Document:

<PAGE>   1
                                                                     Exhibit 4.2

                  FIRST SUPPLEMENTAL INDENTURE dated as of November 20, 2000
between Cedar Brakes I, L.L.C. (the "Issuer") and Bankers Trust Company, as
trustee (the "Trustee" and, together with the Issuer, the "Parties").

                                   WITNESSETH:

                  WHEREAS, the Issuer and the Trustee have entered into an
Indenture dated as of September 26, 2000 (the "Indenture"), which provides for
the creation and issuance of 8.50% senior secured bonds due 2014 in the
aggregate principal amount of $310,600,000;

                  WHEREAS, the Parties desire to amend certain provisions of the
Indenture pursuant to Section 1001 thereof in order to clarify certain defined
terms related to the Exchange Offer and the Exchange Offer process and make
other related technical amendments as provided herein;

                  NOW, THEREFORE, in consideration of the premises contained
herein and for other good and valuable consideration receipt of which is hereby
acknowledged, the Parties hereby agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

Unless otherwise defined herein, and subject to the amendments herein, terms
defined in the Indenture shall have such defined meanings when used herein.

                                   ARTICLE II

                             AMENDMENTS TO INDENTURE

                  SECTION 201. Amendment of Recitals. The first Whereas clause
of the Indenture is hereby deleted in its entirety and replaced with the
following paragraph:

                  "WHEREAS, the Issuer has duly authorized the creation of an
issue of 8.50% Senior Secured Bonds due 2014 in the aggregate principal amount
of $310,600,000, and 8.50% Series B Senior Secured Bonds due 2014 to be issued
in

<PAGE>   2

exchange for the 8.50% Senior Secured Bonds due 2014, pursuant to the
Registration Rights Agreement (as defined herein) and, to provide therefor, the
Issuer has duly authorized the execution and delivery of this Indenture."

                  SECTION 202. Amendment of Exhibit A to the Indenture. Exhibit
A to the Indenture is hereby amended by:

                  (a) deleting the definition of "Bonds" and replacing it with
                      the following definition:

                  ""Bonds" means, collectively, the Initial Bonds, the Private
Exchange Bonds, if any, and the Unrestricted Bonds, treated as a single class of
securities, as amended or supplemented from time to time in accordance with the
terms of this Indenture, that are issued pursuant to this Indenture;
individually, a "Bond"."

                  (b) deleting the definition of "Exchange Offer" and replacing
                      it with the following definition:

                  ""Exchange Offer" means the offer that may be made by the
Issuer pursuant to the Registration Rights Agreement to the Holders of the
Initial Bonds to exchange their Initial Bonds for the Exchange Bonds."

                  (c) inserting the following definitions in the appropriate
                      alphabetical order therein:

                  ""Exchange Bonds" means the 8.50% Series B Senior Secured
Bonds due 2014, to be issued in exchange for the Initial Bonds pursuant to the
Registration Rights Agreement."

                  ""Initial Bonds" means, collectively, the 8.50% Senior Bonds
due 2014 of the Issuer issued on the Closing Date for so long as such securities
constitute Restricted Securities."

                  ""Private Exchange Bonds" has the meaning provided in the
Registration Rights Agreement."

                  ""Restricted Security" has the meaning assigned to such term
in Rule 144(a)(3) under the Securities Act; provided, however, that the Trustee
shall be entitled to request and conclusively rely on an Opinion of Counsel with
respect to whether any Bond constitutes a Restricted Security."

                                       2
<PAGE>   3

                  ""Unrestricted Bonds" means one or more Bonds that do not and
are not required to bear the restrictive legends set forth in Section 202,
including, without limitation, the Exchange Bonds."

