Exhibit 4(b)

                               PRICING SUPPLEMENT

                           TXU EASTERN FUNDING COMPANY

                                                                  6 OCTOBER 2000

                 (POUND)50,000,000 7.25 PER CENT. NOTES DUE 2030
   ISSUED PURSUANT TO THE (EURO)2,000,000,000 EURO MEDIUM TERM NOTE PROGRAMME
     (the "PROGRAMME") TO BE CONSOLIDATED AND FORM A SINGLE SERIES WITH THE
     (POUND)225,000,000 7.25 PER CENT. NOTES DUE 2030 ISSUED ON 8 MARCH 2000
                                  ("TRANCHE 1")




(Terms used herein shall be deemed to be defined as such for the purposes of the
Conditions)

THE NOTES CONSTITUTE LONGER TERM DEBT SECURITIES ISSUED IN ACCORDANCE WITH
REGULATIONS MADE UNDER SECTION 4 OF THE BANKING ACT 1987. The Issuer of the
Notes is not an authorised institution or a European authorised institution (as
such are defined in the Banking Act 1987 (Exempt Transactions) Regulations
1997). Repayment of the principal and payment of any interest or premium in
connection with the Notes has been guaranteed by TXU Europe Limited, which is
not an authorised institution or a European authorised institution.

This Pricing Supplement, under which the Notes described herein (the "NOTES")
are issued, is supplemental to, and should be read in conjunction with, the
Offering Circular (the "OFFERING Circular") dated 15 December 1999 issued in
relation to the Programme. The Notes will be issued on the terms of this Pricing
Supplement read together with the Offering Circular.

PROVISIONS APPEARING ON THE FACE OF THE NOTES

1.   Series No.:                             1

2.   Tranche No.:                            2

3.   ISIN:                                   XS0108297044 on consolidation with
                                             Tranche 1 issued on 8 March 2000

4.   Temporary ISIN                          XS0118715183

5.   Currency:                               pounds sterling ("(POUND)")

6.   Nominal Amount of Tranche:              (pound)50,000,000

7.   Issue Date:                             12 October 2000

PROVISIONS APPEARING ON THE BACK OF THE NOTES

8.   Form:                                   Bearer

9.   Denomination(s)                         (pound)1,000,(pound)10,000 and
                                             (pound)100,000


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<PAGE>


10.  Redenomination into Euro (of Notes      Redenomination not applicable
     denominated in a currency that may be
     redenominated into Euro in accordance
     with Condition 7(i)):

11.  Interest Commencement Date              8 March 2000
     (other than Zero Coupon Notes):

12.  Interest Rate (including after          7.25 per cent. per annum
     Maturity Date)

13.  Interest Payment Date(s) (other         8 March of every year commencing
     than Zero Coupon Notes):                8 March 2001

14.  Relevant Time (Floating Rate            N/A
     Notes):

15.  Interest Determination Date             N/A
     (Floating Rate Notes):

16.  Primary Source for the Floating         N/A
     Rate (Floating Rate Notes):

17.  Reference Banks (Floating Rate          N/A
     Notes  -  if Primary Source is
     "Reference Banks"):

18.  Relevant Financial Centre               N/A
     (Floating Rate Notes):

19.  Benchmark (Floating Rate Notes):        N/A

20.  Representative Amount (Floating         N/A
     Rate Notes):

21.  Relevant Currency (Floating Rate        N/A
     Notes):

22.  Effective Date (Floating Rate           N/A
     Notes):

23.  Specified Duration (Floating Rate       N/A
     Notes):

24.  Margin (if applicable):                 N/A

25.  Rate Multiplier (if applicable):        N/A

26.  Maximum/Minimum Interest Rate (if       N/A
     applicable):

27.  Maximum/Minimum Instalment Amount       N/A
     (if applicable)


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<PAGE>


28.  Maximum/Minimum  Redemption  Amount     N/A
     (if applicable):

29.  Interest Amount (Fixed Rate Note        (pound)72.50 per each(pound)1,000
     or Variable Coupon Amount Note):        denomination Note (pound)725.00 per
                                             each(pound)10,000 denomination Note
                                             (pound)7,250.00 per each
                                             (pound)100,000 denomination Note

30.  Day Count Fraction                      30/360

31.  Interest Period Date(s) (if             N/A
     applicable):

32.  Redemption  Amount (including early     Nominal Amount, save for early
     redemption):                            redemption upon the occurrence of a
                                             Category II Restructuring Event -
                                             see Appendix A hereto

