Document:

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                                                                 Exhibit 10(W)

                      TRANSITIONAL POWER PURCHASE AGREEMENT

                                 BY AND BETWEEN

                          SIERRA PACIFIC POWER COMPANY

                                       AND

                                 VALMY POWER LLC

DATED:  OCTOBER 16, 2000

ASSET BUNDLE:  NORTH VALMY
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                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

Section                                                                                                        Page
-------                                                                                                        ----
<S>      <C>                                                                                                   <C>
 1.      DEFINITIONS..............................................................................................1
 2.      TERM.....................................................................................................8
 3.      SECURITY................................................................................................10
 4.      SUPPLY SERVICE..........................................................................................11
 5.      NOTIFICATION............................................................................................14
 6.      PRICING OF ENERGY AND ANCILLARY SERVICES................................................................15
 7.      INVOICING AND PAYMENTS..................................................................................16
 8.      REGULATORY APPROVALS....................................................................................20
 9.      COMPLIANCE..............................................................................................20
10.      INDEMNIFICATION.........................................................................................21
11.      LIMITATION OF LIABILITY.................................................................................22
12.      FORCE MAJEURE...........................................................................................23
13.      DISPUTES................................................................................................24
14.      NATURE OF OBLIGATIONS...................................................................................27
15.      SUCCESSORS AND ASSIGNS..................................................................................27
16.      REPRESENTATIONS.........................................................................................29
17.      DEFAULT AND REMEDIES....................................................................................29
18       FACILITY ADDITIONS AND MODIFICATIONS....................................................................30
19.      COORDINATION............................................................................................31
20.      EMERGENCY AND NONEMERGENCY CONDITION RESPONSE...........................................................31
21.      OUTAGE SCHEDULING.......................................................................................31
22.      REPORTS.................................................................................................32
23.      COMMUNICATIONS..........................................................................................32
24.      NOTICES.................................................................................................33
25.      MERGER..................................................................................................34
26.      HEADINGS................................................................................................34
27.      COUNTERPARTS AND INTERPRETATION.........................................................................34
28.      SEVERABILITY............................................................................................34
29.      WAIVERS.................................................................................................35
30.      AMENDMENTS..............................................................................................35
31.      TIME IS OF THE ESSENCE..................................................................................35
32.      APPROVALS...............................................................................................36
33.      PLR SERVICE.............................................................................................36
34.      CONFIDENTIALITY.........................................................................................36
35.      CHOICE OF LAW...........................................................................................38
</TABLE>

<TABLE>
<CAPTION>

Exhibits                                                                                                       Page
--------                                                                                                       ----
<S>               <C>                                                                                          <C>
EXHIBIT A         ASSET BUNDLE CAPACITIES AND OPERATING PARAMETERS..............................................A-1
EXHIBIT B         PRICE FLOOR OF ENERGY, PRICE CEILING OF ENERGY, AND PRICE OF
                  ANCILLARY SERVICES        ....................................................................B-1
EXHIBIT C         SUPPLIER'S MONTHLY INVOICE....................................................................C-1
EXHIBIT D         BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS...................................................D-1
EXHIBIT E         YEAR END TRUE-UP INVOICE......................................................................E-1
EXHIBIT F         NOTICES, BILLING AND PAYMENT INSTRUCTIONS.....................................................F-1
EXHIBIT G         FORM OF AVAILABILITY NOTICE...................................................................G-1
EXHIBIT H         FORM OF GUARANTEE.............................................................................H-1
EXHIBIT I         COMPANY OBSERVED HOLIDAYS.....................................................................I-1
EXHIBIT J         ADJUSTMENTS TO TPPA AMOUNT....................................................................J-1
EXHIBIT K         ADJUSTMENTS TO MINIMUM ANNUAL TAKE............................................................K-1
EXHIBIT L         ENERGY APPLICABLE TO MINIMUM ANNUAL TAKE......................................................L-1
EXHIBIT M         ASSET BUNDLE CONTRACTUAL AND OPERATIONAL CONSTRAINTS..........................................M-1
</TABLE>
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                      TRANSITIONAL POWER PURCHASE AGREEMENT

This Agreement is made and entered into as of October 16, 2000 by and between
Sierra Pacific Power Company, a Nevada corporation ("Buyer"), and Valmy Power
LLC, a Delaware limited liability company (the "Supplier"). Buyer and Supplier
are referred to individually as a "Party" and collectively as the "Parties."

WITNESSETH:

WHEREAS, Buyer is selling its North Valmy generating station and other assets
associated therewith to NRG Energy, Inc., an affiliate of Supplier (the "Asset
Sale");

WHEREAS, notwithstanding the Asset Sale, Buyer expects that it has been
designated as the Provider of Last Resort ("PLR") for its Nevada retail electric
customers who are unable to obtain electric service from an alternative seller
or who fail to select an alternative seller. The load required to serve such
customers, plus the customers under those wholesale sales agreements existing at
the Effective Date, is referred to herein as Buyer's Transitional Resource
Requirement; and

WHEREAS, as a result of the Asset Sale, Buyer will no longer have its interest
in the North Valmy generating station as a source of supply for its Transitional
Resource Requirement; and

WHEREAS, Supplier has or is willing to secure the necessary resources to provide
a portion of Buyer's Transitional Resource Requirement; and

WHEREAS, Buyer desires to purchase from Supplier and Supplier desires to sell
Energy and Ancillary Services under contract to Buyer; and

NOW, THEREFORE, in consideration of the mutual covenants, representations and
agreements hereinafter set forth, and intending to be legally bound hereby, the
Parties agree as follows:

1.       DEFINITIONS

         1.1      Format.

                  1.1.1    References to Articles and Sections herein are
                           cross-references to Articles and Sections,
                           respectively, in this Agreement, unless otherwise
                           stated.

                  1.1.2    Any parts of this Agreement which are incorporated by
                           reference shall have the same meaning as if set forth
                           in full text herein.

                                       2
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         1.2      Definitions. As used in this Agreement, the following terms
                  -----------
                  shall have the meanings set forth below:

                  1.2.1    "Agreement" means this Agreement together with the
                            ---------
                           Exhibits attached hereto, as such may be amended from
                           time to time.

                  1.2.2    "Adjusted Replacement Cost of Energy" means the
                            -----------------------------------
                           Replacement Cost of Energy that will be due from
                           Supplier after True-up in accordance with the
                           provisions of Section 7.5. Example determinations of
                           the Adjusted Replacement Cost of Energy are shown on
                           Exhibit E.

                  1.2.3    "Ancillary Services" means those capacity-related
                            ------------------
                           services as listed in Exhibit B as well as the Energy
                           component of such services. These services are
                           defined in Buyer's OATT.

                  1.2.4    "Asset Bundle" means the North Valmy generating
                            ------------
                           station and other assets associated therewith
                           pursuant to the terms of the Asset Sale Agreement.

                  1.2.5    "Asset Bundle Capacity" means, with respect to each
                            ---------------------
                           unit listed in Exhibit A, the net generating capacity
                           (in megawatts ("MW")) of such unit, as modified from
                           time to time in accordance with Section 5.2, Section
                           20, and Section 21, and not to exceed at any time the
                           net capacity for each unit listed in Exhibit A. Asset
                           Bundle Capacity shall also mean, as the context
                           requires, the Energy (in megawatt-hours ("MWh")) and
                           the Ancillary Services which the units would be
                           capable of producing if they operated at the capacity
                           level described in the first sentence of this Section
                           1.2.5.

                  1.2.6    "Asset Sale" has the meaning set forth in the
                            ----------
                           Recitals.

                  1.2.7    "Asset Sale Agreement" means the Agreement between
                            --------------------
                           Buyer and Supplier's affiliate, NRG Energy, Inc.,
                           dated as of October 16, 2000, to purchase Buyer's
                           Asset Bundle.

                  1.2.8    "Asset Sale Closing" means the transfer of Buyer's
                            ------------------
                           ownership of the Asset Bundle through the
                           consummation of the Asset Sale pursuant to the terms
                           of the Asset Sale Agreement.

                  1.2.9    "Average Cost of Delivered Energy" means the total
                            --------------------------------
                           cost of Delivered Energy for the Contract Year after
                           the application of the Annual True-up Mechanism from
                           Section 7.5 divided by the total Delivered Energy for
                           the Contract Year. Example determinations of Average
                           Cost of Delivered Energy are shown on Exhibit E.

                                       3
<PAGE>

                  1.2.10   "Availability Notice" means a notice delivered from
                            -------------------
                           time to time by Supplier to Buyer pursuant to Section
                           5.2 notifying Buyer of changes in the availability of
                           the Asset Bundle.

                  1.2.11   "Business Day" means any day other than Saturday,
                            ------------
                           Sunday, and any day that is an observed holiday by
                           Buyer as shown on Exhibit I.

                  1.2.12   "Buyer's OATT" means Buyer's then-effective Open
                            ------------
                           Access Transmission Tariff, as it may be amended,
                           which as been accepted for filing by the FERC.

                  1.2.13   "CALPX" means the California Power Exchange and any
                            -----
                           successor entity thereto.

                  1.2.14   "Confidential Information" has the meaning set forth
                            ------------------------
                           in Section 34.

                  1.2.15   "Contract Year" means, with respect to the first
                            -------------
                           Contract Year, the period beginning on the Effective
                           Date and, with respect to each subsequent Contract
                           Year, the period immediately following the end of the
                           preceding Contract Year, and in each case ending on
                           the earlier of the date which is twelve (12) months
                           thereafter or the termination date of this Agreement.

                  1.2.16   "Control Area" has the meaning set forth in Buyer's
                            ------------
                           OATT.

                  1.2.17   "Control Area Operator" means an entity or
                            ---------------------
                           organization, and its representatives, which is
                           responsible for operating and maintaining the
                           reliability of the electric power system(s) within
                           the Buyer's Control Area. The Control Area Operator
                           is also referred to as the transmission operator.

                  1.2.18   "Credit Amount" shall mean an amount equal to the
                            -------------
                           TPPA Amount, plus an additional amount equal to
                           $40/MWh multiplied by 286 megawatts, multiplied by
                           the number of hours remaining in this Agreement until
                           March 1, 2003.

                  1.2.19   "Delivered Amount" means, with respect to any
                            ----------------
                           Dispatch Hour, the Energy delivered by Supplier to
                           Buyer at the designated Point(s) of Delivery during
                           such Dispatch Hour, whether or not such Energy was
                           generated by the Asset Bundle, plus any additional
                           amounts pursuant to Section 4.1.2, Section 4.1.3 and
                           the Ancillary Services provided by Supplier for Buyer
                           during any Dispatch Hour pursuant to the terms of
                           this Agreement.

                  1.2.20   "Derating" means a reduction to the Asset Bundle
                            --------
                           Capacity.

                                       4
<PAGE>

                  1.2.21   "Dispatch Hour" means the prescribed hour(s) when
                            -------------
                           Energy is to be delivered by Supplier to Buyer at the
                           designated Point(s) of Delivery and the prescribed
                           hour(s) when Ancillary Services are to be provided to
                           the ISA by Supplier on behalf of Buyer.

                  1.2.22   "EDU" means electric distribution utility, the
                            ---
                           organization with the responsibility for the
                           distribution of energy over Buyer's distribution
                           system to retail end-users.

                  1.2.23   "Effective Date" means the date that this Agreement
                            --------------
                           becomes effective which shall be the date on which
                           the Closing Date, as defined in the Asset Sale
                           Agreement, actually occurs; provided, however, that
                           the Effective Date shall not occur until the FERC has
                           accepted this Agreement without condition or the
                           Parties have modified this Agreement as provided in
                           Section 2.2.2 and the FERC has accepted the modified
                           Agreement for filing.

                  1.2.24   "Emergency Condition" shall mean a public declaration
                            -------------------
                           by the ISA or Control Area Operator that the Control
                           Area is in danger of imminent voltage collapse or
                           uncontrollable cascading outages.

                  1.2.25   "Energy" means electricity (measured in MWh) and
                            ------
                           associated power-producing capacity to be provided by
                           Supplier to Buyer pursuant to this Agreement. Also
                           known as "firm energy and associated firm capacity".

                  1.2.26   "Event of Default" has the meaning set forth in
                            ----------------
                           Section 17 hereof.

                  1.2.27   "FERC" means the Federal Energy Regulatory Commission
                            ----
                           and any successor agency thereto.

                  1.2.28   "Force Majeure" has the meaning set forth in Section
                            -------------
                           12 hereof.

                  1.2.29   "GAAP" means Generally Accepted Accounting Principles
                            ----
                           for the United States.

                  1.2.30   "Good Utility Practice" means the applicable
                            ---------------------
                           practices, methods, and act:

                           (i)      required by applicable Laws, permits and
                                    reliability criteria, whether or not the
                                    Party whose conduct at issue is a member
                                    thereof, and

                           (ii)     otherwise engaged in or approved by a
                                    significant portion of the United States
                                    electric utility industry during the
                                    relevant time period, which, in the exercise
                                    of reasonable judgement in light of the
                                    facts known at the time the decision was
                                    made, could have been expected to accomplish
                                    the desired result at a reasonable cost
                                    consistent with good business practices,
                                    safety, environmental

                                       5
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                                    protection, economy and expediency. Good
                                    Utility Practice is not intended to be
                                    limited to the optimum practice, method or
                                    act to the exclusion of all others, but
                                    rather to practices, methods or acts
                                    generally accepted in the United States
                                    electric utility industry.

                  1.2.31   "Governmental Authority" means any foreign, federal,
                            ----------------------
                           state, local, tribal or other governmental,
                           regulatory or administrative agency, court,
                           commission, department, board, or other governmental
                           subdivision, legislature, rulemaking board, tribunal,
                           arbitrating body, or other governmental authority.

                  1.2.32   "Gross Replacement Costs of Energy" means Buyer's
                            ---------------------------------
                           Replacement Cost of Energy prior to adjustment for
                           the amount that Buyer would have paid for the Energy
                           if Supplier had delivered the Energy to Buyer.
                           Example determinations of Gross Replacement Costs of
                           Energy are shown on Exhibit D.

                  1.2.33   "Guarantee" has the meaning set forth in Section
                            ---------
                           3.1.2 hereof.

                  1.2.34   "Guarantor" has the meaning set forth in Section
                            ---------
                           3.1.2 hereof.

                  1.2.35   "Invoiced Replacement Costs" means the Replacement
                            --------------------------
                           Costs which have been billed to Supplier or
                           subtracted from payments to Supplier in accordance
                           with the provisions of Section 4.2 and Section 7.4.

                  1.2.36   "ISA" means the Mountain West Independent System
                            ---
                           Administrator, or the regional transmission
                           organization authorized with the responsibility for
                           the scheduling and administration of Energy and
                           Ancillary Services over, through and within the
                           Transmission System in coordination with other
                           interconnected entities to provide transmission
                           services. The ISA is also referred to herein as
                           transmission administrator.

                  1.2.37   "ISA's OATT" means the ISA's then-effective Open
                            ----------
                           Access Transmission Tariff, as it may be amended,
                           which as been accepted for filing by the FERC.

                  1.2.38   "Law" means any law, treaty, code, rule, regulation,
                            ---
                           order, determination, permit, certificate,
                           authorization, or approval of an arbitrator, court or
                           other Governmental Authority which is binding on a
                           Party or any of its property.

                  1.2.39   "Limit on Excused Energy" means the amount of energy
                            -----------------------
                           that can be excused under the provisions of Section
                           12.4 as shown on Exhibit A.

                  1.2.40   "Market Price of Energy" has the meaning set forth in
                            ----------------------
                           Section 6.2.1.

                                       6
<PAGE>

                  1.2.41   "Minimum Annual Energy Take" has the meaning set
                            --------------------------
                           forth in Section 4.1.2.

                  1.2.42   "Minimum Hourly Energy Take" has the meaning set
                            --------------------------
                           forth in Section 4.1.3.

                  1.2.43   "Minimum Investment Grade Rating" of a Person means
                            -------------------------------
                           that such Person has a minimum credit rating on its
                           senior unsecured debt securities of at least two of
                           the following ratings: (i) BBB as determined by
                           Standard & Poor's Corporation, (ii) Baa2 as
                           determined by Moody's Investors Service, Inc., or
                           (iii) a comparable rating by another nationally
                           recognized rating service reasonably acceptable to
                           Buyer.

                  1.2.44   "Minimum Tangible Net Worth" means the total book
                            --------------------------
                           value of shareholder's equity less the balance of
                           goodwill, as reported on the latest quarterly balance
                           sheet prepared in accordance with Generally Accepted
                           Accounting Principles (GAAP).

                  1.2.45   "Negotiated Service" has the meaning set forth in the
                            ------------------
                           wholesale generation tariff filed in FERC Docket No.
                           ER00-2018-000.

                  1.2.46   "NERC" means the North American Electric Reliability
                            ----
                           Council and any successor entity thereto.

                  1.2.47   "Nonemergency Condition" shall mean the
                            ----------------------
                           determination, direction or order by the ISA, or
                           Control Area Operator to Supplier and/or Buyer to
                           change the Supply Amount which is not a result of or
                           due to an Emergency Condition. A Nonemergency
                           Condition includes an insufficiency of Ancillary
                           Services to securely operate the Control Area.

                  1.2.48   "Operating Representatives" means the persons
                            -------------------------
                           designated to transmit and receive routine operating
                           and emergency communications required under this
                           Agreement.

                  1.2.49   "Party" has the meaning set forth in the preamble of
                            -----
                           this Agreement.

                  1.2.50   "Permitted Deratings" means those reductions to the
                            -------------------
                           Asset Bundle Capacity of which Supplier may notify
                           Buyer from time to time in an Availability Notice
                           pursuant to Section 5.2.

                  1.2.51   "Person" means any natural person, partnership,
                            ------
                           limited liability company, joint venture,
                           corporation, trust, unincorporated organization, or
                           governmental entity or any department or agency
                           thereof.

                  1.2.52   "Point of Delivery" means the point (s) which has
                            -----------------
                           (have) been specified as the Interconnection Point(s)
                           in the Interconnection Agreement

                                       7
<PAGE>

                           between Buyer and Supplier, dated October 16, 2000,
                           as it may be amended from time to time, as well as
                           any alternative locations agreed upon pursuant to
                           Section 4.1.6.

                  1.2.53   "Price Ceiling of Energy" means the ceiling price of
                            -----------------------
                           Energy as stated in Exhibit B.

                  1.2.54   "Price Floor of Energy" means the floor price of
                            ---------------------
                           Energy as stated in Exhibit B.

                  1.2.55   "Provider of Last Resort (PLR)" has the meaning set
                            -----------------------------
                           forth in the Recitals.

                  1.2.56   "PUCN" means the Public Utilities Commission of
                            ----
                           Nevada and any successor entity thereto.

                  1.2.57   "Recourse Service" has the meaning set forth in the
                            ----------------
                           wholesale generation tariff filed in FERC Docket No.
                           ER00-2018-000.

                  1.2.58   "Replacement Costs" means with respect to a period of
                            -----------------
                           time, the difference between (a) the actual costs,
                           including without limitation related penalties and
                           transmission costs, incurred by Buyer to replace any
                           shortfall between (1) the Supply Amount and (2) the
                           Delivered Amounts of Energy, (or in the case of
                           Ancillary Services the Supplier's schedule of
                           Ancillary Services) during such period and (b) the
                           payments the Supplier would have been entitled to in
                           respect of such shortfall in delivery; provided that
                           Replacement Costs shall also be subject to the annual
                           true-up mechanism set forth in Section 7.5.

                  1.2.59   "Supply Amount" means, with respect to each Dispatch
                            -------------
                           Hour, the amount of Energy and Ancillary Services,
                           not to exceed the Asset Bundle Capacity for such
                           Dispatch Hour, requested by Buyer to be delivered by
                           Supplier during any Dispatch Hour. The Supply Amount
                           for any Dispatch Hour shall be determined pursuant to
                           Section 5.1.

                  1.2.60   "Total Amount of Energy Replaced" means the summation
                            -------------------------------
                           of Replacement Energy as shown on Exhibit E.

                  1.2.61   "TPPA Amount" means the amount paid by Buyer to
                            -----------
                           Supplier in consideration of this Agreement.

                  1.2.62   "Transitional Resource Requirement" or "TRR" means
                            ---------------------------------
                           the Energy and loss compensation necessary for Buyer
                           to meet its obligations as a Provider of Last Resort
                           (PLR) for Nevada and under those wholesale sales
                           agreements existing at the Effective Date.

                                       8
<PAGE>

                  1.2.63   "Transmission System" means the facilities used to
                            -------------------
                           provide transmission service within Buyer's Control
                           Area in accordance with Buyer's OATT or the ISA's
                           OATT, as may be applicable.

                  1.2.64   "WSCC" means the Western Systems Coordinating Council
                            ----
                           and any successor entity thereto.

2.       TERM

         2.1      Term. Unless terminated earlier pursuant to the terms of this
                  ----
                  Agreement, the term of this Agreement shall commence on the
                  Effective Date and continue until the earlier of the effective
                  date of an order by a Governmental Authority terminating
                  Buyer's PLR responsibility, or March 1, 2003. Supplier shall
                  provide service under this Agreement commencing on the first
                  hour on the day after the Effective Date.

         2.2      Termination.
                  -----------

                  2.2.1    Except pursuant to Sections 2.2.2 or 17.4, this
                           Agreement may not be terminated without the explicit
                           prior written approval of Buyer.

                  2.2.2    If, prior to the Asset Sale Closing, the FERC or any
                           other Governmental Authority places conditions on or
                           requires revisions of this Agreement which have a
                           material adverse effect on Supplier or Buyer, the
                           Parties agree to negotiate in good faith those
                           amendments to the Agreement reasonably needed to
                           preserve the bargain between the Parties. If the
                           Parties fail to negotiate mutually acceptable
                           amendments to this Agreement within sixty (60) days
                           of such action by the FERC or other Governmental
                           Authority, either Party may terminate the Agreement
                           after first notifying the other Party in writing at
                           least ten (10) Business Days prior to the termination
                           date; provided that neither Party may exercise a
                           right of termination pursuant to this Section 2.2.2
                           after the Asset Sale Closing.

                  2.2.3    This Agreement may be terminated with the mutual
                           agreement of the Parties.

                  2.2.4    This Agreement also may be terminated at Buyer's
                           unilateral discretion after the Effective Date
                           subject to Section 2.3 provided FERC has accepted the
                           wholesale generation tariff filed in FERC Docket No.
                           ER00-2018-000 on terms and conditions that do not
                           have a material adverse effect on the business,
                           operations or financial condition of the Purchased
                           Assets, as defined in the Asset Sale Agreement.

                           If within seven (7) days from the date of receipt by
                           Supplier from Buyer of the FERC's order in Docket No.
                           ER00-2018-000, Supplier does not provide to Buyer its
                           written, reasonable determination and rationale that
                           such FERC order has resulted in a material adverse
                           effect, as stated in the first paragraph of this
                           Section 2.2.4, such FERC order

                                       9
<PAGE>

                           shall be deemed automatically acceptable to Supplier.
                           If Supplier timely submits its determination but
                           Buyer disagrees with Supplier's determination
                           regarding the effect of such FERC order, the
                           disagreement shall be subject to resolution pursuant
                           to Section 13 of this Agreement, in which case this
                           Agreement shall remain in effect until a final
                           determination to the contrary is made pursuant to
                           Section 13.

                  2.2.5    Any termination of this Agreement pursuant to this
                           Section 2 shall not take effect until FERC either
                           authorizes the termination or accepts a written
                           notice of termination.

         2.3      Effect of Termination.
                  ---------------------

                  2.3.1    Adjustment of TPPA Amount. If the Effective Date of
                           -------------------------
                           this Agreement is before June 1, 2001, the TPPA
                           Amount shall be adjusted to equal (1) the TPPA Amount
                           multiplied by (2) 100% plus the sum of the monthly
                           adjustments from Exhibit J for each month or portion
                           thereof between the Effective Date and June 1, 2001.
                           An example calculation is shown on Exhibit J.

                           If the Effective Date of this Agreement is after June
                           1, 2001, the TPPA Amount shall be adjusted to equal
                           (1) the TPPA Amount multiplied by (2) 100% minus the
                           sum of the monthly adjustments from Exhibit J for
                           each month or portion thereof between June 1, 2001
                           and the Effective Date. An example calculation is
                           shown on Exhibit J.

                           If this Agreement is terminated before March 1, 2003,
                           Supplier shall pay to Buyer an amount, in accordance
                           with the provisions of Section 7, equal to the TPPA
                           Amount which existed before any adjustment in
                           accordance with the first or second paragraph of this
                           Section 2.3.1, multiplied by the sum of the monthly
                           adjustments for each month or portion thereof between
                           the date on which this Agreement is terminated and
                           March 1, 2003. An example calculation is shown on
                           Exhibit J.

                  2.3.2    Any default or termination of this Agreement shall
                           not release either Party from any applicable
                           provisions of this Agreement with respect to:

                           2.3.2.1  The payment of liquidated damages pursuant
                                    to Sections 4.2, 12, 17, 18, or 21.

                           2.3.2.2  Indemnity obligations contained in Section
                                    10, to the extent of the statute of
                                    limitations period applicable to any third
                                    party claim.

                           2.3.2.3  Limitation of liability provisions contained
                                    in Section 11.

                                       10
<PAGE>

                           2.3.2.4  Payment of any unpaid amounts in respect of
                                    obligations arising prior to or resulting
                                    from termination.

                           2.3.2.5  For a period of one (1) year after the
                                    termination date, the right to raise a
                                    payment dispute and the resolution thereof
                                    pursuant to Section 13.

                           2.3.2.6  The resolution of any dispute submitted
                                    pursuant to Section 13 prior to, or
                                    resulting from, termination.

3.       SECURITY

         3.1      Supplier Certification; Guarantee. As a condition of Buyer's
                  ---------------------------------
                  execution of, and continuing compliance with, this Agreement,
                  Supplier shall at Supplier's option comply with the provisions
                  of either Section 3.1.1 or Section 3.1.2.

                  3.1.1    Supplier Certification. Supplier shall (a) provide a
                           ----------------------
                           certificate from a duly authorized corporate officer
                           of Supplier certifying that, as of the Effective
                           Date, Supplier has a credit rating equal to or higher
                           than the Minimum Investment Grade Rating; or (b) post
                           a letter of credit in a form reasonably acceptable to
                           Buyer in the amount of the Credit Amount from a
                           financial institution with each of: (i) a credit
                           rating of A2 or better from Moody's Investors
                           Service, Inc., (ii) a credit rating of A or better
                           from Standard & Poor's Corporation, and (iii) a
                           Minimum Tangible Net Worth ("MTNW") of one (1)
                           billion dollars.

                  3.1.2    Guarantee. In the alternative to the provisions of
                           ---------
                           Section 3.1.1, the Supplier may provide a corporate
                           guarantee, in form and substance as set forth in
                           Exhibit H, made by an entity (the "Guarantor") that:

                           3.1.2.1  has a credit rating equal to or higher than
                                    the Minimum Investment Grade Rating,
                                    together with a certificate from a duly
                                    authorized corporate officer of such
                                    Guarantor certifying that, as of the
                                    Effective Date, such Guarantor has a credit
                                    rating equal to or higher than the Minimum
                                    Investment Grade Rating; or

                           3.1.2.2  has a MTNW of no less than one (1) billion
                                    dollars, together with a certificate from a
                                    duly authorized corporate officer of such
                                    Guarantor certifying that, as of the
                                    Effective Date, such Guarantor has a MTNW of
                                    no less than one (1) billion dollars; or

                           3.1.2.3  posts a letter of credit in a form
                                    reasonably acceptable to Buyer in the amount
                                    of the Credit Amount from a financial
                                    institution with each of: (i) a credit
                                    rating of A2 or better from Moody's
                                    Investors Service, Inc., (ii) a credit
                                    rating of A or better from Standard & Poor's
                                    Corporation, and (iii) a Minimum Tangible
                                    Net Worth ("MTNW") of one (1) billion
                                    dollars.

                                       11
<PAGE>

         3.2      Compliance.
                  ----------

                  3.2.1    Reporting. If at any time during the term of this
                           ---------
                           Agreement, Standard & Poor's Corporation, Moody's
                           Investors Service, Inc. or another nationally
                           recognized firm downgrades the credit rating of
                           Supplier, the Guarantor, or the financial institution
                           that issued the letter of credit, as applicable, then
                           Supplier shall provide Buyer with written notice of
                           such change of circumstance within two (2) Business
                           Days of any such change. In the event such a
                           downgrade also constitutes an Event of Default
                           pursuant to Section 17, the requirements of this
                           Section 3.2.1 are in addition to, and not in lieu of,
                           the requirements of Section 17.

4.       SUPPLY SERVICE

         4.1      Obligations of the Parties.
                  --------------------------

         4.1.1    Supply Amount. Supplier shall be required to provide the
                  -------------
                  Supply Amount in any Dispatch Hour. As provided in Section
                  5.1, Buyer shall make reasonable efforts to ensure that the
                  Supply Amount is no greater than necessary to satisfy Buyer's
                  TRR.

                  4.1.1.1  With the Buyer's prior consent, not to be
                           unreasonably withheld or delayed, Supplier shall be
                           entitled to generate or otherwise procure the Supply
                           Amount from sources other than the Asset Bundle.

                  4.1.1.2  Supplier shall deliver the Supply Amount to Buyer
                           during the Dispatch Hour on a continuous basis at the
                           Point(s) of Delivery and shall schedule the Supply
                           Amount in accordance with the Buyer's OATT or the
                           ISA's OATT, as applicable.

                  4.1.1.3  The Buyer at its sole discretion shall designate the
                           allocation of the Supply Amount between Energy and
                           Ancillary Services in accordance with the
                           notification provisions of Section 5.

                           4.1.1.3.1 The Parties recognize that operation of the
                                     Asset Bundle is subject to, and thus the
                                     Supply Amount at times may be limited by,
                                     the operational parameters of the Asset
                                     Bundle. The Parties further recognize that
                                     the consolidation of two or more generating
                                     units into an Asset Bundle precludes
                                     contractual provisions addressing such
                                     operational parameters in a matter normally
                                     applied to Energy purchases from specified
                                     generating units. Consequently, Supplier
                                     will have the

                                       12
<PAGE>

                                     right to raise concerns regarding the
                                     effect of such operational parameters upon
                                     Buyer's day-ahead requests, and Buyer will
                                     make good faith efforts to alleviate
                                     Supplier's concerns.

                           4.1.1.3.2 The Parties further recognize that the
                                     Asset Bundle also is subject to the
                                     contractual and operating constraints set
                                     forth in Exhibit M.

                  4.1.2    Minimum Annual Energy Take. The Buyer shall accept a
                           --------------------------
                           minimum annual energy take during each Contract Year.
                           The Minimum Annual Energy Take shall be set forth on
                           Exhibit A.

                           4.1.2.1   Buyer's Obligation to Take. If Buyer is
                                     --------------------------
                                     unwilling to accept the Minimum Annual
                                     Energy Take for any Contract Year, as may
                                     be adjusted pursuant to Section 4.1.2.2,
                                     the difference (in MWh) between the Supply
                                     Amount of Energy (including consideration
                                     for Energy that would have been taken but
                                     was unavailable due to Permitted Deratings
                                     or Force Majeure, as well as the Total
                                     Amount of Energy Replaced) and the Minimum
                                     Annual Energy Take shall be billed at the
                                     Price Ceiling of Energy less the Price
                                     Floor of Energy. An example of the monthly
                                     determination of the amount of Energy to be
                                     credited against the Minimum Annual Energy
                                     Take is shown on Exhibit L.

                           4.1.2.2   Adjustments to Minimum Annual Energy Take.
                                     -----------------------------------------
                                     Buyer shall have the right to reduce the
                                     Minimum Annual Energy Take if the number of
                                     customers taking electric service from
                                     Buyer falls below the number of customers
                                     on December 31, 2000./1/ Adjustments will
                                     be applicable, on a pro rata basis, on the
                                     first (1st) day of the month immediately
                                     following Supplier's receipt of Buyer's
                                     notice of adjustment. Buyer shall provide
                                     supporting data in reasonable detail to
                                     support its calculations. An example of the
                                     calculation of a revised Minimum Annual
                                     Energy Take is shown on Exhibit K.

                  4.1.3    Minimum Hourly Energy Take. The Buyer shall accept a
                           --------------------------
                           Minimum Hourly Energy Take for any Dispatch Hour if
                           the Supply Amount, or a portion thereof, is provided
                           to Buyer from the Asset Bundle. The Minimum Hourly
                           Energy Take is stated in Exhibit A.

                           4.1.3.1   Buyer's Obligation to Take. If Buyer is
                                     --------------------------
                                     unwilling to accept the Minimum Hourly
                                     Energy Take, the difference (in MWh)

--------------------------------
/1/ If the retail markets are opened to competition prior to December 31, 2000,
the date immediately preceding the date on which the markets are opened will be
substituted for December 31, 2000.

                                       13
<PAGE>

                                     between the Supply Amount of Energy
                                     (including consideration for Energy that
                                     would have been taken but was unavailable
                                     due to Permitted Deratings or Force
                                     Majeure, as well as the Total Amount of
                                     Energy Replaced) and Minimum Hourly Energy
                                     Take shall be billed at the Price Ceiling
                                     of Energy less the Price Floor of Energy.

                  4.1.4    Supplier Rights to Output. Supplier may sell to
                           -------------------------
                           others any portion of the Asset Bundle Capacity in
                           excess of the Supply Amount.

                  4.1.5    Point(s) of Delivery. Supplier shall deliver, and
                           --------------------
                           Buyer shall take delivery of, the Supply Amount of
                           Energy at the Point(s) of Delivery. Subject to
                           Section 4.1.6.2, Supplier shall be responsible for
                           all costs associated with delivery of the Supply
                           Amount of Energy to the Point(s) of Delivery.

                  4.1.6    Alternative Points of Delivery. For any Dispatch
                           ------------------------------
                           Hour, either Party may designate one or more
                           alternative Points of Delivery, subject to the other
                           Party's prior approval and consistent with Buyer's
                           OATT or the ISA's OATT, as applicable, such approval
                           not to be unreasonably withheld or delayed.

                           4.1.6.1   If Supplier has designated an alternative
                                     Point of Delivery, Supplier shall be
                                     responsible for all costs of delivery to
                                     such alternative Point of Delivery.

                           4.1.6.2   If Buyer has designated an alternative
                                     Point of Delivery, Buyer shall be
                                     responsible for all costs of delivery to
                                     such alternative Point of Delivery.

                  4.1.7    Fuel. Buyer shall have no responsibility for any fuel
                           ----
                           procurement or fuel transportation costs or
                           activities associated with the Asset Bundle during
                           the term of this Agreement.

                  4.1.8    Resale. Except as provided in the next sentence, the
                           ------
                           Supply Amount may be resold by Buyer only as
                           necessary to satisfy Buyer's TRR. If, after
                           submitting the day-ahead request of the Supply Amount
                           pursuant to Section 5.1, the Buyer determines the
                           Supply Amount requested exceeds Buyer's actual TRR,
                           then the Buyer also shall resell at wholesale that
                           amount of Energy in excess of Buyer's actual TRR as
                           necessary to balance its load and resources.

                  4.1.9    Right to Review. Buyer and Supplier each shall have
                           ---------------
                           the right to review during normal business hours the
                           relevant books and records of the other Party to
                           confirm the accuracy of such as it pertains to
                           transactions under this Agreement. The review shall
                           be consistent with standard business practices and
                           shall follow reasonable notice to the other Party.
                           Reasonable notice for a review of the previous
                           month's records shall be at least a twenty-four (24)
                           hour period from a Business

                                       14
<PAGE>

                           Day to a subsequent Business Day. If a review is
                           requested of other than the previous month's records,
                           then notice of that request shall be provided with a
                           minimum of seven (7) calendar days written notice by
                           the requesting Party. The notice shall specify the
                           period to be covered by the review. The Party
                           providing records can make reasonable requests that
                           the receiving Party keep the records confidential,
                           and the receiving Party shall take reasonable steps
                           to accommodate such requests.

         4.2      Liquidated Damages.
                  ------------------

                  4.2.1    If the Delivered Amount of Energy is less than the
                           Supply Amount of Energy in any Dispatch Hour during a
                           month, and Replacement Costs computed in respect of
                           such month are greater than zero, then Supplier shall
                           reimburse Buyer for such Replacement Costs. If
                           Supplier's schedule of Ancillary Services is less
                           than the Supply Amount of Ancillary Services in any
                           Dispatch Hour during a month, Supplier shall
                           reimburse Buyer for such Replacement Costs for the
                           difference between Supplier's schedule and the Supply
                           Amount of Ancillary Services. An example of the
                           methodology used to calculate Replacement Costs is
                           provided in Exhibit D.

                  4.2.2    Supplier also shall be responsible for any costs
                           incurred by Buyer associated with a violation of
                           reliability criteria (including but not limited to
                           imbalance costs or penalties) due to a deviation
                           between the Supply Amount and Delivered Amount.

                  4.2.3    The Parties recognize and agree that the payment of
                           such amounts by Supplier pursuant to this Section 4.2
                           is an appropriate remedy in the event of such a
                           failure and that any such payment does not constitute
                           a forfeiture or penalty of any kind, but rather
                           constitutes actual costs to Buyer under the terms of
                           this Agreement.

         4.3      Supplier Operating Representative. Supplier shall provide and
                  ---------------------------------
                  maintain a twenty-four (24) hour seven (7) day per week
                  communication link with Buyer's control center and with
                  Buyer's schedulers. Supplier's operating representatives shall
                  be available to address and make decisions on all operational
                  matters under this Agreement on a twenty-four (24) hour seven
                  (7) day per week basis.

5.       NOTIFICATION

         5.1      Scheduling Notification. Buyer shall provide Supplier with a
                  -----------------------
                  day-ahead request of the Supply Amount one (1) hour prior to
                  when day-ahead bids are due to the CALPX. Buyer shall make
                  reasonable efforts to ensure that the day-ahead request of the
                  Supply Amount is no greater than that amount then projected to
                  be necessary to satisfy Buyer's TRR. In addition, for each
                  day-ahead request, the change in the Supply Amount from one
                  (1) hour to the next hour shall be no greater than the ramping
                  capability of the units within the Asset Bundle as shown

                                       15
<PAGE>

                  in Exhibit A.

         5.2      Availability Notification.
                  -------------------------

                  5.2.1    No later than 5:00 a.m. (Pacific Time) of each day,
                           Supplier shall deliver to Buyer an Availability
                           Notice in the form set forth in Exhibit G.

                  5.2.2    Availability Notices shall provide, for the
                           ninety-six (96) hour period starting at 6:00 a.m.
                           (Pacific Time) that day, Supplier's hourly projection
                           of the unavailability or derating ("Derating") of the
                           Asset Bundle compared to the Asset Bundle Capacity
                           figures stated for each unit in Exhibit A. Each
                           Availability Notice also shall contain, as
                           applicable:

                           (a) the units which are subject to a Derating;
                           (b) the magnitude of the Derating;
                           (c) the hours during which the Derating is expected
                               to apply;
                           (d) the cause of the Derating;
                           (e) the extent, if any, to which the Derating is
                               attributable  to a Permitted Derating; and
                           (f) the projected Asset Bundle Capacity for each
                               unit during the period covered by the
                               Availability Notice, pursuant to Section
                               5.2.4 below.

                  5.2.3    If and to the extent a Derating is the result of one
                           or more of the following causes, it shall be a
                           Permitted Derating:

                           (a) approved planned outages pursuant to Section
                               21;
                           (b) response to an Emergency Condition as described
                               in Section 20; or
                           (c) subject to the limitations expressed in Section
                               12.5, a Force Majeure event.

                  5.2.4    In respect of any Dispatch Hour, the Asset Bundle
                           Capacity of each unit shall be the Asset Bundle
                           Capacity figure stated in Exhibit A minus any
                           Permitted Derating applicable during such hour.

                  5.2.5    Neither the Asset Bundle Capacity nor the Supply
                           Amount shall be reduced by Deratings which are not
                           Permitted Deratings. Supplier shall be responsible
                           for all Replacement Costs, pursuant to Section 4.2.1,
                           caused by Deratings that are not Permitted Deratings.

                                       16
<PAGE>

6.       PRICING OF ENERGY AND ANCILLARY SERVICES

         6.1      Overview. The price of Energy paid by Buyer to Supplier shall
                  --------
                  be based upon a designated hourly market price, subject to
                  monthly floor, monthly ceiling, and annual true-up provisions.
                  The Price Floor of Energy will ensure that Supplier will
                  receive an average price for Energy for each month which is
                  not less than the price stated in Exhibit B. The Price Ceiling
                  of Energy provision provides that the average price of Energy
                  paid to Supplier each month and for each year shall not exceed
                  the price stated in Exhibit B.

