or, (bb) where the change in the manner in which the financial
     statements are prepared is a change from the accounting principles at the
     Signing Date to US GAAP, the Company shall, if requested by the Agent,
     supply to the Agent: (A) a description of any change necessary for those
     financial statements to reflect the accounting principles at the Signing
     Date; and (B) sufficient information to enable the Finance Parties to
     determine whether Clause 18.1 (Financial ratios) has been complied with and
     make an accurate comparison between the financial position shown by the set
     of financial statements prepared on the changed basis and the most recent
     financial statements delivered to the Agent under this Agreement.

(b)  If negotiations referred to in paragraph (a) (aa) above are not concluded
     to the reasonable satisfaction of the Agent within a period of 30 days from
     the commencement of such negotiations the Company agrees that it will
     procure (at the expense of the Company) that the Auditors provide financial
     statements reflecting the Appropriate Accounting Principles, and any
     reference in this Agreement to financial statements under this Agreement
     shall be construed as a reference to such financial statements as adjusted
     to reflect the Appropriate Accounting Principles.

(c)  If the ratio of EBITDA to Net Interest Costs under Clause 18.1(a) above is
     less than 2:1 due to the payment or proper accrual of any exceptional,
     special or windfall tax or levy, then, notwithstanding the provisions of
     Clause 19 (Events of Default), no Event of Default shall occur as a result
     thereof except:

          (i)  the Company and the Agent (acting in accordance with the
               instructions of the Majority Banks) shall consult for a period
               not exceeding 30 days with a view to agreeing a revised basis for
               calculation of the ratio or a revised ratio; and


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                                       49


          (ii) the failure to agree a basis for such calculation or a revised
               ratio by the end of that 30-day period shall constitute an Event
               of Default under Clause 19.1(b) (Breach of other obligations)
               which, for the purposes of that Clause, shall not be capable of
               remedy.

18.3 AUTHORISATIONS

     Each Obligor shall obtain and comply with and do all that is necessary to
     maintain in full force and effect all consents, authorisations, approvals
     and licences required by law or regulation to enable it to enter into and
     perform its obligations under the Finance Documents to which it is a party
     or to ensure their legality, validity or admissibility in evidence.

18.4 DISPOSALS

(a)  No Obligor shall, and the Company will procure that no other member of the
     Group will, (either in a single transaction or in a series of transactions,
     whether related or not) sell, convey, transfer or otherwise dispose of:

     (i)  any shares in Finco 2, Bidco, The Energy Group Limited or any
          Principal Subsidiary;

     (ii) any loans to or other claims on any Principal Subsidiary;

     (iii) the whole or a substantial part of the undertaking or assets of (i)
          the Distribution Business or (ii) the Generation Business as a whole;
          or

     (iv) any other significant assets.

(b)  The restrictions will not apply:

     (i)  with respect to paragraph (a)(iii) above, to (A) the expenditure or
          application of cash, or (B) any disposal in the ordinary course of
          business (including by way of securitisation) or (C) any disposal
          where the net book value of the assets disposed of, when aggregated
          with the net book value of any other assets forming part of the
          Distribution Business or (as the case may be) the Generation Business
          disposed of otherwise than in the ordinary course of operating the
          respective businesses in the same financial year of the Group, does
          not exceed 10 per cent. of the Adjusted Share Capital and Reserves at
          the end of the previous financial year;

     (ii) to a disposal made by any member of the Group to another member of the
          Group; or

     (iii) with respect to paragraph (a)(iv) above, to any disposal on arm's
          length terms (including by way of securitisation); or

     (iv) to any sale, conveyance, transfer or other disposal with respect to
          the King's Lynn generating facility which otherwise would infringe
          sub-Clause (iii) above provided none of the parties to any such
          transaction is a Relevant Person or Project Finance Subsidiary.

18.5 NEGATIVE PLEDGE

     No Obligor shall, and the Company will procure that none of its
     Subsidiaries shall:


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                                       50


     (a)  create or permit to subsist any Security Interests (other than
          Permitted Security Interests) upon the whole or any part of its
          present or future revenues or assets; or

     (b)  sell, transfer or otherwise dispose of any of its assets on terms
          whereby it is or may be leased to or re-acquired by a member of the
          Group or any of its Associated Companies; or

     (c)  sell, transfer or otherwise dispose of any of its receivables on
          recourse terms (save for recourse for disputed or ineligible debts or
          similar rights of recourse) except for the discounting of bills or
          notes in the ordinary course of trading,

     in circumstances where the transaction is entered into primarily as a
     method of raising finance or of financing the acquisition of an asset,
     unless the aggregate disposal proceeds of all such transactions during any
     Accounting Reference Period is less than (pound)50,000,000, provided that
     the restriction in Clause 18.5(b) above shall not apply to any sale,
     transfer or other disposal and leaseback or re-acquisition with respect to
     the King's Lynn generating facility for so long as none of the parties to
     any such transaction is a Relevant Person or Project Finance Subsidiary.

18.6 PARI PASSU INDEBTEDNESS

     Each Obligor shall ensure that its Indebtedness under the Finance Documents
     to which it is a party will rank at least pari passu with all its other
     unsubordinated and unsecured Indebtedness with the exception of that
     preferred by operation of law.

18.7 GUARANTEES AND DISTRIBUTIONS

     No Obligor shall, and the Company will procure that none of its
     Subsidiaries shall:

     (a)  give any guarantee, indemnity or other legally binding assurance
          against loss to any person (other than a member of the Group) in
          respect of the obligations of any Relevant Person other than any
          guarantee issued by the Company or an SPV in connection with
          Equity-Credit Preferred Securities

     (b)  enter into any transaction under which (or do anything as a result of
          or by which) cash or other assets are transferred by or from it to any
          Relevant Person;

            provided that this Clause 18.7 shall not prohibit:

          (i)  provided that no Default is outstanding or would result from the
               dividend, distribution or provision, the declaration, payment or
               making of any lawful dividends or other distributions or the
               provision of loans, deposits or other credit but excluding
               guarantees or indemnities entered into in favour of or in respect
               of the indebtedness of any Relevant Person or distributions as a
               result of any reduction in share capital; or

          (ii) anything done under a transaction entered into on terms no more
               onerous to the relevant member of the Group than a transaction
               entered into on an arm's length basis on normal commercial terms.

18.8 LICENSEES

(a)  In so far as is necessary to prevent a Material Adverse Effect, each
     Obligor shall take, and procure that each Licensee takes, all appropriate
     steps efficiently to perform and discharge its duties and functions in


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                                       51


     accordance with the provisions of the Electricity Act, the terms and
     conditions of the relevant Licence, the provisions of any final order or
     confirmed provisional order made under the Electricity Act and all
     undertakings (if any) given by a Licensee to the Director General and/or
     the Secretary of State in respect of the matters referred to in Section
     25(5) of the Electricity Act.

(b)  The Company shall promptly inform the Agent of any material undertaking
     given by any member of the Group to the Director General and/or the
     Secretary of State.

(c)  The Company shall, forthwith upon receipt of the same, deliver to the Agent
     in sufficient copies for the Banks, copies of all notices or orders served
     on any member of the Group by the Director General or the Secretary of
     State in exercise of the powers conferred on him by the Electricity Act and
     keep the Agent informed of any references to the Competition Commission or
     the exercise or purported exercise by the Secretary of State or the
     Director General of the powers conferred on him by the Fair Trading Act
     1973, the Competition Act 1980 and/or Section 12 of the Electricity Act.

(d)  The Company shall procure that the relevant Licensee will not consent to
     any revocation of the PES Licence (except where a public electricity supply
     licence is granted to a member of the Group in its place) or to any
     material modification or amendment to or restriction in the terms and
     conditions of the PES Licence if such revocation, modification, amendment
     or restriction ought to have a Material Adverse Effect.

(e)  The Company shall ensure at all times that the Licensee under the PES
     Licence has sufficient working capital to finance the performance and
     discharge of its duties as a Public Electricity Supplier in accordance with
     the provisions of the Electricity Act and the terms and conditions of the
     PES Licence.

18.9 NO OUTSTANDING LOANS

     The Company shall procure that (except for investments constituting Liquid
     Assets) no Licensee will have outstanding at any one time any loans to
     (other than deposits with, or investments in debt instruments of, any
     institution authorised under the Banking Act 1987, or the Building
     Societies Act 1986 or any European Authorised Institution as defined in the
     Banking Act 1987) or investments in any person other than a member of the
     Group in excess of an aggregate of (pound)5 million.

18.10 ENVIRONMENTAL AND SAFETY LAWS

     Each Obligor shall, and the Company shall procure that each other member of
     the Group will, comply with any environmental or safety laws applicable to
     it where failure to do so has a Material Adverse Effect.

18.11 INSURANCE

     Each Obligor shall, and the Company shall procure that each member of the
     Group will have insurance and maintain insurance in respect of property
     damage, third party liability and such other risks in respect of its
     business and assets is in accordance with good industry practice.

18.12 GENERATION BUSINESS

     The Company shall procure that any Licensee from time to time licensed to
     carry on the whole or part of the Generation Business will not consent to
     any revocation of the relevant Generation Licence (except where a


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                                       52


     Generation Licence is granted to a member of the Group in its place or the
     same arises in respect of a disposal permitted under Clause 18.4
     (Disposals)) or to any material modification or amendment to or restriction
     in the terms and conditions of such Generation Licence if such revocation,
     modification, amendment or restriction might reasonably be expected to have
     a Material Adverse Effect.

18.13 BUSINESS OF REC

     Each Obligor shall procure that the REC will not enter into or engage in
     any business or activity other than the Supply Business, a Second-Tier
     Supply Business or the Distribution Business or the business of a holding
     company of the company carrying on any such business, other than any
     business or activity the aggregate turnover of which does not in any
     financial year exceed five per cent. of the aggregate turnover of the
     Supply Business, the Second-Tier Supply Businesses and the Distribution
     Business (excluding the turnover on transactions which the Supply Business,
     any of the Second-Tier Supply Businesses and/or the Distribution Business
     made with each other) in the immediately preceding financial year.

18.14 CHANGE IN BUSINESS

     No Obligor shall, and the Company will procure that no other member of the
     Group shall, carry on any business other than those which are usual for
     energy companies and electricity companies (including, without limitation,
     electricity distribution, supply and generation and energy trading and
     business activities related to the gas, telecommunications and water
     industries) in Europe or the business of a holding company of any company
     carrying on any such business. Provided that the limitation of business
     activities contained in this Clause 18.14 will not apply to any other
     business activities carried on by members of the Group as long as such
     other business activities do not in aggregate account for more than 10% of
     the consolidated gross assets or consolidated gross revenues of the Group
     (as calculated in accordance with the Appropriate Accounting Principles).

18.15 FUNCTIONS OF THE COMPANY

(a)  The Company shall not carry on any business other than being the holding
     company of the Group (and any Project Finance Subsidiaries) and anything
     ancillary to any of the other matters described in this Clause 18.15.

(b)  The Company shall not own any material assets other than (i) any Liquid
     Assets held by it from time to time, (ii) its shareholding in Finco 2, (ii)
     its direct or indirect interest in all persons ("EQUITY SPVS") issuing or
     guaranteeing Equity-Credit Preferred Securities and all intermediate
     undertakings through which it holds its interest in Equity SPVs, (iii) its
     direct or indirect interest in all SPVs and all intermediate undertakings
     through which it holds its interest in SPVs (provided always that, in
     respect of (ii) and (iii) above each such intermediate undertaking's sole
     purpose is to hold directly or indirectly an interest in an SPV or an
     Equity SPV and, if applicable, act as a conduit as between the SPV or
     Equity SPV and the Company for any sums lent or arising or investments made
     in connection with the SPVs and Equity SPVs, issue or issues of capital
     market instruments or other securities), and (iv) Indebtedness due to the
     Company.