                  SECTION 203. Amendment to Section 303 of the Indenture.
Section 303 of the Indenture is hereby amended by deleting the third paragraph
thereof and replacing it with the following paragraph:

                  "At any time and from time to time after the execution and
delivery of this Indenture, the Issuer may deliver Bonds executed by the Issuer
to the Trustee for authentication, together with the Issuer Order for the
authentication and delivery of such Bonds, directing the Trustee to authenticate
the Bonds and certifying that all conditions precedent to the issuance of Bonds
contained herein have been fully complied with. Each such Issuer Order shall
specify the amount of Bonds to be authenticated, the date on which the Bonds are
to be authenticated, whether the bonds are to be Initial Bonds, Private Exchange
Bonds or Unrestricted Bonds and whether the Bonds are to be issued as Physical
Bonds or Global Bonds or such other information as the Trustee may reasonably
request. The Trustee shall receive an Officers' Certificate and an Opinion of
Counsel of the Issuer in connection with such authentication of Bonds. Upon
receipt of any such Issuer Order, the Trustee shall, in accordance with such
Issuer Order, authenticate (i) Initial Bonds for original issue in the aggregate
principal amount not to exceed $310,600,000, (ii) Private Exchange Bonds from
time to time for issue only in exchange for a like principal amount of Initial
Bonds and (iii) Unrestricted Bonds from time to time only (A) in exchange for a
like principal amount of Initial Bonds or (B) in an aggregate principal amount
of not more than the excess of $310,600,000 over the sum of the aggregate
principal amount of (x) Initial Bonds then outstanding, (y) Private Exchange
Bonds then outstanding and (z) Unrestricted Bonds issued in accordance with
(iii)(A) above. The aggregate principal amount of Bonds outstanding at any time
may not exceed $310,600,000."

                                       3
<PAGE>   4
                                   ARTICLE III

                                  MISCELLANEOUS

                  SECTION 301. Limited Effect. Except as expressly amended
hereby, all of the provisions of the Indenture shall continue to be, and shall
remain, in full force and effect in accordance with their terms.

                  SECTION 302. Construction As One Instrument. This First
Supplemental Indenture shall be construed as supplementing and forming part of
the Indenture, and shall be read accordingly.

                  SECTION 303. Severability. If at any time any one or more of
the provisions hereof is or becomes illegal, invalid or unenforceable in any
respect under the applicable law of any jurisdiction, neither the validity or
enforceability of the remaining provisions hereof nor the legality, validity or
enforceability of such provisions under the applicable law of any other
jurisdiction shall in any way be affected or impaired thereby.

                  SECTION 304. Counterparts. This First Supplemental Indenture
may be executed in counterparts and by each of the Parties on separate
counterparts, both of which shall constitute one and the same instrument

                  SECTION 305 Binding Effect. This First Supplemental Indenture
shall become effective when it shall have been executed by the Parties.

                  SECTION 306. Governing Law. This FIRST SUPPLEMENTAL INDENTURE
shall be governed by, and construed in accordance with, the laws of the State of
NEW YORK (without giving effect to the principles thereof relating to conflicts
of law except section 5-1401 of the new york GENERAL OBLIGATIONS LAW).

                                       4
<PAGE>   5

                  IN WITNESS WHEREOF, the Parties have caused this First
Supplemental Indenture to be duly executed as of the date and year first above
written.

                                        CEDAR BRAKES I, L.L.C.

                                        By:  /s/ JOHN L. HARRISON
                                             -----------------------------------
                                             Name: John L. Harrison
                                             Title Vice President, Senior
                                                   Managing Director and Class
                                                   A Manager

                                        BANKERS TRUST COMPANY
                                             Trustee, Paying Agent and Registrar

                                        By:  /s/ MARION ZINOWSKI
                                             -----------------------------------
                                             Name: Marion Zinowski
                                             Title Assistant Vice President

                                       5<PAGE>   1
                                                                     EXHIBIT 4.3

                                 [FACE OF BOND]
                             CEDAR BRAKES I, L.L.C.
                       8.50% Senior Secured Bond Due 2014

                                                               CUSIP [_________]

No. [_______]                                                   $[_____________]