         6.2      Price of Energy.
                  ---------------

                  6.2.1    Market Price of Energy. In respect of any Dispatch
                           ----------------------
                           Hour, the designated Market Price of Energy shall be
                           the North of Path 15 ("NP 15") hourly market-clearing
                           price in the day-ahead market from the CALPX as
                           published at the following Web Site (or its successor
                           web site)
                           http://www.calpx.com/prices/index_prices_dayahead_
                           --------------------------------------------------
                           trading.html. Should this hourly market in the day-
                           ------------
                           ahead market not exist for the entire term, the
                           Parties shall agree upon a similar market price
                           index.

                  6.2.2    Price Floor of Energy. The Price Floor of Energy is
                           ---------------------
                           stated in Exhibit B and shall not change during the
                           term of this Agreement.

                  6.2.3    Price Ceiling of Energy. The Price Ceiling of Energy
                           -----------------------
                           is stated in Exhibit B and shall not change during
                           the term of this Agreement.

         6.3      Pricing of Ancillary Services. The price of the capacity
                  -----------------------------
                  component of Ancillary Services is stated in Exhibit B. The
                  price of Ancillary Services shall not change during the term
                  of the Agreement. Supplier shall make available to Buyer and
                  Buyer shall offer to pass through the Energy portion of
                  Ancillary Services with respect to the Supply Amount to the
                  ISA, or Control Area Operator, at the Price Ceiling of Energy
                  (plus expected direct transaction costs). The net proceeds
                  shall be credited to the Supplier pursuant to Section 7.

         6.4      Price Revisions. The Parties waive any and all rights to seek
                  ---------------
                  to revise the provisions of this Agreement, including the
                  prices stated, pursuant to Sections 205 and/or 206 of the
                  Federal Power Act.

         6.5      Recourse Service. Buyer agrees not to purchase Recourse
                  ----------------
                  Service during the term of the Agreement. However, Buyer is
                  permitted to purchase Negotiated Service during the term of
                  the Agreement.

                                       17
<PAGE>

7.       INVOICING AND PAYMENTS

         7.1      Invoicing and Payment. On or before the tenth (10th) day of
                  ---------------------
                  each month, Supplier shall send to Buyer an invoice setting
                  forth the Supply Amount, Delivered Amount, the Market Price of
                  Energy pursuant to Section 6.2.1 for each Dispatch Hour in the
                  previous month, any amount due in accordance with Section 7.13
                  and the total due from Buyer. The invoice shall be calculated
                  based upon data available to Supplier and shall be in
                  accordance with this Section 7 and Exhibit C. Buyer shall
                  promptly notify Supplier if Buyer in good faith disputes any
                  portion of the invoice, stating in reasonable detail the
                  reason for the dispute.

         7.2      Monthly Invoice Calculation. On each monthly invoice, Supplier
                  ---------------------------
                  shall calculate the following amounts:

                  7.2.1    The Delivered Amount in respect of each Dispatch Hour
                           multiplied by the corresponding Market Price of
                           Energy pursuant to Section 6.2.1, summed over the
                           billing period;

                  7.2.2    Sum of the Delivered Amounts in respect of all
                           Dispatch Hours of the billing period multiplied by
                           the Price Ceiling of Energy;

                  1.1.1    Sum of the Delivered Amounts in respect of all
                           Dispatch Hours of the billing period multiplied by
                           the Price Floor of Energy;

                  7.2.3    For each Dispatch Hour of the billing period, the
                           shortfall, if any, between the Supply Amount and the
                           Delivered Amount (and in the case of Ancillary
                           Services the shortfall between the Supply Amount of
                           Ancillary Services and Supplier's schedule of
                           Ancillary Services);

                  7.2.4    The Supply Amount of Ancillary Service for each
                           dispatch hour multiplied by the price of Ancillary
                           Services as stated in Exhibit B; and

                  7.2.5    The Delivered Amount of Energy related to Ancillary
                           Services for each dispatch hour multiplied by the
                           Price Ceiling of Energy as stated in Exhibit B.

                  7.2.6    If applicable, any amount to be calculated in
                           accordance with Section 7.13.

         7.3      Supplier's Invoice. Supplier will invoice the lesser of the
                  ------------------
                  amounts calculated in Sections 7.2.1 and 7.2.2, provided that
                  if the amount calculated in Section 7.2.1 is less than the
                  amount calculated in Section 7.2.3, Supplier shall invoice
                  Buyer the amount calculated in Section 7.2.3. Supplier shall
                  also include in its invoice the amounts calculated in Sections
                  7.2.5, 7.2.6 and 7.2.7. If the Delivered Amount exceeds the
                  Supply Amount, Buyer shall not be obligated to pay for the
                  excess amount. Buyer shall pay Supplier for the amounts
                  invoiced pursuant to Section 7.2.6 upon Buyer's receipt of
                  payment from ISA or Control Area Operator. Examples of this
                  monthly invoice calculation (and annual true-up process) are

                                       18
<PAGE>

                  contained in Exhibit C.

         7.4      Buyer's Invoice. In the event any shortfall occurs pursuant to
                  ---------------
                  Section 7.2.4 or payment is due to Buyer pursuant to Section
                  7.13, Buyer shall within ten (10) Business Days of receipt of
                  Supplier's invoice deliver to Supplier a Buyer's invoice
                  detailing any Replacement Costs or other payment due. Buyer
                  shall provide supporting data in reasonable detail to support
                  its calculations of Replacement Costs. Supplier shall promptly
                  notify Buyer if Supplier in good faith disputes any portion of
                  the invoice, stating in reasonable detail the reason for the
                  dispute. If the Buyer's invoice results in an amount due from
                  Supplier to Buyer, Buyer may offset such amount from its
                  payment of Supplier's corresponding invoice. Buyer shall have
                  the right to adjust the invoices issued in accordance with
                  this Section 7.4 if Buyer incurs Replacement Costs that were
                  not known when earlier invoices were issued. Adjusted invoices
                  shall be issued within thirty (30) days of the date on which
                  the additional Replacement Costs become known. Buyer shall
                  provide supporting data in reasonable detail to support its
                  calculations of Replacement Costs. Supplier shall promptly
                  notify Buyer if Supplier in good faith disputes any portion of
                  the invoice, stating in reasonable detail the reason for the
                  dispute. If the Buyer's adjusted invoice results in an amount
                  due from Supplier to Buyer, Buyer may offset such amount from
                  its payment of Supplier's corresponding invoice.

         7.5      Annual True-Up Mechanism for Energy.
                  -----------------------------------

                  7.5.1    The annual true-up mechanism will provide adjustments
                           among the Parties with respect to each Contract Year
                           in the following scenarios:

                           (a)      If (i) the Price Ceiling of Energy
                                    multiplied by the hourly Delivered Amount of
                                    Energy summed over the Contract Year is less
                                    than or equal to (ii) the Market Price of
                                    Energy for each hour pursuant to Section
                                    6.2.1 multiplied by the Delivered Amount of
                                    Energy for each hour during the Contract
                                    Year, Supplier shall subtract (x) the amount
                                    invoiced by Supplier for Energy pursuant to
                                    Section 7.3 summed of over the Contract Year
                                    from (y) the Price Ceiling of Energy
                                    multiplied by the hourly Delivered Amount of
                                    Energy summed over the Contract Year. If the
                                    difference calculated in accordance with the
                                    preceding sentence is greater than or equal
                                    to zero, Buyer shall pay the difference to
                                    Supplier. If the difference is less than
                                    zero, Supplier shall refund the difference
                                    to Buyer.

                           (b)      If (i) the Price Ceiling of Energy
                                    multiplied by the hourly Delivered Amount of
                                    Energy summed over the Contract Year is
                                    greater than or equal to (ii) the Market
                                    Price of Energy for each hour pursuant to
                                    Section 6.2.1 multiplied by the Delivered
                                    Amount of Energy for each hour during the
                                    Contract Year, Supplier shall

                                       19
<PAGE>

                                    subtract (x) the amount invoiced by Supplier
                                    for Energy pursuant to Section 7.3 summed of
                                    over the Contract Year from (y) the Market
                                    Price of Energy multiplied by the hourly
                                    Delivered Amount of Energy summed over the
                                    Contract Year. If the difference calculated
                                    in accordance with the preceding sentence is
                                    greater than or equal to zero, Buyer shall
                                    pay the difference to Supplier. If the
                                    difference is less than zero, Supplier shall
                                    refund the difference to Buyer.

                           (c)      If Buyer incurred Replacement Costs for
                                    energy during the Contract year, Supplier
                                    shall multiply the Total Amount of Energy
                                    Replaced during the Contract Year by the
                                    Average Cost of Delivered Energy after
                                    true-up as determined in accordance with
                                    Section 7.5.1 (a) or 7.5.1 (b). If the
                                    amount so obtained is greater than the sum
                                    of the monthly Gross Replacement Costs of
                                    Energy from Buyer's Invoices for the
                                    Contract Year, the Adjusted Replacement Cost
                                    of Energy for the Contract Year shall be
                                    zero. If the amount so obtained is less than
                                    the sum of the monthly Gross Replacement
                                    Costs of Energy from Buyer's Invoices for
                                    the Contract Year, the Adjusted Replacement
                                    Cost of Energy for the Contract Year shall
                                    be the sum of the monthly Gross Replacement
                                    Costs of Energy less the amount obtained in
                                    accordance with the first sentence of this
                                    Section 7.5.1(c).

                                    If the Adjusted Replacement Cost of Energy
                                    is greater than the sum of the monthly
                                    Invoiced Replacement Costs of Energy from
                                    Buyer's Invoices for the Contract Year,
                                    Supplier shall pay the difference to Buyer.
                                    If the sum of the monthly Invoiced
                                    Replacement costs of Energy is greater than
                                    the Adjusted Replacement Cost of Energy,
                                    Buyer shall pay the difference to Seller.

                  7.5.2    True-up adjustments will be calculated by Supplier
                           within twenty (20) days after each Contract Year.
                           Examples of the true-up calculations and invoice form
                           are set forth in Exhibit E. Interest shall be
                           calculated pursuant to 18 CFR Section 35.19a and
                           shall be included in the true-up invoice. Invoices
                           for true-up adjustments shall be submitted by
                           Supplier within thirty (30) days after the end of the
                           Contract Year. Payments for such invoices shall be
                           due from Buyer thirty (30) days from receipt of the
                           true-up invoice.

         7.6      Invoice Disagreements. Should there be a good faith dispute
                  ---------------------
                  over any invoice, the Parties shall promptly seek resolution
                  pursuant to Section 13. Pending resolution of the invoice
                  dispute, payment shall be made or offsets or credits taken, as
                  applicable, based upon the undisputed portion of the invoice.

                                       20
<PAGE>

         7.7      Adjustments. Upon resolution of the dispute, the prevailing
                  -----------
                  Party shall be entitled to receive the disputed amount, as
                  finally determined to be payable along with interest
                  (calculated pursuant to 18 C.F.R. (S)35.19a through the date
                  of payment. No invoice (or payment covered thereby) shall be
                  subject to adjustment unless notice or request for adjustment
                  is given within one (1) year of the date payment thereunder
                  was due.

         7.8      Method of Payment. Subject to Sections 7.3, 7.6 and 7.7, Buyer
                  -----------------
                  shall remit all amounts due by wire or electronic fund
                  transfer, pursuant to Supplier's invoice instructions, no
                  later than thirty (30) days after receipt of the invoice.

         7.9      Overdue Payments. Overdue payments shall bear interest from
                  ----------------
                  and including, the due date to the date of payment on the
                  unpaid portion calculated pursuant to 18 C.F.R.(S)35.19a.

         7.10     Buyer Right to Offset. Buyer shall have the right to offset
                  ---------------------
                  any amounts Supplier owes to Buyer, including Replacement
                  Costs (except for such amounts disputed in good faith by
                  Supplier), against the amounts owed by Buyer to Supplier.

         7.11     Taxes. Each Party shall pay ad valorem and other taxes
                  -----
                  attributed to its facilities and services provided. Supplier
                  shall not include any taxes of any kind in its invoices to
                  Buyer. The prices of Energy and Ancillary Services shall not
                  change during the term of this Agreement as a result of any
                  changes in local, state or federal taxes, fees or levies.

         7.12     Late Invoices. If either Party submits an invoice outside of
                  -------------
                  the time deadlines set forth herein, that Party shall not
                  forfeit its rights to collect the amounts due thereunder,
                  provided that such invoice is no more than six (6) months
                  late, and provided that changes to invoices remain subject to
                  the deadline in Section 7.7.

         7.13     Termination Prior to March 1, 2003. Notwithstanding any other
                  ----------------------------------
                  provision herein, in the event that this Agreement is
                  terminated before March 1, 2003 and as a result of such
                  termination Buyer is entitled to a payment in accordance with
                  Section 2.3.1, Supplier shall include an amount calculated in
                  accordance with Section 2.3.1 and Exhibit J, to be paid by
                  Supplier to Buyer in the next monthly invoice submitted to
                  Buyer following such termination.

8.       REGULATORY APPROVALS

         8.1      This Agreement will be filed with the FERC and any other
                  appropriate regulatory agencies by the appropriate Party as
                  may be required.

9.       COMPLIANCE

         9.1      Each Party shall comply with all relevant Laws and shall, at
                  its sole expense, maintain in full force and effect all
                  relevant permits, authorizations, licenses, and other
                  authorizations material to the maintenance of facilities and
                  the performance of obligations under this Agreement.

                                       21
<PAGE>

         9.2      Each Party and its representatives shall comply with all
                  relevant requirements of any authorized Control Area Operator,
                  ISA, and/or EDU to ensure the safety of its employees and the
                  public, and to ensure electric system reliability and
                  integrity, material to the performance of this Agreement.

         9.3      Buyer and Supplier shall perform or cause to be performed,
                  their obligations under this Agreement in all material
                  respects in accordance with Good Utility Practices. Supplier
                  covenants and agrees that as of the Effective Date it shall
                  (a) have the right to control the operation of the Asset
                  Bundle (b) be willing and able to perform its obligations
                  under this Agreement.

10.      INDEMNIFICATION

         10.1     To the fullest extent permitted by law, a Party to this
                  Agreement ("the Indemnifying Party") shall indemnify, defend
                  and hold harmless the other Party, its parent, affiliates, and
                  successors and agents (each an "Indemnified Party") from and
                  against any and all claims, demands, suits, obligations,
                  payments, liabilities, costs, judgments, damages, losses or
                  expenses asserted by third parties against an Indemnified
                  Party and arising out of, relating to, or resulting from the
                  Indemnifying Party's breach of, or the negligent performance
                  of its obligations under this Agreement.

                  10.1.1   Such indemnity shall also extend to actual courts
                           costs, attorneys' fees, expenses and other
                           liabilities incurred in the defense of any claim,
                           action or proceeding, including negotiation,
                           settlement, defense and appeals, to which this
                           indemnification obligation applies. In furtherance of
                           the foregoing indemnification and not by way of
                           limitation thereof, the Indemnifying Party hereby
                           waives any defense it otherwise might have against
                           the Indemnified Party under applicable workers'
                           compensation laws.

                  10.1.2   In claims against any Indemnified Party by an agent
                           of the Indemnifying Party, or anyone directly or
                           indirectly employed by them or anyone for whose acts
                           they may be liable, the indemnification obligation
                           under this Section 10 shall not be limited by a
                           limitation on amount or type of damages, compensation
                           or benefits payable by or for the Indemnifying Party
                           or a subcontractor under workers' or workmen's
                           compensation acts, disability benefit acts or other
                           employee benefit acts.

                  10.1.3   Such indemnity shall also extend to all costs and
                           expenses incurred by the Indemnified Party in any
                           action or proceeding to enforce the provisions of
                           this Agreement, but only if and to the extent the
                           Indemnified Party prevails in such action or
                           proceeding.

         10.2     No Negation of Existing Indemnities; Survival. Each Party's
                  ---------------------------------------------
                  indemnity

                                       22
<PAGE>

                  obligations hereunder shall not be construed to negate,
                  abridge or reduce other rights or obligations or indemnity
                  which would otherwise exist at law or equity. The obligations
                  contained herein shall survive any termination, cancellation,
                  or suspension of this Agreement to the extent that any third
                  party claim is commenced during the applicable statute of
                  limitations period.

10.3     Indemnification Procedures.
         --------------------------

         10.3.1   Any Party seeking indemnification under this Agreement shall
                  give the other Party notice of such claim promptly but in any
                  event on or before thirty (30) days after the Party's actual
                  knowledge of such claim or action. Such notice shall describe
                  the claim in reasonable detail, and shall indicate the amount
                  (estimated if necessary) of the claim that has been, or may be
                  sustained by, said Party. To the extent that the other Party
                  will have been actually and materially prejudiced as a result
                  of the failure to provide such notice, such notice will be a
                  condition precedent to any liability of the other Party under
                  the provisions for indemnification contained in this
                  Agreement.

         10.3.2   In any action or proceeding brought against an Indemnified
                  Party by reason of any claim indemnifiable hereunder, the
                  Indemnifying Party may, at its sole option, elect to assume
                  the defense at the Indemnifying Party's expense, and shall
                  have the right to control the defense thereof and to determine
                  the settlement or compromise of any such action or proceeding.
                  Notwithstanding the foregoing, an Indemnified Party shall in
                  all cases be entitled to control its defense in any action if
                  it:

                  (i)      may result in injunctions or other equitable remedies
                           in respect of the Indemnified Party which would
                           affect its business or operations in any materially
                           adverse manner;

                  (ii)     may result in material liabilities which may not be
                           fully indemnified hereunder; or

                  (iii)    may have a significant adverse impact on the business
                           or the financial condition of the Indemnified Party
                           (including a material adverse effect on the tax
                           liabilities, earnings or ongoing business
                           relationships of the Indemnified Party) even if the
                           Indemnified Party pays all indemnification amounts in
                           full.

         10.3.3   Subject to Section 10.3.2, neither Party may settle or
                  compromise any claim for which indemnification is sought under
                  this Agreement without the prior consent of the other Party;
                  provided, however, said consent shall not be unreasonably
                  withheld or delayed.

11.      LIMITATION OF LIABILITY

         11.1     Responsibility for Damages: Except as otherwise provided
                  --------------------------
                  herein or to the extent

                                       23
<PAGE>

                  of the other Party's negligence or willful misconduct, each
                  Party shall be responsible for all physical damage to or
                  destruction of the property, equipment and/or facilities owned
                  by it and its affiliates and any physical injury or death to
                  natural Persons resulting therefrom, regardless of who brings
                  the claim and regardless of who caused the damage, and shall
                  not seek recovery or reimbursement from the other Party for
                  such damage; provided, that in any such case the Parties will
                  exercise Due Diligence to remove the cause of any disability
                  at the earliest practicable time.

         11.2     No Consequential Damages: To the fullest extent permitted by
                  ------------------------
                  law and notwithstanding other provisions of this Agreement, in
                  no event shall a Party, or any of its Agents, be liable to the
                  other Party, whether in contract, warranty, tort, negligence,
                  strict liability, or otherwise, for special, indirect,
                  incidental, multiple, consequential (including but not limited
                  to lost profits or revenues and lost business opportunities),
                  or punitive damages related to or resulting from performance
                  or nonperformance of this Agreement or any activity associated
                  with or arising out of this Agreement. For purposes of
                  clarification, Replacement Costs shall not be considered
                  consequential or incidental damages under this Section 11.2.
                  In addition, this limitation on liability shall not apply with
                  respect to claims pursuant to Section 10 hereof.

         11.3     Survival: The provisions of this Section 11 shall survive any
                  --------
                  termination, cancellation, or suspension of this Agreement.

12.      FORCE MAJEURE

         12.1     An event of "Force Majeure" shall be defined as any
                  interruption or failure of service or deficiency in the
                  quality or quantity of service or any other failure to perform
                  any of its obligations hereunder to the extent such failure
                  occurs without fault or negligence on the part of that Party
                  and is caused by factors beyond that Party's reasonable
                  control, which by the exercise of reasonable diligence that
                  Party is unable to prevent, avoid, mitigate or overcome,
                  including:

                  (i)      acts of God or the public enemy, such as storms,
                           flood, lightning, and earthquakes,

                  (ii)     failure, threat of failure, or unscheduled withdrawal
                           of facilities from operation for maintenance or
                           repair, and including unscheduled transmission and
                           distribution outages,

                  (iii)    sabotage of facilities and equipment,

                  (iv)     civil disturbance,

                  (v)      strike or labor dispute,

                  (vi)     action or inaction of a court or public authority, or

                                       24
<PAGE>

                  (vii)    any other cause of similar nature beyond the
                           reasonable control of that Party.

         12.2     Economic hardship of either Party shall not constitute Force
                  Majeure under this Agreement. Notwithstanding this, if Buyer
                  suffers an event of Force Majeure it shall be relieved of its
                  obligation to take delivery of, or otherwise pay for, Energy
                  and Ancillary Services under this Agreement for the duration
                  of the event of Force Majeure. In addition, if Buyer is unable
                  to have Energy and Ancillary Services delivered from the
                  Point(s) of Delivery to its service territory due to an outage
                  on the Transmission System, that shall be considered a Force
                  Majeure event and shall relieve Buyer of performance for the
                  extent of the event.

         12.3     In the event of a Force Majeure, neither Party shall be
                  considered in default under this Agreement or responsible to
                  the other Party in tort, strict liability, contract or other
                  legal theory for damages of any description, and affected
                  performance obligations shall be extended by a period equal to
                  the term of the resultant delay, but in no event shall exceed
                  the term of the Agreement, provided that the Party relying on
                  a claim of Force Majeure:

                  (i)      provides prompt written notice of such Force Majeure
                           event to the other Party, giving an estimate of its
                           expected duration and the probable impact on the
                           performance of its obligations hereunder;

                  (ii)     exercises all reasonable efforts to continue to
                           perform its obligations under this Agreement;

                  (iii)    expeditiously takes action to correct or cure the
                           event or condition excusing performance so that the
                           suspension of performance is no greater in scope and
                           no longer in duration than is dictated by the
                           problem; provided, however, that settlement of
                           strikes or other labor disputes will be completely
                           within the sole discretion of the Party affected by
                           such strike or labor dispute;

                  (iv)     exercises all reasonable efforts to mitigate or limit
                           damages to the other Party; and

                  (v)      provides prompt notice to the other Party of the
                           cessation of the event or condition giving rise to
                           its excuse from performance.

         12.4     Notwithstanding the above provisions, a Force Majeure event
                  shall excuse Supplier from its obligation to deliver the
                  Supply Amount pursuant to Section 4 of this Agreement only for
                  the first forty-eight (48) hours of the Force Majeure event;
                  provided that such forty-eight (48) hour limit shall not apply
                  to the extent the Force Majeure event is an outage on the
                  Transmission System. After such twenty-four (24) hour period,
                  Supplier must either deliver the Supply Amount at the Point(s)
                  of Delivery or pay liquidated damages pursuant to Section 4.2
                  of this Agreement.

                                       25
<PAGE>

         12.5     If Supplier has notified Buyer of an event of Force Majeure,
                  and if Supplier so requests, Buyer will attempt to replace the
                  Supply Amount that is not excused in accordance with Section
                  12.4 with Energy or Ancillary Services from another Asset
                  Bundle. However, Buyer's inability to acquire such replacement
                  Energy or Ancillary Services shall not excuse Supplier from
                  Supplier's obligation to deliver the Supply Amount not
                  otherwise excused in accordance with Section 12.4

13.      DISPUTES

         13.1     Any action, claim or dispute which either Party may have
                  against the other arising out of or relating to this Agreement
                  or the transactions contemplated hereunder, or the breach,
                  termination or validity thereof (any such claim or dispute, a
                  "Dispute") shall be submitted in writing to the other Party.
                  The written submission of any Dispute shall include a concise
                  statement of the question or issue in dispute together with a
                  statement listing the relevant facts and documentation that
                  support the claim.

         13.2     The Parties agree to cooperate in good faith to expedite the
                  resolution of any Dispute. Pending resolution of a Dispute,
                  the Parties shall proceed diligently with the performance of
                  their obligations under this Agreement.

         13.3     The Parties shall first attempt in good faith to resolve any
                  Dispute through informal negotiations by the Contract
                  Representatives. In the event that the Contract
                  Representatives are unable to satisfactorily resolve the
                  Dispute within thirty (30) days from the receipt of notice of
                  the Dispute, either Party may by written notice to the other
                  Party refer the Dispute to its respective senior management
                  for resolution as promptly as practicable. If the Parties'
                  senior management are unable to resolve the Dispute within
                  forty-five (45) days from the date of such referral,
                  thereafter the Parties may agree in writing to extend the time
                  period of such senior management negotiations. In the event
                  the Parties' senior management do not resolve the dispute
                  within the prescribed or extended time period, either Party
                  may initiate arbitration through the serving and filing of a
                  demand for arbitration and the Parties expressly agree that
                  arbitration in accordance with this Section 13 shall be the
                  exclusive means to further resolve any Dispute and hereby
                  irrevocably waive their right to a jury trial with respect to
                  any Dispute, provided that at any time:

                  13.3.1   A request made by a Party for provisional remedies
                           requesting preservation of the Parties' respective
                           rights and obligations under the Agreement may be
                           resolved by a court of law located in the County of
                           the principal place of business of Buyer.

                  13.3.2   Nothing in this Agreement shall preclude, or be
                           construed to preclude, any Party from filing a
                           petition or complaint with the FERC or PUCN with
                           respect to any arbitrable Dispute over which said
                           agency has jurisdiction. In such case, the other
                           Party may request the FERC or PUCN, as applicable, to
                           reject or to waive jurisdiction. If jurisdiction is

                                       26
<PAGE>

                           rejected or waived with respect to all or a portion
                           of the Dispute, the portion of the Dispute not so
                           accepted by the FERC or PUCN, as applicable, shall be
                           resolved through arbitration in accordance with this
                           Agreement. To the extent that the FERC or PUCN, as
                           applicable, asserts or accepts jurisdiction over the
                           Dispute, the decision, finding of fact or order of
                           FERC shall be final and binding, subject to judicial
                           review under the Federal Power Act or Nevada Revised
                           Statutes and subject to the provisions of Section
                           2.2.2. Any arbitration proceedings that may have
                           commenced with respect to the Dispute prior to the
                           assertion or acceptance of jurisdiction by the FERC
                           or PUCN, as applicable, shall be terminated to the
                           extent the FERC or PUCN accepts or asserts
                           jurisdiction over such Dispute.

         13.4     Unless otherwise agreed by the Parties, any arbitration
                  initiated under this Agreement shall be conducted in
                  accordance with the following:

                  13.4.1   Arbitrations shall be held within the County of the
                           principal place of business of Buyer.

                  13.4.2   Except as otherwise modified herein, the arbitration
                           shall be conducted in accordance with the "Commercial
                           Arbitration Rules" of the American Arbitration
                           Association ("AAA") then in effect.

                  13.4.3   Arbitration shall be conducted by one neutral
                           arbitrator who shall be selected pursuant to the AAA
                           rules and the following:

                           13.4.3.1 The Parties agree that the list of potential
                                    arbitrators provided by the AAA shall, if
                                    available, contain twenty (20) candidates,
                                    and at least fifty percent (50%) of the
                                    candidates shall be members of the AAA
                                    National Energy Panel.

                           13.4.3.2 The Parties also agree that each shall be
                                    allowed to strike the names of five
                                    candidates before ranking the remaining
                                    candidates and returning the list to the AAA
                                    in accordance with the Commercial
                                    Arbitration Rules. If the Parties are unable
                                    to agree on an arbitrator, such arbitrator
                                    shall be appointed by the AAA.

                           13.4.3.3 The arbitrator shall not have any current or
                                    past substantial business, financial, or
                                    personal relationships with either Party (or
                                    their Affiliates) and shall not be a vendor,
                                    supplier, customer, employee, consultant, or
                                    competitor to either of the Parties or their
                                    Affiliates.

                           13.4.3.4 The arbitrator shall be authorized only to
                                    interpret and apply the provisions of this
                                    Agreement or any related agreements entered
                                    into under this Agreement and shall have no
                                    power to modify or change any provision of
                                    this Agreement. The arbitrator shall have no
                                    authority to award punitive or multiple
                                    damages or

                                       27
<PAGE>

                                    any damages inconsistent with this
                                    Agreement. The arbitrator shall within
                                    thirty (30) days of the conclusion of the
                                    hearing, unless such time is extended by
                                    agreement of the Parties, notify the Parties
                                    in writing of his or her decision, stating
                                    his or her reasons for such decision and
                                    separately listing his or her findings of
                                    fact and conclusions of law. Judgment on the
                                    award may be entered in any court having
                                    jurisdiction.

         13.5     The Parties shall proceed with the arbitration expeditiously,
                  and the arbitration shall be concluded within five (5) months
                  of the filing of the demand for arbitration pursuant to this
                  Section 13 in order that the decision may be rendered within
                  six (6) months of such filing, unless the arbitrator extends
                  such time at the request of a Party upon a showing of good
                  cause or upon agreement of the Parties.

         13.6     Any arbitration proceedings, decision or award rendered
                  hereunder and the validity, effect and interpretation of any
                  arbitration agreement shall be governed by the Federal
                  Arbitration Act of the United States, 9 U.S.C. (S)(S)1 et
                  seq.

         13.7     The decision of the arbitrator shall be final and binding on
                  both Parties and may be enforced in any court having
                  jurisdiction over the Party against which enforcement is
                  sought.

         13.8     The fees and expenses of the arbitrator shall be shared by the
                  Parties equally, unless the decision of the arbitrator shall
                  specify some other apportionment of such fees and expenses.
                  All other expenses and costs of the arbitration shall be borne
                  by the Party incurring the same.

14.      NATURE OF OBLIGATIONS

         14.1     Except where specifically stated in this Agreement to be
                  otherwise, the duties, obligations, and liabilities of the
                  Parties shall be several, not joint or collective. The
                  provisions of this Agreement shall not be construed to create
                  an association, trust, partnership, or joint venture; to
                  impose a trust or partnership duty, obligation, or liability
                  or agency relationship on or with regard to either Party.

         14.2     Nothing in this Agreement nor any action taken hereunder shall
                  be construed to create any duty, liability, or standard of
                  care to any person not a Party to this Agreement. Each Party
                  shall be individually and severally liable for its own
                  obligations under this Agreement.

         14.3     By this Agreement, neither Party dedicates any part of its
                  facilities or the service provided under this Agreement to the
                  public.

15.      SUCCESSORS AND ASSIGNS

         15.1     This Agreement may be assigned, without express written
                  consent of the other Party, as follows:

                                       28
<PAGE>

                  15.1.1   Buyer may assign this Agreement or assign or delegate
                           its rights and obligations under this Agreement, in
                           whole or in part, if such assignment is made to an
                           affiliate, parent, subsidiary, successor or any
                           party, provided that such assignee operates all or a
                           portion of the PLR or if such assignment is required
                           by Law or applicable regulations.

                  15.1.2   Buyer also may assign this Agreement as provided in
                           Section 11.5 of the Asset Sale Agreement; provided
                           that such assignment is to an entity that (a) has the
                           right to control the operation of the Asset Bundle;
                           and (b) is willing and able to perform its
                           obligations under this Agreement.

         15.2     Supplier may, without the consent of Buyer, assign, transfer,
                  pledge or otherwise dispose of its rights and interests
                  hereunder to a trustee, lending institution, or any Person for
                  the purposes of financing or refinancing the Asset Bundle,
                  including upon or pursuant to the exercise of remedies under
                  such financing or refinancing, or by way of assignments,
                  transfers, conveyances of dispositions in lieu thereof;
                  provided, however, that no such assignment or disposition
                  shall relieve or in any way discharge Supplier or such
                  permitted assignee from the performance of its duties and
                  obligations under this Agreement. Buyer agrees to execute and
                  deliver such documents as may be reasonably necessary to
                  accomplish any such assignment, transfer, conveyance, pledge
                  or disposition of rights hereunder for purposes of the
                  financing or refinancing of the Asset Bundle, so long as
                  Buyer's rights under this Agreement are not thereby materially
                  altered, amended, diminished or otherwise impaired.

         15.3     Either Party may, without the consent of the other Party,
                  assign this Agreement to a successor to all or substantially
                  all of the assets of such Party by way of merger,
                  consolidation, sale or otherwise, provided such successor
                  assumes and becomes liable for all of such Party's duties and
                  obligations hereunder including Section 3 hereof.

         15.4     Except as stated above, neither this Agreement nor any of the
                  rights, interests, or obligations hereunder shall be assigned
                  by either Party, including by operation of law, without the
                  prior written consent of the other Party, said consent not to
                  be unreasonably withheld. Any assignment of this Agreement in
                  violation of the foregoing shall be, at the option of the
                  non-assigning Party, void.

         15.5     Except as set forth above, no assignment or transfer of rights
                  or obligations under this Agreement by a Party shall relieve
                  said Party from full liability and financial responsibility
                  for the performance thereof after any such transfer or
                  assignment unless and until the transferee or assignee shall
                  agree in writing to assume the obligations and duties of said
                  Party under this Agreement and the other Party has consented
                  in writing to such assumption; said consent not to be
                  unreasonably withheld.

         15.6     This Agreement and all of the provisions hereof are binding
                  upon, and inure to the benefit of, the Parties and their
                  respective successors and permitted assigns.

                                       29
<PAGE>

16.      REPRESENTATIONS

         16.1     Representations of the Parties. The Parties represent and
                  ------------------------------
                  warrant each to the other as follows:

                  16.1.1   Incorporation. Buyer is a corporation duly
                           -------------
                           incorporated, validly existing and in good standing
                           under the laws of the State of Nevada. Supplier is a
                           limited liability company duly organized, validly
                           existing and in good standing under the laws of the
                           State of Delaware. Both Buyer and Supplier have all
                           requisite corporate power and authority to own, lease
                           and operate their material assets and properties and
                           to carry on their business as now being conducted.

                  16.1.2   Authority. The Party has full corporate power and
                           ---------
                           authority to execute and deliver this Agreement and,
                           subject to the procurement of applicable regulatory
                           approvals, to carry out the actions required of it by
                           this Agreement. The execution and delivery of this
                           Agreement and the transactions contemplated hereby
                           have been duly and validly authorized by all
                           necessary corporate action required on the part of
                           the Party. The Agreement has been duly and validly
                           executed and delivered by the Party and, assuming
                           that it is duly and validly executed and delivered by
                           the other Party, constitutes a legal, valid and
                           binding agreement of the Party.

                  16.1.3   Compliance With Law. The Party represents and
                           -------------------
                           warrants that it is not in violation of any
                           applicable Law, or applicable regulation, which
                           violation could reasonably be expected to materially
                           adversely affect the other Party's performance of its
                           obligations under this Agreement. The Party
                           represents and warrants that it will comply with all
                           Laws, and regulations applicable to its compliance
                           with this Agreement, non-compliance with which would
                           reasonably be expected to materially adversely affect
                           either Party's performance of its obligations under
                           this Agreement.

                  16.1.4   Representations of Both Parties. The representations
                           -------------------------------
                           in this Section 16 shall continue in full force and
                           effect for the term of this Agreement.

17.      DEFAULT AND REMEDIES

         17.1     An Event of Default hereunder shall be deemed to have occurred
                  upon a Party's (Defaulting Party) failure to comply with any
                  material obligation imposed upon it by this Agreement.
                  Examples of an Event of Default include, but are not limited
                  to the following:

                  (i)      Failure to make any payments due under this
                           Agreement;

                  (ii)     Failure to deliver the Supply Amount for a period of
                           five (5) consecutive days;

                                       30
<PAGE>

         (iii)    Failure to follow the directions of a Control Area Operator,
                  ISA, EDU, WSCC, NERC, PUCN, FERC, or any successor thereto
                  where following such directions is required hereunder;

         (iv)     Supplier not being in compliance with Section 3; and

         (v)      Failure of the Guarantor to be in compliance with the terms of
                  the Guarantee delivered under Section 3.1.2.

         17.2     An Event of Default shall be excused:

                  17.2.1   In the event such Event of Default was caused by
                           Force Majeure provided that the Party claiming a
                           Force Majeure complies with the requirements of
                           Section 12; and

                  17.2.2   In the event such Event of Default was caused by
                           transmission and distribution outages or disruptions.

         17.3     Unless excused, in an Event of Default the Non-Defaulting
                  Party shall be entitled to provide written notice (or verbal
                  notice in case of emergency followed by written notice) of the
                  Event of Default to the Defaulting Party and to specify a cure
                  period, which cure period shall be a minimum of thirty (30)
                  days.

         17.4     If an Event of Default is not cured by the Defaulting Party
                  during the cure period specified by the Non-Defaulting Party,
                  the Non-Defaulting Party shall be entitled to those remedies
                  which are not inconsistent with the terms of this Agreement,
                  including termination and the payment of liquidated damages. A
                  Defaulting Party shall not be liable to the Non-Defaulting
                  Party for any punitive, consequential or incidental damages.
                  For purposes of clarification, Replacement Costs shall not be
                  considered consequential or incidental damages under this
                  Section 17.4.

         17.5     Notwithstanding this Section 17, liquidated damages shall be
                  paid to Buyer pursuant to Sections 4.2, 12, 18, and 21.

18.      FACILITY ADDITIONS AND MODIFICATIONS

         18.1     Supplier shall be entitled to make additions and modifications
                  to the Asset Bundle subject to the following:

                  18.1.1   To the extent additions and modifications interfere
                           with the operation of the Asset Bundle in providing
                           the Supply Amount to Buyer beyond the limits for
                           planned outages set forth in Section 21, liquidated
                           damages shall be paid to Buyer pursuant to Section
                           4.2.

                  18.1.2   Supplier shall use reasonable efforts to minimize any
                           adverse impact on Buyer during the course of making
                           such additions and modifications.

                                      31

<PAGE>

                  18.1.3   Such additions and modifications shall be conducted
                           in accordance with Good Utility Practice, and all
                           applicable Laws, regulations, reliability criteria
                           and the Interconnection Agreement between Buyer and
                           Supplier, dated October 16, 2000, as it may be
                           amended from time to time.

         18.2     Supplier shall seek Buyer's prior written approval for all
                  Supplier's additions or modifications to the Asset Bundle
                  which might reasonably be expected to have an adverse effect
                  upon Buyer with respect to operations or performance under
                  this Agreement.

19.      COORDINATION

         19.1     Upon knowledge thereof, each Party shall promptly give notice
                  to the other Party of any labor dispute which is delaying or
                  threatens to delay the timely performance of this Agreement,
                  which shall include a description of the general nature of the
                  dispute.

20.      EMERGENCY AND NONEMERGENCY CONDITION RESPONSE

         20.1     Buyer and Supplier shall comply with any applicable
                  requirement of any Governmental Authority, NERC, WSCC, ISA,
                  Control Area Operator, transmission operator, EDU or any
                  successor of any of them, regarding the reduced or increased
                  generation of the Asset Bundle in the event of an Emergency
                  Condition or Nonemergency Condition.

         20.2     Supplier shall not be obligated to deliver the Supply Amount
                  and no liquidated damages shall become due, if the Supply
                  Amount is reduced in the event of an Emergency Condition or a
                  Nonemergency Condition.

         20.3     Each Party shall provide prompt verbal notice to the other
                  Party of any Emergency Condition or Nonemergency Condition.

         20.4     Either Party may take reasonable and necessary action to
                  prevent, avoid or mitigate injury, danger, damage or loss to
                  its own equipment and facilities, or to expedite restoration
                  of service; provided, however, that the Party taking such
                  action shall give the other Party prior notice if at all
                  possible before taking any action. However, this Section 20.4
                  shall not be construed to supersede Sections 20.2 and 20.3.

21.      OUTAGE SCHEDULING

         21.1     Supplier shall request Buyer's approval prior to any
                  inspections, proposed planned outages or other non-forced
                  outages (all hereinafter referred to as "planned outages") of
                  the Asset Bundle so as to minimize the impact on the
                  availability of the Asset Bundle. Under no circumstances shall
                  Supplier conduct a planned outage without the express prior
                  consent of Buyer pursuant to this Section 21.

                                       32

<PAGE>

         21.2     Planned Outages.
                  ---------------

                  21.2.1   Within sixty (60) days following the Effective Date
                           of this Agreement and on or before October 1 of each
                           Contract Year, Supplier shall provide Buyer with a
                           schedule of proposed planned outages for the period
                           beginning on the date of such proposed schedule for
                           the following twelve (12) months. The proposed
                           planned outage schedule will designate days for each
                           unit in which the Asset Bundle Capacity will be
                           reduced in part or total for each such unit. Each
                           proposed schedule shall include all applicable
                           information, including but not limited to the
                           following: Month, day and time of requested outage;
                           facilities impacted (such as Unit and description);
                           duration of outage; purpose of outage; amount of
                           capacity (in MWs) which is derated; other conditions
                           and remarks; and name of contact and phone number.