(c)  The Company shall not incur any liabilities (whether or not in connection
     with Borrowed Money) other than:

     (i)  as a result of borrowing under this Agreement or the Multi-option
          Facilities Agreement or liabilities otherwise incurred in connection
          with this Agreement, the Multi-option Facilities Agreement or the
          Original Facilities Agreement, or as a result of borrowing (subject,


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                                       53


          in the case of any proposed Borrowed Money from Finco 2 or Bidco, to
          Clause 18.18 (Indebtedness of Finco 2 to the Company) and of Bidco to
          Finco 2)) from other members of the Group or other persons (provided
          that each amount borrowed other than borrowings not
          exceeding(pound)30,000,000, is on-lent to Finco 2), or liabilities
          incurred in connection with the Acquisition; or

     (ii) incurred as a result of the Company's existence and administrative
          operation in accordance with the terms of this Agreement, including,
          without limitation, audit and legal fees, taxation and other expenses
          incurred by it in acting as contemplated by this Agreement; or

     (iii) under any guarantee, indemnity or similar instrument in respect of
          Borrowed Money incurred by: (aa) a member of the Group which is, and
          for so long as such guarantee, indemnity or similar instrument is
          outstanding, remains, a holding company of the REC, or (bb) an SPV; or

     (iv) under any guarantee, undertaking, performance bond or similar
          instrument or obligation, not being in respect of Borrowed Money, in
          respect of the liabilities and/or obligations of members of the Group;
          or

     (v)  under any guarantee given by the Company in replacement of, or in
          respect of the same obligations as are guaranteed under, certain
          guarantees given by Energy Holdings (No. 3) Limited (formerly The
          Energy Group PLC) on or prior to 22 October 1998 in respect of the
          obligations of former direct and indirect Subsidiaries of Energy
          Holdings (No. 3) Limited.

     (vi) under any guarantee of or in connection with any Equity-Credit
          Preferred Securities.

18.16 DERIVATIVE TRANSACTIONS

     No Obligor shall, and the Company will procure that no other member of the
     Group shall, enter into any Derivatives Transaction other than:

     (a)  in connection with the management of foreign currency or interest rate
          exposures likely to be incurred in the conduct of the Group's business
          or that of any Project Finance Subsidiary, and/or

     (b)  any contracts where the exposure is principally related to the future
          generation, availability, supply, distribution or pricing of fuel,
          power or energy, or other energy-related risks.

18.17 PROJECT FINANCE SUBSIDIARIES

      All transactions and arrangements between the Group on the one hand and
      Project Finance Subsidiaries (or members of the Group who incur Project
      Finance Borrowings falling within paragraph (c) of the definition of
      Project Finance Borrowings but only in connection with the Project to
      which such Project Finance Borrowing directly relates) on the other shall
      be (a) on arm's length terms, and (b) to the extent that they involve
      liability of, or recourse to the Group in respect of Indebtedness to
      finance or refinance, or in respect of the financing or refinancing of, a
      Project, such liability or recourse shall be limited to the degree of
      recourse described in paragraph (c) of the definition of "Project Finance


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                                       54


      Borrowings" unless the Company shall promptly on the occurrence of such
      liability or right of recourse notify the Agent that the relevant Project
      Finance Borrowing which is the subject of such liability or right of
      recourse shall have ceased or shall thereupon cease to be a Project
      Finance Borrowing, attaching a detailed re-calculation of the Leverage
      Ratio showing the effect of such re-designation.

18.18 INDEBTEDNESS OF FINCO 2 TO THE COMPANY

     The Company will procure that:

     (a)  Finco 2 will not repay, forgive or novate nor shall the Company accept
          the repayment or novation of amounts outstanding from Finco 2 to the
          Company if and to the extent that such repayment, novation or
          forgiveness of any indebtedness from time to time due from Finco 2 to
          the Company (after application of the proceeds of such repayment,
          forgiveness or novation by the Company) would result (and shall ensure
          that it does not subsequently result) in the net amount owing
          (including any accrued interest) by Finco 2 to the Company falling
          short of the aggregate of the Advances and all other Borrowed Money of
          the Company by more than(pound)30,000,000 (without double counting
          where Borrowed Money guaranteed by the Company is also lent to it)
          (including in each case any accrued interest) unless the Company shall
          immediately repay an equivalent amount of the Advances (but only to
          the extent that the Company has not immediately repaid an equivalent
          amount under the Multi-option Facilities Agreement).

     (b)  If no amount is due, owing or incurred by the Company under the
          Facility none of the restrictions in this Clause 18.18 shall apply
          until and unless the Company shall draw any Advance and for so long as
          any such Advance is outstanding.

     (c)  Any amount which purports to be lent from Finco 2 to the Company shall
          for the purpose of this Clause be deemed to be applied in repayment of
          any existing indebtedness due from Finco 2 to the Company at the
          relevant time and the provisions of this Clause shall therefore apply
          to the lending of any such amount exactly as if it had been a
          repayment of debt.

     (d)  Any amount lent down by the Company to Finco 2 which represents the
          on-lending of Borrowed Monies incurred or guaranteed by the Company
          (the "Connected Borrowing") shall bear a rate of interest at least
          equal to that applicable to the Connected Borrowing from time to time.

     (e)  The Company shall procure that each loan owing from The Energy Group
          Limited to Energy Group Overseas B.V. ("EGO B.V."), which originally
          came into being as a result of the on lending through the Group of the
          proceeds of the issuance by EGO B.V. of $500,000,000 aggregate
          principal amount of unsecured debt securities ("Yankee Bonds") in
          October 1997 carries a rate of interest at least equal to that of the
          respective series of the Yankee Bonds and is not discharged, novated
          or assigned in any way which would either:

          (i)  cause the ultimate obligor to be a company which is not a holding
               company of the REC; or

          (ii) cause the ultimate beneficiary of the series of related
               indebtedness to be a person other than the Group Company which is
               the obligor under the Yankee Bonds.


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                                       55


18.19 RANKING OF BOND ISSUER

(a)  Where the Company issues a guarantee of the obligations of an SPV in
     respect of a raising of Borrowed Money by that SPV the amount raised by
     such SPV shall be on-lent to the Company on terms that the obligations of
     the Company in respect of repayment of that loan are expressly subordinated
     to the claims of all other unsecured and unsubordinated creditors of the
     Company in the event of the insolvency of the Company or such loan is made
     on such terms as are, in the opinion of the Agent (acting reasonably),
     effective to provide that the creditors of the SPV under the relevant
     capital market instrument will not (after taking account of the possibility
     of the SPV making an intra-group claim against the Company, in addition to
     the claim of the creditors of such SPV under the Company's guarantee)
     become entitled to a claim against the Company that ranks better than pari
     passu with the claims of the Finance Parties under the Finance Documents on
     a liquidation of the Company.

(b)  Where the SPV is an unlimited company (or any other entity whose immediate
     owner would have unlimited liability for that entity's liabilities and
     obligations), the Company shall hold its interest in the SPV indirectly, by
     virtue of the Company being the holder of the issued share capital of one
     or more private limited companies (or any other entities whose immediate
     owner would have limited liability (by reference only to unpaid share
     capital or a similar concept) for that entity's liabilities or obligations)
     which is the direct or indirect owner of such SPV.

(c)  The Company shall ensure that no Group Company other than the Company or
     any holding company of the relevant SPV shall:

     (i)  transfer cash or assets to an SPV or holding company of an SPV; or

     (ii) give any guarantee, indemnity or other assurance for the obligations
          of an SPV or holding company of an SPV, unless the Facility shall
          simultaneously be equally and rateably secured by a guarantee from the
          same Group Company.

(d)  The Company shall not and shall ensure that no holding company of the
     relevant SPV shall:

     (i)  transfer cash or assets to an SPV or holding company of an SPV save
          only to the extent required to service interest, principal and/or
          premium payable under capital markets instruments issued by the SPV or
          as the Company may be required to pay under the terms of any loan
          between the SPV and the Company made under Clause 18.19(a) above or as
          may be required initially to capitalise an SPV in accordance with
          professional advice received or to meet liabilities of such SPV
          arising from its existence and administration operation in accordance
          with the terms of this Agreement including audit and legal fees,
          taxation and other expenses incurred by it; or

     (ii) give any guarantee, indemnity or other assurance for the Borrowed
          Money of an SPV or holding company of an SPV, unless the Facility
          shall simultaneously be equally and rateably secured by a guarantee
          from the same Group Company (save for any guarantee given by the
          Company under Clause 18.19(a)above)


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                                       56


18.20 ADDITIONAL GUARANTORS

     The Company shall ensure that, if after the signing of this Agreement, any
     member of the Group or any Relevant Person gives any guarantee of any
     Indebtedness of an Obligor in respect of Borrowed Money, that person shall
     simultaneously become a Guarantor under this Agreement in accordance with
     Clause 27.6 (Guarantors).

18.21 EQUITY-CREDITPREFERRED SECURITIES

     Nothing in this Agreement shall prevent, and this Agreement shall not be
     breached by, the issuance of Equity-CreditPreferred Securities or the
     incurring by any member of the Group of guarantees thereof complying with
     paragraph (iv) of the definition thereof.

18.22 RESTRICTIONS RELATED TO EXCESS EQUITY FUNDING

     Any Borrowed Money which is raised with a view to repaying, or is used to
     repay, all or part of the Excess Equity Funding, or which is raised to
     refinance any Indebtedness which was incurred for that purpose or so used,
     shall rank pari passu with the Facility, and shall be raised by the Company
     or by an SPV guaranteed by the Company, and not by any other member of the
     Group.

19.  EVENTS OF DEFAULT

19.1 EVENTS OF DEFAULT

     Each of the events set out below is an Event of Default (whether or not
     caused by any reason whatsoever outside the control of any Relevant Company
     (or any other person)) namely if:

     (A)  NON-PAYMENT: any Obligor fails to pay any sum due from it under any of
          the Finance Documents on its due date in the manner stipulated in the
          relevant Finance Document (or within three Business Days of the due
          date if the delay is caused by technical difficulties or
          administrative error in the transfer of funds); or

     (B)  BREACH OF OTHER OBLIGATIONS: any Obligor commits any breach of or
          omits to observe any of the obligations or undertakings expressed to
          be assumed by it under any of the Finance Documents (other than any
          such obligations referred to in Clause 19.1(a) (Non-payment) and in
          respect of any such breach or omission which, in the reasonable
          opinion of the Majority Banks, is capable of remedy, such action as
          shall remedy the same to the reasonable satisfaction of the Majority
          Banks shall not have been taken within 21 days of the relevant Obligor
          becoming aware of such default; or

     (C)  MISREPRESENTATION: any representation, warranty or statement made or
          deemed to be made or repeated by or on behalf of any Obligor in, or in
          connection with, any of the Finance Documents or in any notice,
          accounts, certificate or statement referred to in or delivered under
          any of the Finance Documents is or proves to have been incorrect or
          misleading and if capable of being remedied, in the reasonable opinion
          of the Majority Banks, is not remedied to the reasonable satisfaction
          of the Majority Banks 21 days after the date on which the relevant
          Group Company becomes aware of such misrepresentation; or


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                                       57


     (D)  CROSS-DEFAULT:

          (i)  any Borrowed Money of a member of the Group is not paid when due
               or within any originally stated applicable grace period; or

          (ii) (by reason of an event of default or default howsoever described)
               any Borrowed Money of a member of the Group is declared or
               becomes capable of being declared to be or otherwise becomes due
               and payable prior to its specified maturity; or

          (iii)any Borrowed Money of a member of the Group which is repayable on
               demand is not repaid on demand being made,

          in circumstances where, in all or any of the above paragraphs, the
          Borrowed Money amounts in aggregate at any one time to more than
          (pound)20,000,000 or, if higher, an amount of 2% of Adjusted Share
          Capital and Reserves or its equivalent in other currencies, unless the
          alleged default is being disputed in good faith and the Company has
          shown to the Agent's satisfaction (acting reasonably) that it has
          adequate cash resources to pay that Borrowed Money and its other debts
          as they fall due; or

