Document:

AMENDMENT NO. 1
                                     TO THE
                          1993 ALASKA INTERTIE PROJECT
                             PARTICIPANTS AGREEMENT

                  THIS AMENDMENT NO. 1 ("AMENDMENT") TO THE 1993 ALASKA INTERTIE
PROJECT PARTICIPANTS  AGREEMENT . ("Participants  Agreement entered into on this
10th day of  December,  1999,  by and among the Parties  hereto,  namely  ALASKA
ELECTRIC  GENERATION &  TRANSMISSION  COOPERATIVE,  INC.,  The  MUNICIPALITY  OF
ANCHORAGE d/b/a MUNICIPAL LIGHT & POWER, CHUGACH ELECTRIC ASSOCIATION, INC., The
CITY OF FAIRBANKS, GOLDEN VALLEY ELECTRIC ASSOCIATION,  INC., The CITY OF SEWARD
d/b/a SEWARD ELECTRIC SYSTEM,  each designated in the Participants  Agreement as
Participants  and HOMER  ELECTRIC  ASSOCIATION,  INC.,  and  MATANUSKA  ELECTRIC
ASSOCIATION,   INC.,  each  designated  in  the  Participants  Agreement  as  an
Additional Party.

                                   WITNESSETH:

         WHEREAS,  this  Amendment  provides for the  withdrawal  of each of the
Participants   and  Additional   Parties  other  than  Golden  Valley   Electric
Association, Inc. ("GVEA") from participation in the Healy-Fairbanks Segment and
for the assumption by GVEA of all obligations related thereto for the completion
of the Healy-Fairbanks Segment; and

         WHEREAS,  GVEA agrees to provide to the other  participating  utilities
access to the  Healy-Fairbanks  Segment  for the  purpose of  assured  access to
resources,  economy  energy  transactions  and other  similar uses to the extent
capacity on the  Healy-Fairbanks  segment is  available  in excess of GVEA's own
requirements under tariffs approved by the Alaska Public Utilities Commission.

         NOW  THEREFORE,  IN  CONSIDERATION  of the mutual  covenants  set forth
herein, the parties agree to amend the Participants Agreement as follows:

         Section 1.  Effective Date of Amendment.  This  Amendment  shall become
effective    at   24:00    hours    on   the    first    date    that   it   has
been executed by all of the Parties.

         Section 2.  Amendment of Agreement.

         (a) Section 2(b) is amended by  replacing  "Project" in the second line
with "Anchorage-Kenai Peninsula Segment".

         (b) Section 3(a) of the Agreement is replaced by the following:

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                  (a)      The  Healy-Fairbanks   Segment.  The  Healy-Fairbanks
                           Segment  of the  Project  shall  consist  of a 230-kV
                           electric  power   transmission  line  between  Healy,
                           Alaska,  and  Fairbanks,  Alaska.  GVEA  shall be the
                           solely responsible for the routing and design of such
                           Segment.

         (c) The third  sentence of Section 4(a) of the  Agreement is amended as
follows:

         Unless  otherwise  changed in accordance  with this  Agreement,  GVEA's
         Participant  Share of the  Healy-Fairbanks  Segment  shall be 1 00% and
         each  Participant  Cs Share of the  Anchorage-Kenai  Peninsula  Segment
         shall initially be as follows:

         (d)      Section 4(b)(3) of the Agreement is amended as follows:

                 (1)      Paragraph (A) is replaced with the following:

                           (A)      Generally.   Each   Participant   shall   be
                                    entitled to withdraw from  participation  in
                                    the Anchorage-Kenai  Peninsula Segment,  but
                                    in each case,  only in  accordance  with the
                                    provisions of this Section 4(b)(3).

                 (2)      Paragraph  (C) is  amended  by  deleting  the  second
sentence.

                 (3)      Paragraph (D) is amended by deleting subparagraph (i).

                 (4)      Paragraph (E) is deleted.

         (e) Section  4(b)(4) of the  Agreement is amended by inserting  "in the
Anchorage-Kenai  Peninsula Segment" after "Participants  Share" in-the third and
fourth lines.

         (f)      Section 5(a) of the Agreement is replaced with the following:

                  (a) Ownership As Tenants in Common.  The Participants shall be
owners of the Anchorage-Kenai Peninsula Segment (including all personal and real
property interests thereof) as tenants in common,  with undivided  interests and
obligations with respect to all Anchorage-Kenai Peninsula assets and liabilities
in the proportionate  amounts of their respective  Participants'  Shares in such
Segment. Except as otherwise provided hereunder, the Participants shall share in
the  Anchorage-Kenai   Peninsula  Segment's  benefits,   burdens  and  risks  in
proportion   to  their   respective   Participants   Shares  in  such   Segment,
notwithstanding  the  IPG may  select  one or more  individual  Participants  to
manage, design, build, finance, operate and/or maintain such Segment or portions
thereof on behalf of the Participants collectively.

         (g)      Section 5(d)(3) is, replaced with the following:

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                  (3)      Terms and conditions governing GVEA facilities.  GVEA
                           shall  provide  the  other  Participants   access  to
                           capacity  in  the.  Healy-Fairbanks  Segment  and its
                           transmission system for the purpose of assured access
                           to resources,  economy energy  transactions and other
                           similar  uses under rates and tariffs  filed with and
                           approved  by the Alaska  Public  Utility  Commission.
                           (Exhibit D(2) is deleted from the Agreement)

         (h) Sections 6(a)(1) and 6(a)(2) are amended by replacing  "Project" in
the  third and  second  lines,  respectively,  with  "Anchorage-Kenai  Peninsula
Segment'.