33.  Maturity Date:                          8 March 2030

34.  Redemption for Taxation Reasons         Yes
     permitted on days other than
     Interest Payment Dates:

35.  Amortisation Yield (Zero Coupon         N/A
     Notes):

36.  Terms of redemption at the option       N/A
     of the Issuer or description of
     any other Issuer's option (if
     applicable):

37.  Issuer's Option Period (if              N/A
     applicable):

38.  Terms of redemption at the option       See Appendix A hereto
     of the Noteholders  or description
     of any other Noteholders' option
     (if applicable):

39.  Noteholders' Option Period (if          See Appendix A hereto
     applicable):

40.  Instalment Date(s) (if applicable):     N/A

41.  Instalment Amount(s) (if                N/A
     applicable):

42.  Unmatured Coupons to become void        Yes
     upon early redemption:

43.  Talons to be attached to Notes          Yes in respect of Definitive Notes
     and, if applicable, the number of       15 Interest Payment Dates between
     Interest Payment Dates between          maturity of the Talon
     the maturity of each Talon (if
     applicable):


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<PAGE>


44.  Business Day Jurisdictions for          London
     Condition 7(g) (jurisdictions
     required to be open for payment):

45.  Additional steps that may only be       N/A
     taken following approval by an
     Extraordinary Resolution in
     accordance with Condition  11(a)
     (if applicable):

46.  Details of any other additions or       See Appendix B
     variations to the Conditions (if
     applicable):

47.  The Agents appointed in respect of      Citibank, N.A.
     the Notes are (*):

PROVISIONS APPLICABLE TO GLOBAL NOTES AND GLOBAL CERTIFICATES

48.  Notes to be represented on issue        Temporary Global Note
     by:

49.  Applicable TEFRA exemption (if "C       TEFRA D
     Rules" or "not applicable"):

50.  Temporary Global Note exchangeable      The Temporary Global Note is
     for Definitive Notes:                   exchangeable for interests in the
                                             Permanent Global Note upon
                                             certification as to non-U.S.
                                             beneficial ownership not earlier
                                             than 40 days after the Issuer Date


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<PAGE>


51.  Permanent Global Note exchangeable      The Permanent Global Note is
     for Definitive Notes at the             exchangeable in whole, but not in
     request of the holder (if yes)          part, for Definitive Notes (with
                                             attached Coupons and Talons):

                                             (i)  upon not less than 60 days'
                                                  written notice being given to
                                                  the Issuing and Paying Agent
                                                  by Euroclear and/or
                                                  Clearstream, Luxembourg,
                                                  (acting on the instructions of
                                                  any holder of an interest in
                                                  the Permanent Global Note); or

                                             (ii) not later than 60 days after
                                                  the receipt of notice by the
                                                  Issuing and Paying Agent from
                                                  Euroclear and/or Clearstream,
                                                  Luxembourg (acting on the
                                                  instructions of any holder of
                                                  an interest in the Permanent
                                                  Global Note) or the Trustee
                                                  following the occurrence of
                                                  an Exchange Event,

                                                  where "EXCHANGE EVENT" means:

                                                  (1)  an Event of Default has
                                                       occurred and is
                                                       continuing;

                                                  (2)  the Issuer has been
                                                       notified that either
                                                       Euroclear or Clearstream,
                                                       Luxembourg has been
                                                       closed for business for a
                                                       continuous period of 14
                                                       days (other than by
                                                       reason of holiday,
                                                       statutory or otherwise)
                                                       or has announced an
                                                       intention permanently to
                                                       cease business or has in
                                                       fact done so and no
                                                       alternative clearing
                                                       system satisfactory to
                                                       the Trustee is available;
                                                       or

                                                  (3)  the Issuer has or will
                                                       become obliged to pay
                                                       additional amounts as
                                                       provided for or referred
                                                       to in Condition 8 which
                                                       would not be required
                                                       were the Notes in
                                                       definitive form.