                  21.2.2   Buyer shall promptly review Supplier's proposed
                           schedule and shall either require modifications or
                           approve the proposed schedule. Supplier shall use its
                           best efforts to accomplish all planned outages in
                           accordance with the approved schedule. Supplier shall
                           be responsible to Buyer for Replacement Costs (i) if
                           any outage period exceeds its approved schedule,
                           provided that changes to the approved schedule may be
                           requested by either Party and each Party shall make
                           reasonable efforts to accommodate such changes,
                           provided further the Buyer shall have no obligation
                           to agree to Supplier's revisions to the approved
                           planned outage schedule; and (ii) if Supplier
                           conducts a planned outage without the consent of
                           Buyer as provided herein.

22.      REPORTS

         22.1     Supplier shall promptly provide Buyer with copies of any
                  orders, decrees, letters or other written communications to or
                  from any Governmental Authority asserting or indicating that
                  Supplier and/or its Asset Bundle is in violation of Laws which
                  relate to Supplier, or operations or maintenance of the Asset
                  Bundle and which may have an adverse effect on Buyer. Supplier
                  shall use reasonable efforts to keep Buyer appraised of the
                  status of any such matters.

23.      COMMUNICATIONS

         23.1     Supplier's Operating Representatives shall be available
                  twenty-four (24) hours per day for communications with the
                  Control Area Operator and/or the ISA and Buyer to facilitate
                  the operations contained in this Agreement.

         23.2     Supplier shall, at its expense, maintain and install real-time
                  communications equipment at the Asset Bundle to maintain
                  communications between personnel on site at the Asset Bundle,
                  Buyer and the Control Area Operator at all times. Supplier
                  shall provide at its expense:

                                       33

<PAGE>

                  (i)      Ringdown voice telephone lines, and
                  (ii)     Equipment to transmit to and receive telecopies from
                           Buyer and the Control Area Operator.

         23.3     Supplier shall immediately report to Buyer any "Abnormal
                  Condition" that has or may occur, and provide all pertinent
                  information, including but not limited to the following:

                  (i)      A description of the "Abnormal Condition" and the
                           actions to be taken to alleviate the "Abnormal
                           Condition";

                  (ii)     The expected duration including the beginning and
                           ending time of the "Abnormal Condition"; and

                  (iii)    The amount of any adjustment to the current (real
                           time) level of Energy and Ancillary Services.

         23.4     Cause of the Condition.
                  ----------------------

                  23.4.1   An "Abnormal Condition" shall include without
                           limitation any conditions that, to Supplier's
                           knowledge, have or are reasonably likely to:

                           (i)      Adversely affect Supplier's ability to
                                    provide Energy and Ancillary Services to
                                    Buyer;

                           (ii)     Cause an unplanned reduction in the amount
                                    of delivery of Energy and Ancillary Services
                                    to Buyer; or

                           (iii)    Cause an unplanned isolation of the Asset
                                    Bundle from the transmission system.

         23.5     Supplier shall immediately notify Buyer after such "Abnormal
                  Condition" has been alleviated.

24.      NOTICES

         24.1     All notices hereunder shall, unless specified otherwise, be in
                  writing and shall be addressed, except as otherwise stated
                  herein, to the Parties as set forth in Exhibit F.

         24.2     All written notices or submittals required by this Agreement
                  shall be sent either by hand-delivery, regular first class
                  U.S. mail, registered or certified U.S. mail postage paid
                  return receipt requested, overnight courier delivery,
                  electronic mail or facsimile transmission and will be
                  effective and deemed to have been received on the date of
                  receipt personally, on the date and time as documented by
                  method of delivery if during normal business hours or on the
                  next succeeding Business Day, or on the third (3rd) Business
                  Day following deposit with the U.S. mail if sent regular first
                  class U.S. mail.

                                       34

<PAGE>

                  sent regular first class U.S. mail.

         24.3     Notices of an Event of Default pursuant to Section 17 and or
                  Force Majeure pursuant to Section 12 may not be sent by
                  regular first class U.S. mail.

         24.4     Any payments required to be made under this Agreement shall be
                  made to the Party as set forth in Exhibit F.

         24.5     Each Party shall have the right to change, at any time upon
                  written notice to the other Party, the name, address and
                  telephone numbers of its representatives under this Agreement
                  for purposes of notices and payments.

25.      MERGER

         25.1     The Agreement contains the entire agreement and understanding
                  between the Parties with respect to all of the subject matter
                  contained herein, thereby merging and superseding all prior
                  agreements and representations by the Parties with respect to
                  such subject matter.

         25.2     In the event of any conflict between this Agreement and the
                  Asset Sale Agreement, the terms of the Asset Sale Agreement
                  shall govern.

26.      HEADINGS

         26.1     The headings or section titles contained in this Agreement are
                  inserted solely for convenience and do not constitute a part
                  of this Agreement between the Parties, nor should they be used
                  to aid in any manner in the construction of this Agreement.

27.      COUNTERPARTS AND INTERPRETATION

         27.1     This Agreement may be executed in any number of counterparts,
                  each of which shall be deemed an original.

         27.2     In the event an ambiguity or question of intent or
                  interpretation arises, this Agreement shall be construed as if
                  drafted jointly by the Parties and no presumption or burden of
                  proof shall arise favoring or disfavoring any Party by virtue
                  of authorship of any of the provisions of this Agreement.

         27.3     Any reference to any federal, state, local, or foreign statute
                  or law shall be deemed also to refer to all rules and
                  regulations promulgated thereunder, unless the context
                  requires otherwise.

         27.4     The word "including" in this Agreement shall mean "including
                  without limitation".

28.      SEVERABILITY

                                       35

<PAGE>

         28.1     If any term, provision or condition of this Agreement is held
                  to be invalid, void or unenforceable by a court or
                  Governmental Authority of competent jurisdiction and such
                  holding is subject to no further appeal or judicial review,
                  then such invalid, void, or unenforceable term, provision or
                  condition shall be deemed severed from this Agreement and all
                  remaining terms, provisions and conditions of this Agreement
                  shall continue in full force and effect, unless, however, the
                  effect of the severance would vitiate the intent of the
                  Parties hereto, as determined by either Party in its
                  reasonable discretion.

         28.2     The Parties shall endeavor in good faith to replace such
                  invalid, void, or unenforceable provisions with a valid and
                  enforceable provision which achieves the purposes intended by
                  the Parties to the greatest extent permitted by law.

29.      WAIVERS

         29.1     No failure or delay on the part of a Party in exercising any
                  of its rights under this Agreement or in insisting upon strict
                  performance of provisions of this Agreement, no partial
                  exercise by either Party of any of its rights under this
                  Agreement, and no course of dealing between the Parties shall
                  constitute a waiver of the rights of either Party under this
                  Agreement. Any waiver shall be effective only by a written
                  instrument signed by the Party granting such waiver, and such
                  shall not operate as a waiver of, or estoppel with respect to,
                  any subsequent failure to comply therewith.

30.      AMENDMENTS

         30.1     The Parties shall negotiate in good faith to determine
                  necessary amendments, if any, to this Agreement, provided that
                  in negotiating such amendments the Parties shall attempt, in
                  good faith, to reasonably preserve the bargain initially
                  struck in this Agreement if any Governmental Authority, FERC,
                  any state or the PUCN, implements a change in any Law or
                  applicable regulation that materially affects or is reasonably
                  expected to materially affect Buyer's PLR service under this
                  Agreement.

         30.2     The Parties shall meet to discuss the impact of any changes in
                  Buyer's OATT or the ISA's OATT, as applicable, or any rule or
                  practice of NERC, WSCC, or any other Governmental Authority on
                  the terms of this Agreement upon request by either Party
                  during the term of this Agreement.

         30.3     In the event that it is deemed necessary to amend this
                  Agreement, the Parties will attempt to agree upon such
                  amendment and will submit such mutually agreed upon
                  amendment(s) to the FERC for filing and acceptance.

         30.4     Amendments to this Agreement shall be in writing and shall be
                  executed by an authorized representative of each Party.

31.      TIME IS OF THE ESSENCE

                                      36

<PAGE>

         31.1     Time is of the essence of this Agreement and in the
                  performance of all of the covenants and conditions hereof.

32.      APPROVALS

         32.1     Each Party's performance under this Agreement is subject to
                  the condition that all requisite governmental and regulatory
                  approvals for such performance are obtained in form and
                  substance satisfactory to the other Party in its reasonable
                  discretion. Each Party shall use best efforts to obtain all
                  required approvals and shall exercise due diligence and shall
                  act in good faith to cooperate and assist each other in
                  acquiring any regulatory approval necessary to effectuate this
                  Agreement. Further, the Parties agree to reasonably support
                  the other Party in any associated regulatory proceedings,
                  including by being a witness on behalf of the other Party.

         32.2     Notwithstanding Section 30.1, prior to the submission of this
                  Agreement to the FERC, Buyer shall provide Supplier final
                  versions of Exhibits B, C, D, E, F, J, K, and L, which shall
                  be substantially in the form of Exhibits B, C, D, E, F, J, K,
                  and L attached hereto as of the date of execution of this
                  Agreement, if such exhibits are modified as required to be
                  consistent with orders of the FERC in Docket No. ER00-2018-000
                  with regard to pricing of the Asset Bundle Capacity. Upon
                  acceptance by Supplier, such acceptance not to be unreasonably
                  withheld, such final versions of Exhibits B, C, D, E, F, J, K,
                  and L shall replace the initial versions of such exhibits and
                  shall be incorporated as a part of this Agreement.

         32.3     This Agreement is made subject to present or future state or
                  federal laws, regulations, or orders properly issued by state
                  or federal bodies having jurisdiction.

         32.4     The Parties hereto agree to execute and deliver promptly, at
                  the expense of the Party requesting such action, any and all
                  other and further instruments, documents and information which
                  may reasonably be necessary or appropriate to give full force
                  and effect to the terms and intent of this Agreement.

33.      PLR SERVICE

         33.1     The Agreement is premised on Buyer providing PLR service.
                  Notwithstanding anything to the contrary contained herein, if
                  Nevada retail electricity restructuring (including
                  implementation of retail customer choice of electricity
                  suppliers) is delayed beyond the Effective Date of this
                  Agreement, the Parties shall continue to perform this
                  Agreement in all respects pursuant to the terms and conditions
                  hereof as if Buyer was the PLR and Buyer's retail and
                  wholesale customers shall be considered as the TRR.

34.      CONFIDENTIALITY

         34.1     Confidential Information. Certain information provided by a
                  ------------------------
                  Party (the "Disclosing Party") to the other Party (the
                  "Receiving Party") in connection with the negotiation or
                  performance of this Agreement may be considered confidential
                  and/or proprietary (hereinafter referred to as "Confidential
                  Information") by the

                                      37

<PAGE>

                  Disclosing Party. To be considered Confidential Information
                  hereunder, such information must be clearly labeled or
                  designated by the Disclosing Party as "confidential" or
                  "proprietary" or with words of like meaning. If disclosed
                  orally, such information shall be clearly identified as
                  confidential and such status shall be confirmed promptly
                  thereafter in writing.

         34.2     Treatment of Confidential Information. The Receiving Party
                  -------------------------------------
                  shall treat any Confidential Information with at least the
                  same degree of care regarding its secrecy and confidentiality
                  as the Receiving Party's similar information is treated within
                  the Receiving Party's organization. The Receiving Party shall
                  not disclose the Confidential Information of the Disclosing
                  Party to third parties (except as stated hereinafter) nor use
                  it for any purpose other than the negotiation or performance
                  of this Agreement, without the express prior written consent
                  of the Disclosing Party. The Receiving Party further agrees
                  that it shall restrict disclosure of Confidential Information
                  as follows:

                  34.2.1   Disclosure shall be restricted solely to its agents
                           as may be necessary to enforce the terms of this
                           Agreement after advising those agents of their
                           obligations under this Section 34.2.

                  34.2.2   In the event that the Receiving Party is requested,
                           pursuant to or as required by applicable Law or by
                           legal process, to disclose any Confidential
                           Information, the Receiving Party shall provide the
                           Disclosing Party with prompt notice of such request
                           or requirement in order to enable Disclosing Party to
                           seek an appropriate protective order or other remedy
                           and to consult with Disclosing Party with respect to
                           Disclosing Party taking steps to resist or narrow the
                           scope of such request or legal process. The Receiving
                           Party agrees not to oppose any action by the
                           Disclosing Party to obtain a protective order or
                           other appropriate remedy. In the absence of such
                           protective order, and provided that the Receiving
                           Party is advised by its counsel that it is compelled
                           to disclose the Confidential Information, the
                           Receiving Party shall:

                           (i)      furnish only that portion of the
                                    Confidential Information which the Receiving
                                    Party is advised by counsel is legally
                                    required; and

                           (ii)     use its commercially reasonable best
                                    efforts, at the expense of the Disclosing
                                    Party, to ensure that all Confidential
                                    Information so disclosed will be accorded
                                    confidential treatment.

         34.3     Excluded Information. Confidential Information shall not be
                  --------------------
                  deemed to include the following:

                  34.3.1   information which is or becomes generally available
                           to the public other than as a result of a disclosure
                           by the Receiving Party;

                  34.3.2   information which was available to the Receiving
                           Party on a non-

                                       38

<PAGE>

                           confidential basis prior to its disclosures by the
                           Disclosing Party; and

                  34.3.3   information which becomes available to the Receiving
                           Party on a non-confidential basis from a person other
                           than the Disclosing Party or its representative who
                           is not otherwise bound by a confidentiality agreement
                           with Disclosing Party or its agent or is otherwise
                           not under any obligation to Disclosing party or its
                           agent not to disclose the information to the
                           Receiving Party.

         34.4     Injunctive Relief Due to Breach. The Parties agree that
                  -------------------------------
                  remedies at law may be inadequate to protect each other in the
                  event of a breach of this Section 34, and the Receiving Party
                  hereby in advance agrees that the Disclosing Party shall be
                  entitled to seek and obtain, without proof of actual damages,
                  temporary, preliminary and permanent injunctive relief from
                  any court or Governmental Authority of competent jurisdiction
                  restraining the Receiving Party from committing or continuing
                  any breach of this Section 34.

35.      CHOICE OF LAW

         35.1     This Agreement and the rights and obligations of the Parties
                  shall be construed and governed by the Laws of: (i) the State
                  of Nevada as if executed and performed wholly within that
                  state; and (ii) the Federal Power Act, to the extent the
                  rights and obligations of the Parties are covered by such act.

                                       39

<PAGE>

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
by their duly authorized representative on the date set forth below.

SIERRA PACIFIC POWER COMPANY                         VALMY POWER LLC

By:                                                  By:
       -----------------------                              --------------------
       William E. Peterson                                  Craig A. Mataczynski

Title: Senior Vice President, General                Title: President
       Counsel, and Corporate Secretary

Date:  October 16, 2000                              Date:  October 16, 2000

                                      40

<PAGE>

                                    EXHIBIT A
                                  VALMY BUNDLE
                 ASSET BUNDLE CAPACITY AND OPERATING PARAMETERS

<TABLE>
<CAPTION>

                              ASSET BUNDLE:          VALMY

===================================================================================================
       UNIT             NET SUMMER               NET              RAMP RATE       MINIMUM HOURLY
                     CAPABILITY (MW)    WINTER CAPABILITY(MW)     (MW)/HOUR      ENERGY TAKE (MW)
---------------------------------------------------------------------------------------------------
<S>                  <C>                <C>                       <C>            <C>
Valmy Unit 1               127                   127                 100                45
Valmy Unit 2               134                   134                  80                55
Winnemucca                  14                    17                  17
Battle Mt. 1-4               7                     8                   8
---------------------------------------------------------------------------------------------------
Total                      282                   286                 205               100
===================================================================================================
</TABLE>
                                     Minimum Annual Energy Take:   2,130,000 MWh

For purposes of this Exhibit A, the summer months shall consist of June through
September, and the winter months shall consist of the months of January through
May and the months of October through December.

                                      A-1
<PAGE>

                                    EXHIBIT B
                                  VALMY BUNDLE
                      ENERGY AND ANCILLARY SERVICES PRICES

Energy Prices*
-------------

         Price Floor of Energy:            $ 19.63 per MWh
         Price Ceiling of Energy:          $ 36.77 per MWh

Ancillary Service Prices*
------------------------

         Regulation and Frequency Response:
                           On-Peak:        $31.08 per MW-reserved per hour
                           Off-Peak:       $17.76 per MW-reserved per hour

         Operating Reserve - Spinning Reserve:
                           On-Peak:        $31.08 per MW-reserved per hour
                           Off-Peak:       $17.76 per MW-reserved per hour

         Operating Reserve - Supplemental Reserve:
                           On-Peak:        $5.50 per MW-reserved per hour
                           Off-Peak:       $3.14 per MW-reserved per hour

The On-Peak periods shall consist of Hour Ending (HE) 0700 through HE 2200 PPT,
Monday through Saturday. The Off-Peak periods shall consist of HE 0100 through
HE 0600, HE 2300 and HE 2400 PPT, Monday through Saturday; HE 0100 through HE
2400 PPT Sunday and additional Off-Peak days (holidays) as designated annually
by WSCC.

                                                       *SUBJECT TO FERC APPROVAL
                                                        ------------------------

                                      B-1
<PAGE>

                                    EXHIBIT C
                                  VALMY BUNDLE
                           SUPPLIER'S MONTHLY INVOICE

     A     Price Ceiling of Energy     $     36.77 /MWh

     B     Price Floor of Energy       $     19.63 /MWh

<TABLE>
<CAPTION>

MONTH 1 - ENERGY
----------------
                            C              D                 E                   F                 G                   H
      Dispatch         Asset Bundle    Delivered         Supplier          Market Price      Market Price x      Market Price x
        Hour          Capacity (MWh)  Energy (MWh)    Shortfall (MWh)    of Energy ($/MWh)  Delivered Energy Asset Bundle Capacity
        ----          --------------  ------------    ---------------    -----------------  ---------------- ---------------------
                                                          (C - D)                                (D x F)             (C x F)
      <S>             <C>             <C>             <C>                <C>                <C>                 <C>
          1                282            282                -                 40.00        $    11,280.00      $     11,280.00
          2                282            282                -                 40.00             11,280.00            11,280.00
          3                282            222               60                 40.00              8,880.00            11,280.00
          4                282            222               60                 40.00              8,880.00            11,280.00
          5                152            142               10                 30.00              4,260.00             4,560.00
          6                182            182                -                 30.00              5,460.00             5,460.00
          7                272            252               20                 20.00              5,040.00             5,440.00
          8                282            282                -                 20.00              5,640.00             5,640.00
          9                282            282                -                 20.00              5,640.00             5,640.00
         10                282            282                -                 25.00              7,050.00             7,050.00
-----------------------------------------------------------------------------------------------------------------------------------
                          2,580          2,430              150                             $    73,410.00      $     78,910.00

I.     Sum of (Delivered Energy times corresponding
          hourly Market Price)                                             Sec 7.2.1        $    73,410.00
          IT.     Sum of (Asset Bundle Capacity times corresponding
            hourly Market Price)                                                                                $     78,910.00

J.     Sum of hourly Delivered Energy multiplied by the Price
          Ceiling of Energy                                                Sec 7.2.2        $     89,351.10
          JT.     Sum of hourly Asset Bundle Capacity multiplied by
            the Price Ceiling of Energy                                                                         $     94,866.60

K.     Sum of hourly Delivered Energy multiplied by the Price Floor
          of Energy                                                        Sec 7.2.3        $     47,700.90
          KT.     Sum of hourly Asset Bundle Capacity multiplied
            by the Price Floor of Energy                                                                        $     50,645.40

L.     Invoiced Amount  Energy                      Sec 7.3   (K less than I less than J)   $     73,410.00

M.     Theoretical Amount for Expected Performance            (KT less than IT less than JT)                   $      78,910.00
</TABLE>

MONTH 1 - ANCILLARY SERVICE CAPACITY - REGULATION AND FREQUENCY RESPONSE
------------------------------------------------------------------------

<TABLE>
<CAPTION>
                            N              O                 P                   Q                 R                   S

       Dispatch        Schedule of     Ancillary        Supplier        Capacity Price of  Price x Ancillary    Price x Schedule
                        Ancillary      Capacity
        Hour          Capacity (MW)  Supplied (MW)    Shortfall (MW)      Services ($/MW)  Capacity Supplied  of Ancillary Services
        ----          -------------  -------------    --------------      ---------------  -----------------  ---------------------
                                                          (N - O)                               (O x Q)              (N x Q)
       <S>            <C>            <C>              <C>                 <C>              <C>                <C>
          1                 -              -                 -                17.76            $   -                $   -
          2                 -              -                 -                17.76                -                    -
          3                 -              -                 -                31.08                -                    -
          4                 -              -                 -                31.08                -                    -
</TABLE>

                                      C-1
<PAGE>

                                    EXHIBIT C
                                  VALMY BUNDLE
                           SUPPLIER'S MONTHLY INVOICE

<TABLE>

         <S>               <C>            <C>               <C>               <C>               <C>                 <C>
          5                 30             30                -                31.08             932.40              932.40
          6                 -              -                 -                31.08                -                   -
          7                 -              -                 -                31.08                -                   -
          8                 -              -                 -                31.08                -                   -
          9                 -              -                 -                31.08                -                   -
         10                 -              -                 -                31.08                -                   -
-----------------------------------------------------------------------------------------------------------------------------------
                            30             30                -                              $     932.40        $        932.40

T.    Invoiced Amount - Ancillary Service Capacity - Regulation and
        Frequency Response                                                Sec 7.2.5         $     932.40

U.    Theoretical Amount for Expected Performance                                                               $        932.40
</TABLE>

MONTH 1 - ANCILLARY SERVICE CAPACITY - SPINNING RESERVE
-------------------------------------------------------

<TABLE>
<CAPTION>

                            V              W                 X                   Y                 Z                   AA

      Dispatch         Schedule of     Ancillary        Supplier        Capacity Price of  Price x Ancillary    Price x Schedule
                        Ancillary      Capacity
        Hour          Capacity (MW)  Supplied (MW)    Shortfall (MW)      Services ($/MW)  Capacity Supplied  of Ancillary Services
        ----          -------------  -------------    --------------      ---------------  -----------------  ---------------------
                                                          (V - W)                               (W x Y)              (V x Y)
      <S>             <C>            <C>              <C>               <C>                <C>                <C>
          1                 -              -                 -               17.76          $      -           $       -
          2                 -              -                 -               17.76                 -                   -
          3                 -              -                 -               31.08                 -                   -
          4                 -              -                 -               31.08                 -                   -
          5                 80             80                -               31.08              2,486.40            2,486.40
          6                 80             60                20              31.08              1,864.80            2,486.40
          7                 -              -                 -               31.08                 -                   -
          8                 -              -                 -               31.08                 -                   -
          9                 -              -                 -               31.08                 -                   -
         10                 -              -                 -               31.08                 -                   -
-----------------------------------------------------------------------------------------------------------------------------------
                           160            140                20                             $   4,351.20       $    4,972.80

AB.    Invoiced Amount  Ancillary Service Capacity  Spinning Reserve      Sec 7.2.5         $   4,351.20

AC.    Theoretical Amount for Expected Performance                                                             $    4,972.80
</TABLE>

MONTH 1 - ANCILLARY SERVICE CAPACITY - SUPPLEMENTAL RESERVE
-----------------------------------------------------------

<TABLE>
<CAPTION>

                            AD             AE               AF                  AG                 AH                  AI

      Dispatch         Schedule of     Ancillary                        Capacity Price of  Price x Ancillary     Price x Schedule
                        Ancillary       Capacity         Supplier
        Hour          Capacity (MW)  Supplied (MW)    Shortfall (MW)     Services ($/MW)   Capacity Supplied  of Ancillary Services
        ----          -------------  -------------    --------------     ---------------   -----------------  ---------------------
                                                                                               (AE x AG)           (AD x AG)
      <S>             <C>            <C>              <C>               <C>                 <C>               <C>
          1                 -              -                 -                3.14          $        -          $        -
          2                 -              -                 -                3.14                   -                   -
          3                 -              -                 -                5.50                   -                   -
          4                 -              -                 -                5.50                   -                   -
          5                10             10                 -                5.50                 55.00               55.00
          6                10             10                 -                5.50                 55.00               55.00
          7                10             10                 -                5.50                 55.00               55.00
</TABLE>

                                      C-2
<PAGE>

                                   EXHIBIT C
                                  VALMY BUNDLE
                           SUPPLIER'S MONTHLY INVOICE

<TABLE>

         <S>               <C>            <C>               <C>               <C>          <C>                 <C>
          8                 -              -                 -                5.50                 -                  -
          9                 -              -                 -                5.50                 -                  -
         10                 -              -                 -                5.50                 -                  -
-----------------------------------------------------------------------------------------------------------------------------------
                            30             30                -                             $      165.00       $      165.00

AJ.    Invoiced Amount - Ancillary Service Capacity - Supplemental
         Reserve                                                         Sec 7.2.5         $      165.00

AK.    Theoretical Amount for Expected Performance                                                             $      165.00
</TABLE>

MONTH 1 - ANCILLARY SERVICE ENERGY
----------------------------------

<TABLE>
<CAPTION>

                            AL             AM               AN                  AO                 AP                  AQ

                       Schedule of     Ancillary                                                Price x
      Dispatch          Ancillary        Energy          Supplier        Price Ceiling of      Ancillary        Price x Schedule
        Hour           Energy (MWh)  Supplied (MWh)   Shortfall (MWh)     Energy ($/MWh)    Energy Supplied   of Ancillary Energy
        ----           -----------   --------------   ---------------     --------------    ---------------   -------------------
                                                         (AL  AM)                             (AM x AO)           (AL x AO)
      <S>              <C>           <C>              <C>                 <C>              <C>                 <C>
          1                 -              -                -                36.77         $       -           $      -
          2                 -              -                -                36.77                 -                  -
          3                 -              -                -                36.77                 -                  -
          4                 -              -                -                36.77                 -                  -
          5                 40             40               -                36.77             1,470.80            1,470.80
          6                 30             10               20               36.77               367.70            1,103.10
          7                 10             10               -                36.77               367.70              367.70
          8                 -              -                -                36.77                 -                  -
          9                 -              -                -                36.77                 -                  -
         10                 -              -                -                36.77                 -                  -
-----------------------------------------------------------------------------------------------------------------------------------
                            80             60               20          $      367.70      $    2,206.20       $    2,941.60

AR.    Invoiced Amount - Ancillary Services Energy  Sec 7.2.6                              $    2,206.20

AS.    Theoretical Amount for Expected Performance                                                             $    2,941.60

MONTH 1 - TOTAL INVOICE AMOUNT                     Sec 7.3     (L + T + AB + AJ + AR)      $   81,064.80
====================================================================================================================================

</TABLE>

MONTH 2 - ENERGY
----------------

<TABLE>
<CAPTION>
                            C              D                 E                   F                 G                   H

      Dispatch         Asset Bundle    Delivered         Supplier          Market Price      Market Price x      Market Price x
        Hour          Capacity (MWh)  Energy (MWh)    Shortfall (MWh)    of Energy ($/MWh)  Delivered Energy   Asset Bundle Cap.
        ----          --------------  ------------    ---------------    -----------------  ----------------   -----------------
                                                          (C - D)                               (D x F)             (C x F)
      <S>             <C>             <C>             <C>                <C>               <C>                 <C>
          1                282            282               -                  40.00       $   11,280.00       $   11,280.00
          2                282            282               -                  40.00           11,280.00           11,280.00
          3                282            222               60                 40.00            8,880.00           11,280.00
          4                282            222               60                 50.00           11,100.00           14,100.00
</TABLE>

                                      C-3
<PAGE>

                                   EXHIBIT C
                                 VALMY BUNDLE
                          SUPPLIER'S MONTHLY INVOICE

<TABLE>
         <S>               <C>            <C>               <C>                <C>         <C>                 <C>
          5                152            142               10                 50.00            7,100.00            7,600.00
          6                182            182               -                  50.00            9,100.00            9,100.00
          7                272            252               20                 30.00            7,560.00            8,160.00
          8                282            282               -                  30.00            8,460.00            8,460.00
          9                282            282               -                  30.00            8,460.00            8,460.00
         10                282            282               -                  35.00            9,870.00            9,870.00
-----------------------------------------------------------------------------------------------------------------------------------
                          2,580          2,430              150                            $   93,090.00       $   99,590.00

I.     Sum of (Delivered Energy times corresponding hourly
         Market Price)                                                     Sec 7.2.1       $   93,090.00
           IT.     Sum of (Asset Bundle Capacity times corresponding
                     hourly Market Price)                                                                      $   99,590.00

J.     Sum of hourly Delivered Energy multiplied by the Price Ceiling
         of Energy                                                         Sec 7.2.2       $   89,351.10
           JT.     Sum of hourly Asset Bundle Capacity multiplied by the
                     Price Ceiling of Energy                                                                   $   94,866.60

K.     Sum of hourly Delivered Energy multiplied by the Price Floor of
         Energy                                                            Sec 7.2.3       $   47,700.90
          KT.     Sum of hourly Asset Bundle Capacity multiplied by
                    the Price Floor of Energy                                                                  $   50,645.40

L.     Invoiced Amount  Energy                      Sec 7.3            (I greater than J)  $   89,351.10

M.    Theoretical Amount for Expected Performance                      (IT greater than JT)                    $   94,866.60
</TABLE>

MONTH 3 - ENERGY
----------------

<TABLE>
<CAPTION>
                            C              D                 E                   F                 G                   H

      Dispatch         Asset Bundle    Delivered         Supplier          Market Price      Market Price x      Market Price x

        Hour          Capacity (MWh)  Energy (MWh)    Shortfall (MWh)    of Energy ($/MWh)  Delivered Energy   Asset Bundle Cap.
        ----          --------------  ------------    ---------------    -----------------  ----------------   -----------------
                                                          (C - D)                               (D x F)             (C x F)
      <S>             <C>             <C>             <C>                <C>                <C>                <C>
          1                282            282               -                  30.00        $    8,460.00      $    8,460.00
          2                282            282               -                  20.00             5,640.00           5,640.00
          3                282            222               60                 20.00             4,440.00           5,640.00
          4                282            222               60                 20.00             4,440.00           5,640.00
          5                152            142               10                 15.00             2,130.00           2,280.00
          6                182            182               -                  15.00             2,730.00           2,730.00
          7                272            252               20                 15.00             3,780.00           4,080.00
          8                282            282                                  15.00             4,230.00           4,230.00
          9                282            282                                  15.00             4,230.00           4,230.00
         10                282            282                                  15.00             4,230.00           4,230.00
-----------------------------------------------------------------------------------------------------------------------------------
                          2,580          2,430             150                              $   44,310.00      $   47,160.00

I.     Sum of (Delivered Energy times corresponding hourly
         Market Price)                                                      Sec 7.2.1       $   44,310.00
          IT.     Sum of (Asset Bundle Capacity times corresponding
                    hourly Market Price)                                                                       $   47,160.00

J.     Sum of hourly Delivered Energy multiplied by the Price Ceiling
         of Energy                                                          Sec 7.2.2       $   89,351.10
          JT.     Sum of hourly Asset Bundle Capacity multiplied by
                    the Price Ceiling of Energy                                                                $   94,866.60

</TABLE>

                                      C-4
<PAGE>

                                   EXHIBIT C
                                  VALMY BUNDLE
                           SUPPLIER'S MONTHLY INVOICE

<TABLE>
<S>    <C>                                                                <C>                 <C>                 <C>
K.     Sum of hourly Delivered Energy multiplied by the Price Floor of
         Energy                                                           Sec 7.2.3           $   47,700.90
          KT.     Sum of hourly Asset Bundle Capacity multiplied by the
                    Price Floor of Energy                                                                         $   50,645.40

L.    Invoiced Amount - Energy                     Sec 7.3          (I less than K)           $   47,700.90

M.    Theoretical Amount for Expected Performance                 (IT less than KT)                               $   50,645.40
</TABLE>

For the purposes of this example, the portions of the monthly invoices
attributable to Ancillary Services for the second and third months were assumed
to be the same as the corresponding portions for the first month.

                                      C-5
<PAGE>

                                    EXHIBIT D
                                  VALMY BUNDLE
                   BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS

MONTH 1 - ENERGY
----------------

<TABLE>
<CAPTION>

                              A                   B *                    C *                       D
      Dispatch           Replacement       Replacement Cost        Replacement Cost        Gross Replacement
        Hour            Energy (MWh)       of Energy ($/MWh)          of Energy              Cost of Energy
        ----            ------------       -----------------          ---------              --------------
                                                                                              (A x B) + C
      <S>               <C>                <C>                    <C>                       <C>
         1                    0                             na    $      0.00               $          0.00
         2                    0                             na           0.00                          0.00
         3                   60                          35.00         100.00                      2,200.00
         4                   60                          30.00          50.00                      1,850.00
         5                   10                          30.00          50.00                        350.00
         6                    0                             na           0.00                          0.00
         7                   20                          25.00           0.00                        500.00
         8                    0                             na           0.00                          0.00
         9                    0                             na           0.00                          0.00
         10                   0                             na           0.00                          0.00
-------------------------------------------------------------------------------------------------------------
                             150                                                            $      4,900.00

E.     Gross Replacement Cost of Energy                                                     $      4,900.00

F.     Theoretical Supplier's Invoice Amount for Expected Performance                       $     78,910.00

G.     Actual Supplier's Invoice Amount                                                           73,410.00
                                                                                            ---------------
H.     Avoided Payment to Supplier                                     (F - G)              $      5,500.00

I.     Invoiced Replacement Cost - Energy                              (E less than H)      $          0.00
</TABLE>

MONTH 1 - ANCILLARY SERVICE CAPACITY - REGULATION AND FREQUENCY RESPONSE
------------------------------------------------------------------------

<TABLE>
<CAPTION>
                              J                   K *                    L *                       M
      Dispatch           Replacement       Replacement Cost        Replacement Cost        Gross Replacement
        Hour            Capacity (MW)     of Capacity ($/MW)         of Capacity            Cost of Capacity
        ----            -------------     ------------------         -----------            ----------------
                                                                                              (J x K) + L
      <S>               <C>               <C>                     <C>                       <C>
         1                    0                             na    $      0.00               $          0.00
         2                    0                             na           0.00                          0.00
         3                    0                             na           0.00                          0.00
         4                    0                             na           0.00                          0.00
         5                    0                             na           0.00                          0.00
         6                    0                             na           0.00                          0.00
         7                    0                             na           0.00                          0.00
         8                    0                             na           0.00                          0.00
         9                    0                             na           0.00                          0.00
         10                   0                             na           0.00                          0.00
--------------------------------------------------------------------------------------------------------------
                              0                                                             $          0.00

N.     Gross Replacement Cost of Ancillary Capacity -                                       $          0.00
         Regulation & Frequency Response

O.     Theoretical Supplier's Invoice Amount for Expected Performance                       $        932.40

P.     Actual Supplier's Invoice Amount                                                              932.40

Q.     Avoided Payment to Supplier                                    (O - P)               $          0.00

R.     Invoiced Replacement Cost - Ancillary Capacity                 (N = Q)               $          0.00
</TABLE>

                                      D-1
<PAGE>

                                   EXHIBIT D

                                 VALMY BUNDLE
                  BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS

<TABLE>
<CAPTION>
MONTH 1 - ANCILLARY SERVICE CAPACITY - SPINNING RESERVE
-------------------------------------------------------
                              S                   T *                    U *                       V
      Dispatch           Replacement       Replacement Cost        Replacement Cost        Gross Replacement
        Hour            Capacity (MW)     of Capacity ($/MW)         of Capacity            Cost of Capacity
        ----            -------------     ------------------         -----------            ----------------
                                                                                              (S x T) + U
      <S>               <C>               <C>                      <C>                     <C>
         1                    0                           na          $   0.00                 $    0.00
         2                    0                           na              0.00                      0.00
         3                    0                           na              0.00                      0.00
         4                    0                           na              0.00                      0.00
         5                    0                           na              0.00                      0.00
         6                   20                        40.00            100.00                    900.00
         7                    0                           na              0.00                      0.00
         8                    0                           na              0.00                      0.00
         9                    0                           na              0.00                      0.00
         10                   0                           na              0.00                      0.00
------------------------------------------------------------------------------------------------------------
                             20                                                                $  900.00

W.    Gross Replacement Cost of Ancillary Capacity - Spinning Reserve                          $  900.00
X.    Theoretical Supplier's Invoice Amount for Expected Performance                           $4,972.80
Y.    Actual Supplier's Invoice Amount                                                          4,351.20
Z.    Avoided Payment to Supplier                                       (X - Y)                $  621.60
AA.   Invoiced Replacement Cost - Ancillary Capacity         (W greater than Z)                $  278.40

<CAPTION>
MONTH 1 - ANCILLARY CAPACITY - SUPPLEMENTAL RESERVE
---------------------------------------------------
                             AB                  AC *                    AD *                      AE
      Dispatch           Replacement       Replacement Cost        Replacement Cost        Gross Replacement
        Hour            Capacity (MW)     of Capacity ($/MW)         of Capacity            Cost of Capacity
        ----            -------------     ------------------         -----------            ----------------
                                                                                             (AB x AC) + AD

<S>      <C>                  <C>                        <C>           <C>                     <C>
         1                    0                          na            $ 0.00                  $  0.00
         2                    0                          na              0.00                     0.00
         3                    0                          na              0.00                     0.00
         4                    0                          na              0.00                     0.00
         5                    0                          na              0.00                     0.00
         6                    0                          na              0.00                     0.00
         7                    0                          na              0.00                     0.00
         8                    0                          na              0.00                     0.00
         9                    0                          na              0.00                     0.00
         10                   0                          na              0.00                     0.00
------------------------------------------------------------------------------------------------------------
                              0                                                                $  0.00

AF.   Gross Replacement Cost of Ancillary Capacity - Supplemental Reserve                      $  0.00
AG.   Theoretical Supplier's Invoice Amount for Expected Performance                           $165.00
AH.   Actual Supplier's Invoice Amount                                                          165.00
                                                                                            ----------------
AI.   Avoided Payment to Supplier                                    (AG - AH)                 $  0.00
</TABLE>

                                      D-2
<PAGE>

                                   EXHIBIT D

                                 VALMY BUNDLE
                  BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS

<TABLE>
<S>                                                                  <C>                       <C>
AJ.   Invoiced Replacement Cost - Ancillary Capacity                 (AF = AI)                 $  0.00

<CAPTION>
MONTH 1 - ANCILLARY SERVICE ENERGY
----------------------------------
                             AK                  AL *                    AM *                      AN
      Dispatch           Replacement       Replacement Cost        Replacement Cost        Gross Replacement
        Hour            Energy (MWh)       of Energy ($/MWh)         of Energy **            Cost of Energy
        ----            ------------       -----------------         ------------            --------------
                                                                                             (AK x AL) + AM
      <S>               <C>                <C>                      <C>                    <C>
         1                    0                           na           $ 0.00                       0.00
         2                    0                           na             0.00                       0.00
         3                    0                           na             0.00                       0.00
         4                    0                           na             0.00                       0.00
         5                    0                           na             0.00                       0.00
         6                   20                        40.00            20.00                     820.00
         7                    0                           na             0.00                       0.00
         8                    0                           na             0.00                       0.00
         9                    0                           na             0.00                       0.00
         10                   0                           na             0.00                       0.00
------------------------------------------------------------------------------------------------------------
                             20                                                                $  820.00

AO.   Gross Replacement Cost of Ancillary Energy                                               $  820.00
AP.   Theoretical Supplier's Invoice Amount for Expected Performance                           $2,941.60
AQ.   Actual Supplier's Invoice Amount                                                          2,206.20
AR.   Avoided Payment to Supplier                                    (AP - AQ)                 $  735.40
AS.   Invoiced Replacement Cost - Ancillary Energy        (AO greater than AR)                 $   84.60

MONTH 1 - TOTAL INVOICE AMOUNT                          (I + R + AA + AJ + AS)                 $  363.00
============================================================================================================

<CAPTION>
MONTH 2 - ENERGY
----------------
                              A                   B *                    C *                       D
      Dispatch           Replacement       Replacement Cost        Replacement Cost        Gross Replacement
        Hour            Energy (MWh)       of Energy ($/MWh)          of Energy              Cost of Energy
        ----            ------------       -----------------          ---------              --------------
                                                                                              (A x B) + C
      <S>               <C>                <C>                     <C>                     <C>
         1                    0                   na                   $  0.00                      0.00
         2                    0                   na                      0.00                      0.00
         3                   60                  40.00                  200.00                  2,600.00
         4                   60                  55.00                  100.00                  3,400.00
         5                   10                  48.00                  200.00                    680.00
         6                    0                   na                      0.00                      0.00
         7                   20                  35.00                  300.00                  1,000.00
         8                    0                   na                      0.00                      0.00
         9                    0                   na                      0.00                      0.00
         10                   0                   na                      0.00                      0.00
------------------------------------------------------------------------------------------------------------
                            150                                                                $7,680.00
</TABLE>

                                      D-3
<PAGE>

                                   EXHIBIT D
                                 VALMY BUNDLE
                  BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS

<TABLE>

<S>    <C>                                                                              <C>
E.     Gross Replacement Cost of Energy                                                 $        7,680.00

F.     Theoretical Supplier's Invoice Amount for Expected Performance                   $        94,866.60

G.     Actual Supplier's Invoice Amount                                                        89,351.10

H.     Avoided Payment to Supplier                                     (F - G)          $        5,515.50

I.      Invoiced Replacement Cost - Energy                  (E greater than H)          $        2,164.50

<CAPTION>
MONTH 3 - ENERGY

                              A                   B *                    C *                       D
      Dispatch           Replacement       Replacement Cost        Replacement Cost        Gross Replacement
        Hour            Energy (MWh)       of Energy ($/MWh)          of Energy              Cost of Energy
        ----            ------------       -----------------          ---------              --------------
                                                                                              (A x B) + C
      <S>               <C>                <C>                     <C>                     <C>
         1                    0                   na               $     0.00                     0.00
         2                    0                   na                     0.00                     0.00
         3                   60                  22.00                  100.00                  1,420.00
         4                   60                  18.00                  50.00                   1,130.00
         5                   10                  18.00                   0.00                    180.00
         6                    0                   na                     0.00                     0.00
         7                   20                  18.00                  50.00                    410.00
         8                    0                   na                     0.00                     0.00
         9                    0                   na                     0.00                     0.00
        10                    0                   na                     0.00                     0.00
-------------------------------------------------------------------------------------------------------------------
                             150                                                        $        3,140.00

E.     Gross Replacement Cost of Energy                                                 $        3,140.00
F.     Theoretical Supplier's Invoice Amount for Expected Performance                   $       50,645.40
G.     Actual Supplier's Invoice Amount                                                         47,700.90
                                                                                     --------------------
H.     Avoided Payment to Supplier                                     (F - G)          $        2,944.50
I.      Invoiced Replacement Cost - Energy                  (E greater than H)          $         195.50
</TABLE>

For the purposes of this example, the portions of the monthly invoices
attributable to Ancillary Services for the second and third months were assumed
to be the same as the corresponding portions for the first month.