                  CEDAR BRAKES I, L.L.C., a Delaware limited liability company
(the "Issuer", which term includes any successor under the Indenture hereinafter
referred to), for value received, promises to pay to [_____________], or its
registered assigns, the outstanding principal sum of [WRITTEN AMOUNT]
($[amount]), on or prior to February 15, 2014 or such earlier date as this Bond
may be redeemed (the "Maturity Date"), such payment to be made in annual
installments on each February 15, and end on the Maturity Date set forth above,
each such installment to be in an amount equal to the Outstanding principal
amount on the Closing Date multiplied by the percentage set forth opposite the
applicable Payment Date on Annex A attached hereto (provided that the portion of
the principal amount remaining unpaid on the Maturity Date, together with all
interest accrued thereon, shall in any and all cases be due and payable on the
Maturity Date), and to pay interest thereon from the Closing Date or from the
most recent Payment Date to which interest has been paid or duly provided for,
semi-annually on February 15 and August 15, in each year, commencing on February
15, 2001, at a rate of 8.50% per annum, until the principal hereof is paid or
made available for payment, plus additional interest (to the extent that the
payment of such interest shall be legally enforceable) at the rate of 1.0% per
annum on any overdue principal and premium and on any overdue installment of
interest; provided, that, in the event that an Exchange Offer (as defined in the
Registration Rights Agreement) has not been made, with respect to the Bonds, on
or before the date which is two hundred and seventy (270) days after the Closing
Date or a Shelf Registration Statement (as defined in the Registration Rights
Agreement) has not been filed or

<PAGE>   2

declared effective within the time period specified in the Registration Rights
Agreement, additional interest shall accrue on the Bonds at the rate of 0.50%
per annum (such additional interest, the "Additional Interest") from and
including the date on which any such Registration Default (as defined in the
Registration Rights Agreement) shall occur to but excluding the date on which
all such Registration Defaults (as defined in the Registration Rights Agreement)
have been cured. All references to "interest" in this Bond include Additional
Interest. The interest so payable, and punctually paid or duly provided for, on
any Payment Date will, as provided in the Indenture, be paid to the Person in
whose name this Bond (or one or more Predecessor Bonds) is registered at the
close of business on the Regular Record Date for such interest, which shall be
the February 1 and August 1 (whether or not a Business Day), as the case may be,
next preceding such Payment Date. Any such principal or interest not so
punctually paid or duly provided for (collectively, "Defaulted Payments") will
forthwith cease to be payable to the Holder on such Regular Record Date and may
either be paid to the Person in whose name this Bond (or one or more Predecessor
Bonds) is registered at the close of business on a Special Record Date for the
payment of such Defaulted Payment to be fixed by the Issuer, notice whereof
shall be given by the Trustee to Holders of Bonds not less than 10 days prior to
such Special Record Date.

                  Reference is hereby made to the further provisions of this
Bond set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.

                  Terms used but not otherwise defined herein shall have their
meanings as defined in the Indenture. The provisions of this Bond do not purport
to be complete and are subject to, and qualified in their entirety by reference
to, the provisions of the Indenture.

                  Unless the certificate of authentication hereon has been
executed by the Trustee referred to below by manual signature, this Bond shall
not be entitled to any benefit under the Indenture or be valid or obligatory for
any purpose.

                                       2
<PAGE>   3

                  IN WITNESS WHEREOF, the Issuer has caused this Bond to be duly
executed manually or by facsimile by its duly authorized officers.

Dated:

                                             CEDAR BRAKES I, L.L.C.

                                             By:
                                                 -------------------------------
                                                 Name:
                                                 Title:

                                       3
<PAGE>   4

                          CERTIFICATE OF AUTHENTICATION

Dated:

                  This is one of the 8.50% Senior Secured Bonds due 2014 of the
Issuer described in the within-mentioned Indenture.

                                            Bankers Trust Company, as Trustee

                                            By:
                                                --------------------------------
                                                   Authorized Signatory

                                       4
<PAGE>   5

                             [REVERSE SIDE OF BOND]
                             CEDAR BRAKES I, L.L.C.
                       8.50% Senior Secured Bond due 2014

1. Principal and Interest.

                  The Issuer will pay the principal of this Bond on or prior to
February 15, 2014 in the manner set forth on the face of this Bond.