PROVISIONS RELATING ONLY TO THE SALE AND LISTING OF THE NOTES

52.  Issue Price                             99.755 per cent., plus 214 days
                                             accrued interest

53.  Details of any additions or             N/A
     variations to the selling
     restrictions:

54.  Listing:                                Luxembourg


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<PAGE>


55.  Dealer's Commission:                    N/A

56.  Method of issue of Notes:               Non-Syndicated

57.  The following Dealers are               Royal Bank of Canada Europe Limited
     subscribing the Notes:

58.  Common Code:                            010829704 on consolidation with
                                             Tranche 1 issued on 8 March 2000

59.  Temporary Common Code:                  11871518

60.  Net Proceeds:                           (pound)52,012,361

61.  Use of Proceeds (if different from      N/A
     that stated in the Offering
     Circular):

The Issuer confirms that:

(a)  as at the date hereof, it has complied with its obligations under the
     listing rules of the Luxembourg Stock Exchange in relation to the admission
     to, and continuing listing of, the Programme and of any previous issues
     made under it and listed on the same exchange as the Programme; and

(b)  it will have complied with its obligations under the listing rules of the
     Luxembourg Stock Exchange by the time when the Notes are so admitted; and

(c)  as at the date hereof, it has not, since the last publication of
     information in compliance with the listing rules of the Luxembourg Stock
     Exchange about the Programme, any previous issues made under the Programme
     and listed on the Luxembourg Stock Exchange, or the Notes, having made all
     reasonable enquiries, become aware of any change in circumstances which
     could reasonably be regarded as significantly and adversely affecting its
     ability to meet its obligations as issuer in respect of the Notes as they
     fall due; and

(d)  as at the date hereof, it has complied and will continue to comply with,
     its obligations under the Banking Act 1987 (Exempt Transactions)
     Regulations 1997 to lodge all relevant information in relation to the Notes
     with the London Stock Exchange.

RESPONSIBILITY

The Issuer and the Guarantor accepts responsibility for the information
appearing in this Pricing Supplement.

Signed on behalf of the Issuer          Signed on behalf of the Guarantor



By:                                     By:
   -------------------------------         -------------------------------
   Duly Authorised Signatory               Duly Authorised Signatory


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<PAGE>


                                   APPENDIX A

Condition 6(e) is deleted and replaced with the following:

"(e) Redemption at the option of the Noteholders

If, at any time while any of the Notes remains outstanding, a Potential Put
Event occurs and during the Relevant Period, or (other than where the Potential
Put Event is a Category II Restructuring Event) prior to the commencement of the
Relevant Period, an Independent Financial Adviser shall have certified in
writing to the Trustee that such Potential Put Event will not be or is not, in
its opinion, materially prejudicial to the interests of the Noteholders, the
following provisions of this Condition 6(e) shall cease to have any further
effect in relation to such Potential Put Event.

If, at any time while any of the Notes remains outstanding, a Potential Put
Event occurs and an Independent Financial Advisor shall have certified in
writing to the Trustee that such Potential Put Event is, in its opinion,
materially prejudicial to the interests of the Noteholders (a "NEGATIVE
CERTIFICATION"), then, unless at any time the Issuer shall have given a notice
under Condition 6(c), the holder of each Note will, upon the giving of a Put
Event Notice (as defined below), have the option (the "PUT OPTION") to require
the Issuer to redeem or, at the option of the Issuer, purchase (or procure the
purchase of) that Note on the Put Date (as defined below), at its Put Event
Redemption Amount together with (or, where purchased, together with an amount
equal to) interest (if any) accrued to (but excluding) the Put Date.

Any certification by an Independent Financial Adviser as aforesaid as to whether
or not, in its opinion any Potential Put Event is materially prejudicial to the
interests of the Noteholders shall, in the absence of manifest error, be
conclusive and binding on the Trustee, the Issuer, the Guarantor and the
Noteholders.

Promptly upon, and in any event within 14 days after, the Issuer becoming aware
that a Potential Put Event has occurred, the Issuer shall, and at any time upon
the Trustee becoming similarly so aware the Trustee may, and if so requested by
the holders of at least one-quarter in nominal amount of the Notes then
outstanding shall, give notice (a "PUT EVENT NOTICE") to the Noteholders in
accordance with Condition 16 specifying the nature of the Potential Put Event
and the procedure for exercising the Put Option, provided that where the
Potential Put Event is a Category II Restructuring Event the Issuer shall again
give such notice 90 days prior to the Revocation Date (such latter notice, a
"CATEGORY II PUT EVENT NOTICE").