         (i)      Section. 6(e)(3)is amended as follows:

                  (1) Insert  "related  to  Anchorage-Kenai  Peninsula  Segment"
after "Section 6(e)(3)' in the first and fourth lines.

                  (2)      Add a new Section 6(e)(6) as follows:

                           (6)      GVEA  shall be  solely  responsible  for all
                                    matters  related to the  financing,  design,
                                    construction,  operation and  maintenance of
                                    the  Healy-Fairbanks  Segment,  as  well  as
                                    accounting and auditing  procedures  related
                                    to   such   Segment   in   accordance   with
                                    arrangements   satisfactory  to  the  Alaska
                                    Industrial Development and Export Authority.

         (j)      Sections 6(h)is amended by:

                  (1)  replacing  "each  Project  Segment"  in the first line of
paragraph (1) with "the Anchorage-Kenai Peninsula Segment"; and

                  (2) `replacing "each Segment of the Project" in the second and
third  lines  of  paragraph  (2)  with  Anchorage-Kenai  Peninsula  Segment  and
"Project"  in the fifth and sixth lines of paragraph  (2) with  "Anchorage-Kenai
Peninsula Segment."

         (k)      Section 7(a)is amended as follows:

                  (a)      Chugach  shall serve as the  Construction  Manager of
                           the Anchorage-Kenai  Peninsula Segment unless Chugach
                           elects to withdraw or is removed  pursuant to Section
                           70)..   Chugach   shall   be   responsible   for  the
                           preparation   of  the  design  of  such  Segment  for
                           approval by the IPG and shall be responsible  for the
                           construction  of  such  Segment   utilizing   Prudent
                           Utility  Practices  and  subject to the  construction
                           budget   approved  by  the  IPG.   Chugach  shall  be
                           responsible  for selecting and supervising any design
                           engineering firms or subcontractors necessary for the

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                           successful    completion   of   the   Anchorage-Kenai
                           Peninsula Segment.

         (l) Section 7(b) is amended by  replacing  `Each  Construction  Manager
with  "Chugach  or a  replacement  Construction  Manager" in the first and sixth
lines.

         (m) Section 7(c),  7(d),  7(e),  7(f),  7(g),  7(h),  7(i), and 70) are
amended as follows:

                  (1) Replace  "Each  Construction  Manager'  with "Chugach or a
replacement  Construction  Manager"  in the first  and ninth  lines of the first
paragraph.

                  (2) Delete  "Healy-Fairbanks  Segment or" in the third line of
the first paragraph.

                  (3) Replace "The Construction Managers" and "each Construction
Manager"  and  "that  Construction  Manager'  with  "Chugach  or  a  replacement
Construction Manager" in the second, third and fourth paragraphs of Section 7(c)
and in Sections 7(d), 7(e), 7(f), 7(g), 7(h), 7(i) and 70).

         (n) Section 8(a) is amended by replacing  "each Intertie Grant Account"
with `he Intertie Grant Account for the  Anchorage-Kenai  Peninsula Segment" and
adding the following sentence to the initial paragraph:

         The following  provisions only apply to the disbursement of Grant Funds
for the Anchorage-Kenai Peninsula Segment.

         (o)   Section   8(b)   is   amended   by   replacing   "Project"   with
"Anchorage-Kenai  Peninsula  Segment" in the initial paragraph and subparagraphs
(1) and (5).

         (p) Section 8(c) is amended by replacing  "each Segment of the Project"
with "the  Anchorage-Kenai  Peninsula Segment' in the second and third lines and
replacing "Project" with "Anchorage-Kenai Peninsula Segment" in the fifth line.

                  (q)  Section  8(d) is  amended  by  replacing  "Project"  with
"Anchorage-Kenai Peninsula Segment" in the first line.

         (r) Section 9(a) is amended by striking  "and shall be  removable  only
for reasonable  cause,  after reasonable  notice and opportunity to cure" in the
second and third lines.

         (s)   Section   9(c)   is   amended   by   replacing   "Project"   with
"Anchorage-Kenai Peninsula Segment" in the second and third lines.

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         (t)  Section  10(b) is  amended  by  replacing  paragraph  (1) with the
following new paragraph:

         (1)The IPG shall adopt in each  Operating Year (and revise as necessary
or prudent  during  such  Operating  Year).  in  accordance  with its rules,  an
Operating  Budget of Annual  Project  Costs  for the  Anchorage-Kenai  Peninsula
Segment for that operating Year, which budget shall be in an amount estimated by
the IPG to be sufficient to pay all Annual Project Costs.  Such budget of Annual
Project Costs shall be broken down into categories  approved by the IPG. No less
than 120 days  prior to the  beginning  of each  Operating  Year  Chugach or its
replacement  as O&M Manager shall prepare and submit to the IPG an annual budget
of costs,  which  budget  (or a  replacement  budget)  the IPG shall  approve or
disapprove  no  later  than  sixty  (60)  days  prior to the  beginning  of said
Operating   Year;   provided,   that  the  annual  budget  shall  include  costs
attributable to overhead or administrative and general costs of the O&M Manager,
any Participant,  or any agency or political  subdivision of the State,  only to
the extent that said costs are approved by the IPG before they are incurred, are
reasonably   incurred  for  labor  directly  employed  by  that  O&M  Manger  in
performance  of its  duties  under  the O&M  Agreement,  and would not have been
incurred but for the activities undertaken as O&M Manager.