                                   EXHIBIT E

                                 VALMY BUNDLE

                           YEAR END TRUE-UP INVOICE

        A   Price Ceiling of Energy       $                 36.77  /MWh
        B   Price Floor of Energy         $                 19.63  /MWh

EXAMPLE 1
---------

<TABLE>
<CAPTION>

                           C                    D                      E                       F                       G
                       Delivered         Market Price x         Price Ceiling x          Price Floor x        Supplier's Invoiced
      Month           Energy (MWh)      Delivered Energy       Delivered Energy        Delivered Energy         Amount - Energy
      -----           ------------      ----------------       ----------------        ----------------         ---------------
                                                                    (A x C)                 (B x C)
      <S>             <C>               <C>                    <C>                     <C>                    <C>
        1                2,430          $   73,410.00          $   89,351.10           $   47,700.90               $      73,410.00
        2                2,430              93,090.00              89,351.10               47,700.90                      89,351.10
        3                2,430              44,310.00              89,351.10               47,700.90                      47,700.90
</TABLE>

                                      D-4
<PAGE>

                                   EXHIBIT E
                                  VALMY BUNDLE
                            YEAR END TRUE-UP INVOICE
<TABLE>
    <S>                 <C>            <C>                  <C>                         <C>                       <C>
        4                2,820             118,440.00             103,691.40               55,356.60                     103,691.40
        5                2,820             107,160.00             103,691.40               55,356.60                     103,691.40
        6                2,620              99,560.00              96,337.40               51,430.60                      96,337.40
        7                2,820             112,800.00             103,691.40               55,356.60                     103,691.40
        8                2,820             107,160.00             103,691.40               55,356.60                     103,691.40
        9                2,280              88,920.00              83,835.60               44,756.40                      83,835.60
        10               2,820             101,520.00             103,691.40               55,356.60                     101,520.00
        11               2,820             126,900.00             103,691.40               55,356.60                     103,691.40
        12               2,520             100,800.00              92,660.40               49,467.60                      92,660.40
------------------------------------------------------------------------------------------------------------------------------------

      Total             31,630        $  1,174,070.00       $   1,163,035.10             $620,896.90              $    1,103,272.40
</TABLE>

(Total of Column D) greater than (Total of Column E) therefore Annual True-up
-----------------------------------------------------------------------------
calculated under Section 7.5.1(a)
---------------------------------
<TABLE>

<S>   <C>                                                                             <C>                                <C>
H.    Annual True-up - Delivered Energy                                               (Total E - Total G)                $59,762.70
I.     Average Cost of Delivered Energy after True-up ($/MWh)                         (Total E / Total C)                    $36.77
</TABLE>

<TABLE>
<CAPTION>

                           J                    K                      L                       M                       N
                      Replacement      Replacement Energy      Gross Replacement     Adjusted Replacement    Invoiced Replacement
      Month           Energy (MWh)       x Average Cost         Cost of Energy          Cost of Energy          Cost of Energy
      -----           ------------       --------------         --------------          --------------          --------------
                                             (I x J)
      <S>             <C>              <C>                  <C>                      <C>                      <C>
        1                 150                               $      4,900.00            $                      $                0.00
        2                 150                                      7,680.00                                                2,164.50
        3                 150                                      3,140.00                                                  195.50
        4                  0                                         0.00                                                      0.00
        5                  0                                         0.00                                                      0.00
        6                  0                                         0.00                                                      0.00
        7                  0                                         0.00                                                      0.00
        8                  0                                         0.00                                                      0.00
        9                  0                                         0.00                                                      0.00
        10                 0                                         0.00                                                      0.00
        11                 0                                         0.00                                                      0.00
        12                 0                                         0.00                                                      0.00
------------------------------------------------------------------------------------------------------------------------------------

      Total               450         $      16,546.50      $   15,720.00              $               0.00   $            2,360.00

O.    Annual True-up - Replacement Costs                                              (Total N - Total M)     $            2,360.00

Total Annual True-up *                                                                      (H + O)                      $62,122.70
====================================================================================================================================

</TABLE>

EXAMPLE 2
---------

<TABLE>
<CAPTION>
                           C                    D                      E                       F                       G
                       Delivered         Market Price x         Price Ceiling x          Price Floor x        Supplier's Invoiced
      Month           Energy (MWh)      Delivered Energy       Delivered Energy        Delivered Energy         Amount - Energy
      -----           ------------      ----------------       ----------------        ----------------         ---------------
                                                                    (A x C)                 (B x C)
      <S>             <C>             <C>                   <C>                     <C>                     <C>
        1                2,430        $     73,410.00       $      89,351.10        $      47,700.90        $      73,410.00
        2                2,430              93,090.00              89,351.10               47,700.90               89,351.10
        3                2,430              44,310.00              89,351.10               47,700.90               47,700.90
</TABLE>

                                      E-2
<PAGE>

                                   EXHIBIT E
                                 VALMY BUNDLE
                           YEAR END TRUE-UP INVOICE
<TABLE>
<CAPTION>

<S>      <C>             <C>          <C>                 <C>                     <C>                   <C>
         4               2,820             107,160.00             103,691.40               55,356.60              103,691.40
         5               2,820              95,880.00             103,691.40               55,356.60               95,880.00
         6               2,620              89,080.00              96,337.40               51,430.60               89,080.00
         7               2,820             101,520.00             103,691.40               55,356.60              101,520.00
         8               2,820              95,880.00             103,691.40               55,356.60               95,880.00
         9               2,280              79,800.00              83,835.60               44,756.40               79,800.00
        10               2,820              90,240.00             103,691.40               55,356.60               90,240.00
        11               2,820             115,620.00             103,691.40               55,356.60              103,691.40
        12               2,520              90,720.00              92,660.40               49,467.60               90,720.00
-----------------------------------------------------------------------------------------------------------------------------
      Total             31,630       $   1,076,710.00     $     1,163,035.10      $       620,896.90      $     1,060,964.80

(Total of Column E) (greater than) (Total of Column D) therefore Annual True-up calculated under Section 7.5.1(b)

H.    Annual True-up - Delivered Energy                                             (Total D - Total G)   $        15,745.20

I.    Average Cost of Delivered Energy after True-up ($/MWh)                        (Total D / Total C)               $34.04

<CAPTION>
                           J                    K                      L                       M                       N
                      Replacement      Replacement Energy      Gross Replacement     Adjusted Replacement    Invoiced Replacement
      Month           Energy (MWh)       x Average Cost         Cost of Energy          Cost of Energy          Cost of Energy
      -----           ------------       --------------         --------------          --------------          --------------
                                             (I x J)
<S>                   <C>                <C>                <C>                         <C>                 <C>
        1                 150                               $      4,900.00                                 $                  0.00
        2                 150                                      7,680.00                                                2,164.50
        3                 150                                      3,140.00                                                  195.50
        4                  0                                           0.00                                                    0.00
        5                  0                                           0.00                                                    0.00
        6                  0                                           0.00                                                    0.00
        7                  0                                           0.00                                                    0.00
        8                  0                                           0.00                                                    0.00
        9                  0                                           0.00                                                    0.00
        10                 0                                           0.00                                                    0.00
        11                 0                                           0.00                                                    0.00
        12                 0                                           0.00                                                    0.00
------------------------------------------------------------------------------------------------------------------------------------
      Total               450         $      15,318.35      $     15,720.00       $                401.65   $              2,360.00

O.    Annual True-up - Replacement Costs                                              (Total N - Total M)   $              1,958.35

Total Annual True-up *                                                                      (H + O)         $             17,703.55
====================================================================================================================================

<CAPTION>

EXAMPLE 3
---------

                           C                    D                      E                       F                       G
                       Delivered         Market Price x         Price Ceiling x          Price Floor x        Supplier's Invoiced
      Month           Energy (MWh)      Delivered Energy       Delivered Energy        Delivered Energy         Amount - Energy
      -----           ------------      ----------------       ----------------        ----------------         ---------------
                                                                    (A x C)                 (B x C)
<S>                   <C>             <C>                   <C>                     <C>                     <C>
        1                2,430        $      73,410.00      $       89,351.10       $       47,700.90       $       73,410.00
</TABLE>

                                      E-3
<PAGE>

                                   EXHIBIT E
                                 VALMY BUNDLE
                           YEAR END TRUE-UP INVOICE
<TABLE>
<S>                      <C>          <C>                   <C>                     <C>                     <C>
        2                2,430              93,090.00              89,351.10               47,700.90               89,351.10
        3                2,430              44,310.00              89,351.10               47,700.90               47,700.90
        4                2,820              90,240.00             103,691.40               55,356.60               90,240.00
        5                2,820              84,600.00             103,691.40               55,356.60               84,600.00
        6                2,620              73,360.00              96,337.40               51,430.60               73,360.00
        7                2,820              73,320.00             103,691.40               55,356.60               73,320.00
        8                2,820              67,680.00             103,691.40               55,356.60               67,680.00
        9                2,280              50,160.00              83,835.60               44,756.40               50,160.00
        10               2,820              56,400.00             103,691.40               55,356.60               56,400.00
        11               2,820              50,760.00             103,691.40               55,356.60               55,356.60
        12               2,520              40,320.00              92,660.40               49,467.60               49,467.60
-----------------------------------------------------------------------------------------------------------------------------------
      Total              31,630       $     797,650.00      $     1,163,035.10      $            620,896.90 $            811,046.20
<CAPTION>
(Total of Column E) > (Total of Column D) therefore  Annual  True-up  calculated under Section 7.5.1(b)
------------------------------------------------------------------------------------------------------

<S>                                                                                   <C>                   <C>
H.    Annual True-up - Delivered Energy                                               (Total D - Total G)   $            (13,396.20)

I.    Average Cost of Delivered Energy after True-up ($/MWh)                          (Total D / Total C)                    $25.22
</TABLE>

<TABLE>
<CAPTION>
                           J                    K                      L                       M                       N
                      Replacement      Replacement Energy      Gross Replacement     Adjusted Replacement    Invoiced Replacement
      Month           Energy (MWh)       x Average Cost         Cost of Energy          Cost of Energy          Cost of Energy
      -----           ------------       --------------         --------------          --------------          --------------
<S>                   <C>             <C>                   <C>                     <C>                     <C>
                                             (I x J)

        1                 150                               $      4,900.00                                 $                  0.00
        2                 150                                      7,680.00                                                2,164.50
        3                 150                                      3,140.00                                                  195.50
        4                  0                                         0.00                                                      0.00
        5                  0                                         0.00                                                      0.00
        6                  0                                         0.00                                                      0.00
        7                  0                                         0.00                                                      0.00
        8                  0                                         0.00                                                      0.00
        9                  0                                         0.00                                                      0.00
        10                 0                                         0.00                                                      0.00
        11                 0                                         0.00                                                      0.00
        12                 0                                         0.00                                                      0.00
------------------------------------------------------------------------------------------------------------------------------------
      Total               450         $      11,348.17      $       15,720.00       $              4,371.83 $              2,360.00

O.    Annual True-up - Replacement Costs                                              (Total N - Total M)   $            (2,011.83)

Total Annual True-up *                                                                      (H + O)         $           (15,408.03)
====================================================================================================================================
</TABLE>

EXAMPLE 4
---------

<TABLE>
<CAPTION>
                           C                    D                      E                       F                       G
                       Delivered         Market Price x         Price Ceiling x          Price Floor x        Supplier's Invoiced
      Month           Energy (MWh)      Delivered Energy       Delivered Energy        Delivered Energy         Amount - Energy
      -----           ------------      ----------------       ----------------        ----------------         ---------------
<S>                   <C>             <C>                   <C>                     <C>                     <C>

</TABLE>
                                      E-4
<PAGE>

                                   EXHIBIT E
                                 VALMY BUNDLE
                           YEAR END TRUE-UP INVOICE
<TABLE>
<CAPTION>

                                                                    (A x C)                 (B x C)
<S>                     <C>                 <C>                   <C>                     <C>                      <C>
        1                2,430            $ 73,410.00          $   89,351.10             $ 47,700.90            $  73,410.00
        2                2,430              93,090.00              89,351.10               47,700.90               89,351.10
        3                2,430              44,310.00              89,351.10               47,700.90               47,700.90
        4                2,820              50,760.00             103,691.40               55,356.60               55,356.60
        5                2,820              47,940.00             103,691.40               55,356.60               55,356.60
        6                2,620              41,920.00              96,337.40               51,430.60               51,430.60
        7                2,820              42,300.00             103,691.40               55,356.60               55,356.60
        8                2,820              39,480.00             103,691.40               55,356.60               55,356.60
        9                2,280              29,640.00              83,835.60               44,756.40               44,756.40
        10               2,820              33,840.00             103,691.40               55,356.60               55,356.60
        11               2,820              33,840.00             103,691.40               55,356.60               55,356.60
        12               2,520              30,240.00              92,660.40               49,467.60               49,467.60
------------------------------------------------------------------------------------------------------------------------------------
      Total              31,630           $560,770.00          $1,163,035.10             $620,896.90            $ 688,256.20
</TABLE>
(Total of Column E) > (Total of Column D) therefore  Annual  True-up  calculated
under Section 7.5.1(b)
<TABLE>
<CAPTION>
<C>    <S>                                                                              <C>                            <C>
H.    Annual True-up - Delivered Energy                                               (Total F - Total G)   $           (67,359.30)

I.    Average Cost of Delivered Energy after True-up ($/MWh)                         (Total F / Total C)                    $19.63
</TABLE>
<TABLE>
<CAPTION>

                           J                    K                      L                       M                       N

                      Replacement      Replacement Energy      Gross Replacement     Adjusted Replacement    Invoiced Replacement
      Month           Energy (MWh)       x Average Cost         Cost of Energy          Cost of Energy          Cost of Energy
      -----           ------------       --------------         --------------          --------------          --------------
                                             (I x J)
<S>                    <C>                 <C>                  <C>                      <C>                    <C>
        1                 150                                   $ 4,900.00                                       $            0.00
        2                 150                                     7,680.00                                                2,164.50
        3                 150                                     3,140.00                                                  195.50
        4                  0                                          0.00                                                    0.00
        5                  0                                          0.00                                                    0.00
        6                  0                                          0.00                                                    0.00
        7                  0                                          0.00                                                    0.00
        8                  0                                          0.00                                                    0.00
        9                  0                                          0.00                                                    0.00
        10                 0                                          0.00                                                    0.00
        11                 0                                          0.00                                                    0.00
        12                 0                                          0.00                                                    0.00
------------------------------------------------------------------------------------------------------------------------------------
      Total               450         $      8,833.50           $15,720.00               $     6,886.50          $        2,360.00
</TABLE>
<TABLE>
<CAPTION>
<C>    <S>                                                                            <C>                    <C>
O.    Annual True-up - Replacement Costs                                              (Total N - Total M)   $            (4,526.50)

Total Annual True-up *                                                                      (H + O)         $           (71,885.80)
====================================================================================================================================
</TABLE>
*  Positive  Total  Annual  True-up  is  indicative  of a payment  from Buyer to
Supplier; Negative Total Annual True-up is indicative of a payment from Supplier
to Buyer.
<PAGE>

                                    EXHIBIT F
                    NOTICES, BILLING AND PAYMENT INSTRUCTIONS

Supplier:
--------

a) Agreement Notices:                       Name and Address
   -----------------                                         -------------------
                                    Phone:
                                           -------------------------------------
                                    Fax:
                                         ---------------------------------------

b) Payment Check:                           Name and Address
   -------------                                             -------------------

c) Payment Wire Transfer:                   Bank:
   ---------------------                          ------------------------------

                                    ABA #:
                                           -------------------------------------
                                    For:    Supplier's Name
                                                            --------------------
                                    Account No:
                                                --------------------------------
                                    For:
                                         ---------------------------------------

d) Invoices:                                Name and Address
   --------                                                  -------------------
                                    Phone:
                                           -------------------------------------
                                    Fax:
                                         ---------------------------------------

e) Operating Notifications:
   -----------------------

         i) (Management, if required)
         ii) Pre-Schedule:                  Phone:
                                                   -----------------------------
                                    Fax:
                                         ---------------------------------------

         iii) Real Time:                    Phone:
                                                   -----------------------------
                                    Fax:
                                         ---------------------------------------

         iv) Monthly Checkout       Phone:
                                           -------------------------------------
               Person:                      Fax:
                                                 -------------------------------

                                      F-6
<PAGE>

Buyer:
-----

a) Agreement Notices:
   -----------------
         Address:                   Gary Craythorn
                           Manager, Resource Contracts
                           Nevada Power Company
                           6226 West Sahara Avenue, M/S 26A
                           Las Vegas, Nevada 89146
         Phone:            702/367-5425
         Fax:                       702/227-2455
         E-mail:                    gcraythorn@nevp.com
<TABLE>
<S>      <C>                                    <C>                                   <C>
b) Invoices:
   --------

         US Post Office:  (Via Certified Mail)               Overnight Delivery
         ---------------                                     ------------------
                                                        Address:   Nevada Power Company
                          Attn: Kathy Crews             Attn: Kathy Crews
                          P.O. Box 230, M/S 20          6226 West Sahara  Ave., M/S 20
                          Las Vegas, Nevada 89151       Las Vegas, Nevada 89146
         Telephone:       702/227-2476
         Fax:             702/367-5096
         E-mail:          kcrews@nevp.com
</TABLE>

<TABLE>
<S>     <C>                <C>                                   <C>                       <C>
c) Schedules:
   ---------
         i)  Pre-Schedule: Primary Name: Rick Engebretson        Phone:  702/862-7195
                                                                 E-mail: rengebretson@nevp.com
                   Alternate Name: Tim Schuster                  Phone:  702/862-7194
                                                                 E-mail: tschuster@nevp.com
                                                                 Fax:    702/227-2404
         ii)  Real Time:                                         Phone:  702/862-7106
                                                                 Fax:    702/227-2404
         iii)  Monthly Checkout: Kathy Crews                     Phone:  702/227-2476
                                                                 Fax:    702/367-5096
                                                                 E-mail: kcrews@nevp.com
</TABLE>

<TABLE>
<S>     <C>                                 <C>            <C>
d) Control Area/Transmission:
   -------------------------
         i)  Reliability Dispatch:                    Phone:   (702) 451-2026
                                            Fax:     (702) 862-7113
         ii)  Transmission Dispatch:                  Phone:   (702) 451-8346
                                            Fax:     (702) 862-7113
</TABLE>

                                      F-7
<PAGE>

                                    EXHIBIT G

                          FORM OF AVAILABILITY NOTICE*
Date of Notice:

Time of Notice:

Supplier:

Name of Supplier's
Representative:

Buyer:

Asset Bundle:

Availability Dates (96 hours
total):
<TABLE>
<CAPTION>

                            A               B                C             D            E               F               G
                      Available from                      Permitted   Asset Bundle   Available    Total Derating    Permitted
Availability   Hour   Valmy     Unit  Total Derating of  Derating of  Capacity of   from Valmy      of   Valmy      Derating of
    Date      Ending     1 (MW)       Valmy Unit 1 (MW)  Unit 1 (MW)  Unit 1 (MW)   Unit 2 (MW)     Unit 2 (MW)     Unit 2  (MW)
    ----      ------     ------       -----------------  -----------  -----------   -----------     -----------     ------------
                       (A (greater         (___ - A)     (C) (greater    (A - C)    (E (greater      (___ - E)       (B (greater
                      than) or = __)                     than) or = B)             than) or = ___)                  than) or = F)

<S>           <C>      <C>             <C>              <C>          <C>           <C>             <C>            <C>

               0600
               0700
               0800
               0900
               1000
               1100
               1200
               1300
               1400
               1500
               1600
               1700
               1800
               1900
               2000
               2100
               2200
               2300
               2400
               0100
               0200
               0300
               0400
               0500
               0600
               0700
                :
          (96 hours total)
                :
               300
               400
               500
</TABLE>
     H           I**                    J
Asset Bundle Alternative   Cause and Expected Duration of
Capacity of  Point(s) of   Deratings and Identification
 Unit 2 (MW)  Delivery         of Permitted Deratings
 -----------  --------         ----------------------
  (G - E)

     * The Parties' operational personnel shall develop a similar form for the
other generating units in the bundle.
<PAGE>

** The Parties' operational personnel shall develop the necessary procedure to
document requests and responses to utilize Alternative Point(s) of Delivery.

                               G-1
<PAGE>

                                   EXHIBIT H
                               FORM OF GUARANTEE

                  This Guaranty is entered into as of October 16, 2000 by NRG
Energy, Inc., a Delaware corporation ("Guarantor"), on behalf of Valmy Power
LLC, a Delaware limited liability company ("Supplier"), in favor of and for the
benefit of Sierra Pacific Power, a Nevada corporation ("SPPC"). SPPC is
sometimes referred to herein as "Beneficiary".

                  WHEREAS, Supplier and SPPC are entering into a Transitional
Power Purchase Agreement dated as of October 16, 2000 2000 (the "TPPA") by which
Supplier has agreed to sell and SPPC has agreed to buy Energy and Ancillary
Services (as defined in the TPPA) produced by the North Valmy generating station
being sold by SPPC; and

                  WHEREAS, it is a condition to the obligation of SPPC to enter
into the TPPA for Guarantor to guaranty the Supplier's obligations under the
TPPA in an amount not to exceed the Credit Amount (as defined in the TPPA) (the
"Guarantied Obligations").

                  1. Guaranty. Guarantor irrevocably and unconditionally
guaranties, as primary obligor and not merely as surety, the due and punctual
payment in full of all Guarantied Obligations (including amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C.(SS) 362(a)).

                  In the event that all or any portion of the Guarantied
Obligations is paid by Supplier, the obligations of Guarantor hereunder shall
continue and remain in full force and effect or be reinstated, as the case may
be, in the event that all or any part of such payment(s) is rescinded or
recovered directly or indirectly from the Beneficiary as a preference,
fraudulent transfer or otherwise, and any such payments that are so rescinded or
recovered shall constitute Guarantied Obligations (to the extent such payments,
in the aggregate, do not exceed the Credit Amount).

                  Subject to the other provisions of this Section 1, upon
failure of Supplier to pay any of the Guarantied Obligations when and as the
same shall become due, Guarantor will upon demand pay, or cause to be paid, in
cash, to SPPC, an amount equal to the aggregate of the unpaid Guarantied
Obligations to the extent due. In the event Guarantor fails to pay the
Guarantied Obligations, each and every default in the payment shall give rise to
a separate cause of action and separate causes of action may be brought
hereunder as each such cause of action arises.

                  2. Expenses. The Guarantor agrees to reimburse SPPC for all
reasonable costs and expenses (including, without limitation, the reasonable
fees and expenses of legal counsel) in connection with (i) any default by
Guarantor hereunder and any enforcement or collection proceeding resulting
therefrom, including, without limitation, all manner of participation in or
other involvement with bankruptcy, insolvency, receivership, foreclosure,
winding up or liquidation proceedings of or involving the Guarantor, judicial or
regulatory proceedings of or involving the Guarantor and workout, restructuring
or other negotiations or proceedings of or involving the Guarantor (whether or
not the workout, restructuring or transaction contemplated thereby is
consummated) and (ii) the enforcement of this Section 2.

                  3. Guaranty Absolute; Continuing Guaranty. The obligations of
Guarantor hereunder are irrevocable, absolute, independent and unconditional and
shall not be affected by any circumstance which constitutes a legal or equitable
discharge of a guarantor or surety other than payment in full of the

                                      H-3
<PAGE>

Guarantied Obligations. In furtherance of the foregoing and without limiting the
generality thereof, Guarantor agrees that: (a) this Guaranty is a guaranty of
payment when due and not of collectibility; (b) the obligations of Guarantor
hereunder are independent of the obligations of Supplier under the TPPA and a
separate action or actions may be brought and prosecuted against Guarantor
whether or not any action is brought against the Supplier and whether or not the
Supplier is joined in any such action or actions; and (c) Guarantor's payment of
a portion, but not all, of the Guarantied Obligations shall in no way limit,
affect, modify or abridge Guarantor's liability for any portion of the
Guarantied Obligations that has not been paid. This Guaranty is a continuing
guaranty and shall be binding upon Guarantor and its successors and assigns.

                  4. Actions by Beneficiary. The Beneficiary may from time to
time, without notice or demand and without affecting the validity or
enforceability of this Guaranty or giving rise to any limitation, impairment or
discharge of Guarantor's liability hereunder, (a) renew, extend, accelerate or
otherwise change the time, place, manner or terms of payment of the Guarantied
Obligations, (b) settle, compromise, release or discharge, or accept or refuse
any offer of performance with respect to, or substitutions for, the Guarantied
Obligations or any agreement relating thereto and/or subordinate the payment of
the same to the payment of any other obligations, (c) request and accept other
guaranties of the Guarantied Obligations and take and hold security for the
payment of this Guaranty or the Guarantied Obligations, (d) release, exchange,
compromise, subordinate or modify, with or without consideration, any security
for payment of the Guarantied Obligations, any other guaranties of the
Guarantied Obligations, or any other obligation of any Person with respect to
the Guarantied Obligations, (e) enforce and apply any security hereafter held by
or for the benefit of the Beneficiary in respect of this Guaranty or the
Guarantied Obligations and direct the order or manner of sale thereof, or
exercise any other right or remedy that the Beneficiary may have against any
such security, and (f) exercise any other rights available to SPPC under the
TPPA.

                  5. No Discharge. This Guaranty and the obligations of
Guarantor hereunder shall be valid and enforceable and shall not be subject to
any limitation, impairment or discharge for any reason (other than payment in
full of the Guarantied Obligations), including without limitation the occurrence
of any of the following, whether or not Guarantor shall have had notice or
knowledge of any of them: (a) any failure to assert or enforce or agreement not
to assert or enforce, or the stay or enjoining, by order of court, by operation
of law or otherwise, of the exercise or enforcement of, any claim or demand or
any right, power or remedy with respect to the Guarantied Obligations or any
agreement relating thereto, or with respect to any other guaranty of or security
for the payment of the Guarantied Obligations, (b) any waiver or modification
of, or any consent to departure from, any of the terms or provisions of any
other guaranty or security for the Guarantied Obligations, (c) the Guarantied
Obligations, or any agreement relating thereto, at any time being found to be
illegal, invalid or unenforceable in any respect, (d) the application of
payments received from any source to the payment of indebtedness other than the
Guarantied Obligations, even if the Beneficiary might have elected to apply such
payment to any part or all of the Guarantied Obligations, (e) any failure to
perfect or continue perfection of a security interest in any collateral which
secures any of the Guarantied Obligations, (f) any defenses, set-offs or
counterclaims which the Supplier may assert against the Beneficiary in respect
of the Guarantied Obligations, including but not limited to failure of
consideration, breach of warranty, payment, statute of frauds, statute of
limitations, accord and satisfaction (other than the right to set off or recoup
overdue undisputed payments due from Beneficiary under the TPPA), and (g) any
other act or thing or omission, or delay to do any other act or thing, which may
or might in any manner or to any extent vary the risk of Guarantor as an obligor
in respect of the Guarantied Obligations.

                  6. Waivers for the Benefit of Beneficiary. Guarantor waives,
for the benefit of Beneficiary, until the Guarantied Obligations are paid in
full: (a) any right to require the Beneficiary, as a

                                      H-4
<PAGE>

condition of payment or performance by Guarantor, to (i) proceed against the
Supplier, any other guarantor of the Guarantied Obligations or any other Person,
(ii) proceed against or exhaust any security held from the Supplier, any other
guarantor of the Guarantied Obligations or any other Person, or (iii) pursue any
other remedy in the power of the Beneficiary; (b) any defense arising by reason
of the incapacity, lack of authority or any disability or other defense of the
Supplier including, without limitation, any defense based on or arising out of
the lack of validity or the unenforceability of the Guarantied Obligations or
any agreement or instrument relating thereto or by reason of the cessation of
the liability of the Supplier from any cause other than payment in full of the
Guarantied Obligations; (c) any defense based upon any statute or rule of law
which provides that the obligation of a surety must be neither larger in amount
nor in other respects more burdensome than that of the principal; (d) (i) any
principles or provisions of law, statutory or otherwise, that are or might be in
conflict with the terms of this Guaranty and any legal or equitable discharge of
Guarantor's obligations hereunder, (ii) the benefit of any statute of
limitations affecting Guarantor's liability hereunder or the enforcement hereof,
(iii) any rights to set-offs, recoupments and counterclaims, and (iv)
promptness, diligence and any requirement that the Beneficiary protect, secure,
perfect or insure any lien on any property subject thereto; (e) notices,
demands, presentments, protests, notices of protest, notices of dishonor and
notices of any action or inaction, including acceptance of this Guaranty; and
(f) to the fullest extent permitted by law, any defenses or benefits that may be
derived from or afforded by law which limit the liability of or exonerate
guarantors or sureties, or which may conflict with the terms of this Guaranty.

                  7. Waiver of Rights Against Supplier. Guarantor waives any
claim, right or remedy, direct or indirect, that Guarantor now has or may
hereafter have against the Supplier or any of its assets in connection with this
Guaranty or the performance by Guarantor of its obligations hereunder, in each
case whether such claim, right or remedy arises in equity, under contract, by
statute, under common law or otherwise and including without limitation (a) any
right of subrogation, reimbursement or indemnification that Guarantor now has or
may hereafter have against the Supplier, (b) any right to enforce, or to
participate in, any claim, right or remedy that the Beneficiary now has or may
hereafter have against the Supplier, and (c) any benefit of, and any right to
participate in, any collateral or security hereafter held by the Beneficiary.
Guarantor further agrees that, to the extent the waiver or agreement to withhold
the exercise of its rights of subrogation, reimbursement and indemnification as
set forth herein is found by a court of competent jurisdiction to be void or
voidable for any reason, any rights of subrogation, reimbursement or
indemnification Guarantor may have against the Supplier or against any
collateral or security shall be junior and subordinate to any rights the
Beneficiary may have against Supplier, to all right, title and interest the
Beneficiary may have in any such collateral or security, and to any right the
Beneficiary may have against such other guarantor.

                  8. Representations and Warranties of Guarantor. Guarantor
represents and warrants to SPPC as follows:

         (a)      Guarantor is a corporation duly organized, validly existing
and in good standing under the laws of its state of incorporation. Guarantor has
the requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted.

         (b)      Guarantor has the corporate power and authority to execute and
deliver this Guaranty and to consummate the transactions contemplated hereby.
The execution and delivery of this Guaranty and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Guarantor, and no other corporate proceedings on the part
of Guarantor, including the approval of its shareholders, are necessary to
authorize this Guaranty or to consummate the transactions so contemplated. This
Guaranty has been duly and validly executed and delivered by Guarantor and

                                      H-5
<PAGE>

constitutes a valid and binding agreement of Guarantor, enforceable against
Guarantor in accordance with its terms.

         (c)      There are no legal or arbitral proceedings by or before any
governmental or regulatory authority or agency, now pending or (to Guarantor's
knowledge) threatened against Guarantor or its subsidiaries that could
reasonably be expected to have a material adverse effect on the consolidated
financial condition, operations or business taken as a whole of it and its
subsidiaries.

         (d)      The representations and warranties made herein will remain
true until Guarantor has fulfilled all obligations to pay in full the Guaranteed
Obligations.

                  9. Set Off. In addition to any other rights the Beneficiary
may have under law or in equity, if any amount shall at any time be due and
owing by Guarantor to the Beneficiary under this Guaranty, the Beneficiary is
authorized at any time or from time to time, without notice (any such notice
being expressly waived), to set off and to appropriate and to apply any
indebtedness of the Beneficiary owing to Guarantor and any other property of
Guarantor held by the Beneficiary to or for the credit or the account of
Guarantor against and on account of the Guarantied Obligations and liabilities
of Guarantor to the Beneficiary under this Guaranty.

                  10. Disputes. Any action, claim or dispute arising out of or
relating to this Guaranty (any such action, claim or dispute, a "Dispute") shall
be submitted in writing to the other Party. In the event Guarantor and SPPC are
unable to resolve the Dispute satisfactorily within thirty (30) days from the
receipt of notice of the Dispute, either Guarantor or SPPC may initiate
arbitration through the serving and filing of a demand for arbitration.
Guarantor and SPPC expressly agree that such arbitration shall be the exclusive
means to further resolve any Dispute and hereby irrevocably waive their right to
a jury trial with respect to any Dispute, provided that at any time a request
made for provisional remedies requesting preservation of respective rights and
obligations under the Guaranty may be resolved by a court of law located in the
County of the principal place of business of SPPC. Arbitration shall be
conducted in accordance with Sections 13.4, 13.5, 13.6, 13.7, and 13.8 of the
TPPA.

                  11. Amendments and Waivers. No amendment, modification,
termination or waiver of any provision of this Guaranty, and no consent to any
departure by Guarantor therefrom, shall in any event be effective without the
written concurrence of SPPC and, in the case of any such amendment or
modification, Guarantor. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.

                  12. Miscellaneous. It is not necessary for Beneficiary to
inquire into the capacity or powers of Guarantor or Supplier or the officers,
directors or any agents acting or purporting to act on behalf of any of them.

                  The rights, powers and remedies given to Beneficiary by this
Guaranty are cumulative and shall be in addition to and independent of all
rights, powers and remedies given to Beneficiary by virtue of any statute or
rule of law or in the TPPA. Any forbearance or failure to exercise, and any
delay by Beneficiary in exercising, any right, power or remedy hereunder shall
not impair any such right, power or remedy or be construed to be a waiver
thereof, nor shall it preclude the further exercise of any such right, power or
remedy.

                  In case any provision in or obligation under this Guaranty
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or

                                      H-6
<PAGE>

obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.

                  This Guaranty shall inure to the benefit of Beneficiary and
its respective successors and assigns.

                  13. Notices. All notices, requests, demands, waivers, consents
and other communications hereunder shall be in writing, shall be delivered
either in person, by telegraphic, facsimile or other electronic means, by
overnight air courier or by mail, and shall be deemed to have been duly given
and to have become effective (a) upon receipt if delivered in person or by
telegraphic, facsimile or other electronic means, (b) one (1) business day after
having been delivered to an air courier for overnight delivery or (c) three (3)
business days after having been deposited in the U.S. mails as certified or
registered mail, return receipt requested, all fees prepaid, directed to the
parties at the following addresses:

                  If to Guarantor, addressed to: Brian B. Bird, Treasurer
                                                 NRG Energy, Inc.
                                                 901 Marquette Avenue, Suite
                                                 2300
                                                 Minneapolis, MN  55402
                                                 Facsimile:
                                                             ---------------

                  If to SPPC, addressed to:      William E. Peterson
                                                 Nevada Power Company
                                                 6100 Neil Road
                                                 Reno, Nevada 89511
                                                 Facsimile:  (775) 834-5959

                  IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be
duly executed and delivered by its officers thereunto duly authorized as of the
date first written above.

                                                       NRG ENERGY, INC.
                                                       By:
                                                          ----------------------
                                                            Craig A. Mataczynski
                                                       Title: President
                                                       Address: 901 Marquette
                                                                Ave., Suite 2300
                                                                Minneapolis, MN
                                                                55402

                                      H-7
<PAGE>

                                   EXHIBIT I
                           COMPANY OBSERVED HOLIDAYS

                  New Year's Day                     January 1st
                  President's Day                    Third Monday in February
                  Memorial Day (observed)            Last Monday in May
                  Independence Day                   July 4th
                  Labor Day                          First Monday in September
                  Nevada Day                         Last Friday in October
                  Thanksgiving Day                   Fourth Thursday in November
                  Thanksgiving Friday                Friday after Thanksgiving
                  Christmas Day                      December 25th

Holidays falling on Saturday will be observed on the preceding Friday and those
falling on Sunday will be observed on the following Monday.

                                      I-1
<PAGE>

                                   EXHIBIT J
                                 VALMY BUNDLE
                          ADJUSTMENTS TO TPPA AMOUNT

<TABLE>
<CAPTION>
                          Monthly                                                                Monthly
            Month        Adjustment                                            Month           Adjustment
-----------------------------------------                         --------------------------------------------------
           <S>           <C>                                                   <C>             <C>
           Mar-01                    3.4%                                      Mar-02                           3.4%
           Apr-01                    4.4%                                      Apr-02                           4.4%
           May-01                    4.0%                                      May-02                           4.0%
           Jun-01                    4.3%                                      Jun-02                           4.3%
           Jul-01                    5.0%                                      Jul-02                           5.0%
           Aug-01                    5.0%                                      Aug-02                           5.0%
           Sep-01                    4.9%                                      Sep-02                           4.9%
           Oct-01                    5.1%                                      Oct-02                           5.1%
           Nov-01                    5.0%                                      Nov-02                           5.0%
           Dec-01                    5.1%                                      Dec-02                           5.1%
           Jan-02                    5.1%                                      Jan-03                           5.1%
           Feb-02                    4.6%                                      Feb-03                           4.6%
</TABLE>

Example 1 - Effective Date of Agreement is April 15, 2001

        A.  TPPA Amount:               $ 15,000,000

<TABLE>
<CAPTION>
                             B                   C                     D
                          Monthly            Applicable            Applicable
      Month             Adjustment           Portion *             Adjustment
------------------------------------------------------------------------------------
                                                                    (B x C)
      <S>               <C>                  <C>                   <C>
           Apr-01                   4.4%            50.0%                       2.2%
           May-01                   4.0%           100.0%                       4.0%
------------------------------------------------------------------------------------
      Total                                                                     6.2%
</TABLE>

<TABLE>
<S>                                                               <C>                                            <C>
E.  Total of Monthly Applicable Adjustments                                                                      6.2%

F    Adjusted TPPA Amount                                         (A x (1+D))                            $         0
=====================================================================================================================
</TABLE>

Example 2 - Effective Date of Agreement is September 15, 2001
        G.  TPPA Amount:               $ 15,000,000

                             H                   I                     J
                          Monthly            Applicable            Applicable
      Month             Adjustment            Portion *            Adjustment
--------------------------------------------------------------------------------

                                      J-1

<PAGE>

                                    EXHIBIT J

                                  VALMY BUNDLE

                           ADJUSTMENTS TO TPPA AMOUNT

                                             (H x I)

      Jun-01             4.3%       100.0%               4.3%
      Jul-01             5.0%       100.0%               5.0%
      Aug-01             5.0%       100.0%               5.0%
      Sep-01             4.9%        50.0%               2.5%
-------------------------------------------------------------
    Total                                               16.8%

K.  Total of Monthly Applicable Adjustments                                16.8%

L   Adjusted TPPA Amount                      (G x (1-K))     $       12,480,000
================================================================================

Example 3 - Termination Date of December 31, 2002

      M.    TPPA Amount:               $     15,000,000

                     N            O             P

                  Monthly     Applicable    Applicable

    Month       Adjustment    Portion **    Adjustment
-------------------------------------------------------------
                                              (N x O)

      Jan-03              5.1%    100.0%               5.1%
      Feb-03              4.6%    100.0%               4.6%
-------------------------------------------------------------
    Total                                              9.7%

Q.  Total of Monthly Applicable Adjustments                                 9.7%

R    Payment Amount                           (M x Q)           $      1,455,000
================================================================================

* The applicable  portion of the month is the number of days in the month during
which  deliveries  of energy  from  Supplier  to Buyer were made  divided by the
number of days in the month.