To exercise the Put Option, the holder of a Note must deposit such Note with any
Paying Agent at its specified office, on a day which is a Business Day in the
City of London and in the place of such specified office falling within the
period (the "PUT PERIOD") of (i), in the case where the Put Option is in respect
of an event other than a Category II Restructuring Event, 45 days after that on
which a Put Event Notice is given or (ii) otherwise, at any time up to 15 days
prior to the Put Date, accompanied by a duly completed and signed notice of
exercise in the form (for the time being current) obtainable from any specified
office of any Paying Agent (a "PUT NOTICE") and in which the holder may specify
a bank account to which payment is to be made under this Condition 6. Where any
Note is delivered without all Coupons relating to it which mature after the day
(the "PUT DATE") being (i) in the case where the Put Option is in respect of an
event other than a Category II Restructuring Event, the fifteenth day after the
date of expiry of the Put Period or (ii) otherwise, the Revocation Date
(provided that such day is a Business Day in the City of London, otherwise the
next day which is a Business Day in the City of London), the exercise of the Put


                                       7
<PAGE>


Option in respect of such Note shall be subject to the provision of such
indemnity as the Issuer may reasonably require. The Paying Agent to which such
Note and Put Notice are delivered shall issue to the Noteholder concerned a
non-transferable receipt in respect of the Note so delivered. Payment in respect
of any Note so delivered shall be made, if the holder duly specifies in the Put
Notice an account with a bank to which payment is to be made, on the Put Date by
transfer to that bank account and, in every other case, on or after the Put Date
in each case against presentation and surrender or (as the case may be)
endorsement of such receipt at any specified office of any Paying Agent. A Put
Notice, once given, shall be irrevocable. For the purposes of Conditions 9, 10,
11, 12, 14, 16 and 17 and for certain other purposes specified in the Trust
Deed, receipts issued pursuant to this Condition 6(e) shall be treated as if
they were Notes. The Issuer shall redeem or, at the option of the Issuer,
purchase (or procure the purchase of) the relevant Note on the applicable Put
Date unless previously redeemed or purchased.

The Trustee is under no obligation to ascertain whether a Potential Put Event or
any event which could lead to the occurrence of, or could constitute a,
Potential Put Event has occurred and until it shall have actual knowledge or
express notice to the contrary, the Trustee may assume that no Potential Put
Event or such other event has occurred.

In this Condition 6(e):

"BUSINESS DAY" means, in relation to any place, a day on which commercial banks
and foreign exchange markets generally settle payments in that place.

"CATEGORY I RESTRUCTURING EVENT " means the occurrence of any one or more of the
following events:

(A)  (aa) the Secretary of State and/or Director General of Electricity
          Supply (or any successor) gives the Guarantor or the holder of the PES
          Licence written notice of revocation (or issues a public notice
          generally) of the PES Licence (excluding any second tier supply
          licence and provided that the giving of notice pursuant to paragraph 3
          of Part 1 of the PES Licence in each case as in effect on the date of
          the Pricing Supplement, or any other similar provision in any other
          PES Licence, shall not be deemed to constitute the revocation of the
          PES Licence); or

     (bb) the Guarantor or the holder of the PES Licence agrees in writing with
          the Secretary of State and/or Director General of Electricity Supply
          to any revocation or surrender of the PES Licence; or

     (cc) any legislation (whether primary or subordinate) is enacted
          terminating or revoking the PES Licence,

     except in any such case in circumstances where a licence or licences (each,
     a "SUCCESSOR Licence") on substantially not less favourable terms is or are
     granted to the Guarantor or one or more Relevant Subsidiaries or
     Subsidiaries (not being an Excluded Subsidiary) of the Guarantor at least
     51 per cent. of the ordinary share capital of which is owned directly or
     indirectly by the Guarantor and which is Controlled by the Guarantor; or

(B)  any modification (other than a modification which is of a formal, minor or
     technical nature) is made to the terms and conditions of the PES Licence on
     or after the date of the Pricing Supplement, unless two directors of the
     Guarantor have certified in good faith to the Trustee that the modified
     terms and conditions are not materially less favourable to the business of
     the Group; or


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<PAGE>


(C)  (aa) the Pooling and Settlement Agreement is terminated under Clause
          67.4 thereof and not replaced by one or more agreements, commercial
          arrangements or open market mechanisms or frameworks, in each case on
          terms which two directors of the Guarantor certify in good faith to
          the Trustee to be not materially less favourable to the business of
          the Group; or

     (bb) a holder of the PES Licence is given notice pursuant to Clause 67.3.2
          of the Pooling and Settlement Agreement requiring it to cease to be a
          party thereto; or