     (E)  LEGAL PROCESS: (without prejudice to any other provision of this
          Agreement) any final judgment or order in an amount exceeding
          (pound)2,000,000 (or its equivalent in other currencies) made against
          any Relevant Company is not stayed or complied with or paid within 28
          days (or in the case of payments, when due (if later)) or a creditor
          attaches or takes possession of, or a distress, execution,
          sequestration or other process is levied or enforced upon or sued out
          against, any part of the undertakings, assets, rights or revenues of
          any Relevant Company with a book value or market value in excess
          of(pound)2,000,000 and is not discharged or stayed within 14 days; or

     (F)  INSOLVENCY: any Relevant Company:

          (i)  is deemed unable to pay its debts in accordance with Section
               123(1)(a), (b) or (e) or (2) of the Insolvency Act 1986 unless,
               in the case of Section 123(1)(a) only, a statutory notice has
               been withdrawn, stayed or dismissed within 14 days; or

          (ii) is unable generally to pay its debts as they fall due; or

     (G)  ADMINISTRATION:

          (i)  any meeting of the directors of any Relevant Company is convened
               for the purpose of considering any resolution to present an
               application for an administration order; or

          (ii) a petition for an administration order in relation to any
               Relevant Company is presented to the court or an administration
               order is sought of the court on the basis of an undertaking to
               subsequently present a petition which, if in either case it is
               being contested by the Relevant Company in good faith with
               appropriate proceedings diligently pursued, is not discharged
               within 21 days; or


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                                       58


          (iii)any Relevant Company passes a resolution to present an
               application for an administration order; or

          (iv) an administration order is made in relation to any Relevant
               Company; or

     (H)  COMPOSITIONS ETC: any steps are taken, or negotiations commenced, by
          any Relevant Company or by its creditors generally with a view to
          proposing any kind of composition, scheme of arrangement, compromise
          or arrangement, in each case involving such company and its creditors
          generally; or

     (I)  APPOINTMENT OF RECEIVERS AND MANAGERS:

          (i)  any administrative or other receiver or any manager is appointed
               of any Relevant Company or any material part of its assets and/or
               undertaking; or

          (ii) the directors of any Relevant Company request any person to
               appoint such a receiver or manager; or

          (iii)any other steps are taken to enforce any Security Interest over
               all or any material part of the assets and/or undertakings of any
               Relevant Company; or

     (J)  WINDING UP:

          (i)  any meeting of any Relevant Company is convened for the purpose
               of considering any resolution for (or to petition for) its
               winding up; or

          (ii) any Relevant Company passes such a resolution; or

          (iii)any person presents any petition for the winding up of any
               Relevant Company (not being a petition which the Company can
               demonstrate to the satisfaction of the Agent is frivolous
               vexatious or an abuse of the process of the court) which is not
               dismissed or discharged within 14 days of service thereof; or

          (iv) an order for the winding up of any Relevant Company is made, not
               (in any case) being a winding-up of a Subsidiary of the Company
               involving an amalgamation or reorganisation on a solvent basis
               which has been approved in advance by the Agent (acting
               reasonably); or

     (K)  DISSOLUTION: any corporate, legal or administrative proceedings are
          commenced by any person (including, without limitation, the Registrar
          of Companies) with a view to the dissolution of any Relevant Company,
          not being a dissolution involving an amalgamation or reorganisation on
          a solvent basis which has been approved in advance by the Agent
          (acting reasonably); or

     (L)  ANALOGOUS PROCEEDINGS: there occurs, in relation to any Relevant
          Company, in any country or territory in which it carries on business
          or to the jurisdiction of whose courts any part of its assets is
          subject, any event which, in the reasonable opinion of the Majority
          Banks, appears in that country or territory corresponds with, or has
          an effect equivalent to, any of those mentioned in Clauses 19.1(e)
          (Legal process) to (j) (Dissolution) (inclusive) or any Relevant
          Company otherwise becomes subject, in any such country or territory,


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          to a legal procedure under of any law relating to insolvency,
          bankruptcy or liquidation; or

     (M)  CESSATION OF BUSINESS: other than in relation to a disposal permitted
          under this Agreement, any Relevant Company suspends or ceases or
          threatens to suspend or cease to carry on its business unless another
          member of the Group carries on such business in its place; or

     (N)  CHANGE OF CONTROL:

          (i)  Bidco ceases to be a wholly-owned subsidiary (as that term is
               used in section 736 of the Act) of Finco 2; or

          (ii) Finco 2 ceases to be a wholly-owned direct or indirect Subsidiary
               of the Parent (other than as permitted by paragraph (iii) below)
               and at least a 90% owned direct subsidiary of the Company; or

          (iii)less than 50% plus one share of the equity share capital of the
               Company is held by the Parent (directly or indirectly) at any
               time; or

          (iv) The Energy Group Limited (company no. 3613919) ceases to be a
               wholly-owned Subsidiary of Bidco; or

          (v)  REC or any other Licensee ceases to be a wholly-owned Subsidiary
               of the Company; or

          (vi) there is a Change in Control of the Parent; or

     (O)  DISTRIBUTION BUSINESS/GENERATION BUSINESS:

          (i)  the Group ceases, or threatens to cease, to carry on the
               Distribution Business or the Generation Business as a whole;

          (ii) all or a majority of the issued shares of any Licensee or any
               other Relevant Company or the whole or any material part of the
               assets or revenues of (aa) the Distribution Business or (bb) the
               Generation Business (taken as a whole) are seized, nationalised,
               expropriated or compulsorily acquired by or under the authority
               of a Government Entity;

          (iii)any change is made in the statutory or regulatory requirements
               applicable to the Distribution Business or the Generation
               Business or any new statutory or regulatory requirements are
               imposed on it which would be reasonably likely to have a Material
               Adverse Effect; or

     (P)  LICENCES:

          (i)  the Secretary of State or any other person with the ability to do
               so gives notice in writing of the revocation of a Licence for any
               reason or a Licence ceases to be in full force and effect in any
               material respect except where a similar licence is or licences
               are granted to a member of the Group in its place;


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          (ii) without prejudice to paragraph (i) above, any legislation
               (whether primary or subordinate) with regard to the creditors of
               Licensees or the ability of Licensees to raise finance under a
               Licence or with regard to generators or electricity or public
               electricity suppliers generally is enacted and that enactment
               would be reasonably likely to have a Material Adverse Effect;

          (iii)any amendment is made to the terms and conditions of a Licence
               and the amendment would be reasonably likely to have a Material
               Adverse Effect; or

     (Q)  ELECTRICITY ACT:

          (i)  any of the provisions of the Electricity Act (or any subordinate
               legislation) detailing the rights, powers, authorities,
               obligations and duties of the Secretary of State or the Director
               General, or the manner in or time at which they are to be
               exercised, are repealed, amended or introduced in a manner which
               would be reasonably likely (in the opinion of the Majority Banks)
               to have a Material Adverse Effect; or

          (ii) the relevant licensee fails to comply with a final order (within
               the meaning of section 25 of the Electricity Act) or with a
               provisional order (within the meaning of that section) which has
               been confirmed under that section and in either case which has
               not been revoked under that section or the validity of which has
               not been questioned under section 27 of the Electricity Act, if
               such failure to comply would be reasonably likely to have a
               Material Adverse Effect; or

     (R)  POOLING AND SETTLEMENT AGREEMENT: REC or any other member of the Group
          ceases to be a party to the Pooling and Settlement Agreement, or any
          notice requiring REC or any other member of the Group to cease to be a
          party to the Pooling and Settlement Agreement is given to such company
          under the relevant clauses of the Pooling and Settlement Agreement,
          except where another member of the Group becomes a party to that
          agreement in its place or such cessor occurs or such notice is given
          in the context of a general disbandment of the Pooling and Settlement
          Agreement; or

     (S)  GAS FRAMEWORK AGREEMENT: the relevant member of the Group ceases to be
          a party to the Gas Framework Agreement where this would be reasonably
          likely to lead to a Material Adverse Effect, except where another
          member of the Group becomes a party to that agreement in its place;

     (T)  FINANCE DOCUMENTS: any Finance Document is not or ceases to be legal,
          valid and binding on or (subject to the Reservations) enforceable
          against any Obligor or is alleged by the Company or any other Obligor
          to be ineffective for any reason; or

     (U)  UNLAWFULNESS: it becomes unlawful at any time for any Obligor to
          perform all or any of its material obligations under any of the
          Finance Documents; or

     (V)  MATERIAL ADVERSE EFFECT: at any time after the date of this Agreement
          there is a change in the financial condition of an Obligor which has a
          Material Adverse Effect.

19.2 ACCELERATION


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                                       61


     The Agent may, and, if so requested by the Majority Banks, shall, without
     prejudice to any other rights of the Finance Parties after the happening of
     an Event of Default, and so long as the same is outstanding, by notice to
     the Company:

     (a)  declare that the obligation of each Bank to make its Commitments
          available shall be terminated, whereupon the Total Commitments shall
          be reduced to zero forthwith; and/or

     (b)  declare that the Advances and all interest and fees accrued and all
          other sums payable under the Finance Documents have become due and
          payable or have become due and payable on demand, whereupon the same
          shall immediately or in accordance with the terms of such notice,
          become due and payable or become obligations payable on demand: and/or

     (c)  declare that the Guarantees (or any of them) have become enforceable
          (in whole or in part).

     On or at any time after the making of any such declaration, the Agent shall
     be entitled, to the exclusion of the Obligors, to select the duration of
     Interest Periods.

20.  THE AGENT AND THE ARRANGER

20.1 APPOINTMENT AND DUTIES OF THE AGENT

(a)  Each Finance Party (other than the Agent) irrevocably appoints the Agent to
     act as its agent under and in connection with the Finance Documents.

(b)  Each Party appointing the Agent irrevocably authorises the Agent on its
     behalf to:

     (i)  perform the duties and to exercise the rights, powers and discretions
          that are specifically delegated to it under or in connection with the
          Finance Documents, together with any other incidental rights, powers
          and discretions; and

     (ii) execute each Finance Document expressed to be executed by the Agent on
          that Party's behalf.

(c)  The Agent shall have only those duties which are expressly specified in the
     Finance Documents. Those duties are solely of a mechanical and
     administrative nature.

20.2 ROLE OF THE ARRANGER

     Except as otherwise provided in the Finance Documents, the Arranger has no
     obligations of any kind to any other Party under or in connection with any
     Finance Document.

20.3 RELATIONSHIP

     The relationship between the Agent and the other Finance Parties is that of
     agent and principal only. Nothing in this Agreement constitutes the Agent
     as trustee or fiduciary for any other Party or any other person and the
     Agent need not hold in trust any moneys paid to it for a Party or be liable
     to account for interest on those moneys.


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                                       62


20.4 MAJORITY BANKS' INSTRUCTIONS

(a)  The Agent will be fully protected if it acts in accordance with the
     instructions of the Majority Banks in connection with the exercise of any
     right, power or discretion or any matter not expressly provided for in the
     Finance Documents. Any such instructions given by the Majority Banks will
     be binding on all the Banks. In the absence of such instructions the Agent
     may act as it considers to be in the best interests of all the Banks.

(b)  The Agent is not authorised to act on behalf of a Bank (without first
     obtaining that Bank's consent) in any legal or arbitration proceedings
     relating to any Finance Document.

20.5 DELEGATION

      The Agent may act under the Finance Documents through its personnel and
      agents.

20.6 RESPONSIBILITY FOR DOCUMENTATION

     Neither the Agent nor the Arranger is responsible to any other Party for:-

     (a)  the execution, genuineness, validity, enforceability or sufficiency of
          any Finance Document or any other document;

     (b)  the collectability of amounts payable under any Finance Document; or

     (c)  the accuracy of any statements (whether written or oral) made in or in
          connection with any Finance Document (including the Information
          Memorandum).