         (u)  Section  10(c) is amended by  inserting  "for the  Anchorage-Kenai
Peninsula  Segment" after "Annual Project Costs' in the second line of paragraph
(1) and the first line of paragraph (2).

         (v)      Section 10(d) is amended as follows:

                  (1) Replace  "appropriate  Project  Segment" and "each Project
Segment" vath "the  Anchorage-Kenai  Peninsula  Segment" in the second and sixth
lines of paragraph (1).

                  (2) Replace  "each  Project  Segment" in the first line of the
initial paragraph and `Project" in the. first line of subparagraph (A) with "the
Anchorage-Kenai Peninsula Segment".

                  (3) Replace "each Segment" with "the Anchorage-Kenai Peninsula
Segment' in the first line of paragraph (4) and delete subparagraph (A)(ii).

         (w) Section  10(e)(1) is amended by replacing "each Project Segment" in
the third line with `the Anchorage-Kenai Peninsula Segment'

         (x) Section 11 (a) is amended by replacing  `each  Project  Segment" in
the second line and "Project Segment" in the eighth line, the tenth and eleventh
lines with "the  Anchorage-Kenai  Peninsula Segment" and deleting  respectively,
Healy and Fairbanks, and", in the fifth and sixth lines.

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         (y) Section 11 (b) is amended by  replacing ", on either  Segment,  the
Project"  in the  first  line  and the  fifth  line  with  "the  Anchorage-Kenai
Peninsula  Segment" and replacing  "relevant Project Segment" in the eighth line
with "the Anchorage-Kenai Peninsula Segment."

         (z)      Section 11 (c) is amended as follows:

                  (1)  Replace  "either  Project  Segment"  in the first line of
paragraph (1) and "the Project Segment' in the second line of paragraph (2) with
"the Anchorage-Kenai Peninsula Segment".

                  (2) Replace "Project" with `Anchorage-Kenai Peninsula Segment"
in the first  line,  the  fourth  line and the sixth line of  paragraph  (3) and
replace "either' with "such" in the second line of paragraph (3).

         (aa)     Section  13(i) and 13(j) are amended by  replacing  "a Project
                  Segment" with "the Anchorage-Kenai Peninsula Segment."

         (bb)     Section 13(k) is amended by striking  "Golden Valley  Electric
                  Association,   Inc'  shall  be  Construction  Manager  of  the
                  Healy-Fairbanks  Segment"  in  the  third  and  fourth  lines,
                  replacing  `either" in the sixth line with "such  Construction
                  Manager"  and  deleting in the seventh line may be referred to
                  collectively as Construction Managers".

         (cc)     Section   13(o)  is  amended  by  replacing   "Project"   with
                  "Anchorage-Kenai  Peninsula  Segment" in the first line.  (dd)
                  Section 13(s) is amended by:

                           (i)      striking   "the   Healy-Fairbanks   Intertie
                                    Account and" in the first line,

                           (ii)     striking "or both" in the second line,

                           (iii)    replacing  "2.02"  with 2.01 " in the second
                                    line.

         (ee)     Section  13(u)  is  amended  by  striking   "the   $43,200,000
                  appropriated  by Section 1 of ch. 29, SLA 1993, for payment as
                  a  grant  under  AS   37.05.316   for   construction   of  the
                  Healy-Fairbanks Segment and" in lines one through three.

         (ff)     Section  13(aa) is amended by replacing "a Project  Segment or
                  both Segments" with "the Anchorage-Kenai Peninsula Segment" in
                  the second line and replacing "each" with "such" in the fourth
                  line.

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         (gg)     Section  13(bb) is amended by replacing  "Project or a Project
                  Segment" with "Anchorage-Kenai Peninsula Segment" in the third
                  and fifth line.

         (hh)     Section  13(cc) is amended by  replacing  "Project  or Project
                  Segment" with "Anchorage-Kenai Peninsula Segment" in the third
                  and fourth lines.

         Section 3.  Obligations  of the  Participants  Related  to the  Design,
Construction,  Operation and Maintenance of the Healy-Fairbanks  Segment. Golden
Valley shall be solely  responsible for all past,  present and future funding of
the design,  construction,  operation  and  maintenance  of the  Healy-Fairbanks
Segment  to the  extent not funded  from the  Healy-Fairbanks  Intertie  Account
established in the Grant Administration Agreement.

         Section 4. Consent to Ratification  of  Assignments.  The assignment of
the City of Fairbanks d/b/a Fairbanks Municipal Utilities System interest in the
1993 Alaska  Intertie  Project  Participants  Agreement and the Alaska  Intertie
Agreement,  dated December 23, 1985 and its Participant's  Share under each such
Agreement to Golden Valley Electric Association, Inc. is hereby consented to and
ratified by the parties hereto.

         IN WITNESS WHEREOF, the parties have caused this Amendment No. 1 to the
Participants Agreement to be executed on the day and year first above written.

                                    ALASKA  ELECTRIC  GENERATION &  TRANSMISSION
                                    COOPERATIVE, INC.

                                    By:         /s/
                                        -----------------------------------

                                    Title:      Ops Mgr
                                           -----------------------------------

                                    MUNICIPAL LIGHT & POWER

                                    By:         /s/
                                        -----------------------------------

                                    Title:
                                           -----------------------------------

                                    CHUGACH ELECTRIC ASSOCIATION, INC.