** The applicable portion of the month is the number of days in the month during
which  deliveries  of energy from Supplier to Buyer would have been made divided
by the number of days in the month.

                                      J-2

<PAGE>

                                    EXHIBIT K

                                  VALMY BUNDLE

                       ADJUSTMENTS TO MINIMUM ANNUAL TAKE
<TABLE>
<CAPTION>

           A                     B                 C                    D                     E                    F

                            Base Number       Base Energy           Sales per          Current Number       Adjusted Energy
        Class *            of Customers       Sales (MWh)        Customer (MWh)         of Customers          Sales (MWh)
------------------------------------------------------------------------------------------------------------------------------------
                                                                     (C / B)                                   (D x E) **
<S>                          <C>               <C>                   <C>                 <C>                   <C>
Residential                        475,000          5,800,000             12                470,000            5,738,947
Commercial                          65,000          2,800,000             43                 60,000            2,584,615
Industrial                           1,000          4,900,000                                   800            3,600,000
Street Lighting                          5            130,000                                     5              130,000
Other Retail                            50            600,000                                    50              600,000
Wholesale                                5            850,000                                     5              850,000
------------------------------------------------------------------------------------------------------------------------------------
                                   541,060         15,080,000                               530,860           13,503,563
</TABLE>
<TABLE>
<CAPTION>
<C>    <S>                                                                                <C>                        <C>
G.  Adjustment to Minimum Annual Take                                                      (F / C)                      89.55%

H.  Minimum Annual Take from Exhibit A (MWh)                                                                         2,130,000

I.   Revised Minimum Annual Take (MWh)                                                     (G x H)                   1,907,415
</TABLE>

           J                              K

      Month During          Applicable Min.
     Contract Year       Annual Take (MWh)
--------------------------------------------------
           1                    2,130,000
           2                    2,130,000
           3                    2,130,000
           4                    2,130,000
           5                    1,907,415
           6                    1,907,415
           7                    1,907,415
           8                    1,810,500
           9                    1,810,500
           10                   1,704,000
           11                   1,704,000
           12                   1,704,000
--------------------------------------------------
         Total                 22,975,245
<TABLE>
<CAPTION>
<C>   <S>                                                                            <C>                              <C>
L.  Minimum Take for Contract Year (MWh)                                              (Total of K / 12)              1,914,604
</TABLE>
*    As reported on Buyer's FERC Form 1

                                      K-2
<PAGE>

                                   EXHIBIT K
                                  VALMY BUNDLE
                       ADJUSTMENTS TO MINIMUM ANNUAL TAKE

** Adjusted Energy Sales for the remaining Industrial, Street Lighting, Other
Retail, and Wholesale customers will be based upon actual sales during the base
period.

                                      K-3
<PAGE>

                                    EXHIBIT L
                                  VALMY BUNDLE
                    ENERGY APPLICABLE TO MINIMUM ANNUAL TAKE

<TABLE>
<CAPTION>

      A                B                C                D               E *               F               G **
   Dispatch         Supply          Delivered        Permitted          Force         Replacement       Applicable
     Hour        Amount (MWh)      Energy (MWh)    Derating(MWh)     Majeure(MWh)     Energy(MWh)      Energy (MWh)
----------------------------------------------------------------------------------------------------------------------
                                                                                                        (C+D+E+F)
<S>              <C>               <C>             <C>               <C>              <C>              <C>
         1             282              282                                                                  282
         2             282              282                                                                    0
         3             282              282                                                                  282
         4             282              282                                                                  282
         5             282              282                                                                  282
         6             282              262               20                                                 282
         7             282              262               20                                                 282
         8             282              262                                                20                282
         9             282              282                                                                  282
        10             282              282                                                                  282
        11             282              282                                                                  282
        12             282              282                                                                  282
        13             282                0                               282                                282
        14             282                0                               282                                282
        15             282                0                               282                                282
        16             282                0                               282                                282
        17             282              232                                                30                262
        18             282              282                                                                  282
        19             282              282                                                                  282
        20             282              282                                                                  282
        21             282              282                                                                  282
        22             282              282                                                                  282
        23             282              282                                                                  282
        24             252              252                                                                  252
        25             232              232                                                                  232
        26             202              202                                                                  202
        27             232              202               30                                                 232
        28             252              252                                                                  252
        29             282              282                                                                  282
        30             282              282                                                                  282
        31             282              282                                                                  282
        32             282              282                                                                  282
        33             282              282                                                                  282
        34             282              282                                                                  282
        35             282              282                                                                  282
        36             282              282                                                                  282
----------------------------------------------------------------------------------------------------------------------
     total           9,912            8,644               70            1,128              50              9,892
</TABLE>

                                      L-1
<PAGE>

                                   EXHIBIT L
                                  VALMY BUNDLE
                    ENERGY APPLICABLE TO MINIMUM ANNUAL TAKE

*  Includes energy excused because of Supplier's and Buyer's events of Force
   Majeure
** G cannot be greater than B

                                      L-2
<PAGE>

                                    EXHIBIT M
               ASSET BUNDLE CONTRACTUAL AND OPERATING CONSTRAINTS

1.       For the purposes of this Exhibit M, "Constrained Capacity" shall mean
         that portion of the Asset Bundle Capacity that has been designated as
         being subject to contractual and operational constraints in accordance
         with the provisions of this Exhibit M.

2.       Section 4.1.4 of the Agreement, which addresses Supplier's right to
         Asset Bundle Capacity in excess of the Supply Amount, shall not be
         applicable to Constrained Capacity.

3.       Asset Bundle Capacity scheduled in accordance with Section 5.1 of the
         Agreement, which addresses Buyer's notifications to Supplier, shall not
         be deemed to include Constrained Capacity unless Buyer's schedules
         specifically designate Constrained Capacity as being applicable to the
         schedules.

4.       The Asset Bundle Capacity described in the following table shall be
         deemed Constrained Capacity for the designated Asset Bundles.

<TABLE>
<CAPTION>
         ----------------------------------------------------------------------------------------------------

              Source of Capacity             Annual Limit            Monthly Limit           Daily Limit
         ----------------------------------------------------------------------------------------------------
              <S>                         <C>                        <C>                     <C>
                Winnemucca and             100 hours at max.
                Battle Mt. 1-4            capacity for each
                    (25 MW)                     unit*                    None                   None
         ----------------------------------------------------------------------------------------------------

         ----------------------------------------------------------------------------------------------------
</TABLE>

* Buyer is attempting to raise the operating limits on these generating units.
If Buyer is successful, the higher limits will be applicable to this Exhibit M.

                                      M-2<PAGE>

                                                                  Exhibit 10(X)

--------------------------------------------------------------------------------

                             ASSET SALE AGREEMENT

                                    BETWEEN

                         SIERRA PACIFIC POWER COMPANY

                                      AND

                           WPS NORTHERN NEVADA, LLC

                                      FOR

                         THE TRACY/PINON ASSET BUNDLE

                               October 25, 2000

--------------------------------------------------------------------------------
<PAGE>

                             ASSET SALE AGREEMENT

          ASSET SALE AGREEMENT, dated as of October 25, 2000, between Sierra
Pacific Power Company, a Nevada corporation (the "Seller"), and WPS Northern
Nevada, LLC, a Nevada limited liability company (the "Buyer").

          WHEREAS, the Seller owns and operates (directly or indirectly through
wholly-owned subsidiaries) the "Purchased Assets" (as defined herein); and

          WHEREAS, the Buyer, WPS Resources Corporation, a Wisconsin corporation
("WPSR"), WPS Power Development, Inc., a Wisconsin corporation ("PDI") and an
indirect wholly-owned subsidiary of WPSR, and Seller entered into that certain
Equity Contribution Agreement, dated as of the date hereof (the "Equity
Contribution Agreement"), pursuant to which PDI has agreed to make certain
capital contributions into Buyer on or prior to the Closing Date and WPSR has
agreed to unconditionally guarantee the performance by Buyer of all of Buyer's
obligations under this Agreement due to be performed by Buyer at or prior to the
Closing and any Adjustment Amount due thereafter; and

          WHEREAS, the Buyer desires to purchase and assume from the Seller, and
the Seller desires to sell to the Buyer, the Purchased Assets and certain
associated liabilities upon the terms and conditions hereinafter set forth in
this Agreement;

          NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements hereinafter set forth, and intending
to be legally bound hereby, the parties hereto agree as follows:

                                   ARTICLE I
                                   ---------
                                  DEFINITIONS
                                  -----------

          1.1 Definitions. As used in this Agreement, the following terms have
              -----------
the meanings specified or referred to in this Section 1.1:

          (1)  "Adjustment Amount" shall have the meaning set forth in Section
3.2(a) hereof.

          (2)  "Adjustment Statement" shall have the meaning set forth in
Section 3.2(a) hereof.

          (3)  "Affiliate" shall have the meaning set forth in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act.
<PAGE>

          (4)  "Agreement" means this Asset Sale Agreement for the Tracy/Pinon
Bundle, dated October 25, 2000, between Seller and Buyer, together with the
Schedules and Exhibits thereto.

          (5)  "Ancillary Agreements" means the Interconnection Agreement, the
Transitional Power Purchase Agreement, the Operating Easement Agreements, the
Equity Contribution Agreement, the Bills of Sale, the Assignment of Leases, the
Deeds and the Instrument of Assumption.

          (6)  "Assignment of Leases" means the Assignment of Leases in the form
of Exhibit A hereto.

          (7)  "Assumed Liabilities" shall have the meaning set forth in Section
2.3 hereof.

          (8)  "Benefit Plans" shall have the meaning set forth in Section
2.4(i) hereof.

          (9)  "Benefit Plans of Buyer" shall have the meaning set forth in
Section 7.10(d) hereof.

          (10) "Bill of Sale" means the Bills of Sale to be delivered at the
Closing with respect to the Purchased Assets which constitute personal property
and which are to be transferred at the Closing, substantially in the form of
Exhibit B hereto.

          (11) "Brunswick Diesel" means the Brunswick diesel generating facility
and related assets located in Carson City County, Nevada.

          (12) "Business Day" means any day other than Saturday, Sunday and any
day which is a legal holiday or a day on which banking institutions in the State
of New York are authorized by law or other governmental action to close.

          (13) "Buyer" shall have the meaning set forth in the preface hereto.

          (14) "Buyer Representatives" means the Buyer's accountants, counsel,
environmental consultants, financial advisors and other authorized
representatives.

          (15) "Buyer Required Regulatory Approvals" shall have the meaning set
forth in Section 6.3(b) hereof.

                                       2
<PAGE>

          (16) "Buyer's Easements" shall have the meaning set forth in Section
4.3(f) hereof.

          (17) "CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C.(S)9601, et seq., as amended.
                                                          -------

          (18) "Closing" shall have the meaning set forth in Section 4.1 hereof.

          (19) "Closing Date" shall have the meaning set forth in Section 4.1
hereof.

          (20) "COBRA" means the Consolidated Omnibus Reconciliation Act of
1985, as amended.

          (21) "Code" means the Internal Revenue Code of 1986, as amended.

          (22) "Collective Bargaining Agreements" shall have the meaning set
forth in Section 7.10(a) hereof.

          (23) "Confidentiality Agreement" means the Confidentiality and Auction
Protocols Agreement, dated March 17, 2000, between the Seller and the Buyer.

          (24) "CPUC" means the California Public Utility Commission or any
successor thereto.

          (25) "CSFB" shall have the meaning set forth in Section 7.7 hereof.

          (26) "Direct Claim" shall have the meaning set forth in Section 9.2(c)
hereof.

          (27) "Dispute" shall have the meaning set forth in Section 11.6
hereof.

          (28) "Emission Allowance Account" means the system account used by
USEPA to track the number of SO2 Allowances held by the Seller or any of the
Seller Subsidiaries in respect of the Purchased Assets.

          (29) "Emission Reduction Credit" means a permanent, enforceable,
quantifiable and surplus emissions reduction which can be considered as a
reduction

                                       3
<PAGE>

for the purpose of offsetting requirements under the federal Clean Air Act or
any state counterpart thereto.

          (30) "Encumbrances" means any mortgages, pledges, liens, security
interests, conditional and installment sale agreements, activity and use
limitations, conservation easements, deed restrictions, encumbrances and charges
of any kind.

          (31) "Environmental Laws" means all Federal, state and local laws,
regulations, rules, ordinances, codes, decrees, judgments, directives, or
judicial or administrative orders relating to pollution or protection of the
environment, natural resources or human health and safety, including, without
limitation, laws relating to Releases or threatened Releases of Hazardous
Substances (including, without limitation, ambient air, surface water,
groundwater, land, surface and subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, Release,
transport or handling of Hazardous Substances, laws relating to record keeping,
notification, disclosure and reporting requirements respecting Hazardous
Substances, and laws relating to the management and use of natural resources.

          (32) "Environmental Permits" shall have the meaning set forth in
Section 5.13(a) hereof.

          (33) "Environmental Site Assessments" means, collectively (i) the
Tracy Station Phase I Environmental Site Assessment, dated October 1998; (ii)
the Tracy Station Phase II Environmental Site Assessment, dated March 1999;
(iii) the Tracy Station Phase II Environmental Assessment Closure Report, issued
November 1999; (iv) the Brunswick Diesel Phase I Environmental Site Assessment,
dated October 1998; (v) the Gabbs Diesel Phase I Environmental Site Assessment,
dated October 1998 and (vi) the Valley Road Diesel Phase I Environmental Site
Assessment, dated October 1998.

          (34) "Equity Contribution Agreement" shall have the meaning set forth
in the Recitals.

          (35) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.

          (36) "ERISA Affiliate" shall have the meaning set forth in Section
2.4(i) hereof.

          (37) "ERISA Affiliate Plans" shall have the meaning set forth in
Section 2.4(i) hereof.

                                       4
<PAGE>

          (38) "Estimated Adjustment Amount" means (i) the Estimated Maintenance
and Capital Expenditures Amount plus (ii) the Estimated Inventory Adjustment
Amount plus (iii) the Estimated Materials and Supplies Adjustment Amount.

          (39) "Estimated Closing Payment" shall have the meaning set forth in
Section 4.2 hereof.

          (40) "Estimated Inventory Adjustment Amount" means the book value, as
determined by an independent evaluator designated by the Seller and approved by
the Buyer, which approval shall not be unreasonably withheld, of the Fuel
Inventory priced at the Seller's weighted average fuel costs used at or in
connection with the Purchased Assets as of the date that is ten (10) days before
the Closing Date, which valuation shall be provided to the Buyer by the Seller
no later than five (5) days before the Closing Date.

          (41) "Estimated Maintenance and Capital Expenditures Amount" means the
Seller's estimate of the Maintenance and Capital Expenditures Amount, which
estimate shall be the Seller's good faith reasonable estimate of the Maintenance
and Capital Expenditures Amount actually incurred, as set forth in Schedule
1.1(41) attached hereto as of the date set forth in such Schedule 1.1(41).

          (42) "Estimated Materials and Supplies Adjustment Amount" means the
Seller's good faith reasonable estimate of the book value of materials and
supplies used at or in connection with the Purchased Assets on the Materials and
Supplies Valuation Date.

          (43) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

          (44) "Excluded Assets" shall have the meaning set forth in Section 2.2
hereof.

          (45) "Excluded Liabilities" shall have the meaning set forth in
Section 2.4 hereof.

          (46) "Federal Power Act" means the Federal Power Act of 1935, as
amended.

          (47) "FERC" means the Federal Energy Regulatory Commission or any
successor thereto.

                                       5
<PAGE>

          (48) "Final Order" shall have the meaning set forth in Section 8.1(c)
hereof.

          (49) "Fuel Inventory" means coal, fuel oil and alternative fuel
inventories that are located at, or are in transit to, the sites included within
the Tracy/Pinon Bundle on the Closing Date.

          (50) "Gabbs Diesel" means the Gabbs diesel generating facility and
related assets located in Nye County, Nevada.

          (51) "Good Utility Practices" mean the applicable practices, methods
and acts:

               (i)  required by applicable Laws, Permits and Environmental
Permits or Applicable Reliability Criteria (as defined in the Interconnection
Agreement), whether or not the party whose conduct is at issue is a member
thereof; and

               (ii) otherwise engaged in or approved by a significant portion of
the United States electric utility industry during the relevant time period,
which, in the exercise of reasonable judgment in light of the facts known at the
time the decision was made, could have been expected to accomplish the desired
result at a reasonable cost consistent with applicable Laws, applicable Permits
and Environmental Permits, Applicable Reliability Criteria (as defined in the
Interconnection Agreement), good business practices, safety, environmental
protection, economy and expediency.

Good Utility Practices are not intended to be limited to the optimum practices,
methods or acts to the exclusion of all others, but rather to practices, methods
or acts generally accepted in the United States electric utility industry.

          (52) "Governmental Authority" means any executive, legislative,
judicial, regulatory or administrative agency, body, commission, department,
board, court, tribunal, arbitrating body or authority of the United States or
any foreign country, or any state, local or other governmental subdivision
thereof.

          (53) "Hazardous Substances" means (i) any petrochemical or petroleum
products, oil, coal ash, radioactive materials, radon gas, natural gas,
synthetic gas, and mixtures thereof, asbestos and asbestos-containing materials
in any form that is or could become friable, urea formaldehyde foam insulation
and transformers or other equipment which may contain polychlorinated biphenyls;
(ii) any chemicals, materials or substances defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"restricted

                                       6
<PAGE>

hazardous materials," "extremely hazardous substances," "toxic substances,"
"contaminants" or "pollutants" or words of similar meaning and regulatory
effect; or (iii) any other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any applicable Environmental Laws.

          (54) "Holding Company Act" means the Public Utility Holding Company
Act of 1935, as amended.

          (55) "Hourly Employees" shall have the meaning set forth in Section
7.10(a) hereof.

          (56) "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.

          (57) "Income Tax" means any federal, state, local or foreign Tax (i)
based upon, measured by or calculated with respect to net income, profits or
receipts (including, without limitation, capital gains Taxes and minimum Taxes)
or (ii) based upon, measured by or calculated with respect to multiple bases
(including, without limitation, corporate franchise taxes) if one or more of the
bases on which such Tax may be based, measured by or calculated with respect to,
is described in clause (i), in each case together with any interest, penalties
or additions to such Tax.

          (58) "Indemnifiable Losses" shall have the meaning set forth in
Section 9.1(a) hereof.

          (59) "Indemnifying Party" shall have the meaning set forth in Section
9.1(d) hereof.

          (60) "Indemnitee" shall have the meaning set forth in Section 9.1(c)
hereof.

          (61) "Indenture" means Indenture of Mortgage dated as of December 1,
1940, as supplemented from time to time, between Seller and State Street Bank
and Trust Company, as Trustee.

          (62) "Independent Accounting Firm" means an independent accounting
firm of national reputation mutually appointed by the Seller and the Buyer.

          (63) "Independent Appraiser" shall have the meaning set forth in
Section 3.3 hereof.

                                       7
<PAGE>

          (64) "Instrument of Assumption" means the Instrument of Assumption in
the form of Exhibit C attached hereto.

          (65) "Intellectual Property" means patents and patent rights,
trademarks and trademark rights, trade names and trade name rights, service
marks and service mark rights, service names and service name rights, brand
names, inventions, copyrights and copyright rights, computer programs and
pending applications for and registrations of patents, trademarks, service marks
and copyrights.

          (66) "Interconnection Agreement" means the Interconnection Agreement,
dated as of October 25, 2000, between the Seller and the Buyer.

          (67) "Inventory Adjustment Amount" shall have the meaning set forth in
Section 3.2(a) hereof.

          (68) "Knowledge" means the actual knowledge of the directors and
executive officers of the specified Person, which directors and executive
officers are charged with the responsibility for the particular function as of
the date of the Agreement, or with respect to any certificate delivered pursuant
to the Agreement, the date of delivery of such certificate, after reasonable
inquiry by them of selected employees of the specified Person whom they believe,
in good faith, to be the persons generally responsible for the subject matters
to which the knowledge is pertinent.

          (69) "Laws" means all laws, statutes, rules, regulations, ordinances
and other pronouncements having the effect of law of the United States, any
foreign country or any domestic or foreign state, county, city or other
political subdivision or of any Governmental Authority.

          (70) "Leased Assets" shall have the meaning set forth in Section 7.4
hereof.

          (71) "Leases" shall have the meaning set forth in Section 5.10 hereof.

          (72) "Maintenance and Capital Expenditures Adjustment Amount" shall
have the meaning set forth in Section 3.2(a) hereof.

          (73) "Maintenance and Capital Expenditures Amount" means the aggregate
amount of actual funds reasonably expended on, or for which liabilities were
reasonably accrued in accordance with generally accepted accounting principles
applied on a consistent basis with respect to (i) any Scheduled

                                       8
<PAGE>

Maintenance Expenditures or Scheduled Capital Expenditures, made with respect to
the Purchased Assets by the Seller beginning on January 1, 2001 and ending on
the Closing Date; provided, however, that the portion of the Maintenance and
Capital Expenditures Amount attributable to Scheduled Maintenance Expenditures
shall be the lesser of (x) the actual amounts expended plus the accrued
liabilities related thereto for the period beginning on January 1, 2001 and
ending on the earlier of June 30, 2001 and the Closing Date and (y) Two Million
Eight Hundred Thirty Thousand Dollars ($2,830,000), and (ii) any maintenance
expenditures and capital expenditures which were made by the Seller at the
Buyer's request, beginning on the date of this Agreement and ending on the
Closing Date.

          (74) "Management Employee" shall have the meaning set forth in Section
7.10(b) hereof.

          (75) "Management Transition Plan" means the Management Transition
Plan, Generation Bundled Employees, as detailed in the Generation Divestiture
Severance Packet, dated July, 2000, of the Seller.

          (76) "Material Adverse Effect" means any change or changes in or
effect on the Purchased Assets that is materially adverse to the business,
results of operations, financial condition or physical condition of the
Purchased Assets, individually or in the aggregate, except for (i) any change or
effect resulting from changes in the international, national, regional or local
wholesale or retail markets for electric power; (ii) any change or effect
resulting from changes in the international, national, regional or local markets
for any fuel used at the Purchased Assets; (iii) any change or effect resulting
from changes in the North American, national, regional or local electric
transmission systems; (iv) any change in applicable laws, judgments, orders or
decrees; (v) any conditions imposed by a Governmental Authority in connection
with the consents or approvals required for the transactions contemplated
hereby; and (vi) any materially adverse change in or effect on the Purchased
Assets which is cured (including by the payment of money) by the Seller to the
reasonable satisfaction of Buyer before the Termination Date.

          (77) "Materials and Supplies Adjustment Amount" shall have the meaning
set forth in Section 3.2(a) hereof.

          (78) "Materials and Supplies Valuation Date" means the date that is
ten (10) days prior to the Closing Date.

          (79) "Necessary Capital Expenditures" shall have the meaning set forth
in Section 7.1(c) hereof.

                                       9
<PAGE>

          (80) "Necessary Maintenance Expenditures" shall have the meaning set
forth in Section 7.1(e) hereof.

          (81) "Offering Memorandum" means the Offering Memorandum of Sierra
Pacific Resources, dated March, 2000 as supplemented from time to time.

          (82) "Off-Site Location" means any real property other than the Real
Property.

          (83) "Operating Easement Agreements" means the operating easements
providing the right to continue operating and maintaining certain generation and
transmission facilities at the Purchased Assets, each in substantially the form
of Exhibit D or Exhibit E attached hereto.

          (84) "Operating Easements" means the Seller's Easements and/or Buyer's
Easements granted pursuant to the Operating Easement Agreements.

          (85) "OPUC" means the Oregon Public Utility Commission or any
successor thereto.

          (86) "Permits" shall have the meaning set forth in Section 5.20
hereof.

          (87) "Permitted Encumbrances" means (i) all exceptions, restrictions,
easements, covenants, charges, rights of way and monetary and non-monetary
Encumbrances of record, except for such Encumbrances which have a Material
Adverse Effect or secure indebtedness; (ii) any state of facts that a current
survey of the Real Property would disclose, except for such facts which have a
Material Adverse Effect; (iii) with respect to any date before the Closing Date,
Encumbrances under the Indenture; (iv) mortgages, liens, pledges, charges,
Encumbrances and restrictions incurred in connection with the Seller's purchase
of personal property after the date of this Agreement, in accordance with
Section 7.1, securing all or a portion of the purchase price therefor; (v) the
Buyer's Easements and the Seller's Easements (in accordance with the Operating
Easement Agreements applicable to such easements and the Interconnection
Agreement); (vi) statutory liens for current Taxes, assessments or other
governmental charges not yet due or delinquent or the validity of which is being
contested in good faith by appropriate proceedings provided that such contested
sums are paid or dismissed prior to Closing or with respect to which Seller pays
the Taxes, assessments or other government charges under protest; (vii)
mechanics', carriers', workers', repairers' and other similar liens arising or
incurred in the ordinary course of business relating to obligations which are
not yet due and payable or the validity of which are being contested in good
faith by appropriate proceedings provided that such contested

                                       10
<PAGE>

sums are paid or dismissed prior to Closing or for which Seller has posted an
appropriate bond to secure payment; (viii) zoning, entitlement, conservation
restriction and other land use and environmental regulations by Governmental
Authorities which do not have a Material Adverse Effect; and (ix) such other
liens, imperfections in or failure of title, charges, easements, restrictions
and Encumbrances which do not materially detract from the value of or materially
interfere with the present use of the Purchased Assets and do not, in the
aggregate, have a Material Adverse Effect.

          (88) "Person" means any individual, partnership, joint venture,
corporation, limited liability company, limited liability partnership, trust,
unincorporated organization or Governmental Authority or any department or
agency thereof.

          (89) "Pinon Facility" means the Pinon Pine Integrated Coal
Gasification Combined Cycle power plant and related assets located in Storey
County, Nevada.

          (90) "PUCN" means the Public Utilities Commission of Nevada or any
successor thereto.

          (91) "Purchase Price" shall have the meaning set forth in Section 3.1
hereof.

          (92) "Purchased Assets" means, subject to the Permitted Encumbrances,
all of the right, title and interest, in, to and under the real and personal
property, tangible or intangible, of the Seller and the Seller Subsidiaries
constituting the Tracy/Pinon Bundle or used principally for generation purposes
in connection with the Tracy/Pinon Bundle including, without limitation, the
following assets owned by the Seller or the Seller Subsidiaries: (i) the Real
Property described on Schedule 1.1(92)(i) as associated with the Tracy/Pinon
Bundle (the "Tracy/Pinon Bundle Real Property"); (ii) all inventories of fuels,
supplies, materials and spares located on or in transit to the Tracy/Pinon
Bundle Real Property on the Closing Date; (iii) the machinery, equipment,
vehicles, furniture and other personal property located on the Tracy/Pinon
Bundle Real Property on the Closing Date, including, without limitation, the
items of personal property included in Schedule 1.1(92)(iii) as being associated
with the Tracy/Pinon Bundle, and all warranties against manufacturers or vendors
relating thereto, to the extent that such warranties are freely transferable;
(iv) the contracts, agreements and personal property leases listed on Schedules
1.1(92)(iv) as being associated with the Tracy/Pinon Bundle and which are
assignable; (v) the Permits listed on Schedule 1.1(92)(v) as being associated
with the Tracy/Pinon Bundle, to the extent transferable; (vi) the Environmental
Permits listed on Schedule 5.12 as being associated with the Tracy/Pinon Bundle;
(vii) all

                                       11
<PAGE>

books, operating records, operating, safety and maintenance manuals, engineering
design plans, blueprints and as-built plans, specifications, procedures and
similar items of the Seller or any of the Seller Subsidiaries relating
specifically to the aforementioned assets other than books of account associated
with the Tracy/Pinon Bundle; (viii) the SO2 Allowances identified on Schedule
1.1(92)(viii) associated with the Tracy/Pinon Bundle; (ix) any assets purchased
or to be purchased by the Seller pursuant to Section 7.4 associated with the
Tracy/Pinon Bundle; (x) the names "Tracy and Clark Mountain Station", "Pinon
Pine", "Gabbs", "Valley Road" and "Brunswick" or any other trade names,
trademarks, service marks or logos associated with the Tracy/Pinon Bundle or any
part, derivative or combination thereof; (xi) the Intellectual Property used
solely in connection with the sites included within the Tracy/Pinon Bundle; and
(xii) the Water Rights, including without limitation those Water Rights listed
on Schedule 1.1(123).

          (93) "Qualifying Offer of Employment" shall have the meaning set forth
in Section 7.10(b) hereof.

          (94) "Real Property" means each parcel of real property owned by the
Seller (or to which the Seller holds an interest therein), including, but not
limited to, buildings, structures and improvements located thereon, fixtures
contained therein and appurtenances thereto and easements and other rights
relating thereto and as more fully described on Schedule 5.8.

          (95) "Release" means release, spill, leak, discharge, dispose of,
pump, pour, emit, empty, inject, leach, dump or allow to escape into or through
the environment, including without limitation the abandonment or discarding of
barrels, containers and other receptacles containing any Hazardous Substance.

          (96) "Remediation" means an action of any kind to address a Release or
threatened Release of Hazardous Substance or the presence of Hazardous
Substances at, under, on or from the Purchased Assets or an Off-Site Location,
including, without limitation, any or all of the following activities to the
extent they relate to or arise from the presence, Release or threatened Release
of a Hazardous Substance at the Purchased Assets or an Off-Site Location: (i)
monitoring, investigation, assessment, treatment, cleanup, containment, removal,
mitigation, response or restoration work; (ii) obtaining any permits, consents,
approvals or authorizations of any Governmental Authority necessary to conduct
any such activity; (iii) preparing and implementing any plans or studies for any
such activity; (iv) obtaining a written notice from a Governmental Authority
with jurisdiction over the Purchased Assets or an Off-Site Location under
Environmental Laws that no material additional investigation or work is required
by such Governmental Authority; (v) the use, implementation, application,
installation, operation or maintenance of removal or remedial actions on the
Purchased Assets or an Off-Site

                                       12
<PAGE>

Location, remedial technologies applied to the surface or subsurface soils or
ground or surface water, excavation and treatment or disposal of soils or waters
at an Off-Site Location, systems for treatment of surface water or ground water,
engineering controls or institutional controls; and (vi) any other activities
reasonably determined by a party to be necessary or appropriate or required
under Environmental Laws to address the presence, Release or threatened Release
of Hazardous Substances at the Purchased Assets or an Off-Site Location.

          (97)  "Scheduled Capital Expenditures" means those capital
expenditures included on Schedule 1.1(97).

          (98)  "Scheduled Maintenance Expenditures" means those maintenance
expenditures included on Schedule 1.1(98).

          (99)  "SEC" means the Securities and Exchange Commission or any
successor thereto.

          (100) "Securities Act" means the Securities Act of 1933, as amended.

          (101) "Seller" shall have the meaning set forth in the preface hereto.

          (102) "Seller Agreements" means those agreements listed on Schedule
5.18, the Collective Bargaining Agreements and the Management Transition Plan.

          (103) "Seller Balance Sheet" shall have the meaning set forth in
Section 5.5 hereof.

          (104) "Seller Required Regulatory Approvals" shall have the meaning
set forth in Section 5.3(b) hereof.

          (105) "Seller Subsidiaries" shall mean the following wholly-owned
Subsidiaries of Seller: Pinon Pine Company, L.L.C., a Delaware limited liability
company, Pinon Pine Corp., a Nevada corporation, Pinon Pine Investment Co., a
Nevada corporation, and GPSF-B, Inc., a Delaware corporation.

          (106) "Seller's Easements" shall have the meaning set forth in Section
4.4(f) hereof.

          (107) "Separation Schedule" means the schedule to be delivered to the
Buyer by the Seller by the earlier of February 21, 2001 or 60 days prior to the
Closing Date, which shall delineate the Purchased Assets from the Seller's other

                                       13
<PAGE>

assets and which shall be consistent with the separation schedule summary
attached hereto as Exhibit F and otherwise reasonably acceptable to Buyer.

          (108) "SO2 Allowance" means an authorization by the Administrator of
the USEPA under the Clean Air Act, 42 U.S.C.(S).7401, et seq., to emit one ton
                                                     ------
of sulfur dioxide during or after a specified calendar year.

          (109) "Subsidiary", when used in reference to any other Person means
any corporation of which outstanding securities having ordinary voting power to
elect a majority of the Board of Directors of such corporation are owned
directly or indirectly by such other Person.

          (110) "Sustained Run Test" shall have the meaning set forth in Section
7.15 hereof.

          (111) "Tax" means any tax, charge, fee, levy, penalty or other
assessment (other than any Income Tax) imposed by any U.S. federal, state, local
or foreign taxing authority, including, but not limited to, any excise,
property, sales, transfer, franchise, payroll, withholding, social security or
other tax, including any interest, penalties or additions attributable thereto.

          (112) "Tax Return" means any return, report, information return,
declaration, claim for refund or other document (including any related or
supporting information) supplied or required to be supplied to any authority
with respect to Taxes and including any supplement or amendment thereof.

          (113) "Termination Date" shall have the meaning set forth in Section
10.1(b) hereof.

          (114) "Third Party Claim" shall have the meaning set forth in Section
9.2(a) hereof.

          (115) "Tracy/Pinon Bundle" means the Tracy and Clark Mountain Station,
the Pinon Facility, the Gabbs Diesel, the Valley Road Diesel and the Brunswick
Diesel.

          (116) "Tracy and Clark Mountain Station" means the Tracy and Clark
Mountain Station generating facility and related assets located in Storey and
Washoe Counties, Nevada.

          (117) "Transitional Power Purchase Agreement" or ("TPPA") means the
Transitional Power Purchase Agreement, dated as of October 25, 2000, between the
Buyer and the Seller.

                                       14
<PAGE>

          (118) "TPPA Amount" shall have the meaning set forth in Section 3.1
hereof.

          (119) "Tuscarora Transportation Agreement" means the Transportation
Service Agreement dated January 11, 1995 (as amended on November 1, 1998)
between Tuscarora Gas Transmission Company and Seller.

          (120) "USEPA" means the United States Environmental Protection Agency,
or any successor agency thereto.

          (121) "Valley Road Diesel" means the Valley Road diesel generating
facility and related assets located in Washoe County, Nevada.

          (122) "WARN Act" means the Federal Worker Adjustment Retraining and
Notification Act of 1988, as amended.

          (123) "Water Rights" means all rights and interests in and to all
permits, certificates and/or decrees for the use of waters of the State of
Nevada, including the surface waters of the Truckee River, that are owned, held
or otherwise enjoyed by the Seller or any Seller Subsidiary with respect to
Tracy/Pinon Station; Water Rights includes, without limitation, those Water
Rights listed in Schedule 1.1(123), as well as any pending application(s) for
Water Rights for any use associated with Tracy/Pinon Station.

                                  ARTICLE II
                                  ----------
                               PURCHASE AND SALE
                               -----------------

          2.1  The Sale. Upon the terms and subject to the satisfaction of the
               --------
conditions contained in this Agreement, at the Closing, the Seller shall, and
shall cause the Seller Subsidiaries to, sell, assign, convey, transfer and
deliver to the Buyer, and the Buyer shall purchase and acquire from the Seller
and the Seller Subsidiaries, free and clear of all Encumbrances (except for
Permitted Encumbrances and the operating easement(s) granted in accordance with
the Operating Easement Agreements and the Interconnection Agreement), all of the
Seller's and the Seller Subsidiaries' right, title and interest in, to and under
the real and personal property, tangible or intangible, owned by the Seller and
the Seller Subsidiaries and constituting the Purchased Assets.

          2.2  Excluded Assets. Notwithstanding any provision herein to the
               ---------------
contrary, the Purchased Assets shall not include the following (collectively,
the "Excluded Assets"):

                                       15
<PAGE>

          (a)  all cash, cash equivalents, bank deposits, accounts receivable,
and any income, sales, payroll or other tax receivables;

          (b)  the names "Sierra Pacific Resources," "Sierra Pacific Power
Company," "Sierra Pacific," "Nevada Power Company" and "Nevada Power" or any
related or similar trade names, trademarks, service marks or logos;

          (c)  transmission, substation and communication facilities and related
support equipment described in Schedule 2.2(c);

          (d)  any refund, credit penalty payment, adjustment or reconciliation
(i) related to Real Property, personal property or other Taxes paid prior to the
Closing Date in respect of the Purchased Assets, whether such refund, adjustment
or reconciliation is received as a payment or as a credit against future Taxes
payable, or (ii) arising under the Seller Agreements and relating to a period
before the Closing Date;

          (e)  except to the extent specifically required by law and except such
personnel records set forth on Schedule 2.2(e), the personnel records relating
to any employees of the Seller;

          (f)  the rights and assets described in the Separation Schedule as not
part of the Purchased Assets; and

          (g)  the SO2 Allowances identified on Schedule 2.2(g).

          2.3  Assumed Liabilities. On the Closing Date, the Buyer shall deliver
               -------------------
to the Seller the Instrument of Assumption pursuant to which the Buyer shall
assume and agree to discharge to the maximum extent permitted by law, all of the
liabilities and obligations of the Seller and the Seller Subsidiaries, direct or
indirect, known or unknown, absolute or contingent, which relate to the
Purchased Assets, other than Excluded Liabilities, in accordance with the
respective terms and subject to the respective conditions thereof, including,
without limitation, the following liabilities and obligations:

          (a)  all liabilities and obligations of the Seller and the Seller
Subsidiaries to be paid or performed after the Closing Date arising under (i)
the Seller Agreements, the Environmental Permits, the Permits, the Leases,
contracts and any other agreements or leases in each case assigned to the Buyer
pursuant to this Agreement in accordance with the terms thereof, and (ii) the
leases, contracts and other agreements entered into by the Seller with respect
to the Purchased Assets after the date hereof consistent with the terms of this
Agreement (including in the case of

                                       16
<PAGE>

(i) and (ii), without limitation, agreements with respect to liabilities for
real or personal property taxes or other Taxes on any of the Purchased Assets);
except, in each case, to the extent such liabilities and obligations, but for a
breach or default by the Seller or any Seller Subsidiary, would have been paid,
performed or otherwise discharged on or prior to the Closing Date or to the
extent the same arise out of any such breach or default;

          (b)  all liabilities and obligations associated with the Purchased
Assets in respect of Taxes for which the Buyer is liable pursuant to Section 7.8
hereof;

          (c)  any liabilities and obligations for which the Buyer has
indemnified the Seller pursuant to Section 9.1 hereof;

          (d)  all liabilities to employees for which the Buyer is liable
pursuant to Section 7.10 hereof, including the Collective Bargaining Agreements
and the Management Transition Plan;

          (e)  any liability, obligation or responsibility under or related to
former, current or future Environmental Laws or the common law, whether such
liability or obligation or responsibility is known or unknown, contingent or
accrued, arising as a result of or in connection with (i) any violation or
alleged violation of Environmental Law, prior to the Closing Date, with respect
to the ownership or operation of the Purchased Assets, including, without
limitation, any fines or penalties that arise in connection with the ownership
or operation of the Purchased Assets prior to the Closing Date or the costs
associated with correcting any such violations; (ii) loss of life, injury to
persons or property or damage to natural resources (whether or not such loss,
injury or damage arose or was made manifest before the Closing Date or arises or
becomes manifest after the Closing Date), caused (or allegedly caused) by the
presence or Release of Hazardous Substances at, on, in, under, adjacent to,
discharged from, emitted from or migrating from the Purchased Assets prior to
the Closing Date, including, without limitation, Hazardous Substances contained
in building materials at the Purchased Assets or in the soil, surface water,
sediments, groundwater, landfill cells, or in other environmental media at or
adjacent to the Purchased Assets; and (iii) the investigation and/or Remediation
(whether or not such investigation or Remediation commenced before the Closing
Date or commences after the Closing Date) of Hazardous Substances that are
present or have been Released prior to the Closing Date at, on, in, under,
adjacent to, discharged from, emitted from or migrating from the Purchased
Assets, including, without limitation, Hazardous Substances contained in
building materials at the Purchased Assets or in the soil, surface water,
sediments, groundwater, landfill cells, or in other environmental media at or
adjacent to the Purchased Assets; provided, as to all of the above, that nothing
set forth in this Section 2.3(e) shall

                                       17
<PAGE>

require the Buyer to assume any liabilities that are expressly excluded in
Section 2.4 hereof;

          (f)  any liability, obligation or responsibility under or related to
former, current or future Environmental Laws or the common law, whether such
liability or obligation or responsibility is known or unknown, contingent or
accrued, arising as a result of or in connection with (i) any violation or
alleged violation of Environmental Law, on or after the Closing Date, with
respect to the ownership or operation of the Purchased Assets; (ii) compliance
with applicable Environmental Laws on or after the Closing Date with respect to
the ownership or operation of the Purchased Assets; (iii) loss of life, injury
to persons or property or damage to natural resources caused (or allegedly
caused) by the presence or Release of Hazardous Substances at, on, in, under,
adjacent to, discharged from, emitted from or migrating from the Purchased
Assets on or after the Closing Date, including, without limitation, Hazardous
Substances contained in building materials at the Purchased Assets or in the
soil, surface water, sediments, groundwater, landfill cells, or in other
environmental media at or adjacent to the Purchased Assets; (iv) loss of life,
injury to persons or property or damage to natural resources caused (or
allegedly caused) by the off-site disposal, storage, transportation, discharge,
Release, recycling, or the arrangement for such activities, of Hazardous
Substances, on or after the Closing Date, in connection with the ownership or
operation of the Purchased Assets; (v) the investigation and/or Remediation of
Hazardous Substances that are present or have been released on or after the
Closing Date at, on, in, under, adjacent to, discharged from, emitted from or
migrating from the Purchased Assets, including, without limitation, Hazardous
Substances contained in building materials at the Purchased Assets or in the
soil, surface water, sediments, groundwater, landfill cells or in other
environmental media at or adjacent to the Purchased Assets; and (vi) the
investigation and/or Remediation of Hazardous Substances that are disposed,
stored, transported, discharged, Released, recycled, or the arrangement of such
activities, on or after the Closing Date, in connection with the ownership or
operation of the Purchased Assets, at any Off-Site Location; provided, that
nothing set forth in this Section 2.3(f) shall require the Buyer to assume any
liabilities that are expressly excluded in Section 2.4 hereof;

          (g)  all liabilities incurred by the Seller with respect to the
Maintenance and Capital Expenditures Amount made with respect to the Purchased
Assets;

          (h)  all liabilities or obligations associated with the Purchased
Assets in respect of the continued operation of the Pinon Facility and the
continued provision of information to the United States Department of Energy
("DOE") pursuant to Section 7.12(b) and (c); and

                                       18
<PAGE>

          (i)  all other liabilities or obligations exclusively relating to the
Purchased Assets no matter when the events or occurrences giving rise to such
liabilities or obligations took place.