     (cc) any notice declaring an event of default (as defined in the Pooling
          and Settlement Agreement) is given to a holder of the PES Licence
          under Clause 66.1.1 or 66.2 thereof and such default remains
          unremedied or unwaived; or

     (dd) any modification (other than a modification which is of a formal,
          minor or technical nature) is made to the Pooling and Settlement
          Agreement on or after the date of the Pricing Supplement, unless two
          directors of the Guarantor have certified in good faith to the Trustee
          that any such modification has not had and will not have a materially
          adverse effect on the financial rights and obligations of a holder of
          the PES Licence under the Pooling and Settlement Agreement or a
          materially adverse effect on the business of the Group, provided that
          any such modification shall, to the extent it grants or confers powers
          or discretions on the Director General of Electricity Supply (or any
          successor) under or in respect of the Pooling and Settlement
          Agreement, be deemed not to have a materially adverse effect as
          aforesaid, but for the avoidance of doubt any modification to the
          Pooling and Settlement Agreement made by the Director General of
          Electricity Supply (or any successor) by virtue of or pursuant to any
          such powers or discretions and which otherwise would have a materially
          adverse effect as provided above shall not by virtue of this
          sub-paragraph be deemed not to have such an effect; or

     (ee) a holder of the PES Licence ceases to be a party to the Pooling and
          Settlement Agreement for any other reason (other than pursuant to (bb)
          and (cc) above) except where a licence or licences is or are granted
          to one or more Subsidiaries as contemplated by sub-paragraph (A) above
          and at or about the same time all rights and obligations of such
          holder pursuant to the Pooling of Settlement Agreement which are
          attributable to such licence(s) are assigned and transferred to such
          Subsidiary and/or Subsidiaries in such manner as the Trustee may
          approve (such approval not to be unreasonably withheld or delayed) or
          such Subsidiary or Subsidiaries enters or enter into one or more
          agreements, commercial arrangements or open market mechanisms or
          frameworks in relation to such licence(s) which two directors of each
          of the Issuer and Guarantor certify to be not materially less
          favourable to the business of the Group; or

(D)  any legislation (whether primary or subordinate) is enacted which removes,
     qualifies or amends (other than an amendment which if of a formal, minor or
     technical nature) the duties of the Secretary of State and/or the Director
     General of Electricity Supply under Section 3 of the Electricity Act as in
     force on the date of the Pricing Supplement, unless two directors of the
     Guarantor have certified in good faith to the Trustee that such removal,
     qualification or amendment is unlikely to have a materially adverse effect
     on the financial condition of the Group or any Relevant Subsidiary.

A "CATEGORY II RESTRUCTURING EVENT " occurs where the Secretary of State and/or
Director General of Electricity Supply (or any successor) gives the Guarantor or
the holder of the PES Licence written notice of revocation (or issues a public


                                       9
<PAGE>


notice generally) of the PES Licence pursuant to paragraph 3 of Part 1 of the
PES Licence, except in any such case in circumstances where a licence or
licences (each, a "SUCCESSOR LICENCE") on substantially not less favourable
terms is or are granted to the Guarantor or one or more Relevant Subsidiaries or
Subsidiaries (not being an Excluded Subsidiary) of the Guarantor at least 51 per
cent. of the ordinary share capital of which is owned directly or indirectly by
the Guarantor and which is Controlled by the Guarantor.

"CONTROL" means the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a person, whether through
the ownership of voting securities, by contract or otherwise (and references to
"Controlled" shall be construed accordingly).

"ELECTRICITY ACT" means the Electricity Act 1989 as amended or re-enacted from
time to time and all subordinate legislation made pursuant thereto.

"EXCLUDED SUBSIDIARY" means any Subsidiary of the Guarantor:

(i)  which is a single purpose company whose principal assets and business
     comprise the ownership, acquisition, development and/or operation of assets
     comprising a Project;

(ii) in its capacity as a partner in, and whose only material asset is its
     interest in, a single purpose partnership whose principal assets and
     business comprise a Project (as defined in Condition 10 (Events of
     Default);

(iii) none of whose indebtedness for borrowed money in respect of the financing
     of such ownership, acquisition, development and/or operation of such assets
     comprising a Project is subject to any recourse whatsoever to any member of
     the Group (other than such Subsidiary or another Excluded Subsidiary) in
     respect of the repayment thereof, except as expressly referred to in
     sub-paragraph (ii) of the definition of Project Finance Indebtedness (as
     defined in Condition 10 (Events of Default)); and

(iv) which has been designated as such by the Guarantor by written notice to the
     Trustee,

provided that the Guarantor may give notice to the Trustee at any time that any
Excluded Subsidiary is no longer an Excluded Subsidiary, whereupon it shall
cease to be an Excluded Subsidiary.