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<PAGE>

                                    By:         /s/
                                        -----------------------------------

                                    Title:      General Manager
                                           -----------------------------------

                                    CITY OF FAIRBANKS

                                    By:         /s/
                                        -----------------------------------

                                    Title:      Mayor of Fairbanks
                                           -----------------------------------

                                    GOLDEN VALLEY ELECTRIC ASSOCIATION, INC.

                                    By:         /s/
                                        -----------------------------------

                                    Title:      Pres.
                                           -----------------------------------

                                    SEWARD ELECTRIC SYSTEM

                                    By:         /s/
                                        -----------------------------------

                                    Title:      Manager, Eng & Utilities
                                           -----------------------------------

                                    HOMER ELECTRIC ASSOCIATION, INC.

                                    By:         /s/
                                        -----------------------------------

                                    Title:      Gen Mgr
                                           -----------------------------------

                                    MATANUSKA ELECTRIC ASSOCIATION, INC.

                                    By:         /s/
                                        -----------------------------------

                                    Title:      General Manager
                                           -----------------------------------

                                       8GRANT ADMINISTRATION AGREEMENT

         THIS AGREEMENT (the "Agreement") is made and entered into this 30th day
of August,  1994,  by and between  the ALASKA  INDUSTRIAL  DEVELOPMENT  & EXPORT
AUTHORITY ("AIDEA") GOLDEN VALLEY ELECTRIC ASSOCIATION, INC. ("GVEA"), FAIRBANKS
MUNICIPAL  UTILITIES  SYSTEM  ("FMUS"),  ANCHORAGE  MUNICIPAL  LIGHT  AND  POWER
("ML&P"), CHUGACH ELECTRIC ASSOCIATION, INC. ("CEA"), ALASKA ELECTRIC GENERATION
AND TRANSMISSION COOPERATIVE, INC. ("AEG&T") on behalf of its members (Matanuska
Electric Association,  Inc. and Homer Electric Association,  Inc.), and the CITY
OF SEWARD  ("Seward")  (ML&P,  CEA,  AEG&T and Seward  hereinafter  collectively
referred to as the "Southern Participating Utilities"; GVEA and FMUS hereinafter
collectively referred to as the "Northern Participating Utilities"; the Southern
Participating  Utilities and the Northern  Participating  Utilities  hereinafter
collectively referred to as the "Participating Utilities").

                                    RECITALS

         WHEREAS,  pursuant  to  Section 1 ch.  19,  SLA 1993,  the  Legislature
appropriated $43,200,000 to the Department of Administration ("DOA") for payment
as a grant under AS  37.05.316 to GVEA for the purpose of  constructing  a power
transmission intertie between Healy and Fairbanks  ("Healy-Fairbanks  Intertie")
to benefit all utilities participating in the intertie; and

         WHEREAS,  pursuant to Section 2 of ch. 3.9, SLA 1993  (Sections 1 and 2
of ch.19, SLA 1993 hereinafter referred to as the "Intertie Appropriation"), the
Legislature  appropriated  $46,800,000  to DOA for  payment as a grant  under AS
37.05.316 to CEA for the purpose of constructing a power  transmission  intertie
between  Anchorage  and the  Kenai  Peninsula  ("Anchorage-Kenai  Intertie")  to
benefit  all  utilities   participating   in  the  intertie  (the  two  intertie
appropriations  are  hereinafter  collectively  referred  to  as  the  "Intertie
Grants"); and

         WHEREAS,  pursuant to Section  1(b) and (C) and Section 2(b) and (c) of
the Intertie Appropriation,  DOA, AIDEA, and the Participating Utilities were to
enter into a written agreement satisfying certain statutory conditions precedent
to DOA's transfer of the Intertie Grants; and

         WHEREAS,  in order to satisfy such  requirement,  DOA,  AIDEA,  and the
Participating  Utilities  have entered  into an Intertie  Grant  Agreement  (the
"Intertie  Grant  Agreement"),  which  among  other  things,  provides  that the
Intertie  Grants  are  to be  transferred  to  AIDEA  for  the  benefit  of  the
Participating  Utilities,  and that  certain  conditions  are to be met prior to
AIDEA releasing any of the grant funds to the Participating Utilities; and

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<PAGE>

         WHEREAS,   also  as  part  of  the  Intertie   Grant   Agreement,   the
Participating  Utilities  have  agreed to form an  Intertie  Participants  Group
("IPG") to, among other things,  oversee the  construction  of the interties and
address grant expenditure matters; and

         WHEREAS,  pursuant to the Intertie Grant Agreement,  DOA and AIDEA have
entered  into  a  Grant  Transfer  and  Delegation  Agreement  ("Grant  Transfer
Agreement")  whereby the  Intertie  Grants were  transferred  to AIDEA to act as
custodian and administrator of the Intertie Grants; and

         WHEREAS,  Section 7 of the Intertie Grant Agreement requires that AIDEA
and the  Participating  Utilities  enter into a Grant  Administration  Agreement
which  shall  set  forth  the  terms  and  conditions  to be  satisfied  by  the
Participating  Utilities in order for there to be a disbursement of the Intertie
Grants, and which shall also provide for AIDEA's obligations with respect to the
Intertie Grants.