                  The Issuer promises to pay interest on the principal amount of
this Bond on each Payment Date, as set forth below, at the rate per annum shown
above.

                  Interest will be payable semi-annually (to the Holders of
record of the Bonds (or any predecessor Bonds) at the close of business on the
Regular Record Date immediately preceding the Payment Date) on each Payment
Date, commencing February 15, 2001.

                  Interest on this Bond will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the Closing
Date; provided that, if there is no existing default in the payment of interest
and if this Bond is authenticated between a Regular Record Date referred to on
the face hereof and the next succeeding Payment Date, interest shall accrue from
such Payment Date. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.

2. Method of Payment.

                  The principal of, premium, if any, and interest on the Bonds
shall be payable and the Bonds shall be exchangeable and transferable at the
office or agency of the Issuer in the Borough of Manhattan, The City of New
York, maintained for such purposes (which initially shall be the Corporate Trust
Office of the Trustee) or, at the option of the Issuer, interest may be paid by
check mailed to the address of the Person entitled thereto as such address shall
appear on the Register; provided that (a) all payments with respect to the
Global Bonds and the Physical Bonds the Holders of which have given wire
transfer instructions to the Trustee by the Regular Record Date shall be
required to be made by wire transfer of immediately available funds to

                                       5
<PAGE>   6

the accounts specified by the Holders thereof; (b) the payment of the final
installment of principal of, or interest on, each Bond shall only be made upon
presentation and surrender of such Bond at the Corporate Trust office, or such
other place as may be designated pursuant to the Indenture; and (c) pursuant to
the Indenture, upon written request from any Holder of Outstanding Bonds in the
aggregate principal amount of $1,000,0000 payments of interest on, or principal
(other than the final payment of principal) of, such Bonds shall be made by wire
transfer to such Holder. The Bonds will not be entitled to the benefit of any
sinking fund.

3. Registrar.

                  The Trustee will act as the Registrar.

4. Indenture; Limitations.

                  The Issuer issued the Bonds under an Indenture dated as of
September 26, 2000 (the "Indenture"), between the Issuer and Bankers Trust
Company, as trustee (the "Trustee"). The terms of the Bonds include those stated
in the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act. The Bonds are subject to all such terms and Holders are referred
to the Indenture and the Trust Indenture Act for a statement of all such terms.
To the extent permitted by applicable law, in the event of any inconsistency
between the terms of this Bond and the terms of the Indenture, the terms of the
Indenture shall control. The Indenture will not be qualified under the Trust
Indenture Act; thus Holders of the Bonds will not be entitled to the protections
provided under the Trust Indenture Act to holders of debt securities issued
under a qualified indenture.

                  The Bonds are general obligations of the Issuer. The aggregate
principal amount of the Bonds issued on the Closing Date is $310,600,000.

5. Optional Redemption.

                  The Bonds may be redeemed at the option of the Issuer, in
whole or in part, at any time and from time to time at a Redemption Price equal
to 100% of the Outstanding

                                       6
<PAGE>   7

principal amount, plus accrued and unpaid interest, if any, thereon to the
Redemption Date, plus a Make-Whole Premium.

                  Notice of a redemption will be mailed at least 30 days but not
more than 60 days before the Redemption Date to each Holder to be redeemed at
such Holder's last address as it appears in the Register. On and after the
Redemption Date, interest ceases to accrue on Bonds or portions of Bonds called
for redemption, unless the Issuer defaults in the payment of the Redemption
Price.

6. Denominations; Transfer; Exchange.

                  The Bonds are issued only in registered form without coupons
and initially only in minimum denominations of $100,000 and any integral
multiple of $1,000 above that amount; provided, however, that initial purchases
of the Bonds by purchasers who are institutional "accredited investors" who are
not Qualified Institutional Buyers shall be in minimum amounts of $250,000; and
provided further that, after initial issuance, Bonds may be issued upon exchange
or transfer in such amounts as may be necessary to evidence the entire unpaid
principal amount of any Bond surrendered or exchanged. A Holder may register the
transfer or exchange of Bonds in accordance with the Indenture. The Issuer may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and to pay any taxes and fees required by law or permitted by
the Indenture. The Issuer need not register the transfer or exchange of any
Bonds selected for redemption (except the unredeemed portion of any Bond being
redeemed in part). Also, it need not register the transfer or exchange of any
Bonds for a period of 15 days before a selection of Bonds to be redeemed is
made.