20.7 DEFAULT

(a)  The Agent is not obliged to monitor or enquire as to whether or not a
     Default has occurred. The Agent will not be deemed to have knowledge of the
     occurrence of a Default. However, if the Agent receives notice from a Party
     referring to this Agreement, describing the Default and stating that the
     event is a Default, it shall promptly notify the Banks.

(b)  The Agent may require the receipt of security satisfactory to it whether by
     way of payment in advance or otherwise, against any liability or loss which
     it will or may incur in taking any proceedings or action arising out of or
     in connection with any Finance Document before it commences these
     proceedings or takes that action.

20.8 EXONERATION

(a)  Without limiting paragraph (b) below, the Agent will not be liable to any
     other Party for any action taken or not taken by it under or in connection
     with any Finance Document, unless directly caused by its gross negligence
     or wilful misconduct.

(b)  No Party may take any proceedings against any officer, employee or agent of
     the Agent in respect of any claim it might have against the Agent or in
     respect of any act or omission of any kind (including gross negligence or
     wilful misconduct) by that officer, employee or agent in relation to any
     Finance Document. Any officer, employee or agent of the Agent may rely on
     this sub-clause and enforce its terms under the Contracts (Rights of Third
     Parties) Act 1999.


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                                       63


20.9 RELIANCE

      The Agent may:-

     (a)  rely on any notice or document believed by it to be genuine and
          correct and to have been signed by, or with the authority of, the
          proper person;

     (b)  rely on any statement made by a director or employee of any person
          regarding any matters which may reasonably be assumed to be within his
          knowledge or within his power to verify; and

     (c)  engage, pay for and rely on legal or other professional advisers
          selected by it (including those in the Agent's employment and those
          representing a Party other than the Agent).

20.10 CREDIT APPROVAL AND APPRAISAL

     Without affecting the responsibility of any Obligor for information
     supplied by it or on its behalf in connection with any Finance Document,
     each Bank confirms that it:-

     (a)  has made its own independent investigation and assessment of the
          financial condition and affairs of each Obligor and its related
          entities in connection with its participation in this Agreement and
          has not relied exclusively on any information provided to it by the
          Agent or the Arranger in connection with any Finance Document; and

     (b)  will continue to make its own independent appraisal of the
          creditworthiness of each Obligor and its related entities while any
          amount is or may be outstanding under the Finance Documents or any
          Commitment is in force.

20.11 INFORMATION

(a)  The Agent shall promptly forward to the person concerned the original or a
     copy of any document which is delivered to the Agent by a Party for that
     person.

(b)  The Agent shall promptly supply a Bank with a copy of each document
     received by the Agent under Clause 4 (Conditions precedent) upon the
     request and at the expense of that Bank.

(c)  Except where this Agreement specifically provides otherwise, the Agent is
     not obliged to review or check the accuracy or completeness of any document
     it forwards to another Party.

(d)  Except as provided above, the Agent has no duty:-

     (i)  either initially or on a continuing basis to provide any Bank with any
          credit or other information concerning the financial condition or
          affairs of the Company or any related entity of any Obligor whether
          coming into its possession or that of any of its related entities
          before, on or after the date of this Agreement; or

     (ii) unless specifically requested to do so by a Bank in accordance with a
          Finance Document, to request any certificates or other documents from
          any Obligor.


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                                       64


20.12 THE AGENT AND THE ARRANGER INDIVIDUALLY

(a)  If it is also a Bank, each of the Agent and the Arranger has the same
     rights and powers under this Agreement as any other Bank and may exercise
     those rights and powers as though it were not the Agent or the Arranger.

(b)  Each of the Agent and Arranger may:-

     (i)  carry on any business with an Obligor or its related entities;

     (ii) act as agent or trustee for, or in relation to any financing
          involving, an Obligor or its related entities; and

     (iii) retain any profits or remuneration in connection with its activities
          under this Agreement or in relation to any of the foregoing.

(c)  In acting as the Agent, the agency division of the Agent will be treated as
     a separate entity from its other divisions and departments. Any information
     acquired by the Agent which, in its opinion, is acquired by it otherwise
     than in its capacity as the Agent may be treated as confidential by the
     Agent and will not be deemed to be information possessed by the Agent in
     its capacity as such.

(d)  Each Obligor irrevocably authorises the Agent to disclose to the other
     Finance Parties any information which in its opinion is received by it in
     its capacity as the Agent.

(e)  The Agent may deduct from any amount received by it for the Banks pro rata
     any unpaid fees, costs and expenses of the Agent incurred by it in
     connection with the Finance Documents.

20.13 INDEMNITIES

(a)  Without limiting the liability of any Obligor under the Finance Documents,
     each Bank shall forthwith on demand indemnify the Agent for that Bank's
     proportion of any liability or loss incurred by the Agent in any way
     relating to or arising out of its acting as the Agent, except to the extent
     that the liability or loss arises directly from the Agent's gross
     negligence or wilful misconduct.

(b)  A Bank's proportion of the liability or loss set out in paragraph (a) above
     is the proportion which its participation in the Advances (if any) bears to
     the Original Sterling Amount of all the Advances on the date of the demand.
     However, if there are no Advances outstanding on the date of demand, then
     the proportion will be the proportion which its Commitment bears to the
     Total Commitments at the date of demand or, if the Total Commitments have
     been cancelled, bore to the Total Commitments immediately before being
     cancelled.

20.14 COMPLIANCE

(a)  The Agent may refrain from doing anything which might, in its opinion,
     constitute a breach of any law or regulation or be otherwise actionable at
     the suit of any person, and may do anything which, in its opinion, is
     necessary or desirable to comply with any law or regulation of any
     jurisdiction.


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                                       64


(b)  Without limiting paragraph (a) above, the Agent need not disclose any
     information relating to any Obligor or any of its related entities if the
     disclosure might, in the opinion of the Agent, constitute a breach of any
     law or regulation or any duty of secrecy or confidentiality or be otherwise
     actionable at the suit of any person.

20.15 RESIGNATION OF AGENT

(a)  Notwithstanding its irrevocable appointment, the Agent may resign by giving
     notice to the Banks and the Company, in which case the Agent may forthwith
     appoint one of its Affiliates as successor Agent or, failing that, the
     Majority Banks may appoint a successor Agent.

(b)  If the appointment of a successor Agent is to be made by the Majority Banks
     but they have not, within 30 days after notice of resignation, appointed a
     successor Agent which accepts the appointment, the retiring Agent may
     appoint a successor Agent.

(c)  The resignation of the retiring Agent and the appointment of any successor
     Agent will both become effective only upon the successor Agent notifying
     all the Parties that it accepts the appointment. On giving the
     notification, the successor Agent will succeed to the position of the
     retiring Agent and the term "AGENT" will mean the successor Agent.

(d)  The retiring Agent shall, at its own cost, make available to the successor
     Agent such documents and records and provide such assistance as the
     successor Agent may reasonably request for the purposes of performing its
     functions as the Agent under this Agreement.

(e)  Upon its resignation becoming effective, this Clause 20 shall continue to
     benefit the retiring Agent in respect of any action taken or not taken by
     it under or in connection with the Finance Documents while it was the
     Agent, and, subject to paragraph (d) above, it shall have no further
     obligation under any Finance Document.

(f)  The Majority Banks may, by notice to the Agent, require it to resign in
     accordance with paragraph (a) above. In this event, the Agent shall resign
     in accordance with paragraph (a) above but it shall not be entitled to
     appoint one of its Affiliates as successor Agent.

20.16 BANKS

(a)  The Agent may treat each Bank as a Bank, entitled to payments under this
     Agreement and as acting through its Facility Office(s) until it has
     received not less than five Business Days' prior notice from the Bank to
     the contrary.

(b)  The Agent may at any time, and shall if required to do so by the Majority
     Banks, convene a meeting of the Banks.

20.17 EXTRAORDINARY MANAGEMENT TIME AND RESOURCES

     The Company shall forthwith on demand pay the Agent for the cost of
     utilising its management time or other resources in connection with:

     (a)  any amendment, waiver, consent or suspension of rights (or any
          proposal for any of the foregoing) requested by or on behalf of the
          Company and relating to a Finance Document or a document referred to
          in any Finance Document; or


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                                       66


     (b)  the occurrence of a Default; or

     (c)  the enforcement of, or the preservation of any rights under, any
          Finance Document.

     Any amount payable to the Agent under this Clause will be calculated on the
     basis of such reasonable daily or hourly rates as the Agent may notify to
     the Company, and is in addition to any fee paid or payable to the Agent
     under Clause 21 (Fees).

21.  FEES

21.1 ARRANGEMENT FEE

     The Company shall pay on the date of this Agreement to the Arranger an
     arrangement fee in the amount agreed in the relevant Fee Letter. This fee
     shall be distributed by the Arranger among the Banks in accordance with the
     arrangements agreed by the Arranger with the Banks prior to the date of
     this Agreement.

21.2 AGENT'S FEE

     The Company shall pay to the Agent for its own account an agency fee in the
     amount and at the times agreed in the relevant Fee Letter.

21.3 COMMITMENT FEE

(a)  The Company shall pay to the Agent for each Bank a commitment fee in
     Sterling computed at the rate of 50 per cent. of the Applicable Margin on
     the undrawn, uncancelled amount of that Bank's Commitment during the
     Commitment Period. For this purpose, Advances are taken at their Original
     Sterling Amount.

(b)  Accrued commitment fee is payable quarterly in arrear. Accrued commitment
     fee shall also be payable to the Agent for the relevant Bank(s) on the
     cancelled amount of its Commitment at the time the cancellation comes into
     effect.

21.4 TERM OUT FEE

     The Company shall pay to the Agent a term-out fee, for distribution to each
     Bank pro rata to the proportion its participation in Term-out Advances
     bears to the aggregate principal amount of all Term-out Advances
     outstanding at that time. In respect of each Term-out Advance drawn under
     Clause 6.1 (Repayment) a Term-out fee will be calculated at the rate of
     0.05% flat on the principal amount of that Term-out Advance, and is payable
     on the Drawdown Date for that Term-out Advance.

21.5 VAT

     Any fee referred to in this Clause 21 is exclusive of any value added tax
     or any other tax which might be chargeable in connection with that fee. If
     any value added tax or other tax is so chargeable, it shall be paid by the
     Company at the same time as it pays the relevant fee.


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                                       67


22.  EXPENSES

22.1 INITIAL AND SPECIAL COSTS

     The Company shall within three Business Days of demand pay the Agent and
     the Arranger the amount of all reasonable costs and expenses (including
     legal fees) incurred by either of them in connection with:

     (a)  the negotiation, preparation, printing and execution of:

          (i)  this Agreement and any other documents referred to in this
               Agreement;

          (ii) any other Finance Document (other than a Novation Certificate)
               executed after the date of this Agreement; and

     (b)  any amendment, waiver, consent or suspension of rights (or any
          proposal for any of the foregoing) requested by or on behalf of an
          Obligor or, in the case of Clause 26.7 (Change of currency), the
          Agent, and relating to a Finance Document or a document referred to in
          any Finance Document.

22.2 ENFORCEMENT COSTS

     The Company shall forthwith on demand pay to each Finance Party the amount
     of all costs and expenses (including legal fees) incurred by it in
     connection with the enforcement of, or the preservation of any rights
     under, any Finance Document.

23.  STAMP DUTIES

     The Company shall pay and forthwith on demand indemnify each Finance Party
     against any liability it incurs in respect of any stamp, registration and
     similar tax which is or becomes payable in connection with the entry into,
     performance or enforcement of any Finance Document.