                                    AGREEMENT

         NOW,  THEREFORE,  in  consideration  of the  recitals  above (which are
hereby incorporated into and shall be deemed part of this Agreement), and of the
covenants and agreements  hereinafter set forth, it is agreed by and between the
parties hereto as follows:

         Section 1. Custodian and  Administrator.  The parties  acknowledge that
pursuant to the Grant Transfer Agreement,  DOA has delegated all its powers arid
duties with respect to the  administration  of the Intertie  Grants to AIDEA and
that the Intertie Grants have been transferred from DOA to AIDEA for the benefit
of the Participating  Utilities. The Participating Utilities have requested that
AIDEA serve as custodian and administrator of the Intertie Grants.  AIDEA hereby
accepts such appointment and agrees to act as custodian and administrator of the
Intertie Grants for the benefit of the Participating  Utilities,  subject to the
terms and conditions of, and authority and powers granted by, this Agreement and
applicable  law,  including  but not limited to those  statutes and  regulations
applicable  to the  administration  of  grants  to  named  recipients  under  AS
37.05.316 by the DOA..

         Section 2. Custody/Investment of Grant Funds.

         2.01.  Appropriation Accounts.  AIDEA shall establish two appropriation
accounts to account for and to disburse the Intertie  Grants.  One account shall
be designated the "Healy-Fairbanks Intertie Account" which shall be comprised of
the $43,200,000  appropriation  made by Section 1 of the Intertie  Appropriation
and all interest arid other income to be earned thereon. The other account shall
be designated the "Anchorage-Kenai Intertie Account" which shall be comprised of
the $46,800,000  appropriation  made by Section 2 of the Intertie  Appropriation
and all interest and other income to be earned thereon (the monies  collectively
comprising the Healy-Fairbanks Intertie Account and the Anchorage-Kenai Intertie

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<PAGE>

Account hereinafter  referred to as the "Intertie Funds").  AIDEA shall have the
authority to create and designate subaccounts for these two accounts as it deems
necessary from time to time.

         2.02.  Institutional  Custodian.  In order to carry  out its  custodial
duties  under  this  Agreement,  AIDEA  may  designate  and  hire  one  or  more
institutional  trustees  to act as  custodian  for  all  or any  portion  of the
Intertie  Funds and any  securities  which such funds may be  invested  in. Such
institutional custodian shall hold the Intertie Funds and any securities subject
to the terms and conditions of this  Agreement and  applicable  law. AIDEA shall
ensure that any institutional  custodian  provide the appropriate  procedures to
separately account for the monies, and interest and other income earned thereon,
in each of the intertie accounts established pursuant to Section 2.01.

         2.03. Investment of Intertie Funds.

                  (a) Generally. AIDEA shall develop and implement an investment
strategy (the  "Investment  Strategy") in cooperation  with GVEA and CEA for the
investment of the Intertie Funds. In developing the Investment  Strategy,  AIDEA
may also consult with and hire the services of professional investment advisers.
AIDEA is hereby authorized,  on behalf of the Participating  Utilities, to make,
execute,  acknowledge and deliver any and all documents or instruments  that may
be necessary  or  appropriate,  to exercise all other rights and powers,  and to
take all  appropriate  actions  which  it  deems  necessary,  to  implement  the
Investment Strategy.

                  (b) Limitations.  The Investment  Strategy shall be consistent
with the  principles  set out in AS 37.10.071.  Investment of the Intertie Funds
shall be limited to United States  Treasury  debt  obligations,  or  obligations
insured by or guaranteed  by the United States or agencies or  instrumentalities
of the United States. The Investment  Strategy shall take into consideration the
cash flow needs of the Participating  Utilities. The IPG shall submit to AIDEA a
schedule for the use of grant funds,  and any  amendments or changes  thereto as
necessary  from  time to time,  to assist  AIDEA in  developing  the  Investment
Strategy.

                  (c)  Institutional   Investor.   In  order  to  implement  the
Investment  Strategy,  AIDEA may  designate  and hire  either the  institutional
custodian  hired  pursuant to Section  2.02 or another  institutional  entity to
invest the Intertie  Funds pursuant to the  Investment  Strategy,  the terms and
conditions  of this  Agreement  and  applicable  law.  AIDEA  shall  provide the
necessary direction to provide for the investment of the Intertie Funds.

                                       3
<PAGE>

         Section 3. Use of Intertie Funds.

         3.01.  Healy-Fairbanks  Intertie Account. Monies in the Healy-Fairbanks
Intertie  Account and any  designated  subaccounts of such account shall only be
used for the following purposes:

                  (a) all costs  reasonably  related to the design,  permitting,
and construction of the Healy-Fairbanks Intertie;

                  (b)  to  pay  the  costs  associated  with  any  institutional
custodian and/or investor hired pursuant to Sections 2.02 and 2.03(c); and

                  (c)  to  pay  the  costs   associated  with  any  professional
investment adviser hired pursuant to Section 2.03(a).

         3.02.  Anchorage-Kenai  Intertie Account. Monies in the Anchorage-Kenai
Intertie  Account and any  designated  subaccounts of such account shall only be
used for the following purposes:

                  (a) all costs  reasonably  related to the design,  permitting,
arid construction of the Anchorage-Kenai Intertie;

                  (b)  to  pay  the  costs  associated  with  any  institutional
custodian and/or investor hired pursuant to Sections 2.02 and 2.03(c); and

                  (c)  to  pay  the  costs   associated  with  any  professional
investment adviser hired pursuant to Section 2.03(a).

         3.03. Unexpended Funds.

                  (a) Project  Completion.  Any monies  remaining  in either the
Healy-Fairbanks  Intertie Account or the Anchorage-Kenai Intertie Account at the
completion of the  respective  intertie  project and payment of all  outstanding
obligations for the applicable project shall be returned to DOA and deposited in
the State General Fund.