All of the foregoing liabilities and obligations to be assumed by the Buyer
hereunder (excluding any Excluded Liabilities) are collectively referred to
herein as the "Assumed Liabilities." It is understood and agreed that nothing in
this Section 2.3 shall constitute a waiver or release of any claims arising out
of the contractual relationships between the Seller and the Buyer.

          2.4  Excluded Liabilities. The Buyer shall not assume or be obligated
               --------------------
to pay, perform or otherwise discharge the following liabilities (collectively,
the "Excluded Liabilities"):

          (a)  any liabilities or obligations of the Seller or any Seller
Subsidiary in respect of any Excluded Assets or other assets of the Seller or
any Seller Subsidiary which are not Purchased Assets;

          (b)  any liabilities or obligations in respect of Taxes attributable
to the Purchased Assets for taxable periods ending on or prior to the Closing
Date, except for Taxes for which the Buyer is liable pursuant to Section 7.8(a)
hereof;

          (c)  any liabilities, obligations or responsibilities relating to the
disposal, storage, treatment, transportation, discharge, Release, threatened
Release, recycling, or the arrangement for such activities, by the Seller or any
Seller Subsidiary, of Hazardous Substances that were generated, used or stored
at the Purchased Assets, at any Off-Site Location, where the disposal, storage,
treatment, transportation, discharge, Release, threatened Release, recycling or
the arrangement for such activities at such Off-Site Location occurred prior to
the Closing Date, provided that for purposes of this Section 2.4(c), "Off-Site
Location" does not include any location to which Hazardous Substances disposed
of, discharged from, emitted from or Released at the Purchased Assets have
migrated including, but not limited to, surface waters that have received waste
water discharges from the Purchased Assets;

          (d)  any liabilities, obligations or responsibilities relating to (i)
the transmission facilities delineated in the Interconnection Agreement or
Operating Easement Agreements or (ii) any operations of Seller or any Seller
Subsidiary on, or usage of, the operating easements, including, without
limitation, liabilities, obligations or responsibilities arising as a result of
or in connection with (A) any violation or alleged violation of Environmental
Laws and (B) loss of life, injury to persons or property or damage to natural
resources, except to the extent caused by the Buyer;

                                       19
<PAGE>

          (e)  any liabilities or obligations required to be accrued by the
Seller in accordance with generally accepted accounting principles and the FERC
Uniform System of Accounts on or before the Closing Date with respect to
liabilities related to the Purchased Assets other than any liability assumed by
the Buyer under Section 2.3(a), (e) or (f) hereof;

          (f)  any liabilities or obligations relating to any personal injury
(including, without limitation, workers' compensation claims), discrimination,
wrongful discharge, or unfair labor practice filed with or pending before any
court or administrative agency, or any threatened claim of which Seller has
Knowledge on the Closing Date, with respect to liabilities principally relating
to the Purchased Assets, other than any liabilities or obligations assumed by
the Buyer under Section 2.3(e) hereof;

          (g)  any payment obligations of the Seller or any Seller Subsidiary
for goods delivered or services rendered prior to the Closing;

          (h)  any liabilities or obligations imposed upon, assumed or retained
by the Seller or any Seller Subsidiary pursuant to the Interconnection
Agreement, Operating Easement Agreements or any other Ancillary Agreement;

          (i)  any liabilities, obligations or responsibilities relating to any
"employee benefit plan" (as defined in Section 3(3) of ERISA) maintained by the
Seller or any Seller Subsidiary and any trade or business (whether or not
incorporated) that are or have ever been under common control, or that are or
have ever been treated as a single employer, with the Seller or any Seller
Subsidiary under Section 414(b), (c), (m) or (o) of the Code (an "ERISA
Affiliate") or to which the Seller or any Seller Subsidiary and any ERISA
Affiliate contributed thereunder (the "ERISA Affiliate Plans"), including any
multiemployer plan, maintained by, contributed to, or obligated to contribute
to, at any time, by the Seller, any Seller Subsidiary or any ERISA Affiliate
(hereinafter referred to as "Benefit Plans"), including any liability (i) to the
Pension Benefit Guaranty Corporation under Title IV of ERISA; (ii) with respect
to non-compliance with the notice and benefit continuation requirements of
COBRA; (iii) with respect to any non-compliance with ERISA or any other
applicable Laws; or (iv) with respect to any suit, proceeding or claim that is
brought against any Benefit Plan, ERISA Affiliate Plan, any fiduciary or former
fiduciary of any such Benefit Plan or ERISA Affiliate Plan;

          (j)  liabilities with respect to any accrued payment obligations
incurred by Seller or any Seller Subsidiary prior to the Closing Date; and

                                       20
<PAGE>

          (k)  any liabilities, obligations, or responsibilities relating to the
(i) disposal, storage, treatment, transportation, discharge, Release, threatened
Release, recycling, or the arrangement for such activities, by the Seller or any
Seller Subsidiary, of Hazardous Substances that were generated, used or stored
at Valley Road Diesel, Gabbs Diesel and Brunswick Diesel prior to the Closing
Date, or (ii) the failure of the Seller or any Seller Subsidiary to comply with
any Environmental Laws applicable to Valley Road Diesel, Gabbs Diesel and
Brunswick Diesel prior to the Closing Date.

                                  ARTICLE III
                                  -----------
                                 PURCHASE PRICE
                                 --------------

          3.1  Purchase Price. The purchase price for the Purchased Assets shall
               --------------
be an amount equal to the sum of (i) Two Hundred Forty-Nine Million Eight
Hundred Thousand Dollars ($249,800,000), (ii) the Estimated Adjustment Amount,
(iii) the Adjustment Amount and (iv) any amounts paid by the Seller with respect
to Leased Assets pursuant to Section 7.4 hereof (the "Purchase Price"). The
amount to be paid by Seller to Buyer for the Transitional Power Purchase
Agreement being entered into by Buyer and Seller hereunder shall be One Hundred
Fifteen Million Dollars ($115,000,000) (the "TPPA Amount"), which shall be
comprised of (x) $103,500,000 related to the original term of the TPPA and (y)
$11,500,000 related to Seller's unilateral right to take service under the terms
and conditions of the TPPA for the period from January 1, 2003 through February
28, 2003.

          3.2  Purchase Price Adjustment. (a) Within sixty (60) days after the
               -------------------------
Closing, the Seller shall prepare and deliver to the Buyer a statement (the
"Adjustment Statement") which reflects (i) the difference between (A) the book
value, as determined by an independent evaluator designated by the Seller and
approved by the Buyer as of the Closing Date, of all Fuel Inventory used at or
in connection with the Purchased Assets and (B) the Estimated Inventory
Adjustment Amount (such difference is referred to as the "Inventory Adjustment
Amount"), (ii) the difference between (A) the book value, as determined by an
independent evaluator designated by the Seller and approved by the Buyer as of
the Closing Date, of the materials and supplies used at or in connection with
the Purchased Assets and (B) the Estimated Materials and Supplies Adjustment
Amount (such difference is referred to as the "Materials and Supplies Adjustment
Amount") and (iii) the difference between (A) the Maintenance and Capital
Expenditures Amount and (B) the Estimated Maintenance and Capital Expenditures
Amount (such difference is referred to as the "Maintenance and Capital
Expenditures Adjustment Amount"). The Inventory Adjustment Amount, the Materials
and Supplies Adjustment Amount and the Maintenance and Capital Expenditures
Adjustment Amount are referred to collectively as the "Adjustment Amount." The
Adjustment Statement shall be

                                       21
<PAGE>

prepared using the same generally accepted accounting principles, policies and
methods as the Seller has historically used in connection with the calculation
of the items reflected on the Adjustment Statement. The Buyer agrees to
cooperate with the Seller in connection with the preparation of the Adjustment
Statement and related information, and shall provide to the Seller such books,
records and information as may be reasonably requested from time to time.

          (b)  The Buyer may dispute the Inventory Adjustment Amount, the
Materials and Supplies Adjustment Amount or the Maintenance and Capital
Expenditures Amount; provided, however, that the Buyer shall notify the Seller
                     --------  -------
in writing of the disputed amount, and the basis of such dispute, within ten
(10) Business Days of the Buyer's receipt of the Adjustment Statement. In the
event of a dispute with respect to the Inventory Adjustment Amount, the
Materials and Supplies Adjustment Amount or the Maintenance and Capital
Expenditures Amount, the Buyer and the Seller shall attempt to reconcile their
differences and any resolution by them as to any disputed amounts shall be
final, binding and conclusive on the parties. If the Buyer and the Seller are
unable to reach a resolution of such differences within thirty (30) days of
receipt of the Buyer's written notice of dispute to the Seller, the Buyer and
the Seller shall submit the amounts remaining in dispute for determination and
resolution to the Independent Accounting Firm, which shall be instructed to
determine and report to the parties, within thirty (30) days after such
submission, upon such remaining disputed amounts, and such report shall be
final, binding and conclusive on the parties hereto with respect to the amounts
disputed. The fees and disbursements of the Independent Accounting Firm shall be
allocated between the Buyer and the Seller so that the Buyer's share of such
fees and disbursements shall be in the same proportion that the aggregate amount
of such remaining disputed amounts so submitted by the Buyer to the Independent
Accounting Firm that is unsuccessfully disputed by the Buyer (as finally
determined by the Independent Accounting Firm) bears to the total amount of such
remaining disputed amounts so submitted by the Buyer to the Independent
Accounting Firm.

          (c)  Within ten (10) Business Days after the Buyer's receipt of the
Adjustment Statement, the Buyer shall pay all undisputed portions of the
Adjustment Amount. If there is a dispute with respect to any amount on the
Adjustment Statement, within five (5) Business Days after the final
determination of such disputed amounts on the Adjustment Statement, the Buyer
shall pay to the Seller an amount equal to the disputed portion of the
Adjustment Amount as finally determined to be payable with respect to the
Adjustment Statement; provided, however, that if such amount shall be less than
                      --------  -------
zero, then the Seller shall pay to the Buyer the amount by which such amount is
less than zero. All payments made pursuant to this Section 3.2(c) shall be paid
together, with interest thereon for the period commencing on the Closing Date
through the date of payment, calculated at

                                       22
<PAGE>

the prime rate of The Chase Manhattan Bank in effect on the Closing Date, in
cash by federal or other wire transfer of immediately available funds.

          3.3  Allocation of Purchase Price. The Buyer and the Seller shall use
               ----------------------------
their good faith best efforts to agree upon an allocation among the Purchased
Assets of the sum of the Purchase Price consistent with Section 1060 of the Code
and the Treasury Regulations thereunder within one-hundred twenty (120) days of
the date of this Agreement but in no event less than thirty (30) days prior to
the Closing. The Buyer and the Seller may jointly agree to obtain the services
of an independent appraiser (the "Independent Appraiser") to assist the parties
in determining fair value of the Purchased Assets for purposes of such
allocation. If such an appraisal is made, both the Buyer and the Seller agree to
accept the Independent Appraiser's determination of the fair value of the
Purchased Assets. The parties shall jointly select the Independent Appraiser.
The cost of the appraisal shall be borne equally by the Buyer and the Seller.
Each of the Buyer and the Seller agrees to file Internal Revenue Service Form
8594, and all federal, state, local and foreign Tax Returns, in accordance with
such agreed allocation. Each of the Buyer and the Seller shall report the
transactions contemplated by this Agreement for federal Income Tax and all other
tax purposes in a manner consistent with the allocation determined pursuant to
this Section 3.3. Each of the Buyer and the Seller agrees to provide the other
promptly with any other information required to complete Form 8594. Each of the
Buyer and the Seller shall notify and provide the other with reasonable
assistance in the event of an examination, audit or other proceeding regarding
the agreed upon allocation of the Purchase Price.

          3.4  Proration. (a) The Buyer and the Seller agree that all of the
               ---------
items normally prorated, including those listed below, relating to the business
and operation of the Purchased Assets shall be prorated as of the Closing Date,
with the Seller liable to the extent such items relate to any time period
through the Closing Date, and the Buyer liable to the extent such items relate
to periods subsequent to the Closing Date:

               (i)   personal property, real estate, occupancy and any other
     Taxes, assessments and other charges, if any, on or with respect to the
     business and operation of the Purchased Assets;

               (ii)  rent, Taxes and other items payable by or to the Seller or
     any of the Seller Subsidiaries under any of the Seller Agreements to be
     assigned to and assumed by the Buyer hereunder;

               (iii) any permit, license or registration fees with respect to
     any Environmental Permit or other Permit; and

                                       23
<PAGE>

               (iv) sewer rents and charges for water, telephone, electricity
     and other utilities.

          (b)  In connection with such proration, in the event that actual
figures are not available at the Closing Date, the proration shall be based upon
the actual amount of such Taxes or fees for the preceding year (or appropriate
period) for which actual Taxes or fees are available and such Taxes or fees
shall be reprorated upon request of either the Seller or the Buyer made within
sixty (60) days of the date that the actual amounts become available. The Seller
and the Buyer agree to furnish each other with such documents and other records
as may be reasonably requested in order to confirm all adjustment and proration
calculations made pursuant to this Section 3.4.

          (c)  In connection with any proration of property taxes, in the event
that the Purchased Assets are not separately valued and assessed, the proration
of such property taxes shall be determined based upon the proportion of (i) the
"historic cost less depreciation" of the Purchased Assets to (ii) the total
historic cost less depreciation of all the assets reported on the applicable
Nevada Operating Property Appraisal Report.

                                   ARTICLE IV
                                   ----------
                                   THE CLOSING
                                   -----------

          4.1  Time and Place of Closing. Upon the terms and subject to the
               -------------------------
satisfaction of the conditions contained in this Agreement, the closing of the
transactions contemplated by this Agreement (the "Closing") shall take place at
the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 4 Times Square, New
York, New York, at 10:00 a.m., local time, on the first Business Day following
the date on which all of the conditions to each party's obligations hereunder
have been satisfied or waived, or at such other place or time as the parties may
agree. The date on which the Closing actually occurs is hereinafter referred to
as the "Closing Date." The Closing shall be deemed effective for all purposes as
of 12:00:01 a.m. on the Closing Date.

          4.2  Payment of Purchase Price. Upon the terms and subject to the
               -------------------------
satisfaction of the conditions contained in this Agreement, in consideration of
the aforesaid sale, assignment, conveyance, transfer and delivery of the
Purchased Assets, the Buyer shall pay or cause to be paid to the Seller the
Purchase Price. The Purchase Price shall be paid as follows: (i) an amount at
Closing equal to the sum of $249,800,000 and any amounts with respect to Leased
Assets to be paid pursuant to Section 7.4 hereof, plus (ii) the Estimated
Adjustment Amount for the Closing pursuant to Section 3.2 hereof, less (iii) the
TPPA Amount (the "Estimated Closing

                                       24
<PAGE>

Payment"), by wire transfer of immediately available funds or by such other
means as are agreed to by the Seller and the Buyer.

          4.3  Deliveries by Seller. At the Closing, the Seller shall deliver to
               --------------------
the Buyer the following:

          (a)  Bills of Sale, duly executed by each of the Seller and the Seller
Subsidiaries for the personal property included in the Purchased Assets;

          (b)  The executed consents to transfer the Seller Agreements, the
Environmental Permits and the Permits, to the extent specifically required
hereunder;

          (c)  Each Ancillary Agreement required to be delivered under this
Agreement, duly executed by the Seller;

          (d)  The certificate and opinion of counsel as contemplated by Section
8.2 hereof;

          (e)  One or more deeds of conveyance transferring the Seller's
interest in the Real Property to the Buyer, duly executed and acknowledged by
the Seller and in recordable form subject to Permitted Encumbrances and
retaining to the extent necessary any existing easements in favor of the Seller
with respect to Real Property conveyed to the Buyer, each substantially in the
form of Exhibit G attached hereto;

          (f)  One or more easements to the extent necessary to evidence the
right of the Buyer to use the Real Property of the Seller (the "Buyer's
Easements") associated with the Purchased Assets, duly executed and acknowledged
by the Seller and in recordable form, each substantially in the form of Exhibit
E attached hereto;

          (g)  The Assignment of Leases, in the form of Exhibit A attached
hereto, assigning to the Buyer all of the Seller's right, title and interest as
lessor (or lessee, as the case may be) under the Leases;

          (h)  Copies of the resolutions adopted by the board of directors of
each of the Seller and the Seller Subsidiaries, certified by the secretary of
such party, as having been duly and validly adopted and as being in full force
and effect, authorizing the execution and delivery by such party of this
Agreement, the Ancillary Agreements, the Bill of Sale and other closing
documents described in this Agreement to which it is a party, and the
performance by such party of its obligations hereunder and thereunder;

                                       25
<PAGE>

          (i)  All such other instruments of assignment or conveyance as shall,
in the reasonable opinion of the Buyer and its counsel, be necessary to transfer
to the Buyer the Purchased Assets in accordance with this Agreement, the
Ancillary Agreements and where necessary or desirable, in recordable form;

          (j)  Such other agreements, documents, instruments and writings as are
required to be delivered by the Seller or any Seller Subsidiary at or prior to
the Closing Date pursuant to this Agreement, the Ancillary Agreements or
otherwise required in connection herewith or therewith; and

          4.4  Deliveries by Buyer. At the Closing, the Buyer shall deliver to
               -------------------
the Seller the following:

          (a)  The Estimated Closing Payment by wire transfer of immediately
available funds or by such other means as are agreed to by the Seller and the
Buyer;

          (b)  Each Ancillary Agreement required to be delivered under this
Agreement, duly executed by the Buyer;

          (c)  The certificate and opinion of counsel as contemplated by Section
8.3 hereof;

          (d)  One or more easements to the extent necessary to evidence the
right of the Seller to use the Real Property of the Buyer (the "Seller's
Easements"), to the extent necessary for the Seller to continue and maintain its
transmission and distribution business, in favor of the Seller with respect to
Real Property conveyed to the Buyer, duly executed and acknowledged by the
Buyer, each substantially in the form of Exhibit D attached hereto, and the
Buyer shall bear any transfer or similar tax incurred in connection herewith as
set forth in Section 7.8 hereof;

          (e)  The Instrument of Assumption, duly executed by the Buyer
providing for the assumption of all of the Seller's right, title and interest as
lessor (or lessee as the case may be) under the Leases;

          (f)  All such other instruments of assumption as shall, in the
reasonable opinion of the Seller and its counsel, be necessary for the Buyer to
assume the Assumed Liabilities in accordance with this Agreement;

          (g)  Copies of the resolutions adopted by the board of directors of
the Buyer, certified by the secretary of the Buyer, as having been duly and
validly adopted and as being in full force and effect, authorizing the execution
and delivery by the Buyer of this Agreement, the Ancillary Agreements and other
closing

                                       26
<PAGE>

documents described in this Agreement to which the Buyer is a party, and the
performance by the Buyer of its obligations hereunder and thereunder; and

          (h)  Such other agreements, documents, instruments and writings as are
required to be delivered by the Buyer at or prior to the Closing Date pursuant
to this Agreement the Ancillary Agreements or otherwise required in connection
herewith or therewith.

                                   ARTICLE V
                                   ---------
                    REPRESENTATIONS AND WARRANTIES OF SELLER
                    ----------------------------------------

          The Seller represents and warrants to the Buyer as follows:

          5.1  Organization; Qualification.
               ---------------------------

          (a)  The Seller is a corporation duly organized, validly existing and
in good standing under the laws of the State of Nevada and has all requisite
corporate power and authority to own, lease, and operate its properties and to
carry on its business as is now being conducted. The Seller is duly qualified or
licensed to do business as a foreign corporation and is in good standing in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification necessary, except where
the failure to be so duly qualified or licensed and in good standing would not
have a Material Adverse Effect. The Seller has heretofore delivered to the Buyer
complete and correct copies of its Certificate of Incorporation and Bylaws as
currently in effect.

          (b)  Each of the Seller Subsidiaries is duly organized, validly
existing and in good standing under the laws of the State of Nevada or the State
of Delaware, as applicable, and has all requisite corporate or limited liability
company power and authority to own, lease, and operate its properties and to
carry on its business as is now being conducted. Each of the Seller Subsidiaries
is duly qualified or licensed to do business as a foreign corporation or limited
liability company and is in good standing in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification necessary, except where the failure to be so duly
qualified or licensed and in good standing would not have a Material Adverse
Effect.

          5.2  Authority Relative to this Agreement. Each of the Seller and the
               ------------------------------------
Seller Subsidiaries has full corporate or limited liability company, as
applicable, power and authority to execute and deliver this Agreement and the
Ancillary Agreements to which it is a party and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Ancillary

                                       27
<PAGE>

Agreements and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by the board of directors of each
of the Seller and the Seller Subsidiaries and no other corporate or limited
liability company, as applicable, proceedings on the part of the Seller or any
of the Seller Subsidiaries are necessary to authorize this Agreement or the
Ancillary Agreements or to consummate the transactions contemplated hereby and
thereby. This Agreement and the Ancillary Agreements to which it is a party have
been duly and validly executed and delivered by each of the Seller and the
Seller Subsidiaries, and assuming that this Agreement and the Ancillary
Agreements constitute valid and binding agreements of the Buyer, subject to the
receipt of the Seller Required Regulatory Approvals and the Buyer Required
Regulatory Approvals, constitute valid and binding agreements of each such
party, enforceable against such party in accordance with their terms, except
that such enforceability may be limited by applicable bankruptcy, insolvency,
moratorium or other similar laws affecting or relating to enforcement of
creditors' rights generally or general principles of equity.

          5.3  Consents and Approvals; No Violation. (a) Except as set forth in
               ------------------------------------
Schedule 5.3(a), and other than obtaining the Seller Required Regulatory
Approvals and the Buyer Required Regulatory Approvals, neither the execution and
delivery of this Agreement or the Ancillary Agreements by the Seller and the
Seller Subsidiaries, as applicable, nor the sale by the Seller and the Seller
Subsidiaries of the Purchased Assets pursuant to this Agreement or the Ancillary
Agreements shall in each case (i) conflict with or result in any breach of any
provision of the Certificate of Incorporation or Bylaws (or other similar
governing documents) of such party, (ii) require any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Authority or regulatory authority, except (x) where the failure to obtain such
consent, approval, authorization or permit, or to make such filing or
notification, would not have a Material Adverse Effect or (y) for those
requirements which become applicable to such party as a result of the specific
regulatory status of the Buyer (or any of its Affiliates) or as a result of any
other facts that specifically relate to the business or activities in which the
Buyer (or any of its Affiliates) is or proposes to be engaged; (iii) result in a
default (or give rise to any right of termination, cancellation or acceleration)
under any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, agreement or other instrument or obligation to which it is a
party or by which it, or any of the Purchased Assets may be bound, except for
such defaults (or rights of termination, cancellation or acceleration) as to
which requisite waivers or consents have been obtained or which, in the
aggregate, would not have a Material Adverse Effect; or (iv) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to such party,
or any of its assets, which violation would have a Material Adverse Effect.

          (b)  Except as set forth in Schedule 5.3(b) and except for (i) any
required approvals under the Federal Power Act, (ii) approvals or other actions
by

                                       28
<PAGE>

the PUCN, the CPUC and/or the OPUC (iii) the approval, if required, of the SEC
pursuant to the Holding Company Act, and (iv) the filings by the Seller and the
Buyer required by the HSR Act and the expiration or earlier termination of all
waiting periods under the HSR Act (the filings and approvals referred to in
clauses (i) through (iv) above are collectively referred to as the "Seller
Required Regulatory Approvals"), no declaration, filing or registration with, or
notice to, or authorization, consent or approval of any Governmental Authority
or regulatory authority is necessary for the consummation by the Seller or any
of the Seller Subsidiaries of the transactions contemplated hereby, other than
such declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not obtained or made, shall not, in the aggregate, have a
Material Adverse Effect and other than the Permits and Environmental Permits.

          5.4  Reports. Since January 1, 1996, each of the Seller and the Seller
               -------
Subsidiaries, pursuant to the Securities Act, the Exchange Act, the applicable
State public utility laws, the Federal Power Act and the Holding Company Act,
has filed or caused to be filed with the SEC, the applicable state or local
utility commissions or regulatory bodies, or the FERC, as the case may be, all
material forms, statements, reports and documents (including all exhibits,
amendments and supplements thereto) required to be filed by them with respect to
the business and operations of such party as it relates to the Purchased Assets
under each of the Securities Act, the Exchange Act, the applicable State public
utility laws, the Federal Power Act and the Holding Company Act and the
respective rules and regulations thereunder, all of which complied in all
material respects with all applicable requirements of the appropriate act and
the rules and regulations thereunder in effect on the date each such report was
filed.

          5.5  Financial Statements. The Seller has previously furnished to the
               --------------------
Buyer (i) consolidated balance sheets of the Seller as of June 30, 2000, and
(ii) the related statements of income and retained earnings and changes in
financial position of the Seller for the fiscal year then ended. The balance
sheet of the Seller as of June 30, 2000 is referred to herein as the "Seller
Balance Sheet." Each of the balance sheets included in the financial statements
referred to in this Section 5.5 (including the related notes thereto) presents
fairly the financial position of the Seller and the Seller Subsidiaries as of
their respective dates, and the other related statements included therein
(including the related notes thereto) present fairly the results of operations
and changes in financial position for the periods then ended, all in conformity
with generally accepted accounting principles applied on a consistent basis,
except as otherwise noted therein.

          5.6  Undisclosed Liabilities. To Seller's Knowledge and except as set
               -----------------------
forth in Schedule 5.6, neither the Seller nor any Seller Subsidiary has any
liability or obligation relating to the business or operations of the Purchased
Assets, secured or

                                       29
<PAGE>

unsecured (whether absolute, accrued, contingent or otherwise, and whether due
or to become due), of a nature required by generally accepted accounting
principles to be reflected in a corporate balance sheet or disclosed in the
notes thereto, which are not accrued or reserved against in the Seller Balance
Sheet or disclosed in the notes thereto in accordance with generally accepted
accounting principles, except those which either were incurred in the ordinary
course of business, whether before or after the date of the Seller Balance
Sheet, or those which in the aggregate are not material to the Purchased Assets.

          5.7  Absence of Certain Changes or Events. To Seller's Knowledge and
               ------------------------------------
except as set forth in Schedule 5.7, or in the reports, schedules, registration
statements and definitive proxy statements filed by the Seller with the SEC, and
except as otherwise contemplated by this Agreement, since the date of the Seller
Balance Sheet there has not been: (i) any Material Adverse Effect; (ii) any
damage, destruction or casualty loss, whether covered by insurance or not, which
had a Material Adverse Effect; (iii) any entry into any agreement, commitment or
transaction (including, without limitation, any borrowing, capital expenditure
or capital financing) by the Seller or any Seller Subsidiary, which is material
to the business or operations of the Purchased Assets, except agreements,
commitments or transactions in the ordinary course of business or as
contemplated herein; or (iv) any change by the Seller or any Seller Subsidiary,
with respect to the Purchased Assets, in accounting methods, principles or
practices except as required or permitted by generally accepted accounting
principles.

          5.8  Real Property. Schedule 5.8 sets forth all real property owned,
               -------------
used or occupied by Seller and/or the Seller Subsidiaries (the "Real Property");
including a description of all land, and all encumbrances, easements or rights
of way of record (or, if not of record, of which Seller has Knowledge) granted
on or appurtenant to or otherwise affecting such Real Property, and all plants,
buildings or other structures located thereon. To Seller's Knowledge,
encumbrances, easements or rights of way which are not of record, if any, would
not have a Material Adverse Effect. There are now in full force and effect duly
issued certificates of occupancy permitting the Real Property and improvements
located thereon to be legally used and occupied as the same are now constituted.
No fact or condition exists which would prohibit or adversely affect the
ordinary rights of access to and from the Real Property from and to the existing
highways and roads and there is no pending or, to the Knowledge of Seller,
threatened restriction or denial, governmental or otherwise, upon such ingress
and egress. To Seller's Knowledge, there is not (i) any claim of adverse
possession or prescriptive rights involving any of the Real Property, (ii) any
structure located on any Real Property which encroaches on or over the
boundaries of neighboring or adjacent properties or (iii) any structure of any
other party which encroaches on or over the boundaries of any such Real
Property. To Seller's Knowledge no public improvements have been commenced and
none are planned

                                       30
<PAGE>

which in either case may result in special assessments or otherwise would have a
Material Adverse Effect.

          5.9  No Certified Survey Map Required. To Seller's Knowledge, other
               --------------------------------
than those governmental approvals previously obtained by the Seller, no
certified survey map or other state, municipal, or other governmental approval
regarding the division, platting, or mapping of real estate is required as a
prerequisite to the conveyance by Seller to Buyer (or as a prerequisite to the
recording of any conveyance document) of any Real Property or Leases.

          5.10 Leasehold Interests. Schedule 5.10 lists, as of the date of this
               -------------------
Agreement, all material Real Property leases (the "Leases") relating to the
Purchased Assets under which the Seller or any Seller Subsidiary is a lessee,
lessor or under which Seller or any Seller Subsidiary otherwise has any interest
and which are to be assigned to, and assumed by, the Buyer on the Closing Date.
Except as set forth in Schedule 5.10, to the Seller's Knowledge, all such Leases
are valid, binding and enforceable in accordance with their terms, and are in
full force and effect; there are no existing material defaults by the Seller or
any Seller Subsidiary thereunder; and no event has occurred which (whether with
or without notice, lapse of time or both) would constitute a material default
thereunder.

          5.11 Improvements. Except as set forth in Schedule 5.11, neither the
               ------------
Seller nor any Seller Subsidiary has received any written notices from any
Governmental Authority stating or alleging that any improvements with respect to
the Purchased Assets have not been constructed in compliance with applicable
Laws. Except as set forth in Schedule 5.11, no written notice has been received
by the Seller or any Seller Subsidiary from any Governmental Authority requiring
or advising as to the need for any repair, alteration, restoration or
improvement in connection with the Purchased Assets.

          5.12 Insurance. Except as set forth in Schedule 5.12, all material
               ---------
policies of fire, liability, workers' compensation and other forms of insurance
purchased or held by and insuring the Purchased Assets are in full force and
effect, all premiums with respect thereto covering all periods up to and
including the date as of which this representation is being made have been paid,
and no notice of cancellation or termination has been received with respect to
any such policy which was not replaced on substantially similar terms prior to
the date of such cancellation. Except as described in Schedule 5.12, as of the
date of this Agreement, neither the Seller nor any Seller Subsidiary has been
refused any insurance with respect to the Purchased Assets nor has its coverage
been limited by any insurance carrier to which it has applied for any such
insurance or with which it has carried insurance during the last twelve (12)
months.

                                      31
<PAGE>

          5.13 Environmental Matters. (a) Except as set forth in Schedule 5.13,
               ---------------------
in any public filing by the Seller pursuant to the Securities Act or the
Exchange Act, or in the Environmental Site Assessments, the Seller holds, and is
in compliance with, all permits, licenses and governmental authorizations (the
"Environmental Permits") required for the Seller or any Seller Subsidiary to
operate the Purchased Assets under applicable Environmental Laws, and to the
Knowledge of the Seller each of the Seller and the Seller Subsidiaries is
otherwise in compliance with applicable Environmental Laws with respect to the
Purchased Assets, except for such failures to hold or comply with required
Environmental Permits, or such failures to be in compliance with applicable
Environmental Laws, which, individually or in the aggregate, are not reasonably
likely to have a Material Adverse Effect. The Seller's Environmental Permits are
set forth on Schedule 5.13.

          (b)  To Seller's Knowledge and, except as set forth in Schedule 5.13,
in any public filing by the Seller pursuant to the Securities Act or the
Exchange Act, or in any Environmental Site Assessment, (i) neither the Seller
nor any Seller Subsidiary has received any written request for information under
any Environmental Law, or been notified in writing that it is a potentially
responsible party under CERCLA or any similar State law with respect to any of
the Purchased Assets, and (ii) there have been no activities associated with the
Purchased Assets prior to the Closing Date for which Buyer will be required to
hold, obtain or surrender to any Governmental Authority any emission reduction
credits on or after the Closing Date, except for such liability under such laws
or activities as would not, individually or in the aggregate, be reasonably
likely to have a Material Adverse Effect.

          (c)  Except as set forth in Schedule 5.13, in any public filing by the
Seller pursuant to the Securities Act or the Exchange Act, or in any
Environmental Site Assessment, with respect to the Purchased Assets, neither the
Seller nor any Seller Subsidiaries has entered into or agreed to any consent
decree or order, or is subject to any judgment, decree, or judicial order
relating to compliance with any Environmental Law or to investigation or
Remediation of Hazardous Substances under any Environmental Law, except such
consent decrees or orders, judgments, decrees or judicial orders that would not,
individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect.

          (d)  To the Seller's Knowledge, except as set forth in Schedule
5.13(d), in any public filing by the Seller pursuant to the Securities Act or
the Exchange Act or in the Environmental Site Assessments, no Releases of
Hazardous Substances have occurred at, on, in, from or under the Purchased
Assets with respect to which any Remediation is required under any Environmental
Law except for such Releases which, individually or in the aggregate are not
reasonably likely to have a Materially Adverse Effect.

                                      32
<PAGE>

          (e)  Except as set forth in Schedule 5.13(e), in any public filing by
the Seller pursuant to the Securities Act or the Exchange Act, or in the
Environmental Site Assessments, to the Seller's Knowledge no underground storage
tanks are currently or have historically been located at, on or under the
Purchased Assets except for such underground storage tanks which, individually
or in the aggregate are not reasonably likely to have a Materially Adverse
Effect.

          (f)  The representations and warranties made in this Section 5.13 are
the Seller's exclusive representations and warranties relating to environmental
matters.

          5.14 Labor Matters. With respect to its employees at the Purchased
               -------------
Assets, except to the extent set forth in Schedule 5.14 and except for such
matters as shall not have a Material Adverse Effect: (i) the Seller is in
compliance with all applicable Laws respecting employment and employment
practices, terms and conditions of employment and wages and hours; (ii) neither
the Seller nor any Seller Subsidiary has received notice of any unfair labor
practice, charge or complaint against the Seller pending before the National
Labor Relations Board; (iii) there is no labor strike, slowdown or stoppage
actually pending or, to Seller's Knowledge threatened against or affecting the
Seller; (iv) neither the Seller nor any Seller Subsidiary has received notice
that any representation petition respecting the employees of the Seller has been
filed with the National Labor Relations Board; (v) no arbitration proceeding
arising out of or under collective bargaining agreements is pending against the
Seller; (vi) no grievance arising out of or under collective bargaining
agreements is pending against Seller; and (vii) the Seller has not experienced
any primary work stoppage since at least December 31, 1995. The Seller
Subsidiaries do not have, nor at any time have the Seller Subsidiaries had, any
employees.

          5.15 ERISA; Benefit Plans. (a) Except as set forth in Schedule
               --------------------
5.15(a)(i), with respect to its employees at the Purchased Assets, the Seller
has fulfilled its obligations under the minimum funding requirements of Section
302 of ERISA, and Section 412 of the Code, with respect to each "employee
pension benefit plan" (as defined in Section 3(2) of ERISA) and each such plan
is in compliance in all material respects with the presently applicable
provisions of ERISA and the Code. The Seller has not incurred any liability
under Section 4062(b) of ERISA to the Pension Benefit Guaranty Corporation in
connection with any employee pension benefit plan relating to employees at the
Purchased Assets which is subject to Title IV of ERISA. Except as set forth in
Schedule 5.15(a)(ii), the Internal Revenue Service has issued a letter for each
employee pension benefit plan determining that such plan is exempt from United
States Federal Income Tax under Sections 401(a) and 501(a) of the Code, and
there has been no occurrence since the date of any such

                                      33
<PAGE>

determination letter which has adversely affected such qualification, and no
withdrawal liability has been incurred by or asserted against the Seller with
respect to any employee pension benefit plan which is a "multiemployer plan" (as
defined in Section 3(37) of ERISA).

          (b)  Schedule 5.15(b) lists, as of the date of this Agreement, all
deferred compensation, pension, profit-sharing and retirement plans, including
multiemployer plans, and all material bonus and other employee benefit or fringe
benefit plans maintained or with respect to which contributions are made by the
Seller in respect of employees who are the employees of the Seller who work at
the Purchased Assets. Accurate and complete copies of all such plans, other than
multiemployer plans, have been made available to the Buyer.

          5.16 Real Property Encumbrances. Schedule 5.16 describes any Permitted
               --------------------------
Encumbrances on the Real Property. Copies of any surveys in the Seller's
possession or any policies of title insurance currently in force and in the
possession of the Seller with respect to such Real Property have been delivered
by the Seller to the Buyer.

          5.17 Condemnation. Neither the whole nor any part of the Real Property
               ------------
or any other real property or rights leased, used or occupied by the Seller or
any Seller Subsidiary in connection with the ownership or operation of the
Purchased Assets is subject to any pending suit for condemnation or other taking
by any public authority, and, to the Knowledge of the Seller, no such
condemnation or other taking is threatened or contemplated.

          5.18 Certain Contracts and Arrangements. (a) Except (i) the Seller
               ----------------------------------
Agreements listed in Schedule 5.18 or any other Schedule hereto, (ii) for
contracts, agreements, personal property leases, commitments, understandings or
instruments which shall expire prior to the Closing Date, (iii) for agreements
with suppliers, distributors and sales representatives entered into in the
ordinary course of business, and (iv) for contracts, agreements, personal
property leases, commitments, understandings or instruments with a value less
than $250,000, in the aggregate, or with annual payments less than $50,000, in
the aggregate, neither the Seller nor any Seller Subsidiary is a party to any
written contract, agreement, personal property lease, commitment, understanding
or instrument which is material to the business or operations of the Purchased
Assets.

          (b)  Except as disclosed in Schedule 5.18, each material Seller
Agreement listed on Schedule 5.18 constitutes a valid and binding obligation of
the parties thereto and is in full force and effect and may be transferred to
the Buyer pursuant to this Agreement and shall continue in full force and effect
thereafter, in

                                      34
<PAGE>

each case without breaching the terms thereof or resulting in the forfeiture or
impairment of any rights thereunder.

          (c)  Except as set forth in Schedule 5.18, there is not, under any of
the Seller Agreements listed on Schedule 5.18, any default or event which, with
notice or lapse of time or both, would constitute a default on the part of the
Seller or any Seller Subsidiary, except, with respect to the Seller Agreements
only, such events of default and other events as to which requisite waivers or
consents have been obtained or which would not, in the aggregate, have a
Material Adverse Effect.

          5.19 Legal Proceedings, etc. Except as set forth in Schedule 5.19 or
               ----------------------
in any filing made by the Seller pursuant to the Securities Act or the Exchange
Act, there are no claims, actions, or proceedings pending, and to Seller's
Knowledge no investigation pending or threatened against the Seller or any
Seller Subsidiary relating to the Purchased Assets before any court,
Governmental Authority or regulatory authority or body acting in an adjudicative
capacity, which, if adversely determined, would have a Material Adverse Effect.
Except as set forth in Schedule 5.19, neither the Seller nor any Seller
Subsidiary is subject to any outstanding judgment, rule, order, writ, injunction
or decree of any court, Governmental Authority or regulatory authority relating
to the Purchased Assets which has a Material Adverse Effect.