"GENERATION LICENCE" means the electricity generation licence granted by the
Secretary of State to Eastern Merchant Generation Limited under the Electricity
Act as in effect on the date of the Pricing Supplement.

The "GROSS REDEMPTION YIELD" on the Notes and the Reference Stock will be
expressed as a percentage and will be calculated on the basis indicated by the
Joint Index and Classification Committee of the Institute and Faculty of
Actuaries as reported in the Journal of the Institute of Actuaries, Vol. 105,
Part I, 1978, page 18 or such other basis as the Trustee may approve.

"GROUP" means the Guarantor and its Subsidiary Undertakings and "member of the
Group" shall be construed accordingly.

"INDEBTEDNESS FOR BORROWED MONEY" means any present or future indebtedness
(whether being principal, premium, interest or other amounts) for or in respect
of (i) money borrowed, (ii) liabilities under or in respect of any acceptance or
acceptance credit, or (iii) any notes, bonds, debentures, debenture stock, loan
stock or other securities offered, issued or distributed whether by way of


                                       10
<PAGE>


public offer, private placing, acquisition consideration or otherwise and
whether issued for cash or in whole or in part or for a consideration other than
cash.

"INDEPENDENT FINANCIAL ADVISER" means a financial adviser appointed by the
Issuer and approved by the Trustee (such approval not to be unreasonably
withheld or delayed) or, if the Issuer shall not have appointed such an adviser
within 21 days after becoming aware of the occurrence of a Potential Put Event
and the Trustee is indemnified to its satisfaction against the costs of such
adviser, a financial adviser appointed by the Trustee following consultation
with the Issuer.

A "LOSS OF CONTROL EVENT" occurs where TXU Europe Limited ceases to own directly
or indirectly at least a majority of the ordinary share capital of TXU Europe
Group plc and all Principal Subsidiaries (as defined in Condition 10 (Events of
Default)) or ceases to Control TXU Europe Group plc and all Principal
Subsidiaries.

"PES LICENCE" means the public electricity supply licence granted by the
Secretary of State to Eastern Electricity plc under the Electricity Act (but for
the avoidance of doubt excluding for this purpose any second tier licence) as in
effect on the date of the Pricing Supplement and/or any Successor Licence.

"POTENTIAL PUT EVENT" means any of (a) a Rating Downgrade Event, (b) a Loss of
Control Event, (c) a Category I Restructuring Event or (d) a Category II
Restructuring Event

"POOLING AND SETTLEMENT AGREEMENT" means the agreement dated 30 March 1990 (as
amended and restated as at 22 April 1994) made by Eastern Electricity plc with
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 and,
while the same has effect, the Initial Settlement Agreement also dated 30 March
1990 and made between the same parties, in each case as in force on the date of
the Pricing Supplement.

A "PUT EVENT" occurs on the date of the last to occur of (a) a Potential Put
Event and (b) the relevant Negative Certification.

The "PUT EVENT REDEMPTION AMOUNT" of a Note means its principal amount, save
that where the Put Event arose as a result of a Category II Restructuring Event
"Put Event Redemption Amount" means the higher of:

(i)  the principal amount thereof; and

(ii) that price (the "REDEMPTION PRICE"), expressed as a percentage rounded to
     three decimal places (0.0005 being rounded downwards), at which the Gross
     Redemption Yield on the Notes, if they were to be purchased at such price
     on the third dealing day prior to the publication of the Category II Put
     Event Notice, would be equal to the Gross Redemption Yield on such dealing
     day of the 6 per cent. Treasury Stock due 7 December 2028 or such other
     United Kingdom Government Stock as the Trustee, with the advice of three
     leading brokers operating in the gilt-edged market and/or gilt-edged market
     makers, shall determine to be appropriate (the "REFERENCE STOCK") on the
     basis of the middle market price of the Reference Stock prevailing on such
     dealing day, as determined by Deutsche Bank AG London (or such other
     person(s) as the Trustee may approve). Any reference in the Terms and
     Conditions to "principal" shall be deemed to include any sum payable as the
     Redemption Price.