                  (b) No  Construction  of Project.  As required by Section 7 of
the Intertie  Grant  Agreement,  in the event the IPG notifies AIDEA that one or
both of the intertie projects will not be constructed, the monies in the account
associated  with the respective  intertie,  after the payment of all outstanding
obligations, shall be returned to DOA and deposited in the State General Fund.

                  (c)  Unreasonable  Delay of  Projects.  As required by Section
2.4(b) of the Grant Transfer Agreement,  in the event that AIDEA determines,  in
its  reasonable  discretion,  that  development  of either  intertie  project is
unreasonably delayed by the affected  Participating  Utilities,  the unobligated
and unexpended  monies in the account  associated  with the respective  intertie

                                       4
<PAGE>

shall be returned to DOA and deposited in the State  General  Fund.  AIDEA shall
give  fifteen  (15)  days  prior  notice  of  such   decision  to  the  affected
Participating Utilities.

         Section 4.  Disbursement of Intertie Funds.  Except for the payments of
costs incurred by the Authority under Sections 3.01(b),  3.01(c),  3.02(b),  and
3.02(c),   any  disbursement,   release,   encumbrance,   assignment  or  pledge
(hereinafter  collectively  referred to as  "disbursement"  for purposes of this
Section 4) of the Intertie Funds from the intertie  accounts shall be subject to
the procedures, conditions precedent, and limitations/ceilings set forth in this
Section 4.

         4.01. Conditions Precedent.  The disbursement of Intertie Funds for the
purposes  described in Section  3.01(a) and 3.02(a) is not  permitted  until the
following   conditions  precedent  have  been  satisfied  by  the  Participating
Utilities:

                  (a) the Participating Utilities have entered into and executed
a Participation  Agreement,  in a form satisfactory to AIDEA, as required by and
in accordance  with the Intertie Grant Agreement and Section 2.4(c) of the Grant
Transfer Agreement,  and transmitted a copy of the signed and executed agreement
to AIDEA; and

                  (b) the  Participating  Utilities  have  determined and agreed
upon which contractual  obligations  related to the Intertie Grants and Intertie
Funds must be submitted to the Alaska Public Utilities Commission for its review
and approval,  and provided  written notice to AIDEA of such  determination  and
agreement.

         4.02.  Disbursement  Schedules.  Any disbursement of the Intertie Funds
shall be subject to the limits and ceilings set forth in this Section 4.02.

                  (a) Project Phases Ceilings. The Schedule A, which is attached
to and hereby  incorporated into this Agreement,  and has been approved by AIDEA
and the IPG,  sets  forth  certain  dollar  ceilings  for the  initial  phase of
development  for each of the  intertie  projects.  The IPG  shall  submit to the
Authority,  for the  Authority's  review and  approval,  a  proposed  budget for
subsequent phases of development.  No disbursement of Intertie Funds for each of
the respective  interties  which exceeds the  established  ceilings set forth in
Schedule A shall be  permitted.  The parties agree that the IPG is authorized to
request  amendments to Schedule A, subject to AIDEA's  approval,  to provide for
upward adjustment only of the ceilings set for the project phases. The IPG shall
submit any  requests  for  amendments  to  Schedule A to AIDEA in  writing.  The
submittal  shall include  appropriate  findings and an explanation as to why the
existing  ceiling is not  sufficient.  AIDEA  agrees to consider any request for
amendment within fifteen (15) days of the receipt of such request.  No amendment
shall be effective until approved by AIDEA.

                                       5

<PAGE>

                  (b)  Limitation  on Phase II  Expenditures.  Except  as may be
approved by the  Authority,  grant funds will not be applied to reimburse  costs
incurred  for Phase II  activities,  as  described  in Schedule A, until (a) the
Participating  utilities have  demonstrated,  to the  satisfaction of AIDEA, the
ability to raise all additional  amounts needed to complete  construction of the
intertie(s),  and (b) final approval, not subject to further judicial appeal, of
matters  submitted  to the Alaska  Public  Utilities  Commission  related to the
financing or use of the intertie(s).

         4.03. Disbursement Procedures.  Subject to the conditions,  imitations,
and ceilings set forth in Sections 4.01 and 4.02,  and the terms and  conditions
of this  Agreement,  disbursement  of the Intertie Funds shall be subject to the
following procedures:

                  (a) All invoices  shall be initially  submitted to the IPG for
its review and approval.

                  (b) After IPG review and approval,  the IPG shall submit, on a
monthly basis all approved invoices to AIDEA for payment.  Each invoice shall be
referenced  to a  particular  intertie  project  and a  specific  phase for that
project to allow AIDEA to properly  charge the invoice  against the  appropriate
project and to  determine  if payment is  authorized  pursuant  to the  Intertie
Appropriation or the disbursement schedules set forth in Section 4.02. AIDEA may
request further  documentation or explanation with respect to any invoice and is
authorized to withhold  payment  until  documentation,  acceptable to AIDEA,  is
submitted.

                  (c) If payment of an invoice is authorized in accordance  with
(b),  AIDEA shall pay such  invoice  within  fifteen (15) days of receipt of the
invoice.

         Section 5. Audit Requirements.