7. Persons Deemed Owners.

                  A Holder may be treated as the owner of a Bond for all
purposes.

8. Unclaimed Money.

                  If money for the payment of principal, premium, if any, or
interest remains unclaimed for two years, the Trustee will pay the money back to
the Issuer at its

                                       7
<PAGE>   8

request. After that, Holders entitled to the money must look to the Issuer for
payment, unless an abandoned property law designates another Person, and all
liability of the Trustee with respect to such money shall cease.

9. Discharge Prior to Redemption or Maturity.

                  If the Issuer irrevocably deposits, or causes to be deposited,
with the Trustee money sufficient to pay the then outstanding principal of,
premium, if any, and accrued interest on the Bonds to redemption or maturity,
the Issuer will be discharged from the Indenture and the Bonds, except in
certain circumstances for certain sections thereof.

10. Amendment; Supplement; Waiver.

                  Subject to certain exceptions, the Indenture or the Bonds may
be amended or supplemented with the consent of the Majority Holders, and any
existing default or compliance with any provision may be waived with the consent
of the Majority Holders (other than for a default in the payment of the
principal of (of Make-Whole Premium, if any) or any interest in any Bond or in
respect of a covenant or provision of the Indenture that cannot be modified or
amended without the unanimous affirmative vote of all Holders) of the principal
amount of the Bonds then outstanding. Without notice to or the consent of any
Holder, the parties thereto may amend or supplement the Indenture or the Bonds
to, among other things, cure any ambiguity, defect or inconsistency; provided
that such cure shall not materially adversely affect the interests of the
Holders.

11. Restrictive Covenants.

                  The Indenture contains certain covenants, including, without
limitation, covenants with respect to the following matters: (i) Indebtedness of
the Issuer; (ii) restricted payments; (iii) transactions with Affiliates; (iv)
fundamental change; and (v) compliance with Material Agreements.

                                       8
<PAGE>   9

12. Successor Persons.

                  When a successor person or other entity assumes all the
obligations of its predecessor under the Bonds and the Indenture, the
predecessor person will be released from those obligations.

13. Remedies for Events of Default.

                  If an Event of Default (other than a Bankruptcy Event of
Default) occurs and is continuing, then and in every such case the Trustee, upon
the direction of Holders of no less than 25% of the Outstanding Bonds (for an
Event of Default with respect to a default in payment of principal, premium, if
any, or interest) or the Majority Holders (for any other Event of Default),
shall declare the principal amount of all the Bonds to be due and payable
immediately, by a notice in writing to the Issuer, and, upon any such
declaration, such principal amount, any accrued and unpaid interest and all
other amounts payable under the Bonds shall become immediately due and payable.

                  If a Bankruptcy Event of Default occurs, the principal amount
of, any accrued interest on and all other amounts payable under the Bonds then
Outstanding shall become immediately due and payable. The Trustee may require
indemnity reasonably satisfactory to it before it enforces the Indenture or the
Bonds. Subject to certain limitations, the Majority Holders may direct the
Trustee in its exercise of any trust or power.

14. Trustee Dealings with Issuer.

                  The Trustee under the Indenture, in its individual or any
other capacity, may become the owner or pledgee of Bonds and may make loans to,
accept deposits from, perform services for, and otherwise deal with, the Issuer
and its Affiliates as if it were not the Trustee; provided that no conflicting
interest results.