          5.20 Permits. The Seller holds all permits, licenses, franchises and
               -------
other governmental authorizations, consents and approvals, other than with
respect to Environmental Laws (collectively, "Permits"), as set forth in
Schedule 5.20(a), necessary to operate the Purchased Assets as presently
operated, except where the failure to have such Permits does not have a Material
Adverse Effect. Except as set forth in Schedule 5.20(b), with respect to the
Purchased Assets, neither the Seller nor any Seller Subsidiary has received any
written notification, and neither the Seller nor any Seller Subsidiary otherwise
has Knowledge, that it is in violation of any of such Permits, or any law,
statute, order, rule, regulation, ordinance or judgment of any Governmental
Authority or regulatory body or authority applicable to the Purchased Assets,
except for notifications of violations which would not, in the aggregate, have a
Material Adverse Effect. The Seller and the Seller Subsidiaries are in
compliance with all Permits, laws, statutes, orders, rules, regulations,
ordinances, or judgments of any Governmental Authority or regulatory body or
authority applicable to the Purchased Assets, except for violations which, in
the aggregate, do not have a Material Adverse Effect.

          5.21 Regulation as a Utility. The Seller and certain of its affiliates
               -----------------------
are regulated as public utilities in the States of Nevada and California. Except
as set forth on Schedule 5.21, neither the Seller nor any Seller Subsidiary is
subject to regulation as a public utility or public service company (or similar
designation) by

                                      35
<PAGE>

the United States, any State of the United States, any foreign country or any
municipality or any political subdivision of the foregoing.

          5.22 Taxes. Each of the Seller and the Seller Subsidiaries has, in
               -----
respect of the Purchased Assets and the operation thereof, (i) filed all Tax
Returns required to be filed other than those Tax Returns the failure of which
to file would not have a Material Adverse Effect which Tax Returns are true,
complete and correct in all material respects, and (ii) paid in full all
material Taxes shown to be due on such Tax Returns. Except as set forth in
Schedule 5.22, neither the Seller nor any Seller Subsidiary has received any
notice of deficiency or assessment from any taxing authority with respect to
liabilities for Taxes of the Seller or any Seller Subsidiary in respect of the
Purchased Assets, which have not been fully paid or finally settled, and any
such deficiency shown in such Schedule 5.22 is being contested in good faith
through appropriate proceedings. Except as set forth in Schedule 5.22, there are
no outstanding agreements or waivers extending the applicable statutory periods
of limitation for Taxes associated with the Purchased Assets for any period.

          5.23 Intellectual Property. Except as set forth on Schedule 5.23,
               ---------------------
Seller has, or will as of the Closing have, such ownership of or such rights by
license or other agreement to use all Intellectual Property necessary to permit
Seller and the Seller Subsidiaries to conduct their business as currently
conducted, except where the failure to have such ownership, license or right to
use would not, individually or in the aggregate, have a Material Adverse Effect.
Except as disclosed in Schedule 5.23, (i) to Seller's Knowledge, Seller is not,
nor has Seller or any Seller Subsidiary received any notice that Seller is, in
default (or with the giving of notice or lapse of time or both, would be in
default), under any contract or license to use such Intellectual Property, (ii)
there are no material restrictions on the transfer of any material contract or
license, or any interest therein, held by Seller in respect of such Intellectual
Property, (iii) to Seller's Knowledge, such Intellectual Property is not being
infringed by any other Person, and (iv) such Intellectual Property is used
solely in connection with the sites included within the Tracy/Pinon Bundle.
Neither the Seller nor any Seller Subsidiary has received notice that it is
infringing any Intellectual Property of any other Person in connection with the
operation of business of the Purchased Assets and neither the Seller nor any
Seller Subsidiary, to Seller's Knowledge, is infringing on any Intellectual
Property of any other Person the effect of which, individually or in the
aggregate, would have a Material Adverse Effect.

          5.24 Compliance with Laws. Except as disclosed in Schedule 5.24, each
               --------------------
of Seller and the Seller Subsidiaries is in compliance with all applicable Laws
with respect to the ownership or operation of the Purchased Assets except where
the failure to be in compliance would not, individually or in the aggregate,
create a Material Adverse Effect.

                                      36
<PAGE>

          5.25 Sufficiency of Purchased Assets. As of the Closing Date, the
               -------------------------------
Communication Facilities, Metering Facilities, and Protective Facilities (each
as defined in the Interconnection Agreement) included in the Purchased Assets
shall be capable of being operated in conformance with, and shall include all
facilities and other equipment required in order for Buyer to perform, the terms
and conditions of Exhibit E to the Interconnection Agreement.

          5.26 Emission Allowances and Emission Reduction Credits. (a) The
               --------------------------------------------------
Emission Allowance Account contains the SO2 Allowances identified on Schedule
1.1(92)(vii), free and clear of all Encumbrances other than Permitted
Encumbrances.

          (b)  The SO2 emissions from the Purchased Assets from January 1, 2001
through and including the Closing Date (the "Period of Seller's Operation")
shall not exceed an average of 1.03 tons per day (the "Authorized Emissions").

          (c)  If the average daily SO2 emissions of the Purchased Assets during
the Period of Seller's Operation exceed the Authorized Emissions, then, not less
than thirty (30) days prior to the date on which Buyer must surrender SO2
Allowances to USEPA in respect of the Purchased Assets for the Period of
Seller's Operation, Seller shall transfer to the Emission Allowance Account
sufficient SO2 Allowances of vintage year 2001 or earlier to cover the amount of
SO2 emissions in excess of the Authorized Emissions. Seller shall be solely
responsible for, and shall indemnify, defend and hold Buyer harmless from and
against, any fines, penalties, claims or actions relating to deficiencies in the
total number of SO2 Allowances surrendered to USEPA for calendar year 2001, to
the extent such deficiency was caused by Seller's failure to transfer to the
Emission Allowance Account sufficient SO2 Allowances of vintage year 2001 or
earlier to cover the amount of SO2 emissions during the Period of Seller's
Operation in excess of the Authorized Emissions.

          5.27 Condition of Assets. Except as disclosed in Schedule 5.27, the
               -------------------
tangible assets (real and personal) at, related to, or used in connection with
each of the Tracy and Clark Mountain Station, Gabbs Diesel, Brunswick Diesel,
Valley Road Diesel and the Pinon Facility in each case taken as a whole, (i) are
in good operating and usable condition and repair, free from any material
defects (except for ordinary wear and tear, in light of their respective ages
and historical usages, and except for such defects as do not materially
interfere with the use thereof in the conduct of the normal operation and
maintenance of the Purchased Assets taken as a whole) and (ii) have been
maintained consistent with Good Utility Practices.

                                      37
<PAGE>

          5.28 Title to Purchased Assets. (a) Subject to Permitted Encumbrances,
               -------------------------
Seller owns and has good and marketable title to the Real Property free and
clear of all Encumbrances and (b) Sellers owns, directly or indirectly (by and
through the Seller Subsidiaries), and has good and marketable title to the
Personal Property. Schedule 5.28 identifies the purchased Assets owned by the
Seller Subsidiaries.

          5.29 Water Rights. Seller has diligently pursued the certification of
               ------------
all permitted Water Rights and properly extended the deadline for certification
of all permitted Water Rights not yet perfected, and each of Seller and the
Seller Subsidiaries has complied with the terms and conditions of all Water
Right permits, certificates and decrees, and has not taken or failed to take
steps that have resulted or will result in any Water Right being considered
abandoned or lost pursuant any applicable Law except where such failure would
not have a Material Adverse Effect.

          5.30 Information. The information provided by Seller in Schedule 5.30
               -----------
is accurate except for such inaccuracies which, individually or in the
aggregate, would not have a Material Adverse Effect.

                                   ARTICLE VI
                                   ----------
                     REPRESENTATIONS AND WARRANTIES OF BUYER
                     ---------------------------------------

          The Buyer represents and warrants to the Seller as follows:

          6.1  Organization. The Buyer is a limited liability company organized,
               ------------
validly existing and in good standing under the laws of the State of Nevada and
has all requisite limited liability company power and authority to own, lease
and operate its properties and to carry on its business as is now being
conducted. The Buyer is duly qualified or licensed to do business as a foreign
limited liability company and is in good standing in each jurisdiction in which
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except where the failure to
be so duly qualified or licensed and in good standing would not have a Material
Adverse Effect. The Buyer has heretofore delivered to the Seller complete and
correct copies of its articles of organization (or other similar governing
documents), as currently in effect.

          6.2  Authority Relative to this Agreement. The Buyer has full limited
               ------------------------------------
liability company power and authority to execute and deliver this Agreement and
the Ancillary Agreements to which it is a party and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Ancillary Agreements to which it is a party and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized

                                      38
<PAGE>

by the sole member of the Buyer and no other limited liability company
proceedings on the part of the Buyer are necessary to authorize this Agreement
or the Ancillary Agreements to which it is a party or to consummate the
transactions contemplated hereby and thereby. This Agreement and the Ancillary
Agreements to which it is a party have been duly and validly executed and
delivered by the Buyer, and assuming that this Agreement and the Ancillary
Agreements to which it is a party constitute valid and binding agreements of the
Seller, subject to the receipt of the Buyer Required Regulatory Approvals and
the Seller Required Regulatory Approvals, constitute valid and binding
agreements of the Buyer, enforceable against the Buyer in accordance with their
terms, except that such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally or general principles of equity.

          6.3  Consents and Approvals; No Violation. (a) Except as set forth in
               ------------------------------------
Schedule 6.3(a), and other than obtaining the Buyer Required Regulatory
Approvals and the Seller Required Regulatory Approvals, neither the execution
and delivery of this Agreement or the Ancillary Agreements to which it is a
party by the Buyer nor the purchase by the Buyer of the Purchased Assets
pursuant to this Agreement or the Ancillary Agreements shall (i) conflict with
or result in any breach of any provision of the articles of organization (or
other similar governing documents) of the Buyer, (ii) require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Authority or regulatory authority, except (x) where the failure to
obtain such consent, approval, authorization or permit, or to make such filing
or notification, would not have a Material Adverse Effect or (y) for those
requirements which become applicable to the Buyer as a result of the specific
regulatory status of the Seller (or any of its Affiliates) or as a result of any
other facts that specifically relate to the business or activities in which the
Seller (or any of its Affiliates) is or proposes to be engaged; (iii) result in
a default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, agreement, lease or other instrument or obligation to
which the Buyer or any of its subsidiaries is a party or by which any of their
respective assets may be bound, except for such defaults (or rights of
termination, cancellation or acceleration) as to which requisite waivers or
consents have been obtained.

          (b)  Except as set forth in Schedule 6.3(b) and (i) the filings by the
Buyer and the Seller required by the HSR Act and the expiration or earlier
termination of all waiting periods under the HSR Act (the filings and approvals
referred to in Schedule 6.3(b) and clause (i) are collectively referred to as
the "Buyer Required Regulatory Approvals"), no declaration, filing or
registration with, or notice to, or authorization, consent or approval of any
Governmental Authority or regulatory body or authority is necessary for the
consummation by the Buyer of the transactions contemplated hereby, other than
such declarations, filings, registrations,

                                      39
<PAGE>

notices, authorizations, consents or approvals which, if not obtained or made,
shall not, in the aggregate, have a Material Adverse Effect.

          6.4  Regulation as a Utility. Except as set forth in Schedule 6.4, the
               -----------------------
Buyer is not subject to regulation as a public utility or public service company
(or similar designation) by the United States, any State of the United States,
any foreign country or any municipality or any political subdivision of the
foregoing.

          6.5  Availability of Funds. The Buyer has sufficient funds available
               ---------------------
to it or has received binding written commitments from responsible financial
institutions to provide sufficient funds on the Closing Date to pay the Purchase
Price.

          6.6  Equity Contribution Agreement. A true and correct copy of the
               -----------------------------
Equity Contribution Agreement has been provided to Seller. The execution and
delivery of the Equity Contribution Agreement by WPSR and WPS Power Development,
Inc. ("PDI") and the consummation of the transactions contemplated thereby has
been duly and validly authorized by all necessary corporate or other action
required on the part of each of WPSR and PDI. The Equity Contribution Agreement
has been duly and validly executed and delivered by each of WPSR and PDI and
constitutes the legal, valid and binding obligations of each of WPSR and PDI
enforceable against each of WPSR and PDI in accordance with its terms, except
that such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws
affecting or relating to enforcement of creditors' rights generally and general
principles of equity (regardless of whether enforcement is considered in a
proceeding at law or in equity).

                                  ARTICLE VII
                                  -----------
                            COVENANTS OF THE PARTIES
                            ------------------------

          7.1  Conduct of Business of the Seller. Except as described in
               ---------------------------------
Schedule 7.1, during the period from the date of this Agreement to the Closing
Date, the Seller shall, and shall cause the Seller Subsidiaries to, operate and
maintain the Purchased Assets according to Seller's ordinary and usual course of
business consistent with Good Utility Practices. Without limiting the generality
of the foregoing, and, except as contemplated in this Agreement or as described
in Schedule 7.1, prior to the Closing Date, without the prior written consent of
the Buyer (unless such consent would be prohibited by Law), the Seller shall
not, and shall not permit any of the Seller Subsidiaries to, with respect to the
Purchased Assets:

                                      40
<PAGE>

          (a)  (i) create, incur or assume any material amount of indebtedness
for money borrowed other than in the ordinary course of business including
obligations in respect of capital leases but excluding purchase money mortgages
granted in connection with the acquisition of property; or (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other Person;

          (b)  make any material change in the operations of the Purchased
Assets including, without limitation, the quality or levels of Fuel Inventory
and materials and supplies customarily maintained by the Seller;

          (c)  except as set forth in Schedule 1.1(41), make any capital
expenditures with respect to the Purchased Assets or enter into any contract or
commitment therefor, except that the Seller shall make any capital expenditures
(i) requested by the Buyer, provided that the Buyer shall reimburse the Seller
for such capital expenditures as part of the Adjustment Amount and (ii) deemed
necessary by the Seller and consented to by the Buyer, whose consent shall not
be unreasonably withheld ("Necessary Capital Expenditures"); provided, however,
                                                             --------  -------
that if the Buyer requests that the Seller make enhancements with a cost in
excess of the cost of any Necessary Capital Expenditure, the Buyer shall
reimburse the Seller for the cost of such enhancement to the extent that the
cost of such enhancement exceeds the cost of the Necessary Capital Expenditures
as part of the Adjustment Amount;

          (d)  sell, lease (as lessor), transfer or otherwise dispose of, any of
the Purchased Assets, other than assets used, consumed or replaced in the
ordinary course of business consistent with Good Utility Practices and not
mortgage or pledge, or impose or suffer to be imposed any Encumbrance on, any of
the Purchased Assets other than Permitted Encumbrances;

          (e)  except as set forth in Schedule 1.1(41), make any maintenance
expenditures, except that the Seller shall make any maintenance expenditures (i)
requested by the Buyer, provided that the Buyer shall reimburse the Seller for
such maintenance expenditures as part of the Adjustment Amount and (ii) deemed
necessary by the Seller and consented to by the Buyer, whose consent shall not
be unreasonably withheld ("Necessary Maintenance Expenditures"); provided,
                                                                 --------
however, that if the Buyer requests that the Seller make enhancements/upgrades
-------
with a cost in excess of the cost of any Necessary Maintenance Expenditure, the
Buyer shall reimburse the Seller for the cost of such enhancements/upgrades to
the extent the cost of such enhancements/upgrades exceeds the cost of the
Necessary Maintenance Expenditure as part of the Adjustment Amount;

          (f)  amend, terminate or grant any waiver in respect of any of the
Seller Agreements or Leases;

                                       41
<PAGE>

          (g)  enter into or amend any real or personal property Tax agreement,
treaty or settlement;

          (h)  execute, enter into or amend any agreement, order, decree or
judgment relating to any Permit or Environmental Permit;

          (i)  enter into any commitment for the purchase or sale of fuel
(whether commodity or transportation) that Seller intends to assign to Buyer
having a term of greater than ninety (90) days that extends beyond December 31,
2001 if the aggregate payment under such commitment is expected to exceed
$500,000 or if the aggregate payments under such commitment and all other then
outstanding commitments not previously consented to by the Buyer would be
expected to exceed $1,000,000;

          (j)  except for the Transitional Power Purchase Agreement, enter into
any wholesale sales agreement having a term extending beyond the Closing Date,
where the sales of energy are expected to be supplied via the Purchased Assets;

          (k)  sell, lease or otherwise dispose of SO2 Allowances, except those
listed in Schedule 2.2(g); or

          (l)  enter into any contract, agreement, commitment or arrangement,
whether written or oral, with respect to any of the transactions set forth in
the foregoing paragraphs (a) through (k).

          7.2  Access to Information. (a) Between the date of this Agreement and
               ---------------------
the Closing Date, Seller shall (and shall cause the Seller Subsidiaries to) (i)
during ordinary business hours and upon reasonable notice, give Buyer and the
Buyer Representatives reasonable access to all books, records, plants, offices
and other facilities and properties constituting the Purchased Assets or the
Assumed Liabilities; (ii) permit the Buyer and the Buyer representatives to make
such reasonable inspections thereof as the Buyer may reasonably request; (iii)
cause its officers and advisors to furnish Buyer with such financial and
operating data and other information with respect to the Purchased Assets or the
Assumed Liabilities as Buyer may from time to time reasonably request; and (iv)
furnish Buyer with a copy of each report, schedule, or other document filed or
received by Seller between the date of this Agreement and the Closing Date with
the SEC, FERC, PUCN, or other Governmental Authority with respect to the
Purchased Assets or the Assumed Liabilities; (v) furnish Buyer with all such
other information as shall be reasonably necessary to enable Buyer to verify the
accuracy of the representations and warranties of Seller contained in this
Agreement; and (vi) at Buyer's reasonable request make available to Buyer and
the Buyer Representatives, to answer questions

                                       42
<PAGE>

concerning the Purchased Assets, the operation of the Purchased Assets, or the
Assumed Liabilities, personnel of the Seller during ordinary business hours for
reasonable time periods at locations reasonably selected by Seller (such
personnel shall be reasonably suited to answer questions based on the scope of
their responsibilities); provided, however, that (A) any such inspections and
investigations shall be conducted in such a manner as not to interfere
unreasonably with the operation of the Purchased Assets, (B) Seller shall not be
required to take any action which would constitute a waiver of the
attorney-client or other privilege, (C) Seller need not supply Buyer with any
information which Seller is under a legal or contractual obligation not to
supply and (D) the number of individuals representing Buyer in such inspections
at any given time, shall not exceed seven (7) unless Seller consents to a number
larger than seven (7) and such consent shall not be unreasonably withheld.
Notwithstanding anything in this Section 7.2(a) to the contrary, prior to the
Closing Date, Buyer shall not have the right to perform or conduct any
environmental sampling or testing at, in, on, or underneath the Purchased Assets
(except for such environmental sampling or testing as Buyer may reasonably deem
necessary to investigate (i) the validity of any claims, actions, proceedings or
investigations instigated by any Governmental Authority on or after the date
hereof with respect to any alleged violation of Environmental Laws or (ii) any
other environmental condition arising or occurring on or after the date hereof
which Buyer reasonably believes may constitute a violation of Environmental
Laws.

          (b)  The Parties agree that between the date hereof and the Closing
Date, at the sole responsibility and expense of Buyer, Seller shall, and shall
cause the Seller Subsidiaries to, permit designated representatives
("Observers") of Buyer to regularly observe, in the presence of personnel of
Seller and at Buyer's reasonable discretion, all operations of Seller and the
Seller Subsidiaries that relate specifically to the Purchased Assets, and the
operation thereof, and to observe material discussions with third parties
relating specifically to the Purchased Assets or the Assumed Liabilities;
provided, however, that (A) any such observations shall be conducted in such a
manner as not to interfere unreasonably with the operation of the Purchased
Assets, (B) Buyer shall not be entitled to observe any discussions between
Seller and its legal counsel or accountants and shall not otherwise be entitled
to observe any activities or discussions which may constitute a waiver of the
attorney-client or other privilege, and (C) Seller need not permit the Observers
to observe or participate in discussions concerning any information which Seller
are under a legal or contractual obligation not to disclose. The Observers may
recommend or suggest that actions be taken or not be taken by Seller; provided,
however, that Seller will be under no obligation to follow any such
recommendations or suggestions and that Seller shall be entitled, subject to the
terms of this Agreement, to conduct their business in accordance with their own
judgment and discretion. The Observers shall have no authority to bind or make
agreements on behalf of Seller or any Seller Subsidiaries, to conduct
discussions with or make representations to third parties on

                                       43
<PAGE>

behalf of Seller or any Seller Subsidiaries or to issue instructions to or
direct or exercise authority over Seller or any Seller Subsidiaries or any of
their respective officers, employees, advisors or agents.

          (c)  All information furnished to or obtained by the Buyer and the
Buyer Representatives pursuant to this Section 7.2 shall be subject to the
provisions of the Confidentiality Agreement and shall be treated as "Evaluation
Material" (as defined in the Confidentiality Agreement).

          (d)  For a period of ten (10) years after the Closing Date, the Seller
and its representatives shall have reasonable access to all of the books and
records of the Purchased Assets, as the case may be, transferred to the Buyer
hereunder to the extent that such access may reasonably be required by the
Seller in connection with matters relating to or affected by the operation of
the Purchased Assets prior to the Closing Date. Such access shall be afforded by
the Buyer upon receipt of reasonable advance notice and during normal business
hours. The Seller shall be solely responsible for any costs or expenses incurred
by them pursuant to this Section 7.2(d). If the Buyer shall desire to dispose of
any such books and records prior to the expiration of such ten-year period, the
Buyer shall, prior to such disposition, give the Seller a reasonable opportunity
at the Seller's expense, to segregate and remove such books and records as the
Seller may select.

          7.3  Expenses. Except to the extent specifically provided herein,
               --------
whether or not the transactions contemplated hereby are consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be borne by the party incurring such costs and
expenses.

          7.4  Further Assurances. Subject to the terms and conditions of this
               ------------------
Agreement, each of the parties hereto shall use all commercially reasonable
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable Laws and
regulations to consummate and make effective the sale of the Purchased Assets
pursuant to this Agreement including, without limitation, the use of the
Seller's and the Buyer's commercially reasonable efforts to obtain all Permits
and Environmental Permits necessary for the Buyer to operate the Purchased
Assets. From time to time after the date hereof, without further consideration,
the Seller shall, at its own expense, execute and deliver (or cause the Seller
Subsidiaries to execute and deliver, if applicable) such documents to the Buyer
as the Buyer may reasonably request in order more effectively to vest in the
Buyer good title to the Purchased Assets. From time to time after the date
hereof, the Buyer shall, at its own expense, execute and deliver such documents
to the Seller as the Seller may reasonably request in order to more effectively
consummate the sale of the Purchased Assets pursuant to this Agreement. To the
extent that any of the Purchased Assets are contained in an electronic format,

                                       44
<PAGE>

Seller shall cooperate with Buyer to transfer such items to Buyer in a format
that is reasonably acceptable to Buyer. To the extent that any personal property
lease, relating to any assets (the "Leased Assets") which are principally used
by the Seller for generation purposes at the Purchased Assets, cannot be
assigned to the Buyer, the Seller shall use its commercially reasonable efforts
to acquire title to such Leased Assets and to include them in the Purchased
Assets before the Closing Date. The Seller's costs associated with acquiring
title to such Leased Assets shall be paid by the Buyer as part of the Purchase
Price.

          7.5  Public Statements. The parties shall consult with each other
               -----------------
prior to issuing any public announcement, statement or other disclosure with
respect to this Agreement or the transactions contemplated hereby and the Buyer
shall not issue any such public announcement, statement or other disclosure
without having first received the written consent of the Seller, except as may
be required by law and except that the parties may make public announcements,
statements or other disclosures with respect to this Agreement and the
transactions contemplated hereby to the extent and under the circumstances in
which the parties are expressly permitted by the Confidentiality Agreement to
make disclosures of "Evaluation Material" (as defined in the Confidentiality
Agreement).

          7.6  Consents and Approvals. (a) As promptly as practicable, the
               ----------------------
Seller and the Buyer shall each file or cause to be filed with the Federal Trade
Commission and the United States Department of Justice any notifications
required to be filed under the HSR Act and the rules and regulations promulgated
thereunder with respect to the transactions contemplated hereby. The parties
shall use their respective best efforts to respond promptly to any requests for
additional information made by either of such agencies, and to cause the waiting
periods under the HSR Act to terminate or expire at the earliest possible date
after the date of filing.

          (b)  As promptly as practicable, the Seller and the Buyer shall
cooperate with each other and (i) prepare and file all necessary documentation,
(ii) effect all necessary applications, notices, petitions and filings and
execute all agreements and documents, (iii) use all commercially reasonable
efforts to obtain the transfer or reissuance to the Buyer of all necessary
Environmental Permits, Permits, consents, approvals and authorizations of all
governmental bodies and (iv) use all commercially reasonable efforts to obtain
all necessary consents, approvals and authorizations of all other parties, in
the case of each of the foregoing clauses (i), (ii), (iii) and (iv), necessary
or advisable to consummate the transactions contemplated by this Agreement
(including, without limitation, the Seller Required Regulatory Approvals and the
Buyer Required Regulatory Approvals) or required by the terms of any note, bond,
mortgage, indenture, deed of trust, license, franchise, permit, concession,
contract, lease or other instrument to which the Seller, any Seller Subsidiary,
or the Buyer is a party or by which any of them is bound. The Seller

                                       45
<PAGE>

shall have the right to review and approve in advance all characterizations of
the information relating to Purchased Assets; and each of the Seller and the
Buyer shall have the right to review and approve in advance all
characterizations of the information relating to the transactions contemplated
by this Agreement which appear in any filing made in connection with the
transactions contemplated hereby. The parties hereto agree that they shall
consult with each other with respect to the transferring to the Buyer or the
obtaining by the Buyer of all such necessary Environmental Permits, Permits,
consents, approvals and authorizations of all third parties and governmental
bodies. The Seller and the Buyer shall designate separate counsel with respect
to all applications, notices, petitions and filings (joint or otherwise)
relating to this Agreement and the transactions contemplated hereby on behalf of
the Seller, on the one hand and the Buyer on the other hand, with all
governmental bodies. To the extent that a consent to an assignment of any
material Seller Agreement cannot be obtained before the Closing Date, the Seller
shall enter into all such agreements with the Buyer as are necessary to give the
Buyer the rights, obligations and burdens of such Seller Agreements.

          (c)  The parties hereto shall consult with each other prior to
proposing or entering into any stipulation or agreement with any federal, state
or local Governmental Authority or agency or any third party in connection with
any federal, state or local governmental consents and approvals legally required
for the consummation of the transactions contemplated hereby and shall not
propose or enter into any such stipulation or agreement without the other
party's prior written consent, which consent shall not be unreasonably withheld.

          (d)  Seller shall use commercially reasonable efforts to defend and
support the form of Generation Tariff applicable to the Purchased Assets in the
form filed with FERC in Docket No. ER00-2018.

          7.7  Fees and Commissions. The Seller and the Buyer each represent and
               --------------------
warrant to the other that, except for Credit Suisse First Boston ("CSFB"), which
is acting for and at the expense of the Seller, and PricewaterhouseCoopers
Securities LLC, which is acting for and at the expense of the Buyer, no broker,
finder or other Person is entitled to any brokerage fees, commissions or
finder's fees in connection with the transaction contemplated hereby by reason
of any action taken by the party making such representation. The Seller and the
Buyer shall pay to the other or otherwise discharge, and shall indemnify and
hold the other harmless from and against, any and all claims or liabilities for
all brokerage fees, commissions and finder's fees (other than as described
above) incurred by reason of any action taken by such party.

          7.8  Tax Matters. (a) Seller shall pay all applicable sales taxes
               -----------
incurred in connection with this Agreement and the transactions contemplated

                                       46
<PAGE>

hereby. Notwithstanding any other provision of this Agreement, all transfer and
similar Taxes (other than sales tax) incurred in connection with this Agreement
and the transactions contemplated hereby shall be borne by the Buyer, and the
Buyer shall, at its own expense, file, to the extent required by law, all
necessary Tax Returns and other documentation with respect to all such Taxes,
and, if required by applicable Law, the Seller shall join in the execution of
any such Tax Returns or other documentation, provided, however, Seller shall
work with Buyer in good faith to minimize all transfer and similar taxes and
Buyer shall indemnify Seller for any reasonable out-of-pocket expenses incurred
by Seller in minimizing such taxes. Seller and Buyer agree, upon request, to use
their reasonable best efforts to provide or obtain any certificate or other
document from or requested by any Governmental Authority or any other Person as
may be necessary to mitigate, reduce or eliminate any Tax that could be imposed
by reason of this Section 7.8(a).

          (b)  With respect to Taxes to be prorated in accordance with Section
3.4 hereof only, the Buyer shall prepare and timely file all Tax Returns
required to be filed with respect to the Purchased Assets, if any, and shall
duly and timely pay all such Taxes shown to be due on such Tax Returns. The
Buyer's preparation of any such Tax Returns shall be subject to the Seller's
approval, which approval shall not be unreasonably withheld. The Buyer shall
make such Tax Returns available for the Seller's review and approval no later
than twenty (20) days prior to the due date for filing such Tax Return. Within
ten (10) days after receipt of such Tax Return, the Seller shall pay to the
Buyer its proportionate share of the amount shown as due on such Tax Return
determined in accordance with Section 3.4 hereof. In addition to any amount of
reimbursement due in accordance with Section 3.4 hereof, Buyer shall reimburse
Seller for any Nevada property taxes previously paid by Seller which relate to
the Purchased Assets and have a lien date after the Closing Date. If the
Purchased Assets have not been separately valued and assessed, the amount of
such reimbursement shall be determined based upon the proportion of (i) the
"historical cost less depreciation" of the Purchased Assets to (ii) the total
historical cost less depreciation of all the assets reported on Seller's Nevada
Operating Property Appraisal Report.

          (c)  Each of the Buyer and the Seller shall provide the other with
such assistance as may reasonably be requested by the other party in connection
with the preparation of any Tax Return, any audit or other examination by any
taxing authority, or any judicial or administrative proceedings relating to
liability for Taxes, and each shall retain and provide the requesting party with
any records or information which may be relevant to such return, audit or
examination, proceedings or determination. Any information obtained pursuant to
this Section 7.8 or pursuant to any other Section hereof providing for the
sharing of information or review of any Tax Return or other schedule relating to
Taxes shall be kept confidential by the parties hereto.

                                       47
<PAGE>

          7.9  Supplements to Schedules. Prior to the Closing Date, the Seller
               ------------------------
shall supplement or amend the Schedules required by Article V with respect to
any matter hereafter arising which, if existing or occurring at the date of this
Agreement, would have been required to be set forth or described in such
Schedules. No supplement or amendment of any Schedule made pursuant to this
Section 7.9 shall be deemed to cure any breach of any representation or warranty
made in this Agreement unless the parties agree thereto in writing.

          7.10 Employees. (a) Schedule 7.10(a) sets forth all collective
               ---------
bargaining agreements to which the Seller is a party in connection with the
Purchased Assets (the "Collective Bargaining Agreements"), as well any Letters
of Agreement between Seller and IBEW Local 1245 ("Local 1245 LOA"), letters of
intent, or other such agreements or understandings related to the sale and
transfer of certain plants. The Buyer shall offer employment to begin as of the
Closing Date to the Seller's employees who work at the Purchased Assets and who
are included in the bargaining units covered by the Collective Bargaining
Agreements ("Hourly Employees"). The Buyer shall assume the Collective
Bargaining Agreements and Seller's obligations under such agreements, except
that Seller shall be responsible for any transition or retention bonuses payable
to the union employees.

          (b)  Continued Employment. The Buyer shall, as of the Closing Date,
               --------------------
make a Qualifying Offer of Employment (as defined herein) to each employee of
Seller identified on Schedule 7.10(b) who is actively employed by Seller
immediately prior to the Closing Date (each such employee who accepts a
Qualifying Offer of Employment, a "Management Employee"). An offer of employment
shall be deemed a "Qualifying Offer of Employment" if (A) the proposed base
salary and level of incentive compensation is at least 90% of the employee's
base salary and level of incentive compensation immediately prior to the Closing
Date and (B) the proposed principal place of employment is within one hundred
(100) miles of the employee's principal place of employment immediately prior to
the Closing Date. Seller shall be responsible for any transition or retention
bonuses payable to Management Employees.

          (c)  Benefit Continuation. Subject to applicable Law, the Buyer shall
               --------------------
maintain for a period of at least one year after the Closing Date, without
interruption, such employee compensation, welfare and benefit plans, programs,
policies and fringe benefits covering Management Employees that will be as
economically similar, in the aggregate, as those provided pursuant to those
employee compensation, welfare and benefit plans, programs, policies and fringe
benefits of the Seller and their subsidiaries as in effect immediately prior to
the Closing Date. To the extent permissible under the terms of the Benefit Plans
of Buyer and required by applicable Law, the Buyer shall waive all limitations
as to preexisting conditions

                                       48
<PAGE>

exclusions and waiting periods with respect to participation and coverage
requirements applicable to the Management Employees under any Benefit Plans of
Buyer that are welfare benefit plans that such employees may be eligible to
participate in after the Closing Date, other than limitations or waiting periods
that are already in effect with respect to such employees and that have not been
satisfied as of the Closing Date under any welfare benefit plan maintained for
the Management Employees immediately prior to the Closing Date.

          (d)  Service Credit. The Management Employees shall be given credit
               --------------
for all service with the Seller or its subsidiaries (and service credited by
Seller or such subsidiary), to the same extent as such service was credited for
such purpose by Seller or such subsidiary, under all employee benefit plans,
programs and policies of the Buyer in which they become participants (the
"Benefit Plans of Buyer") for purposes of eligibility, vesting, benefit accrual
and determination of level of benefits. Notwithstanding the foregoing, such
service with the Seller shall be recognized for purposes of benefit accrual
under a defined benefit pension plan or a retiree medical plan (a "plan")
sponsored by the Buyer only if assets and liabilities are transferred to the
Buyer's plan and trust from the Seller's plan and trust.

          (e)  Assumptions. The Buyer shall assume only those obligations that
               -----------
are required to be assumed by the Buyer under the Collective Bargaining
Agreement or obligations for which there was a transfer of assets and
liabilities to the Buyer's plan and trust from the Seller's plan and trust.
Absent such transfer of plan assets and liabilities, benefits accrued under such
Benefits Plans of Seller and all benefits currently payable as of the Closing
Date shall be and shall remain the obligation of the Seller. Any individual
covered under any such Benefit Plan of Seller that is a Group Health Plan (as
defined in Section 4980B(g)(2) of the Code and Section 607(l) of ERISA) and who
is eligible for continued coverage under such Group Health Plan as of the
Closing Date, shall continue to be covered under such Group Health Plan after
Closing pursuant to the provisions of COBRA.

          (f)  Severance Plan. The Buyer shall maintain the Management
               --------------
Transition Plan for a period of eighteen (18) months following the Closing Date
and shall give all Management Employees service credit for purposes of
determining the level of benefits thereunder in the same manner as set forth in
Section 7.10(d) hereof. Each of the Buyer and the Seller shall be responsible
for 50% of any payments required under the Management Transition Plan for any
Management Employee terminated without Cause (as defined in the Management
Transition Plan) within eighteen (18) months following the Closing Date.

          (g)  WARN Act. The Seller shall perform timely and discharge all
               --------
requirements, if any, under the WARN Act and under applicable state and local
laws and regulations for the notification of its employees arising from the sale
of the

                                       49
<PAGE>

Purchased Assets to the Buyer up to and including the Closing Date. The Buyer
shall cooperate with the Seller to provide the Seller with such information as
may be needed from the Buyer for inclusion in such notices, including providing
the Seller at least 90 days prior to the date on which the Closing is
anticipated to occur or such date to which the Buyer and the Seller mutually
agree) with a list of all of the Seller's employees to whom the Buyer shall make
offers of employment. After the Closing Date, the Buyer shall be responsible for
performing and discharging all requirements under the WARN Act and under
applicable state and local laws and regulations for the notification of its
employees with respect to the Purchased Assets.

          7.11 Risk of Loss. (a) From the date hereof through the Closing Date,
               ------------
all risk of loss or damage to the property included in the Purchased Assets
shall be borne by the Seller.

          (b)  If, before the Closing Date all or any portion of the Purchased
Assets are taken by eminent domain, or is the subject of a pending or to the
Knowledge of the Seller, contemplated taking which has not been consummated, the
Seller shall notify the Buyer promptly in writing of such fact. If such taking
would have a Material Adverse Effect, the Buyer and the Seller shall negotiate
in good faith to settle the loss resulting from such taking (including, without
limitation, by making a fair and equitable adjustment to the Purchase Price)
and, upon such settlement, consummate the transaction contemplated by this
Agreement pursuant to the terms of this Agreement. If no such settlement is
reached within sixty (60) days after the Seller has notified the Buyer of such
taking, then the Buyer or the Seller may, if such taking relates to the
Purchased Assets, terminate this Agreement pursuant to Section 10.1(f) hereof.

          (c)  If, before the Closing Date all or any material portion of the
Purchased Assets are damaged or destroyed by fire or other casualty, the Seller
shall notify the Buyer promptly in writing of such fact. If such damage or
destruction would have a Material Adverse Effect and the Seller has not notified
the Buyer of its intention to cure such damage or destruction within fifteen
(15) days after its occurrence, the Buyer and the Seller shall negotiate in good
faith to settle the loss resulting from such casualty (including, without
limitation, by making a fair and equitable adjustment to the Purchase Price)
and, upon such settlement, consummate the transactions contemplated by this
Agreement pursuant to the terms of this Agreement. If no such settlement is
reached within sixty (60) days after the Seller has notified the Buyer of such
casualty, then the Buyer or the Seller may terminate this Agreement pursuant to
Section 10.1(f) hereof.

          7.12 Additional Covenants of the Buyer. (a) Notwithstanding any other
               ---------------------------------
provision hereof, Buyer covenants and agrees that, for a period of five (5)
years commencing on the Closing Date, Buyer shall not transfer the Purchased
Assets, or

                                       50
<PAGE>

any material portion of the Purchased Assets, to any entity or Affiliate of such
entity who at that time is the owner of any bundle of generation assets
previously owned by Seller within the northern regions of Nevada, as such
regions are described in the Offering Memorandum. Buyer further covenants and
agrees that, in the event that Buyer transfers the Purchased Assets or any
material portion of the Purchased Assets during such five (5) year period, Buyer
shall obtain from its transferee a covenant and agreement which restricts such
transferee's ability to transfer the Purchased Assets that is substantially
similar to Buyer's covenant and agreement in the first sentence of this Section
7.12(a) and an additional covenant and agreement that is substantially similar
to that of this sentence, and each such covenant and agreement shall survive and
remain in effect until five (5) years from the Closing Date as defined in this
Agreement. The covenants and agreements contained in this Section 7.12(a) shall
survive Closing and shall continue in effect for a period of five (5) years
commencing on the Closing Date;

          (b)  Buyer hereby covenants and agrees that, for a period of
twenty-four (24) months following the earlier of the Closing Date or January 1,
2001, Buyer shall use reasonable efforts to operate the Pinon Facility and
provide such information, reports and data required to be provided to DOE
pursuant to the terms of the Cooperative Agreement by and between the Seller and
DOE dated as of July 31, 1992, as amended; and

          (c)  Buyer hereby covenants and agrees that, if at any time during the
24-month period described in section 7.12(b) of this Agreement Buyer elects to
abandon all further efforts to make the Pinon Facility operational, Buyer shall
comply with the requirements of Section 4(b) of Amendment M010 to the
Cooperative Agreement dated as of November 2, 1999 and shall deliver to DOE,
within 60 days of cessation of efforts, a complete and final report explaining,
substantiating and documenting why such efforts were abandoned. The
documentation provided to DOE shall address both the technical and economic
factors which influenced Buyer's decision. The covenants and agreements
contained in this Section 7.12(c) and Section 7.12(b) shall survive Closing and
shall continue in effect for a period of twenty-four (24) months following the
earlier of the Closing Date or January 1, 2001.