5.01.  General.  The parties  acknowledge  that the audit  requirements of 2 AAC
45.010 apply to the Intertie Grants,  Intertie Funds, and the use of such monies
for the  purposes  set forth in this  Agreement.  The  Participating  Utilities,
through  the IPG,  agree to have  performed  annual  audits as required by 2 AAC
45.010 on the  departments,  agencies,  or  establishments  of that entity which
actually  received,  spent, or otherwise  administered  the grant funds,  and to
submit to the  state  coordinating  agency,  as such  term is  defined  in 2 AAC
45.010(o)(4),  separate audit reports,  as required by and in accordance  with 2
AAC 45.010,  on an annual basis, for both the  Healy-Fairbanks  Intertie project
and the  Anchorage-Kenai  Intertie  project.  Each audit and the resulting audit
report shall cover the preceding  calendar  year,  and the audit report shall be
submitted  no later than April 15 of each year,  beginning  on April 15, 1995. A
copy of each audit  report shall be  transmitted  to AIDEA at the same time each
audit report is transmitted to the state coordinating  agency. The Participating
Utilities  shall  also  submit  copies to the state  coordinating  agency to the
extent required by 2 AAC 45.010(h).

                                       6
<PAGE>

         5.02.  Audit  Standards  and Report  Contents.  The audits  required by
Section 5.01 shall be conducted by an independent auditor in accordance with the
audit  standards  set forth in 2 AAC 45.010 (c). The audit reports shall address
at a minimum the items set forth in 2 AAC 45. 010 (d) through (g).

         5.03. Additional Requirements. The audits and audit reports required by
this Section 5 shall comply fully with all requirements imposed by 2 AAC 45.010,
and  any  amendments  or  modifications  thereto,  regardless  of  whether  such
requirements  are  specifically  set forth in this Agreement.  In addition,  the
Participating  Utilities  shall ensure that the  requirements of 2 AAC 45.010(j)
are satisfied by any applicable third party recipients.

         5.04.  Books and  Records.  In  addition  to  complying  with the audit
requirements  of Sections  5.01-5.03,  the  Participating  Utilities and the IPC
shall  permit  AIDEA to have  reasonable  access  upon  request to all books and
records (except those protected by law or court rule, such as attorney-client or
work product privilege)  related to the (a) design,  permitting and construction
of the interties; (b) Intertie Grants; and (c) Intertie Funds.

         Section 6. Waiver of Liability/Indemnification.

         6.01.  Waiver  of   Liability/Indemnification  on  Custodial/Investment
Duties.  The  Participating  Utilities,  and all their  successors  and assigns,
hereby waive and release AIDEA,  and all its officers,  directors and employees,
from any and all claims and liabilities of any nature and kind whatsoever  which
are related to or may arise out of AIDEA's  obligations  and duties as custodian
and investor under this  Agreement,  except those which may arise from the gross
negligence or willful misconduct of AIDEA. The Participating  Utilities agree to
and shall  indemnify,  defend and hold  harmless  AIDEA,  and all its  officers,
directors and employees,  from and against, any and all demands,  claims, causes
of action, losses, fines, penalties,  judgments, damages (including punitive and
consequential  damages),  or  liabilities  of any  nature  and  kind  whatsoever
(including  attorney's  fees,  and other  legal fees and  expenses)  incurred in
connection  with or  resulting  from or arising  out of or in any way related to
AIDEA's  obligations  and duties as custodian and investor under this Agreement,
except those which may arise from the gross negligence or willful  misconduct of
AIDEA.

         6.02. Indemnification on Contractor Claims. The Participating Utilities
agree to and  shall  indemnify,  defend  and hold  harmless  AIDEA,  and all its
officers,  directors  and  employees,  from and  against,  any and all  demands,
claims,  causes  of  action,  losses,  fines,  penalties,   judgments,   damages
(including punitive and consequential damages), or liabilities of any nature and
kind whatsoever  (including  attorney's fees, and other legal fees and expenses)
incurred in  connection  with or resulting  from or arising out of or in any way
related to the design and  construction of the interties,  which may be asserted
against  AIDEA,  or its  officers,  directors or employees,  by any  contractor,
subcontractor, consultant, or third party or entity.

                                       7
<PAGE>

         Section 7. Miscellaneous/General Terms.

         7.01. No Third-Party Beneficiaries.  Nothing in this Agreement shall be
interpreted  or  construed  as  creating  any rights or  privileges  of any kind
whatsoever in persons or entities who are not parties to this Agreement.

         7.02. Applicable Law and Venue. This Agreement shall be construed under
the laws of the  State of  Alaska  and any  dispute  shall  be  resolved  in the
Superior Court for the State of Alaska,  Third Judicial District,  at Anchorage,
Alaska.

         7.03. No Strict Construction.  This Agreement was drafted in accordance
with the wishes of all parties and after negotiation and discussion  between all
parties, and all, parties have been represented by counsel in such negotiations.
The rule of  construction  that a contract shall be construed  against the party
who drafted it shall not apply to construction of this Agreement.

         7.04. Counterparts.  This Agreement may be executed in counterparts, in
which case all such counterparts shall constitute one and the same Agreement.

         7.05.  Successor and Assigns.  This Agreement shall be binding upon the
parties and their successors and assigns.

         7.06.  Modifications/Amendments.  This Agreement may not be modified or
amended except by a writing signed by all the parties.

         7.07.  Captions/Headings.  All  captions  and  headings  used  in  this
Agreement are for the  convenience  of reference only and shall not be construed
as part of the Agreement.

         IN WITNESS  WHEREOF,  the  parties  have caused  this  Agreement  to be
executed on the date first above written.

                                 ALASKA INDUSTRIAL DEVELOPMENT &EXPORT AUTHORITY

                                 By:            /s/
                                    --------------------------------------------
                                 Its:  Executive Director
                                     -------------------------------------------

                                       8
<PAGE>

                                 GOLDEN VALLEY ELECTRIC ASSOCIATION, INC.