24.  INDEMNITIES

24.1 CURRENCY INDEMNITY

(a)  If a Finance Party receives an amount in respect of an Obligor's liability
     under the Finance Documents or if that liability is converted into a claim,
     proof, judgment or order in a currency other than the currency (the
     "CONTRACTUAL CURRENCY") in which the amount is expressed to be payable
     under the relevant Finance Document:

     (i)  that Obligor shall indemnify that Finance Party as an independent
          obligation against any loss or liability arising out of or as a result
          of the conversion;

     (ii) if the amount received by that Finance Party, when converted into the
          contractual currency at a market rate in the usual course of its
          business, is less than the amount owed in the contractual currency,
          the Obligor shall forthwith on demand pay to that Finance Party an
          amount in the contractual currency equal to the deficit; and


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                                       68


     (iii) the Obligor shall forthwith on demand pay to the Finance Party
          concerned on demand any exchange costs and taxes payable in connection
          with any such conversion.

(b)  Each Obligor waives any right it may have in any jurisdiction to pay any
     amount under the Finance Documents in a currency other than that in which
     it is expressed to be payable.

24.2 OTHER INDEMNITIES

     The Company shall forthwith on demand indemnify each Finance Party against
     any loss or liability which that Finance Party incurs as a consequence of:

     (a)  the occurrence of any Default;

     (b)  a change in currency of a country or the operation of Clause 19.2
          (Acceleration) or Clause 30 (Pro rata Sharing);

     (c)  any payment of principal or an overdue amount being received from any
          source otherwise than on the last day of a relevant Interest Period or
          Designated Interest Period (as defined in Clause 9.3 (Default
          interest)) relative to the amount so received; or

     (d)  an Advance (or part of an Advance) not being prepaid in accordance
          with a notice of prepayment or (other than by reason of negligence or
          default by that Finance Party) an Advance not being made after the
          Company has delivered a Request.

     The Company's liability in each case includes any loss of Applicable Margin
     or other loss or expense on account of funds borrowed, contracted for or
     utilised to fund any amount payable under any Finance Document, any amount
     repaid or prepaid or any Advance.

25.  EVIDENCE AND CALCULATIONS

25.1 ACCOUNTS

     Accounts maintained by a Finance Party in connection with this Agreement
     are prima facie evidence of the matters to which they relate.

25.2 CERTIFICATES AND DETERMINATIONS

     Any certification or determination by a Finance Party of a rate or amount
     under the Finance Documents is, in the absence of manifest error,
     conclusive evidence of the matters to which it relates.

25.3 CALCULATIONS

     Interest (including any applicable Mandatory Cost) and the fee payable
     under Clause 21.3 (Commitment fee) accrue from day to day and are
     calculated on the basis of the actual number of days elapsed and a year of
     365 days, or, in the case of interest payable on an amount denominated in
     an Optional Currency or where market practice otherwise dictates, 360 days.


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                                       69


26.  AMENDMENTS AND WAIVERS

26.1 PROCEDURE

(a)  Subject to Clause 26.2 (Exceptions), any term of the Finance Documents may
     be amended or waived with the agreement of the Company and the Majority
     Banks. The Agent may effect, on behalf of any Finance Party, an amendment
     or waiver permitted under this Clause.

(b)  The Agent shall promptly notify the other Parties of any amendment or
     waiver effected under paragraph (a) above, and any such amendment or waiver
     shall be binding on all the Parties.

26.2 EXCEPTIONS

(a)  Except with the prior written consent of all the Banks, the Agent shall not
     have authority on behalf of the Banks to agree with any Obligor any
     amendment or waiver which relates to:-

     (i)  the definition of "MAJORITY BANKS" in Clause 1.1 (Definitions);

     (ii) an extension of the date for, or a decrease in an amount or a change
          in the currency of, any payment to a Bank under the Finance Documents
          (including the Applicable Margin and any fee payable under Clause 21.3
          (Commitment fee));

     (iii) an increase in any Bank's Commitment;

     (iv) the incorporation of additional obligors and/or drawers otherwise than
          in accordance with Clause 27.6 (Guarantors);

     (v)  the incorporation of additional borrowers;

     (vi) a term of a Finance Document which expressly requires the consent of
          all Banks; or

     (vii) Clause 2.2 (Nature of a Finance Party's rights and obligations),
          Clause 27.2 (Transfers by Banks), Clause 30 (Pro rata sharing) or this
          Clause 26,

(b)  An amendment or waiver which relates to the rights and/or obligations of
     the Agent may not be effected without the agreement of the Agent.

26.3 MEANING OF MAJORITY BANKS

     Where any of the Finance Documents provides for any matter to be determined
     by reference to the opinion of, or to be subject to the consent or request
     of, the Majority Banks or for any action to be taken on the instructions of
     the Majority Banks, such opinion, consent, request or instructions shall
     (as between the Banks) only be regarded as having been validly given or
     issued by the Majority Banks if all the Banks shall have received prior
     notice of the matter on which such opinion, consent, request or
     instructions are required to be obtained and the relevant majority of Banks
     shall have given or issued such opinion, consent, request or instructions,
     but so that (as between the Obligors and the Finance Parties) the Obligors
     shall each be entitled (and bound) to assume that such notice shall have
     been duly received by each Bank and that the relevant majority shall have
     been obtained to constitute Majority Banks when notified to this effect by
     the Agent whether or not this is the case.


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                                       70


26.4 NOTICE TO MAJORITY BANKS

     If, within 10 Business Days of the Agent despatching to each Bank a notice
     requesting instructions (or confirmation of instructions) from the Banks or
     the agreement of the Banks to any amendment, modification, waiver,
     variation or excuse of performance for the purposes of, or in relation to,
     any of the Finance Documents, the Agent has not received a reply
     specifically giving or confirming or refusing to give or confirm the
     relevant instructions or, as the case may be, approving or refusing to
     approve the proposed amendment, modification, waiver, variation or excuse
     of performance, then (subject to Clause 26.6 (Late responses)) the Agent
     shall treat any Bank which has not so responded as having indicated a
     desire to be bound by the wishes of 66 2/3 per cent. of those Banks
     (measured in terms of the relevant participations in outstanding Advances
     or, if none, the relevant Commitments of those Banks) which have so
     responded. Any Bank which notifies the Agent of a wish or intention to
     abstain on any particular issue shall be treated as if it had not
     responded.

26.5 MEANING OF ALL BANKS

     (a)  Where this Agreement or any other Finance Document provides for any
          matter to be determined by reference to the opinion of, or to be
          subject to the consent of or request of, all of the Banks or the Banks
          acting unanimously or for any action to be taken on the instruction of
          all the Banks, such opinion, consent, request or instructions shall
          (as between the Banks) only be regarded as having been validly given
          or issued by all the Banks (or the Banks acting unanimously) if all
          the Banks shall have received prior notice (the "AGENT'S NOTICE") of
          such matter containing a request for written instructions from such
          Bank to be received by the Agent within ten Business Days of the
          receipt (or the deemed receipt pursuant to Clause 33.2 (Addresses for
          notices)) of the Agent's Notice. Before the expiry of such deadline,
          the Agent will use reasonable endeavours to contact any Bank which has
          not responded to the Agent's Notice in order to obtain a response from
          such Bank.

     (b)  If, in respect of a Bank, the Agent:

          (i)  shall not have received written instructions in respect of such
               matter from such Bank; and

          (ii) the Agent shall have received written instructions in respect of
               such matter from at least five other Banks,

          in each case within such time period (and subject to Clause 26.6 (Late
          responses)), such Bank shall be deemed to have irrevocably renounced
          and waived its right to make any such determination, approval, consent
          or provide instructions to the Agent in respect of such matter; shall
          not have any rights, recourse or remedy against the Agent in respect
          of such matter; and shall be bound (as shall each of the Obligors) by
          the determination, approval, consent or instructions of the other
          Banks in respect of such matter. This clause 26.5(b) shall not apply
          in so far as it would create any obligation on a Bank to provide an
          increased Commitment without such Bank having expressed such increased
          Commitment in writing.

     (c)  Clauses 26.3 (Meaning of Majority Banks) and 26.4 (Notice to Majority
          Banks) shall not apply in relation to those matters which are to be
          decided by all the Banks.


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                                       71


26.6 LATE RESPONSES

     In any case where a Bank fails to respond within the time limit set down
     under Clauses 26.4 (Notice to Majority Banks) or 26.5 (Meaning of all
     Banks), such Bank's response, if it responds before any determination or
     instruction is acted upon or communicated to any Obligor, will be taken
     into account as if it had been received within the time limit provided that
     the Agent has received actual notice of such response before any such
     action or communication.

26.7 CHANGE OF CURRENCY

     If a change in any currency of a country occurs (including where there is
     more than one currency or currency unit recognised at the same time as the
     lawful currency of a country), this Agreement will be amended to the extent
     the Agent (acting reasonably and after consultation with the Company)
     determines is necessary to reflect the change.

26.8 WAIVERS AND REMEDIES CUMULATIVE

     The rights of each Finance Party under the Finance Documents:

     (a)  may be exercised as often as necessary;

     (b)  are cumulative and not exclusive of its rights under the general law;
          and

     (c)  may be waived only in writing and specifically.

     Delay in exercising or non-exercise of any such right is not a waiver of
     that right.

27.  CHANGES TO THE PARTIES

27.1 TRANSFERS BY OBLIGORS

     No Obligor may assign, transfer, novate or dispose of any of, or any
     interest in, its rights and/or obligations under the Finance Documents.

27.2 TRANSFERS BY BANKS

(a)  A Bank (the "EXISTING BANK") may, subject to paragraph (b) below, at any
     time assign, transfer or novate in whole or in part any of its Commitment
     and/or any of its rights and/or obligations under this Agreement to another
     bank or financial institution (the "NEW BANK").

(b)  (i)  A transfer of part of a Commitment must be in a minimum amount of at
          least (pound)5,000,000 and must not result in the transferring Bank
          having a commitment after the transfer of less than (pound)5,000,000;
          and

     (ii) the prior consent of the Company is required for any such assignment,
          transfer or novation, unless, the New Bank is another Bank or an
          Affiliate of a Bank. However, the prior consent of the Company must
          not be unreasonably withheld or delayed and will be deemed to have
          been given if, within five Business Days of receipt by the Company of
          an application for consent, it has not been expressly refused.

(c)  A transfer of obligations will be effective only if either:


<PAGE>

                                       72


     (i)  the obligations are novated in accordance with Clause 27.3 (Procedure
          for novations); or

     (ii) the New Bank confirms to the Agent and the Company that it undertakes
          to be bound by the terms of this Agreement as a Bank in form and
          substance satisfactory to the Agent. On the transfer becoming
          effective in this manner the Existing Bank shall be relieved of its
          obligations under this Agreement to the extent that they are
          transferred to the New Bank.

(d)  Nothing in this Agreement restricts the ability of a Bank to sub-contract
     an obligation if that Bank remains liable under this Agreement for that
     obligation.

(e)  On each occasion an Existing Bank assigns, transfers or novates any of its
     Commitment and/or any of its rights and/or obligations under this
     Agreement, the New Bank shall, on the date the assignment, transfer and/or
     novation takes effect, pay to the Agent for its own account a fee of
     (pound)750.

(f)  An Existing Bank is not responsible to a New Bank for:

     (i)  the execution, genuineness, validity, enforceability or sufficiency of
          any Finance Document or any other document;

     (ii) the collectability of amounts payable under any Finance Document; or

     (iii) the accuracy of any statements (whether written or oral) made in or
          in connection with any Finance Document.

(g)  Each New Bank confirms to the Existing Bank and the other Finance Parties
     that it:

     (i)  has made its own independent investigation and assessment of the
          financial condition and affairs of each Obligor and its related
          entities in connection with its participation in this Agreement and
          has not relied exclusively on any information provided to it by the
          Existing Bank in connection with any Finance Document; and

     (ii) will continue to make its own independent appraisal of the
          creditworthiness of each Obligor and its related entities while any
          amount is or may be outstanding under this Agreement or any Commitment
          is in force.