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<PAGE>


"RATED SECURITIES" means the Notes, if at any time and for so long as they have
a rating from a Rating Agency, and otherwise any other unsecured and
unsubordinated debt of the Issuer or a Relevant Subsidiary (or of any Subsidiary
of the Guarantor which is guaranteed on an unsecured and unsubordinated basis by
the Guarantor or a Relevant Subsidiary) having an initial maturity of five years
or more which is rated by a Rating Agency.

"RATING AGENCY" means any of Standard & Poor's Rating Service, a division of the
McGraw-Hill Companies, Inc., Moody's Investors Service Limited or Duff & Phelps
Credit Rating Co. or any of their respective Subsidiaries and their successors
or any rating agency substituted for either of them (or any permitted substitute
of them) by the Issuer from time to time with the prior written approval of the
Trustee (such approval not to be unreasonably withheld or delayed).

A "RATING DOWNGRADE EVENT" shall be deemed to have occurred if the then current
rating assigned to the Rated Securities by any Rating Agency (whether provided
by a Rating Agency at the invitation of the Issuer or by its own volition) is
withdrawn or reduced from an investment grade rating (BBB-/Baa3, or their
respective equivalents for the time being, or better) to a non-investment grade
rating (BB+/Bal, or their respective equivalents for the time being, or worse)
or, if the Rating Agency shall then have already rated the Rated Securities
below investment grade (as described above), the rating is lowered one full
rating category (from BB+/Bal to BB/Ba2 or such similar lowering), PROVIDED that
a Rating Downgrade Event shall be deemed not to have occurred if the rating
assigned to the Rated Securities by each Rating Agency making the relevant
reduction in rating or, where applicable, declining to assign a rating of at
least investment grade as provided in this Condition 6(e), is subsequently
increased to, or, as the case may be, there is assigned to the Notes or other
unsecured and unsubordinated debt of the Issuer, the Guarantor or a Relevant
Subsidiary (or of any Subsidiary of the Guarantor which is guaranteed on an
unsecured and unsubordinated basis by the Guarantor or a Relevant Subsidiary)
having an initial maturity of five years or more by such Rating Agency, an
investment grade rating (BBB-/Baa3 or their respective equivalents for the time
being) or better prior to any Negative Certification being issued.

"RELEVANT INDEBTEDNESS" means any present or future indebtedness (whether being
principal, premium, interest or other amounts) in the form of or represented by
notes, bonds, debentures, debenture stock, loan stock or other securities,
whether issued for cash or in whole or in part for a consideration other than
cash, and which, with the agreement of the person issuing the same, are quoted,
listed or ordinarily dealt in on any stock exchange or recognised
over-the-counter or other securities market, but shall in any event not include
Project Finance Indebtedness.

"RELEVANT LICENCES" means the Generation Licence and the PES Licence and, in any
such case, and from time to time any other licence or licences relating to the
generation and/or distribution of electricity granted to the Guarantor and/or
any Relevant Subsidiary or Subsidiary as contemplated pursuant to paragraph (A)
of "Category I Restructuring Event " below and "RELEVANT LICENCE" shall be
construed accordingly.

"RELEVANT PERIOD" means the period of 90 days, starting from and including the
day on which the Category I Restructuring Event, Rating Downgrade Event or Loss
of Control Event, as the case may be, occurs or, in relation to a Category II
Restructuring Event, the period commencing 90 days prior to the Put Date up to
but excluding the Put Date;

"RELEVANT SUBSIDIARY" means a member of the Group that holds a Relevant Licence.

"REVOCATION DATE" means the date of the determination of the PES Licence
following the 25 year notice period pursuant to a Category II Restructuring
Event.


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"SECRETARY OF STATE" means the Secretary of State for Trade and Industry (or any
successor).

"SUBSIDIARY" means a "subsidiary" within the meaning of Section 736 of the
Companies Act.

"SUBSIDIARY UNDERTAKING" shall have the meaning given to it by Section 258 of
the Companies Act 1985 (but, in relation to the Issuer, shall exclude any
undertaking (as defined in the Companies Act 1985) whose accounts are not
included in the then latest published audited consolidated accounts of the
Issuer, or (in the case of an undertaking which has first become a subsidiary
undertaking of a member of the Group since the date as at which any such audited
accounts were prepared) would not have been so included or consolidated if it
had become so on or before that date).