                                 By:            /s/
                                    --------------------------------------------
                                 Its:  General Manager
                                     -------------------------------------------

                                 FAIRBANKS MUNICIPAL UTILITIES SYSTEM

                                 By:            /s/
                                    --------------------------------------------
                                 Its:  City Manager
                                     -------------------------------------------

                                 ANCHORAGE MUNICIPAL LIGHT & POWER

                                 By:
                                    --------------------------------------------
                                 Its: Mayor, Municipality of Anchorage
                                     -------------------------------------------

                                 CHUGACH ELECTRIC ASSOCIATION, INC.

                                 By:
                                    --------------------------------------------
                                 Its: General Manager
                                     -------------------------------------------

                                 ALASKA  ELECTRIC  GENERATION  AND  TRANSMISSION
                                 COOPERATIVE,  INC.  on  behalf  of its  members
                                 (Matanuska Electric Association, Inc. and Homer
                                 Electric Association, Inc.)

                                 By:
                                    --------------------------------------------
                                 Its:   Executive Mgr
                                     -------------------------------------------

                                       9
<PAGE>

                                 CITY OF SEWARD

                                 By:
                                    --------------------------------------------
                                 Its:   City Manager
                                     -------------------------------------------

                                       10
<PAGE>

                                  SCHEDULE A-1

                            HEALY-FAIRBANKS INTERTIE

1.       PHASE DESCRIPTION

         Phase I  -        Design
         Phase II -        Construction

         These  phases  will  be  conducted  sequentially.   However,  efficient
performance will dictate some overlapping of phases.

2.       PHASE I - DESIGN

         a. The Phase I ceiling shall be $6.64 million.

         b. Phase I includes  the project  permitting,  engineering,  and design
including both project definition and detailed design activities.  Specifically,
Phase I shall include:

                  (1)      Environmental Assessment

                           o        DVG Survey System
                           o        Archaeological Investigation

                  (2)      Line - Engineering and Design

                           o        Geotechnical
                           o        Easements and Land Rights

                  (3)      Substation Design

                  (4)      Energy Storage System Design

                           o        System Studies for Scoping

                  (5)      APUC and/or REA Approvals

                  (6)      Develop Finance Plan

                  (7)      Develop and Issue Bid Documents

                                       11
<PAGE>

                  (8)      Development of the Phase II Ceiling for Submission to
                           AIDEA for Approval

3.       PHASE II - CONSTRUCTION

         a. Phase II ceiling shall be $____________).1

         b. Phase II shall include the  procurement and receipt of equipment and
materials at the job sites and site management for installation,  checkout,  and
start-up.

         c. Specifically, Phase II shall include:

                  (1)      Transmission Line Construction

                           o        Link 1
                           o        Link 2
                           o        Link 3
                           o        Link 4
                           o        Link 5
                           o        Construction Management
                           o        Right-of-Way Clearing

                  (2)      Substation

                           o        Wilson Substation
                           o        Healy Substation
                           o        Construction Management

                  (3)      Energy Storage System Fabrication Installation

--------
         1 To be determined pursuant to 2(b)(8), above.

                                       12
<PAGE>

                                  SCHEDULE A-2

                            ANCHORAGE-KENAI INTERTIE

1.       PHASE DESCRIPTION - Anchorage-Kenai 138 kV Intertie ($84.1 Million)

         Phase I  -        Route Selection and Preliminary Design
         Phase II -        Final Design and Construction

         These  phases  will  be  conducted  sequentially.   However,  efficient
performance will dictate some overlapping of phases.

2.       PHASE I - ROUTE SELECTION & PRELIMINARY DESIGN

         a.       The Phase I ceiling shall be $5.1 million.

         b.       Phase I includes the following:

                  (1)      Development and Approval of Project Team
                  (2)      Preliminary Environmental Assessment
                  (3)      Preliminary     Geotechnical    and    Archaeological
                           Investigation
                  (4)      Preliminary Easement Investigation
                  (5)      Identify   Corridors,   Determine   Alternate   Route
                           Alignments
                  (6)      Prepare Route Selection Report
                  (7)      Investigate Design Alternatives
                  (8)      Approval  of Line Route End  Points  and  Preliminary
                           Design
                  (9)      Development of the Phase II Ceiling for Submission to
                           AIDEA for Approval

3.       PHASE II- FINAL DESIGN AND CONSTRUCTION

         a.       The Phase II ceiling will be $_____.2

         b.       Phase II includes the completion of the following tasks:

                  (1)      Final Environmental, Geotechnical, and Archaeological
                           Investigations

--------
         2 To be determined pursuant to 2(b)(9), above.

                                       13
<PAGE>

                  (2)      Selection of Specific Location of Facilities
                  (3)      Procurement of Easements
                  (4)      Design Modifications to Bernice Lake Substation
                  (5)      Design Submarine Cable Terminal Stations
                  (6)      Design Submarine Cable Crossing Specifications
                  (7)      Preparation   of   Functional    Design,    Drawings,
                           Specifications, and Bid Documents and Award
                  (8)      Preparation of Construction and Material Contracts
                  (9)      Right-of-Way Clearing
                  (10)     Transmission Line Construction
                           o        South Kenai Line
                           o        North Kenai Line
                           o        Anchorage Line
                  (11)     Modification of Bernice Lake Substation
                  (12)     Submarine Cable Terminal Stations
                  (13)     Submarine Cable Crossing
                  (14)     Commissioning and Project Closeout

                                       14

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