(h)  Nothing in any Finance Document obliges an Existing Bank to:

     (i)  accept a re-transfer from a New Bank of any of the rights and/or
          obligations assigned, transferred or novated under this Clause; or

     (ii) support any losses incurred by the New Bank by reason of the
          non-performance by any Obligor of its obligations under this Agreement
          or otherwise.

(i)  Any reference in this Agreement to a Bank includes a New Bank, but excludes
     a Bank if no amount is or may be owed to or by that Bank under this
     Agreement and its Commitment has been cancelled or reduced to nil.


<PAGE>

                                       73


27.3 PROCEDURE FOR NOVATIONS

(a)  A novation is effected if:

     (i)  the Existing Bank and the New Bank deliver to the Agent a duly
          completed certificate, substantially in the form of Schedule 5 (a
          "NOVATION CERTIFICATE"); and

     (ii) the Agent executes it.

(b)  Each Party (other than the Existing Bank and the New Bank) irrevocably
     authorises the Agent to execute any duly completed Novation Certificate on
     its behalf.

(c)  To the extent that they are expressed to be the subject of the novation in
     the Novation Certificate:

     (i)  the Existing Bank and the other Parties (the "EXISTING PARTIES") will
          be released from their obligations to each other (the "DISCHARGED
          OBLIGATIONS");

     (ii) the New Bank and the existing Parties will assume obligations towards
          each other which differ from the discharged obligations only insofar
          as they are owed to or assumed by the New Bank instead of the Existing
          Bank;

     (iii) the rights of the Existing Bank against the existing Parties and vice
          versa (the "DISCHARGED RIGHTS") will be cancelled; and

     (iv) the New Bank and the existing Parties will acquire rights against each
          other which differ from the discharged rights only insofar as they are
          exercisable by or against the New Bank instead of the Existing Bank,

     all on the date of execution of the Novation Certificate by the Agent or,
     if later, the date specified in the Novation Certificate.

27.4 REFERENCE BANKS

     If a Reference Bank (or, if a Reference Bank is not a Bank, the Bank of
     which it is an Affiliate) ceases to be a Bank, the Agent shall (in
     consultation with the Company) appoint another Bank or an Affiliate of a
     Bank to replace that Reference Bank.

27.5 NO INCREASED COSTS

     If at the time of any assignment, transfer or novation by any Bank under
     Clause 27.2 or any change of a Bank's Facility office, circumstances exist
     or are reasonably foreseeable which would oblige the Company to pay to the
     New Bank (or, in the case of a change of Facility office, the relevant
     Bank) under Clause 12 (Taxes) or 14 (Increased Costs) any amount in excess
     of the amount which it would have been obliged to pay to that Bank under
     the relevant Clause in the absence of that assignment, transfer or novation
     or change of Facility office, the Company shall not be obliged to pay that
     excess.


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                                       74


27.6 GUARANTORS

(a)  (i) Subject to paragraph (b) below, the Company shall procure that each
     member of the Group which provides a guarantee for any Indebtedness of the
     Company after the date of this Agreement becomes a Guarantor within 14 days
     of it providing such guarantee by delivering to the Agent a Guarantor
     Accession Agreement, duly executed by that member of the Group.

     (ii) Upon execution and delivery of a Guarantor Accession Agreement, the
          relevant member of the Group will become a Guarantor.

     (iii) The Company shall procure that, at the same time as a Guarantor
          Accession Agreement is delivered to the Agent, there is also delivered
          to the Agent all those other documents listed in Part III of Schedule
          7, in each case in form and substance satisfactory to the Agent.

(b)  If the Company demonstrates to the satisfaction of the Agent that it is
     illegal for the Company to comply with its obligations under paragraph (a)
     above, the Company shall only be obliged so to comply within 14 days after
     it becomes legal to do so.

(c)  The execution of a Guarantor Accession Agreement constitutes confirmation
     by the relevant member of the Group that the representations and warranties
     set out in Clause 16 (Representations and warranties) to be made by it on
     the date of the Guarantor Accession Agreement are correct, as if made with
     reference to the facts and circumstances then existing.

27.7 REGISTER

     The Agent shall keep a register of all the Parties and shall supply any
     other Party (at that Party's expense) with a copy of the register on
     request.

28.  DISCLOSURE OF INFORMATION

     A Bank may disclose to one of its Affiliates or any person with whom it is
     proposing to enter, or has entered into, any kind of transfer,
     participation or other agreement in relation to this Agreement:

     (a)  a copy of any Finance Document; and

     (b)  any information which that Bank has acquired under or in connection
          with any Finance Document.

29.  SET-OFF

     A Finance Party may, at any time after a Default has occurred and is
     outstanding, set off any matured obligation owed by an Obligor under the
     Finance Documents (to the extent beneficially owned by that Finance Party)
     against any obligation (whether or not matured) owed by that Finance Party
     to that Obligor, regardless of the place of payment, booking branch or
     currency of either obligation. If the obligations are in different
     currencies, the Finance Party may convert either obligation at a market
     rate of exchange in its usual course of business for the purpose of the
     set-off. If either obligation is unliquidated or unascertained, the Finance
     Party may set off in an amount estimated by it in good faith to be the
     amount of that obligation.


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                                       75


30.  PRO RATA SHARING

30.1 REDISTRIBUTION

     If any amount owing by an Obligor under the Finance Documents to a Finance
     Party (the "RECOVERING FINANCE PARTY") is discharged by payment, set-off or
     any other manner other than through the Agent in accordance with Clause 11
     (Payments) (a "RECOVERY"), then:

     (a)  the recovering Finance Party shall, within three Business Days, notify
          details of the recovery to the Agent;

     (b)  the Agent shall determine whether the recovery is in excess of the
          amount which the recovering Finance Party would have received had the
          recovery been received by the Agent and distributed in accordance with
          Clause 11 (Payments);

     (c)  subject to Clause 30.3 (Exceptions), the recovering Finance Party
          shall, within three Business Days of demand by the Agent, pay to the
          Agent an amount (the "REDISTRIBUTION") equal to the excess;

     (d)  the Agent shall treat the redistribution as if it were a payment by an
          Obligor under Clause 11 (Payments) and shall pay the redistribution to
          the Finance Parties (other than the recovering Finance Party) in
          accordance with Clause 11.7 (Partial payments); and

     (e)  after payment of the full redistribution, the recovering Finance Party
          will be subrogated to the portion of the claims paid under paragraph
          (d) above, and that Obligor will owe the recovering Finance Party a
          debt which is equal to the redistribution, immediately payable and of
          the type originally discharged.

30.2 REVERSAL OF REDISTRIBUTION

      If under Clause 30.1 (Redistribution):

     (a)  a recovering Finance Party must subsequently return a recovery, or an
          amount measured by reference to a recovery, to an Obligor; and

     (b)  the recovering Finance Party has paid a redistribution in relation to
          that recovery,

     each Finance Party shall, within three Business Days of demand by the
     recovering Finance Party through the Agent, reimburse the recovering
     Finance Party all or the appropriate portion of the redistribution paid to
     that Finance Party together with interest on the amount to be returned to
     the recovering Finance Party for a period whilst it held the
     re-distribution. Thereupon the subrogation in Clause 30.1(e)
     (Redistribution) will operate in reverse to the extent of the
     reimbursement.

30.3 EXCEPTIONS

(a)  A recovering Finance Party need not pay a redistribution to the extent that
     it would not, after the payment, have a valid claim against the Obligor in
     the amount of the redistribution under Clause 30.1(e) (Redistribution).


<PAGE>

                                       76


(b)  A recovering Finance Party is not obliged to share with any other Finance
     Party any amount which the recovering Finance Party has received or
     recovered as a result of taking legal proceedings, if the other Finance
     Party had an opportunity to participate in those legal proceedings but did
     not do so or did not take separate legal proceedings.

31.  SEVERABILITY

     If a provision of any Finance Document is or becomes illegal, invalid or
     unenforceable in any jurisdiction, that shall not affect:

     (a)  the legality, validity or enforceability in that jurisdiction of any
          other provision of the Finance Documents; or

     (b)  the legality, validity or enforceability in other jurisdictions of
          that or any other provision of the Finance Documents.

32.  COUNTERPARTS

     Each Finance Document may be executed in any number of counterparts, and
     this has the same effect as if the signatures on the counterparts were on a
     single copy of the Finance Document.

33.  NOTICES

33.1 GIVING OF NOTICES

     All notices or other communications under or in connection with this
     Agreement shall be given in writing and, unless otherwise stated, may be
     made by letter, telex or facsimile. Any such notice will be deemed to be
     given as follows:

     (a)  if by letter, when delivered personally or on actual receipt;

     (b)  if by telex, when despatched, but only if, at the time of
          transmission, the correct answerback appears at the start and at the
          end of the sender's copy of the notice; and

     (c)  if by facsimile, when received in legible form.

     However, a notice given in accordance with the above but received on a
     non-working day or after business hours in the place of receipt will only
     be deemed to be given on the next working day in that place.

33.2 ADDRESSES FOR NOTICES

(a)  The address, telex number and facsimile number of each Party (other than
     the Company and the Agent) for all notices under or in connection with this
     Agreement are:

     (i)  those notified by that Party for this purpose to the Agent on or
          before it becomes a Party; or

     (ii) any others notified by that Party for this purpose to the Agent by not
          less than five Business Days' notice.


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                                       77


(b)  The address and facsimile number of the Company are:

     TXU Europe Limited
     Wherstead Park
     Wherstead
     Ipswich
     Suffolk

     Telefax:    +44 147 355 5002
     Attention:  Group Finance Director

     or such other as the Company may notify to the other Parties by not less
     than five Business Days' notice.

(c)  The address and facsimile number of the Agent are:

     Chase Manhattan International Ltd
     Trinity Tower
     9 Thomas More Street
     London E1 9YT

     Telefax:    +44 207 777 2360
     Attention:  Stephen Clarke

     or such other as the Agent may notify to the other Parties by not less than
     five Business Days' notice.

(d)  All notices from or to an Obligor shall be sent through the Agent.

(e)  The Agent shall, promptly upon request from any Party, give to that Party
     the address, telex number or facsimile number of any other Party applicable
     at the time for the purposes of this Clause.

34.  JURISDICTION

(a)  The English courts have jurisdiction to settle any dispute in connection
     with any Finance Document.

(b)  The English courts are the most appropriate and convenient courts to settle
     any such dispute.

(c)  This Clause is for the benefit of the Finance Parties only. To the extent
     allowed by law, the Finance Parties may take:

     (i)  proceedings in any other court; and

     (ii) concurrent proceedings in any number of jurisdictions.

     35.  Governing LawThis Agreement is governed by English law.


<PAGE>

                                       78


This Agreement has been entered into on the date stated at the beginning of this
Agreement.