Any reference to an obligation being guaranteed shall include a reference to an
indemnity being given in respect of the obligation."


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                                   APPENDIX B

1.   The following new Condition 18 is inserted after Condition 17:

"18  FINANCIAL COVENANT

(a)  Interest Cover Covenant

The Guarantor shall ensure that at each financial year end by reference to the
annual audited consolidated financial statements of the Group produced under US
GAAP, the ratio of Net Revenues to Net Interest in respect of the immediately
preceding 12 months shall not be less than 1.75 to 1.0;

where:

"DISTRIBUTION" means any payment of dividends or other distribution and any
return of capital including, without limitation, any payment in respect of, or
on the redemption of, any share capital whether at a premium or otherwise, or
any payment in respect of indebtedness for borrowed money to any person in the
Group or to any person on their behalf, whether in cash or in kind and whether
by way of interest, repayment of principal or otherwise and shall, for the
avoidance of doubt, include any payment in respect of Subordinated Debt and
Subordinated Loan Stock;

"NET INTEREST" includes, in relation to any period, the aggregate amount of all
of the following insofar as they are payable by, or accrue in respect of
indebtedness of, any member of the Group (except to another member of the Group)
during that period: interest, commissions and fees in respect of moneys
borrowed, discounts in respect of bills, notes or debts discounted, and that
part of any amount under a financing lease or hire purchase, credit sale,
conditional sale or deferred payment agreement which represents any of the
foregoing save for interest payments in respect of Subordinated Debt or which
constitute Distributions less the aggregate amount of interest income of the
Group (excluding such income from another member of the Group) for such period.
For this purpose, a discount shall be apportioned in accordance with US GAAP
over the period for which that bill, note or debt is to be outstanding and shall
be deemed to accrue from day to day during that period;

"NET REVENUES" means, in relation to any period, the consolidated income of the
Group for that period before Tax, interest and minority interests and before all
extraordinary items, all as shown in the statements of consolidated income of
the Group for that period, adding back all amounts provided (through the
statements of consolidated income) for depreciation, goodwill and amortisation;

"SUBORDINATED DEBT" means any indebtedness for borrowed money of the Issuer
which ranks subordinate to the Notes under the former's terms and conditions;

"SUBORDINATED LOAN STOCK" means any loan stock issued by the Issuer which is not
redeemable at the instance of the holder thereof on terms whereby all payments
thereunder rank subordinate to the Notes under the terms of the relevant loan
documentation; and

"TAXES" or "TAX" means any present or future taxes of any nature (including,
without limitation, value added tax), levy, impost, duty or other charge of a
similar nature now or hereafter imposed by the laws of the United Kingdom or the
United States and any other jurisdiction or any political subdivision thereof
(including, without limitation, any penalty or interest payable in connection
with any failure to pay or any delay in paying the same).


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(b)  Certification of Compliance with Interest Cover Covenant

The Guarantor will, within 10 Business Days (as defined in Condition 6(e)) in
London ("LONDON BUSINESS DAY") of the filing with the Registrar of Companies of
each set of yearly audited financial statements, deliver to the Trustee a
certificate signed on its behalf by two of their respective directors or one
director and the Company Secretary:

     (i)  confirming compliance with Condition 18(a) as at the end of the
          preceding financial year; and

     (ii) setting out in reasonable detail and in a form satisfactory to the
          Trustee the computations necessary to demonstrate such compliance.

(c)  Auditor's Certification of Compliance

Within 30 London Business Days of the filing with the Registrar of Companies of
such financial statements in Condition 18(b), the Guarantor will deliver to the
Trustee a certificate of the independent auditors of the Guarantor confirming
compliance with Condition 18(a) as at the end of the preceding financial
period.".

2.   Paragraph (f) of Condition 6 (Redemption, Purchase and Options) is
amended by deleting the phrase "at any time" in the second line of the first
sentence and by inserting the following text after the word "price" at the end
of that sentence: ", provided that such purchase(s) may only take place at any
time after the third anniversary of the Issue Date".

3.   Paragraph (b) of Condition 10 (Events of Default) is amended by
inserting the following text between the words "Notes" and "the Guarantee" in
the second line of that paragraph: "(which, for the avoidance of doubt, includes
the Guarantor's obligations under Condition 18(a), 18(b) and 18(c))"

4.   Paragraph (i) of Condition 10 (Events of Default) is deleted.


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