PRIVILEGED AND CONFIDENTIAL

I wanted to highlight my preliminary thoughts.  I suggest we get together so I can get a feel for where you want to go.

Objectives:

Primary objective is to avoid repayment of the principal Lenders prior to at least January 1, 2002.

Secondary objectives are (a) to avoid the Lenders being able to declare a default resulting in on-balance sheet treatment, and (ii) securing firm replacement financing from OPIC, but without risking the availability of the OPIC financing caused by a delay in Completion (I do not have good feel for this aspect of the matter yet, and need to pursue it with Ranabir Dutt when he returns from meeting with OPIC).

Primary Issues:

1.	Under the Construction Agency Agreement (CAA) can we (ESAT) state definitively that there will not be Completion before 	01/01/02?
2.	Is the current running of the Project, for commissioning and testing, risking an argument that there has been Completion?
3.	Can Completion be deferred without the Lenders declaring a default (Agent Event of Default) under the CAA , resulting in 	balance sheet obligations?

Other Issues:

4.	Can the timing of the availability of the OPIC financing be delayed to accommodate a deferral of Completion, without risking 	the firmness or availability of the OPIC financing, particularly in current capital markets?
5.	Are lost energy/capacity payments/revenues from deferring Completion a material commercial consideration?

The following deals only with items 1 -3.  As mentioned, I need to get a better feel for the OPIC side of things, and item 5 is a commercial matter.

Outside Payment Date:

As I understand it, the repayment obligation occurs upon the earlier of:

	(a)	Final Completion (as certified by ESAT) under the EPC Contract; or
	(b)	an Agent Event of Default; or
	(c)	the Maturity Date - August 31, 2002.

Alternative #1:  Deferring the activities of the EPC Contractor, including to stopping current testing operations, to ensure Completion does not occur this year.

The risk is the Lenders declaring an Agent Event of Default. This will also put some risk on the Lenders, however, for improperly declaring an Agent Event of Default for any of our resulting losses, noting:

(a)  Completion arguably means (although not entirely clear) Final Completion under the EPC Contract, requiring (i) Facility Substantial Completion (we need to confirm where we are on that); (ii) completion of the final punchlist; (iii) completion of all NEPCO clean-up and final documentation obligations; (iv) NEPCO receiving all releases and lien waivers (knowing the lien release requirements and timing are under applicable law is fundamental); and (iv) NEPCO satisfying all warranty and other obligations under the EPC Contract.  It is fundamental to determine if Final Completion is even a reality before year-end?

(b)  It is ESAT that certifies when Completion occurs.

(c)  Although there are obligations within the Scope of Authority under the CAA to take all Required Actions (Completion within the Budget and the Plans and Specifications) there is some scope or leeway for ESAT to unilaterally amend the Plans and Specifications, and thereby affect the timing for Completion, provided Completion occurs before August 31, 2001.  It may be too late  

(d)  An Agent Event of Default is subject to a 10-day curing period after notice.

(e)  The Termination Payment is due within a further 10 days after notice.

Alternative #2:  Deferring the process is not necessary.

The risk is that we may be moving the Project closer to Completion in the current year and/or an interpretation that the Project is in fact Complete, noting:

(a)  The definition of Completion under the CAA does not necessarily require Final Completion or even Facility Substantial Completion under the EPC Contract.  The test is more vague, and could be to a lower standard.  Noting this difference, and understanding the mood of the Lenders is fundamental. 

(b)  There is an obligation on ESAT to take the Required Actions under the CAA for Completion, as well as potential good faith obligations.      

(c)  The Project is currently operating (although as noted, apparently for testing and commissioning purposes).

(b)  We may still run the risk, in any event, of the Lenders declaring an Agent Event of Default.

Other Items to Consider:

The concepts of the Start Date and Commercial Operations under the Consortium Agreement do not seem to be relevant.