<PAGE>

                                       79


                                   SCHEDULE 1

                              BANKS AND COMMITMENTS

BANKS                                                            COMMITMENTS
                                                                   (pound)

Banca Monte dei Paschi di Siena SpA, London Branch                15,000,000

Bank of America, N.A.                                             15,000,000

The Bank of New York                                              15,000,000

The Bank of Nova Scotia                                           15,000,000

The Bank of Tokyo-Mitsubishi, Ltd.                                15,000,000

Barclays Bank PLC                                                 15,000,000

Bayerische Landesbank Girozentrale, London Branch                 15,000,000

BNP Paribas                                                       15,000,000

The Chase Manhattan Bank                                          15,000,000

Citibank, N.A.                                                    15,000,000

Commerzbank Aktiengesellschaft, London Branch                     15,000,000

Credit Lyonnais                                                   15,000,000

The Dai-ichi Kangyo Bank, Limited                                 15,000,000

Deutsche Bank AG London                                           15,000,000

Fleet National Bank                                               15,000,000

National Australia Bank Limited (ACN 004044937)                   15,000,000

Societe Generale, London Branch                                   15,000,000

The Toronto-Dominion Bank                                         15,000,000

UBS AG, London Branch                                             15,000,000

Westdeutsche Landesbank Girozentrale                              15,000,000
                                                                  -----------

Total Commitments                                         (pound)300,000,000
                                                                 ------------


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                                       80


                                   SCHEDULE 2

                         CONDITIONS PRECEDENT DOCUMENTS

1.   A copy of the memorandum and articles of association and certificate of
     incorporation of the Company.

2.   A copy of a resolution of the board of directors of the Company:-

     (a)  approving the terms of, and the transactions contemplated by, this
          Agreement executed by the Company and resolving that it execute this
          Agreement and the Fee Letter;

     (b)  authorising a specified person or persons to execute this Agreement
          and the Fee Letter on its behalf; and

     (c)  authorising a specified person or persons, on its behalf, to sign
          and/or despatch all documents and notices to be signed and/or
          despatched by it under or in connection with this Agreement.

3.   A specimen of the signature of each person authorised by the resolution
     referred to in paragraph 2 above.

4.   A certificate of a director of the Company confirming that the borrowing of
     the Total Commitments in full would not cause any borrowing limit binding
     on the Company to be exceeded.

5.   A certificate of an authorised signatory of the Company certifying that
     each copy document specified in this Schedule 2 is correct, complete and in
     full force and effect as at a date no earlier than the date of this
     Agreement.

6.   Evidence satisfactory to the Agent that the total commitments under the
     (pound)250,000,000 multicurrency facility dated 21st May, 1998 between
     (among others) Eastern Electricity plc and Chase Manhattan International
     Limited as facility agent have been reduced to (pound)150,000,000.

7.   Evidence satisfactory to the Agent that all amounts of principal under the
     Excess Equity Funding have been repaid in full.

8.   Evidence that the Company has paid, or has made arrangements satisfactory
     to the Agent for the payment of, all fees referred to under Clauses 21.1
     (Arrangement fee) and 21.2 (Agent's fee).

9.   A copy of any other authorisation or other document, opinion or assurance
     which the Agent considers to be necessary or desirable in connection with
     the entry into and performance of, and the transactions contemplated by,
     any Finance Document or for the validity and enforceability of any Finance
     Document.

10.  A legal opinion of Allen & Overy, legal advisers to the Arranger and the
     Agent, substantially in the form of Schedule 6, addressed to the Finance
     Parties.


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                                       81


                                   SCHEDULE 3

                        CALCULATION OF THE MANDATORY COST

(a)  The Mandatory Cost for an Advance for its Interest Period is the rate
     determined by the Agent to be equal to the arithmetic mean (rounded upward,
     if necessary, to four decimal places) of the respective rates notified by
     each of the Reference Banks to the Agent and calculated in accordance with
     the following formulae:

     in relation to an Advance denominated in Sterling:

     BY + S(Y-Z) + F x 0.01 % per annum
     ----------------------
          100-(B + S)

     in relation to any other Advance:

     F x 0.01 % per annum
     --------
       300

     where on the day of application of a formula:

     B    is the percentage of the Reference Bank's eligible liabilities (in
          excess of any stated minimum) which the Bank of England requires the
          Reference Bank to hold on a non-interest-bearing deposit account in
          accordance with its cash ratio requirements;

     Y    is LIBOR at or about 11.00 a.m. on that day for the Interest Period;

     S    is the percentage of the Reference Bank's eligible liabilities which
          the Bank of England requires the Reference Bank to place as a special
          deposit;

     Z    is the interest rate per annum allowed by the Bank of England on
          special deposits; and

     F    is the charge payable by the Reference Bank to the Financial Services
          Authority under paragraph 2.02 or 2.03 (as appropriate) of the Fees
          Regulations (but where for this purpose, the figure in paragraph 2.02b
          and 2.03b will be deemed to be zero) expressed in pounds per (pound)1
          million of the fee base of the Reference Bank.

(b)  For the purposes of this Schedule 3:

     (i)  "ELIGIBLE LIABILITIES" and "SPECIAL DEPOSITS" have the meanings given
          to them at the time of application of the formula by the Bank of
          England; and

     (ii) "FEE BASE" has the meaning given to it in the Fees Regulations;

     (iii) "FEES REGULATIONS" means the Banking Supervision (Fees) Regulations
          2000 and/or any other regulations governing the payment of fees for
          banking supervision.

(c)  In the application of the formula, B, Y, S and Z are included in the
     formula as figures and not as percentages, e.g. if B = 0.5% and Y = 15%, BY
     is calculated as 0.5 x 15.


<PAGE>

                                       82


(d)  If a Reference Bank does not supply a rate to the Agent, the applicable
     Mandatory Cost will be determined on the basis of the rate(s) supplied by
     the remaining Reference Banks.

(e)  (i)  The formula is applied on the first day of the Interest Period of the
          Advance.

     (ii) Each rate calculated in accordance with the formula is, if necessary,
          rounded to four decimal places.

(f)  If the Agent determines that a change in circumstances has rendered, or
     will render, the formula inappropriate, the Agent (after consultation with
     the Banks) shall notify the Company of the manner in which the Mandatory
     Cost will subsequently be calculated. The manner of calculation so notified
     by the Agent shall, in the absence of manifest error, be binding on all the
     Parties.


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                                       83


                                   SCHEDULE 4

                                 FORM OF REQUEST

To:   CHASE MANHATTAN INTERNATIONAL LTD as Agent

From: TXU EUROPE LIMITED
                                                         Date: [              ]


TXU   EUROPE LIMITED - (POUND)300,000,000 REVOLVING CREDIT AGREEMENT DATED 23RD
      AUGUST, 2000

1.   We wish to borrow an Advance as follows:

     (a)  Drawdown Date: [                   ]

     (b)  Amount: [                     ]

     (c)  Interest Period: [                 ]

     (d)  Maturity Date:    [                ] (for Term-out Advances only)

     (e)  Payment instructions: [                 ].

2.   We confirm that each condition specified in Clause 4.2 (Further conditions
     precedent) is satisfied on the date of this Request.

By:

TXU EUROPE LIMITED
Authorised Signatory


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                                       85


                                   SCHEDULE 5

                          FORM OF NOVATION CERTIFICATE

To:   CHASE MANHATTAN INTERNATIONAL LTD as Agent

From: [THE EXISTING BANK] and [THE NEW BANK]    Date: [               ]


TXU EUROPE LIMITED - (POUND)300,000,000 REVOLVING CREDIT AGREEMENT DATED 23RD
AUGUST, 2000

We refer to Clause 27.3 (Procedure for novations).

1.   We [           ] (the "EXISTING BANK") and [           ] (the "NEW BANK")
     agree to the Existing Bank and the New Bank novating all the Existing
     Bank's Commitment (or part) rights and obligations referred to in the
     Schedule in accordance with Clause 27.3 (Procedure for novations).

2.   The specified date for the purposes of Clause 27.3(c) (Procedure for
     novations) is [date of novation].

3.   The Facility Office and address for notices of the New Bank for the
     purposes of Clause 33.2 (Addresses for notices) are set out in the
     Schedule.

4.   This Novation Certificate is governed by English law.


                                  THE SCHEDULE

                 COMMITMENT/RIGHTS AND OBLIGATIONS TO BE NOVATED

[Insert relevant details]

[NEW BANK]

[Facility Office              Address for notices]

[Existing Bank]          [New Bank]               CHASE MANHATTAN
                                                  INTERNATIONAL LTD

By:                      By:                      By:

Date:                    Date:                    Date:


<PAGE>

                                       85


                                   SCHEDULE 6

                     FORM OF LEGAL OPINION OF ALLEN & OVERY

To:   The Finance Parties named as
      original parties to the Agreement
      (as defined below)

      [DATE]

Dear Sirs,

    TXU EUROPE LIMITED (THE "COMPANY") - (POUND)300,000,000 CREDIT AGREEMENT
                DATED 23RD AUGUST, 2000 (THE "CREDIT AGREEMENT")

We have received instructions from and participated in discussions with Chase
Manhattan plc as arranger in connection with the Credit Agreement.

Terms defined in the Credit Agreement have the same meaning in this opinion.

For the purposes of this opinion we have examined the following documents:-

(a)  a signed copy of the Credit Agreement;

(b)  a certified copy of the memorandum and articles of association and
     certificate of incorporation of the Company; and

(c)  certified copies of the minutes of meetings of the respective boards of
     directors of the Company held on [           ].

On [           ], we carried out a search of the Company at the Companies
Registry. On [           ] we made a telephone search of the Company at the
winding-up petitions at the Companies court.

The above are the only documents or records we have examined and the only
searches and enquiries we have carried out for the purpose of this opinion.

We assume that:-

(i)  the Company is not unable to pay its debts within the meaning of section
     123 of the Insolvency Act, 1986 at the time it enters into the Credit
     Agreement and will not as a consequence of the Credit Agreement, be unable
     to pay its debts within the meaning of that section;

(ii) no step has been taken to wind up the Company or appoint a receiver in
     respect of it or any of its assets although the searches of the Companies
     Registry referred to above give no indication that any winding-up order or
     appointment of a receiver has been made;

(iii) all signatures and documents are genuine;


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                                       86


(iv) all documents are and remain up-to-date;

(v)  the correct procedure was carried out at the board meetings referred to in
     paragraph (c) above, for example, there was a quorum, all relevant
     interests of directors were declared and the resolutions were duly passed
     at each of the meetings; and

(vi) any restrictions in the Company's Articles of Association would not be
     contravened by entry into and performance by the Company of the Credit
     Agreement;

(vii) the Credit Agreement has been duly executed on behalf of the Company by
     the persons authorised by the resolutions passed at the meetings referred
     to in paragraph (c) above; and

(viii) the Credit Agreement is a legally binding, valid and enforceable
     obligation of each Finance Party.

Subject to the qualifications set out below and to any matters not disclosed to
us, it is our opinion that, so far as the present laws of England are
concerned:-

(1)  STATUS: The Company is a company incorporated with limited liability under
     the laws of England and is not in liquidation.

(2)  POWERS AND AUTHORITY: The Company has the corporate power to enter into and
     perform the Credit Agreement and has taken all necessary corporate action
     to authorise the execution, delivery and performance of the Credit
     Agreement.

(3)  LEGAL VALIDITY: The Credit Agreement constitutes a legally binding, valid
     and enforceable obligation of the Company.

(4)  NON-CONFLICT: The execution, delivery and performance by the Company of
     each of the Credit Agreement will not violate any provision of (i) any
     existing English law applicable to companies generally, or (ii) the
     memorandum or articles of association of the Company.

(5)  CONSENTS: No authorisations of governmental, judicial or public bodies or
     authorities in England are required by the Company in connection with the
     performance, validity or enforceability of the Credit Agreement.

(6)  TAXES: All payments due from the Company under the Credit Agreement may be
     made without deduction of any United Kingdom taxes, if, in the case of any
     interest, the person that made the Advance to which the interest relates
     was, at the time of making the Advance, a "bank" as defined in section 840A
     of the Income and Corporation Taxes Act 1988 and the person beneficially
     entitled to the interest is within the charge to United Kingdom corporation
     tax as respects that interest at the time the interest is paid.

(7)  REGISTRATION REQUIREMENTS: It is not necessary or advisable to file,
     register or record the Credit Agreement in any public place or elsewhere in
     England.

(8)  STAMP DUTIES: No stamp, registration or similar tax or charge is payable in
     England in respect of the Credit Agreement.

This opinion is subject to the following qualifications:-


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                                       87


(i)  This opinion is subject to all insolvency and other laws affecting the
     rights of creditors or secured creditors generally.

(ii) No opinion is expressed on matters of fact.

(iii) We assume that no foreign law affects the conclusions stated above.