          7.13 Title Insurance. Within 30 days after the effective date of this
               ---------------
Agreement, Seller shall provide to Buyer title insurance commitments, issued by
a title insurance company or companies reasonably satisfactory to Buyer,
agreeing to issue to Buyer standard form owner's (or lessee's, as the case may
be) policies of title insurance with respect to all owned Real Property and
Leases, together with a copy of each document to which reference is made in such
commitments. In the case of owned Real Property, such policies shall be standard
ALTA Form 1992 owner's policies in the full amount of that portion of the
Purchase Price allocated respectively

                                       51
<PAGE>

to each subject parcel of owned Real Property under Section 7.13 hereof,
insuring good and marketable title thereto (expressly including all easements
and other appurtenances) subject to Permitted Encumbrances. In the case of
Leases, such policies shall be upon standard ALTA Form 1992 leasehold owner's
policies and in such amounts as such shall be reasonably acceptable to Buyer. In
either case, all policies shall insure fee simple or leasehold title, as the
case may be, to the Real Property each in form and substance reasonably
acceptable to Buyer, and shall contain such endorsements as Buyer shall
reasonably request (including, but not limited to, an endorsement over rights of
creditors, if requested by Buyer or Buyer's lender).

          7.14 Surveys. Within 30 days after the effective date of this
               -------
Agreement, Seller shall provide to Buyer surveys of all owned Real Property and
all leased Real Property prepared in accordance with ALTA/ASCM standards, each
dated no more than 120 days prior to the effective date of this Agreement, and
each detailing the legal description, the perimeter boundaries, all improvements
located thereon, all easements and encroachments affecting each such parcel of
owned Real Property and such other matters as may be reasonably requested by
Buyer or the title insurance companies, each containing a surveyor certificate
reasonably acceptable to Buyer and the title insurance companies, and each
prepared by a registered land surveyor satisfactory to Buyer.

          7.15 Pinon Facility. Seller shall, at Seller's expense, make the
               --------------
repairs to the hot gas filter system necessary to restore the Pinon Facility to
a condition such that a sustained run performance test (the "Sustained Run
Test") may be performed in accordance with the protocols outlined in Schedule
7.15. The Buyer and Seller shall jointly retain and equally share the cost of
the services of an engineering firm, mutually acceptable to the parties, to (i)
assist in the development of the scope of work necessary to perform the
Sustained Run Test, (ii) review the maintenance and repairs performed prior to
the Sustained Run Test and (iii) develop a list of steps, design changes, and
upgrades, if any, necessary for the Pinon Facility to reach commercial
viability, and such scope of work and the repairs made to the hot gas filter
system in accordance therewith shall be consistent with the protocols outlined
in Schedule 7.15. The Seller shall use its commercially reasonable efforts in
cooperation with Buyer to perform the Sustained Run Test, on or prior to April
30, 2001. Notwithstanding any other provision of this Agreement, Seller shall
not be responsible for any costs and expenses related to design modifications or
upgrading the technical, physical or operational characteristics of the Pinon
Facility, including any costs and expenses relating to implementing any design
modifications or technical, physical or operational upgrades recommended by the
engineering firm retained by the parties relating to the commercial viability of
the Pinon Facility. Seller shall cooperate with the Buyer if, at Buyer's
expense, Buyer requests that design modifications or upgrades to the technical,
physical or operational

                                       52
<PAGE>

characteristics of the Pinon Facility be performed prior to the Closing Date,
and further Seller agrees to use its commercially reasonable efforts to assist
the Buyer in obtaining additional funding for the Pinon Facility from DOE.

          7.16 Additional Gas Supply. Within 30 days of the date hereof Buyer
               ---------------------
shall determine whether it desires additional natural gas transportation
capacity on the Tuscarora gas pipeline pursuant to the Tuscarora Transportation
Agreement in excess of the 29,720 decatherms per day to be assigned to Buyer by
Seller in accordance with the terms hereof, up to a maximum of an additional
15,000 decatherms per day for the duration of the TPPA, and shall provide notice
to Seller of such additional amount if the Buyer so desires. Within 30 days of
such notice, the parties shall negotiate an agreement in good faith in which
Seller shall agree to assign, on an interruptible basis, with such interruption
allowable only as necessary to serve Seller's local distribution company
customers, the additional amount of decatherms per day on the Tuscarora gas
pipeline pursuant to the Tuscarora Transportation Agreement as requested in
Buyer's notice to Seller for the duration of the TPPA, and if such interruption
occurs Seller shall agree to pay to Buyer the delivered cost differential
between the cost of delivered natural gas and the average inventory cost of No.
6 fuel oil at the Tracy and Clark Mountain Station.

          7.17 Seller Subsidiaries. Within thirty (30) days after the date
               -------------------
hereof, Buyer may elect, in lieu of the asset transfers by the Seller
Subsidiaries contemplated hereunder, to acquire the membership or other
ownership interests of Seller Subsidiaries. Such election may be made by written
notice thereof to Seller within such thirty-day period. If Buyer makes such
election hereunder, Seller shall take, or cause to be taken, all action
(including, without limitation, executing and delivering documents and
instruments) and shall do, or cause to be done, all things necessary, proper or
advisable under applicable Laws and regulations and as reasonably requested by
Buyer to consummate and make effective the transfer of such ownership interests
in the Seller Subsidiaries on the Closing Date. Further, the parties hereby
agree to cooperate with each other to achieve a mutually beneficial transfer.

                                 ARTICLE VIII
                                 ------------
                              CLOSING CONDITIONS
                              ------------------

          8.1  Conditions to Each Party's Obligations to Effect the Transactions
               -----------------------------------------------------------------
Contemplated Hereby. The respective obligations of each party to effect the
-------------------
transactions contemplated hereby shall be subject to the fulfillment at or prior
to the Closing Date of the following conditions:

                                       53
<PAGE>

          (a)  The waiting period under the HSR Act applicable to the
consummation of the transactions contemplated hereby shall have expired or been
terminated;

          (b)  No preliminary or permanent injunction or other order or decree
by any federal or state court which prevents the consummation of the
transactions contemplated hereby or by the Ancillary Agreements shall have been
issued and remain in effect (each party agreeing to use its reasonable best
efforts to have any such injunction, order or decree lifted) and no statute,
rule or regulation shall have been enacted by any state or federal government or
Governmental Authority in the United States which prohibits the consummation of
the transactions contemplated hereby or by the Ancillary Agreements;

          (c)  All federal, state and local government consents and approvals
required for the consummation of the transactions contemplated hereby or by the
Ancillary Agreements, including, without limitation, the Seller Required
Regulatory Approvals and the Buyer Required Regulatory Approvals, shall have
become Final Orders (a "Final Order" for purposes of this Agreement means a
final order after all opportunities for rehearing are exhausted (whether or not
any appeal thereof is pending) that has not been revised, stayed, enjoined, set
aside, annulled or suspended, with respect to which any required waiting period
has expired; and as to which all conditions to effectiveness prescribed therein
or otherwise by law, regulation or order have been satisfied) with such terms
and conditions as shall have been imposed by the Governmental Authority issuing
such Final Order; provided that such Final Orders shall not have imposed terms
and conditions which would reasonably be expected to have a material adverse
effect on the business, results of operations, financial condition or physical
condition of the Purchased Assets;

          (d)  All consents and approvals required under the terms of any note,
bond, mortgage, indenture, contract or other agreement to which the Seller or
the Buyer, or any of their subsidiaries, is a party for the consummation of the
transactions contemplated hereby shall have been obtained, other than those (i)
which if not obtained, would not, in the aggregate, have a Material Adverse
Effect, or (ii) for which an agreement which is described in the last sentence
of Section 7.6(b) hereof has been entered into; and

          (e)  There shall have been no changes in applicable Laws, judgements,
orders or decrees which would, in the aggregate, have a material adverse effect
on the business, results of operations, financial condition or physical
condition of the Purchased Assets.

                                       54
<PAGE>

          8.2  Conditions to Obligations of Buyer. The obligation of the Buyer
               ----------------------------------
to effect the transactions contemplated by this Agreement shall be subject to
the fulfillment at or prior to the Closing Date of the following additional
conditions:

          (a)  There shall not have occurred and be continuing, a Material
Adverse Effect;

          (b)  The Seller shall have performed and complied with in all material
respects the covenants and agreements contained in this Agreement required to be
performed and complied with by it on or prior to the Closing Date, and the
representations and warranties of the Seller set forth in this Agreement shall
be true and correct in all material respects as of the date of this Agreement
and as of the Closing Date as though made at and as of the Closing Date, and the
Buyer shall have received a certificate to that effect signed by an authorized
officer of the Seller;

          (c)  The Buyer shall have received a certificate from an authorized
officer of the Seller, dated the Closing Date, to the effect that to the best of
such officer's knowledge, the conditions set forth in Sections 8.2(a) and (b)
hereof have been satisfied;

          (d)  The Buyer shall have received an opinion from Woodburn & Wedge,
P.C., dated the Closing Date and satisfactory in form and substance to the Buyer
and its counsel, substantially to the effect that, with respect to Seller and
each of the Seller Subsidiaries:

               (1)  Such party is a corporation, or limited liability company,
as applicable, organized, existing and in good standing under the laws of the
State of its formation and has the corporate or limited liability company, as
applicable, power and authority to execute and deliver this Agreement and the
Ancillary Agreements to which it is a party and to consummate the transactions
contemplated hereby and thereby; and the execution and delivery of this
Agreement and the Ancillary Agreements to which it is a party and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by requisite corporate or limited liability company, as applicable,
action taken on the part of such party;

               (2)  This Agreement and the Ancillary Agreements to which it is a
party have been executed and delivered by such party and (assuming that the
Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals
are obtained) are valid and binding obligations of such party, enforceable
against such party in accordance with their terms, except that such enforcement
thereof may be limited by (A) bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting creditors' rights generally, and (B) general
principles of

                                       55
<PAGE>

equity (regardless of whether enforceability is considered in a proceeding at
law or in equity) and except to the extent that the right to indemnification and
contribution contained therein may be limited by state or federal securities
laws or the public policy underlying such laws;

               (3)  The execution, delivery and performance of this Agreement
and the Ancillary Agreements to which it is a party by such party shall not
constitute a violation of the Certificate of Incorporation or Bylaws (or similar
governing documents) of such party; and

               (4)  No declaration, filing or registration with, or notice to,
or authorization, consent or approval of any Governmental Authority is necessary
for the consummation by the Seller and the Seller Subsidiaries of the Closing
other than (i) the Seller Required Regulatory Approvals, all of such Seller
Required Regulatory Approvals having been obtained and being in full force and
effect with such terms and conditions as shall have been imposed by any
applicable Governmental Authority (ii) such declarations, filings or
registrations with, or notices to, or authorizations, consents or approvals
relating to Permits and Environmental Permits and (iii) such declarations,
filings or registrations with, or notices to, or authorizations, consents or
approvals which, if not obtained or made, would not, in the aggregate have a
Material Adverse Effect.

          As to any matter contained in such opinion which involves the laws of
any jurisdiction other than the federal laws of the United States or the laws of
the State of Nevada, such counsel may rely upon opinions of counsel admitted in
such other jurisdictions. Any opinions relied upon by such counsel as aforesaid
shall be delivered together with the opinion of such counsel. Such opinion may
expressly rely as to matters of fact upon certificates furnished by the Seller
and appropriate officers and directors of the Seller and by public officials;
and

          (e)  Each of the Seller and the Seller Subsidiaries shall have
executed and delivered, as of the Closing, each of the Ancillary Agreements to
be executed by such party and all required approvals and conditions relating to
the Ancillary Agreements shall have been obtained or satisfied.

          (f)  Title Insurance. Buyer shall have received title insurance
               ---------------
policies with respect to all owned Real Property and Leases meeting the
requirements of Section 7.13.

          (g)  Permits. Buyer shall have obtained (by transfer from Seller
               -------
hereunder or otherwise) all material Permits and Environmental Permits necessary
to own, operate and maintain the Purchased Assets substantially consistent with
Seller's historical ownership, operation, and maintenance of the Purchased
Assets, and to

                                       56
<PAGE>

perform its covenants and agreements hereunder and under the Ancillary
Agreements.

          (h)  Surveys. Buyer shall have received surveys with respect to all
               -------
owned Real Property and Leases meeting the requirements of Section 7.14.

          (i)  Reliance Letter. Buyer shall have received a letter report
               ---------------
addressed to Buyer from the applicable environmental consultant, dated within
ten (10) Business Days prior to the Closing Date, (a) updating the Environmental
Site Assessments concerning the Purchased Assets and (b) permitting Buyer to
rely on the Environmental Site Assessments, as updated, as though such
assessment(s) had originally been performed on behalf of, addressed and
delivered to Buyer. Seller makes no representations or warranties regarding the
accuracy of any information or the conclusions in any such update and the
provision of the updated Environmental Site Assessment shall not, by itself,
create any rights or remedies of the Buyer against the Seller after the Closing
Date under or pursuant to Environmental Laws or this Agreement.

          8.3  Conditions to Obligations of Seller. The obligation of the Seller
               -----------------------------------
to effect the transactions contemplated by this Agreement shall be subject to
the fulfillment at or prior to the Closing Date of the following additional
conditions:

          (a)  The Buyer shall have performed in all material respects its
covenants and agreements contained in this Agreement required to be performed on
or prior to the Closing Date;

          (b)  The representations and warranties of the Buyer set forth in this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and as of the Closing Date as though made at and as of the
Closing Date;

          (c)  The Seller shall have received a certificate from an authorized
officer of the Buyer, dated the Closing Date, to the effect that, to the best of
such officer's knowledge, the conditions set forth in Sections 8.3(a) and (b)
hereof have been satisfied;

          (d)  The Seller shall have received an opinion from Foley & Lardner,
counsel for the Buyer, dated the Closing Date and satisfactory in form and
substance to the Seller and its counsel, substantially to the effect that:

               (1)  The Buyer is a limited liability company organized, existing
and in good standing under the laws of the State of Nevada and has the limited
liability company power and authority to execute and deliver this Agreement and
the Ancillary Agreements and to consummate the transactions contemplated

                                       57
<PAGE>

hereby and thereby; and the execution and delivery of this Agreement and the
Ancillary Agreements and the consummation of the transactions contemplated
hereby have been duly authorized by all requisite limited liability company
action taken on the part of the Buyer;

               (2)  this Agreement and the Ancillary Agreements have been
executed and delivered by the Buyer and (assuming that the Seller Required
Regulatory Approvals and the Buyer Required Regulatory Approvals are obtained)
are valid and binding obligations of the Buyer, enforceable against the Buyer in
accordance with their terms, except that such enforcement thereof may be limited
by (A) bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and (B) the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to certain
equitable defenses and to the discretion of the court before which any
proceeding therefore may be brought;

               (3)  the execution, delivery and performance of this Agreement
and the Ancillary Agreements by the Buyer shall not constitute a violation of
the articles of organization (or other similar governing documents), as
currently in effect, of the Buyer; and

               (4)  no declaration, filing or registration with, or notice to,
or authorization, consent or approval of any Governmental Authority is necessary
for the consummation by the Buyer of the Closing other than the Buyer Required
Regulatory Approvals, all of such Buyer Required Regulatory Approvals having
been obtained and being in full force and effect with such terms and conditions
as shall have been imposed by any applicable Governmental Authority.

          As to any matter contained in such opinion which involves the laws of
any jurisdiction other than the federal laws of the United States and the State
of Wisconsin, such counsel may rely upon opinions of counsel admitted to
practices in such other jurisdictions. Any opinions relied upon by such counsel
as aforesaid shall be delivered together with the opinion of such counsel. Such
opinion may expressly rely as to matters of facts upon certificates furnished by
appropriate officers and directors of the Buyer and its subsidiaries and by
public officials; and

          (e)  The Buyer shall have executed and delivered, as of the Closing,
each of the Ancillary Agreements to be executed by the Buyer and all required
approvals and conditions relating to the Ancillary Agreements have been obtained
or satisfied.

                                       58
<PAGE>

                                  ARTICLE IX
                                  ----------
                                INDEMNIFICATION
                                ---------------

          9.1 Indemnification. (a) The Seller shall indemnify, defend and hold
              ---------------
harmless the Buyer its officers, directors, employees, members, Affiliates and
agents (each, a "Buyer Indemnitee") from and against any and all claims, demands
or suits (by any Person), losses, liabilities, damages (including consequential
or special damages), obligations, payments, costs, Taxes and expenses
(including, without limitation, the costs and expenses of any and all actions,
suits, proceedings, assessments, judgments, settlements and compromises relating
thereto and reasonable attorneys' fees and reasonable disbursements in
connection therewith) to the extent the foregoing are not covered by insurance,
(collectively, "Indemnifiable Losses"), asserted against or suffered by any
Buyer Indemnitee relating to, resulting from or arising out of (i) any breach by
the Seller of any representation, warranty, covenant or agreement of the Seller
contained in this Agreement, (ii) the Excluded Liabilities, (iii) any claim
against a Buyer Indemnitee arising out of Seller's ownership or operation of the
Excluded Assets, or (vi) any noncompliance with any bulk sales or transfer laws
as provided in Section 11.11.

          (b)  The Buyer shall indemnify, defend and hold harmless the Seller
from and against any and all Indemnifiable Losses asserted against or suffered
by the Seller relating to, resulting from or arising out of (i) any breach by
the Buyer of any representation, warranty, covenant or agreement of the Buyer
contained in this Agreement or the Ancillary Agreements or (ii) the Assumed
Liabilities.

          (c)  Any person entitled to receive indemnification under this
Agreement (the "Indemnitee") having a claim under these indemnification
provisions shall make a good faith effort to recover all losses, damages, costs
and expenses from insurers of such Indemnitee under applicable insurance
policies so as to reduce the amount of any Indemnifiable Loss hereunder. The
amount of any Indemnifiable Loss shall be reduced (i) to the extent that the
Indemnitee receives any insurance proceeds with respect to an Indemnifiable
Loss, less any costs, expenses, or premium incurred in connection therewith, and
(ii) to take into account any Tax or Income Tax benefit recognized by the
Indemnitee arising from the recognition of the Indemnifiable Loss, net of any
Tax or Income Tax detriment (but only to the extent that the Parties, following
good faith negotiations for a period of thirty (30) days, jointly agree that
such Tax benefit would be realized by the Indemnitee), and (iii) by the amount
of any payment actually received by the Indemnitee with respect to an
Indemnifiable Loss.

          (d)  The expiration, termination or extinguishment of any covenant,
agreement, representation or warranty shall not affect the parties' obligations
under this Section 9.1 if the Indemnitee provided the person required to

                                       59
<PAGE>

provide indemnification under this Agreement (the "Indemnifying Party") with
proper notice of the claim or event for which indemnification is sought prior to
such expiration, termination or extinguishment.

          (e)  The rights and remedies of the Seller and the Buyer under this
Article IX are exclusive and in lieu of any and all other rights and remedies
which the Seller and the Buyer may have under this Agreement or otherwise for
declaratory, injunctive or monetary relief with respect to (i) any breach or
failure to perform any representation, warranty, covenant or agreement set forth
in this Agreement or (ii) the Assumed Liabilities or the Excluded Liabilities,
as the case may be. Without limiting the foregoing, with respect to the
Purchased Assets, the Buyer shall, as of the Closing Date, for itself and its
Affiliates, irrevocably release, hold harmless and forever discharge the Seller
from any and all claims of any kind or character, whether known or unknown,
hidden or concealed, resulting from or arising out of or in connection with
Hazardous Substances or any Environmental Law, other than those liabilities and
obligations set forth in Section 2.4(c), Section 2.4(d) and Section 2.4(k)
hereof. In furtherance of the foregoing, the Buyer shall, as of the Closing
Date, for itself and on behalf of its Affiliates, irrevocably waive any and all
rights and benefits with respect to such claims that it then has, or in the
future, may have conferred upon it by virtue of any statute, regulation or
common law principle which provides that a general release does not extend to
claims which a party does not know or suspect to exist in its favor at the time
of executing the release, if knowledge of such claims would have materially
affected such party's settlement with the obligor. In this connection, the Buyer
shall acknowledge, as of the Closing Date, that it is aware that factual matters
unknown to it on the Closing Date may give, or thereafter may give, rise to
claims that are then unknown, unanticipated and unsuspected, and Buyer further
agrees that such release shall be negotiated and agreed upon in light of that
awareness, and the Buyer, for itself and on behalf of its Affiliates,
nevertheless intends irrevocably to release the Seller from the claims described
in this Section 9.1(e).

          (f)  Each party to this Agreement waives any provision of law to the
extent that it would limit or restrict the agreements contained in this Section
9.1. Nothing herein shall prevent either party to this Agreement from
terminating this Agreement in accordance with Article X. Notwithstanding any
provisions in this Agreement to the contrary, all parties to this Agreement
shall retain their remedies at law or in equity with respect to willful, knowing
or intentional misrepresentations or breaches of this Agreement, including a
failure to consummate the Closing hereunder when and if required to do so.

          (g)  The rights and obligations of indemnification under this Section
9.1 shall not be limited or subject to set-off based on any violation or alleged
violation of any obligation under this Agreement or otherwise, including but not

                                       60
<PAGE>

limited to breach or alleged breach by the Indemnitee of any representation,
warranty, covenant or agreement contained in this Agreement.

          9.2  Defense of Claims. (a) If any Indemnitee receives notice of the
               -----------------
assertion of any claim or of the commencement of any claim, action, or
proceeding made or brought by any Person who is not a party to this Agreement or
any Affiliate of a party to this Agreement (a "Third Party Claim") with respect
to which indemnification is to be sought from an Indemnifying Party, the
Indemnitee shall give such Indemnifying Party reasonably prompt written notice
thereof, but in any event not later than ten (10) calendar days after the
Indemnitee's receipt of notice of such Third Party Claim. Such notice shall
describe the nature of the Third Party Claim in reasonable detail and shall
indicate the estimated amount, if practicable, of the Indemnifiable Loss that
has been or may be sustained by the Indemnitee. The Indemnifying Party shall
have the right to participate in or, by giving written notice to the Indemnitee,
to elect to assume the defense of any Third Party Claim at such Indemnifying
Party's own expense and by such Indemnifying Party's own counsel, and the
Indemnitee shall cooperate in good faith in such defense at such Indemnitee's
own expense.

          (b)  If within ten (10) calendar days after an Indemnitee provides
written notice to the Indemnifying Party of any Third Party Claim the Indemnitee
receives written notice from the Indemnifying Party that such Indemnifying Party
has elected to assume the defense of such Third Party Claim as provided in the
last sentence of Section 9.2(a) hereof, the Indemnifying Party shall not be
liable for any legal expenses subsequently incurred by the Indemnitee in
connection with the defense thereof; provided, however, that if the Indemnifying
                                     --------  -------
Party fails to take reasonable steps necessary to defend diligently such Third
Party Claim within twenty (20) calendar days after receiving notice from the
Indemnitee that the Indemnitee believes the Indemnifying Party has failed to
take such steps, the Indemnitee may assume its own defense, and the Indemnifying
Party shall be liable for all reasonable expenses thereof. Without the prior
written consent of the Indemnitee, the Indemnifying Party shall not enter into
any settlement of any Third Party Claim which would lead to liability or create
any financial or other obligation on the part of the Indemnitee for which the
Indemnitee is not entitled to indemnification hereunder. If a firm offer is made
to settle a Third Party Claim without leading to liability or the creation of a
financial or other obligation on the part of the Indemnitee for which the
Indemnitee is not entitled to indemnification hereunder and the Indemnifying
Party desires to accept and agree to such offer, the Indemnifying Party shall
give written notice to the Indemnitee to that effect. If the Indemnitee fails to
consent to such firm offer within ten (10) calendar days after its receipt of
such notice, the Indemnitee may continue to contest or defend such Third Party
Claim and, in such event, the maximum liability of the Indemnifying Party as to
such Third Party Claim shall be

                                       61
<PAGE>

the amount of such settlement offer, plus reasonable costs and expenses paid or
incurred by the Indemnitee up to the date of such notice.

          (c)  Any claim by an Indemnitee on account of an Indemnifiable Loss
which does not result from a Third Party Claim (a "Direct Claim") shall be
asserted by giving the Indemnifying Party reasonably prompt written notice
thereof, stating the nature of such claim in reasonable detail and indicating
the estimated amount, if practicable, but in any event not later than ten (10)
calendar days after the Indemnitee becomes aware of such Direct Claim, and the
Indemnifying Party shall have a period of thirty (30) calendar days within which
to respond to such Direct Claim. If the Indemnifying Party does not respond
within such thirty (30) calendar day period, the Indemnifying Party shall be
deemed to have accepted such claim. If the Indemnifying Party rejects such
claim, the Indemnitee shall be free to seek enforcement of its rights to
indemnification under this Agreement.

          (d)  If the amount of any Indemnifiable Loss, at any time subsequent
to the making of an indemnity payment in respect thereof, is reduced by
recovery, settlement or otherwise under or pursuant to any insurance coverage,
or pursuant to any claim, recovery, settlement or payment by or against any
other entity, the amount of such reduction, less any costs, expenses or premiums
incurred in connection therewith (together with interest thereon from the date
of payment thereof at the prime rate then in effect of The Chase Manhattan
Bank), shall promptly be repaid by the Indemnitee to the Indemnifying Party.
Upon making any indemnity payment, the Indemnifying Party shall, to the extent
of such indemnity payment, be subrogated to all rights of the Indemnitee against
any third party in respect of the Indemnifiable Loss to which the indemnity
payment relates; provided, however, that (i) the Indemnifying Party shall then
be in compliance with its obligations under this Agreement in respect of such
Indemnifiable Loss and (ii) until the Indemnitee recovers full payment of its
Indemnifiable Loss, any and all claims of the Indemnifying Party against any
such third party on account of such indemnity payment are hereby made expressly
subordinated and subjected in right of payment to the Indemnitee's rights
against such third party. Without limiting the generality or effect of any other
provision hereof, each such Indemnitee and Indemnifying Party shall duly execute
upon request all instruments reasonably necessary to evidence and perfect the
foregoing subrogation and subordination rights. Nothing in this Section 9.2(d)
shall be construed to require any party hereto to obtain or maintain any
insurance coverage.

          (e)  A failure to give timely notice as provided in this Section 9.2
shall not affect the rights or obligations of any party hereunder except if, and
only to the extent that, as a result of such failure, the party which was
entitled to receive such notice was actually prejudiced as a result of such
failure.

                                       62
<PAGE>

                                   ARTICLE X
                                   ---------
                          TERMINATION AND ABANDONMENT
                          ---------------------------

          10.1 Termination. (a) This Agreement may be terminated at any time
               -----------
prior to the Closing Date, by mutual written consent of the Buyer and the
Seller.

          (b)  This Agreement may be terminated by the Seller or the Buyer if
(i) the transactions contemplated hereby shall not have been consummated on or
before eighteen (18) months from the date of this Agreement (the "Termination
Date"); provided, however, that the right to terminate this Agreement under this
        --------  -------
Section 10.1(b) shall not be available to either Seller or Buyer if its failure
to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Closing Date to occur on or before such date;
provided, further, that if on the Termination Date the conditions to the Closing
--------  -------
set forth in Section 8.1(c) shall not have been fulfilled but all other
conditions to the Closing shall be fulfilled or shall be reasonably capable of
being fulfilled, then the Termination Date shall be the date which is
twenty-four (24) months from the date of this Agreement.

          (c)  This Agreement may be terminated by either the Seller or the
Buyer if (i) any Governmental Authority or regulatory body, the consent of which
is a condition to the obligations of the Seller or the Buyer to consummate the
transactions contemplated hereby, shall have determined not to grant its consent
and all appeals of such determination shall have been taken and have been
unsuccessful, or (ii) any court of competent jurisdiction in the United States
or any State shall have issued an order, judgment or decree permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated
hereby and such order, judgment or decree shall have become final and
nonappealable.

          (d)  This Agreement may be terminated by the Buyer, if there has been
a material violation or breach by the Seller of any agreement, representation or
warranty contained in this Agreement which has rendered the satisfaction of any
condition to the obligations of the Buyer impossible and such violation or
breach has not been waived by the Buyer.

          (e)  This Agreement may be terminated by the Seller, if there has been
a material violation or breach by the Buyer of any agreement, representation or
warranty contained in this Agreement which has rendered the satisfaction of any
condition to the obligations of the Seller impossible and such violation or
breach has not been waived by the Seller.

          (f)  This Agreement may be terminated by either the Seller or the
Buyer in accordance with the provisions of Section 7.11(b) or (c) hereof.

                                       63
<PAGE>

          (g)  This Agreement may be terminated by Seller if there shall have
occurred any event or events which materially adversely affect Buyer's ability
to satisfy its obligations pursuant to this Agreement or Buyer's, WPSR's or
PDI's ability to satisfy their respective obligations pursuant to the Equity
Contribution Agreement.

          (h)  This Agreement may be terminated by Seller if the Equity
Contribution Agreement ceases to be in effect.

          10.2 Procedure and Effect of Termination. In the event of termination
               -----------------------------------
of this Agreement and abandonment of the transactions contemplated hereby by
either or both of the parties pursuant to Section 10.1 hereof, written notice
thereof shall forthwith be given by the terminating party to the other party and
this Agreement shall terminate and the transactions contemplated hereby shall be
abandoned, without further action by any of the parties hereto. If this
Agreement is terminated as provided herein:

          (a)  such termination shall be the sole remedy of the parties hereto
with respect to breaches of any agreement, representation or warranty contained
in this Agreement and none of the parties hereto nor any of their respective
trustees, directors, officers or Affiliates, as the case may be, shall have any
liability or further obligation to the other party or any of their respective
trustees, directors, officers or Affiliates, as the case may be, pursuant to
this Agreement, except in each case as stated in this Section 10.2 and in
Sections 7.2(c), 7.3 and 7.7 hereof; and

          (b)  all filings, applications and other submissions made pursuant to
this Agreement, to the extent practicable, shall be withdrawn from the agency or
other person to which they were made.

                                  ARTICLE XI
                                  ----------
                           MISCELLANEOUS PROVISIONS
                           ------------------------

          11.1 Amendment and Modification. Subject to applicable Law, this
               --------------------------
Agreement may be amended, modified or supplemented only by written agreement of
the Seller and the Buyer.

          11.2 Waiver of Compliance; Consents. Except as otherwise provided in
               ------------------------------
this Agreement, any failure of any of the parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the party entitled to
the benefits thereof only by a written instrument signed by the party granting
such waiver, but such waiver or failure to insist upon strict compliance with

                                       64
<PAGE>

such obligation, covenant, agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure.

          11.3 Survival of Representations and Warranties. Each and every
               ------------------------------------------
representation and warranty contained in this Agreement and each and every
covenant contained in this Agreement (other than the representations and
warranties in Sections 5.1, 5.2, 5.3 and 5.26(c) (which representations and
warranties shall survive for one (1) year following the Closing Date) and the
covenants in Sections 3.2, 3.3, 3.4, 5.28(a), 7.2(c), 7.2(d), 7.3, 7.7, 7.10,
7.12, 9.1 and 9.2 hereof (which covenants shall survive in accordance with their
terms)) shall expire with, and be terminated and extinguished by, (i) the
consummation of the sale of the Purchased Assets and the transfer of the Assumed
Liabilities pursuant to this Agreement and shall not survive the Closing Date,
or (ii) the termination of this Agreement pursuant to Section 10.1 hereof or
otherwise; and none of the Seller, the Buyer or any officer, director, trustee
or Affiliate of either of them shall be under any liability whatsoever with
respect to any such representation, warranty or covenant.

          11.4 Notices. All notices and other communications hereunder shall be
               -------
in writing and shall be deemed given if delivered personally or by facsimile
transmission, telexed or mailed by overnight courier or registered or certified
mail (return receipt requested), postage prepaid, to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice, provided that notices of a change of address shall be effective
only upon receipt thereof):

          (a)  If to the Seller, to:

               Sierra Pacific Resources
               6100 Neil Road
               Reno, Nevada 89511
               Attention: William E. Peterson, Esq.
               Telecopy:  (775) 834-5959

               with copies to:

               Skadden, Arps, Slate, Meagher & Flom LLP
               4 Times Square
               New York, New York  10036-6522
               Attention:  Sheldon S. Adler, Esq.
               Telecopy:  (212) 735-2000

                                       65
<PAGE>

          (b)  if to the Buyer, to:

               WPS Northern Nevada, LLC
               c/o WPS Power Development, Inc.
               1088 Springhurst Drive
               Green Bay, Wisconsin 54304
               Attention:  B. Frank Moon
               Telecopy:  (920) 617-6140

               with copies to:

               Foley & Lardner
               777 East Wisconsin Avenue
               Milwaukee, Wisconsin 53202
               Attention:  Mary Ann C. Halloin, Esq.
               Telecopy:  (414) 297-4900

          11.5 Assignment. This Agreement and all of the provisions hereof shall
               ----------
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any party
hereto, including by operation of law without the prior written consent of the
other party, nor is this Agreement intended to confer upon any other Person
except the parties hereto any rights or remedies hereunder. Notwithstanding the
foregoing, Buyer may assign or otherwise transfer its rights hereunder and under
any Ancillary Agreement to any bank, financial institution or other lender
providing financing to Buyer as collateral security for such financing;
provided, however, that no such assignment shall (x) impair or materially delay
the consummation of the transactions contemplated hereby or (y) relieve or
discharge Buyer, as the case may be, from any of its obligations hereunder and
thereunder.

          11.6 Arbitration. Any dispute, controversy or claim arising out of or
               -----------
relating to this agreement, or the breach, termination or validity hereof (a
"Dispute"), shall be finally settled by arbitration in accordance with the
then-prevailing Commercial Arbitration Rules of the American Arbitration
Association, as modified herein (the "Rules"). The place of arbitration shall be
Nevada. There shall be three arbitrators, of whom the Seller shall appoint one
and of whom the Buyer shall appoint one. The two arbitrators so appointed shall
select a third arbitrator who shall act as the chairman of the tribunal. If any
arbitrator is not appointed within the time limits provided herein or in the
Rules, such arbitrator shall be appointed by the American Arbitration
Association. The arbitral tribunal is not empowered to award damages in excess
of compensatory damages, and each party hereby irrevocably waives any right to
recover punitive, exemplary or similar damages with respect to

                                       66
<PAGE>

any dispute. Any arbitration proceedings, decision or award rendered hereunder
and the validity, effect and interpretation of this arbitration provision shall
be governed by the Federal Arbitration Act, 9 U.S.C. (S)(S) 1-16, and judgment
upon any award may be entered in any court of competent jurisdiction.

          11.7 Governing Law. This Agreement shall be governed by and construed
               -------------
in accordance with the laws of the State of Nevada (regardless of the laws that
might otherwise govern under applicable Nevada principles of conflicts of law)
as to all matters, including but not limited to matters of validity,
construction, effect, performance and remedies.

          11.8 Counterparts. This Agreement may be executed in counterparts,
               ------------
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

          11.9 Interpretation. The article and section headings contained in
               --------------
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.

          11.10 Entire Agreement. This Agreement, including the documents,
                ----------------
exhibits, schedules, certificates and instruments referred to herein, and the
Confidentiality Agreement embody the entire agreement and understanding of the
parties hereto in respect of the transactions contemplated by this Agreement.
There are no restrictions, promises, representations, warranties, covenants or
undertakings, other than those expressly set forth or referred to herein or
therein. It is expressly acknowledged and agreed that there are no restrictions,
promises, representations, warranties, covenants or undertakings of the Seller
contained in any material made available to the Buyer pursuant to the terms of
the Confidentiality Agreement (including the Offering Memorandum) as
supplemented, or the correspondence relating to the divestiture of Seller's
generation assets previously made available to the Buyer by the Seller and CSFB.
This Agreement supersedes all prior agreements and understandings between the
parties with respect to such transactions other than the Confidentiality
Agreement.

          11.11 Bulk Sales or Transfer Laws. The Buyer acknowledges that the
                ---------------------------
Seller shall not comply with the provision of any bulk sales or transfer laws of
any jurisdiction in connection with the transactions contemplated by this
Agreement. The Buyer hereby waives compliance by the Seller with the provisions
of the bulk sales or transfer laws of all applicable jurisdictions.

                                       67
<PAGE>

          IN WITNESS WHEREOF, the Seller and the Buyer have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first above written.

                          SIERRA PACIFIC POWER COMPANY

                          By:
                             ----------------------------------------------
                             Name:    William E. Peterson
                             Title:   Sr. Vice President, General Counsel
                                      and Corporate Secretary

                          WPS NORTHERN NEVADA, LLC

                          By:  WPS POWER DEVELOPMENT, INC.
                                     (Its Sole Member)

                          By:
                             ----------------------------------------------
                               Name:  Gerald L. Mroczkowski
                               Title:    Vice President

                                       68
<PAGE>

                               TABLE OF CONTENTS
                               -----------------

                                                                            Page
                                                                            ----

                                   ARTICLE I
DEFINITIONS....................................................................1
           1.1      Definitions................................................1

                                  ARTICLE II
PURCHASE AND SALE.............................................................15
           2.1      The Sale..................................................15
           2.2      Excluded Assets...........................................15
           2.3      Assumed Liabilities.......................................16
           2.4      Excluded Liabilities......................................19

                                  ARTICLE III
PURCHASE PRICE................................................................21
           3.1      Purchase Price............................................21
           3.2      Purchase Price Adjustment.................................21
           3.3      Allocation of Purchase Price..............................23
           3.4      Proration.................................................23

                                  ARTICLE IV
THE CLOSING...................................................................24
           4.1      Time and Place of Closing.................................24
           4.2      Payment of Purchase Price.................................24
           4.3      Deliveries by Seller......................................25
           4.4      Deliveries by Buyer.......................................26

                                   ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER......................................27
           5.1      Organization; Qualification...............................27
           5.2      Authority Relative to this Agreement......................27
           5.3      Consents and Approvals; No Violation......................28
           5.4      Reports...................................................29
           5.5      Financial Statements......................................29
           5.6      Undisclosed Liabilities...................................29
           5.7      Absence of Certain Changes or Events......................30
           5.8      Real Property.............................................30
           5.9      No Certified Survey Map Required..........................31
           5.10     Leasehold Interests.......................................31
           5.11     Improvements..............................................31
           5.12     Insurance.................................................31

                                       i
<PAGE>

                                                                            Page
                                                                            ----

           5.13     Environmental Matters.....................................32
           5.14     Labor Matters.............................................33
           5.15     ERISA; Benefit Plans......................................33
           5.16     Real Property Encumbrances................................34
           5.17     Condemnation..............................................34
           5.18     Certain Contracts and Arrangements........................34
           5.19     Legal Proceedings, etc....................................35
           5.20     Permits...................................................35
           5.21     Regulation as a Utility...................................35
           5.22     Taxes.....................................................36
           5.23     Intellectual Property.....................................36
           5.24     Compliance with Laws......................................36
           5.25     Sufficiency of Purchased Assets...........................37
           5.26     Emission Allowances and Emission Reduction Credits........37
           5.27     Condition of Assets.......................................37
           5.28     Title to Purchased Assets.................................38
           5.29     Water Rights..............................................38
           5.30     Information...............................................38

                                  ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER.......................................38
           6.1      Organization..............................................38
           6.2      Authority Relative to this Agreement......................38
           6.3      Consents and Approvals; No Violation......................39
           6.4      Regulation as a Utility...................................40
           6.5      Availability of Funds.....................................40
           6.6      Equity Contribution Agreement.............................40

                                  ARTICLE VII
COVENANTS OF THE PARTIES......................................................40
           7.1      Conduct of Business of the Seller.........................40
           7.2      Access to Information.....................................42
           7.3      Expenses..................................................44
           7.4      Further Assurances........................................44
           7.5      Public Statements.........................................45
           7.6      Consents and Approvals....................................45
           7.7      Fees and Commissions......................................46
           7.8      Tax Matters...............................................46
           7.9      Supplements to Schedules..................................48
           7.10     Employees.................................................48
           7.11     Risk of Loss..............................................50
           7.12     Additional Covenants of the Buyer.........................50

                                      ii
<PAGE>

                                                                            Page
                                                                            ----

           7.13     Title Insurance...........................................51
           7.14     Surveys...................................................52
           7.15     Pinon Facility............................................52
           7.16     Additional Gas Supply.....................................53
           7.17     Seller Subsidiaries.......................................53

                                 ARTICLE VIII
CLOSING CONDITIONS............................................................53
           8.1      Conditions to Each Party's Obligations to
                    Effect the Transactions Contemplated Hereby...............53
           8.2      Conditions to Obligations of Buyer........................55
           8.3      Conditions to Obligations of Seller.......................57

                                  ARTICLE IX
INDEMNIFICATION...............................................................59
           9.1      Indemnification...........................................59
           9.2      Defense of Claims.........................................61

                                   ARTICLE X
TERMINATION AND ABANDONMENT...................................................63
           10.1     Termination...............................................63
           10.2     Procedure and Effect of Termination.......................64

                                  ARTICLE XI
MISCELLANEOUS PROVISIONS......................................................64
           11.1     Amendment and Modification................................64
           11.2     Waiver of Compliance; Consents............................64
           11.3     Survival of Representations and Warranties................65
           11.4     Notices...................................................65
           11.5     Assignment................................................66
           11.6     Arbitration...............................................66
           11.7     Governing Law.............................................67
           11.8     Counterparts..............................................67
           11.9     Interpretation............................................67
           11.10    Entire Agreement..........................................67
           11.11    Bulk Sales or Transfer Laws...............................67

                                      iii

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