15. No Recourse Against Certain Others.

                  Except as otherwise specifically provided in the Material
Agreements, no recourse under or upon any obligation, covenant or agreement
contained in this Bond, the Indenture or any Security Document, or because of
any

                                       9
<PAGE>   10

indebtedness evidenced thereby, shall be had against any incorporator, as such,
or against any past, present or future stockholder, member, manager, officer or
director, as such, of the Issuer or of any successor, either directly or through
the Issuer or any successor, under any rule of law, statute, or constitutional
provision or by the enforcement of any assessment or by any legal or equitable
proceeding or otherwise, all such liability being expressly waived and released
by the acceptance of the Bonds by the Holders thereof and as part of the
consideration for the issuance of the Bonds. Nothing contained herein shall,
however, limit the liability of any of the foregoing for any fraud, gross
negligence or willful misconduct on their part.

16. Authentication.

                  This Bond shall not be valid until the Trustee manually signs
the certificate of authentication on the other side of this Bond.

17. Governing Law.

                  The Indenture and this Bond shall be governed by, and
construed in accordance with, the laws of the State of New York (without giving
effect to the principles thereof relating to conflicts of law except Section
5-1401 of the New York General Obligations Law).

                  The Issuer will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to CEDAR BRAKES I,
L.L.C., 1001 Louisiana Street, Houston, Texas 77002, Attention: President.

                                       10
<PAGE>   11

                                                                      ANNEX A to
                                                                            Bond

                           REPAYMENT SCHEDULE FOR BOND

<TABLE>
<CAPTION>
                                        Percentage of                                           Percentage of
                                  Original Principal Amount                               Original Principal Amount
Payment Date                              Payable                 Payment Date                     Payable
------------                      -------------------------      -------------            -------------------------
<S>                               <C>                            <C>                      <C>
Feb. 15, 2002                             1.8859                 Feb. 15, 2009                       8.7594
Feb. 15, 2003                             2.5345                 Feb. 15, 2010                       9.9352
Feb. 15, 2004                             3.5500                 Feb. 15, 2011                      11.2515
Feb. 15, 2004                             4.9112                 Feb. 15, 2012                      12.6390
Feb. 15, 2006                             5.7527                 Feb. 15, 2013                      14.2640
Feb. 15, 2007                             6.6977                 Feb. 15, 2014                      10.0892
Feb. 15, 2008                             7.7298
</TABLE>

                                       11
<PAGE>   12

                            [FORM OF TRANSFER NOTICE]
                  FOR VALUE RECEIVED the undersigned registered
                Holder hereby sells, assigns and transfers unto

Insert Taxpayer Identification No.

(Please print or typewrite name and address including zip code of assignee)

the within Bond and all rights thereunder, hereby irrevocably constituting and
appointing

attorney to transfer such Bond on the books of the Issuer with full power of
substitution in the premises.

[THE FOLLOWING PROVISION TO BE INCLUDED ON ALL CERTIFICATES EXCEPT PERMANENT
REGULATION S PHYSICAL BONDS]

                  In connection with any transfer of this Bond occurring prior
to the date which is the earlier of the date of an effective Registration
Statement or [_______] the undersigned confirms that without utilizing any
general solicitation or general advertising that:

                  [Check One]

[ ](a)            this Bond is being transferred in compliance with the
                  exemption from registration under the Securities Act of 1933,
                  as amended, provided by Rule 144A thereunder.

or

[ ](b)            this Bond is being transferred other than in accordance with
                  (a) above and documents are being furnished which comply
                  with the conditions of transfer set forth in this Bond and the
                  Indenture.

If none of the foregoing boxes is checked, the Trustee or other Registrar shall
not be obligated to register this Bond in the name of any Person other than the
Holder hereof unless and until the conditions to any such transfer

                                       12
<PAGE>   13

of registration set forth herein and in Section 307 of the Indenture shall have
been satisfied.

Date:

                                                   -----------------------------
                                                   NOTICE: The signature to this
                                                   assignment must correspond
                                                   with the name as written upon
                                                   the face of the within-
                                                   mentioned instrument in every
                                                   particular, without
                                                   alteration or any change
                                                   whatsoever.

Signature Guarantee:

TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.

                  The undersigned represents and warrants that it is purchasing
this Bond for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Issuer as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.

Dated:

                                                   -----------------------------
                                                   NOTICE:  To be executed by an
                                                   executive officer

                                       13

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