(v)  The term "ENFORCEABLE" means that a document is of a type and form enforced
     by the English courts. It does not mean that each obligation will be
     enforced in accordance with its terms. Certain rights and obligations of
     the Company may be qualified by the non-conclusively of certificates,
     doctrines of good faith and fair conduct, the availability of equitable
     remedies and other matters, but in our view these qualifications would not
     defeat your legitimate expectations in any material respect.

This opinion is given for your sole benefit and may not be relied upon by or
disclosed to any other person.

Yours faithfully


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                                       88


                                   SCHEDULE 7

                                     PART I

                                    GUARANTEE

1.   GUARANTEE

     Each Guarantor irrevocably, unconditionally, jointly and severally:

     (a)  as principal obligor, guarantees to each Finance Party prompt
          performance by the Company of all its obligations under the Finance
          Documents;

     (b)  undertakes with each Finance Party that whenever the Company does not
          pay any amount when due under or in connection with any Finance
          Document, that Guarantor shall forthwith on demand by the Agent pay
          that amount as if that Guarantor instead of the Company were expressed
          to be the principal obligor; and

     (c)  indemnifies each Finance Party on demand against any loss or liability
          suffered by it if any obligation guaranteed by that Guarantor is or
          becomes unenforceable, invalid or illegal.

2.   CONTINUING GUARANTEE

     This guarantee is a continuing guarantee and will extend to the ultimate
     balance of all sums payable by the Company under the Finance Documents,
     regardless of any intermediate payment or discharge in whole or in part.

3.   REINSTATEMENT

(a)  Where any discharge (whether in respect of the obligations of any Obligor
     or any security for those obligations or otherwise) is made in whole or in
     part or any arrangement is made on the faith of any payment, security or
     other disposition which is avoided or must be restored on insolvency,
     liquidation or otherwise without limitation, the liability of each
     Guarantor under this Part I of Schedule 7 shall continue as if the
     discharge or arrangement had not occurred.

(b)  Each Finance Party may concede or compromise any claim that any payment,
     security or other disposition is liable to avoidance or restoration.

4.   WAIVER OF DEFENCES

     The obligations of each Guarantor under this Part I of Schedule 7 will not
     be affected by any act, omission, matter or thing which, but for this
     provision, would reduce, release or prejudice any of its obligations under
     this Part I of Schedule 7 or prejudice or diminish those obligations in
     whole or in part, including (whether or not known to it or any Finance
     Party):

     (a)  any time or waiver granted to, or composition with, the Company or
          other person;

     (b)  the release of any other Obligor or any person under the terms of any
          composition or arrangement with any creditors of any member of the
          Group;


<PAGE>

                                       89


     (c)  the taking, variation, compromise, exchange, renewal or release of, or
          refusal or neglect to perfect, take up or enforce, any rights against,
          or security over assets of, the Company or other person or any
          non-presentation or non-observance of any formality or other
          requirement in respect of any instrument or any failure to realise the
          full value of any security;

     (d)  any incapacity or lack of powers, authority or legal personality of or
          dissolution or change in the members or status of the Company or any
          other person;

     (e)  any variation (however fundamental) or replacement of a Finance
          Document or any other document or security so that references to that
          Finance Document in this Part I of Schedule 7 shall include each
          variation or replacement;

     (f)  any unenforceability, illegality or invalidity of any obligation of
          any person under any Finance Document or any other document or
          security, to the intent that each Guarantor's obligations under this
          Part I of Schedule 7 shall remain in full force and its guarantee be
          construed accordingly, as if there were no unenforceability,
          illegality or invalidity;

     (g)  any postponement, discharge, reduction, non-provability or other
          similar circumstance affecting any obligation of the Company under a
          Finance Document resulting from any insolvency, liquidation or
          dissolution proceedings or from any law, regulation or order so that
          each such obligation shall for the purposes of the Guarantor's
          obligations under this Part I of Schedule 7 shall be construed as if
          there were no such circumstance.

5.   IMMEDIATE RECOURSE

     Each Guarantor waives any right it may have of first requiring any Finance
     Party (or any trustee or agent on its behalf) to proceed against or enforce
     any other rights or security or claim payment from any person before
     claiming from that Guarantor under this Part I of Schedule 7.

6.   APPROPRIATIONS

     Until all amounts which may be or become payable by the Obligors under or
     in connection with the Finance Documents have been irrevocably paid in
     full, each Finance Party (or any trustee or agent on its behalf) may:

     (a)  refrain from applying or enforcing any other moneys, security or
          rights held or received by that Finance Party (or any trustee or agent
          on its behalf) in respect of those amounts, or apply and enforce the
          same in such manner and order as it sees fit (whether against those
          amounts or otherwise) and no Guarantor shall be entitled to the
          benefit of the same; and

     (b)  hold in a suspense account any moneys received from any Guarantor or
          on account of any Guarantor's liability under this Part I of Schedule
          7, without liability to pay interest on those moneys.


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                                       90


7.   NON-COMPETITION

     Until all amounts which may be or become payable by the Obligors under or
     in connection with the Finance Documents have been irrevocably paid in
     full, no Guarantor shall, after a claim has been made or by virtue of any
     payment or performance by it under this Part I of Schedule 7.

     (a)  be subrogated to any rights, security or moneys held, received or
          receivable by any Finance Party (or any trustee or agent on its
          behalf) or be entitled to any right of contribution or indemnity in
          respect of any payment made or moneys received on account of that
          Guarantor's liability under this Part I of Schedule 7;

     (b)  claim, rank, prove or vote as a creditor of any Obligor or its estate
          in competition with any Finance Party (or any trustee or agent on its
          behalf); or

     (c)  receive, claim or have the benefit of any payment, distribution or
          security from or on account of any Obligor, or exercise any right of
          set-off as against any Obligor,

     unless the Agent otherwise directs. Each Guarantor shall hold in trust for
     and forthwith pay or transfer to the Agent for the Finance Parties any
     payment or distribution or benefit of security received by it contrary to
     this Part I of Schedule 7 or as directed by the Agent.

8.   ADDITIONAL SECURITY

     This guarantee is in addition to and is not in any way prejudiced by any
     other security now or hereafter held by any Finance Party.


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                                       91


                                   SCHEDULE 7

                                     PART II

                          GUARANTOR ACCESSION AGREEMENT

To:   CHASE MANHATTAN BANK INTERNATIONAL LTD as Agent

From: [PROPOSED GUARANTOR]
                                                            Date: [        ]

       TXU EUROPE - (POUND)300,000,000 CREDIT AGREEMENT DATED 23RD AUGUST, 2000
                            (THE "CREDIT AGREEMENT")

We refer to Clause 27.6 (Guarantors).

We, [name of company] of [Registered Office] (Registered no. [       ]) agree to
become a Guarantor and to be bound by the terms of the Credit Agreement
(including the Guarantee) as a Guarantor in accordance with Clause 27.6
(Guarantors).

Our address for notices for the purposes of Clause 33.2 (Addresses for notices)
is:-

[

                              ]


This Guarantor Accession Agreement is entered into by way of deed and is
governed by English law.

*[THE COMMON SEAL of         )
[PROPOSED GUARANTOR]         )
was affixed to this deed in  )
the presence of:-            )


Director

Director/Secretary]

[EXECUTED as a deed by              )
[PROPOSED GUARANTOR]                )                 Director
acting by [NAME OF DIRECTOR]        )
and [NAME OF DIRECTOR/SECRETARY]    )                 Director/Secretary]


------------------------
*    Note:  Substitute execution clause for foreign companies where appropriate.


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                                       92


                                   SCHEDULE 7

                                    PART III

                         TO BE DELIVERED BY A GUARANTOR

1.   A Guarantor Accession Agreement, duly executed by the Guarantor.

2.   A copy of the memorandum and articles of association and certificate of
     incorporation of the Guarantor.

3.   A copy of a resolution of the board of directors of the Guarantor:-

     (i)  approving the terms of, and the transactions contemplated by, the
          Guarantor Accession Agreement and resolving that it execute the
          Guarantor Accession Agreement;

     (ii) authorising a specified person or persons to execute the Guarantor
          Accession Agreement; and

     (iii) authorising a specified person or persons, on its behalf, to sign
          and/or despatch all documents to be signed and/or despatched by it
          under or in connection with this Agreement.

4.   A copy of a resolution, signed by all the holders of the issued or allotted
     shares in the Guarantor, approving the terms of, and the transactions
     contemplated by, the Guarantor Accession Agreement.

5.   A copy of a resolution of the Board of Directors of each corporate
     shareholder in the Guarantor:-

     (i)  approving the terms of the resolution referred to in paragraph 4
          above; and

     (ii) authorising a specified person or persons to sign the resolution on
          its behalf.

6.   A certificate of a director of the Guarantor certifying that the borrowing
     of the Total Commitments in full would not cause any borrowing limit
     binding on it to be exceeded.

7.   A copy of any other authorisation or other document, opinion or assurance
     which the Agent considers to be necessary or desirable in connection with
     the entry into and performance of, and the transactions contemplated by,
     the Guarantor Accession Agreement or for the validity and enforceability of
     any Finance Document.

8.   A specimen of the signature of each person authorised by the resolutions
     referred to in paragraphs 3 and 5 above.

9.   If available, a copy of the latest audited accounts of the Guarantor.


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                                       93


10.  A certificate of an authorised signatory of the Guarantor certifying that
     each copy document specified in Part III of this Schedule 7 is correct,
     complete and in full force and effect as at a date no earlier than the date
     of the Guarantor Accession Agreement.

11.  A legal opinion of Allen & Overy, legal advisers to the Arranger and the
     Agent, addressed to the Finance Parties.


<PAGE>

                                       94


                                   SIGNATORIES

COMPANY

TXU EUROPE LIMITED

By:       H.C. GOODBOURN


ARRANGER

CHASE MANHATTAN plc

By:       KATHRYN JEPSON


BANKS

BANCA MONTE DEI PASCHI DI SIENA SPA, LONDON BRANCH

By:       GIORGIO GUANO, COLIN HARBOUR


BANK OF AMERICA, N.A.

By:       C. G. COUCHMAN


THE BANK OF NEW YORK

By:       NATHAN S. HOWARD


THE BANK OF NOVA SCOTIA

By:       BEVERLEY ROBERTS


THE BANK OF TOKYO-MITSUBISHI, LTD.

By:       DAVID DALLISON


BARCLAYS BANK PLC

By:       JONATHAN PUGHE


<PAGE>

                                       95


BAYERISCHE LANDESBANK GIROZENTRALE, LONDON BRANCH

By:       KATHRYN JEPSON


BNP PARIBAS

By:       KATHRYN JEPSON


THE CHASE MANHATTAN BANK

By:       KATHRYN JEPSON


CITIBANK, N.A.

By:       ROBERT A WELFORD


COMMERZBANK AKTIENGESELLSCHAFT, LONDON BRANCH

By:       R. S. SULLIVAN


CREDIT LYONNAIS

By:       KATHRYN JEPSON


THE DAI-ICHI KANGYO BANK, LIMITED

By:       COLIN VITTERY


DEUTSCHE BANK AG LONDON

By:       MICHAEL STARMER-SMITH


FLEET NATIONAL BANK

By:       ROBERT S. WHITE


NATIONAL AUSTRALIA BANK LIMITED (ACN 004044937)

By:       RICHARD J. MOORE


<PAGE>

                                       96


SOCIETE GENERALE, LONDON BRANCH

By:       KATHRYN JEPSON


THE TORONTO-DOMINION BANK

By:       KATHRYN JEPSON


UBS AG, LONDON BRANCH

By:       KATHRYN JEPSON


WESTDEUTSCHE LANDESBANK GIROZENTRALE

By:       T. SAI LOUIE


AGENT

CHASE MANHATTAN INTERNATIONAL LIMITED

By:       KATHRYN JEPSON